[Posted 7:00 AM ET]
Revolution
Jack L., my old boss who gave me the adage “wait 24 hours,”
was known to be a hands off leader and there was a reason for
this. “I wouldn’t have hired you if I didn’t think you could do
the job, now do it.” Frankly, his workers thrived. But I kept
coming back to his statement as I watched the tragedy in
Minneapolis this week.
There are some very foolish commentators on outlets like CNBC
who wonder why when the question is posed ‘Is this country on
the right or wrong track?’ a vast majority answer in the negative.
Why the economy is great! The stock market is at an all-time
high! What’s everyone complaining about?
I look at it a different way. The latest NBC News/Wall Street
Journal poll revealed that 19% of Americans believe the nation is
headed in the right direction and 67% say we’re on the wrong
track. I can’t believe there are 19% who are happy with the
current state of affairs. Then again, if your only concern is
yourself, and we have more than our fair share of Americans
who act that way, I guess you can approach that figure.
But you couldn’t help but watch the latest example of our
crumbling infrastructure and get sick to your stomach. No
simpler example of failure of leadership and failure to do a job
you won’t find.
Our system of government is broken and the current group of
elected officials is an absolutely pitiful lot. Where is their sense
of responsibility to attack our nation’s critical issues? We’ve
been talking about crumbling bridges and roadways for decades.
I know in the heat of the moment, and amidst the sheer confusion
and chaos, that this isn’t possible, but I was praying one survivor
of the bridge disaster would scream into the television cameras,
“I was almost killed! My kids almost lost their mother! Others
did! And why? Because someone didn’t do their job. I’m sick
of this. When is this country going to wake up?!”
I have traveled the world and seen a lot. No doubt, when I touch
back down in New Jersey, I’m happy to be home. America is
still the best country on earth. But it is far from great these days.
But I want to leave you with this example of our distressing
leadership void. I saw a piece on Wednesday about Sydney,
Australia. From the AP:
“This city has installed dozens of loudspeakers to tell residents
what to do in a terrorist attack, an official announced.
“The speakers should be operational in time for next month’s
meeting of 21 world leaders at the Asia Pacific Economic
Cooperation summit, said David Campbell, state police minister
of New South Wales.
“ ‘If there were a terrorist event or a major building fire and there
were people in the streets, this is a way of giving them
information,’ Campbell told Australian Broadcasting Corp.
“A wailing siren would attract residents’ attention, followed by a
police announcement directing people to evacuation points
plotted around the downtown area.
“The move comes just weeks after the Sydney City Council
urged locals to prepare survival bags in case of emergency,
including maps, first-aid supplies, important documents, spare
change and an extra set of keys.”
Aussie critics cried that this was fearmongering. I call it
leadership.
I take you back to the New York City blackout of Aug. 15, 2003.
I made the following observation in this space the next day.
“Watching the crowd of up to 100,000 attempting to get
ferries to take them from Manhattan to New Jersey during the
blackout, I kept thinking, what will happen if a dirty bomb or
chemical attack takes place and there’s true panic?
”Every individual in America, even those living in the most rural
areas, should think through a plan for the most terrifying
scenarios. In some cases, there will be little one can do, but what
worries me is that many states and cities say they have firm
emergency plans in place (New York, for the most part, did
perform admirably this week), but no one is telling the average
citizen what to really prepare for, outside of our duct tape scare.
We need leadership. We can handle the truth. We can sacrifice.
And as Prime Minister Howard said, we also ‘have to brace
ourselves.’”
Funny how I alluded to Australia back then, too. But as we
approach the sixth anniversary of 9/11, how many of you can
honestly say your local or state government has given you even
rudimentary survival tips or plans? We all know it would be
chaos nonetheless if a dirty bomb went off, or there was a full-
scale attack on a large chemical plant, but thousands of lives can
still be saved. A few weeks ago, former defense secretary
William Perry addressed the unthinkable; a nuclear attack. In
this instance, millions could survive, even within a relatively
small radius from the blast point. But as he pointed out, the
people need to know what to do.
So where is our leadership? Why do we keep putting these
pathetic figures, most of them corrupt (see Ted Stevens), into
positions of such high responsibility? And when are you and I
going to rise up and say “Enough!” It is unconscionable that we
have to think twice about driving across a bridge. It is
unconscionable that there are children in Minneapolis today who
lost a parent, or a spouse, over simple negligence. It will be even
more unconscionable when we receive another attack on our soil
and innocent lives are lost because the people didn’t have a plan.
And it’s about time we began to hold those responsible
accountable. Just don’t look to the White House for guidance.
Wall Street
I’m starting to write this segment around 3:00 p.m. on Friday and
I just watched Jim Cramer on CNBC almost explode through the
television set as he went ballistic over how bad it is out there on
Wall Street and how Federal Reserve Chairman Ben Bernanke
needs to cut interest rates immediately.
Here’s what I know. We had another week where the economic
releases were less than expected, including on both
manufacturing and consumer spending, we had another punk
jobs report, and the rate on home mortgages, even for ‘prime’
candidates, is suddenly skyrocketing, irrespective of where the
benchmark 10-year Treasury sits.
On top of this there was a slew of bad news on the mortgage
originators’ front, as well as with the investment banks and
anything housing related, and as reflected in July auto sales, the
consumer appears to finally be pulling in their horns in earnest.
Plus there were further stories from overseas, such as with IKB, a
German bank with a heavy exposure to subprime bonds, or
Australian giant Macquarie, the world’s largest private manager
of infrastructure (ironically) that is also in the investment game.
Two of its funds lost 25% in value the past month.
The great trader/strategist Jim Rogers said this week that the U.S.
subprime market rout has “a long way to go. This was one of the
biggest bubbles we’ve ever had in credit.” I didn’t see his
comments for Bloomberg include the fact it is a global
phenomenon.
Economist Larry Kudlow, the unofficial Mr. Sunshine for the
White House, said “the rest of the world is rising” so stop
worrying. Economist David Hale wrote in an op-ed for the Wall
Street Journal that we were witnessing the “best economy ever.”
It’s all about globalization and corporations maxing out
productivity, he wrote.
No doubt hundreds of millions worldwide have emerged from
poverty and moved into the middle class…a great thing.
But I also recall similar statements were made before the Asian
currency crisis of 1997, after which many an Indonesian went
back to eating insects.
Bond expert Tony Crescenzi gave a number of reasons why
today’s credit crisis is nothing to be concerned about. Crescenzi
noted record international reserves, record corporate cash levels,
improved balance sheets at even the state level, and a strong
banking system.
But that has little to do with Mr. and Mrs. Jones being able to
meet their mortgage payment. And I repeat, the real estate
bubble is global. Talk to any Londoner, for example. It’s about
“affordability,” and a growing gap between rich and poor.
It’s the same story in China and Brazil, Russia and Spain. The
rich are thriving, while the little guy is struggling mightily to just
make ends meet. Before this cycle plays out you will see
massive protests outside the United States, of this I’m sure.
And the pretty budget or balance sheet picture that Tony
Crescenzi and others paint will lose its luster as tax revenues
and profits dry up. But that’s been my 2008 scenario, though it’s
kind of looking like I may need to move up the timeframe a bit.
Where the likes of Kudlow and Hale are correct, however, is in
their dire warnings on protectionism, which is where Congress is
headed.
Lastly, as if there wasn’t already enough bad news, throw in the
fact the U.S. stock market is rigged, though on this I need to be
very clear.
Over time, the average investor doesn’t have to worry. Good
companies will perform like good companies, while bad will
perform like bad. But the intra-day activity in many stocks, as
well as the broader action at the close of trading, the last half
hour, was clearly rigged this past week. The hedge funds and
investment banks controlled the activity, totally irrespective of
fundamentals, especially Wednesday and Thursday.
Well now, who’s ready to join me for a beer?
Street Bytes
–The equity markets declined for a third straight week, with the
Dow Jones losing 84 points, 0.6%, to close at 13181. The S&P
500 and Nasdaq lost 1.8% and 2.0%, respectively, and are both
off 8% from their recent highs. [The Dow has corrected 6%.]
–U.S. Treasury Yields
6-mo. 4.89% 2-yr. 4.45% 10-yr. 4.69% 30-yr. 4.86%
The inflation news contained in the various reports on the
economy was good, plus there was Friday’s flight-to-safety. But
now all eyes are on the Federal Reserve and its meeting on
Tuesday. Just what will they say in the statement? The market
is looking for assurance that the Fed gives a damn about their
pain and is prepared to act if necessary.
–Credit Crisis, part II: As reported by the Journal, the credit
crunch has caused “46 leveraged financing deals around the
world to be pulled since June 22, representing more than $60
billion in funding that companies had planned for mergers and
acquisitions. The number of deals pulled last year: zero.”
Banks are also holding $400 billion in uncompleted management
and leveraged buyouts globally.
–I have largely ignored oil and energy as a topic because there
has been a lot more of greater import the past few months.
Here’s my bottom line. The automakers blame high gasoline
prices for the recent sales drop as well as housing. That’s a
copout. Gasoline prices have stabilized, nationwide, below
$3.00. It’s about housing and consumers having tapped out their
home equity lines. The price of crude may be near an all-time
high, but the gasoline futures closed the week at $2.02. Tack on
70-90 cents for a pump price. When the futures price gets back
above $2.30, then it becomes a worry again. As for $75 oil, it
has not had a great impact on earnings, but much higher and
you’d shock the system. If, however, the economy were to
suddenly slow, chances are good oil would plummet.
–The International Monetary Fund reported that for the first time
the biggest contributor to world economic growth this year will
be China.
I had to read this twice before I got out the beer coaster and
scribbled…$3 trillion (China’s economy) Xs 11% GDP growth
is $330 billion, vs. $13 trillion (U.S.) Xs 2% is $260 billion.
[Rough estimates, of course.]
So this week U.S. Treasury Secretary Henry Paulson went to
China to meet with officials, including President Hu Jintao, with
Paulson telling Hu, “Both sides should spare no effort to make
the strategic dialogue successful as it is at a crucial moment.”
But China made no major concessions (Paulson’s past
experience in dealing with the Chinese proving to be worthless
yet again) and the U.S. Congress continues to move towards
punitive actions that will roil the relationship further between our
two countries, as well as lead to increased instability in financial
markets.
Of course China has been cooking its own Peking Duck with one
report after another concerning shoddy products. This week’s
entry is a bad one; Mattel’s disclosure that it needed to recall one
million toys made in China because they were covered in lead
paint.
And last week I reiterated how it was almost funny that China
decided to diversify its large currency reserves and invest in
things like Blackstone’s IPO, which then took a bath. Friday’s
New York Times had a story by Keith Bradsher addressing this
topic.
“The first purchase by the Chinese government’s new overseas
investment fund, a $3 billion stake in the Blackstone Group, has
produced an unusual public reaction within China….
“Chinese bloggers, and even some financial media, have not
taken the hammering lying down. They are assiduously tracking
the dwindling value of the government stake, and some bloggers
and postings in Internet chat rooms [such as on Sina.com] are
bitterly questioning Beijing’s stock judgment….
“ ‘The foreign reserves are the product of the sweat and blood of
the people of China, please invest them with more care!’”
As Bradsher noted, the above posting had disappeared shortly
afterwards.
I also saw a story on corruption in China on the BBC the other
day and the reporter summed up the public’s growing distrust of
its government in succinct fashion.
You can’t vote, you can’t demonstrate (or you’ll likely be
arrested), and you can’t even write a letter to the local paper. So
the Internet is the only vehicle to express your feelings.
I’ve said it before and I’ll probably say it another 20 times in the
future, but I see big problems with the Beijing Olympics next
year. The last thing the government wants to have to deal with
are massive protests as the world’s cameras are fixed on the nation,
but this is exactly what the Chinese may get.
In the meantime, China’s benchmark Shanghai Composite Index
hit a new closing high on Friday and is up more than 60% this
year after more than doubling in ’06. This is normally a surefire
way to keep the people happy.
–For the first time ever, Detroit’s Big Three saw its market share
fall below 50% in the month of July as auto sales slid across the
board, including for Toyota. General Motors’ were off 22%,
Ford’s 19%, Chrysler Group’s 8% and Toyota’s 7%. As noted
above, all blamed the housing slump to some extent.
GM did have a solid earnings report, though, thanks to rising
sales in Europe.
–Strategist Jeremy Grantham is a bit of an iconoclast, and
always worth listening to, and this week he said up to half of all
hedge funds may close in the next five years.
–The analysts were so clueless as to the problems developing at
American Home Mortgage that the day the stock dropped from
$10 to $1, I looked at the earnings estimates and the average for
2008 was $2.92 a share, with one at over $5. Instead the
company shut its doors on Friday and laid off over 6,000.
–Employment, by some measurements, may still be strong, but
there have been some big layoff announcements recently aside
from the one above, including Johnson & Johnson’s 4,800 and
Unilever’s 20,000 over the next four years (with most of the
latter in Europe).
–One positive on the jobs front had been Wall Street, where U.S.
securities firms added 10,000 positions in June, pushing total
jobs in the industry to a new peak, 848,000; higher than the
previous record in March 2001. Unfortunately, yet another
classic contrarian indicator.
–Global semiconductor sales were up only 0.9% in June.
–Two weeks ago I noted a Bloomberg story on The Robin Hood
Foundation, a behemoth philanthropic organization in New York
founded by hedge fund king Paul Tudor Jones II. The issue was
that many of the donors or board members are being paid
through the foundation’s investments in their own hedge fund
vehicles.
So this week I found it rather amusing that one of Tudor Jones’
own offerings, the Raptor Fund, dropped 9% in July. I have no
idea whether any of the foundation’s money is in it, nor do I care,
but it’s worthy of a little follow-up by Bloomberg, I imagine.
–Good news! The average account balance for 401(k) investors
increased from $67,700 at the end of 1999 to $121,200 end of
2006. The median account, though, was $66,600, up from
$24,900. But what will the end of 2007 and ’08 reveal?
–So I have this computer repair store nearby, I’m there looking
for a software program, and I see a sign that they sell new PCs.
Seeing as I was on the verge of junking yet another Dell over a
problem with the hard drive, I started asking these folks just what
they sold. Duly satisfied, they set about configuring a model to
meet my needs. [Aside from an AMD chip, you don’t know
what you’re getting but you’re dealing with a long-established
store and you get a 3-year warranty.]
But what I found interesting was the guy told me “By the way,
we install Windows XP. You can’t believe how many problems
we’ve had with Vista.”
–Hey, would someone please tell Lou Morrell, investment
manager and treasurer at Wake Forest University, including
oversight of the school’s endowment (Wake being my alma
mater) to stick to cash? Back on June 22, right after the initial
Bear Stearns hedge fund blow-up came to light, Morrell was
quoted in the Journal as saying “There is an opportunity out there
to buy these loans at a discount.” Then on July 27, he is back in
the Journal saying he is “still optimistic.” We don’t need any
heroes, Mr. Morrell. I don’t want to have to come down there
and teach you a lesson or two.
–Sorry, folks, but I couldn’t care less about Rupert Murdoch’s
acquisition of Dow Jones and the Wall Street Journal. I like the
Journal, and Murdoch is too smart a guy to mess with it in any
big way. Instead, I’m more interested to see how CNBC deals
with its new competitor when Fox Business Network is launched
Oct. 15. One thing is for certain…there is a coming cleavage
war, guys. That’s just how these things work.
–Lastly, it’s obviously been a good time to hold cash. My 80/20
cash/equity recommended split is ahead of the S&P year to date.
But I just have to add from personal experience, in light of the
Bear Stearns conference call on Friday that was designed to
reassure investors and shareholders, and did the opposite, that
back in early 1989, I was sitting in on a conference call at
Thomson McKinnon Securities with senior management where
our head of retail had the mission of reassuring his fellow
executives that all was well; that Thomson was well within all
capital requirements. Thomson had a much less complicated
financial structure than Bear Stearns does today, yet within
weeks Thomson had declared bankruptcy. Years ago, on the
issue of derivatives, specifically, I began warning that, 1) Wall
Street is peopled with folks who just aren’t that smart (4.0 GPAs,
yes…common sense, zero) and, 2) the Street really has no idea
what it owns. Life lessons now being learned, friends.
Foreign Affairs
Iraq…The Middle East
In a highly publicized op-ed piece for the New York Times, two
war critics, Michael O’Hanlon and Kenneth M. Pollack of the
Brookings Institution, returned from a week in Iraq and
concluded the following.
“Here is the most important thing Americans need to understand:
We are finally getting somewhere in Iraq, at least in military
terms. As two analysts who have harshly criticized the Bush
administration’s miserable handling of Iraq, we were surprised
by the gains we saw and the potential to produce not necessarily
‘victory’ but a sustainable stability that both we and the Iraqis
could live with.
“After the furnace-like heat, the first thing you notice when you
land in Baghdad is the morale of our troops. In previous trips to
Iraq we often found American troops angry and frustrated –
many sensed they had the wrong strategy, were using the wrong
tactics and were risking their lives in pursuit of an approach that
could not work.
“Today, morale is high. The soldiers and marines told us they
feel that they now have a superb commander in Gen. David
Petraeus; they are confident in his strategy, they see real results,
and they feel now they have the numbers needed to make a real
difference….
“(But)…In the end, the situation in Iraq remains grave. In
particular, we still face huge hurdles on the political front. Iraqi
politicians of all stripes continue to dawdle and maneuver for
position against one another when major steps towards
reconciliation – or at least accommodation – are needed. This
cannot continue indefinitely. Otherwise, once we begin to
downsize, important communities may not feel committed to the
status quo, and Iraqi security forces may splinter along ethnic
and religious lines.
“How much longer should American troops keep fighting and
dying to build a new Iraq while Iraqi leaders fail to do their part?
And how much longer can we wear down our forces in this
mission? These haunting questions underscore the reality that
the surge cannot go on forever. But there is good happening on
the battlefields of Iraq today that Congress should plan on
sustaining the effort at least into 2008.”
That’s what I call fair and balanced. Of course you can imagine
that when O’Hanlon and Pollack appeared on some of the talk
shows I caught, they were pilloried by the Left, who saw their
work as a betrayal.
Unfortunately, while there has been some success militarily, the
political situation is as bad as it’s ever been. For starters, if you
see an Iraqi parliamentarian vacationing in your neighborhood
this month, feel free to give them a piece of your mind.
The Sunni bloc of 44 (of 275 total seats in parliament) formally
quit the government this week, while Prime Minister al-Maliki
and Co. missed a deadline to compile a list of eligible voters for
a constitution-mandated December referendum on the status of
Kirkuk. The Kurds want to reclaim it, while the Sunnis and Shia
oppose Kirkuk becoming part of Kurdistan. But the parties in
2006 had agreed to hold the vote. This is a huge issue.
And this week we learned that when it comes to the
reconstruction effort, the U.S. inspector general said the “asset-
transfer process is broken.” In other words, all the projects that
the U.S. and the coalition complete, which are then handed over
to the Iraqis, are in turn dropped by the government. Yet another
example of ‘what the hell are we fighting for then?’ It also
should have disturbed some of you to see the aftermath of the
Iraq soccer team’s stirring win over Saudi Arabia in the Asian
Cup final. Who were the first to fire off their guns in
celebration? The police and troops…this after the government
said it was illegal for the citizenry to do so. Gotta love that
discipline. But, heck, only four died in the celebration from stray
bullets. And at least there were no car bombs this time.
Separately, another big issue in the region this week was the trip
by Secretary of State Condoleezza Rice and Defense Secretary
Robert Gates to win support for the Iraqi government. In
exchange, Saudi Arabia ($20 billion), Egypt ($13 billion),
Jordan, UAE, and others were awarded huge defense contracts as
a counter to Iran’s increasing influence. For its part, Israel
received another $30 billion in future military aid that will fill the
coffers of the likes of Boeing, Raytheon, and Lockheed Martin.
Only one thing. Saudi Arabia, Egypt and the others didn’t give
their support to Iraq as Rice and Gates had hoped because while
they fear Iran, they don’t want to rile them up either. But the
Saudis et al did accept the gifts anyway for appearing on the
show. I at least hope Washington follows up and collects the
appropriate taxes.
As for the mullahs in Iran, the above was a good excuse to
solidify their relationship with Russia, no doubt, as Moscow will
be happy to keep supplying the Iranians with the latest in
technology, such as fighter jets, on top of the already delivered
spiffy advanced antiaircraft systems the Kremlin has shipped.
Iran has also had a good time putting people to death this year,
some 125 at last count, for numerous crimes and sins.
On a different issue, Tehran does have a point when it questions
the U.S.-India Civil Nuclear Accord. Iran is a member of the
Nuclear Nonproliferation Treaty, after all, and India (and
Pakistan) aren’t. I didn’t say Iran was a responsible member,
please note, but it allows Tehran to score some propaganda
points.
On the U.S.-India agreement, I’ve long been in support of it, so I
noted with interest the viewpoint of the Journal’s Bret Stephens.
Mr. Stephens correctly reminds us that what is worrisome is
India’s ongoing military ties to Iran, which the Bush
administration is downplaying but some in Congress (who have
to approve the deal) aren’t.
Stephens notes that while India initially ignored the complaints,
“the Indians are starting to get it. ‘We are aware of our
responsibilities and we know the danger of an Iran with nuclear
weapons,’ says Raminder Singh Jassal, India’s deputy chief of
mission in Washington. He dismisses the naval visits [between
Iran and India] as ‘ceremonial’ and insists ‘we know how to
calibrate our relationship [with Iran] without compromising on
essentials.”
Stephens concludes: “Maybe that’s true. Or maybe the U.S. and
India have different notions of what a ‘calibrated’ relationship
means. But if Congress is going to punch a hole in the NPT to
accommodate India – with all the moral hazard that entails for
the nonproliferation regime – it should get something in return.
Getting India to drop, and drop completely, its presumptively
ceremonial military ties to Iran isn’t asking a lot.”
And what does Pakistan think of all this? It’s just like the old
days. They’ll increase their ties with China, as today’s
burgeoning version of the Cold War continues to take shape. It’s
all so exciting!
Russia: Time to dust off that copy of the film “Ice Station
Zebra,” starring Ernest Borgnine. Ernie himself, just 90, may
need to be enlisted in a new Cold War over the Cold Arctic.
Due to global warming, Arctic sea ice has decreased nearly 20%
in the last two decades. This in turn opens up the area to drilling
and mining opportunities, as the U.S. Geological Survey
estimates the Arctic seabed and subsoil holds as much as 25% of
the world’s undiscovered oil and gas. Nickel is also said to be
abundant.
So it should then come as no surprise that the Russians have
staked their claim over the territory with an expedition to plant a
flag beneath the North Pole. The expedition leader said “The
Arctic is ours and we should demonstrate our presence.”
No it isn’t. No one is said to have jurisdiction over the Arctic,
which is governed by the International Seabed Authority, which
means that the U.S., Canada and Denmark, in particular, can
stake their own claims.
Eric Posner, a law professor at the University of Chicago,
addressed the topic in an op-ed for the Journal.
“At some point, Russia, the U.S. and other countries will carve
up the Arctic into mutually exclusive economic zones. Russia is
positioning itself to take the lion’s share. Russia has major
advantages over Canada and the U.S. in the battle over the
Arctic. Control over the seas is determined by two things: power
and propinquity [ed. ‘proximity’]. With respect to the Arctic,
Russia has both. The U.S. has power but not, for the most part,
propinquity; Canada has propinquity but not power. As long as
the U.S. and Canada are at loggerheads over the Northwest
Passage, they will have trouble resisting Russia’s claims to the
rest of the Arctic.
“If the U.S. supports Canada’s claim to the Northwest Passage,
in return for some sort of guarantee of U.S. military and civilian
access, the two countries will strengthen their position vis-à-vis
Russia. As the world heats up, the two countries need to prepare
themselves for the re-emergence of old rivalries, and in the battle
over control of the Arctic, the U.S. and Canada are natural
allies.”
And we still have Ernie. [Pssst….don’t remind the Russkies,
but if I remember right, Ernie played a Russian defector. He’ll
be better able to divine Putin’s intentions.]
Meanwhile, Belarus and Gazprom battled over a $460 million
natural gas bill that Gazprom claimed Belarus owed. Belarus
was looking for a break, being already late in payment, but
Gazprom held firm and Belarus relented, paying down enough to
satisfy the Russian gas giant for now.
And while Belarussians don’t have to worry about a cut-off of
supplies, Gazprom had earlier made it clear it was not going to
mess with the rest of Europe, which is an improvement in the
language used during past gas disputes on the continent.
Switching gears, former Soviet president Mikhail Gorbachev was
in the news with some anti-American rhetoric, in referring to his
feeling that the U.S. is taking “unilateral actions.”
“”When I look at today’s world I have a worrying feeling about
the growth of world disorder. I don’t think the current president
of the United States and his administration will be able to change
the situation as it is developing now – it is very dangerous….No
single center can command the entire world, no one. Current
America has made so many mistakes.”
Well, Gorby is right in some respects. But then it’s not as if the
Kremlin is making things any better. Such as in the case of
Kosovo. The Washington Post editorialized:
“To its credit, the Bush administration has refused to be cowed
by [Russia’s attempts to block Kosovo’s path to independence.]
Instead, officials have made clear that the new negotiations will
be limited to 120 days and that regardless of their result the
United States will seek recognition of an independent Kosovo….
“The consequences of a Western failure to recognize an
independent Kosovo this year could be severe. Violence could
easily erupt in the tense province, as it has several times since
1999. And Mr. Putin could conclude that belligerent
obstructionism is a winning strategy for Russia, in Europe and
elsewhere. Though besieged with other foreign policy problems,
the Bush administration needs to invest in the tough diplomacy
needed to ensure that those outcomes are avoided.”
Lastly, Sarah E. Mendelson and Theodore P. Gerber had a rather
distressing opinion piece in the Washington Post concerning a
survey of 1,800 Russians ages 16 to 29 that they commissioned.
“Nearly 80 percent agreed that ‘the United States tried to impose
its norms and way of life on the rest of the world.’ Nearly 70
percent disagreed that the United States ‘does more good than
harm.’”
It’s all about Putin and his rhetoric that young people are
devouring like wolves. Putin, after all, likened U.S. policies to
those of the Third Reich recently. Mendelson and Gerber
conclude:
“The legacy of a new generation of Russians who are nostalgic
for the Soviet Union, ambivalent about Stalin and hostile toward
the United States may jeopardize U.S.-Russian relations long
after Putin is gone.”
I’ll tell you one thing. If I wasn’t white and didn’t blend in
reasonably well, I would not travel to Russia these days.
Otherwise, you’re increasingly a target for Putin’s emerging
goon squads.
Turkey: In the wake of the Islamist AKP’s election victory, the
nation’s top general, Yasar Buyukanit, said “The views of the
Turkish Armed Forces do not vary from day to day. We are fully
what we said on April 12,” [referring to a keynote address in
which he emphasized the next president must] “adhere in earnest,
and not just in words to…the ideal of a secular, democratic
state.” [Turkish Daily News]
In other words, the coup plotters are working overtime in case
Prime Minister Erdogan installs Foreign Minister Abdullah Gul
in the president slot. Gul is a danger, in the generals’ eyes, to
erode Turkey’s separation of religion and state. Gul will,
however, resubmit his candidacy.
On the issue of Iraq, Turkey and the Kurds, columnist Robert
Novak wrote in the Washington Post:
“High-level U.S. officials are working with their Turkish
counterparts on a joint military operation to suppress Kurdish
guerrillas and capture their leaders. Through covert activity,
their goal is to forestall Turkey from invading Iraq.
“While detailed operational plans are necessarily concealed, the
broad outlines have been presented to select members of
Congress as required by law. U.S. Special Forces are to work
with the Turkish army to suppress the Kurds….The Bush
administration is trying to prevent another front from opening in
Iraq, which would have disastrous consequences.”
I’m all in favor of decapitating the Kurd rebel effort, but the U.S.
needs to do this diplomatically, working with its Kurd allies as
well as the Turks. As Novak points out, this new policy hardly
makes sense considering the U.S. government has “betrayed” the
Kurds so often in the past. Novak concludes that two key Bush
supporters, John McCain and Lindsey Graham, “were surprised
by Bush during a recent meeting with him. When they shared
their impressions with colleagues, they commented on how
unconcerned the president seemed. That may explain his
willingness to embark on such a questionable venture against the
Kurds.”
And just a note on the growing worldwide water crisis, I saw in
the Turkish Daily News that Ankara residents are facing their
first cuts in water in 15 years thanks to a severe drought, with
schools now scheduled to open “one month later due to concerns
over transmission of communicable diseases.”
[One other. With all the rain in China recently, it’s amazing to
read about the severe drought in other parts of the nation, though
in actuality it’s no different than talking about record rains in
Texas and drought in California. In southern Guangdong, next to
Hong Kong, hundreds of thousands face water shortages so the
counties have carried out “335 artificial rainfall operations.”]
North Korea: Lil’ Kim and his band of Orcs have for the first
time specifically linked the Bush administration’s removing the
North from its list of state sponsors of terrorism to any further
progress on the nuclear weapons front. An envoy close to the
six-party talks told the South China Morning Post, “It is proof
that it is going to be a long tough road. Even before the next
steps have been hammered out, Pyongyang is setting its own
thresholds…they are wanting to make the fullest capital possible
out of any residual goodwill for closing Yongbyon.”
Japan: Prime Minister Shinzo Abe suffered a crushing defeat in
the first significant test at the polls of his leadership, in what was
described as the worst drubbing for the ruling LDP since 1955.
While the election was for the largely ceremonial upper house of
parliament, and not the lower (which selects who is prime
minister), the people sent a strong message to Abe that they were
tired of all the scandals. Consider this…four ministers have been
forced to leave due to corruption disclosures, including one who
took his own life. The farm minister, who later resigned,
recently showed up at a press conference with bandages all over
his face and told reporters, “don’t worry about it.”
Abe refuses to resign, however, even as the newspapers in Japan
scream for him to do so. The issue for the U.S., though, is Abe’s
dysfunctional government won’t be in a position to pursue
increased spending plans for the military.
South Korea: The people are beginning to blame America over
their hostage crisis in Afghanistan. Earlier, they were blaming
the hostages themselves for placing themselves in danger.
Regardless, it’s getting ugly.
India and Bangladesh: I saw pictures of the historic flooding
here and by one estimate, up to one-third of Bangladesh is under
water after 20 days of rain, while northeastern India is suffering
immensely. Yes, it’s monsoon season but it’s the worst in
memory.
Britain: Foot and mouth disease has returned. Not good.
Zimbabwe: [Or as we like to call it around here, “Hell.”] The
nation began circulating a new $200,000 Zimbabwe dollar note,
which means the locals can use it to buy about 400 shares of
Google…………………………………………..oops, I was just
informed the note is worth about US$1 on the black market…….
Never mind.
Random Musings
–The latest NBC News/Wall Street Journal survey on the 2008
election provided a good snapshot. On the Democratic side,
Hillary draws 43%, nationwide, while Barack Obama has slid to
22% (despite all that money he has raised…a fact I never gave
two hoots about). Republicans, though, favor Rudy Giuliani by a
33-20 margin over Fred Thompson, who still hasn’t officially
entered the race. In a three-way contest Hillary comes in at 42%,
Rudy 34%, and New York Mayor Michael Bloomberg 11%.
The number one concern for Americans? Health care.
–And when it comes to next year’s campaign, the elephants are
certainly handing the donkeys one free gift after another on the
corruption front, the latest being a joint FBI / IRS raid of Alaska
Sen. Ted Stevens’ home. Stevens is under investigation for his
ties to an oil service company, Veco, whose CEO recently
pleaded guilty to bribery involving state legislators. Stevens, 83,
is the longest-serving Republican in the history of the Senate;
thus making him yet another poster boy for term limits. Fat
chance Alaska will be receiving any “bridges to nowhere”
projects anytime soon, while Stevens will be starring in a number
of Democratic campaign spots. Nice job, Republicans. Ask me
if I’ll donate one dollar the rest of my life to the national party.
–Donald Rumsfeld is not a good man. As I pointed out in the
months after the invasion of Iraq, it was one lie after another
coming out of his mouth. And now we have his unbelievable
response to the Tillman tragedy.
–The Washington Post’s Jim Hoagland, in writing of today’s
battles where “every man can become his own guerrilla army,”
such as in Iraq, as well as the overall despondency in America
these days, including with all the scandals in the sports world,
concludes:
“This era’s miniaturization of power in the hands of the
individual favors destructive forces rather than creative ones at
present. In their very different ways, devastating new military
technologies and their wide availability, the Internet, and the
greatly increased flow of money, goods, ideas and people across
national borders have all wrought changes that defenders of the
existing order struggle to comprehend and counter.
“The most vindictive bloggers and many others eager to push the
mainstream media, established politicians or other remnants of
the status quo off a stage that they want to occupy smash
reputations with abandon to call attention to themselves. What
do they have to lose in the unpoliced badlands of the ether?
They contribute to a general deepening of cynicism in the land at
no perceived cost to themselves.
“But deeply polarized nations that devote an inordinate amount
of their time and energy to hunting and prosecuting both real
villains and convenient scapegoats – at the expense of failing to
recognize and respect heroes and helpers of the common good –
do pay an enormous collective price. Such nations descend into
easily manipulated despair and resentment that inevitably lead to
ever greater destruction. Americans would do well to ponder
that in a summer of doubt and division.”
It’s too late. Mr. Hoagland, a longtime member of the
Washington scene and a terrific columnist, is right to a great
extent, especially when it comes to the latest mediums such as
YouTube. But tragedies such as that in Minneapolis, or the latest
member of Congress to be exposed for the dirtball that he is,
doesn’t make his conclusion that it is largely ‘our’ fault an easy
one.
–In the latest sign of the apocalypse, a new company, FlexPetz,
has introduced time-sharing for pets. For an annual fee of
$99.95, a monthly payment of $49.95 and a per-visit charge of
$39.95, animal lovers get to spend time with a dog.
This isn’t taking some canines to the nursing home to cheer up
the patients; this is absurd. But I guess the only hope is that the
dogs unionize to protect their own rights.
–I have to admit I didn’t even know film director Ingmar
Bergman was still alive, until I heard he was dead, but I used to
think when selecting a movie for myself, ‘I want to be
entertained; the last thing I want to see is an Ingmar Bergman
flick.’
Columnist John Podhoretz / New York Post
“In a relentless series of films – one or two a year – made
between 1950 and 1982, he punished his audiences with a view
of life so dark and foreboding that he made his fellow
existentialist artist, Samuel Beckett, seem as upbeat as Oprah….
“Art, in this view, wasn’t supposed to be easy to take or
pleasurable to take in. It was supposed to punish you, assault
you, scrub you clean of impurities.”
Give me Clint, I always say.
–So I have flown over Southeast Asia a number of times and
thus experienced the “Asian Brown Cloud” of smog, but now a
group of scientists, in a study for the journal Nature, has reached
some conclusions, including that the cloud “is causing
Himalayan glaciers to melt, with potentially devastating
consequences for more than two billion people in India, China,
Bangladesh and other downstream countries,” as reported by
Jeremy Page of the London Times.
The researchers have observed that 2/3s of the 46,000 glaciers
are shrinking, which after today’s flooding will eventually lead
to widespread drought.
As I’ve been saying, the global warming debate needs to be
repositioned as a war on pollution and these scientists have
concluded it’s not just the release of aerosols, or greenhouse
gases that are the culprits, but rather it’s the smoke from
factories, power plants and wood fires that stretch across the
subcontinent that is the real one.
–More weather extremes; Boise, Idaho, had its hottest month
ever in July…an amazing 8.4 degrees above normal.
–I didn’t comment last week on the story of the astronauts who
may have been drinking because I wanted to wait 24 hours, plus I
wasn’t about to pile on. But I wish I had come up with Charles
Krauthammer’s brilliant take on the issue in Friday’s
Washington Post.
“Your honor, I rise in defense of drunken astronauts.
“You’ve all heard the reports….A stern and sober NASA has
assured an anxious nation that this matter, uncovered by a
NASA-commissioned study, will be thoroughly looked into and
appropriately dealt with.
“To which I say: Come off it….I place before the jury the
following considerations:
“Have you ever been to the shuttle launch pad? Have you ever
seen that beautiful and preposterous thing the astronauts ride?
Imagine it’s you sitting on top of a 12-story winged tube bolted
to a gigantic canister filled with 2 million liters of liquid oxygen
and liquid hydrogen. Then picture your own buddies – the
‘closeout crew’ – who met you at the pad, fastened your
emergency chute, strapped you into your launch seat, sealed the
hatch and waved, smiling to you through the window. Having
left you lashed to what is the largest bomb on planet Earth, they
then proceed 200 feet down the elevator and drive not one, not
two, but three miles away to watch as the button is pressed that
lights the candle that ignites the fuel that blows you into space.
“Three miles? That’s how far they calculate they must go to be
beyond the radius of incineration should anything go awry on the
launch pad on which, I remind you, these insanely brave people
are sitting. Would you not want to be a bit soused? Would you
be all aflutter if you discovered that a couple of astronauts – out
of dozens – were mildly so? I dare say that if the standards of
today’s fussy flight surgeons had been applied to pilots showing
up for morning duty in the Battle of Britain, the signs in
Piccadilly would today be in German.
“Cut these cowboys some slack. These are not wobbly
Northwest Airliners pilots trying to get off the runway and steer
through clouds and densely occupied airspace. An ascending
space shuttle, I assure you, encounters very little traffic. And for
much of liftoff, the astronaut is little more than spam in a can –
not pilot but guinea pig. With opposable thumbs, to be sure, yet
with only one specific task: to come out alive.
“And by the time the astronauts get to the part of the journey that
requires delicate and skillful maneuvering – docking with the
international space station, outdoor plumbing repairs in zero-G –
they will long ago have peed the demon rum into their recycling
units.”
But as Krauthammer adds, the “most dismaying part of this
brouhaha is not the tipsy Captain Kirk or two but the fact that
space makes the news today only as mini-scandal or farce. It all
started out as a great romance in the 1960s, yet by the 1970s –
indeed, the morning after the 1969 moon landing – romance had
turned to boredom.”
Krauthammer concludes, “President Bush has sensibly called an
end to this nonsense and committed us to going back to the moon
and, ultimately, to Mars. If his successors don’t screw it up,
within 10 years NASA will have us back to where we belong –
on other worlds….
“At which point…we won’t much care whether the extra bounce
in their gait is the effect of the one-sixth gravity or a touch of
moonshine.”
Amen.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $687
Oil, $75.48
Returns for the week 7/30-8/3
Dow Jones -0.6% [13181]
S&P 500 -1.8% [1433]
S&P MidCap -2.1%
Russell 2000 -2.9%
Nasdaq -2.0% [2511]
Returns for the period 1/1/07-8/3/07
Dow Jones +5.8%
S&P 500 +1.0%
S&P MidCap +4.5%
Russell 2000 -4.1%
Nasdaq +4.0%
Bulls 47.2
Bears 26.4 [Source: Chartcraft / Investors Intelligence…huge
moves, as you’d expect given the market action.]
Have a great week. I appreciate your support.
Brian Trumbore
