[Posted 7:00 AM ET]
Wall Street
Republican political commentator Fred Barnes had an op-ed in
the Wall Street Journal on Friday, discussing how President
George W. Bush can recover his mojo (he can’t), but there was a
line that I got a kick out of because it sums up the confusion over
the state of the economy.
“You might think the economy, robust as it is, would give Mr.
Bush a boost. But it provides no help.”
Well, suffice it to say, an economy that has had four straight
quarters of 2.6%, 2.0%, 2.5% and, most recently, 1.3% growth is
far from robust; 3% being commonly defined as “trend”
economic activity.
But two items in particular can lead some to believe the U.S.
economy is doing just fine; the state of the stock market and
employment. Markets, in particular, run on psychology and
stocks have been soaring to new highs, not just here but around
the world, while employment in America remains strong, even if
recent job growth seems to be non-existent.
So why then isn’t the economy growing at a more rapid rate?
Interest rates are still at historic lows, after all. And with
investors’ portfolios up a sizable amount thus far in ’07 you’d
think everyone would be dancing at the malls.
Of course they aren’t because their #1 asset, their home (or 2 or 3
homes, as the case may be), is in most parts of the country taking
on gas. In fact, some of you may be detecting a musty odor,
especially if you’ve been trying to unload yours for six or more
months, even after lowering the price time and again.
So there is a certain unease out there, even as the equity markets
rally. Normally, it’s healthy for stocks when investors climb the
proverbial wall of worry, but this time it’s a little different.
When it comes to stocks, it’s as if folks are thinking as they put
in their ‘buy’ order, should I really be doing this? I’ll tell you
what I did this week in my own portfolio…I sold four issues and
reinvested just a portion in my biodiesel play in an attempt to get
closer to the 80% cash / 20% equities allocation I’ve been
espousing in these pages for over a year now. I just don’t feel
real comfortable these days.
Back to real estate, those, including Warren Buffett, who don’t
think the subprime mortgage debacle is a big deal for the rest of
the sector are flat out wrong. It has definitely impacted
psychology across-the-board and led to a tightening in credit
standards. Those looking to upgrade, in other words, have
difficulty doing so because it’s harder to sell what they own.
Builder Robert Toll said it’s simply a “lack of buyer confidence”
and he sees no recovery in sight. Certainly the one big number
that was published this week, home inventories, up 7% in April
from March, doesn’t help.
[I also see that in the May 21 issue of Business Week, there is a
story about one of our favorite topics, homebuilders and the land
they are on the hook for. There are huge liabilities out there,
many hidden from the books.]
But this week was more about the consumer. April was dreadful
when it came to the major retailers. The International Council of
Shopping Centers, for example, said the majors saw a decline in
April of 2.4%, the worst showing since the council started
tracking this in 1970. And for Wal-Mart, April’s decline of 3.5%
was its worst single showing in 28 years. Rival Target’s same-
store sales were down 6%. So it would appear that what some of
us have been saying for a while now is coming to fruition….that
being it takes time for consumers to recognize their chief asset’s
value is stagnating, at best. But when that reality hits, it’s only
natural to tighten the belt a bit on the spending front, and with
consumer spending accounting for about 70% of economic
activity, that isn’t good, sports fans.
What is good, however, is the global economy, which is why the
jobs picture in the U.S. hasn’t deteriorated. The rest of the world
is growing twice as fast as America, according to Goldman
Sachs, and coupled with a weaker dollar that makes our goods
cheaper overseas, non-U.S. sales by American corporations now
account for 48.6% of the total revenues for companies in the
S&P 500. So pray the rest of the globe doesn’t catch the cold we
appear to be developing, though of course it will because it is
suffering from the same chief symptom we have….a real estate
bubble. Ours has popped. The rest are in the early stages of
doing so; whether it’s Britain, Ireland, out of control Moscow,
Spain, or Australasia. And you can take that to the bank.
It also doesn’t help when our own Federal Reserve at times
appears to be dealing in a world with which we’re not familiar.
In holding the line on interest rates yet again this week, the Fed
offered the same schtick….that the “predominant policy concern
remains the risk that inflation will fail to moderate as expected.”
It has moderated, guys and gals. The core producer price
(wholesale) index for the past year is now just up 1.5%.
The Fed also said “economic growth slowed” since their last
meeting, and that the adjustment in housing is “ongoing.” No
kidding, Sherlock. But wait, there’s more. The Fed said “the
economy seems likely to expand at a moderate pace over the
coming months.” Well if you define moderate as “trend,” or 3%,
you can forget that. In other words, the Fed is kind of like
America’s military leadership, as I’ll detail below; not able to
deal with the reality on the ground.
About now, though, some of you may be thinking to yourself,
‘But editor, the Fed can’t lower rates because the U.S. dollar
would get killed further.’ You’d have a point. This week the
Bank of England raised its key lending rate to 5.50%, in an
attempt to slow their housing sector (as well as to fight inflation).
Home prices have more than tripled in the UK over the past 15
years, while, as the Journal reported, household debt in Britain as
a percentage of disposable income is higher than in the U.S.
At the same time the European Central Bank, while holding the
line on rates, strongly hinted it will also raise them anew come
June. So investors have been dumping dollars to seek higher
returns elsewhere.
But I’ll leave you with a short-term item to focus on…very short-
term…like on Monday. I can’t remember when the last time was
that we didn’t have a blockbuster deal announced over the
weekend or Monday morning. The mergers and acquisition
boom has been a prime driver of stock prices and M&A activity
is 63% higher than for the first four months of last year. April
was the busiest month ever on this score. No deal announcement
on Monday would be a poor sign.
Street Bytes
–The Dow Jones extended its winning streak to six straight
weeks, up 0.5% to 13326, but the Nasdaq fell 0.4% to 2561 and
the S&P 500 was unchanged. After plunging over 140 points on
Thursday, the market rallied on Friday’s punk PPI data, and
retail sales figure, to conclude the Fed may be lowering rates
sooner than later after all.
–U.S. Treasury Yields
6-mo. 4.90% 2-yr. 4.71% 10-yr. 4.68% 30-yr. 4.85%
Treasuries have been basically unchanged since last October,
which is why I long stopped saying much about the sector. But
some corporate and mortgage spreads have been widening
rapidly in the derivatives/swaps market as experts such as Bank
of America CEO Ken Lewis predict “We are close to a time
when we’ll look back and say we did some stupid things.” The
irrational liquidity bubble is about to pop. A few months back,
as Josh P. passed along, Wells Fargo & Co. CEO Richard
Kovacevich said “I am not a forecaster of the future; I’m a
historian. And history says this will blow up. It always has.
And there will be some blood on the street.”
–It’s all about China in so many ways these days. This week the
benchmark Shanghai Composite soared above 4000, or up
another 50% this year alone after a 130% gain in 2006. Asia’s
gambling culture is at work, no doubt, as trading volume hits one
record after another. And, according to Xinhua news agency, in
the first quarter of this year, 4.78 million stock accounts were
opened and in April, alone, a further 4.5 million new accounts
were set up.
China’s trade surplus also screamed higher yet again, $17 billion
in April, as exports rose 27% vs. an increase of 21% on imports,
thereby further exacerbating trade tensions with the U.S.
But when, and how, does the bubble burst? Speculators (there
are few real investors in the Shanghai market) just keep ignoring
all the dire warnings, including from government officials,
though I’m here to tell you I’ve figured it out. The game ends
when there is a major run on one of China’s largest banks, these
institutions being poorly regulated with shoddy books and
excessive loan portfolios. At least that’s my prediction and I’m
sticking to it.
–In the latest ranking on competitiveness, as published by Swiss-
based IMD business school, the United States retained its top
ranking. Project director Stephane Garelli said the U.S. position
was cemented by the dynamism of its financial markets and was
the easiest place to secure venture capital for business
development, as well as surpassing all other economies in key
technology criteria such as computers in use and hi-tech exports.
In turn, the U.S. is hurt by its trade deficit and national debt
levels that meant it was relinquishing its grip on monetary policy.
“It’s very good to be the leader, but the problem is that the U.S.
model has been copied by everyone else,” said Garelli. “The
U.S. constantly needs to reinvent itself because everyone else
steals its recipe.” [South China Morning Post]
Top Ten
1. U.S.
2. Singapore
3. Hong Kong
4. Luxembourg
5. Denmark
6. Switzerland
7. Iceland
8. Netherlands
9. Sweden
10. Canada
–Warren Buffett reiterated his warning on derivatives, “financial
weapons of mass destruction,” at his annual shareholder meeting.
“The introduction of derivatives has totally made any regulation
of margin requirements a joke,” referring to rules limiting the
amount of borrowed money an investor can apply to each trade.
“I believe we may not know where exactly the danger begins and
at what point it becomes a super danger. We don’t know when it
will precisely, but…at some point some very unpleasant things
will happen in the markets.” [Wall Street Journal]
–A Hong Kong couple was accused by the SEC of trading on
inside information concerning News Corporation’s bid for Dow
Jones, earning $8 million in the process. One possible contact
was Dow Jones director David Li, who happens to be a friend of
the couple. Mr. Li denies this.
–The chairman and chief executive of HBO, Chris Albrecht, was
forced to resign after he was arrested and charged with assaulting
his girlfriend in Las Vegas. The timing couldn’t be worse as
“The Sopranos” wraps up its run and the network looks to new
programming to fill the void.
–Former New York Stock Exchange CEO Dick Grasso won a
significant battle in his pay dispute when an appeals court ruled
3-2 that then New York Attorney General Eliot Spitzer didn’t
have the authority to bring key parts of the case disputing
Grasso’s $187 million pay package.
The suit sought to force Grasso to give back a large portion of his
compensation, ostensibly because Spitzer said it was
unreasonably high under the state’s rules governing not-for-profit
companies.
Two of the six elements of the case remain and with Spitzer no
longer attorney general, it remains to be seen whether his
successor, Andrew Cuomo, will even want to pursue the case
further. Grasso still has to deal with a separate decision last fall
by a New York State justice that he should be forced to give back
some compensation for breaching his fiduciary duty.
–Significantly, Democrats and the administration reached
agreement on labor rights for trade deals that could help passage
of pending ones with the likes of Panama and Peru. [The fate of
trade deals with Colombia and South Korea are less certain.]
–Purdue Pharma, makers of the painkiller OxyContin, was fined
$600 million, one of the largest amounts ever paid by a drug
company, for misleading regulators and doctors about Oxy’s
addiction properties. Three executives, including the president,
also pleaded guilty as individuals and collectively agreed to pay
another $34.5 million in fines.
Purdue Pharma marketed OxyContin as if it posed no threat of
abuse and addiction, yet users soon discovered that when
misused it produced a high as powerful as heroin. Rural areas, in
particular, began to see high rates of addiction and crime related
to the drug. OxyContin is pure oxycodone, a narcotic, found in
much smaller amounts in painkillers such as Percocet.
–It’s been a while since I updated you on the condition of
Alcatel-Lucent’s lawn at its North American headquarters
building, located a few blocks from my home. Thanks to
copious amounts of rain this spring, the lawn has never looked
better, as I suspect they also may have spread some fertilizer
around, aside from that left by the hundreds of Canada geese that
call it home.
And so one shouldn’t be surprised that ALU then reported on
Friday that it saw a solid 10% gain in revenues for the current
quarter, which would represent a turnaround of sorts, and the
shares rose on the news. We’ll take another look at the grass in
July.
–With the latest wildfires in California, that verged on
catastrophic, I guess it’s no surprise that Allstate Corp. is going
to stop writing homeowner policies in the state beginning in July.
The move is being made to help the insurer control its exposure
to fires and earthquakes and is in keeping with Allstate’s prior
actions to trim its exposure to hurricanes in states such as
Florida.
–Fire ants cause $6 billion in agricultural damage annually, but
now researchers may have pinpointed a naturally occurring virus
that kills the ants. The U.S. Department of Agriculture is
seeking commercial partners to develop the virus into a pesticide.
I’ll pass.
–Where have I been? I never knew that sometimes when you
pay for five gallons of gas, you aren’t actually getting that much.
As noted in the Los Angeles Times, “Fuel expands when
temperatures rise. And because gasoline station nozzles don’t
adjust for the change, motorists and truckers end up with less of
the energy that keeps engines humming.” In California, this is
costing drivers $480 million annually. It’s a particularly big
issue for truckers. Congressman Dennis Kucinich is set to hold
hearings on “hot fuel.”
As reporter Elizabeth Douglas notes, “At 60 degrees, a gallon is
231 cubic inches. But when fuel is warmer than 60 degrees, the
liquid expands. When it’s colder, the fuel contracts….Wholesale
facilities are equipped with devices that adjust volumes to bring
the gallon tally in line with the 60-degree standard.”
–Here are the top three most expensive homes on the market in
America these days.
$155 million – The Pinnacle at Yellowstone Club, Big Sky,
Montana
$135 million – Hala Ranch, Aspen, Colorado
$125 million – Trump Estate, Palm Beach, Florida
A new magazine featuring such spreads, “Ultimate Homes,” is
hitting newsstands this week, in case you’re in the market for one
yourself. The Pinnacle abode is 32,000 square feet and situated
on 160 acres with 360 degree views of the Rockies. But… you
run the danger of being mauled by grizzlies.
–It’s all about clean energy, these days. General Motors became
the first U.S. automaker to join a coalition of companies,
including General Electric, calling for mandatory nationwide
caps on global-warming pollution. But GM doesn’t support
tightening of fuel-economy standards, so it’s nothing more than a
PR stunt.
That said, Corporate America is clambering aboard the green
train at light-speed. Citigroup announced a $50 billion initiative
to support investments in “clean” technologies, as well as
improving the carbon footprint on its own facilities.
Meanwhile, the total value of new buildings seeking the U.S.
green building rating rose 50%. As reported in the Financial
Times, in New York, every one of the more than 50 projects
valued above $25 million now being developed in Lower
Manhattan is being built along environmental guidelines.
And Wal-Mart wants to be known as the green retailer, installing
solar panels in 22 stores in California and Hawaii. Kohl’s
previously announced it will convert 64 of its 80 California
stores to solar.
Lastly, I know one reader, Chris C., who will be pleased to learn
hedge fund king Paul Tudor Jones is backing a project involving
underwater turbines (tide power) in New York Harbor that
capture the current and turn it into electricity.
So the march to alternative energy is now unstoppable and this is
a good thing. There will be big winners, as well as countless
losers, though, so hedge your bets, just as I’m attempting to do
with my own investments in solar, biodiesel, and wind power.
But for those of you promoting ethanol, check out my latest
“Wall Street History” piece for further enlightenment. We’re
starving the poor on this one.
–Speaking of the above, I have to add some comments I just
received from my friend Ken S. in Omaha as I was wrapping up
this column. Ken writes on ethanol:
“There are plants being built or planned about every 20 to 30
miles in central Nebraska. I predict corn will be $2.00 to $2.50 a
bushel, 2/3 of these plants out of business and four times the
ethanol produced from cellulose materials in 8 to 10 years.
Everybody is going nuts around here, thinking they are all going
to be rich. They are taking out mortgages on their farms to buy
into the plants and you know this can only lead to trouble.”
Foreign Affairs
Iraq: President Bush and Democratic congressional leaders
continue to do their little dance on funding for the war, each
hoping to be the female spider that then devours the male. But
more than a handful of Republicans, including yours truly, are
increasingly impatient with the surge, though it would appear the
compromise developing is that Congress will give the president
until September, and Commanding General David Petraeus’
report, to prove it is working before the next true showdown.
Thus far, as one U.S. officer told the Washington Post, the
“number of attacks has stayed relatively constant” in Baghdad
since the surge began.
President Bush also appears to be ignoring the advice of advisor
Karl Rove and Vice President Cheney in recognizing that
benchmarks must be in play.
And I assume a few of you noticed what happened this past week
concerning an issue I brought up last time; “Wait until the
American people see that the Iraqi parliament is about to take a
two-month recess!”
The administration finally got the message, but not until Senator
John McCain on Monday pronounced himself livid at the thought
the Iraqis would do this, and then the vice president delivered the
message in person in Baghdad while Secretary of Defense Robert
Gates expressed his own vehement disapproval of the legislators’
plans. As I go to post, however, there is still doubt as to what is
actually going to occur, though in reading some editorials from
the region, more than a few Iraqis feel it infringes on their
sovereignty to have the United States tell them how their
lawmakers are to act. Unbelievable. The White House should
give Maliki two weeks to get his house in order or remove him.
But on another of my pet peeves since 2003, the state of our
military leaders, retired Army officer, and fellow neocon, Ralph
Peters had some of the following for his column in the New York
Post.
“Frankly, this surge is a desperate measure after four years of
blunders and dithering. It may prove too small and too late. But
the stakes are so high that, despite the inevitable cost in
American blood, this last gambit is worth the effort.
“And it is the last gambit. If the troop surge fails, we’ll start
striking the tents. Gen. Petraeus is well aware of all this. If any
four-star general in active duty can make it work, it’s him.
“Unfortunately, that’s faint praise. The Army hasn’t fielded a
four-star with the breadth of vision to wage war at the strategic
level and the killer instinct to win on the battlefield since Gen.
Barry McCaffrey retired a dozen years ago.
“As the generals who led infantry platoons and companies in
Vietnam fade from the ranks, we face an incongruous situation in
which our lieutenants, captains and majors are combat veterans,
while the generals above them never fought in a direct-fire
engagement or led daily patrols through Indian country.
“Junior officers now have a better grasp of what war means than
Army generals do. Platoon leaders want to win. The generals
want to make people happy.
“For two generations, we’ve trained military leaders to be
statesmen in uniform, downplaying pugnacity and guts. We send
promising officers for Ivy League doctorates, stressed political
assignments, and inducted them into the Washington-insider cult
of Salvation Through Negotiations.
“Now we have bobble-head generals who nod along with the
diplomats who want to hold their Versailles Conference before
winning the war.
“It’s past time for our senior leaders to jettison the political
correctness and fight to win. But they honestly don’t know how
anymore. They’ve been so thoroughly drugged with failed
academic theories about counterinsurgency-with-lollipops that
they’re more concerned with avoiding embarrassments than with
killing the enemy….
“We should all pray that this last-ditch effort succeeds. But
we’re paying for a decade-and-a-half of gutting our armed forces
and sacrificing troop strength to pour money into the pockets of
unscrupulous – and well-connected – defense contractors. Now
soldiers die in sewage-flooded alleys while the billion-dollar
bombers sit and rot….
“Whatever happens in Iraq, the core lesson isn’t that such
conflicts can’t be won – that’s nonsense – but that you can’t win
if you’re more concerned about placating your critics than about
defeating the enemy.
“Our troops know how to fight. Their leaders don’t.”
Iran: Vice President Cheney warned Tehran not to think about
blocking the sea lanes. He also reiterated the United States will
not let Iran acquire nuclear weapons, but right now it’s all just
talk. What will be interesting to follow over the coming weeks is
the reaction to the two kidnappings of Americans in Iran, as well
as the Iranian public’s reaction to the gasoline price hikes about
to be imposed.
Afghanistan: In yet another serious incident, NATO confirmed
that a battle between U.S. forces and Taliban militants caused
civilian casualties. A U.S. Special Forces unit was ambushed
and forced to call in airstrikes.
Earlier, a U.S. army spokesman said “I stand before you today,
deeply, deeply ashamed and terribly sorry that Americans have
killed and wounded innocent Afghan people. The deaths and
wounding of innocent Afghans at the hands of Americans is a
stain on our honor and on the memory of the many Americans
who have died defending Afghanistan and the Afghan people.”
Sadly, we’re losing the battle for the hearts and minds.
France: Nicolas Sarkozy won the runoff with Segolene Royal 53-
47, while turnout matched the first round’s 84%….rather
staggering. Rioting in some of France’s poorer areas
accompanied Sarkozy’s election, even though he has done more
for minorities (read immigrants) over the years than any of his
rivals.
Sarkozy has given himself 100 days to gain passage of his first
wave of economic reforms, including loosening of the 35-hour
workweek as well as tax cuts. “I will not act fast, I will act very
fast,” he said as he prepares to take over May 16.
But while he is definitely seen as more pro-American than
Jacques Chirac, Sarkozy is unpredictable and the Bush
administration should be prepared for anything. He may turn out
to be our greatest friend one day, and a belligerent rebel the next.
“(To our) American friends,” he said in his acceptance speech, “I
want to tell them that France will always be by their side when
they need her, but that friendship is also accepting the fact that
friends can think differently.”
One of Sarkozy’s chief priorities is climate change and he has
already sharply criticized the White House on this. Nor has he
been too supportive of the effort in Afghanistan.
Britain: Prime Minister Tony Blair confirmed he is stepping
down June 27, thus ending the longest run for a Labour Party
prime minister, over 10 years. His legacy, unfortunately, is tied
heavily to Iraq despite the fact Britain is in the midst of its
longest stretch of prosperity in 200 years, Scotland and Wales
gained their own identities and parliaments, and Catholics and
Protestants came together in Northern Ireland. 54% of the
British people believe Blair has been a disappointment.
But regarding the new power-sharing agreement in Northern
Ireland, it was startling to see the likes of Ian Paisley and Gerry
Adams laughing together.
Firebrand Paisley said, “I believe we’re starting on a road which
will bring us back to peace and to prosperity. And I would
challenge the people of Northern Ireland to rise to the challenge
today and be determined that come what may, we’ll make this a
country where all men and women will be equal under the law
and equally subject to the law.”
Sinn Fein leader Adams said, “I think what today proves is that
dialogue and perseverance and tenacity and persistence can bring
about results.”
Back to Blair, his successor will be Gordon Brown, who doesn’t
face any party opposition and technically doesn’t have to call an
election until May 2010.
And looking at Europe, overall, in just about one year we will
have had a complete turnover of the continent’s three top leaders;
Sarkozy for Chirac, Brown for Blair, and Merkel for Schroeder.
When it comes to France, it’s why I wasn’t into the French
bashing as much as other conservatives because I’d like to think I
was looking ahead….and indeed wrote as much.
Russia: The Kremlin has cut exports of fuel oil, diesel and
gasoline to Estonia by 30% as a result of the spat over the
removal of a World War II memorial in Tallinn.
And then President Vladimir Putin, in a statement at a Victory
Day parade on Red Square, inferred the United States was
becoming a threat on the level of Hitler, as without actually
naming the U.S. he noted that the world faces threats to peace
and “disrespect for human life, claims to global exclusiveness
and dictate, just as it was in the time of the Third Reich.”
To beat a dead horse, you think Putin is bad, wait until Sergei
Ivanov is in charge.
Turkey: Foreign Minister Abdullah Gul withdrew his bid for the
presidency when a second vote in parliament failed to achieve
the required quorum. But, when new elections for parliament are
held in July, Gul could reemerge as a candidate again.
Meanwhile, the government is increasingly incensed at the
Kurdish militants, who are now employing enhanced IEDs,
having learned how to use them on the Iraq battlefield.
Lebanon: UN Secretary-General Ban warned of ongoing arms
trafficking from Syria into Lebanon. “Any form of illegal
transfer of arms not only stands in contradiction to Resolution
1701 (reached following last summer’s war with Israel), it also
inherently undermines the authority of the state and its monopoly
on the legitimate use of force….I am deeply concerned, however,
that the existing public and media discourse – whether based on
evidence or speculative – may in fact accelerate, if not prompt, a
domestic arms race in Lebanon, with unforeseeable
consequences.”
Colombia: What a distressing time for President Alvaro Uribe, as
he came to Washington to meet with congressional Democrats,
seeking their support, and got an earful instead.
Editorial / Washington Post
“Colombian President Alvaro Uribe may be the most popular
democratic leader in the world. Last week, as he visited
Washington, a poll showed his approval rating at 80.4% –
extraordinary for a politician who has been in office nearly five
years. Colombians can easily explain this: Since his first election
in 2002, Mr. Uribe has rescued their country from near-failed-
state status, doubling the size of the army and extending the
government’s control to large areas that for decades were ruled
by guerrillas and drug traffickers. The murder rate has dropped
by nearly half and kidnappings by 75%. For the first time thugs
guilty of massacres and other human rights crimes are being
brought to justice, and the political system is being purged of
their allies. With more secure conditions for investment, the
free-market economy is booming.
“In a region where populist demagogues are on the offensive,
Mr. Uribe stands out as a defender of liberal democracy, not to
mention a staunch ally of the United States. So it was
remarkable to see the treatment that the Colombian president
received in Washington. After a meeting with the Democratic
congressional leadership, Mr. Uribe was publicly scolded by
House Speaker Nancy Pelosi, whose statement made no mention
of the ‘friendship’ she recently offered Syrian dictator Bashar al-
Assad. Human Rights Watch, which has joined the Democratic
campaign against Mr. Uribe, claimed that ‘today Colombia
presents the worst human rights and humanitarian crisis in the
Western hemisphere’ – never mind Venezuela or Cuba or Haiti.
Former vice president Al Gore, who has advocated direct U.S.
negotiations with the regimes of Kim Jong Il and Mahmoud
Ahmadinejad, recently canceled a meeting with Mr. Uribe
because, Mr. Gore said, he found the Colombian’s record ‘deeply
troubling.’”
Democrats are concerned about the reach of right-wing
paramilitary groups, as noted in this column many times, but as
the Post opines, “this has been well-known for years; what’s new
is that investigations by Colombia’s Supreme Court and attorney
general have resulted in the jailing and prosecution of politicians
and security officials….But the president himself has not been
charged with wrongdoing.” Instead, Uribe has been doing all the
right things in paving the way for the current investigations.
“Perhaps Mr. Uribe is being punished by Democrats…because
he has remained an ally of George W. Bush even as his neighbor,
Venezuela’s Hugo Chavez, portrays the U.S. president as ‘the
devil.’ Whatever the reasons, the Democratic campaign is badly
misguided. If the Democrats succeed in wounding Mr. Uribe or
thwarting his attempt to consolidate a democracy that builds its
economy through free trade, the United States may have to live
without any Latin American allies.”
Robert Novak / Washington Post
“(Uribe’s) three day to Capitol Hill…was described by one
American supporter as ‘catastrophic.’ Colombian sources said
Uribe was stunned by the ferocity of his Democratic opponents,
and Vice President Francisco Santos publicly talked about
cutting U.S.-Colombian ties.
“Uribe got nothing from his meeting with House Speaker Nancy
Pelosi and other Democratic leaders. Military aid remains
stalled, overall assistance is reduced, and the vital U.S.-
Colombian trade bill looks dead. Uribe is the first Colombian
president to crack down on his country’s corrupt army officer
hierarchy and to assault both right-wing paramilitaries and left-
wing guerrillas, but last week he confronted Democrats wedded
to outdated claims of civil rights abuses and rigidly protectionist
dogma….
“Santos, a University of Texas graduate…said that failure to
ratify the free-trade agreement would ‘send a message to the
external enemies of the United States’ (meaning Venezuela’s
Chavez) that ‘this is how America treats its allies.’ He added
that Colombia might ‘have to reevaluate its relationship with the
United States.’….
“President Bush at least paid lip service to Uribe last week, but
his concentration is on Iraq as the U.S. position in its own back
yard deteriorates. Passivity is the best description of the
administration’s posture, while Democrats follow human rights
activists, environmentalists and labor leaders on the road to
losing an important ally.”
I would add for six years the White House’s policy towards Latin
America has been pitiful, and only now, in small snippets,
does the administration seem to get it. But it needs to bring
Pelosi and Co. into the Oval Office and have the president tell
her “Cut the crap” when it comes to this issue.
Thailand: In the worst attack against government forces in recent
memory, seven Thai soldiers were killed by a roadside bomb as
the Muslim insurgency in the south continues to inflict a heavy
cost. 2,000 have died since early 2004.
I know one place I wouldn’t be vacationing these days and that’s
Phuket, which is in the south of the country and a leading
destination for Europeans. You’re taking a risk in going there.
China: I heard from my friend Sister Joanne on the island of Yap
in Micronesia where I have a church and they are working on
plans for a Catholic High School, Yap being 83% Catholic. The
only reason why I mention this is the Chinese Government has
offered to build it since they have done similar projects on other
islands in Micronesia. It’s not a certainty they will, but this is a
topic I’ve written on before when I’m in the region. As the
United States abandons Micronesia, and the flow of subsidies
dries up, China is moving in to fill the void. And it makes
perfect sense, geopolitically. Remember, the U.S. is building up
its base on the island of Guam in a big way and Yap is but an
hour away by air. Beijing thinks long-term, of course, far more
than the average American does with their one hour attention
span, if that, so remember, China is bound and determined to
have a blue-water Navy that competes with America’s. Who
knows…ten years from now my church might have Chinese
characters on the door.
Zimbabwe: As the nation continues to implode and descend into
the netherworld, the government announced 20-hour daily
electricity cuts for households as supplies are shifted to irrigate
the winter wheat crop amid dire food shortages. Up to $2 billion
is needed to install new equipment and expand production of its
crumbling power plants. They won’t see dollar one.
Random Musings
–In the latest Newsweek survey, President Bush’s approval
rating was at 28%, the lowest since Jimmy Carter in 1979. [Bush
was stuck at 34% in the USA Today/Gallup poll, the 8th straight
month below 40% in this one and the longest stretch of dismal
ratings aside from Harry Truman and Richard Nixon.]
Newsweek also has Rudy Giuliani leading John McCain 56-41 in
a two-man race, though in New Hampshire, another poll has Mitt
Romney ahead with 32% to Giuliani’s 23% and McCain’s 22%.
For his part, after fumbling the abortion issue in the debate the
other day, Giuliani has decided to reaffirm his stance on abortion
rights.
On the Democratic side, the USA Today survey has Hillary
Clinton with a 15-point lead over Barack Obama, 38-23, while
Al Gore comes in third at 14%.
–New York City Mayor Michael Bloomberg keeps telling
everyone he is not running for president, while letting his staff
mess with reporters on the topic, but then he went to Houston on
Friday and gave a wide-ranging speech on his national energy
plan. As Crain’s New York Business reported, Bloomberg also
suggested “that those who set later deadlines” than his own target
of 2030 “are afraid to do the work and make the commitments
now.”
“When an elected official makes a promise to achieve something
in the far-off distant future, but refuses to take the steps now that
would allow us to begin making progress, that’s not leadership.
It’s passing the buck. And unfortunately, it’s politics as usual.”
Now does this sound like someone running for president as a
third party candidate or what?
–When it comes to the war on terror, it’s about us, and vigilance.
In the latest example, a New Jersey store clerk went to
authorities after viewing a videotape she was asked to make into
a DVD by a group of suspected Islamic terrorists who were
planning on killing as many soldiers as possible at the state’s
Fort Dix military base. The video showed men in military
fatigues firing off assault weapons while shouting “God is great”
in Arabic. There is no foreign link.
–Stephen Rademaker, a former assistant secretary of state
responsible for arms control and nonproliferation, had some of
the following in a Journal op-ed.
“Two groups with diametrically opposed agendas have for years
argued that the likes of Iran and North Korea will not be deterred
in their quest for nuclear weapons so long as the U.S. and the
other nuclear powers are ignoring their obligation under the
Nuclear Nonproliferation Treaty (NPT) to give up their nuclear
arsenals. Apologists for the proliferators, who care not at all
about nuclear disarmament, and arms control activists, to whom
there is no higher priority than nuclear disarmament, have long
agreed about this and little else….
“Those who argue that the U.S. has disregarded its nuclear
disarmament obligations under the NPT are quick to make
categorical assertions about the treaty’s requirements, but almost
never quote the pertinent language of the NPT, for the simple
reason that it provides no support for their claims. The key
provision, article VI of the treaty, consists of only one sentence:
‘Each of the Parties to the Treaty undertakes to pursue
negotiations in good faith on effective measures relating to
cessation of the nuclear arms race at an early date and to nuclear
disarmament, and on a Treaty on general and complete
disarmament under strict and effective international control.’
“It is impossible to discern from this language a binding legal
obligation on the U.S. and the other four nuclear-weapon states
to give up nuclear weapons. The operative legal requirement is
to ‘pursue negotiations in good faith on effective measures
relating…to nuclear disarmament….
“Few serious students of nuclear strategy believe that the
stockpiles of the nuclear weapon states can be reduced to zero in
the foreseeable future. Fortunately our reliance on nuclear
weapons has been declining, and the U.S. should continue to
eliminate unnecessary nuclear weapons based on considered
judgments about our national security requirements. But we
should not base such decisions about our nuclear force structure
on wishful thinking that we can earn the goodwill of nuclear
proliferators and other critics whose agendas are advanced by
blaming America for nuclear proliferation.”
The reason why I noted the above is because it’s struck me over
the past few weeks how the arguments over nuclear weapons and
disarmament are essentially the same as those in the gun control
debate.
–New Jersey is about to abolish its capital punishment law,
another disappointment for yours truly. Then again, for over 40
years our lawmakers were afraid to use it. It’s funny. As I get
older I’ve become more of a moderate on most issues, but when
it comes to the death penalty I would expand its use. Sister
Joanne and I disagree on this one, that’s for sure.
–President Bush has been invited by Chinese President Hu Jintao
to attend the opening of the Beijing Olympic Games next year.
Authorities hope to conduct a state visit in conjunction with the
staging of the most important global event ever hosted by China,
as one diplomat said.
But if Bush goes, he better not drink the tap water. An official at
the Beijing Water Management Bureau said “The water is
contaminated during the secondary supply process, in the transfer
of water.” Tap water in the Olympic Village, though, will be
made safe, we are assured.
–We have a corporate “Jerk of the Year” candidate…the makers
of Cocaine Energy Drink who were forced to change the name
after receiving a warning from the FDA that it considered the
drink illegal, saying it was being marketed as an alternative to an
illegal street drug.
Maker Redux said the caffeine-loaded drink – which contains no
cocaine – would fight to get the name back. Founder Jamey
Kirby said “We’ve received tens of thousands of e-mails and
phone calls from consumers expressing outrage and disbelief that
the government can ban a perfectly safe product for no reason
other than it has a racy name.” Add an “Idiot of the Year”
nomination to this outfit.
–I received the premiere issue of a new publication, Conde Nast
Portfolio, and inside there is an article by Tom Wolfe (“The
Bonfire of the Vanities”) on today’s Masters of the Universe, i.e.,
the hedge fund crowd. The following is but a small snippet.
“The tales are endless: the hedge fund founder desperate to get
his son into one of Greenwich’s socially swell private schools
who clips a six-figure check to the first page of the application,
witlessly forcing the school to reject both his son and his check
or lose all credibility…
“The hedge fund managers who hold meetings with their
shirttails hanging outside their jeans, like college boys –
“The former manager of Tremont Capital Group who came to
meetings with the fund’s investors barefoot –
“The twinkie wives of ‘these people’ who arrive at real estate
offices seeking to-die-for houses and apartments wearing jeans
and stiletto-heel boots, with gotta-be-blond hair streaming down
to their shoulder blades, holding a baby on a cocked hip with one
hand and a cell phone to the ear with the other while a limousine
waits outside, motor running –
“The twinkies who have their eggs fertilized by their husbands’
sperm in a laboratory, creating embryos for implantation in the
wombs of surrogate mothers who are paid to manufacture
children for delivery in nine months, since why on earth should
any wife whose husband is worth a billion or even $500 million
have to endure the distended belly, bilious mornings, back
cramps, not to mention a cramped social life, to end up with her
perfect personal-trainer-sculpted boy-with-breasts body she has
spent thousands of sweaty hours attaining, ruined…tempting her
husband to survey all the little man-eaters out there, including
those former wives who used to meet regularly at the Boxing Cat
Grill until it burned down, whereas the current wives leave their
husbands catatonic before the plasma TV and meet three or four
times a week at one local bar or another and drive home in their
Hummers and bobtail Mercedes SUVs, bombed out of their
minds, while waiting for the baby to come from the factory –
“Whenever such rich gossip is repeated, somebody invariably
say, ‘Who are these people?’”
Oh, I’ve seen ‘em. I ate a few meals myself at the Boxing Cat,
as well, and the beautiful people are all over the town where I
have my office today, Summit, New Jersey. I must say I get a
real kick out of them, until they almost run me over in a
crosswalk.
–Queen Elizabeth II signed autographs for schoolchildren while
in Washington this week. Now that would be a cool one to have.
–And in our latest news from space that is designed to provide
some perspective; such as reminding us all how truly
insignificant we are, including hedge fund operators and their
twinkie wives, USA Today’s Dan Vergano writes that “NASA
astronomers reported the biggest and brightest star explosion
ever recorded, a blast whose light began reaching Earth in the
past year from 240 million light-years away.” Oh, it’s at times
like these I miss Carl Sagan. What a national treasure he was.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $672
Oil, $62.37
Returns for the week 5/7-5/11
Dow Jones +0.5% [13326]
S&P 500 +0.02% [1505]
S&P MidCap +0.2%
Russell 2000 -0.4%
Nasdaq -0.4% [2561]
Returns for the period 1/1/07-5/11/07
Dow Jones +6.9%
S&P 500 +6.2%
S&P MidCap +11.2%
Russell 2000 +5.3%
Nasdaq +6.1%
Bulls 53.3
Bears 20.0…big drop, and lowest since Aug. ‘05
[Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
