[Posted 7:00 AM ET]
Crisis in the Middle East
I caught Secretary of State Condoleezza Rice’s press conference
announcing she was going to hold talks with a contact group in
Rome, in attempting to come up with a solution to the current
crisis in Israel and Lebanon, and I thought I was watching a high
school valedictorian give their speech.
You know, the one where the 18-year-old is up at the podium, in
most cases seemingly poised beyond their years while talking of
the modern world and the future, and yet you’re thinking, “Kid,
you just don’t know what it’s really all about.”
Rice sounded like she lived in a fantasy world in discussing
Lebanon’s “young, democratic government, free now of Syrian
forces, that is trying to assert its power.”
It made me sick and I haven’t been this depressed about the
geopolitical scene since the days following 9/11. My anger this
time, though, is directed at the Bush administration, as I’ll
attempt to explain later.
But first, as the tragedy unfolded in Lebanon, thanks to
Hizbullah, I hasten to add, world leaders weighed in, including
Russian President Vladimir Putin and French President Jacques
Chirac, who both labeled the use of force by Israel “justified,”
though it also needed to be “balanced” and it didn’t appear to be.
For its part Egypt had evidently been attempting to broker a
prisoner swap on the hostages, including the Israeli soldier taken
by Hamas, but then Hamas stiffened its resistance and Egypt quit
the effort.
Support in the Arab street for both Hizbullah and Hamas was
strong, and leaders in Saudi Arabia, Jordan and Egypt, in
particular, were scared to death this could result in trouble for
their own regimes.
And leave it up to Iran’s Ayatollah Khamenei to call Israel “an
evil, cancerous tumor” in the midst of the Islamic world.
Here is a smattering of opinion, and I emphasize from all sides.
Editorial in Lebanon’s Daily Star, 7/19/06
“Seven days into Israel’s war on Lebanon, there is no hint of
effective international diplomacy on the horizon. The Lebanese
are being forced to accept that they are alone in the world,
without a friend who can defend them against an undeserved
onslaught. The Syrians, who many have argued share a healthy
portion of blame for the current crisis in Lebanon, are too busy
saving their own skins, threatening fierce reprisals if their nation
comes under attack. The Iranians, also fingered in this latest
wave of hostilities, are cozily sitting back and enjoying the
luxury of sacrificing Lebanon and Hizbullah in their quest to
sweeten a deal with the West over their nuclear program.
“Saudi Arabia is abandoning its role as a regional peacemaker,
placing all of the blame squarely upon Hizbullah and Iran, and
expressing no hint of outrage over the collective punishment and
destruction in Lebanon….
“Egypt, the home of an ineffective Arab League, which cannot
even muster the diplomatic will to hold a summit, is busy
scolding Hizbullah for its misdeeds. As Lebanon burns…we see
no sense of urgency on the part of Egyptian leaders to convene
emergency talks….
“Even in Israel, there is no sign of diplomatic efforts on the part
of leading politicians. The rookie Israeli government – which
has achieved record destruction at a scale and pace rarely seen,
even in this part of the world – has stepped aside and let Israeli
generals take the lead. They fail to see the irony in the fact that
their commanders have been pounding the very army that they
expect to impose order over Lebanese territory.
“And the Europeans and the Americans are blindly following as
the Israelis lead us all down a treacherous path….
“This time, (the Lebanese’) beloved homeland has been chosen
as a battleground in which the Israelis will brutalize the Lebanese
in order to teach the Iranians a lesson on behalf of the West. The
war-weary Lebanese have no choice but to pay the ultimate price
and once again bear the brunt of the consequences of world
diplomats’ failure to resolve a crisis peacefully.”
Rami G. Khouri / Daily Star, 7/19/06
“Of the many dimensions of Israel’s current fighting with
Palestinians and Lebanese, the most significant in my view is the
continuing, long-term evolution of Arab public attitudes to Israel.
The three critical aspects of this are: a steady loss of fear by
ordinary Arabs in the face of Israel’s military superiority; a
determined and continuous quest for more effective means of
technical and military resistance against Israeli occupation and
subjugation of Palestinians and other Arabs; and a strong
political backlash against the prevailing governing elites in the
Arab world who have quietly acquiesced in the face of Israeli-
American dictates.
“The Lebanon and Palestine situations today reveal a key
political and psychological dynamic that defines several hundred
million Arabs, and a few billion other like-minded people around
the world. It is that peace and quiet in the Middle East require
three things: Arabs and Israelis must be treated equally; both
domestically and internationally the rule of law must define the
actions of governments and all members of society; and the core
conflict between Palestine and Israel must be resolved in a fair,
legal and sustainable manner….
“Protecting Israel has long been the primary focus of Western
diplomacy, which is why it has not succeeded. For decades now
Israel has established buffer zones, occupation zones, red lines,
blue lines, green lines, interdiction zones, killing fields, surrogate
army zones, and every other conceivable kind of zone between it
and Arabs who fight its occupation and colonial policies – all
without success. Here is why: protecting Israelis while leaving
Arabs to a fate of humiliation, occupation, degradation and
subservient acquiescence to Israeli-American dictates only
guarantees that those Arabs will regroup, plan a resistance
strategy, and come back one day to fight for their land, their
humanity, their dignity and the prospect that their children can
have a normal life one day….
“Piecemeal solutions and stopgap measures will not work any
more. Ending these kinds of military eruptions requires a more
determined effort to resolve the core conflict between Israel and
Palestine. This would then make it easier to address equally
pressing issues within Arab countries, such as Hizbullah’s status
as an armed resistance group or militia inside Lebanon, which
itself is a consequence of Israeli attacks against Lebanon and the
unresolved Palestine issue.”
David Ignatius / Washington Post, 7/19/06
“Given the American stakes in this crisis, the Bush
administration’s passivity is inexplicable. Hizbullah and Israel
have been tossing lighted matches back and forth in a region
soaked with gasoline, and the world is waiting for robust
American diplomacy. Instead we see a tongue-tied superpower,
led by a president who grumbles into an open mike in St.
Petersburg that Kofi Annan should get on the phone to Syria and
make it all go away, or maybe Condoleezza Rice should get on a
plane to the Middle East….
“Rather than bringing positive change, military action in the
Middle East tends to bring unanticipated consequences. In this
case, one wild card is the Shiite population of Iraq – America’s
crucial ally there. If the Israeli campaign against Hizbullah
stretches to weeks and even months, how long will it be before
the United States faces a Shiite insurgency in Iraq, which would
almost certainly spell a decisive American defeat there? And,
ominously, CIA and FBI officials are said to be hearing
increased ‘chatter’ about new terrorist attacks in America.
“When international crises arise, analysts often cite the tragic
chain of events that produced World War II – Neville
Chamberlain’s policy of appeasement that emboldened the Nazis
and led to the slaughter of tens of millions. The 1938 Munich
lesson of the necessity for action is indelible. But it’s also worth
considering the lesson of 1914, in which the world slipped
toward a war that could have been avoided had statesmen
escaped the lock-step chain of action and response.
“Are we living through a Sarajevo moment, like the
concatenation of events that marched Europe toward World War
I? Impossible to know. But given the risks for the United States
and its allies, this ought to be a week when Americans are
aggressive, active diplomats, rather than bystanders. If America
means to be a world leader, it cannot appear to be a prisoner of
events.”
Christopher Hitchens / Wall Street Journal, 7/18/06
“Until a few weeks ago, Palestinian President Mahmoud Abbas
was confronting the Hamas-led government with a very
important decision. ‘If you do not recognize the newly elected
government of Israel as a legitimate negotiating partner,’ he told
them, ‘I will order a referendum among the Palestinians on the
single issue of that recognition.’ He had at his disposal an
important letter, signed by several respected Palestinian political
prisoners, that called for a two-state solution on this basis, and he
was also cutting with the grain of important resolutions by the
European Union and other concerned international interlocutors.
He also knew what many people forgot – Hamas did not win a
majority of the votes in the Palestinian elections, and only hold a
tenuous supermajority of the parliamentary seats. Hamas made it
very clear that they did not relish this proposal, the ultimatum-
point of which was just coming due.
“Does it not seem obvious that the intention of the various
provocations launched from Gaza, from the missiles to the first
abduction of an Israeli soldier, were designed precisely to make
this referendum impossible? And does it not seem at least very
likely that the Hizbullah operations on Israel’s northern border
have been implicitly coordinated to assist Hamas in this
respect?”
Editorial, Wall Street Journal, 7/18/06
“Israel is attempting to do what the world has been unable to
accomplish: Enforce UN Resolution 1559, which calls for the
disarming of all Lebanese militias and Beirut’s control of its own
borders. It’s a shame to see Lebanon’s first semi-independent
government in decades caught up in this new round of violence.
But Hizbullah’s continued military might, backed by Iranian
arms and Syrian intelligence, is the main threat to Lebanese
independence. In disarming Hizbullah, Israel would be doing
Lebanese patriots a favor.”
Editorial, The Times (of London), 7/21/06
“Behind the pictures of landing craft and exhausted evacuees,
collapsed apartment blocks and charred vehicles, bodies and the
bereaved, lies a truth that should not be forgotten. None of this
would be happening if terrorists had not crossed an international
border to kidnap soldiers of a sovereign state, and underlined
such an intolerably provocative act by firing volleys of missiles
at civilians. Israel has a right to defend itself; if the words risk
becoming a cliché it is because they are true, and they remain the
starting point and context for all that has unfolded over the past
nine days….
“There is logic too in yesterday’s apparent preparation for a
possible ground offensive. Destroying half of Hizbullah’s
arsenal of rockets, as Israel claims to have done, is not much use
unless the other half is similarly dealt with. [ed. No one believes
Israel’s claims on the missile front.] ….
“There are wider concerns that Israel would be wise to consider.
Historic ally Lebanon has hardly been a triumphant hunting
ground for its forces. The Lebanese Government is weak and the
dangers to Israel from it slipping into civil war would be great.
Hizbullah might have painted itself into a corner by attacking
when it did, earning it condemnation from parts of the Arab
world; but it would not be in Israel’s interests to regard the moral
high ground from which it set out nine days ago as a free hand to
act without regard to the world around it. Therein lies a different
trap.”
On President Bush’s overall foreign policy.
Michael Abramowitz / Washington Post
“Conservatives complain that the United States is hunkered
down in Iraq without enough troops or a strategy to crush the
insurgency. They see autocrats in Egypt and Russia cracking
down on dissenters with scant comment from Washington, North
Korea firing missiles without consequence, and Iran playing for
time to develop nuclear weapons while the Bush administration
engages in fruitless diplomacy with European allies. They
believe that a perception that the administration is weak and
without options is emboldening Syria and Iran and the Hizbullah
radicals they help sponsor in Lebanon.”
Former House Speaker Newt Gingrich, appearing on “Meet the
Press,” 7/16/06
“Let me put this in a larger context. The United States said there
would be terrible consequences for North Korea if they fired
their missiles. They fired their missiles. We then threatened that
the Chinese would come visit them. The Chinese went and
visited them, nothing happened. We then said we’ll go to the
UN….The Chinese said they’d veto (a resolution) if it was tough.
They passed a weak resolution, and within 45 minutes the North
Koreans had repudiated the resolution. So there’s no
consequence.
“Meanwhile, the Iranians are watching. These two countries are
watching. The Iranians watched, the North Koreans basically
stand us down. The North Koreans watched the Iranians
basically get face-to-face talks. And these two dictatorships are
playing us like a ping-pong game.”
On the issue of Lebanon, I wrote the following…different from
last week’s quotes.
WIR…8/20/05
“And then there’s Hizbullah, not exactly a pleasant next door
neighbor to Israel though with increasing political clout in
Lebanon’s new government. According to Baalbek-based leader
Hussein Hajj Hassan, a member of parliament, ‘Hizbullah will
not hand in its weapons as long as Israel possesses 400 nuclear
missiles.’ Hassan points to Lebanon’s army not being able to
defend the nation against outside threats, and on this point he is
correct. The military desperately needs new equipment and
armaments and the United States has been helping some in this
regard. But it’s also clear UN Security Council Resolution 1559,
which called for the disarming of Hizbullah, will not be carried
out.”
WIR…10/29/05
“Syria is sending arms to the Palestinians here and Iran continues
to flood Hizbullah with support. The Lebanese government, with
Hizbullah as a member of parliament, is too weak to disarm a
group that continues to renounce Israel’s right to exist.
“The West, and separately, Israel, can not afford to be patient for
long and it’s all going to come to a head over the coming six
months.”
[Missed it by three, though later nailed it within a week as you
saw last time.]
WIR…3/11/06
“Just two years ago, Druze leader Walid Jumblatt harshly
criticized U.S. policies in the region, but this week he was in
Washington asking for support in removing Syrian influence
from his country.
“ ‘It took me a long political trip to come to the U.S. and ask for
help against the (Syrian) dictator,’ he said, adding that if the U.S.
fails in Lebanon, the Bush administration’s hopes for democracy
in the Middle East are doomed ‘and we’ll go back to
dictatorships.’
[Throughout this space I have quoted Walid Jumblatt
extensively, and with good reason I have called him the most
fascinating politician in the world today. He may also end up
being bang on. But should things calm down in Lebanon, the
U.S. cannot blindly count on Jumblatt’s cooperation and constant
diplomacy will be required. That is if he isn’t assassinated first.]
Continuing…I also highlighted an issue that is not getting
enough play these days.
WIR…11/26/05
[This particular week, Israeli and Hizbullah forces battled it out
in the disputed Shebaa Farms border region between the two.
Four Hizbullah guerillas were killed in the heaviest fighting since
2000.]
“Israel later dropped leaflets on Beirut and other major Lebanese
population centers, slamming Hizbullah. But think about how
this was accomplished. Israeli jets and helicopters invaded
Lebanese territory to carry this off with obviously zero resistance
from Lebanon’s military; not the kind of thing that would
engender confidence if I was the average citizen of Beirut.”
I should have criticized Israel that week. But the issue came up
again.
WIR…12/17/05
“After (Rafik) Hariri’s death [Feb. ’05], international
condemnation led to Syria being forced to withdraw its army
from Lebanon (though the agents and terrorists obviously stayed
behind), with France and the U.S. leading the charge. But today
nothing, as (Syria’s Bashar) Assad appears to have weathered the
initial storm.
“Watch Lebanon and look for headlines on the status of the
government. In a land where Hizbullah is a fixture, this nation
can be as important a story as Iraq itself.
“Lastly, we go back to Israel which has its own issues with
Lebanon because of the Hizbullah presence. Here, though, Israel
can stop violating Lebanon’s airspace. It’s one thing to clash
with Hizbullah over the disputed Shebaa Farms territory, but it’s
quite another to drop leaflets over Beirut using fighter jets and
attack helicopters.”
Looking back, Israel’s prior actions were nothing more than a
clear violation of Lebanon’s sovereignty and the international
community said nothing. Supporters of Israel would counter the
periodic firing of Katusha rockets over the years was a violation
of its sovereignty as well.
But to me it all comes down to Shebaa Farms. What a wasted
opportunity. Prime Minister Fouad Siniora, in his trip to
Washington that I wrote of 4/22/06, set out to seek U.S.
assistance in enabling Lebanon to recover its occupied territories.
And it’s here where I have to dial back my frustration.
In the immediate aftermath of the assassination of Hariri, I wrote
the following on 2/19/05.
“Regardless of who did it, the killing of Hariri was one dumb
move. French President Jacques Chirac was a close friend of his
and Chirac attended the funeral, a risky gesture given the
explosive climate. While Washington continues to have major
problems with the French leader, including on the issue of
Hizbullah, there is a chance that the U.S. and France could reach
some real accommodation in helping get Syria out of Lebanon.”
I then added on 3/5/05:
“Far be it for me to defend France for its anti-American actions
over the years, but being a neocon doesn’t preclude one from
also being a pragmatist. You’ve since seen what’s happened.
Presidents Bush and Chirac met in Europe and, while disagreeing
on almost everything else, issued a stern warning to the
government in Damascus to get their troops out of Lebanon.
Since that day, Secretary of State Condoleezza Rice and her
French counterpart blasted Syria and then the likes of Germany,
Russia, Egypt and, shockingly, Saudi Arabia piled on to
condemn the government of Bashar Assad. Throw in some
classic ‘people power’ in Beirut itself and before you knew it, the
government in Lebanon had collapsed and Syria’s puppet,
President Lahoud, was scrambling to keep up with the pace of
change.”
[Where I was wrong then was that I thought Assad may fall,
“though it’s difficult to see who would fill the breach.”]
And so this is where history will be harsh. In the first few
months following Rafik Hariri’s death, the UN, U.S. and France
led the way in expelling Syria’s military. President Bush then
had a terrific opportunity to work with Chirac to force Lebanon
to confront the issue of Hizbullah.
And the key? Shebaa Farms, a tiny piece of land attached to the
Golan Heights that Israel kept when it left Lebanon in 2000.
And why has this been important? Because it was Hizbullah’s
raison d’etre, for declaring itself a resistance force. Hizbullah
consistently said it was defending the honor of the Lebanese
people by confronting Israel over Shebaa Farms.
Fouad Ajami, an Arab affairs expert, got it all wrong (as he often
does) in an op-ed Friday in the Wall Street Journal.
Ajami wrote:
“No great emotions stirred in Lebanon about the Shebaa Farms.
It was easy to see through the pretense of Hizbullah. The state
within a state was an end in itself.”
But Ajami misses the point, and the only other ‘expert’ I’ve
observed over the past two weeks who gets it is former U.S.
Green Beret Bob Bevelacqua, who was cut off by Bill O’Reilly
literally as he was mentioning “Sheba……” Major Bevelacqua,
I knew where you were going with this one.
Don’t you see? The U.S., France and the UN should have
pressured Israel to give up Shebaa Farms, thus taking away
Hizbullah’s reason to remain armed there. There would have
been nothing else to defend. Hizbullah would have come up
with a reason to say no, but they would have then been exposed
as frauds before the world community once and for all.
At the same time, the U.S. and France could have worked
together to not only strengthen the Lebanese government, but to
rearm its military. Once Israel had left Shebaa, the majority
government in Lebanon would have had no other choice but to
expel Hizbullah if it remained. If Hizbullah then held fast, well,
Israel would have also had a right, under international agreement,
to move back in.
It wouldn’t have been easy, but it was right there in front of our
leaders all the time.
The other day President Bush said “we worked hard to free
Lebanon from Syrian influence.” Perhaps, for a month or two,
but then the White House, as the sole superpower in the world,
abandoned the heroes of the Cedar Revolution. You never heard
another word from the president except when he wanted to throw
out some inane platitudes on fighting for democracy. I could
show you tens of times I would then add, ‘we haven’t done
enough in Lebanon.’
So President Bush said this week, “Sometimes it requires tragic
situations to help bring clarity in the international community.”
No, Mr. President. Sometimes it takes creative leadership, as
well as a curiosity about the world that is tragically lacking in
your case.
It’s all so sad. On Friday, Condoleezza Rice spoke as if Lebanon
merely had a few bridges down and a sewage plant or two that
was inoperable. Instead Lebanon is being destroyed and the
United States never tried to prevent it.
We all agree Hizbullah and Hamas, and by extension Iran and
Syria, are bent on Israel’s destruction. But there’s far more to
this story and the history is being written by the hour.
Iran / Iraq
Aside from all the evil Iran is involved in with regards to
Hizbullah, it promised that it would give its answer on the
package of incentives for its nuclear program on Aug. 22. But it
also warned:
“If the path of confrontation is chosen instead of the path of
dialogue, and if there is any action to limit the absolute rights of
the Iranian people, the Islamic Republic will have no choice but
to revise its policy.”
Otherwise, an official government statement read, “Iran has
welcomed the offer and is examining it with a positive attitude.”
And over in Iraq, we learned this week that an average of 100
civilians are being killed daily in sectarian violence. Baghdad’s
morgue, for example, has already taken in over 1,000 bodies this
month alone. In fact, since the Iraqi government’s security
crackdown, attacks in Baghdad have soared 40 percent,
according to the U.S. military.
It’s gotten so bad that Grand Ayatollah Ali al-Sistani, seemingly
the only voice of reason in Iraq’s clerical community, said the
bloodletting must stop. Sistani, a Shiite, was addressing the likes
of Moqtada al-Sadr and his Mahdi Army.
Separately, I have written in the past of the brain drain in Iraq
and the issue of doctors being killed, but James Hider and Ali al-
Hamdani reported the following for The Times (of London).
“Baghdad’s medical facilities are simply overwhelmed by the
daily carnage. They were stripped down by a decade of UN
sanctions, looted after the U.S. invasion and then slowly rebuilt
to cope with a peacetime city that never materialized. There are
only 30 intensive care beds in the capital.
“The Ministry of Health has been taken over by supporters of
Moqtada al-Sadr….who have little medical experience.
“Adel Abdel-Mohsin, the Deputy Health Minister, told The
Times that 190 medical staff had been murdered and 400 doctors
kidnapped and that 1,000 (other) doctors had fled the country….
“ ‘Doctors are all afraid of showing up in the wards because of
the recent threats to us,’ a doctor from Baghdad’s main hospital
complex told The Times yesterday.
“ ‘I have started telling families after surgery that their relatives
will die soon because there is no proper follow-up,’ he said….
“Doctors in Baghdad’s hospitals no longer even wear white coats
or carry stethoscopes for fear that gunmen might storm their
hospital. Instead they try to mingle with relatives whenever
armed men enter the building. ‘We are afraid of going near a
patient because if he dies we’ll be kidnapped or killed,’ said the
doctor.”
The threats and violence have gotten so bad, the other day there
were 15 medical staff present in the Baghdad complex where
once there were 500.
On a separate issue, it doesn’t help for Prime Minister Nouri al-
Maliki, a Shia, to blast Israel in the current crisis. “I condemn
Israel’s) aggressions and call on the Arab League…to take quick
action.” That’s our man in Baghdad.
Lastly, you have the ongoing issue of the Kurds which is vastly
underreported but threatens to spill over at any moment.
Turkey’s Islamist government has warned U.S. and Iraqi forces
that they must confront the Kurdish rebels. 15 Turkish soldiers
and policemen were killed in the past week in clashes with the
Kurds and Turkey is warning if their activities are not stopped,
Turkey is going in. Forget the politicians, Turkey’s military
could easily say enough is enough, and frankly I wouldn’t blame
them.
[Any conflict with Turkey would also have an adverse impact on
the new Baku-Tbilisi-Ceyham pipeline connecting Azerbaijan,
Georgia and Turkey that was to supply up to 1 million barrels per
day of oil, much of which would then transit to the U.S. Since it
ends on Turkish soil, they don’t necessarily have to cooperate as
others would gladly take the crude.]
Wall Street
No doubt, the Street is peopled with idiots. How else do you
explain the reaction to Federal Reserve Chairman Ben
Bernanke’s semi-annual testimony to Congress on the state of the
U.S. economy? Following the first round of questioning by the
Senate on Wednesday, the markets roared their approval, with
both stocks and bonds staging significant rallies. But most of the
gains were then given back on Thursday and Friday, and then
some in the case of Nasdaq.
So what did the chairman say? Nothing, really. Growth is
moderating, as anyone who lives in the real world can see, and in
the Fed’s mind inflation pressures “remain contained” but are
also an ongoing concern. Again, nothing new here.
But the market seemed to focus in on Bernanke’s statement that
the Fed may accept higher core inflation (ex-food and energy),
short-term, with the expectation that a slower economy would
lead to falling inflation later.
Well, if you’re one who has been waiting for the Fed to stop
hiking interest rates, you would interpret this last bit to mean the
board may “pause” when it next meets on Aug. 8.
At the same time, though, the Fed’s own forecasts for economic
growth are still quite bullish…3.25-3.50 percent for 2006 and
3.00-3.25 percent in 2007, together with core inflation of just
2.25-2.50 percent. Ergo, if demand remains that strong, such as
for energy which would be the case in a 3.00- 3.50 environment,
then inflation pressures would continue to weigh on markets and
the Fed would have to keep hiking rates, or start up anew which
psychologically would be a disaster. At least that’s my way of
looking at what Bernanke said.
As for my own opinion on the state of things, you know I believe
the Fed already overshot in hiking the funds rate to 5.25 percent,
since the last few moves in particular won’t be felt on key items
such as adjustable rate mortgage readjustments until early 2007.
So at times like these, let’s go back to our three-legged stool; the
consumer, housing, and capital (business) spending. Let’s also
not make this harder than it is.
The consumer is slowing. Chain store and restaurant sales are
telling you this in the two easiest, none big-ticket sectors to
explore. The high cost of gasoline plays a large role here.
Larger items, such as auto sales, are also hurting as Americans
begin to readjust their vision of the ideal set of wheels given the
fact $3.00 gas, or thereabouts, may stick around a while. Auto
makers are suffering because they earn more on SUVs than they
do on Gremlins and Pacers. [They still make these, don’t they?]
Of course the consumer is also influenced by the wealth effect.
Americans have jobs but wage increases are not keeping up with
inflation; at least by any measure matched up against real world
expenses such as for healthcare and college tuition. Additionally,
Americans’ biggest investment is their home and this creates a
problem.
Chairman Bernanke told the House Financial Services
Committee on Thursday that “The downturn in the housing
market so far appears to be orderly.”
Yeah, I’ll buy that. Housing never crashes overnight, like stocks
can. It takes time for it to all sink in when it comes to your
home, but Americans are slowly beginning to understand that
real estate’s glory days are over. And over the next six to 12
months this hard reality will impact consumer spending in an
increasingly big way. Anyone who doesn’t believe that is getting
their heroin directly from Afghanistan.
The tale of the tape:
Sales in Southern California are down seven months in a row.
Sales in affluent Orange County, Cal., are off 26% year-over-
year.
Homebuilders are increasingly offering large discounts, while at
the same time the number of cancellations appears to be soaring.
[Regarding this last bit, I keep looking at those advertisements in
the Wall Street Journal for the luxury condo complexes in areas
such as Miami and Las Vegas. You just know many of these
places, still only half-completed, are hurting.]
Inventories across the country are rising so quickly, as my friend
Jimbo said this week, “ ‘For Sale’ signs now appear to be as
rooted on the front lawns as the oak trees to which they are
juxtaposed.” [At least that’s the case where the two of us live.]
Which brings up another issue…affordability. Boy, this one is a
killer. The Los Angeles Times had a piece that concluded only
11% of southern California households can afford a median-
priced home using conventional financing. That spells trouble in
River City, folks. And it’s not like any of us are getting a break
with our property taxes. Mine hit $10,000 this week….for a
condo in New Jersey!
Now if you tell me the economy will keep chugging along, as the
Fed says it will, and that inflation will remain low, as the Fed
says it will, then people will continue to “get by” for the most
part. And one positive is the fact mortgage rates should not spike
up because long-term rates appear to have peaked for now at still
historically low levels.
[But it’s those with adjustables that are getting whacked and in
many parts of the country that’s the vast majority of new
homeowners.]
So that’s our second leg of the stool. The third is capital
spending and I hate to keep beating a dead horse, but aside from
the fact a weakening housing and consumer sector don’t spell
good news on the cap-ex front, here you also have to deal with
geopolitical events and you all know what the prospects are on
this front, at least for the foreseeable future.
In the midst of this week’s earnings reports, you already have
some high-profile players like Intel, Dell and SAP expressing a
bit of discomfort. Business software giant SAP, for example,
said “The consumer spending environment is stable,” not exactly
“booming,” or even “strong,” while Dell and Intel warned of
slowing commercial markets worldwide and, in the case of these
two, price wars.
Well if the consumer, housing and capital spending are the three
bulwarks of an economy, especially this one, what follows right
below?
Earnings, interest rates, and these days oil prices.
Earnings are trending down, as will become more visible in the
second half (still growing, but at a much slower pace).
Interest rates, as measured by the 10-year, are stuck in a trading
range, 5.00-5.20 percent, but I expect the 10-year to break below
5 percent decisively in the second half, which will actually help
lessen the pain in the real estate market, short-term.
As for oil, it’s anyone’s guess. Tell me what Mahmoud
Ahmadinejad and Grand Ayatollah Khamenei are going to do in
Iran and I’ll tell you where oil is going. Secondly, tell me what
the weather gods have planned during this hurricane season and
I’ll firm up the oil picture even further. Otherwise, until the
global economy tumbles into recession, which is coming, we
aren’t going to catch any significant break in oil prices, say
below $60.
Lastly, China’s growth rate for the second quarter came in even
higher than I noted last week…11.3%…and their foreign
exchange reserves are now $941 billion. Something’s got to
give, soon, and whatever it is it’s not likely to be good for the
rest of us.
Street Bytes
–Stocks finished mixed on the week, with the Dow Jones and
S&P 500 managing gains, solely because of Wednesday’s big
stampede, while Nasdaq fell for a third straight week (now six
out of seven) based on the fact most of the dire earnings news
was on high-profile issues like Intel, Dell and Yahoo!
But there were a lot of good earnings stories out of the likes of
Apple Computer, Google, Honeywell, Caterpillar, Motorola, J.P.
Morgan Chase, Bank of America, even stodgy Bank of New
York. McDonald’s also rocked and rolled last quarter due to the
World Cup and rising breakfast sales; breakfast being the most
important meal of the day, after all. [That’s why I have a
chocolate covered donut and a large coffee from Dunkin’
Donuts, myself.]
Others on the down side, aside from the ones mentioned above,
included Citigroup and Ford, while in the “so-so” category you
had the likes of eBay.
–U.S. Treasury Yields
6-mo. 5.23% 2-yr. 5.07% 10-yr. 5.04% 30-yr. 5.09%
Rates rallied some, but as alluded to above are still basically in a
trading range, though now at the lower end of it. Bernanke’s
testimony helped, as did the fact we didn’t have a blow-up on the
inflation data.
For June, the producer price index came in at 0.5 percent, but
only 0.2 percent core, while the consumer price index was 0.2,
0.3 percent core.
Year-over-year, the figures on the PPI are 4.9 and 1.9 percent,
respectively, with the latter the core, ex-food and energy,
increase. For the CPI the corresponding numbers are 4.3 and 2.6
percent. It’s that 2.6 figure that has the Fed worried.
Housing starts for June were down 5.3 percent, adding to the
good tone in the bond market since bond vigilantes love bad
news, while there was a piece of better economic data in the form
of a stronger-than-expected industrial production number.
[Correction: Last week I said the public/national debt was $8.3
trillion. I took that out of my short-term memory bank, which is
faltering. It’s really over $8.4 trillion.]
–Russian state-owned oil giant Rosneft came to market in
London on Wednesday, the 6th-largest IPO in history, and was
essentially unchanged. What’s left of Yukos attempted to block
the offering on the basis that Rosneft had stolen the former’s
assets, which it had, but the offering proceeded nonetheless.
49% of the shares were purchased by BP, Malaysia’s Petronas
and China’s CNPC, with a fourth mystery buyer. Rosneft’s
future, however, is dependent on finding more reserves.
–On a different oil-related topic, I didn’t have a chance to
comment on this last week but the Journal ran this story that
Saudi Arabia, through its use of new technology, actually has
more oil than the “peak oil” adherents believe it does. Since I’m
increasingly in the peak oil camp myself, I got a kick out of a
commentary from my friends at Pritchard Capital.
“Yes, the Saudis have ramped up their drilling in a big way, and
they are doing more complicated drilling, not because they want
to but because they have to! They went from less than 20
operating rigs to over 100, going to 120 by year end. And yet
Saudi production is still generally flat.”
Recall a few weeks ago I told you of Norway’s plight and how
they are seeking more and more drills just to maintain production
at existing levels, and also how many of these same rigs, both
deepwater and shallow water, are heading to areas like the North
Sea as well as the Persian Gulf, let alone the land rigs that are
being reshuffled all over the world.
Bottom line, it’s the rig operators who are profiting, of course,
and there is a big backlog for new equipment. But they aren’t
necessarily finding any substantial new reserves.
–Bloomberg News had another related tidbit on Friday
concerning Royal Dutch Shell and its quest for oil on Russia’s
Sakhalin Island and the seas north of Japan. Shell’s Sakhalin II
project has doubled to $20 billion as the company is desperate to
replace reserves ‘lost’ amidst its overstatements of two years
ago. Shell is facing all kinds of stumbling blocks here, including
from environmentalists. It’s the other side of the story that Big
Oil doesn’t do a good enough job at getting out when instead all
we hear about are their excessive profits.
–And in keeping with the above, while no doubt Big Oil’s
profits have been humongous in this era of $50, then $60, then
$70 oil, as Terry Keenan points out in the New York Post, last
year ExxonMobil, Chevron and ConocoPhillips paid more than
$44 billion in taxes, a 48 percent increase from 2004….in case
you’re wondering how the U.S. budget deficit could be coming
down so quickly. In fact, as Keenan notes, probably all of the
$55 billion in “unexpected corporate tax receipts (cited by the
administration) has come from the oil industry.” That won’t
always be the case, and it also doesn’t necessarily buttress the tax
cutting adherents’ argument, myself included.
–Former Brocade Communications Systems Inc. CEO Gregory
Reyes (no relation to Mets All-Star shortstop Jose Reyes), is the
first big fish to be fried in the options manipulation / backdating
scandal. At Reyes’s direction, Brocade manipulated its earnings
and played around with compensation expense as new hires were
given backdated options grants as part of Brocade’s attempt to
retain talent in the then competitive Silicon Valley environment.
That’s flat-out securities fraud.
The SEC claims at least 80 other companies are now under
investigation and many in the Valley are probably feeling a bit
queasy these days.
And, according to a joint study by academics at the University of
Iowa and Indiana University, more than 2,000 companies, or
about 29% of publicly traded entities, may have backdated or
manipulated options grants for top executives from 1996 to 2005;
not that this means it’s all criminal behavior as the important part
is disclosure and the accounting for the compensation expense.
–Staying in Silicon Valley, venture capitalists have roared back
when it comes to funding Internet companies. In the first three
months of this year the Los Angeles Times reports “venture
investors funded 761 deals worth about $5.6 billion,” up 12%
from the same period last year with much of this going to online
media and entertainment.
But while this isn’t necessarily a good thing, as some talk of a
second dot.com crash, understand that this figure is one-fifth the
staggering $28.1 billion spent in the first quarter of 2000,
according to PricewaterhouseCoopers.
–There hasn’t been a more patient, long-term investor than Saudi
Prince Alwaleed bin Talal when it comes to his huge stake in
Citigroup. But as Citigroup disappointed the Street with its
earnings this week, Prince Alwaleed said, “I’m patient, but
enough is enough,” in urging the banking giant to take
“draconian measures to control costs.”
–Shares in Microsoft recovered a bit despite a so-so report for
the quarter on word it was dipping into its cash reserves to buy
back $40 billion more of its stock. Since Wall Street started
bitching that Mr. Softie wasn’t doing anything with its cash,
Microsoft will have shelled out $100 billion in both dividends
and share repurchases. The company is, however, fairly
optimistic concerning its current fiscal year.
–It’s always nice to see an airline do well, even if it is at our
expense much of the time. Can’t live without them, after all, and
I do like Continental. The carrier reported second-quarter net
income of $198 million thanks to a 23 percent increase in
passenger revenue, which offset rising fuel costs. Just keep that
middle seat empty in my row, guys.
–Since the end of 2004, 44 of the top 55 executives at Fannie
Mae have left amidst the accounting scandal at the mortgage
giant.
–Amnesty International has blasted Yahoo, Microsoft and
Google in a new report on human rights abuses in China’s online
market.
“All three companies have in different ways facilitated or
participated in the practice of government censorship in China.”
While the three claim they are only abiding by Beijing’s laws
and policies, Amnesty counters that “none of the companies has
been willing or able to specify precisely which laws and legal
processes it has been obliged to follow.” [Financial Times]
–Further proof that the real estate bubble is global. From
Bloomberg News and the South China Morning Post:
“Thai real estate groups are concerned the Bangkok housing
market may slump, as the biggest new supply in nine years
coincides with higher interest rates and a slump in consumer
confidence.”
Thailand’s ongoing political crisis doesn’t help matters.
–Legg Mason paid its CEO, Raymond “Chip” Mason, $35
million in compensation, including a $14 million cash bonus, for
the year ended March 31. A shareholder advisory firm, Proxy
Governance Inc. (what a lousy name), says this is 126% more
than CEOs at peer companies and that his pay has risen 400%
over the last two years. Legg’s compensation committee said the
pay is warranted because he closed a deal with Citigroup and it
was necessary to keep him on board. Ah, where else is the guy
going? He founded the company, for crying out loud, plus he’s
close to retiring.
–Inflation watch: “A ‘perfect storm’ of record summer
temperatures, low global grain stocks and the expected growth in
biofuels has seen wheat prices rise to 10-year highs and may lead
to big increases in the cost of bread and pasta.” [Financial
Times] Of course, ex-food and energy, inflation is benign, so the
government tells us, so what the heck do you care?
But this also means corn and barley prices will rise, which in turn
means higher prices for beer! Aghhhhhhhh!
Actually, as Joe Bastardi of Accuweather recently told my
friends at Pritchard Capital, all the talk of increasing usage of
ethanol and other biofuels is incredibly dependent on the
weather, to a far greater extent than we are taking into
consideration.
–If your financial advisor ever uses the hackneyed expression
“The biggest risk is in being out of the market,” fire them;
especially now that you’re being paid a decent stipend to sit in
cash and you also know the world is fraught with danger.
–The CEO of BetonSports was arrested in Dallas as he changed
flights from the U.K. to his company’s headquarters in Costa
Rica. Of course online gambling is illegal in the U.S., even
though without us Americans plopping down $billions each year,
many of these offshore operations would be folding their tents.
However, Congress doesn’t appear ready to make it totally clear,
through legislation, just what is truly illegal behavior. So fear
not, gamblers.
–Real Estate Bubble, part LXCVIII…. “Tennis star Andre
Agassi is trying to sell for $22 million a San Francisco-area
home he bought five years ago – for $23 million.” [Wall Street
Journal]
Andre and wife Steffi Graf had initially asked $24.5 million back
in 2003.
And what does it feature? Two pools, three spas, a hydrotherapy
waterfall and a tennis court.
But wait….there’s more! The 10,500-square foot main residence
includes a theater, a four-bedroom children’s wing (hope it’s
supervised) and views of San Francisco and the Golden Gate
Bridge.
But wait….there’s more! It also comes with a detached four-
bedroom staff quarters (undoubtedly unsupervised) and a
separate guest house.
Don’t tell anyone, but I’m waiting for it to go down to $18.5 and
then I’m pouncing.
–And lastly, we note the passing of the chairman of Hooters,
Robert Brooks, who died suddenly at the age of 69. I offer
without comment his credo, as told to Fortune magazine in 2003.
“Good food, cold beer and pretty girls never go out of style.”
—
Foreign Affairs
Russia: President Vladimir Putin was on display this week as he
hosted the G8 summit in St. Petersburg, so what did we learn and
what was accomplished?
Well, if you didn’t know it before, he’s mighty confident these
days, puffed up as he is on oil revenues. At their first press
conference, Putin and President Bush were asked about the
process of establishing democracy in Iraq and Putin said, “We
certainly would not want to have the same type of democracy
that they have (there),” adding, “It is true that we assume that
nobody knows better than us how we can strengthen our own
nation. But we know for sure that we cannot strengthen our
nation without developing democratic institutions. And this is
the path that we’ll certainly take, but certainly we will do this by
ourselves.” [New York Times]
Some commentary….Editorial / Washington Post
“President Bush raised the subject of Russian politics
deferentially. ‘There will be a Russian-style democracy,’ he
conceded, borrowing from the Kremlin’s talking points; ‘I don’t
expect Russia to look like the United States.’ British Prime
Minister Tony Blair took the same approach, saying he would
raise the question of democracy ‘without wrecking the hotel
room.’ But this gentlemanly style did not appeal to Mr. Putin….
“If this is how Mr. Putin behaves when the eyes of the world are
upon him, the coming months look bleak. Russia’s leader has
already squashed the independent media. He has emasculated
the powers of Russia’s parliament and the independence of its
judiciary. He has abolished regional democracy, replacing
elected governors with Kremlin appointees. Anyone who
challenges Mr. Putin’s authority faces semi-legal harassment: tax
inspections, lawsuits, regulatory restrictions on efforts to open
offices or hold meetings.”
The conclusion? 2008’s election will be a farce.
More…The Times (of London)
“(With) bloodshed in the Middle East showing little sign of
abating, there are limits on what the leaders ensconced in St.
Petersburg’s ornate splendor can achieve in the short term, and
especially when the host is in such an irascible mood. President
Putin was overcome twice in a single day by the diplomatic
equivalent of a Zidane moment. His decision to head-butt
President Bush over Iraq and knee Tony Blair in the groin over
Lord Levy [ed. enmeshed in a corruption scandal that taints
Blair] speaks volumes about his defensiveness over the
shortcomings of Russian democracy and corruption. That Mr.
Putin should deliver such obviously premeditated insults to two
men who have invested huge amounts of time and capital trying
to sell him to skeptics may have tickled his domestic audience
but it irked his guests.”
Two days later…The Times (of London)
“Vladimir Putin thinks that he is riding high. He approached the
G8 summit facing international opprobrium for Russia’s creeping
autocracy. He has returned to Moscow stronger than ever; the
star of three packed press conferences (two of them held, in the
manner of a cult jazz musician, after midnight) and the creator of
a new ‘architecture for the future of international relations.’ Far
from being lectured on democracy by Messrs Bush and Blair, he
had the temerity to lecture them. To cap it all, they chatted
candidly into a live microphone that they had assumed was
switched off.
“Their actual conversation, for all the inevitable attempts to
mock it, was a sensible analysis of an intractable problem and a
discussion of possibly diplomatic solutions. That problem may
have eclipsed the summit’s formal agenda, but the Russian media
were still partly justified in calling the event a triumph for the
host nation. Barring a total collapse of its relations with the
West, Russia’s membership in the G8 now seems assured.”
But what of the issue of “energy security” that was to dominate
discussion before other events overwhelmed it? Nothing
happened. Russia refuses to ratify the Energy Charter Treaty,
which governs energy investment and transit issues in Europe,
Russia and other nations. In other words, Russia will continue to
use the likes of state-owned Rosneft and Gazprom to jerk
everyone around as it sees fit. Particularly in the case of
Gazprom, it has become the sole legal exporter of Russian
natural gas, which supplies the lion’s share of Europe’s needs.
And then there is this battle over Gazprom’s giant Shtokman
natural gas field. Putin, recognizing Russian companies can’t
develop it alone, will soon be selecting one or two outside
players, such as France’s Total and U.S. majors Chevron or
ConocoPhillips, to help in the project.
But this week Putin heaped praise on Norway’s Norsk Hydro and
Statoil. You don’t have to be a rocket scientist to read between
the lines on this one.
“You have probably heard that we are holding talks with several
countries on the development of different fields,” Putin said.
“But companies from Norway are among the first on this list.
This is a very comfortable partner for us for many reasons. First
of all, they don’t go around with their noses in the air; they work
objectively, very professionally.” [Moscow Times]
In all seriousness, this statement was as telling as anything else
we heard all week when it comes to the direction Putin is taking
his nation in. On the other hand, Putin could be holding up
Chevron and ConocoPhillips because of the failure of the U.S.
and Russia to reach agreement on World Trade Organization
accession. Supposedly, talks on this issue broke off over
Washington’s demand for more copyright protection as well as a
bigger market for U.S. farm products.
Back to Shtokman, though, much of the gas from this project is
to be shipped to the United States in the form of liquefied natural
gas, or LNG, and on this front at least Statoil has been marketing
LNG to the United States for several years.
But there was one other significant item this week, and it came
after the G8 summit wrapped up. Putin met with the leaders of
China and India, speaking of a new “architecture” in
international relations.
“After the collapse of the bipolar world, our world has not
become safer,” Putin said. “On the contrary, it has become less
predictable.”
“Since the entire system of international relations had been
worked out in previous decades to serve a bipolar world, we do
not have the tools to address the challenges of today. And,
therefore, here we are developing the architecture for future
international relations.”
Speaking of China and India, specifically, Putin went on, “Our
approaches to key international problems are very close or, as the
diplomats say, they practically coincide.”
Following this meeting, The Times (of London) concluded:
“The underpinnings of Russia’s relations with the wider world
are unchanged by two days of pageantry on the Gulf of Finland:
its economy is, for now, thriving but critically vulnerable to gas
and oil price fluctuations; and it remains endemically corrupt,
with no rule of law and therefore no guarantees for foreign
investors such as those now considering a stake in Rosneft, the
state oil giant.
“What did change at St. Petersburg was the West’s perception of
Mr. Putin as an individual. His guests paid him the courtesy of
muting their criticism of his anti-democratic tendencies. He
repaid them with wisecracks about Lord Levy and Iraq. A little
more grace, and less hubris, would have served him and his
country better.”
Lastly, two other items.
There was one positive development out of St. Petersburg, and
not to be underestimated; that being a new global initiative
between the U.S. and Russia to combat nuclear terrorism and
hopefully secure weapons-grade material. Within months, the
two should be joined by China, Japan, the other major European
powers, Kazakhstan and Australia.
But on a somewhat related note, aside from us finding out this
week that Iran had representatives observing the recent North
Korean missile tests (though not one educated person on the
planet should be surprised by this), we learned that Russia’s early
warning system failed to see two of Pyongyang’s bottle rockets
hit near Russian territory.
I’ve written quite a bit on this topic over the years. Russia
desperately needs to upgrade its satellite capacity. There are
tremendous holes in its coverage and that’s how you can easily
have an accidental nuclear war. Recall during Boris Yeltsin’s
presidency that the Russians mistook a flock of geese for a
surprise attack but it was Yeltsin, and a courageous Russian
general, that called off a counterstrike for a non-existent threat at
the last possible minute.
North Korea: The U.S. totally abandoned Japan and its hard line
on North Korea in favor of China and their jerking us all around.
So the Security Council came up with a vastly watered down
resolution that “strongly urges” North Korea to cease its nuclear
weapons program. Japan had sought to include more sanctions
and provide for enforcement by armed intervention.
With Washington convincing Tokyo to give Beijing more time
with its own diplomatic effort, of course the Chinese mission
failed. Or rather China wanted it to fail in order to make life
even more difficult for President Bush.
Meanwhile, South Korea appears to be firm in suspending food
aid shipments to the North and in retaliation Pyongyang said it
will end cross-border family reunions. President Roh still
argues, however, that the world shouldn’t “overreact” to the
missile tests.
China: And lest you forget the threat from here, a report by
Wendell Minnick of Defense News.
“China plans to deploy by year’s end the first of 60 Dong Feng
31-series intercontinental ballistic missiles (ICBMs), which will
be the first Chinese nuclear-tipped weapons that can target all of
Europe or the entire continental United States.
“This new capability raises a question among China-watchers:
Will Beijing change its stated policy to use nuclear weapons only
in retaliation for an atomic strike?”
By 2010, China will also have deployed five to seven new
nuclear-powered submarines, each with 16 nukes capable of
hitting any target in the U.S., thus creating a far more deadly
threat.
Taiwan: The military held its biggest live-fire drills in 20 years
on Thursday, showcasing its defenses against a Chinese attack.
India: Prime Minister Manmohan Singh is taking a harder line
following the deadly Mumbai train bombings. The first real
arrests were made on Friday, though what terror groups are
actually responsible is still sketchy.
But there was a different, rather troubling development in India
this week; that being the blocking of some Web sites that host
the country’s most popular blogs; yes, censorship. Some of the
Internet providers, though, have failed to cooperate. The
government has yet to offer a good explanation, though it is
sensitive to criticism on anything terror-related.
Ukraine: It seems certain former president Viktor Yanukovich, a
friend of Moscow’s, will return as prime minister in a new
governing coalition following four months of political stalemate
after the March election. Yanukovich, though, is still expected to
steer Ukraine to membership in the European Union and NATO.
But Putin now has a man who would likely do his bidding. As
for President Viktor Yushchenko, he is a greatly weakened figure
at this point.
Mexico: Lopez Obrador refuses to give up and last Sunday called
for a campaign of “peaceful civil resistance” in addressing a rally
of 1.1 million supporters. [Another is slated for July 30.] Lopez
Obrador now claims fraud at 60,000 of 130,000 polling places in
his contest against President-elect Felipe Calderon.
Of course this whole story is getting lost in the U.S. with
everything else that’s going on, but by the first week in August it
could be capturing more attention unless Lopez Obrador gives it
up. By the way, some of the participants in the rally held
banners that read “Death to Calderon.” Lovely.
Random Musings
–I am more than a bit familiar with Sheikh Nasrallah’s visage.
While in Lebanon last year I wrote of my trip to the Hizbullah
stronghold of Baalbek, bombed this week by Israel.
“It was a spectacular drive up into the mountains and then down
into Bekaa. The valley itself is flat with orchards, vineyards and
very non-descript (ugly) towns. Then about 20 minutes outside
Baalbek the scene changed dramatically. It got darker, even
though the sky was bright, as (my driver and I) drove under our
first banner with pictures of Ayatollah Khomenei and Sheikh
Nasrallah, the current Hizbullah leader. As I later described to a
friend, it began to resemble Mordor as all the Hizbullah flags,
marked with the raised fist and Kalashnikov, waved in the breeze
for miles on end into Baalbek.”
It was more than a bit unsettling.
–Argentines commemorated the anniversary of the 1994
bombing of a Jewish community center that killed 85.
Incredibly, nobody has ever been convicted though prosecutors
still believe it was the work of Hizbullah. And therein lies a
lesson for today. Their reach has always been global.
–Let’s see. According to USA Today and the Congressional
Research Service, here are the number of vetoes by recent
presidents:
Richard Nixon…43
Gerald Ford…66 [in less than 2 ½ years]
Jimmy Carter…31
Ronald Reagan…78
George H.W. Bush…44
Bill Clinton…37
George W. Bush…1
Yes, he finally did it. President Bush issued a veto. And in so
doing he went against Nancy Reagan and a host of others,
including many top congressional Republicans, to reject
legislation passed by Congress that would have overturned his
ban on federal funding for research on embryonic stem cells.
“This bill would support the taking of innocent human life in the
hope of finding medical benefits for others. It crosses a moral
boundary that our decent society needs to respect.”
There are certain topics I try to steer clear of in this column, such
as abortion. And on the topic of stem cell research I have done
little actual study of my own. Let’s just say I’m extremely
disappointed and while the president is playing to his base, if,
hypothetically, his supporters had the chance to vote for him
again and did so solely on this issue, as opposed to issues of war
and peace, for example, then our nation is doomed. Many
Republican candidates feel likewise as to their prospects this fall.
–Back to the issue of presidential vetoes, the Washington Post
has been running a series of reports on our disastrous federal
farm subsidy program. Oh, the president loves to talk about
fiscal responsibility, but why not veto something like the
following.
The U.S. Department of Agriculture runs a Livestock
Compensation Program that was originally intended to help
farmers during a drought. Like every other government
entitlement it has gotten way out of hand.
To wit:
“On a clear, cold morning in February 2003, Nico de Boer heard
what sounded like a clap of thunder and stepped outside his
hillside home for a look. High above the trees, the 40-year-old
dairy farmer saw a trail of smoke curling across the sky – all that
remained of the space shuttle Columbia.
“Weeks later, de Boer was startled to learn that he was one of
hundreds of East Texas ranchers entitled to up to $40,000 in
disaster compensation from the federal government, even though
the nearest debris landed 10 to 20 miles from his cattle.”
Overall, the Livestock Compensation Program doled out $1.2
billion in its first two years of existence, 2002 and 2003. Half of
it went to farmers in areas that were suffering from virtually zero
drought. [Gilbert M. Gaul, Dan Morgan, Sarah Cohen /
Washington Post]
–President Bush addressed the NAACP annual convention for
the first time in his presidency. He should have gone in 2001 or
2002. Instead this appearance looks flat out stupid. And what
was Condoleezza Rice doing there? Oh, I know why, but don’t
you think she has more important issues these days?
–The New York Post had this blurb concerning New York State
attorney-general candidate Andrew Cuomo, Mario’s boy. Talk
about classic politics and conflicts of interest, Cuomo collected
$36,000 ($18,000 apiece) for two speeches he did at universities
that it just so happens had received large grants from the
Department of Housing and Urban Development at the time
Andrew was running the department, 1997-2000. [The two
schools were the University of Nebraska and Indiana University.]
But then why should a Cuomo be any different than the rest?
–Talk about fraud and scandals, an inspection of Boston’s Big
Dig project and a connector tunnel that was the scene of a fatal
accident caused by a roof collapse, has revealed that well over
1,000 bolt assemblies, as well as 300 other areas in the complex,
are unreliable. Gov. Mitt Romney, a Republican presidential
candidate, has an interesting case on his hand. I don’t see how
this helps him, even if he does look like a take-charge guy. I said
last week this could develop into the “crime of the century” and
Massachusetts Attorney General Tom Reilly is contemplating
filing involuntary manslaughter charges due to discovery of
documents that show a substantial dispute back in 1999-2000
over the design of the tunnel. The cost of the Big Dig will now
exceed, gulp, $15 billion.
–I imagine it won’t be for two years or so, but as soon as Beirut
is safe, I’m going back.
–I was glad to see pretty-boy Ralph Reed lose his party’s bid for
lieutenant governor of Georgia. Reed is tied big time to lobbyist
dirtball Jack Abramoff.
–I imagine there are a lot of Lance Armstrong fans out there, but
I’m not one of them and he has created another stir in France
over his remark during ESPN’s “Espy Awards” show that when
it comes to France and their soccer team, “All their players have
tested positive for being assholes.”
Armstrong joined his former teammates at the Tour de France
and when asked about the comment he replied, “It was a joke.
You don’t understand.”
For a variety of reasons, Armstrong is a strong “Jerk of the Year”
candidate.
–I was attending a local zoning board meeting and before an
issue came up that I had a passing interest in, this woman
petitioned to be allowed to have some chickens in her yard. She
already does and a number of witnesses backed up her claim
there isn’t an issue; they’re not noisy, the area is clean, etc.
The rest of the audience, including yours truly, looked at each
other and said, “I didn’t know we had chicken coops in our
town.”
But then the director of our board of health stood up in
opposition and intoned, “Bird flu is here.”
“No it’s not,” said a zoning board member.
“Yes it is. It’s, it’s in Alaska.”
“No it’s not.”
Now I’m just sitting there, thinking I really want to help expose
this doctor for the quack he is, but I wisely kept my mouth shut.
I did decide, though, that he fell into the same category as Lance
Armstrong.
–I can’t help but pass this stuff on, since New Jersey Governor
Jon Corzine wants to seek higher office some day, but the first
big post-budget impasse poll shows him with only a mild
improvement in his approval rating, 44%.
–Jimbo was upset to hear that Victor Willis, the policeman in the
Village People, pleaded no contest to drug charges. This is but
the latest in a string of run-ins with the law since he left the band
in 1980. But as Jimbo says:
“If this had been the Cowboy, the Indian, or the Construction
Worker, I could accept it. But Victor Willis depicted law and
order as the Policeman. Just another icon of the 70s we can no
longer use as our ‘true north’ role model pointer.”
You got that right. I used to put Willis right up there with
Officers Pete Malloy and Jim Reed of “Adam-12.”
–During the week, when I felt overwhelmed with all the material
on the Middle East and thoughts of trying to put another column
together, I have to admit I contemplated Dan Rather’s last sign-
off as my entire “Week in Review”…. “Courage.”
Just kidding, friends!
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $621
Oil, $74.50
Returns for the week 7/17-7/21
Dow Jones +1.2% [10868]
S&P 500 +0.3% [1240]
S&P MidCap -2.0%
Russell 2000 -1.4%
Nasdaq -0.8% [2020]
Returns for the period 1/1/06-7/21/06
Dow Jones +1.4%
S&P 500 -0.6%
S&P MidCap -3.4%
Russell 2000 -0.2%
Nasdaq -8.4%
*The S&P MidCap, Russell and Nasdaq are all off 13-15% from
their recent highs.
Bulls 42.1
Bears 33.7
Note: For more on Lebanon, you may want to check out my July
20 edition of “Hott Spotts.” Then again, you may be so sick of
the topic you’ll opt for some fresh air instead.
🙂 _]
Have a great week. I appreciate your support.
Brian Trumbore
