[Posted 7:00 AM ET]
Wall Street
There’s still a bit of a debate whether or not the U.S. economy is
in recession despite the back-to-back 0.6% quarters in GDP.
Warren Buffet told investors last weekend “The U.S. is in
recession as I define it. I would define that as a situation where
people are doing less well than they were three months, six
months or eight months earlier and most businesses find
themselves in that position too.” Makes sense to me. It’s
certainly today’s reality.
Economist Martin Feldstein added a little more meat to the above
in an op-ed for the Financial Times.
“Prepositions matter. The recent government report that U.S.
gross domestic product increased 0.6 percent in the first quarter
was very misleading. It implied that economic activity was
rising in January, February and March. But the increase actually
refers to the rise from the average level in the fourth quarter of
2007 to the average level in the first quarter. Monthly data since
January indicate that economic activity and GDP have been
declining since the start of this year.
“Private sector payroll employment peaked last November and
has fallen five months in a row, shedding more than 300,000
jobs. Industrial production was lower in March than in
December and January. Real personal income net of taxes and
transfers is also lower than in January. Real retail sales have
fallen since the start of the year. Private housing starts are down
13 percent in just the two months since January and 36 percent
from a year ago….
“The misstatement that the economy expanded in the first quarter
creates an inappropriately sanguine view of the months ahead
and therefore reduces the prospect of strong action to prevent the
deep decline that may otherwise occur. Carlos Gutierrez, the
commerce secretary, whose department produces the GDP
estimates, said the 0.6 percent increase supported the
administration’s view that growth would be slower but positive
in the first half. The administration predicts that after this
slowdown the economy will grow more rapidly in the second
half and in 2009.
“Although the tax rebates now under way may provide some
temporary help, the combination of falling real incomes,
declining household wealth and a dramatic drop in consumer
confidence suggests further falls in consumer spending and GDP.
But the most serious risk is that the rapid fall in house prices –
down more than 12 percent in the past year and falling at a 25
percent rate in the past three months – will raise the number of
negative-equity mortgages, leading to widespread defaults and
foreclosures….
“A downward spiral [Ed. worse than we’ve already seen] in
house prices would cause a fall in household wealth and in the
capital of financial institutions, potentially resulting in a deeper
and longer recession than any seen in the past several decades.”
Feldstein says the Federal Reserve has done enough on the rate
front and what’s needed now is government action to prevent
positive-equity mortgages from going negative; specifically low-
interest loans to allow homeowners to pay down portions of their
mortgage.
But think about it. The Bush administration has had since last
August to craft some kind of solution and just this week, the
House finally passed their version of homeowner aid, yet it
appears the White House will veto it because it’s a mixed bag
that more than a few characterize as a bailout for lenders and
speculators.
As to the credit crisis in the financial sector, there was a renewed
chorus that the ‘worst is over’ from the likes of Buffett,
JPMorgan’s Jamie Dimon, Treasury Secretary Paulson, and
investor George Soros.
Even as a giant like AIG reported another massive round of
writedowns, in its case in the order of $15 billion, I do agree that
the worst is over when it comes to Wall Street’s finances, though
in no way does this mean I would buy financials because the
revenue model is broken and no one knows what the earnings
picture will be over the next 1-2 years.
This also means that as Buffett and Soros readily add to their
sanguine view of the money center and investment banks, the
worst is far from over when it comes to the consumer, the
homeowner and the effect on the broader economy. That’s why
if at times I’ve appeared to pooh-pooh the credit crisis, it’s
because housing, first and foremost, remains paramount. The
credit crisis is a subset of the housing debacle. It started with
housing and ends with housing….period. And, all together now,
this is the case globally.
Of course other side issues, many serious, have emerged at the
same time, whether it’s soaring energy and food prices, or the
price of other commodities. But, again, these last issues
wouldn’t be nearly as serious, at least here in the U.S. and
Europe, were it not for a housing bubble that sapped
homeowners of the equity in their homes, that in turn forced
banks to crack down when it came to using one’s palace as a
piggy bank. Many who once could have ridden out a commodity
bubble or two no longer can without access to cash and ready
credit. At least that’s been my story for ages now and I’m
sticking to it.
Speaking of bubbles, the Wall Street Journal’s latest survey of 53
economists shows that 51 percent said demand from China and
India was the prime factor in soaring energy prices, with 41
percent saying demand was the chief contributor to rising food
costs. In both cases, it’s a combination of supply and demand.
For its part oil rocketed higher and higher and closed the week at
another record, $126 per barrel. This is a bubble at these levels,
though there is always a way, it seems, for buyers of energy to
rationalize the high price and I would submit the coming
drumbeat for action against Iran will be yet another excuse for
speculators.
On the food front, I was right in calling rice another bubble as
the price then went from $25 per 100 lbs. to $20 in the blink of
an eye, and was headed lower still until Cyclone Nargis did a
number on leading producer Burma. So back up to $23 rice went
and this time I can’t argue with the short-term move until we get
a better picture of how long it will take to get Burma’s rice
production going again.
Finally, it bears repeating that the lower- and middle-class
around the world are taking it on the chin. Here in the U.S. food
stamp enrollments are soaring and I’ve heard or read more than a
few anecdotal stories about the traffic at soup kitchens and
depleting resources at food pantries. I also can’t help but note a
comment from a conference call I was in on concerning my solar
power holding. The CEO said just wait until this summer,
“customers will be freaking out about their high electric bills.”
It’s tough to catch a break these days.
Street Bytes
–Stocks finished broadly lower after three weeks of gains that
had taken the major indices to highs for the year. Instead, the
news from AIG, Citigroup, an underwhelming earnings forecast
from Cisco Systems and, most importantly, soaring crude oil
smacked everyone upside the head in a reminder the environment
is far from serene. After Friday’s close, Federal Express also
issued another profits warning due to surging fuel costs. Jet fuel,
for example, is up 35% alone in ’08, while diesel is up 25%. The
Dow Jones lost 2.4% to 12745, while the S&P 500 declined
1.8% and Nasdaq dropped 1.3%.
–U.S. Treasury Yields
6-mo. 1.74% 2-yr. 2.24% 10-yr. 3.77% 30-yr. 4.52%
A Fed official said “serious” inflation pressures may prompt a
rate hike, perhaps sooner than most think, while IMF managing
director, John Lipsky, said “inflation concerns have resurfaced
after years of quiescence” due to food and energy. While global
growth was slowing, Mr. Lipsky added, headline inflation was
“accelerating,” though he doesn’t see a repeat of the 1970s.
Across the pond this week, both the European Central Bank and
Bank of England left interest rates unchanged despite growing
economic weakness, with both agreeing inflation prospects
precluded rate cuts.
–Consumer borrowing in March skyrocketed thanks to increased
use of credit cards; this as banks continue to tighten lending
standards for both the consumer and business.
–Pending home sales hit another record low in March.
Homebuilder DR Horton reported revenues fell about 40% in the
quarter and recorded another massive loss on writedowns. The
homebuilder sector overall has now written down $22 billion in
land and inventory. And in keeping with Martin Feldstein’s
comments above, Moody’s Economy.com now estimates 1 in 12
homeowners are “underwater” and it’s getting worse.
–In reporting a net loss of $7.8 billion for the quarter (after the
above-mentioned writedowns), AIG now has consecutive
quarterly losses for the first time since its IPO in 1969. CEO
Martin Sullivan, who shouldn’t be sleeping well at night (but
undoubtedly is because what does he care if he gets fired as he’ll
get a mega-millions exit package) said “The severity of the
unrealized valuation losses…were beyond our expectations.”
Sounds like someone in over their head, don’t you think?
–Citigroup’s new CEO Vikram Pandit said he will shed one-fifth
of the banking giant’s assets while staying with the global model.
At an investor presentation, analysts yawned. Pandit’s three-year
plan does mean, however, that a second round of heavy layoffs is
in the offing.
–Mortgage giant Fannie Mae reported a first-quarter loss of $2.2
billion as CEO Daniel Mudd said “Right now we are in the belly
of the cycle” and that 2008 and 2009 would be tough years.
Fannie will raise $6 billion in new capital, but Mudd reassured
investors they are already well above statutory requirements.
Shares in Fannie see-sawed after the report.
Separately, a piece in the New York Times by Charles Duhigg
got a lot of play as he wrote that Fannie and sibling Freddie Mac
were “sitting on as much as $19 billion in additional losses that
they have not yet fully acknowledged….If either company
stumbled, the mortgage business could lose its only lubricant,
potentially causing the housing market to plummet and the credit
markets to freeze up completely.”
Of course this has always been the concern with these two
because the costs of any failure would be borne by you and me.
–Vivaaa…Las Vegas………………..not!
Casino operator Tropicana Entertainment filed for bankruptcy
amidst problems at its Las Vegas operations (as well as smaller
regional locations). MGM Mirage saw its profits tumble 30% in
the first quarter as its Vegas properties were also victims of the
slowdown.
Meanwhile, Countrywide Financial, which has rather significant
problems of its own, suspended the home equity credit lines of
virtually all its Las Vegas customers as home values there
declined 23% in February. As reported by Bloomberg, as many
as 15,000 people in Las Vegas, or 5% of the total homeowner
population, had their credit lines suspended by Countrywide and
other lenders, including those with excellent credit scores.
Lastly, the Journal had a front-page story on Friday concerning
Ian Bruce Eichner and his struggling Cosmopolitan Resort
Casino project, which is finally headed towards foreclosure.
Deutsche Bank sunk $1 billion into the casino-hotel complex on
the Vegas Strip and it’s not known how much they will get back.
–UBS, in announcing it was cutting an additional 5,500 jobs,
including 2,600 in investment banking, also revealed a loss of
$10.9 billion in the first quarter as it wrote down a further $19
billion in subprime mortgage securities and other investments,
bringing the total writedown here to nearly $40 billion. Super
job, guys. Some of us can’t even count to $400 million, but you
got it up to $40 billion!
But wait…there’s more! The SEC and Department of Justice are
investigating whether UBS helped clients evade American taxes,
while investors have pulled $12 billion from its asset
management units. Additionally, UBS was fined $35 million for
its role in the auction-rate securities debacle.
–Speaking of asset withdrawals, Legg Mason saw investors pull
out a net $19 billion from its stock and bond funds as Legg
reported a loss for the quarter of $255 million, its first since
going public in 1983.
–Morgan Stanley announced it was laying off an additional
1,500, while drugmaker Merck said it was reducing its sales
force by 15%, or 1,200.
–In addressing shareholders at the annual meeting of his
Berkshire Hathaway company, Warren Buffett said “I think the
Fed did the right thing in stepping in on Bear Stearns. Just
imagine the thousands of counterparties around the world having
to undo contracts.” Buffett added that the whole debacle
illustrates how many of the investment and commercial banks
have grown too large.
“The big investment banks, a number of them, and big
commercial banks, I think they’re almost too big to manage
effectively from a risk standpoint in the way they’ve elected to
conduct their business. You need someone at the top whose
DNA is very, very much programmed against risk.”
The search may take us to planets beyond our solar system.
–David P. passed along a research note out of Credit-Suisse that
there is a strong possibility China’s economy is re-accelerating.
That obviously would have huge implications on a number of
levels. But what’s this? The same Daver (we’ve known each
other almost 40 years) sent along a Lehman Brothers report that
countered because of “looming overcapacity,” Lehman is
reducing its growth forecast for China for 2009. I’m so
confused!
–Last weekend, Yahoo turned down Microsoft’s increased $33
offer and virtually all the major shareholders are furious with
Yahoo CEO Jerry Yang for insisting on $37. While Yahoo stock
then held up fairly well this week, the fact is the company is
slated to earn about 50 cents a share this year and at $26 thus
trades at an outrageous multiple of 50+ for an outfit whose
growth prospects are suspect. [The stock is as high as it is over
hopes the deal will be rekindled.]
–Toyota forecast its first annual profit decline in seven years,
thanks largely to rising materials prices and the U.S. slowdown.
–For those of you wondering what the value of companies who
own billboards is these days, CBS Corp. is acquiring Uruguay-
based Outdoor Advertising Group, which has 17,000 billboards
in South America, for $110 million.
–The H5N1 bird flu virus just doesn’t go away as the first
outbreak hit Seoul, South Korea. There have been no cases of
human infection, yet, but the discovery was made at a cage of
pheasants and chickens in a public park visited by hundreds of
thousands over a holiday weekend. One hopes the birds at least
covered their mouths when they squawked.
–Disney reported a solid quarter as net income rose 22%, thanks
to a surprisingly strong showing at its theme parks in particular.
Spending at Disney World in Orlando, Fla., for example,
increased 7%. Bookings for the rest of the year are still up, as
well, but I’m guessing this changes rapidly.
But Disney Channel phenom’s Miley Cyrus saw ratings for a
new episode of her “Hannah Montana” show drop 24%
following her Vanity Fair photo shoot that was rather suggestive
for a 15-year-old.
–The other day I was over at my parents and we were talking
about Hugh Hefner…really, we were…and it was decided it
hasn’t been that bad a life for the now old man. Alas, while
daughter Christie has long run the show from a business
standpoint, Playboy Enterprises reported dreadful first quarter
earnings as revenues declined at all its divisions. Very sad.
Very, very sad.
–NBC said it will be able to command $3 million per 30 second
spot for next year’s Super Bowl, about a 10% increase over last
year. Some big players, though, such as Anheuser-Busch, lock
in much lower costs for multiple spots. I’m guessing, however,
that NBC may have trouble selling some final slots due to the
economy by next fall.
–18 of the 37 shows currently on Broadway in New York are
less than 70% full after years of record runs.
–We note the passing of Baskin-Robbins co-founder Irvine
Robbins, 90. Robbins was the son of a dairyman in Tacoma,
Washington and after World War II he and brother-in-law Burton
Baskin combined their fledgling ice cream parlor operations. By
1953, they renamed the company Baskin-Robbins, deciding on
the “31 flavors” concept because they were already featuring a
menu with one flavor for every day of the month. They then sold
out in 1967 to United Fruit Co. for $12 million after expanding to
500 stores. Baskin, unfortunately, died six months later of a
heart attack at 54. And now you know….the rest of the story.
–My portfolio: The solar play reported stronger than expected
revenues for the first quarter, but then warned about prospects for
the rest of the year due to the economy (no surprise to me there)
and the feeling amongst management that the investment tax
credit for solar would not be renewed in ’08 thanks to the jerks in
Washington (big surprise to me here). I am livid about the ITC
for obviously very selfish reasons, aside from altruistic ones. It
is beyond belief that the Bush White House can’t understand that
if we are to reduce our dependence……….oh, never mind. The
President can’t wait to go home next January and then after about
a year, he’ll get antsy, call around to go on “Meet the Press” or
something, and the producers will say, “Why would we would do
that?”
Foreign Affairs
Lebanon: It was inevitable this would happen, but as of this
writing, Lebanon is on the brink of total civil war as the worst
violence since the 1975-1990 conflict broke out in Beirut with at
least 18 killed. I’ve seen the video clips and studied my maps
and I’m quite familiar with the neighborhoods impacted thus far
and it’s yet another tragedy that could engulf neighboring states,
namely Israel. As I’m traveling to the region this coming week,
I’ll likely have far more next time but for now here are some of
the facts.
The escalation in fighting occurred after the Sunni, pro-Western
government sought to dismantle Hizbullah’s private telephone
network. Hizbullah leader Sheikh Nasrallah then said the move
was tantamount to a declaration of war. Prior to this, Druse
leader Walid Jumblatt, also pro-West, accused Hizbullah of
setting up surveillance cameras near the airport and on roads
leading to it “to monitor the arrival of Lebanese or foreign
leaders and to kidnap or assassinate [people] on the airport road.”
A Hizbullah statement said “It seems that Jumblatt has
committed himself to fight the United States’ battle against Iran
after he declared that Israel was no longer Lebanon’s enemy.”
Sheikh Nasrallah himself later said Jumblatt “is a thief, a liar and
a murderer.”
What is particularly worrisome as I go to post is the fact the
Lebanese army appears to be siding with Hizbullah, at least
factions of it. Hizbullah took over Sunni leader Saad Hariri’s
television station in Beirut, with the army acting as mediator to
ensure the equipment and building weren’t destroyed, but it only
showed the government (of which Hariri is a key member) to be
impotent.
Israel: As the nation celebrated the 60th anniversary of its
independence, with a wary eye scanning events to its north,
Prime Minister Ehud Olmert told the nation that with regards to
an extensive investigation into alleged illegal campaign
donations:
“I was elected by you, citizens of Israel, to be the Prime Minister
and I don’t intend to shirk this responsibility. At the same time,
and even though the law does not require me to do this, I will
resign from my job if the Attorney-General decides to issue an
indictment against me.”
Of course what this all means is that there is no way any serious
negotiations with the Palestinians will take place while there is
uncertainty over Olmert’s status, this as President Bush is
traveling to the region to push the peace process forward. It also
doesn’t help that Palestinian leader Mahmoud Abbas said he was
frustrated by Bush’s failure to put pressure on Israel and the PA
said Israel was offering nothing more than a “mini-state of
cantons,” surrounded by Israeli military bases and settlements.
“Today it’s clear Israel has no intention of withdrawing from all
the territories that were occupied in 1967,” a statement read.
Separately, it is quite apparent Israeli intelligence is increasingly
convinced Iran is closer to the bomb than once thought by most
experts. Israel now believes Iran could have one by middle of
next year, meaning it would have the capability by year end.
It’s not just Israel, or the United States, that is concerned by this
prospect, NATO Secretary-General Jaap de Hoop Scheffer
warned that if Iran got the bomb, others would clearly follow.
“The nuclear ambitions of Iran and North Korea threaten to set in
motion a domino effect that will be difficult to contain.”
Iran: As for the regime here, Tehran announced it would not
cease enriching uranium despite new incentives offered by the
UN Security Council (and Germany), including assistance on a
civilian nuclear program. Iran also called off talks with the U.S.
over security in Iraq, as relations between Tehran and Baghdad
deteriorate, with the Iraqi government now blaming Iran for
backing Shia militias, which Iran continues to deny.
There was an interesting sidebar in Iran this week, that being a
speech by former moderate (using the term loosely) President
Mohammad Khatami, where he questioned the meaning of
“exporting the revolution,” a phrase coined when Ayatollah
Khomeini came into power. “Did Imam Khomeini mean that we
take up arms, that we blow up places in other nations and we
create groups to carry out sabotage in other countries? He was
vehemently against such measures and was confronting it,” said
Khatami.
Hardliners in the Iranian government took Khatami’s remarks as
a sign of support for Western claims that Iran is fueling unrest in
Iraq and elsewhere. Khatami and his supporters are expected to
attempt to recapture the presidency in 2009. I would add that
this is an example of how I can come to a conclusion that a
preemptive strike on Iran’s nuclear weapons program may not be
the disaster some forecast. Could it be the trigger instead for the
people to rise up against the government that put them in such a
predicament? Regardless of whether or not I’m right on this last
point, I remain convinced that a strike by Israel or the U.S. is
inevitable this year.
Iraq: A note from one-time war architect and neocon Richard
Perle in an opinion piece for the New York Times.
“The most important thing we can do to help the Iraqis and
ourselves is to recognize – and reverse – the seminal mistake that
followed the quick destruction of Saddam Hussein’s murderous
regime: the foolish (however well-meaning) and arrogant belief
that we know better than the Iraqis how to rebuild their
devastated society.
“Some of our technical assistance has certainly been useful, but
for five years, we have been telling the Iraqis how to construct a
political and legal system, how to elect their leaders, who should
occupy which cabinet posts, who should be their prime minister,
how to develop and allocate their resources, how to organize and
regulate their economy. We have been telling Iraqi Shiites how
they should deal with Iraqi Kurds and Sunnis, how an
independent Iraq should relate to the Arab world, how Iraqis
should reconcile sectarian differences, when to negotiate, when
to fight and how to measure progress.
“Stop! Iraqis know far better than we what makes sense for
them. When administration officials and members of Congress,
with their diplomatic, intelligence and political advisers – whose
knowledge of Iraq is often recent, shallow and wrong – hector
and lecture the Iraqis who are struggling to find a way forward, I
wonder whether we have learned anything from our past
mistakes.”
Russia: It was just like the old days on Friday, as Red Square
was the scene of a military parade, the first since the Soviet era,
marking Victory Day in World War II. Putin said the parade
need not be viewed as a threat of any kind, just a “demonstration
of our growing defense capability.” Thanks for telling us that,
Vlad. I was going to sleep with one eye open otherwise.
But what’s this? In an effort to prove himself, Medvedev told
the parade audience that Russia would not allow others to show
“contempt for international law.”
“We must treat extremely seriously any attempts to sow racial or
religious enmity, to stir up the ideology of terror and extremism,
[and] intentions to meddle in the affairs of other states –
especially attempts to redraw borders.” [Financial Times]
Now who do you think this was intended for?
Earlier, in his inaugural speech Medvedev vowed to strengthen
the rule of law and raise living standards, while relying on the
support of Putin. In a short speech prior to Medvedev’s, Putin
summed up his legacy.
“Yes, our work was not without its failures and mistakes, but we
managed to achieve serious, concrete results and effect a
breakthrough to a new way of life. Today we are forming goals
and tasks not for one or two months ahead, but for 20 to 30 years
ahead.”
Accounts of the inauguration described Putin as looking tired and
there have been rumors lately that he will actually step aside in a
year or so once he’s convinced Medvedev is up to the task.
But then on Thursday, a day after passing the baton to
Medvedev, Putin seemed reenergized as he laid out an aggressive
domestic program. He was careful, though, not to discuss
foreign policy or security matters, even as parliament is working
on a bill that would transfer military and security authority over
to the prime minister.
Lastly, Republican nominee John McCain has long been vocal
about booting Russia out of the G-8. It will be interesting to see
if he tones this down, such as in saying he’ll wait to see what
Medvedev does, even though he knows Putin is the puppet-
master. Medvedev himself is faced with an economy that rests
almost solely on oil and gas, while inflation threatens to create a
real domestic crisis. Plus, there are entrenched Kremlin interests
that will slit his throat given an excuse to do so. [Really.]
Burma: Baring any disastrous terror attacks the balance of 2008,
our “Dirtball of the Year” is already in place. Not three-time
winner Robert Mugabe, who is once again deserving, but rather
the junta in Burma over its handling of Cyclone Nargis. To
begin with, India, whose satellites provide Burma (Myanmar)
with its weather forecasts, gave the government two days
advance warning of the severity of Nargis and the military
leaders didn’t pass any of this information on to the people.
That’s staggering.
On Friday, six days after Nargis hit, the UN pulled its relief
operation because the junta was keeping supplies for itself, but
then resumed shipments after gaining assurances the aid would
reach those most in need.
The fact is much of the nation hasn’t seen any help as the death
toll could now easily exceed 50,000. This is nothing less than
the crime of the century.
North Korea: The State Department was excited that Pyongyang
finally turned over supposedly detailed nuclear weapons records,
while the rest of us, including leading congressional
Republicans, are underwhelmed by it all. The logs evidently
give experts a way to measure whether the North is telling the
truth about its bomb program, but critics argue the Bush
administration is just trying to concoct a disarmament deal to
secure its legacy. It’s been nearly five months since the North
failed to adhere to a deadline to produce a full record of its
nuclear weapons program, including the transference of weapons
and know-how to the likes of Syria.
Rep. Peter Hoekstra, the senior Republican on the Intelligence
Committee, said “Any mediocre performance by North Korea is
taken as an earth-shattering positive development by our State
Department. It appears they will say anything to get a deal.”
Venezuela: As reported by the Wall Street Journal, computer
files found on a dead guerrilla leader’s laptops captured in a
March raid confirm long-suspected deep ties between President
Hugo Chavez and Colombia’s rebel group FARC. The files
indicate FARC was offered arms by Chavez, including ground-
to-air missiles, as well as use of a port to receive them. Chavez
claims the files were faked. But the Journal cites a senior U.S.
official as saying “there is complete agreement in the intelligence
community that these documents are what they purport to be.”
Zimbabwe: Opposition leader Morgan Tsvangirai, whose party
won both the presidential and parliamentary elections, said he
would participate in a run-off as Robert Mugabe’s goons
escalated their reign of terror. The Washington Post reported
that another 11 activists were beaten to death on Thursday,
bringing the total to over 30 in the past few weeks, with over 700
being treated for injuries as the thugs go around beating anyone
that doesn’t support the dictator. Meanwhile, South Africa’s
pitiful President Thabo Mbeki refuses to demand his neighbor,
Mugabe, leave office. When the history of the decade, and the
century, is written, at the top of the list of mistakes made will be
the failure to have taken Mugabe out back in 2001 or 2002.
Seldom has targeted assassination been more warranted.
China / Japan: President Hu Jintao called on Japan’s young to
remember the past so as to move towards a long-lasting
friendship as part of Hu’s historic state visit.
“(The) invasions and wars led by Japan’s militarism gravely
damaged the friendship between the peoples of the two countries.
We lay emphasis on [the idea that] history should be kept firmly
in mind, not because [we want] to carry out hatred. Instead, we
should learn from history, move forward, treasure and safeguard
peace, so that friendship between peoples from both countries
can last for generations.”
Hu and Japanese Prime Minister Fukuda agreed to a blueprint on
future ties, including an annual summit between the nations’
leaders, as well as to resolve a dispute over critical gas deposits
in the East China Sea. But while Fukuda urged Hu to hold
further talks with representatives of the Dalai Lama, Hu said the
Dalai Lama would need to stop “inciting violent acts” for any
talks to succeed.
Separately, Taiwan faces a crisis in the last days of the
administration of President Chen Shui-bian as it has come to
light $30 million in government funds, earmarked for forging
diplomatic relations with Papua New Guinea, was stolen by
those entrusted with the cash. Chen’s foreign minister and two
others were forced to resign as they attempted to cover-up the
scandal and the loss.
Mexico: Every week now brings news of a horrific new attack
or two. The acting chief of Mexico’s federal police force was
assassinated, shot nine times as he was returning home, just the
latest in a string of murders targeting police officials. Earlier, 16
members of a ranchers’ association were gunned down in two
separate massacres. As reported by Reuters, “Some 40 men
riding in luxury vehicles and wearing uniforms of an elite police
squad shot nine people dead…..And a group toting automatic
weapons killed seven people.” Each incident was drug related.
Random Musings
–The campaign for the Democratic nomination is winding down
following Barack Obama’s solid win in North Carolina (56-42)
and narrow loss in Indiana (51-49). It appears that Hillary will
concede in two weeks after kicking butt in West Virginia and
Kentucky, just to show everyone she still can.
The exit polls from Tuesday, though, revealed ongoing problems
for Obama as the issue of Rev. Wright is a looming factor come
November. Obama captured 91% of the black vote in both
states, and Hillary took 60% of whites; troubling to some who
wonder what percentage of whites will defect to McCain in the
general election.
Fred Barnes / The Weekly Standard
“Obama told a gathering of veterans in Washington,
Pennsylvania, he’s ‘amused at this notion of elitist.’ He noted he
was ‘raised by a single mom,’ was ‘on food stamps for a while,’
and ‘went to school on scholarship….So when somebody makes
that argument, particularly given that I’ve spent my entire life
working with workers, low-income communities, to try to make
people’s lives a little better, then that’s when you know we’re in
political silly season.’
“He has a point. Growing up and then as a young lawyer, he
wasn’t an elitist. But the issue now, for what it’s worth, is
whether Obama belongs to the educated, sophisticated upper
class of urban America, and reflects the attitudes of this class. At
least in stolen moments, he does.
“So is Obama who he says he is? Of course not. He’s a liberal,
a bit to the left, and, like most graduates of Harvard Law, a
member of America’s meritocratic (but nonetheless elite) upper
class. He’s seized on a big idea – bringing Americans together in
a rebirth of national unity – to frame his campaign. Does this
make him a phony? I don’t think so. But it does make him
something else he insists he’s not, a conventional politician with
a clever spiel.”
Thomas DeFrank of the New York Daily News had a disturbing
column following the North Carolina and Indiana contests.
DeFrank discussed his travels in Indiana and a white, working-
class crowd Hillary was mingling with at the Indianapolis Motor
Speedway.
“ ‘I’m still kind of up in the air between McCain and Hillary,’
said Jason Jenkins, 32, who cited information from a hoax e-mail
as a reason to spurn Obama.
“ ‘I’ll be honest with you. Barack scares the hell out of me,’ he
said. ‘He swore on the Koran.’
“Obama did manage to pull in many white voters, but still
encountered similar sentiments from a man who refused to shake
his hand at a diner in Greenwood, Ind.
“ ‘I can’t stand him,’ the man said. ‘He’s a Muslim. He’s not
even pro-American as far as I’m concerned.’
“Such feelings leave Clinton and the Democratic Party in a tough
spot. With the largest number of remaining delegates now being
party insiders, they have to decide if Obama can overcome
enough of that antipathy – essentially deciding if enough
working-class whites will back away from the black candidate,
whether because of the false Muslim rumors, the Rev. Jeremiah
Wright flap or old-fashioned racism.”
I just have to add that while I personally believe Rev. Wright and
William Ayers are indeed legitimate issues, as to the rest of the
above DeFrank column, what an indictment on the future of this
country.
–As for John McCain, columnist Robert Novak wrote in the
Washington Post:
“(A) gentlemanly contest between the old war hero from the past
and the advocate of reform from the future probably would
guarantee a Democratic takeover of the White House. The
Republican Party, suffering from public disrepute, is facing
major Democratic gains in each house of Congress – leaving the
defeat of Obama as the sole GOP hope for 2008.”
–Speaking of future Democratic gains in Congress, the
Republicans keep shooting themselves in the foot, the latest
example being Staten Island Republican Congressman Vito
Fossella, our StocksandNews “Scumbag of the Week” (a new,
irregular feature).
Vito got caught for drunk driving in Virginia, then lied to his
family and constituents about the import of the woman who
bailed him out. At first, in his drunken stupor, he told police he
was heading to pick up his sick daughter, but said nothing of the
kind when he faced the local press for the first time. Well, the
three-year-old girl in question turned out to be his lovechild and
the woman his long-time mistress. Needless to say, his wife
wants to kill him (a rather easy assumption) and Fossella, already
facing a tight re-election fight, should bow out of the race and
head to Guam, if he knows what’s good for him.
–From a Washington Post report by Craig Whitlock:
“Almost eight years after al-Qaeda nearly sank the USS Cole
with an explosives-stuffed motorboat, killing 17 sailors, all the
defendants convicted in the attack have escaped from prison or
been freed by Yemeni officials.”
In case you were wondering about U.S. relations with Yemen
these days and its government’s true loyalties.
–From an editorial in Defense News:
“The 9/11 attacks thrust into the limelight the danger posed by
transnational threats.
“In that case, it was terrorism. Now governments must consider
how a wider array of emerging challenges could spark future
conflict, like shortages of energy, food and water; a global
pandemic; or radical climate change that could unleash mass
migrations.
“Any one of these challenges – much less a combination of them
– would stress the international system with social and economic
chaos sufficient to weaken leading states and topple unsteady
ones.”
For example, “A warmer world will see rising oceans and
flooded coastal areas, potentially driving billions of people who
live there to higher ground – even if it’s not their own.
“The soaring oil prices underscore the reality that modern life is
impossible without fossil fuels. And as this precious resource
dwindles, market forces alone may not govern access to what’s
left. Some will consider force or other means to secure energy
supplies.
“Mount a terror attack that blocks a strategic chokepoint like the
Bosporus and you’ll see oil prices soar to $160 a barrel,
according to a Harvard Gazette report last week. Other narrows
that keep maritime planners awake at night pondering horror
scenarios are the Malacca and Singapore Straits, through which
so much of the world’s energy and goods flow….
“Food-related unrest in Egypt, for example, emboldens radical
groups like the Muslim Brotherhood and the ever-opportunistic
and resourceful al-Qaeda.”
You just hope the planners and governments focusing on such
threats can come up with remedies so “that the effects of these
predictable shocks are minimized.”
–Having traveled a bit in my life, I couldn’t agree more with the
following from Thomas Friedman / New York Times.
“A few weeks ago, my wife and I flew from New York’s
Kennedy Airport to Singapore. In J.F.K.’s waiting lounge we
could barely find a place to sit. Eighteen hours later, we landed
at Singapore’s ultramodern airport, with free Internet portals and
children’s play zones throughout. We felt, as we have before,
like we had just flown from the Flintstones to the Jetsons. If all
Americans could compare Berlin’s luxurious central train station
today with the grimy, decrepit Penn Station in New York City,
they would swear we were the ones who lost World War II.”
–There was a massive drug bust at San Diego State taking in
some 75 students. So, if you had this on your list of schools to
send an application to next year, you might want to take a pass.
This place isn’t about to make any “Best of…” lists for a few
decades.
–If you missed it Thursday, catch the PBS showing of
“Camelot” from Lincoln Center in a rebroadcast. Still the most
beautiful music ever written…..mused the editor as he has now
gone over 24 hours with nothing but “Camelot” in his head.
–I’m working on a script for a new horror flick………..
“Superdelegates!” starring Howard Wolfson, Harold Ickes,
Nancy Pelosi…and Bill Clinton as ‘Horn Dog.’
–Richard Vines of Bloomberg News reviewed some restaurant
choices in Beijing, for those of you who may be attending the
Games this August, and he writes of a Tibetan establishment,
Makye Ame, that has a number of yak dishes.
“I settled for steamed yak beef dumplings and some Tibetan
roasted mushrooms with yak butter. The food was oily and, let’s
face it, yak will never catch on.”
Oh, I beg to differ. This noble, and nutritious, animal will indeed
catch on, as ranchers in Colorado today would attest. Personally,
I still hope to sweep the country one day with “B’s Yak Shaks”.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $885
Oil, $126.13…up a staggering $10 on the week, or over 8%
Returns for the week 5/5-5/9
Dow Jones -2.4% [12745]
S&P 500 -1.8% [1388]
S&P MidCap +0.4%
Russell 2000 -0.8%
Nasdaq -1.3% [2445]
Returns for the period 1/1/08-5/9/08
Dow Jones -3.9%
S&P 500 -5.5%
S&P MidCap -0.5%
Russell 2000 -6.0%
Nasdaq -7.8%
Bulls 44.0
Bears 32.3 [Source: Chartcraft / Investors Intelligence]
Have a great week. Next time from Amman, Jordan.
Happy Mother’s Day!
Brian Trumbore
