[Posted 7:00 AM ET]
Wall Street
The stock market is once again attempting to decouple itself
from the broader economy, which is how these things normally
work in times of recession as a bottom in equities is hit generally
months before the economic data is at its worst. This week
stronger than expected earnings from the likes of IBM and
Caterpillar, as well as positive news from Google (which is being
tested for steroids as we speak following a stupendous $90 rise in
its share price on Friday), plus short-covering in some of the
financials when they didn’t close their doors for good led to
another strong rally, with the major indexes up over 4% across
the board.
But let’s see if we can simplify matters. The global economy is
without a doubt slowing, everywhere. But there are some large
multi-nationals, such as those listed above (and Google is now
part of the equation with a majority of its revenues originating
overseas), that are still benefiting from growth of any kind. This
trend will end at some point in 2008, just as it did with General
Electric.
There has not been one global forecast, or measurement of
growth in a single major economy, that has revised figures
upwards over the past six months, as best as I can remember, and
only then would I be willing to adjust my own outlook. No
doubt, however, some will say that as the pressures from the
credit crunch are alleviated the worst is over, which is what all
manner of Street executives have been saying recently, such as
the heads of JPMorgan Chase, BlackRock, Citigroup and
Lehman.
To which I reply, not so fast, pilgrim, because it’s still all about
the global real estate bubble. Needless to say I got a kick out of
Monday’s headline in the New York Times:
“Housing Woes in U.S. Spread Around Globe”
Over three years ago I was writing of this topic, including
comments that were almost verbatim those of the Times piece.
“In Ireland, Spain, Britain and elsewhere, housing markets that
soared over the last decade are falling back to earth. Property
analysts predict that some countries…will face an even more
wrenching adjustment than that of the United States, including
the possibility that the downturn could become a wholesale
collapse.”
I’ve written that is already the case in Spain, with Britain and
Ireland to follow. But, again, it’s the same story virtually
everywhere in the world, and it’s Mr. O’Leary’s, Mr. Franco’s,
and Sir Nigel Clark’s #1 asset, just as it is here.
Isn’t it funny how with this week’s positive news on a few fronts,
the bulls conveniently ignored that little factoid our children have
been learning in grade school these days…that the consumer, at
least here in the U.S., represents 70% of our economy?
Percentages around the world in this regard are also increasing,
rapidly, thanks to the global, consumer-driven boom and the
wealth effect that was fueled to a large extent by real estate.
It’s also interesting to note that despite the legitimately positive
news from Caterpillar on the capital spending front, especially
for in the resource sector, and by extension many emerging
markets, most surveys show capital spending is, as the Federal
Reserve’s own review of regional economic activity put it,
slowing “markedly,” with various Fed governors this week
reaffirming that “downside risks to growth are significant.”
But here you could argue that, well, Wall Street’s honchos are
telling you that the credit crunch is easing, yet the evidence
remains otherwise, that banks continue to tighten when it comes
to consumer and business lending. Heck, I’m not ‘short’ stocks
and most of the few holdings I have are of the small cap variety
so I, too, want the credit spigots reopened, but that’s not
happening anytime soon.
In specific news on the housing front, the median home price in
the six-county Southern California market has now fallen 24%
over a year ago to the lowest level in four years, $385,000, after
peaking at $505,000, while foreclosures, nationwide, are up 57%
year over year in March. Even JPMorgan’s Jamie Dimon had to
admit “real estate is getting worse.” No bottom yet. A survey
for the AP and AOL revealed that 60% of Americans said they
would not buy a home next year, as a large number, 14%, are
concerned they will miss a mortgage payment in the next six
months.
No one should be surprised then that given all the above, nine in
10 in this country give the economy a negative rating, up 33% in
a year, according to a poll this week by ABC News and the
Washington Post. Those aren’t the kind of figures that lead to an
immediate increase in consumer confidence, and thus spending.
But wait…there’s more! Like $115 oil and $2.95 gasoline
futures, the latter translating to an average national price at the
pump of around $3.60 shortly…$4.00 in many parts of the
country. Inventories have been plunging, for a variety of
reasons, and while I personally have been holding off on getting
back into some old oil & gas favorites, waiting for a better entry
point (stupidly, it would seem) since I see a nice little correction
around the corner, there is no doubt the long-term fundamentals
for oil in particular are bleak; as in every week seems to bring us
a new story on a key producer nation whose production has
peaked (thus the term ‘peak oil’). This week we had two, Russia
and Nigeria, both critical players, who now join the likes of
Mexico and those generating their supplies from the North Sea.
Massive amounts must be spent on exploration and development
just to keep up with current supply levels and in many cases
there just doesn’t seem to be the political will to tackle the issue
(including here in the U.S. and the reluctance to drill offshore or
in ANWR, for example), or in the case of Big Oil, no apparent
urgency to increase capital spending budgets in any big way
from the likes of Exxon Mobil.
Finally, as I throw the whole kitchen sink at you, there is one
other simple fact. Real wages (inflation-adjusted) around the
world are getting crushed relative to some of our costs,
particularly on the food and energy fronts. Regarding the
former, there are aspects of the food crisis that are flat out nuts,
such as in the case of skyrocketing prices for rice. I know there
are legitimate supply issues due to drought in some parts of the
world, and I know there is rising demand thanks to more and
more people graduating from eating insects to rice (though this
will reverse back), but especially in Asia there is simply a lot of
hoarding and corruption as we’ve seen so often in history from
time to time with a hot commodity. Black markets are thriving
and some governments are scrambling to crack down, even as
they are forced to limit or suspend exports to attempt to take care
of their own today.
I would be very surprised not to see the price of rice plunge in
the coming months. In the interim, though, Robert Zoellick,
president of the World Bank, is calling for an additional $500
million in emergency food aid. Starvation is an issue in parts of
the developing world. But at least there is one silver lining in the
crisis, a reexamination of the biofuel debate. Corn can not be
diverted for fuel and I hope you’re personally not on the hook for
a Midwestern ethanol plant that is half built. You may want to
change your phone number because the bankers are going to be
making some frantic calls over the coming year.
Street Bytes
–By some measures this was the best week for U.S. equities
since the start of the Iraq war five years ago. As noted above it
was a combination of some key companies exceeding
expectations as well as the banks and brokerage outfits not
saying anything worse than expected. Some aspects of the rally
were warranted, others not so. But then I’ve consistently
maintained losses for the year in the market would be minimal
despite the recession and suddenly the year to date losses in the
major averages are just that, minimal, with the Dow Jones and
S&P 500 now down my projected 3% to 5% for the entire year.
–U.S. Treasury Yields
6-mo. 1.66% 2-yr. 2.16% 10-yr. 3.73% 30-yr. 4.51%
Rates soared on the expectation that the Federal Reserve may be
nearing the end of the road in terms of rate cuts as it prepares to
gather in two weeks. Traders now look for the Fed to lower the
funds rate a quarter to 2.00% and then sit for awhile to monitor
both the economy and the pace of inflation. Regarding the latter,
the producer price index for March was up a whopping 1.1% and
is now up a China-like 6.9% year over year. But we’ve been
trained to look at the core reading, ex-food and energy, the stuff
we use throughout the day unless we are on a hunger strike in a
dark, dank prison, and here the core PPI was up only 0.2%.
Similarly, the core CPI also came in at 0.2%.
[I’ll discuss the debate over Libor next week. Some late
information hit that I need to digest first.]
–China reported its economy grew 10.6% in the first quarter,
though some question the legitimacy of the figure seeing as the
crippling winter storms hit during this period and the impact had
to be far worse than indicated. Inflation ran at an 8.3% clip in
March, a slight decline from February’s 8.7% pace.
[China’s stock market is now off about 50% from its high set last
fall. The government has tried to keep from interfering.]
–Delta and Northwest are merging, finally, to create the world’s
biggest airline, though just how many of the 89,000 combined
employees will survive is but one of many issues facing
management, the unions and regulators. A Continental/UAL or
Continental/AMR alliance is next.
–Speaking of job losses, officials for London’s financial sector
are estimating 40,000 will lose their jobs there, while Wachovia
announced it would slash 12% of its workforce; UBS, 10%;
Merrill Lynch, perhaps up to 10%; and Citigroup, another 9,000,
bringing the total here to somewhere between 13,000 and 15,000.
AT&T also got into the act, announcing it would lay off 4,600.
–Merrill Lynch made an early attempt to hoodwink us all as to
the extent of its writedowns when it released its earnings report.
At first read it was merely $1.5 billion; then it jumped all the
way up to $9 billion. Now the Street seems to have settled on a
figure largely expected, $6.5 billion. So much for ‘plain
English,’ as Wall Street is encouraged to use for the benefit of us
peons. CEO John Thain insisted it doesn’t need to issue more
shares to boost capital, but that it might try to foist some
‘preferred’ securities on the masses, and/or institutions.
–Citigroup tried to paint a pretty picture with its dreadful
earnings report on Friday, but consider it has now written off $35
billion in assets. Pretty serious money, as well as massive book
value destruction.
–Wachovia was forced to raise $7 billion in fresh, free-range
capital as it reported a loss of $393 million and further massive
writedowns for its first quarter.
–Google Inc.’s first-quarter profit far surpassed expectations in
both earnings and revenue as CEO Eric Schmidt said “It’s clear
we are well positioned for 2008 and beyond, regardless of the
business environment we are surrounded by.” Despite
independent analysis to the contrary (see comScore), Google’s
U.S. paid clicks grew 20% in the first quarter from a year ago
(which is nonetheless a significant deceleration), but
international revenues rose sharply and now account for 51% of
the total. It was also the 12th quarter of the 15 since Google went
public that its performance has topped analyst expectations. In
response shares in Google, which had peaked last Nov. 7 at
$747, only to plummet to $412 this past March 17, soared back
to $539, up from Thursday’s close of $449.
–Boy, I’ve gotten a kick over the past year or so out of Las
Vegas’ apologists who insist it is recession proof. This week
MGM Mirage announced it is laying off 440 management
employees at both the property and corporate levels, with the
bulk taking place in Vegas where it operates 10 Strip properties
and is building the $8.4 billion CityCenter development. MGM,
though, insisted the moves had nothing to do with a softening
Vegas environment, but daily room rates are already down 20%
from a year ago. Maybe the casinos get through the summer
because of those who had longstanding plans, but by the fall
there will be carnage all over the Strip, just as there is in
neighboring housing developments. You don’t have to be a
card-counter to figure this one out.
–38% of Southern California homes sold in March had been
foreclosed at some point in the prior year, up from 8% in March
2007, according to DataQuick Information Systems. [L.A.
Times]
–For all the talk that the credit crisis may be winding down,
Goldman Sachs was forced to accept just 65 cents on the dollar
for almost $200 million in senior debt tied to Bain Capital’s
buyout of one of Europe’s largest yachtmakers, going back to
last June. Now, with doubts about the health of the yacht
manufacturer as many of its prospective clients – bankers and
hedge fund managers – have been hit by the credit crunch,
Goldman is left holding the bag as it is forced to continue to sit
on about $700 million more of the debt. [London Times / David
P. (“the smartest toes in the room”)]
–But the above isn’t the only case of its kind. Citigroup is
unable to market $5 billion in loans related to the financing of
private-equity firm Terra Firma Capital Partners’ purchase of
music company EMI Group. Citigroup has a total of $43 billion
in leveraged-buyout loans it’s been stuck with since the global
credit markets seized up.
–Credit-default swaps worldwide expanded to $62 trillion in
notional value in 2007, rising a whopping 37 percent in the
second half of 2007 from the earlier reported figure of $45
trillion. Now this figure can be deceiving because it doesn’t
really reflect the actual risks, but the Bank for International
Settlements estimates the gross market value of all outstanding
derivatives contracts to be $9.8 trillion; the amount owed to
banks or investors if the contracts were liquidated. It’s all about
the counterparty risks in actuality.
–The FBI is investigating the subprime mortgage meltdown for
potential financial crimes committed by hedge funds and private
equity firms, with the FBI opening 19 separate criminal probes,
including for accounting fraud and insider trading.
Separately, New York state’s attorney general, Andrew Cuomo,
launched an investigation into the auction-rate securities market,
which collapsed last February, making it nearly impossible for
some investors to gain access to funds that they had been told
were invested in money market like instruments, yet another
huge black eye for the Street.
–My friend Brad K., who is a big player in the steel pool
business, notes that his supplier, ArcelorMittal, hiked prices
30%, which he in turn is forced to pass on to his clients. “There
is no negotiation (on either side), take it or leave it.” In 2007,
industrywide in ground pool sales were off 20%.
–There was much talk of Institutional Investor’s latest survey of
hedge fund manager compensation which revealed the two top
earners, John Paulson and George Soros, took home over $3
billion each in 2007. But if it’s earned legally, there’s not much
you can do about it. To make it into the top 25 you needed to
take home $360 million. Many of those at the top struck a
gusher in betting against the housing industry and the
accompanying mortgages and derivatives instruments attached to
it.
–American Airlines lost $328 million in the first quarter as its
fuel bill rose 45 percent over the year-ago quarter to $2.05
billion. Fares, conversely, were up just 5%; a significant hike
but obviously not nearly enough to take care of the effects of
$100 oil (and a like amount for jet fuel).
–Economist Robert Samuelson, Washington Post, on the politics
surrounding free-trade agreements.
“(It’s) politically convenient to oppose (a) trade agreement
because the popular imagery is that trade destroys U.S. jobs. The
loss of almost 4 million U.S. manufacturing jobs since 1998
seems easy to explain by cheap imports or the flight of plants to
Mexico, China and other poorer countries. The truth is murkier:
Although this has occurred, job losses also stem from greater
efficiency (fewer workers producing more goods) and slumping
domestic demand (for communications equipment and computers
after the dot-com bust and for housing materials and vehicles
now). Nor has falling factory employment crippled overall U.S.
job creation.
“Look at the numbers. From 1998 to 2007, total non-farm
payroll employment rose 12 million, and unemployment
averaged only 4.9 percent – despite the 4 million lost factory
jobs. In that period, U.S. manufacturing output rose 22 percent.
“No matter. Globalization and trade have become lightning rods
for myriad grievances (job insecurity, wage inequality, eroding
fringe benefits). But even if trade caused all the factory job loss,
its impact is shifting. The dollar’s dramatic depreciation (down
an inflation-adjusted 20 percent since early 2003 against a basket
of currencies) has enhanced the competitiveness of U.S. exports.
Their growth now looms as a major source of job creation and
economic expansion….
“What matters for workers and manufacturers is not what
politicians say. It’s the consequences of what they do. On trade,
many Democrats – and some Republicans, too – are fighting the
last war.”
–In just about two weeks’ time, South Korea has identified 20
bird flu outbreaks, including six involving the deadly H5N1
strain.
–In announcing decent earnings for the first quarter, eBay also
admitted its growth in active users was flat over year-ago levels.
–USA Today had a story on how air travel is slower than at any
time in the past 20 years when considering time on the ground
and congestion in the sky. For example, it used to take four
hours and 37 minutes to fly from New York’s JFK to Las Vegas.
Today it’s six hours and 10 minutes.
It’s also interesting to note that the average airspeed is down to
342 mph from 358 mph in 1998. I’m driving if it gets down to
90.
–I continue to bemoan the fact you just can’t get wild salmon
these days and now Safeway, one of the largest supermarket
chains, has restricted some purchases of farm-raised Chilean
salmon over concerns with a virus that is killing millions of fish
there, according to the New York Times. The virus doesn’t pose
a risk to humans, but it obviously impacts quality.
–In its annual estimates of the value of sports franchises, Forbes
magazine pegs the New York Yankees’ value at $1.306 billion.
The Mets were second at $824 million and the Red Sox third at
$816 million.
Foreign Affairs
The Bush Legacy
I have argued for years that while Iraq is the short-term focus,
longer term, the Bush presidency will be judged as much on its
success or failure in preventing North Korea and Iran from
acquiring nuclear weapons. Well, it’s already too late with
regards to the former, and now we’re edging closer and closer to
a nuclear-armed Iran. The Wall Street Journal opined on Iran’s
ever-increasing influence in Iraq and what that foretells for the
Big Picture:
“(Iran’s) tactics will be familiar to anyone who has followed
Iran’s history in Lebanon, where Hizbullah, backed by Iran, is
trying to bring down the elected government. Or in Gaza, where
Iran’s Revolutionary Guard trains and equips Hamas. ‘Iran is
pursuing, as it were, a ‘Lebanonization strategy,’ (Amb. Ryan)
Crocker told Congress, ‘using the same techniques they used in
Lebanon, to co-opt elements of the local Shia community and use
them as basically instruments of Iranian force.’
“This is remarkable enough – a mountain of evidence that Iran is
waging a proxy war against U.S. troops and our allies in Iraq.
Still more remarkable, and depressing, is that most of
Washington has reacted with a collective ‘So what?’ It’s as if
it’s understood that the mullahs can kill Americans and get away
with it. Part of the fault here lies with the Bush Administration,
which has previously spoken up about Iran only to shrink from
doing anything about it.
“Meanwhile, last week Tehran announced it has begun installing
another 6,000 centrifuges at its Natanz uranium enrichment
complex. After five years of deferring to Europe and the United
Nations to keep Iran from going nuclear, President Bush’s
diplomacy has reached an embarrassing dead end.
“So: Iran is contributing to the death of GIs, is arming our
enemies in Iraq, and is proceeding to ignore the world by
enriching uranium for a nuclear weapon. Is the Bush
Administration merely going to slink out of office with that
legacy?”
Editorial / Washington Post
“The proxy war in Iraq is just one front in a much larger Iranian
offensive. Israel has been fighting an on-and-off battle in the
Gaza Strip with Hamas cadres that also have been trained and
equipped by Iran’s Revolutionary Guard. In Lebanon the
Iranian-backed Hizbullah movement has paralyzed the
government while rebuilding its own massive arsenal, which now
includes tens of thousands of missiles. And (April 8), Iranian
President Mahmoud Ahmadinejad announced another major
acceleration in the country’s nuclear program. He said 6,000
more centrifuges were being installed at an existing enrichment
plant, which would give Iran the capacity to produce the core of
a bomb in a matter of months.
“The urgency and momentum of the Bush administration’s
multilateral diplomatic campaign against Iran drained away
following the release in December of a National Intelligence
Estimate that misleadingly emphasized Iran’s reported decision
to put one part of its nuclear program on hold. Israel’s efforts to
stop Hamas’s buildup in Gaza have so far failed, and a United
Nations force in Lebanon has never made a serious effort to
prevent Hizbullah from reconstituting the military capacity it lost
in a 2006 fight with Israel. Negotiations with Iran are on hold:
Tehran has repeatedly put off a fourth round of talks between
U.S. and Iranian diplomats in Iraq….
“(It is) inevitable that Iran’s proxies in Iraq, Gaza and Lebanon
will have to be countered in part by military force, while
diplomatic and economic pressure aimed at stopping Tehran’s
nuclear program is stepped up. Some observers interpreted the
report of Gen. Petraeus and Mr. Crocker as calculated to provide
yet another excuse for keeping U.S. forces in Iraq. In fact, these
two seasoned professionals were pointing at a growing menace
that the Bush administration, and its successor, cannot afford to
ignore.”
In the case of North Korea, the White House is prepared to
compromise to end the impasse over Pyongyang’s refusal to
comply with last December’s agreement for it to fully disclose
everything about its nuclear weapons program. For example, it
won’t have to give full details about the North’s work in Syria
that Israel disrupted in an airstrike last fall. Congressman Ed
Royce (R-Ca.) said the Bush administration has shown “a
consistent willingness to lower the bar with the North Koreans.”
This is pitiful.
Editorial / Wall Street Journal
“The revised nuclear deal hasn’t been formally announced, and
President Bush could still nix it. South Korea’s new President,
Lee Myung-bak, who will be in Washington (this weekend), has
the moral standing to persuade Mr. Bush of the dangers here.
Since taking office at the end of February, Mr. Lee has talked
tough on the subject of North Korean accountability. Pyongyang
has responded by testing short-range missiles that could reach the
South and threatening to reduce Seoul to ‘ashes.’
“Allowing the North to renege on its pledge to account fully for
its nuclear programs is also a slap at Japan, another U.S. ally in
range of Pyongyang’s missiles. Tokyo has been pushing North
Korea for information about the Japanese citizens it abducted in
the 1970s and ‘80s. If Pyongyang doesn’t have to account for its
nuclear weapons or its uranium program, why would it feel
inclined to account for a few Japanese nationals?
“In the waning days of the Bush administration, there seems to
be an attitude that any deal with Pyongyang is better than no
deal. But a ‘disarmament’ accord that gives the North a pass on
proliferation and uranium is more than worthless. In addition to
propping up Kim’s regime, the administration is setting a
standard for nonproliferation that is so low that it may well allow
rogue regimes to keep their weapons while getting credit for
giving them up. This is dangerous.”
Former Ambassador John Bolton / Wall Street Journal
“Pyongyang’s escape from accountability could break down
international counter-proliferation efforts. What possible reason
will Iran now have to be transparent about its nuclear activities?
If North Korea can get away with deception and be rewarded,
why should Iran not do the same? In Libya, Moammar Gadhafi
will kick himself for giving up his nuclear weapons program in
2003. This deal with North Korea is troubling enough, but the
worst news is still to come.
“Last fall, President Bush rejected the idea of giving North Korea
a pass on uranium enrichment and proliferation. Now, in the
waning days of his term, he seems poised to accept it. If he does,
and if this deal proceeds, we can well and truly say: ‘President
Bush, you are no Ronald Reagan.’”
Editorial / Washington Post
“All along the risk has been that North Korea would repeatedly
extract economic and political favors from the United States
without giving up its nuclear arsenal. The latest deal would seem
to greatly increase the chance that that will be the legacy of Mr.
Bush’s diplomacy.”
China: The furor over the Olympic torch relay has subsided a bit,
while China and Taiwan opened up a formal dialogue as
Taiwan’s Vice President-elect Vincent Siew held an historic
meeting with Chinese President Hu Jintao. Taipei has said the
two sides should resume talks on the basis of a vague 1992
understanding that there is only one China but that each side has
its own interpretation of it. Economic exchanges were stressed
in the talks between the two, with direct flights between Taiwan
and the mainland slated to be launched in July. There are,
however, no direct talks slated between Taiwan’s President-elect
Ma and President Hu, as Ma maintains this isn’t possible when
1,000 missiles still target his people.
Back to the torch relay, the torch arrived in Pakistan on
Wednesday, where an official with the Pakistan Sports Board
said “The route has been curtailed because of the weather
condition and overall security situation. It will now be confined
to the stadium.”
I’m sorry, but this is comical. Why the heck even bother?! But
on the larger issue of whether or not President Bush should
attend the opening ceremonies, commentator George Will said
Bush should stay home for the entire Games, while Newsweek’s
Fareed Zakaria wrote that while China’s “handling of the protests
in Tibet is disgraceful…humiliating the entire country over it
would make matters worse.” I agree with Zakaria.
Iraq: Moqtada Sadr, responding to Defense Secretary Robert
Gates’ call for Sadr to become part of the political process,
ungraciously said the U.S. will always be his enemy “till the last
drop of blood. I have no enemy but you. You are the occupier.”
Sadr, who many say is flat out unstable, is particularly upset
these days over the recent killing of one of his relatives, a key
figure in Sadr’s movement.
And following the congressional appearances of Gen. Petraeus
and Amb. Crocker, a survey by ABC News/Washington Post
finds that six in 10 now say the war is not integral to the success
of U.S. anti-terrorism efforts, a new high. [Not a good sign for
John McCain’s candidacy, incidentally.]
Israel: Three Israeli troops died in a Hamas ambush, followed by
Israeli strikes in Gaza that killed at least 18, including some
children, and the Jerusalem Post reported that following
President Bush’s planned visit in mid-May, Israel will launch a
large-scale incursion to “clean Gaza out.” I wrote a few weeks
ago, though, of internal reports, via Defense News, that the
Israeli military knows any such move would entail large
casualties as Hamas’ forces are far better organized and equipped
than before.
So is it any wonder then that Israeli leaders snubbed former U.S.
president Jimmy Carter, as he traveled the region, talking to
Hamas’ leaders, including chief Khaled Mashaal, in exile in
Damascus?
Editorial / Washington Post
“Mr. Carter justifies his meetings with familiar arguments about
the value of dialogue with enemies. But he misses the point.
Contacts between enemies can be useful: Israel is legendary for
such negotiations, and even now it is engaged in back-channel
bargaining with Hamas through Egypt. But it is one thing to
communicate pragmatically, and quite another to publicly and
unconditionally grant recognition and political sanction to a
leader or a group that advocates terrorism, mass murder or the
extinction of another state. That is what Mr. Carter is doing to
lending what is left of his prestige to an avowed terrorist such as
Khaled Meshaal.”
Michael Young / Daily Star [Lebanon]
“Say what you will about Jimmy Carter, he has a way of
transforming moments of plodding gravitas into uproarious
comedy. Remember that moment during the 1980 Democratic
convention when Carter stood up, and in a phrase paying tribute
to Hubert Humphrey, instead praised ‘Hubert Horatio
Hornblower,’ confusing the late vice president with the character
from the C.S. Forester novels?
“As Carter prepares to meet with a senior Hamas leader, Khaled
Meshaal, in Damascus, the former American president again
risks attempting to say one thing, only to blunder into another….
“For one thing, negotiating with Hamas would effectively
undermine the authority and credibility of Palestinian President
Mahmoud Abbas and the Palestine Liberation Organization –
together, the paramount representatives of the Palestinian
people….
“A second consequence of talking up Hamas, Meshaal knows, is
that it would insert Iran and Syria squarely into the Palestinian
track….Whoever ends up speaking on Hamas’ behalf, Tehran
and Damascus could only gain from a dialogue with the
movement….
“(If) Hamas is willing to discuss peace, then the movement has
to first demonstrate this before anyone seriously considers
overhauling the Palestinian-Israeli track. That shouldn’t be
difficult, even if nothing shows that Hamas is contemplating
peace with Israel, while everything about the movement’s
behavior and rhetoric says the contrary.
“That’s why Jimmy Carter is on a fool’s errand, complicating an
already complicated situation. It’s often said that Carter has been
a better ex-president than president. That’s no compliment, so
ghastly was his tenancy of the White House – the Camp David
accords notwithstanding. Peace may be a long way away
between Palestinians and Israelis, but Carter won’t speed things
up any by turning into Meshaal’s patsy.”
Russia: Georgia accused the Kremlin of trying to annex the
breakaway republics of Abkhazia and South Ossetia, as Russia
said it would intensify cooperation with the two. Georgian
President Mikhail Saakashvili responded, “We demand Russia
revise all decisions which violate Georgia’s sovereignty.”
NATO’s secretary general supported Saakashvili in calling for
Russia to back off.
Of course none of this would happen without the approval of
Vladimir Putin, who is still president for another few weeks. On
Tuesday, Putin also solidified his future power by agreeing to
lead United Russia as new party chairman. Putin will assume
this role on May 7, the day Dmitry Medvedev ascends to the
presidency.
Understand that United Russia controls 315 of 450 seats in the
Duma and thus parliament, through Putin’s edicts, can check
Medvedev should the latter become a little too independent for
Putin’s liking. For his part, Medvedev can dismiss the prime
minister, which is what Putin will also become, but the Duma
must endorse a successor, thus no-go on that option for Dmitry.
So in case you harbored doubts as to who will really be running
the country, it’s Putin.
Meanwhile, there is a bit of a scandal involving Vlad. It seems
the 56-year-old has walked out on his 50-year-old wife,
Ludmilla, and may be preparing to marry 24-year-old gymnast,
Alina Kabaeva, who is now a member of parliament. Putin
evidently left his wife two months ago. But on Friday, Putin
himself denied the reports.
Zimbabwe: As Robert Mugabe refuses to accept the results of the
presidential vote that should have tossed him from power, and as
Mugabe unleashes his goons, intimidating the people into
submission, another figure has emerged as a culprit in the
disaster that is this nation, South African President Thabo Mbeki,
the absolutely pitiful leader who refuses to acknowledge any
kind of crisis in his neighbor’s affairs. The rest of Mbeki’s
government, though, has labeled the situation “dire,” as
Zimbabwean opposition leader Morgan Tsvangirai called for
Mbeki’s removal. And now you have an issue in South Africa
where dock workers there are refusing to offload a shipment of
arms from China for Zimbabwe.
But it was Mugabe who held center stage on Friday as he
denounced Tsvangirai and Britain in his first speech since the
elections.
“Down with thieves who want to steal our country.”
Kenya: A new power-sharing cabinet has been formed with a
total of 40 posts evenly split between the two leading parties.
Italy: Billionaire Silvio Berlusconi has returned to power as
prime minister in Italy’s 5,678th government since the end of
World War II, each lasting about four days. Italy is struggling on
all fronts in terms of its economy, its identity and its lessening
influence on events in Europe. You can’t even trust the cheese
here these days as a few weeks ago the Mafia poisoned some
fields cows grazed on, the milk from same then being used in the
making of mozzarella.
Britain: Prime Minister Gordon Brown, beset by poll ratings that
are far worse than President Bush’s, if you can imagine, sought
refuge in Washington this week. Brown’s collapse in his ratings
is worse than Neville Chamberlain’s in 1940 following Hitler’s
invasion of Norway.
Matthew Parris / London Times
“A stranger approached me at St. Pancras station on Thursday,
her tone more inquisitive than hostile. ‘Why do you hate Gordon
Brown so much? Your ferocity seems personal.’ ….
“I don’t think it matters that he’s dour. I blush for him at
advisers’ ham-fisted attempts to make him look cuddlier. The
British are fair-minded people and know very well that to be shy
– even dull – does not make a man worthless. We do not expect
every leader to be a prancing show pony, and after the last one
we were ready for still waters that ran deep. ‘Not flash, just
Gordon’ resonated….
“No, for all I care, Mr. Brown can be a bean-counting, flak-
ducking, procrastinating, tunnel-visioned, trainspotting monster.
These are human qualities. I like human qualities. It’s vacuums
I despise. What is unforgivable is the empty space in Mr.
Brown’s head where an idea ought to be. One big idea, one bold,
brave, all-consuming purpose, one gripping sense of political
direction, would outweigh all the carping criticisms we may have
of Brown the man….
“Not once in the past decade have I heard a media colleague
explain with any force or clarity what the Brown vision for
change amounted to; hardly ever, however, did I hear a senior
colleague seriously question that he had one….
“Speeches are made and columns written urging the wizard to
hurry up and show us his magic. But the wizard hasn’t got any
magic. Poor wand-less Mr. Brown isn’t concealing or delaying
his abracadabra moment. There’s nothing there: nothing to get
cracking with, nothing to communicate, nothing to explain.
“I think his premiership is disintegrating. With no belief in the
human at its center I doubt the disintegration can be halted or
reversed. I think this will become plain by autumn. One way or
another, and very possibly before the next election, I think Mr.
Brown will go.”
Mexico: The New York Times reported a turf war among drug
cartels in the border town of Ciudad Juarez (across from El Paso)
has claimed a staggering 210 lives in the first three months of the
year, twice the rate of last year.
New Zealand: This nation is in a state of shock over a bizarre
tragedy that claimed the lives of six teenagers and a teacher who
were hiking in the Tongariro National Park when a river, swollen
by heavy rains, suddenly rose to four times its normal levels in a
narrow gorge within a half hour and there was no escape.
Random Musings
–In the latest polls, Hillary Clinton leads Barack Obama 46-41 in
Pennsylvania and 40-35 in Indiana, but trails by 13 in North
Carolina. [Bloomberg / L.A. Times] Finally, Pennsylvania’s
primary is on Tuesday.
Nationally, a Washington Post/ABC News survey has Obama
leading Hillary 51-41 (a Gallup/USA Today poll has it at 51-40),
while Hillary now has a 54% unfavorable rating. [A Newsweek
survey has Obama up a staggering 19.]
–On Sunday, April 6, Barack Obama made a comment that a
week later had come back to bite him in a big way. In attempting
to explain his troubles winning over working-class voters,
Obama said these folks have become frustrated with economic
conditions:
“It’s not surprising, then, they get bitter, they cling to guns or
religion or antipathy to people who aren’t like them or anti-
immigrant sentiment or anti-trade sentiment as a way to explain
their frustrations.”
The quote helped fuel the sentiment that he is an arrogant
Harvard-trained lawyer and doesn’t understand the real world;
the same comments that can be made about his wife, after all.
Sen. Obama tried to explain himself, but his attempts were weak
at best and both John McCain and Hillary Clinton pounced. I did
not watch Wednesday’s debate, but from the comments I’ve read
and the clips on television, it’s clear Obama has been shaken.
I recognize many of you are Obama supporters and I respect that
even as you know where my own allegiances lie. So I’m going
to defer from further comment myself, but instead will use
surrogates….a neat little trick of the trade that semi-absolves moi
from poison barb attacks. For now I’ll just say that virtually all
of my relatives are from western Pennsylvania (what I’ve always
called ‘home’ since I was a kid, despite growing up in New
Jersey), and the best people in the country hail from there.
Michael Goodwin / New York Daily News
“Having grown up in one of those small Pennsylvania towns Sen.
Barack Obama sneers at, I know what really makes people there
‘bitter.’ It’s slick-talking politicians who look down on their
beliefs and values.
“Small-town people get doubly ‘bitter’ when those pols have the
gall to ask for their votes while demeaning their lives. See, even
hicks don’t like being played for suckers.
“When they accused Obama of being out of touch for saying
small-towners ‘cling to guns or religion’ out of frustration, Sens.
Hillary Clinton and John McCain were being too kind.
“Snob-ama is not just out of touch. He’s from another planet.
“He might consider going back there, because the White House
now looks out of reach. All the more so because he later added
opposition to gay marriage as another sign of benighted
bitterness.
“Snob-ama’s lame concession yesterday that his mistake was ‘I
didn’t say it as well as I should have’ only makes the repeated
smear worse. He should get off his Ivy League horse and
apologize to the millions of Americans he insulted. As it stands,
he has confirmed he doesn’t understand or respect them.
“Through his warped vision, if you own a gun, oppose gay
marriage or want our nation’s borders sealed, you’re just bitter
over your lousy job. Amazingly, he even sees the embrace of
God as a reaction to the bad economy….
“Such a dark view of heartland hearts is not very Christian and
suggests Snob-ama really did hear the rants of his pastor, the
Rev. Jeremiah Wright. The mentor who led him to Jesus Christ
seems a bitter man who wraps his hate for America in the
trappings of religion.
“If Wright’s typical of religious people, God help us.
Thankfully, he’s not. For the people I grew up with, faith is about
salvation and at least trying to love thy neighbors, even as they
gossip about them. For many, faith begets hope, charity, hard
work and patriotism.”
John Fund / Wall Street Journal
“Democrats have been worrying about defending Mr. Obama’s
highly liberal voting record in a general election. Now they need
to fret that he makes too many mistakes, from ignoring the Rev.
Wright time bomb until the videotapes blew up in front of him,
to his careless condescension towards salt-of-the-earth
Democrats. Mr. Obama has a tendency to make such cultural
miscues. Speaking to small-town voters in Iowa last year, he
asked, ‘Anybody gone into Whole Foods lately and see what
they charge for arugula?’”
–As for Hillary Clinton, she said to a group of Second
Amendment supporters, “As I told you, my dad taught me how to
shoot behind our cottage…I have gone hunting. I am not a
hunter, but I have gone hunting.” Clinton then said she had
hunted ducks, but when pressed by reporters as to when the last
time was, she said the question was “not relevant.”
–John McCain’s economic plan is an absolute mess as it
combines some good ideas, such as cutting the corporate tax rate,
with items such as suspending the federal gas tax for the
summer; something that flies in the face of his platform to reduce
federal spending because, hey, how the heck are you going to
pay for the gas tax holiday, Senator? Additionally, McCain has
now joined the housing bailout camp of Clinton and Obama, as
part of his panderthon.
–George Will writes that former Congressman Bob Barr, who
will get the presidential nomination of the Libertarian Party,
threatens to be the Ralph Nader of the 2008 election, only this
time Barr would be to John McCain what Nader was to Al Gore
– “ruinous.”
–From Kenneth T. Walsh of U.S. News & World Report.
“President Bush often argues that history will vindicate him. So
he can’t be pleased with an informal survey of 109 professional
historians conducted by the History News Network. It found that
98 percent of them believe that Bush’s presidency has been a
failure, while only about 2 percent see it as a success. Not only
that, more than 61 percent of the historians say the current
presidency is the worst in American history. In 2004, only 11.6
percent of the historians rated Bush’s presidency in last place.
Among the reasons given for his low ratings: invading Iraq, ‘tax
breaks for the rich,’ and alienating many nations around the
world. Bush supporters counter that professional historians
today tend to be liberal and that it’s too early to assess how his
policies will turn out.”
–A study from the Rand Corp. supports earlier work out of the
Pentagon that as many as 1 in 5 veterans of the Iraq and
Afghanistan wars is suffering from depression or post-traumatic
stress disorder, an estimated 300,000 in total.
–Religion is personal, but I’ve told you before I’m Catholic and
that I’ve lapsed some, so I do have to note that Pope Benedict
XVI’s trip to America has been extremely well-received and
reviewed. Catholics in this country were hoping he would
address the sex-abuse scandal and he confronted it head on,
saying he was “outraged.” “No words of mine can describe the
pain and harm inflicted by such abuse” nor “the damage that has
occurred within the community of the church. Today I
encourage each of you to do what you can to foster healing and
reconciliation,” and “I ask you to love your priests and affirm the
good works they do.”
–Good for Texas authorities and their gutty crackdown on the
Eldorado polygamist sect. The evidence appears to be
overwhelming that young girls here were sexually abused. At
the same time, however, no doubt this case presents some
interesting legal issues.
–Former Newark Mayor Sharpe James was convicted on all five
counts in his fraud trial, while his former girlfriend, Tamika
(who often wore rather inappropriate outfits in the early days of
the trial), was also convicted on the same conspiracy charges as
well as eight others. The two will likely receive about four years
in the slammer.
Incredibly, the United States attorney for New Jersey,
Christopher Christie (a potential candidate for higher office here)
has now obtained convictions or guilty pleas against more than
125 public officials, from both parties, without losing a case.
He’s like an Action Hero in these parts.
–I totally agree with any congressional legislation that would
ban the use of cellphones by passengers while in the air.
–On Thursday, driving home the road a few blocks from my
place was blocked off by four police cars. An SUV was in the
middle of the street, sideways, but with no signs of damage and it
was clear someone had been hit by the car.
So I read in the paper on Friday that indeed a 12-year-old girl
walking her dog was struck by the vehicle, but thankfully she
appears to have suffered just a broken rib and numerous
lacerations.
I bring this up because there is a touching note to the story.
“The dog ran home, causing the child’s mother to go in search of
her daughter, whom she soon found at the accident scene.”
Animals are truly amazing….and dogs tops.
–Every time I see Jackie Robinson’s widow, Rachel, now 85, I
marvel at what an amazing, dignified, classy woman she is. This
week she was in the news locally because the New York Mets
unveiled the design for the “Jackie Robinson Rotunda” at their
new Citi Field ballpark opening next year. Rachel repeated one
of Jackie’s sayings: “A life is not important except for its impact
on others.”
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $915
Oil, $116.74
Returns for the week 4/14-4/18
Dow Jones +4.3% [12849]
S&P 500 +4.3% [1390]
S&P MidCap +4.4%
Russell 2000 +4.8%
Nasdaq +4.9% [2402]
Returns for the period 1/1/08-4/18/08
Dow Jones -3.1%
S&P 500 -5.3%
S&P MidCap -2.7%
Russell 2000 -5.9%
Nasdaq -9.4%
Bulls 37.8
Bears 38.9 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
