[Posted 7:00 AM ET]
Wall Street
While we await the data on first quarter GDP to see if the
government’s figures confirm what appears to be the obvious,
there is no shortage of esteemed experts claiming the U.S.
economy is in recession, ranging from former Fed chairman Paul
Volcker, to Nobel Prize-winning economist Joseph Stiglitz, to
PIMCO’s Mohamed El-Erian, just for starters. For his part,
Stiglitz says the recession will be “long and deep.” And when it
comes to housing, the source of all this evil, the latest survey of
economists by the Wall Street Journal has 73% believing the
bottom won’t be hit in home prices until the 1st-half of 2009 at
the earliest.
In fact all manner of projections continue to be ratcheted down,
in terms of growth, while figures on the total damages, as in for
the credit crisis, are ratcheted up. Federal and state budget
deficits are yet another victim, as revenues in virtually every case
are beginning to fall off the cliff.
Even stalwart GE, out of nowhere, missed its first quarter
earnings mark badly on Friday, but here your faithful editor was
well ahead of the game.
From WIR…2/2/08
“But what of all those multi-nationals such as GE, Microsoft,
IBM, or Caterpillar that speak of softness in their U.S. numbers
but, because they receive a majority of their orders from
overseas, are telling us talk of a global slowdown is bunk?
“Here’s my take. GE will be among those missing expectations
at some point in 2008. The global economy, beset not just by the
bursting of my global real estate bubble, but also ever-rising food
prices, and stubbornly high energy costs, will continue to slow.
Armageddon? No. A worldwide recession? Yes. Admittedly,
though, there will be more than a few times when I’ll look
foolish with this forecast but I’ll be sitting back in my easy chair,
musing about the Big Picture while the stock and bond markets
play ‘helter-skelter.’”
No one else was writing that about GE just two months ago,
though I admit I would have thought the miss would come later
in the year.
If you’re a raging bull, you couldn’t have been too pleased with
release of the Federal Reserve’s minutes from its March 18
meeting. Some on the Open Market Committee were concerned
about “a prolonged and severe economic downturn,” while there
was increased talk of an “adverse feedback loop.” “Several
participants noted that the problems of declining asset values,
credit losses, and strained financial market conditions could be
quite persistent, restraining credit availability and thus economic
activity,” according to the minutes. And the same minutes noted
“a retrenchment in capital spending.”
Billionaire investor George Soros reiterated some of his past
musings in saying this week that when it comes to real estate, “It
will take much longer for the full effect of the decline in the
housing market to be felt.”
Back to ratcheting up and down, just six months ago the
International Monetary Fund said total losses for banks, hedge
funds, pension funds, insurance companies and sovereign wealth
funds as a result of the credit crisis would be $240 billion. This
week they took it up to $945 billion, a slight increase. At the
same time the Bank for International Settlements, keeper of the
figures on funky investments, i.e., derivatives, such as credit-
default swaps (contracts designed to protect investors against
default and used to speculate on credit quality), said the market
for this product grew at the fastest pace in at least nine years to
$516 trillion (twelve zeroes) in notional value in the first half of
2007. [Bloomberg News]
As for global economic growth, the IMF has lowered its
forecasts yet again, saying the U.S. will be in recession for part
of this year, but only recover to a 0.6% rate of growth in 2009.
The Eurozone, also lowered anew, is now projected to grow just
1.4% in 2008 and 1.2% next year.
Following are a few notes from abroad, starting with my global
real estate bubble theme.
Home prices in the U.K. fell 2.5% from February to March, a
rather sizable decline and the worst since 1992. The chief
economist at Deutsche Bank AG in London, George Buckley,
told Bloomberg, “We’re in for a long period of house prices
falling or not growing at all.” [A major reason why the Bank of
England lowered its key lending rate this week.]
In Spain, bubble central for Europe (though with Britain and
Ireland hot on its heels), they attempted to hold the first “Dutch
auction” for properties but of 216 lots, 194 were withdrawn when
they weren’t purchased at the reserve price, which was set at
discounts of around 30%.
In Japan, Akira Mori, the nation’s richest man and a big investor
in real estate, said “The boom we’ve enjoyed for the past few
years is over. Investors were convinced that prices would keep
rising, so in about six months, they’ll probably rush to get out
regardless of price.”
More broadly, in Australia, business conditions are deteriorating
rapidly amidst a slump in business confidence to its lowest level
since September 2001. Housing is on the verge of rolling over
here as well.
But then we have this issue of food prices and a main staple for
much of the world, rice. By some measures, the price of this
humble seed that bursts with flavor after sprinkling a little
Lawry’s on it, is rising at its fastest pace in 25 years. It’s gotten
to the point where I tried to grow some in my jacuzzi, but I think
I had the water level too high, plus I wasn’t about to let a team of
oxen tramp through my place.
My agrarian failure aside, we truly have a food crisis and it’s
important to note that in the developing world 50% to 60% of
income goes to food. In the case of rice, though, hoarding is a
major culprit as leading exporters, such as Thailand, refuse to
increase the level of same at the risk of not being able to take
care of their own people at realistic prices. [Thailand does say,
however, that prices will come down with the April-June harvest,
something worth watching.] In others nations, such as Egypt, it’s
about wheat and the soaring price of bread. I have to admit I had
no idea Egyptians are the largest consumers of bread in the
world, three times the level of baguette eaters the French.
Rioting over rising prices continues to spread and IMF head
Dominique Strauss-Kahn said in an interview with France 24
television:
“Today there is not just a crisis purely about growth, there is a
crisis at least as important developing through the pick up in
inflation and the prices of commodities, notably foodstuffs. In a
number of countries, notably in Africa, this is going to lead to
economic disorders but also considerable individual suffering.”
Lastly, as various readings on consumer sentiment continue to
plunge, such as a horrible University of Michigan survey that
came in at its worst level since 1982, there are some disturbing
reports on our feelings toward retirement. The Pew Research
Center revealed that among the middle class (defined as income
from $40,000 to $100,000 these days), 54% said they had made
zero progress in the last five years, while a survey for the
Employee Benefit Research Institute showed that only 18% are
confident they will have enough for retirement, down from 27%
a year ago.
Street Bytes
–After a nice stretch of performance, stocks took it on the chin
this week with the lion’s share of the losses coming on Friday
after GE’s dreadful earnings miss, 7 cents, by god. But it wasn’t
just about the first quarter, as CEO Jeffrey Immelt said “In light
of what we have seen…we have revised our earnings outlook for
the full year to protect investors by reflecting a slower economy
and assuming capital markets remain challenging. We are
lowering our full-year EPS guidance to $2.20-$2.30 [from
analyst estimates of $2.40+.]” As I alluded to above in my
comment from this past February, down the road look for similar
comments from the likes of IBM and Microsoft. For now, the
earnings train is just taking off and the next few weeks could be
hairy.
On the week the Dow Jones gave up 2.3% to close at 12325,
while the S&P 500 lost 2.7% to 1332 and Nasdaq dropped 3.4%
to 2290.
–U.S. Treasury Yields
6-mo. 1.39% 2-yr. 1.74% 10-yr. 3.46% 30-yr. 4.29%
Bonds rallied, particularly on the short end, as GE’s report added
credence to the feeling the economy is in need of further rate
reductions when the Fed next meets April 29-30, at which point
it is expected to lower rates another 25 basis points (1/4%). But
the European Central Bank held the line on rates this past week
as ECB President Jean-Claude Trichet said “We are experiencing
a rather protracted period of temporarily high annual rates of
inflation,” adding ensuring price stability is “very serious for us.”
–Las Vegas real estate bits:
Of the 22,000 single-family homes on the market here, 51% are
vacant. And there are now 1,000 houses listed for sale at $1
million or higher, 600 of them built since 2004. Then you have
the investors getting taken for a ride in the condo-hotels. As
reported in the Wall Street Journal, you have cases such as this
one fellow who purchased a $550,000 unit at the MGM Grand in
2005, counting on the cash flow from renting his unit to cover his
$3,000-a-month mortgage, leaving him with a profit. But today
he is netting only between $400 and $1,800 a month before his
mortgage payment. That should be a lesson to all who may be
thinking of acquiring such a unit anywhere in the world.
Meanwhile, room rates are plunging in Vegas. A survey of
average hotel prices for the upcoming week of April 27 through
May 3 reveals they are down 23%.
The other day CNBC had this shill for Vegas real estate on,
Sarah Prinsloo, who said Sin City was “recession resilient.”
Right.
–Delinquencies on mortgages nationwide are now running at
4.46% vs. 2.92% a year ago. [The figure is 7.0% in Florida,
6.6% in Nevada.]
–$715 billion in consumer debt is delinquent.
–The price of gasoline hit a record $3.36 a gallon according to
AAA, and with gasoline futures closing the week at $2.80, prices
are poised to move even higher.
–An assessment by the U.S. Geological Survey estimates that the
largest potential oil resources in the continental United States lie
in an area of shale in a region between North Dakota and
Montana, and it could be extracted using current technology.
Quick, snap up the land!………..sorry, too late. [This same area is
also part of the prime wind corridor and has been attracting
attention for years.]
–The Energy Information Administration sees $101 per barrel
oil for 2008, a huge increase from its earlier projection, even as
global demand softens. This week oil rallied to $112 intraday
before closing at $110, as inventories took an unexpected plunge.
–Mexican President Felipe Calderon, whose performance has
been terrific thus far amidst a world of troubles, has called for
sweeping reform of state oil giant Pemex in terms of allowing it
to contract out more work to boost rapidly sagging production
and exploration. This is critically important to the United States.
–I agree with Senator John McCain and his call to stop adding
oil to the nation’s Strategic Petroleum Reserve. It’s absurd we’re
still stockpiling it to the tune of 70,000 barrels per day. Yes, it
won’t have a meaningful impact on the supply/demand picture
but that doesn’t mean you shouldn’t still stop it. And not for
nothing, but we already have a 35-day supply….if we couldn’t
find another drop, from any source, anywhere in the world.
–Thanks to the surge in grain prices, land values continue to
escalate in the Midwest, up 67% in five years in Iowa, for
example. But this also means massive debt loads for the
American farmer. The USDA forecasts that farm business debt
will hit $228 billion in 2008, to set a record for a fourth
consecutive year. As I wrote when I was in Iowa last August, of
course this is yet another bubble and will end badly at some point
just like all the others.
–China has let its currency, the yuan, rise against the dollar in an
attempt to blunt rising inflation as imported goods then become
cheaper, which is also what the U.S. and Europe have been
complaining about for years as they seek more exports to China.
The flip side is Chinese products coming here are more
expensive, so they are exporting inflation..
[China revised its official GDP figure for 2007 to 11.9% from
11.4%, the fifth straight year of above 10% growth.]
–Yahoo is being incredibly foolish in not accepting Microsoft’s
original $31 a share offer. Microsoft has issued a deadline for
Yahoo to take it or it’s launching a hostile bid, and probably at a
lowered price, while I grow weary of the whole story and talk of
other players becoming involved.
–Washington Mutual has been expanding like crazy in my
neighborhood the past five to seven years, which I always found
amusing, seeing as how I never saw anyone in the branches when
I’d walk by, and so this week they raised $7 billion in badly
needed capital, nearly doubling the number of shares outstanding
in the process, thus rather significantly diluting existing
shareholders. Yet for some dumb reason, the share price held up
reasonably well, despite the fact, sports fans, that even in a
recovery, if and when that occurs, you divide the profits into the
number of shares…..oh, never mind. I’m just miffed I was a
year early in buying puts on WaMu. Right idea, wrong timing.
[Reader Josh P. out west got it right, though, and is still drinking
premium as a result.]
–Private-equity companies paid $1 billion to securities firms in
the U.S. and Europe during the first quarter, down from $4.3
billion a year earlier. As if that wasn’t bad enough, investment
banks saw their revenue from loan underwriting plummet more
than 91 percent and fees from advising on takeovers 51 percent.
Not a pretty picture if you’re wondering where this group is
going to get its earnings.
–Merrill Lynch reports next week and is expected to take further
writedowns of $6 billion to $6.5 billion. CEO John Thain,
however, has maintained Merrill does not need to raise new
capital.
–David P. passed along a note from Credit-Suisse, re: Goldman
Sachs, which “dumped $500 million of the unsellable Chrysler
loans at 63 cents on the dollar to a group of varied investors. The
implied yield on the debt at that price is well over 20%.” Draw
your own conclusions.
–With my own funds, I have never ‘stretched for yield’ with
assets I’ve allocated to cash. I stick with plain vanilla money
market funds, even as the amount paid out falls. But once again
the industry has another black eye as Schwab YieldPlus, pitched
as a money market alternative, is off a staggering 24% in 2008
because it got caught up in the mortgage crisis.
–“60 Minutes” had a piece on sovereign wealth funds last
Sunday and they did a poor job in spelling out the issues. Here’s
the bottom line. Americans should NOT be concerned when
they hear of funds, even out of China, that are investing in our
banks, for example, unless you hear they are packing the board
of directors, which in virtually all cases thus far hasn’t been the
case. [The Chinese fund highlighted on “60 Minutes” has never
asked for board representation.]
Where the trouble arises, and where the program confused
viewers, is with the mammoth reserves of U.S. Treasuries that
the governments hold, such as China’s humongous position. Of
course if they decided to dump a sizable portion of this, as I’ve
long discussed in the past, it would create an issue and is quite
conceivable if, for example, China sought to take back Taiwan
and we threatened to come to its defense. “Oh no you don’t.
We’ll tank your economy.” Remember what I’ve said. Under
that scenario it would harm China’s own economy only briefly
because the rest of the world, after a few weeks pause and
harrumphing in the UN, would go right back to business as usual.
The bigger issue when it comes to China is in the field of
technology espionage, especially on the defense front. They’ve
been building their spy network here for decades, long before the
first sovereign wealth fund was created. Bottom line, each case
is different and needs to be handled accordingly.
–The New York Mets will be opening Citi Field next spring.
That should be a troubling sign to many, given the recent history
of sports stadiums and the fate of the corporate names adorning
them.
–What a freakin’ mess as AMR was forced into a second round
of massive flight cancellations due to the FAA’s ongoing
crackdown on safety inspections. Clearly, the FAA has been
slack in enforcing the rules and in the game to play catch up, the
flying public is once again getting screwed.
–Frontier Airlines became the latest to file for bankruptcy,
though in this case, Frontier is merely looking to reorganize
while continuing operations.
–Capital One Financial is slashing 750 out of its work force of
2,000 in the U.K. AMD is cutting 1,650 jobs.
–I missed this last time, but Josef Stalin’s former oil minister
died, Nikolai Baibakov. He was 97. I mention this because in
reading his obituary, Baibakov’s story is one of survival, to say
the least. He was named Stalin’s oil commissioner in 1944 and
stayed in government until Mikhail Gorbachev fired him in 1985.
But it was in 1942 that Stalin summoned Baibakov and told him
he would be shot if the advancing Nazi army seized oil wells in
Soviet Azerbaijan. Then Stalin said he also would be shot if,
after the war, the wells couldn’t be returned to production.
“If you leave at least a ton of oil to Germans, we will shoot you,”
Baibakov quoted Stalin as saying. “But if the Germans don’t get
there, and we are unable to restart the production, we will shoot
you too.”
Well, Baibakov would go on to spearhead postwar development
of the USSR’s oil and gas deposits in Siberia, having received a
reprieve.
–I’ve always said the debate over global warming needs to be
reshaped, relabeled, to one over ‘global pollution.’ This few
could then dispute. So I was reading a piece in the Wall Street
Journal on how difficult it is to get down to zero emissions in
automobiles (as in the first 98% is relatively simple, it’s the final
2% that’s the problem), and there was this tidbit.
“The number of dangerous smog alerts in Southern California
has dropped to just one or two per year, compared to roughly 180
days a year in the mid-1970s.”
Clean air and clean water are our birthright….period. Those
growing up today can’t begin to understand just how poor the air
quality was in much of this country in the 60s and 70s. And who
deserves a fair amount of credit for the improvement? Richard
Nixon, who established much of the environmental framework
we know of today.
–Two people have died in Spain after contracting the human
form of ‘mad cow disease’ (vCJD), one three months ago, the
other last week. Not good.
–Bird flu keeps simmering, with Chinese officials confirming a
father caught it from his son last December, making it about a
dozen times this has occurred in countries including Cambodia,
Thailand, Vietnam and Indonesia. But the virus has yet to be
spread into the wider community. In the China case, the son died
and the father recovered.
“An air of tension still surrounds this disease,” notes Dr. Jeremy
Farrar of the Hospital for Tropical Diseases in Ho Chi Minh
City. “Given that the species barrier can be breached, the
intriguing question is why the transmissibility of H5N1 among
people remains so low?”
As of April 3, the World Health Organization has reported 378
cases and 238 deaths worldwide. [South China Morning Post]
–My quest for wild salmon is not looking good these days as
there are proposals for a complete shutdown of the Pacific
salmon season as a way of preserving the species for future years
amidst the overfishing that has decimated the population.
–Chris C. passed along a piece I had missed; a survey of
financial literacy among high school seniors, sponsored by the
Jump$tart Coalition for Personal Financial Literacy (and paid for
by Merrill Lynch). Only 48.3 percent of questions on basic
personal finance and economics were answered correctly, such as
only 16.8% correctly answered that stocks likely would offer the
higher rate of growth over 18 years of saving for a child’s
education, while 37.3% thought a highly conservative U.S.
savings bond would offer a better one.
–Lastly, former Fed chairman Alan Greenspan continues to
attempt to reshape his legacy, hitting back at critics. What no
one is mentioning in the articles, though, is the role his wife,
NBC’s Andrea Mitchell, must be playing behind the scenes.
“Now you go out there and tell them to stick it!” “But….” “No
buts….just do it!”
From Greg Ip’s column in the Journal:
“Mr. Greenspan says he doesn’t regret a single decision. In his
view, many critics are ignoring evidence in his favor and failing
to assess the process by which he made decisions.”
[A cousin of mine and her husband sat next to Greenspan and
Mitchell at a Washington dinner last year and my cousin said the
two couldn’t have been more unfriendly and stuck up.]
Foreign Affairs
Iraq: I was able to watch virtually all of Gen. David Petraeus’
and Ambassador Ryan Crocker’s appearance before two Senate
committees and it was not a command performance. The facts
on the ground, even as the surge has led to some progress,
particularly in terms of the levels of violence, simply do not
allow for any gloating. General Petraeus himself said “The
champagne bottle has been pushed to the back of the refrigerator.
And the progress, while real, is fragile and reversible.”
What was striking were the pointed questions coming from
respected Republican Senate leaders such as John Warner (“Are
we safer?”) and Richard Lugar, who blasted the Iraqi
government. Lugar:
“(Despite) the improvements in security, the central government
has not demonstrated that it can construct a ‘top-down’ political
accommodation for Iraq. The Iraqi government is afflicted by
corruption and shows signs of sectarian bias. It sill has not
secured the confidence of most Iraqis or demonstrated much
competence in performing basic government functions.”
That’s the bottom line, no matter where you stand. Congress
appropriately asked the same question over and over again,
“Now what?” And in terms of an inevitable withdrawal, be it
2009 or 2019, what are truly the consequences, aside from the
pat administration response (and that of Senator John McCain)
that all hell will break loose in the entire region? I happen to
believe this myself, but there hasn’t been any real debate on this
specific issue.
Ambassador Crocker, for example, trumpets the party line that al
Qaeda has been seriously degraded, thus we’re safer, but what of
the fact Iraq is the prime recruiting tool? Where there is
encouraging news on this last bit, however, is that more Iraqis
are standing up against al Qaeda than were a year ago.
So there has been success, but it’s also clear President Bush is
dumping the war in the lap of the next occupant of the White
House, which also means another thing. You can kiss off all the
campaign rhetoric from both sides when it comes to virtually all
their domestic initiatives, because there simply isn’t going to be
any money to pay for them as long as the wars in Iraq and
Afghanistan are going full tilt. Let alone we have sliding
revenues as a result of the stumbling economy. General
Petraeus’ tone this week was best described as ‘sober.’ I’d call it
depressing.
A few other items. Bush and Petraeus agreed that there should
be a 45-day pause to reassess, in July after the surge troops have
been withdrawn, in order to figure out whether further
withdrawals of a then force of 140,000 can be made. [Defense
Secretary Robert Gates continues to say further withdrawals will
be made, potentially setting up a contest next fall with Bush and
Petraeus right before the election.] Even the good news for the
soldiers and their families, that tours will be reduced to 12
months (effective with new deployments Aug. 1), with one year
at home before further tours of duty, is tempered by the fact that
there appears to be no break in the cycle, especially when one
considers that the U.S. is looking to increase forces in
Afghanistan, which are going to have to come from Iraq, seeing
how stretched the military is. Heaven help us should Kim Jong-
il or his generals lose control of their senses.
One point that Congress kept hammering home that the
administration must follow through on is sharing the costs of the
war in Iraq. There is no reason why Iraq shouldn’t be paying a
significant amount of what American taxpayers have been
shelling out.
Separately, there is evidence that when the Iraqi Army
encountered difficulties in Basra, it ignored the British, who until
recently held the city, and instead called on the Americans for
assistance, what the London Times has called a “catastrophic
failure” in relations between Iraq and the U.K. A supreme
humiliation.
Lastly, the elephant in the room this week was Iran. It didn’t
help matters that Tehran announced another expansion on the
centrifuge front. If they are telling the truth, and who the heck
knows if they are, it’s yet another worrisome development. One
thing we do know, however, is that once Iran obtains a usable
amount of weapons grade uranium, it has the missile systems to
deliver it. Again, Israel is going to be forced to act, sooner than
later.
China: British Prime Minister Gordon Brown became the latest
European leader to announce he would boycott the Olympic
opening ceremonies, joining French President Sarkozy and
German Chancellor Merkel (who said she wouldn’t attend at all).
President Bush, however, is sticking to his plans to travel to
Beijing.
Bush is making the right call. Here’s my bottom line on this one.
China should not have been granted the Games in 2001 in the
first place. But there were no real protests until just recently and
as I’ve stated before now is not the time to poke China in the eye.
Regarding Tibet, the coverage of the crackdown has been
incredibly one-sided, as well as a failure to understand Beijing’s
indignation; such as with a U.S. Congressional resolution calling
on China to initiate discussions with the Dalai Lama, while
adding China’s response was “disproportionate and extreme.”
The resolution also stated numbers killed and detained without
citing the source of its information, while China has held at least
six rounds of talks with the Dalai Lama’s representatives.
I do not condone the violence, but understand it has gone both
ways, which the media readily ignores. Chinese nationals were
killed at the hands of Tibetans in the riots.
The world is not all black & white, least of all China. Let them
have their Games, at this point, but be very firm on issues such as
promised press access, while continuing behind the scenes to
urge the government to meet with the Dalai Lama directly.
Remember, it’s the year of the rat, and the rat is cornered. Give
it some space and China may figure its own way out of the crisis
relatively peacefully.
As for the torch relay, times have changed, to say the least.
Shelve it for all successive Games. It’s too late to do that this
year, though.
Iran: President Ahmadinejad dismissed his economics and
interior ministers amidst growing problems with the economy,
starting with 18% inflation.
Israel: Prime Minister Olmert and Palestinian President
Mahmoud Abbas held formal talks for the first time in months,
while the May issue of The Atlantic has a controversial piece by
reporter Jeffrey Goldberg. Following is but a brief excerpt.
“The latest iteration of the never-ending Middle East peace
process, launched in Annapolis late least year by President Bush,
is in many ways a farce. Olmert’s ruling coalition is unstable,
and he is deeply unpopular. Bush shows no sustained interest in
understanding the dispute. Condoleezza Rice is ignored across
the Middle East. And Abbas’ authority doesn’t radiate far
beyond Ramallah, the de facto Palestinian capital. The tragedy
of this farce is that this could be the last time a two-state solution
is seen as a viable option. It is a cliché for Middle East leaders to
warn that time is running out [Ed. as in Jordan’s King Abdullah],
but today it seems that the possibility of a two-state solution is
swiftly fading. Palestinian rejectionists and unbending Jewish
settlement leaders are in harmony on this point. ‘It does not
matter what the Jews do. We will not let them have peace,’
Ibrahim Mudeiris, the imam of the Ijlin Mosque in Gaza, told me
not long ago. We spoke after Friday prayers. The street outside
the mosque was crowded with angry young men who had been
excited by Mudeiris’ sermon, in which he identified Jews as ‘the
sons of apes and pigs.’
“ ‘They can be nice to us or they can kill us, it doesn’t matter,’ he
said. ‘If we have a cease-fire with the Jews, it is only so that we
can prepare ourselves for the final battle.’
“For Palestinian radicals, the closing of the settlements would be
a terrible blow. The smartest Palestinian strategists understand
this. ‘The longer they stay out there, the more Israel will appear
to the world to be essentially an apartheid state,’ the former
Palestinian Authority negotiator Michael Tarazi told me a few
years ago. ‘The settlements mean that the egg is hopelessly
scrambled. Basically, it is already one state.’
“The hard-core settlers are as intransigent, and as patient, as their
Palestinian counterparts….
“The Camp David negotiations in 2000 collapsed mainly because
the Palestinian leader, Yasir Arafat, was unable to strike a final
deal with Israel. During the seven years of the Oslo peace
process, which was meant to negotiate a Palestinian state into
existence, the number of Jewish settlers in the West Bank nearly
doubled. It is difficult to blame Palestinians for their cynicism
about Israeli intentions regarding the West Bank. Only by
closing outposts and dismantling settlements can Israeli leaders
help the Palestinian moderates, and themselves. When I asked
Olmert why he argues for an Israeli withdrawal from Palestinian
territory but allows the expansion of existing settlements and the
continued existence of illegal outposts, he barked, ‘I dismantled
Amona!’ Amona is the outpost that came down in February
2006….
“Not one outpost has been dismantled since Amona was closed,
and none seems slated for impending disappearance. This is the
core (of the) criticism of Olmert. The prime minister is a skilled
rhetorician but a political coward, one who speaks the language
of reconciliation but whose actions in Lebanon, and in Gaza,
suggest something else.”
North Korea: It’s easy to dismiss the threat from here. ‘They
couldn’t possibly be so stupid as to launch an attack on South
Korea,’ for example. But they have been involved in
proliferation activities and I keep going back to my concern of
the past few years…just who the heck is behind Kim Jong-il?
Are the generals pragmatists? Are they hardliners? Are they
nothing more than drug runners living high on the hog while the
people suffer? We don’t have any damn idea. Our intelligence
is absolutely non-existent on this critically important issue.
But at least South Korean President Lee has showed some real
backbone and Lee is one who will not just give $billions in badly
needed food aid to Pyongyang, for instance, without gaining
something in return.
For its part, Japan extended economic sanctions on the North for
another six months, citing the lack of a breakthrough on the
nuclear program front, as well as a resolution of past abduction
cases. There are also rumors the U.S. may be willing to
compromise, but we’ve heard this before and the Japanese will
be none too happy should this prove to be the case.
Colombia: The House voted 224 to 195 to put off consideration
of the free trade agreement with Colombia until Speaker Nancy
Pelosi deems it appropriate. Earlier, President Bush had
submitted a 90-day deadline for considering the pact. Bush was
none too pleased at the Democrats’ response.
“Today’s unprecedented and unfortunate action by the House of
Representative led by Speaker Pelosi to change the rules
governing legislation to implement our trade agreement with
Colombia is damaging to our economy, our national security, and
our relations with an important ally. It also undermines the trust
required for any administration to negotiate trade agreements in
the future.”
I couldn’t agree more with the president. This is an abomination
and an incredible slap in the face to our Colombian allies and its
great leader, Alvaro Uribe.
Secretary of State Condoleezza Rice:
“The fate of this agreement raises even larger questions: How
does the U.S. treat its friends, especially when they are under
pressure and attack? Will we remain engaged as a global leader,
or will we pull back unilaterally? Will we define our role in the
world by confidence in our own principles, or by capitulation to
unfounded fears? The eyes of many nations, particularly those in
our own hemisphere, are upon us, and let no one think that the
choices we make will not echo around the globe.” [Wall Street
Journal]
Editorial / Washington Post
“The year 2008 may enter history as the time when the
Democratic Party lost its way on trade….
“Ms. Pelosi denies that her intent is to kill the bill, insisting…that
Congress simply needs more time to consider it ‘in light of the
economic uncertainty in our country.’ She claimed that she
feared that, ‘if brought to the floor immediately, [the pact] would
lose. And what message would that send?’ But Ms. Pelosi’s
decision-making process also included a fair component of pure
Washington pique….
“That political turf-staking, and the Democrats’ decreasingly
credible claims of a death-squad campaign against Colombia’s
trade unionists, constitutes all that’s left of the case against the
agreement. Economically, it should be a no-brainer – especially
at a time of rising U.S. joblessness….The trade agreement…
would give U.S. firms free access to Colombia for the first time,
thus creating U.S. jobs….
“ ‘I take this action with deep respect to the people of Colombia
and will be sure that any message they receive is one of respect
for their country, and the importance of the friendship between
our two countries,’ Ms. Pelosi protested yesterday. Perhaps
Colombia’s government and people will understand. We don’t.”
Russia: President Bush’s last summit with Vladimir Putin
produced no breakthroughs, but they did take in a lovely sunset
together. Earlier, Putin threatened force to split Ukraine into two
states, the eastern half favoring Russia as it is.
Zimbabwe: President Robert Mugabe, refusing to concede defeat
and seeking to buy time before a runoff, thus allowing his goons
to intimidate the opposition forces, is once again going after
white-owned farms in yet another incredibly stupid move that
will lead to mass starvation. Rival Morgan Tsvangirai, who by
all independent polls gained more than 50% of the vote, has
called on South Africa, Britain and the United States to act to
remove Mugabe. This should have been done in 2000.
Kenya: Violence erupted all over again as the opposition pulled
out of talks with President Kibaki.
Morocco: Back in 2003, a series of bomb attacks in Casablanca
claimed 45 lives. This week, nine of the convicted Islamists
responsible for the attacks somehow escaped from Morocco’s
top security jail.
Chile: The nation is going through its worst drought in a century
as La Nina does a number on it. Incredibly, northern Chile has
not seen any rain since August. Just half an inch has fallen on
Santiago over this time.
Venezuela: The government’s TV regulator pulled “The
Simpsons” from morning television because they deemed it
“inappropriate….with messages that go against the whole
education of boys, girls and adolescents.” So what did they
replace it with? “Baywatch.”
Random Musings
–The latest Rasmussen national poll has Barack Obama ahead of
Hillary Clinton 51-41, but in an AP-Ipsos national survey for a
potential Obama-McCain matchup, the two are now tied with 45
apiece, this after Obama had a 10-point lead in the same poll in
February. [Hillary leads McCain 48-45, which she could use to
say she’s more electable.]
–Last week I said Clinton adviser Mark Penn’s dealings with
Colombia and the trade pact, which Hillary has opposed, were
“unreal.” A few days later he was forced to step down.
–I didn’t comment last time on the disclosure that the Clintons’
earned $109 million from 2000 to 2007 for a number of reasons.
One, I didn’t find this in the least bit startling, and, two, the story
hit pretty late in my own cycle for writing this piece and you
know I like to wait 24 hours…as in I wanted more details on
Bill’s earnings from his relationship with billionaire Ron Burkle
and his Yucaipa Cos. investment firm.
So what we’ve learned is that Bill Clinton curiously received flat
amounts ($1 million one year, $4 million the next, then $5
million) that tax expert Tom Ochsenschlager of the American
Institute of Certified Public Accountants called “quite unusual.”
What it signaled is that Clinton was performing a service.
The real issue then becomes, what was Clinton being paid for?
And, disturbingly, the ruler of Dubai is a big investor in Yucaipa,
so, as Yale University tax law professor Michael Graetz told
Bloomberg News, “if it’s the Sheikh of Dubai paying the
husband of somebody who might be the next president of the
United States, what do they think they’re paying for?”
Well, as of today it looks like the Sheikh, and Burkle, may have
thrown their money away. Just remember that when Billy Boy
was getting these large payments, 2004-2006, Hillary appeared
to be a shoe-in, at least for the nomination.
–On a different matter, it’s still continually amazing how much
both Clintons like to lie; the latest case being the former
president and his excuses for Hillary and her Bosnia trip. He has
killed her this campaign.
–After expending $20 million, an inquest jury in Britain has
found that Princess Diana was unlawfully killed due to the “gross
negligence” of driver Henri Paul and the paparazzi. The jury
also noted Mr. Paul’s drunk driving and the failure of Diana and
Dodi Fayed to wear seatbelts. It’s over. Finis. Give it up,
Mohamed Al Fayed.
–Pope Benedict XVI arrives this week, as the American Roman
Catholic Church continues to drift. Personally, I like the man,
even if I have drifted myself. Today:
70% of American Catholics approve of the pope’s leadership.
58% believe the church should allow women to be ordained.
53% believe gay marriage should not be allowed. [U.S. News &
World Report]
–The United States owes $293 million in back dues for
international organizations such as the UN and this figure is
expected to hit $478 million by year’s end, according to Peter
Eisler at USA Today. We are total hypocrites unless we pay this
off. You can’t bitch about corruption and reform at the UN, for
example, unless you’ve met first met your own obligations.
Only then can you take the moral high ground.
–From time to time I’ve written that Sri Lanka’s Tamil Rebels
are as vicious as any terrorists in the world and that many times
new methods are first tried out here. Thus, the world needs to
take notice of last weekend’s suicide attack at the starting line of
a marathon in Colombo, killing at least 12.
–The city of Seattle has been aggressively recruiting New York
City’s finest, offering police recruits $47,300 a year versus the
pitiful (arbitration ruled) New York starting salary of $25,100.
New York graduates then jump to $59,600 after seven years, but
Seattle’s maximum pay is $67,000 after six; let alone the
difference in the overall cost of living between the two.
–A new study in New Jersey found that more than half of the
state’s 1,230 homicides from 2003 to 2005 were gang or “gang-
like” related, and increasing during this stretch even as other
types of homicide were stable. [Star-Ledger] Let’s hear Barack
Obama address this troubling issue.
–From a piece in the May issue of The Atlantic by Ta-Nehisi
Coates on Bill Cosby.
[At a speech in Detroit]
“Men, if you want to win, we can win. We are not a pitiful race
of people. We are a bright race, who can move with the best.
But we are in a new time, where people are behaving in
abnormal ways and calling it normal….When they used to come
into our neighborhoods, we put the kids in the basement, grabbed
a rifle, and said, ‘By any means necessary.’….
“I’m talking about a time when we protected our women and
protected our children. Now I got people in wheelchairs,
paralyzed. A little girl in Camden, jumping rope, shot through
the mouth. Grandmother saw it out the window.”
[At the University of Massachusetts]
“My problem is I’m tired of losing to white people. When I say I
don’t care about white people, I mean let them say what they
want to say. What can they say to me that’s worse than what
their grandfather said?”
Coates:
“As Cosby sees it, the antidote to racism is not rallies, protests,
or pleas, but strong families and communities. Instead of
focusing on some abstract notion of equality, he argues, blacks
need to cleanse their culture, embrace personal responsibility,
and reclaim the traditions that fortified them in the past….
“Cosby (disparages) activists who charge the criminal-justice
system with racism. ‘These are people going around stealing
Coca-Cola. People getting shot in the back of the head over a
piece of pound cake,’ Cosby said. ‘Then we all run out and are
outraged: ‘The cops shouldn’t have shot him.’ What the hell was
he doing with the pound cake in his hand? I wanted a piece of
pound cake just as bad as anybody else. And I looked at it and I
had no money. And something called parenting said, ‘If you get
caught with it, you’re going to embarrass your mother.’’
“Then he attacked African American naming traditions, and the
style of dress among young blacks: ‘Ladies and gentlemen, listen
to these people. They are showing you what’s wrong…What
part of Africa did this come from? We are not Africans. Those
people are not Africans. They don’t know a damned thing about
Africa – with names like Shaniqua, Shaligua, Mohammed, and
all that crap, and all of them are in jail.” [The preceding was
from his famous speech at the NAACP awards ceremony in
Washington in 2004, where he first began to preach about self-
help.]
Many in Black America don’t like Cosby’s rhetoric, but it plays
well in black barbershops, churches, and backyard barbecues,
“where a unique brand of conservatism still runs strong.”
[Coates]
–I’m a little familiar with the area surrounding the polygamist
temple at Eldorado, Texas, as I used to do client appreciation
dinners in San Angelo, where the 400 plus children have been
taken. Great people down there….yet a few very sick, demented
men threaten to tarnish the image of all.
–Astronomers have discovered a solar system orbiting a distant
star which appears to be similar to our own, including two
planets that match up with Jupiter and Saturn. A chap at St.
Andrews University in the U.K. said his fellow researchers were
on the brink of finding many more of them. Wall Street must be
salivating, as it assumes the new discoveries have yet to hear
about collateralized debt obligations and such.
Vulcan: “Welcome to Ishkibible.”
Investment Banker: “Ah, yeah…thanks. Say, can you take me to
the person responsible for your pension funds?”
Actually, the name of this newfound system orbits the star
“OGLA-2006-BLG-109L.” Seems to me it would be simpler to
name it after Junior Sample and tag it BR-549.
–Back to the congressional hearings on Iraq, Republican Senator
George Voinovich echoed my thoughts when he said, “We (the
American people) haven’t sacrificed one darn bit in this war!”
You know who to blame for that.
—
General David Petraeus noted the following during his
congressional testimony this week.
“In closing, I want to comment briefly on those serving our
nation in Iraq. We have asked a great deal of them and of their
families, and they have made enormous sacrifices.
“My keen personal awareness of the strain on them and on the
force as a whole has been an important factor in my
recommendations.
“The Congress, the executive branch and our fellow citizens
have done an enormous amount to support our troops and their
loved ones. And all of us are grateful for that.
“Nothing means more to those in harm’s way than the
knowledge that their country appreciates their sacrifices and
those of their families. Indeed, all Americans should take great
pride in the men and women serving our nation in Iraq and in the
courage, determination, resilience and initiative they demonstrate
each and every day. It remains the greatest of honors to soldier
with them.”
God bless America.
—
Gold closed at $927
Oil, $110.31
Returns for the week 4/7-4/11
Dow Jones -2.3% [12325]
S&P 500 -2.7% [1332]
S&P MidCap -1.9%
Russell 2000 -3.6%
Nasdaq -3.4% [2290]
Returns for the period 1/1/08-4/11/08
Dow Jones -7.1%
S&P 500 -9.2%
S&P MidCap -6.9%
Russell 2000 -10.2%
Nasdaq -13.7%
Bulls 37.5
Bears 38.4 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
