[Posted 7:00 AM ET]
Wall Street…gloom, despair, and agony on me…
It’s been said that the bonobo, a member of the chimpanzee
family, is our closest relative, but according to a story from this
week, the bonobo, which hails from the Congo, is not quite as
smart as he has been given credit for. But after some of what I
heard the past few days on Wall Street, I respectfully submit man
may be more than a bit overrated himself.
How else to describe the wit and wisdom of Treasury Secretary
Henry Paulson who once again said the subprime mortgage crisis
doesn’t “pose any threat to the overall economy”; this as the
markets swooned on fears there is indeed a strong chance the
contagion will spread. Paulson wasn’t alone, of course, as
countless other White House officials and their shills on the
Street parrot the party line in their best Alfred E. Neuman
imitation, “What, me worry?”
But let’s get something straight up front. I have to reiterate that
last December, in terms of stock market performance, I said we
would finish about flat for 2007. I did not see a recession, either.
I just envisioned an ongoing debacle in housing, at very best
stagnation, and since real estate doesn’t impact the consumers’
psyche overnight, we were going to move through ’07 as prelude
to the real damage in 2008. I have seen nothing yet to dissuade
me from this forecast.
Having said that, I try hard not to get too revved up over any
single week, let alone a day, and so let’s just start out with the
facts, even as stocks experienced their worst drubbing in years.
Homebuilders D.R. Horton, Beazer, Ryland, Pulte, MDC, and
WCI all reported dreadful results for the second quarter, with
massive write-offs (including on land holdings, as I’ve so often
warned about), while revenues were down an almost uniform 30-
40% over year earlier levels.
Then there was the largest mortgage bank in the land,
Countrywide Financial, which startled the Street in releasing an
absolutely dreadful earnings report, missing expectations by a
mile while CEO Angelo Mozilo said “we are experiencing home
price depreciation like never before” as he then compared the
current environment to that of the Great Depression. Mozilo
joined the chorus saying he saw no pickup until 2009 at the
earliest.
But in thinking back to Secretary Paulson’s sunny forecast and
how there would be no contagion from the subprime flu, Angelo
Mozilo couldn’t have been more clear in opposition.
To wit…many of Countrywide’s prime borrowers, not just
subprime, are having serious issues and an increasing number of
these are defaulting on their home equity loans, which many
were using as a second mortgage…after building a home theater
and buying a Beemer, of course. It was this comment of
Mozilo’s that really gave the Street gas.
And in dealing with contagion, you had the likes of USG, a
building products giant, say that “(Housing) is burdened by an
excess supply of new and existing unsold homes” as the
company echoed the sentiments of its homebuilding partners in
adding this is a “multi-year downturn.” For its part, DuPont
blamed housing for some of its own problems, as in falling
demand for paint.
Of course with companies like USG, let alone a Ryland, job
losses are also mounting. USG announced it has laid off 1,100
the last 12 months.
Speaking of employment, housing accounts for 20% of Florida’s
job market, roughly double the national average, and the
depression in the condo arena, statewide, will eventually do
a real number on the labor front. A Bloomberg piece described the
gory details in the Miami area, where 20,000 new units under
construction join 22,900 existing condos for sale. Economist
Mark Zandi expects prices to plummet 30%.
Across the country it isn’t any better. Foreclosures in California
are up 800% over the past year, some 17,400 in the second
quarter (9,500 in Southern California). But these numbers are
actually lower than what they could be because the state’s
economy is still strong. Nonetheless, the mortgage resets are
beginning to sweep the region and this is simply going to
exacerbate the crisis. Plus, housing inventory in California is
now at a 12.6 months supply, vs. about 8 months nationally.
As for existing and new home sales for the month of June, both
came in at rates well below expectations, while falsely claiming
the median price for each category was roughly flat over a year
ago when even a bonobo would know this is a bunch of
malarkey. [Hank Paulson is a different story.]
OK, but where is the spillover, Mr. Editor, aside from some
cursory evidence with the likes of USG and DuPont? It’s in the
credit markets. The problem that started with hedge funds
investing in mortgage pools that were sliced and diced by Wall
Street’s investment banks has spread to the collateralized loan
and junk bond markets, which, together, have helped fuel the
leveraged buyout / private-equity boom that in turn has supported
the stock market and share prices.
This has led to what everyone is calling a repricing of risk and it
is having a severe impact on many of the buyouts that garnered
attention even just a few months ago. Will they in fact be
financed? KKR, for example, pulled the financing on the UK’s
largest drugstore chain, while Cerberus Capital’s deal with
Chrysler Group is up in the air as $12 billion in proposed debt
was postponed. Even UK football giant Manchester United
couldn’t find funding at the right price for a plan to decrease its
debt load, and late Friday, Cadbury Schweppes announced it was
delaying sale of its U.S. division.
Spillover? Seems to me much of the above is the very definition
of the term.
But what of the consumer, who is, as we all know, 2/3s of the
U.S. economy? The grinding news on the housing front, and
now Wall Street’s jitters, will, over time, lead to reduced
consumption…period. I know I’m repeating myself for the
umpteeth time, but it just takes awhile for most Americans to
realize their number one asset is not only going down in value,
even if by just a few percentage points, but that it’s not about to
then bounce back once we’ve hit bottom. Stagnation will be just
as bad, psychologically, as another downdraft. That’s why I
keep pointing to 2008.
And I can’t help but note once more a point I didn’t hear one
expert make this week, at least on the segments I caught on
CNBC or in print; that being this is a global contagion due to real
estate! It is a global housing bubble, whether you are talking
Spain, Britain, Russia, or Australia. Each nation is in various
stages, some still topping, others starting to rollover, but it’s
happening.
What’s the central issue? Aside from easy credit…affordability.
I get a kick out of real estate shills in this country, such as
Barbara Corcoran, who said on NBC’s “Today” show, Thursday,
that this was a perfect time to buy a home. How can she make
such a statement?! In 9 out of 10 cases, even with still low
interest rates, assuming they qualify, most folks have no business
owning some of the homes they purchased, and obviously the
foreclosure data bears this out.
It isn’t just adjustable rate mortgages and resets that caught
people unaware. It’s about simple common sense. I apologize if
I touched a nerve with this last statement, but it’s why even some
of the mega-rich will get theirs when all is said and done.
Two final points. On Friday, the first estimate of second quarter
GDP was released and it was up a solid 3.4%, as the first
quarter’s final revision showed growth of just 0.6%; the latter
having first been pegged at 1.3%, incidentally. If you want,
average the two and you get 2.0%, which in most cases would be
alright.
But the second quarter figure was largely about inventory
rebuilding, while the rate of consumer spending for the April –
June period was only up 1.3%. There is also a real debate on
business, or capital spending. The GDP report said it was strong,
but the cap-spending portion of June durable goods was down.
Guess which side of the fence I’m on?
Lastly, what this past week helped prove is how many have been
living in a state of denial. Homebuilders kept building, hedge
funds kept lapping up the collateralized debt obligations based
off of subprime mortgages, private-equity types kept going to the
leveraged buyout well, raping the companies in the process
(more on this below), and, this is global.
But we’re going to have good weeks and bad in the coming
months. It won’t be all straight down, especially since Wall
Street’s investment banks have little clue as to what is really on
their books. It takes time to sort it all out after all.
We do have one thing to be thankful for, though. The terrorists
in London weren’t expert bombmakers. Trust me, if those two
vehicles had gone off the other week much of the above wouldn’t
have made the cutting-room floor.
Street Bytes
–Depending on the index, it was the worst week for U.S. stocks
in 4-5 years with the Dow Jones losing 586 points, 4.2%, to close
at 13265. The S&P 500 plummeted 4.9%, its worst showing
since Sept. 2002, to finish at 1458, while Nasdaq declined 4.7%
to 2562. Additionally, the Russell 2000 index of small cap
stocks is now down 1.2% for the year after a 7.0% drubbing.
As noted above, it was all about the debt crisis, but there were a
slew of earnings reports as well and once again the picture was
decidedly mixed. Among those earning rave reviews, at least for
a few hours, were Merck, Amazon, Apple, 3M and Chevron,
while those disappointing included Texas Instruments, DuPont,
American Express, and Exxon Mobil. [Exxon paid another $7.4
billion in income taxes, by the way.]
–U.S. Treasury Yields
6-mo. 4.93% 2-yr. 4.50% 10-yr. 4.76% 30-yr. 4.93%
Flight-to-safety talk dominated and yields plunged across the
board. Of course some might say that with the 10-year Treasury
having fallen from 5.30% to 4.76% in a matter of weeks, it
makes mortgages more attractive and helps cushion real estate’s
fall. Maybe so, if your credit is exceptional; otherwise it has
zero impact at this point.
–On Tuesday, the Wall Street Journal had a good little piece on
Amazon and how the stock was overvalued ahead of its earnings
release after the close that day and around 3:45 p.m., I called my
friend Dave to say how I kind of wish I had bought ‘puts’ on the
stock. It just made too much sense. Alas, since I seldom go
‘short’ I didn’t act and thank god for that. Like everyone else I
would have been crushed as Amazon beat expectations handily,
ending up 24%, $16, on Wednesday.
Now I love Amazon and have used it quite a bit over the past few
years, but the stock is back to being ridiculously overvalued.
Take the high estimate of $1.32 in earnings for 2008, for
example. Amazon is trading well north of 60 times next year’s
projections.
–Meanwhile, Apple once again handily beat estimates and the
stock recovered from an early week swoon on news sales of the
iPhone may not have been as brisk as once thought. But the
company said it sold 270,000 in its first two days, better than
consensus of 200,000, yet others said Apple would sell 500,000.
In actuality, Apple continues to kick butt with the iMac, let alone
the iPod, and Apple’s multiple is at least reasonable, baring
recession.
–Ford reported its first profit in two years, while acknowledging
it is doing all it can to rid itself of its Jaguar and Land Rover
units. Ford’s revenue rose 5% amidst improvement in its North
American operations, though as noted above, auto sales, industry
wide, are not about to recover in earnest with the ongoing issues
in housing.
–I told you so…that when the Chinese government bought into
The Blackstone Group and its IPO it reminded me of when the
Japanese were aggressive buyers in the late 1980s of all things
U.S., such as Rockefeller Center and Pebble Beach Golf Club,
right at the top. China bought into Blackstone at $31 a share and
just a few weeks later, the price is around $24 for a cool loss of
22%. For this the Chinese got out of the safety of U.S.
Treasuries and other government paper in an attempt to diversify.
At which point I can only comment, cash is not trash.
–Meanwhile, the China Development Bank said it would acquire
a stake in the banking giant expected to emerge from Barclays
Bank’s takeover of Dutch lender ABN Amro, a combination that
would create the 6th-largest in the world. CDB is looking to
eventually have a 7.7% stake.
–I must say, the timing of Countrywide Financial CEO Angelo
Mozilo’s stock-selling isn’t exactly the best in terms of positive
P.R. Depending on how you look at it, Mozilo has cashed out of
about $190 million in options over the past 18 months. Now he
did found the company, and he is 68 years old, and he should be
able to do with it what he wants, but, first, the options awards
going back years were obscene and, second, his regular
compensation has been equally so.
–Speaking of obscene, I’ve certainly written my fair share over
the years about the arrogance displayed by our nation’s elite,
particularly on the corporate and investment front. This week,
PIMCO’s Bill Gross weighed in as part of his August review
(pimco.com), including on the issue of “when is enough,
enough?”
“(When) the fruits of society’s labor become maldistributed,
when the rich get richer and the middle and lower classes
struggle to keep their heads above water as is clearly the case
today, then the system ultimately breaks down; boats do not rise
equally with the tide; the center cannot hold.
“Of course the wealthy fire back in cloying self-justification,
stressing their charitable and philanthropic pursuits, suggesting
that they can more efficiently redistribute wealth than can the
society that provided the basis for their riches in the first place.
Perhaps. But with exceptions (and plaudits) for the Gates and
Buffets of the mega-rich, the inefficiencies of wealth
redistribution by the Forbes 400 mega-rich and their wannabes
are perhaps as egregious and wasteful as any government
agency, if not more. Trust funds for the kids, inheritances for the
grandkids, multiple vacation homes, private planes, multi-million
dollar birthday bashes and ego-rich donations to local art
museums and concert halls are but a few of the ways that rich
people waste money – and I must admit, I am guilty of at least
one of these on this admittedly short list of sins. I have,
however, avoided the last one. When millions of people are
dying from AIDS and malaria in Africa, it is hard to justify the
umpteenth society gala held for the benefit of a performing arts
center or an art museum. A thirty million dollar gift for a concert
hall is not philanthropy, it is a Napoleonic coronation.”
You hear that, Sandy Weill? Don’t invite Mr. Gross to your next
soiree.
–Related to the above, finally the SEC is stepping up its
investigation into the stock-option backdating scandal, filing
civil and criminal charges against a number of executives on
Wednesday, including the former CEO of KLA-Tencor
semiconductor equipment firm, Kenneth Schroeder. All this
dirtball did was backdate options to himself worth millions of
dollars from 1999 to 2002 and once, for good measure, in 2005.
He did so even after corporate counsel advised him that the
practice was improper. Such massive fraud in China would be
punishable by death.
–Ah, but look here. Former Qwest Communications CEO
Joseph “Jersey Boy” Nacchio was sentenced to six years in
federal prison for the $millions he gained in illegal stock sales.
–Ianthe Jeanne Dugan of the Journal had a piece on how private-
equity firms such as Blackstone divvy up the spoils.
“To complete their $4.3 billion Travelport purchase, Blackstone
and Technology Crossover Ventures, a Palo Alto, Calif.-based
venture-capital firm that now owns 11%, invested $1 billion and
borrowed the rest. That debt landed on Travelport’s balance
sheet. In March, Travelport borrowed another $1.1 billion and
paid it out as a dividend to the two firms, returning all their
money in just seven months.
“ ‘This is likely one of the quickest returns of invested capital for
a private-equity deal of its size,’ Travelport’s new chief financial
officer said in a May conference call with analysts.”
This is also ‘rape and pillage.’
–Starbucks increased the price of its coffee an average 9 cents
per beverage, citing the soaring cost of milk, up nearly 70% the
past year. What happens if you drink it black?
–In another item on the inflation front, Rutgers raised its tuition
and other costs 7.8%, but did not restore some 800 classes or any
of the hundreds of job cuts.
–And…my property taxes rose 7%. I now pay $10,500 on a
freakin’ townhouse. Which is a reminder of another important
topic related to today’s real estate scene. Your taxes are going
up, even though your property’s value is in most cases going
down…let alone the fact your town/city is about to reassess your
home and hike taxes further. Stick that in your model, Bernanke.
–Pacific Gas & Electric, Northern California’s largest utility,
announced a major solar power initiative spread over nine square
miles of the Mojave Desert. The recipient of the contract is Solel
Solar Systems, an Israeli company that will employ troughlike
arrays of mirrors, using a technology first adapted in the 1980s.
When completed in 2011 or 2012, the project should power
hundreds of thousands of homes.
–Big merger in the oil and gas drilling space as Transocean and
GlobalSantaFe are hooking up. The combined operation will
have 146 platforms stretching from the North Sea to the Caspian
to the Gulf of Mexico. So since this is yet another industry
where economies of scale matter, the question is, is this deal just
the beginning of another wave of merger activity? Doubtful
now.
–Another sign of the apocalypse, from the Financial Times:
“Fine wines are becoming increasingly unaffordable for
traditional wine collectors as new buyers flush with cash from
Russia and China and wealthy Londoners with big City bonuses
to invest push prices to record highs.”
We’re talking Chateau Lafite Rothschild 1996 that had been
selling for about $8,500 per case is now up to $14,300! I’ll pass.
–U.S. sales of “Harry Potter and the Deathly Hallows” hit 8.3
million, the fastest-selling book in history. Another 2.7 million
were sold in Britain in the first 24 hours.
Foreign Affairs
Iraq: Molly Hennessy-Fiske of the Los Angeles Times described
Thursday’s Iraqi parliament session. Only half showed up, the
speaker was absent, no votes were taken, no legislation passed,
and all this as parliament prepares to adjourn this weekend for its
August recess. Earlier, the largest Sunni bloc, comprising 44 of
the 275 seats, said it was suspending its participation.
And Iran and the United States held further talks about security
in Iraq, though afterwards U.S. Ambassador Ryan Crocker said
“Iran has stepped up its support for paramilitary groups in Iraq”
since the first round of discussions were held, witness the
increasing lethality of attacks as Iran trains the insurgents. At the
same time, the Washington Post reports that Crocker is
pressuring the White House to grant more Iraqis visas; those that
are employed by our government. And here’s a startling statistic.
The U.S. has accepted four times more Iranians into this country
than Iraqis the past nine months. It is estimated that over
100,000 Iraqis are being targeted for collaborating with U.S. or
foreign reconstruction groups.
Lastly, Iraq’s national soccer team beat Vietnam in the
quarterfinals of the Asian Cup tournament, so the people hit the
streets to shoot off their guns in celebration. At least three were
killed by stray bullets.
Then the Iraqis upset South Korea in the semifinals, and amidst
this celebration two suicide bombers killed 50 amidst the
cheering throngs. What a sick place.
Turkey: The ruling Islamist AKP won 47% of the popular vote in
Sunday’s parliamentary election, giving it 340 of 550 seats, with
another 27 needed to reach the 67% threshold necessary to
change the constitution. But finding those last few seats won’t
be easy as the main opposition parties are not about to join a
coalition with Prime Minister Erdogan. Ironically, the Kurds,
having gained enough for some seats in parliament for the first
time in years may just do so, but this will all shake out shortly.
The biggest immediate issue is whether Abdullah Gul, currently
the foreign minister, will seek the presidency again, a post that
historically has been held by a figure aligned with the generals.
But Gul’s wife wears a headscarf and you’ll recall earlier this
year when Gul wanted the office there were massive protests
because of his Islamist leanings.
Some say the generals are preparing for a coup. I’m sure they
always have such plans in their hip pockets, given Turkey’s
modern history, but for now, here is the opinion of Ralph Peters
from his perch at the New York Post.
“Following the pattern Muslim parties had employed
successfully elsewhere, the AKP played down its devotion to
punitive Islam and delivered the services the people in Turkey’s
urban slums or in parched Anatolian villages had always been
promised, but never got.
“Many early supporters of the AKP weren’t voting for a
government of mullahs, but for a party that brought electricity,
clean drinking-water and rudimentary sewage systems to their
neighborhoods – while cracking down on crime.
“To be fair, the AKP leadership really did clean up some aspects
of government and has presided over the healthiest economic
expansion in Turkey’s post-Ottoman history – the party saw that
businessmen could be turned into vital allies, so it opened the
door to entrepreneurs shut out by the oligarchs tied to the
corrupt, old parties….
“But for all of the AKP’s practical successes, the party is an
Islamist party. It fully intends to destroy Turkey’s secular laws.
The party has suffered setbacks when it acted prematurely, either
when fanatics sought to impose Sharia law on adulterers, or
when the party tried to ram through the selection of a
suspiciously devout president. [Ed. Abdullah Gul] Overall,
though, the AKP has pursued a successful policy of creeping
Islamization – instead of being murdered at high noon, Ataturk’s
constitution is suffering the death of a thousand cuts….
“Turkey has fallen in love with a sanitized dream of past glory
and an airbrushed version of Islam. On Sunday, it voted for the
headscarf and the veil. Polls show that most Turks don’t want
Sharia law, but the balloting opened the barn door for the
serpent.”
Afghanistan: The Taliban killed one German and a South Korean
hostage as part of its demands that South Korea (with 200 non-
combatants) and Germany (3,000 troops) exit the country. Nine
NATO soldiers were killed this week, including four Americans.
Lebanon: The U.S. Congress still hasn’t released aid to the
Lebanese Army for fighting the terrorists at the refugee camp
near Tripoli. Over 110 Lebanese soldiers have died in the effort
to destroy the Fatah al-Islam zealots, yet all Washington has
done is supply ammunition.
The Lebanese need heavy arms. They’re being outgunned. Just
remember this next time you see President Bush or Condoleezza
Rice talking of our support for the Siniora government.
As for Hizbullah, Sheikh Hassan Nasrallah told Al Jazeera that
his militia had the power to strike Israel anywhere, having rebuilt
its missile capability. The Israeli military believes Hizbullah has
relocated its force from more rural areas to populated ones,
making it harder to target.
On the issue of Syria and Lebanon, though, the Wall Street
Journal’s Bret Stephens points out that one of the true scandals
these days is the fact Syria now occupies 177 square miles of
Lebanon, which a new survey for the UN Security Council
affirms. Syria, in essence, has been encroaching on Lebanese
territory for the past three decades
And then there is a piece by Riad Kahwaji for Defense News in
the July 23, 2007 issue that addresses Syria’s recent actions.
“Syria is readying for potential war, whether offensively, as part
of an attempt to retake the Golan Heights, or defensively, if ally
Iran should be attacked over its nuclear program.
“In early June, Syrian President Bashar Assad banned many
Syrians who work in Lebanon from leaving the country to go to
their daily jobs. Syrian analysts say this indicates that Assad
may want to call up reserves within hours if war breaks out.”
Assad has removed all checkpoints into villages in the Syrian
part of the Golan demilitarized zone in an effort to get people to
move into the villages.
“Syrian analysts see this as an attempt by Assad to build up the
civilian population and infrastructure in the disputed area,
allowing the launch of a resistance movement and guerrilla
attacks on the Israeli forces that occupy part of the Golan.”
On July 17, during ceremonies recognizing the start of his second
seven-year term, Assad said:
“The current year will be fateful and the remaining months [of
this year] will determine the destiny and future of the region and
maybe the world.”
As Riad Kahwaji notes, “This was taken as a hint that (Assad’s)
efforts to retake the Golan Heights might turn violent.”
India: While details were not forthcoming, the U.S. and India
reportedly completed negotiations on a nuclear cooperation deal.
The agreement would allow India access to U.S. nuclear fuel and
equipment for the first time, even though it doesn’t permit
inspection of all of India’s existing facilities, including those
manufacturing nuclear weapons, and an inspection regime needs
to be signed off on by the International Atomic Energy Agency
as well as the 45-nation Nuclear Suppliers Group. Additionally,
the U.S. Congress must sign off. All of this calls into question
efforts to rein in Iran’s own nuclear program. Unlike India, Iran
is a member of the nuclear Non-Proliferation Treaty, and for its
part Tehran is saying it is complying with its mandates. [Of
course it isn’t, but Iran will use the double-standard to its
benefit.] Pakistan will also rail the India-U.S. agreement greatly
strengthens its chief rival in the region.
Russia: Charles K. passed along a note that in recent days there
was a meeting in Moscow between a U.S. group led by Henry
Kissinger, George Schultz and Robert Rubin, and a Russian
delegation headed by former Prime Minister Yevgeny Primakov
and current Foreign Minister Sergei Lavrov. President Vladimir
Putin was evidently in attendance. The purpose was to discuss
some of the issues that have been plaguing U.S.-Russian
relations the past few years. Kind of bizarre this didn’t receive
more press, I’ll admit, and I’m not exactly thrilled Kissinger is
involved.
In the meantime, Putin continued to spar with Britain and his
new counterpart, Gordon Brown, over the extradition of former
KGB agent Andrei Lugovoi, wanted in the murder of fellow ex-
spy Alexander Litvinenko. Britain’s foreign secretary suggested
that Russia change its constitution to allow the handover of
Lugovoi, while Putin said, Britain is forgetting it “has not been a
colonial power for a long time.” Gordon Brown countered, “We
cannot stand by when a British citizen is assassinated on our
streets, when we identify the culprit and we do not get the
cooperation from Russian authorities.”
Well, this isn’t about to go nuclear, but it is a rather serious
diplomatic crisis, especially seeing as Putin’s Russia is a member
of the G-8. But then on Wednesday, addressing a gathering of
senior military and security officers, Putin said:
“The situation in the world and internal political interests require
the Foreign Intelligence Service to permanently increase its
capabilities, primarily in the field of information and analytical
support for the country’s leadership….(as well as) all-around
strengthening of our military forces.”
So of course the U.S. and Britain are Putin’s primary targets and
when you see something like this you can’t help but ask yourself,
‘Is this the face of someone who is about to give up the
presidency?’ Doesn’t seem that way.
North Korea: Pyongyang’s chief delegate to military discussions
with Seoul said “We don’t need these fruitless talks any more”
and walked out. The main dispute is over the sea border, which
has been in question since the end of the Korean War. The
waters are important because they contain rich fishing grounds.
Japan: Prime Minister Shinzo Abe may not survive his nation’s
parliamentary elections.
Random Musings
–Well, I blew this one, as did all the others who supported Eliot
Spitzer in his race for governor of New York. I had no problem
with his aggressive actions as New York Attorney General
because no one else was cracking down on corporate crime and I
maintain if he hadn’t, many of the dirtballs since punished would
not have been. My attitude also was, hey, if the guy has
ambitions to be governor, good, because New York had suffered
for years under the lethargy of George Pataki.
But I didn’t realize what an idiot Spitzer could be and, clearly, by
his actions, as laid out in a blistering report by Attorney General
Andrew Cuomo (a fellow Democrat), Spitzer and his top aides
improperly used the state police to tail Republican Senate
Majority Leader Joseph Bruno. Cuomo did not cite Spitzer
himself in the findings, as Spitzer immediately suspended the
two in question, but there is little doubt he had some direct
involvement, seeing as Spitzer was always known as Gov.
Micromanager.
Spitzer apologized to New Yorkers and to Bruno for his staff’s
“clear lapses in judgment,” but maintained he knew nothing of
the operation to frame Bruno for allegedly improper use of a
state helicopter. Now, Bruno is gunning for Spitzer and coming
investigations of the governor could lead to his resignation, the
issue is that serious. But like they say, “power corrupts…”
–Democrats have raised $100 million more than Republicans for
the 2008 elections, including $60 million more by candidates
running for the White House. Imagine what they would do if
they had real leaders?
–Columnist Robert Novak, on Democratic Senate Majority
Leader Harry Reid.
“Reid, the soft-spoken trial lawyer from Searchlight, Nev., has
tended to suppress free expression in the World’s Greatest
Deliberative Body in his tumultuous 6 ½ months as majority
leader. Last week, he cut off an attempt by Sen. Arlen Specter,
the veteran moderate Republican, to respond to him with an
abruptness that I had not witnessed in a half-century of Senate
watching. When Specter finally got the floor, he declared:
‘Nothing is done here until the majority leader decides to
exercise his power to keep the Senate in all night on a
meaningless, insulting session….Last night’s performance made
us the laughingstock of the world.’ It may get worse if plans to
eviscerate ethics legislation are pursued.”
–MySpace.com used to say it was aware it was being used
by sex offenders and that a database of 7,000 had been created
and the profiles removed, out of some 180 million total on the
site. But now, under pressure from various state attorneys
general, MySpace admits it has found more than 29,000
registered users. What a sick, screwed up world we live in.
–Sports Illustrated’s Rick Reilly on Barry Bonds and his pursuit
of Hank Aaron’s home run record, Bonds having hit #754 on
Friday.
“The truth is, it won’t matter what we do. We live in an era
when our Crap Detectors must always have fresh batteries.
Every day we use them to decide which numbers are real and
which are fake – $90 Enron stock and Donald Trump’s handicap
and 36 double D’s on 100-pound women. And we know this
number is fake. And this celebration is fake. And this feat is
fake.
“Remember this: The man who held the record before Bonds –
one of the most principled and honorable men you will ever meet
– is reluctant to even speak to Bonds on the phone, much less be
there to witness the record breaker. Just because a thief paints
over a masterpiece doesn’t mean the masterpiece isn’t still
underneath.
“And when the (hype) is finally over and the confetti is swept up,
Barry Bonds will have to go back to the one place where even he
doesn’t believe the lies. His mirror.”
–French newspapers announced the death of the Tour de France
after the leader was thrown out for evading drug tests prior to the
event.
–Pat Tillman’s mother commented on the latest twist in the
investigation into her son’s death in Afghanistan. “It’s so
humiliating and disrespectful. It’s one more example of the
Army investigating itself,” she said. “It was all done to glorify
this war. It’s a sham. Pat deserves the truth.”
There is growing evidence Tillman’s death may have been flat
out murder rather than friendly fire.
–Three workers were killed at space pioneer Burt Rutan’s
headquarters for his Scaled Composites operation, done in by an
explosion during the test of a propellant system. It was June
2004 that Rutan’s firm became the first to launch a reusable
manned rocket into space. Thursday’s test was of an upgrade to
SpaceShip One.
–TAM Airways of Brazil is receiving a ton of heat over the
recent crash of one of its planes in Sao Paulo that killed nearly
200. Elizabeth Spiers piled on in an op-ed in the Washington
Post last weekend addressing her own experience with TAM on a
trip she took to Brazil this past April.
So I feel compelled to counter the criticisms, having flown
TAM back in December 2004 on my trip to Paraguay. This is
what I wrote in my “Bar Chat” column of 12/21/04.
“TAM Airways is one of the best I’ve ever flown. Incredibly
efficient. For starters, I’ve never seen anyone load a packed
plane as quickly as they do and they serve full, delicious meals.”
I also have to admit I noted TAM served free beer and the
stewardesses were very attractive.
I feel sorry for TAM, as I do obviously for the victims’ families.
Accidents happen for all manner of reasons, but my cursory
reading of this situation is this disaster had as much to do with
Brazil’s air traffic control system, and an incredibly short
runway, as it did with TAM and any mistakes it and its pilots
made. I would have no problem flying TAM again, but ask me if
I’m about to take a trip to Sao Paulo.
–My friend Jimbo was over in Ireland with the family, paying $7
or more for a pint in some locales, but I liked what a doorman
told him in Dublin regarding the rain. “It is never a case of
inclement weather; it is always a case of inappropriate
garments.”
–Lastly, I’m running on fumes having spent a few days in
Milwaukee this week, including taking in a Keith Urban concert
Thursday evening. I then flew back Friday morning for a
friend’s wedding last night and in between banged away on
the keyboard and tried to keep up with the markets as best I
could.
But I can’t help but praise Milwaukee for its fantastic art
museum (sorry, Bill Gross; baseball commissioner Bud Selig
donated a wing) and to Mark R., an order of Usinger’s Famous
Sausages is on the way. Also, if you’re a Keith Urban fan, go
see his show.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $672
Oil, $77.02
Returns for the week 7/23-7/27
Dow Jones -4.2% [13265]
S&P 500 -4.9% [1458]
S&P MidCap -6.1%
Russell 2000 -7.0%
Nasdaq -4.7% [2562]
Returns for the period 1/1/07-7/27/07
Dow Jones +6.4%
S&P 500 +2.9%
S&P MidCap +6.8%
Russell 2000 -1.2% [yup…negative for the year]
Nasdaq +6.1%
Bulls 53.9
Bears 18.0 [Source: Chartcraft / Investors Intelligence…
reminder, contrarian indicator, plus there is about a 10-day lag
from the newsletter writers’ forecasts to the time I post this.]
Have a great week. I appreciate your support.
Brian Trumbore
