For the week 10/13-10/17

Wall Street…stopping the bleeding 

At times like these we’re looking for heroes and at least for this week, the man who stepped forward to attempt to lead the world out of this financial debacle was British Prime Minister Gordon Brown. Funny it was him, seeing as Gordon was dead and buried by those in his own Labour Party, as well as your editor, just a few weeks ago, but it was Brown who, in the words of the London Times’ Philip Webster, “sought to don the mantle of Churchill and Roosevelt…as he called for world leaders to gather for a new Bretton Woods, the conference held in 1944 to draw up a postwar financial order. 

“ ‘First Britain, then Europe, now the world,’ a Conservative frontbencher said, reflecting on Mr. Brown’s newfound confidence as he tackled the financial crisis, making a plethora of speeches, press conference appearances and trips on the international stage. 

“Only an hour after outlining his plan for a ($60 billion) public injection to rescue three British Banks, Mr. Brown turned his attention to reforming the world’s financial system.” 

“Gordon Brown came to save capitalism, not to bury it. Paying ($60 billion) to part-denationalize some of the commanding heights of the economy may not be many people’s idea of what free marketeering governments do, but the prime minister has taken bold steps to save the financial system and – with it – the real economy. The model he has set out for rescuing banks is a good one, and is now being imitated across Europe and in the U.S. 

“Mr. Brown’s measures – to recapitalize banks, to guarantee interbank lending and to extend liquidity provisions – are systematic and comprehensive. The scale of the response is indicative of the depth of this financial crisis – arguably the worst of the past century. But, if other governments follow through on their commitments, the plan may even work.” 

Well, Europe followed, led by French President Nicolas Sarkozy, as France, Germany, Spain, the Netherlands and Austria committed $1.8 trillion to guarantee bank loans and take stakes in lenders. Sarkozy said “The greatest risk is in inertia.”  

And then the United States stepped in as the Treasury, Federal Reserve and FDIC acted in various ways, including a pledge to take $250 billion of the $700 billion rescue plan and inject it directly into those banks most needing a capital boost, including the first $125 billion for Citigroup, Wells Fargo, JPMorgan Chase, Bank of America, Morgan Stanley, Goldman Sachs, Merrill Lynch, Bank of New York Mellon, and State Street; while the government is guaranteeing interbank lending for three years, any new debt offered by those banks taking federal money, and a guarantee from the FDIC that it will insure 100% of non-interest bearing accounts, which most impacts small businesses who hold such funds for mundane things like meeting payrolls.  

In return, the Feds are going to earn a 5% dividend on preferred shares (not the 10% Warren Buffett is receiving for investments in General Electric and Goldman Sachs), though the hope is the banks will then buy out the government’s stakes as the credit markets open up and the ability to raise private capital returns. Just understand that while the situation is fluid, this week’s actions were truly momentous, not just for the U.S. but around the world. And to those all hot and bothered about the end of capitalism and free markets, seriously, don’t lose sleep over it. I sure as hell am not when it comes to the banks. [As for other sectors of the economy and government interference, that’s another story.] For now, to paraphrase Linus as he’s bucking up Charlie Brown’s disastrous Christmas tree, our system isn’t all bad. Nothing that a little regulation and responsibility won’t cure. 

“The government’s rescue plan moved into a new phase Monday night with the announcement that Treasury is injecting $125 billion into the country’s nine largest banks. This amount – as much as $25 billion each for the biggest – seems to have stopped the financial panic for now by easing fears of insolvency. Another $125 billion is on the table for other banks that need capital on the same terms offered to the big boys. 

“The good news here is that Treasury Secretary Hank Paulson has at last moved from promises to action, and credit markets have responded positively. But this is also a very dangerous moment. The government has taken ownership stakes in the largest banks in the land. This extraordinary intervention is perilous – not least to the banks themselves – unless it is limited in scope and time. Mr. Paulson called the capital injection ‘distasteful’ but unavoidable, and we can’t disagree. The trick is to ensure that neither he nor his successors develop a taste for politically distressed credit. 

“Despite the risks, directly recapitalizing the banks is likely to prove a better tool than buying up ‘troubled assets,’ though the Treasury seems on course to do some of that too. Giving banks this additional capital cushion should give them some leeway to sell those assets at market prices without risking insolvency. At the same time, it avoids the vexing problem of how to price securities that the smartest minds in finance are having trouble assigning a value to…. 

“For those of us who believe in free markets, these interventions are unpleasant. These drastic steps might have been avoided had Treasury and the FDIC acted sooner, yet now they are necessary given the panic that threatens the larger economy. The goal should be to rebuild the financial system so Americans can once again trust their banks enough that government can then recede to its normal supervisory role. We are under no illusions that government will cede its new powers easily, but if it doesn’t the economic damage will be far greater than anything we’ve seen so far.” 

Not all are confident government officials have stumbled on the solution. Rather, some, as best represented by columnist Ben Stein in the New York Times, remain very angry. 

“A few days ago, I spoke to a large gathering of investors in the San Diego suburb of La Jolla and was startled by the audience’s furious anger at the powers that be. The Wall Street-Treasury-Federal Reserve axis is hated, loathed and feared by these people…. 

“In fact, they are among the angriest upper- and middle-class people I have ever seen. And the most frightened and worried…. 

“And why not? With the experiment of allowing a major investment bank, Lehman Brothers, to simply vanish, leaving huge holes in the portfolios of many other financial entities, Henry M. Paulson Jr., the Treasury Secretary, threw the financial system into chaos…. 

“When confidence is gone, it’s really gone. We see the results all around us, in what seems to be a gathering slowdown. For those of us surveying the financial statements we can get online at any moment to destroy our sleep, the recession is already here and it looks a lot like a depression if we add in the losses on our real estate…. 

“People planning for retirement were told they could expect that their savings in broad indexes of common stocks would double roughly every 10 years. But we are now below where we were in 1998. If pre-retirees needed that doubling to get to their savings goals, they are now cut off at the knees. Unless the stock market stages a miraculous recovery, and I pray it does, a whole generation of boomers will be hopelessly far from its needs for savings. 

“I wonder if Mr. Paulson with his hundreds of millions in the bank really understands the terror of those people in the room in La Jolla and the tens of millions like them. I wonder if Mr. Bernanke does. I wonder if, as they rolled the dice on Lehman and came up snake eyes, they thought of the fear that would spread throughout the land. What do people – decent, hard-working people – do now? The standard advice would be to buy when the market is down, and it’s probably good advice. But only ‘probably’ because we have no idea how far down we’ll go or how long it will take to recover. Maybe it is better to be liquid now. But then again, maybe not. Uncertainty and fear rule. 

“Frankly, I don’t know the answer. I just know that for a long time, we have paid Wall Street ‘experts’ unimaginable sums for preparing for our retirement. They still have our money, and we have ashes. And I wonder whose side government is on, which is a bad thought to have, and I wish I didn’t have it. As the song goes, there is revolution in the air.” 

And it’s important to remind everyone that the fundamentals are absolutely awful these days.  

JPMorgan Chase CEO Jamie Dimon, in surprising the Street with a profitable quarter, added JPM will need to set aside more money to cover loan losses as it braces for the economic slump to get “a lot worse.” “If you’re not fearful, you’re crazy,” Dimon added. 

Earlier, Bill Gates told an audience we are headed for a “fairly significant recession” and the World Bank’s Robert Zoellick warned the global crisis was hitting developing markets particularly hard. “The poorest and most vulnerable groups risk the most serious – and in some cases permanent – damage.” Additionally, the International Monetary Fund, in estimating that credit losses will now hit at least $1.4 trillion (remember, Ben Bernanke said “50 billion” in 2007), concludes “the global financial system is on the verge of systemic meltdown.” And legendary investor Julian Robertson told CNBC he expected “10-15 years of a poor economy.” 

Just look at the U.S. and Britain. In the U.K., unemployment is at a 17-year high, home sales a 30-year low, and retail spending cratered 1.5% in September. 

In the U.S., where does one begin? Just this week we learned retail sales for September plummeted 1.2%, industrial production collapsed 2.8%, another manufacturing barometer, the Philly Fed index, hit a staggering minus 37.5 for October, housing starts for September came in at a mere 817,000, the lowest figure in 17 years and putting us on track for a full year total not seen in six decades(!), building permits, a measure of future activity, hit their worst level since 1981, and a leading measure of consumer sentiment had its biggest one-month decline, ever. 

And what started with housing is now spreading rapidly to the consumer loan sector as credit-card defaults, as alluded to by Jamie Dimon, are soaring, along with delinquent auto loans. Jessica Silver-Greenberg had this passage in a piece for BusinessWeek. 

“Making matters worse (for the big banks), the subprime threat is also greater in credit-card land. Risky borrowers with low credit scores account for roughly 30% of outstanding credit-card debt, compared with 11% of mortgage debt. More than 45% of Washington Mutual’s credit-card portfolio is subprime, according to Innovest. That could become a headache for JPMorgan Chase, which agreed on Sept. 25 to buy the troubled thrift’s credit-card business and other assets for $1.9 billion.” 

Noted bear Jeremy Grantham had some of the following thoughts in an interview with Barron’s, Oct. 13. 

Q: What is your sense of how this crisis has been handled by those in charge? 

Grantham: It’s been a haphazard response, and the next time something happens, you can’t be sure what will happen. In one deal they protect the bonds, while in the next deal the bonds go. Then in the next deal they protect the foreign bonds but not the domestic bonds. My guess is that people will be nervous that they will be at the bad end of one of the tough deals, rather than one of the more gentle deals. 

Q: What was at the core of what got the financial system into this crisis? 

Grantham: It was the belief by a lot of people who counted that financial bubbles did not have to be addressed. The thinking was that…you could step in and, by scattering a bit of money around, ease the downside consequences. Therefore, you could let the tech bubble run amok and wait for it to burst and step in. And you could let the housing bubble run amok and step in. 

At the center of this crisis was a bubble in risk-taking. The risk premiums dropped off the cosmic scale, the lowest ever recorded. 

Grantham: No….this is much worse than I thought. All the fundamentals are turning out worse than I thought they would. All the competencies of the senior people at the Fed, Treasury and [firms like Merrill Lynch and Lehman Brothers] have turned out to be much less than I had expected; that’s very disappointing. 

Q: Do you think we will learn anything from all of this turmoil? 

Grantham: We will learn an enormous amount in a very short time, quite a bit in the medium term and absolutely nothing in the long term. That would be the historical precedent. 

Q: Do you have any closing thoughts about how we got into this financial state? 

Grantham: I ask myself, “Why is it that several dozen people saw this crisis coming for years?” I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke – none of them seemed to see it coming. 

Grantham: I want to emphasize how little I understand all of the intricate workings of the global financial system. I hope that someone else gets it, because I don’t. And I have no idea, really, how this will work out. I certainly wish it hadn’t happened. It is just so intricate that all I can conclude, by instinct and by reading the history books, is that it will be longer, harder and more complicated than we expect. 

So significant damage has been done to the economy, and, even should the critical commercial paper market open up and banks begin to lend to each other, as increasing evidence is showing, we are in a global recession. In addition to all the above, automakers are slashing production around the world, and don’t forget that, here, federal, state and local tax revenues are drying up, further shaking confidence. Deficits, in turn, are exploding, and the unemployment figures are about to do the same. 

Circling back to real estate, economist Martin Feldstein estimated two weeks ago that if home values decline another 10-15%, 40% of all homes would then be underwater. This figure is in dispute, but if we are about to commence a second hard leg down, the consequences could be unimaginable, regardless of how government attacks the problem. 

But that’s the bad news. The good news is stocks trade on sentiment as much as on fundamentals, and you all know the market tends to anticipate better times months before the real economy is in fact improving. 

Professor Burton G. Malkiel / Wall Street Journal 

“(Just) because stock markets have panicked, investors should not. The best position for investors today is not ‘fetal and 100% in cash.’ We are not going to have a depression, and we have survived financial crises before. A century of investing experience, as well as insights from the field of behavioral finance, suggest that investors who bail out of equities during times like these are almost always making the wrong decision…. 

“We will have a serious recession now, but a 1930s-style depression is highly unlikely. We will not let the money supply decline by 25%, as we did in the ‘30s, and automatic stabilizers (like unemployment insurance) are now a significant element of fiscal policy. Don’t forget that the U.S. economy is still the most flexible in the world and our ‘innovation machine’ is alive and well. 

“No one has consistently made money by selling America short, and I am confident the same lesson is true today.” 

“The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary. 

“So…I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities. 

“Why? A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now…. 

“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497…. 

“Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.” 

Editorial / USA Today…on the lack of leadership 

“During the financial panic of 1907, when the stock market and the nation’s banks were teetering, the dominant financier of the day stepped forward to lead a rescue. Twice during that October’s darkest days, J.P. Morgan summoned other financial titans to his home or office and pressured them to join in pumping millions into banks to save the financial system. 

“During this October’s darkest days, financial titans have been conspicuously absent as the stock market and the nation’s credit system have lurched from crisis to crisis. On Monday, after a meeting with Treasury Secretary Henry Paulson, where they learned that taxpayers would inject billions of dollars into their institutions, the nation’s top bank CEOs scurried away without so much as a word to the press corps and millions of nervous investors watching on TV. 

“Where, one might wonder, is any sense of patriotism, or even regret over the excessive risks that enriched the bankers while imperiling nearly everyone else? Nowhere to be seen, reinforcing the impression that the nation’s financial leaders care about nothing except their own wealth. 

“If that impression is false, there is a very simple, effective way they can change it. They could volunteer their services – yes, that means without compensation – to help clean up the mess they made.” 

[As the editorial goes on to point out, only PIMCO’s Bill Gross offered his firm’s services for free, and they will be involved in the auction process we’ve since learned.] 

But back to British Prime Minister Gordon Brown, now all puffed up (and that’s fine with me at this point), he’s pushing for his new economic order, as espoused in an op-ed for the Washington Post on Friday. 

“The old postwar international financial institutions are out of date. They have to be rebuilt for a wholly new era in which there is global, not national, competition and open, not closed, economies. International flows of capital are so big they can overwhelm individual governments. And trust, the most precious asset of all, has been eroded… 

“Confidence about the future is vital to building confidence for today. We must deal with more than the symptoms of the current crisis. We have to tackle the root causes. So the next stage is to rebuild our fractured international financial system. 

“This week, European leaders came together to propose the guiding principles that we believe should underpin this new Bretton Woods: transparency, sound banking, responsibility, integrity and global governance. We agreed that urgent decisions implementing these principles should be made to root out the irresponsible and often undisclosed lending at the heart of our problems. To do this, we need cross-border supervision of financial institutions; shared global standards for accounting and regulation; a more responsible approach to executive remuneration that rewards hard work, effort and enterprise but not irresponsible risk-taking; and the renewal of our international institutions to make them effective early-warning systems for the world economy…. 

“There are no Britain-only or Europe-only or America-only solutions to today’s problems. We are all in this together, and we can only resolve this crisis together. Over the past week, we have shown that with political will it is possible to agree on a global multibillion-dollar package to recapitalize our banks across many continents. In the next few weeks, we need to show the same resolve and spirit of cooperation to create the rules for our new global economy. If we do this, 2008 will be remembered not just as a year of financial crisis but as the year we started to build the world anew.” 

Heck, I’ve always been keen for revolution. Who’s to doubt we need one today, at least in spirit? It’s time for action. 

–Yet another outrageous week. Monday saw the biggest point gain, by far, ever for the Dow Jones Industrial Average, up 936, 11%; the latter the biggest percentage gain since 1933. But Wednesday witnessed a second 700-point decline in two weeks; this one 733. Then, the Dow rose 401 on Thursday and when it all shook out, stocks had staged their best advance in years, with the Dow up 4.8% to 8852, the S&P 500 up 4.6%, and Nasdaq ahead 3.8%. There were actually a few smiles on the Street by week’s end. 

Earnings for the third quarter began to flood in and they were mixed in terms of actual numbers and/or forecasts: Coca-Cola good, Pepsico poor, Johnson & Johnson good, eBay awful, Citigroup poor, IBM so-so, Schlumberger poor, Google good…all over the board. Future reports over the coming weeks will reveal the same as the July-September period is ancient history, and flat out irrelevant, while the outlook for coming quarters is foggy, at best. 

–U.S. Treasury Yields 

Good news on the inflation front as readings for September on consumer and producer prices came in as expected, tame. Focus, though, has remained on the short end of the yield curve, the heart of the credit crisis, and while there are some signs of improvement in the commercial paper market, as well as with LIBOR, it is still too early to say the worst is over.  

Meanwhile, with the run-up on the longer end of the curve, specifically the 10-year, mortgage rates rose a whopping 50 basis points in one week to 6.46% on a 30-year fixed; hardly the kind of news policymakers want to see as they try to juice the housing sector. 

–You want some really good news? Try crude oil, which was trading below $70 before finishing the week at $72, the lowest weekly close since Aug. ’07. It’s the ongoing story of demand destruction, fueled by an unwinding of the hedge funds’ positions. And to think that just three months ago we peaked at $147, days after I wrote on 7/5/08 that “There is no way you can validate $145 oil” as I went on to compare the bubble in crude to that of the tech sector. [The week before I nailed the peak in corn to the day…once $7.70, now $4.03] 

The destruction in the energy sector has been unreal. Valero, for example, has a 52-week high of $72 but closed the week at $18 after hitting $17. National Oilwell Varco, a high-flyer, hit $92 over the past year but traded at $20 before finishing Friday at $25. 

But if you’re not an investor here, you should be fired up to get a break at the gas pump. With gasoline futures at $1.70, an average nationwide pump price (barring a snapback higher), of $2.30-$2.40 is just a few weeks away. 

–Investors pulled out a record $104.4 billion from U.S. mutual funds in September, according to research firm Lipper Inc.   $56 billion was out of money-market funds following the Reserve Fund’s breaking of the buck. 

–Morgan Stanley, on the verge of collapse, secured a $9 billion lifeline from Mitsubishi UFJ Financial Group, a 21% stake in Morgan that will cost MS $900 million a year in dividends via two classes of preferred shares. Be sure to add this number to your calculations when gauging the upside in Morgan Stanley stock down the road. 

–Merrill Lynch, in its last report as an independent company, posted a loss for a fifth straight quarter, $5.2 billion. Over this period, Merrill has spilled red ink of $23.8 billion.  

But within the report we learned just how dire the situation was for Merrill prior to Bank of America saving it last month. For example, Merrill’s deposits declined 10%, $10.5 billion, as customers fled to safer alternatives. 

–Citigroup, in reporting another loss for the quarter, this one $2.8 billion, has now amassed losses of $20.2 billion the past 12 months. [Citi and Merrill, combined, have written off about $110 billion in mortgage-related securities and other positions as well.] 

–The Swiss government took a 9% stake in struggling UBS for $5.3 billion and may guarantee new debt offered by both UBS and Credit Suisse, the latter said to be raising $9 billion privately. In addition to the equity stake in UBS, the government is taking $60 billion in toxic assets off UBS’ balance sheet, though Swiss officials say taxpayers won’t suffer since the assets have already been aggressively written down. 

–As the Wall Street Journal reports, JPMorgan Chase and Cerberus Capital Management are driving talks between General Motors and Chrysler. Cerberus owns Chrysler, while JPMorgan is a large holder of Chrysler bank debt and a lender for GM. Both want equity stakes in a combined venture. 

–Google reported net income rose 26% in the third quarter to $1.35 billion. In the U.S., Google fielded 63% of online searches in August, double the market share of Yahoo and Microsoft combined. Shares in Google soared to $390 following the announcement on Thursday, up from a close that day of $353, and finished the week at $372. But, last Nov. 7, they hit their high of $747. 

–IBM reported a solid quarter from an earnings standpoint, exceeding expectations, but revenues, stripping out currency fluctuations, were up only 2% and, like for everyone else in the world, the July-Sept. period is ancient history. 

–Coca-Cola beat earnings expectations; but Pepsico fell short and announced the slowdown has been so pronounced it is laying off 3,300. It seems we really don’t need that bag of potato chips as much as we thought we did. 

–California successfully raised $5 billion to avert a cash crisis, with Gov. Arnold Schwarzenegger rallying the people to invest in revenue anticipation notes issued by the state, with the public snapping up 78% compared to a previous high of 50% of such an offering; the balance placed in institutional hands. 

–A Los Angeles Times/Bloomberg national poll shows 3/4s of the respondents thought lack of regulation was a major cause for the financial crisis. 90% thought the economy was doing badly (meaning the other 10% are idiots). The all-time low for this last one occurred in January 1999 when only 8% thought the economy was doing badly and 89% thought it was doing well. 

–Atlantic City’s eleven casinos suffered their biggest monthly drop in revenue ever in September, with all eleven reporting a decline, the first time that has ever happened in the 30-year history of gaming in this hellhole. 

–Meanwhile, gaming revenue on the Vegas Strip fell for an eighth straight month in August, the longest streak of such declines since 1983. In May it was a record 16% drop. In August, another 7.4%. 

–Why was I able to identify the global real estate bubble years before others did? Because I knew that ‘no-money down’ or minimal down payments was a mantra far from our borders, be it the U.K., Ireland, Spain, or parts of the Far East. So for proof I just have to point out a statement made by a leading Russian banker in forecasting the coming collapse in values there. “You won’t find zero or 10 percent down payments on the market anymore.” 

The above is also an example of why I was ticked off at the initial response in Europe to the financial crisis, though its leaders wised up soon thereafter. The United States deserves more than its share of the blame, but it still isn’t being reported here that across the pond, many homebuyers were taking the exact same risks some of us did. Understand that the average Brit and Irishman has greater debt loads than we do. And when it comes to Russia, they simply have no concept of personal financial responsibility. Sex, drugs, Mercedes’ and rock ‘n’ roll…24/7. Sounds like fun, but eventually you have to pay the piper. 

–London’s financial industry is expected to shed 62,000 jobs through next year, or back to levels last seen a decade ago. Bonuses, paid out in the first quarter of ’09, are expected to total $6.2 billion vs. $14.9 billion early this year. [That means a lot of service sector job losses, too.] 

–Hedge funds are expected to lay off 10,000 this year out of an estimated 150,000 jobs worldwide. Some expect up to 1,000 outfits to shut their doors. And the Financial Times reported, in terms of actual assets, that one “chief executive of a leading alternative investment manager said he expected the hedge fund industry to shrink by 50% in coming months – with half the decline coming from withdrawals and half coming from investment losses.” 

–Prosecutors have issued subpoenas to a dozen executives at Lehman Brothers, including former CEO Richard Fuld, in connection with three grand jury probes into the firm’s bankruptcy. I can’t stand the way everyone on CNBC, as well as those on the floor of the NYSE, is defending Lehman. “How can you prove they didn’t know better?” is the common excuse. Wrong. The public, and your editor, does require a scalp or two. Not to come up with any would in itself be the crime of the century. A number of Wall Street chieftains need to be waterboarded. 

–Ah, the disadvantages of producing a ‘dated’ magazine. Trader Monthly’s October issue has a story on hedge fund king Vic Sperandeo. The article, though, was written in August. 

“As for the current commodities bubble (inflated in part, some say, by large allocations such as those made via Sperandeo’s quant system), the man who called all those previous crashes sees no end in sight: ‘A bull market in crude will persist until the population demands reality instead of [Al] Gore gospel.’ He scoffs at the notion that traders are to blame for the spike in oil. ‘Speculators follow trends; they don’t make them,’ he insists.” 

–In a developing story, a French savings bank, Groupe Caisse d’Epargne, said it had sustained an $800 million loss due to unauthorized equity derivatives trading and actions taken by a proprietary trading team. The activity was discovered internally. 

–And as of this writing, Russia has not decided whether to give Iceland the $5 billion loan it was asking for. One of the holdups, aside from the fact Russia has its own money problems, is the Kremlin’s asking price. In Reykjavik, it is said the depressed populace is drinking even more heavily than normal. 

–40,000 Hong Kongers bought Lehman Brothers-related investment products through banks for an estimated $2.6 billion, causing great consternation as many pensioners feared all was lost, but now the banks have agreed to buy the securities back at market prices.  

–But the above is but the tip of the iceberg when it comes to the Lehman fallout. 8,000 different firms paid Lehman billions of dollars in collateral as part of their derivatives dealings. Now, many of these partners, a la Hong Kong, have run to the courts to help them reclaim their assets, frozen since Sept. 15. 

[Lehman announced they will hire 200 professionals to sort through a stupendous 1.5 million derivatives trades.] 

–Then there’s China Investment Corp., that nation’s $200 billion sovereign wealth fund, which had over $5 billion in the Reserve Primary Fund, the money market vehicle that broke the buck. The funds are frozen as Reserve slowly liquidates it. 

–Irish television host and investment guru Eddie Hobbs on the problems facing his country, including his forecast of property price drops of up to 60%. 

Irish who grew up in the 1980s or earlier know how bad things might get, but to the Celtic Tiger’s cubs “it’s about as alien as a moonscape.” As I’ve commented after each trip to Ireland the past five+ years, the younger generation, once thought to be wildly successful if you didn’t look at the leverage they employed, was incredibly naïve. 

–According to one estimate, the wealth of the top 25 on the Forbes Russia list has plunged $240 billion since the Russian equity market’s peak in May. [Philip Pan / Washington Post] The Kremlin has already pledged more than $200 billion to bolster the stock market, or 15% of GDP, yet it has failed to stop the bleeding. The key Russian market barometer is now off over 70% just since May 19. 

–Actor Michael Douglas might be reprising his role of Gordon Gekko in 1987’s “Wall Street” in a new film that has been fast-tracked in light of the financial crisis, ‘Money Never Sleeps’. According to the London Times, “The plot will center on Gekko as he struggles to readjust to the modern tumultuous economic climate after being released from the prison sentence imposed for his crimes in the 1980s.” No guarantee Douglas will actually take up the part, but he’s “monitoring the script.” 

–As you would expect, graduate school enrollment is growing amidst the putrid economy, though the credit crisis will obviously impact the ability of many students to pay. Columbia’s assistant dean for MBA admissions told Crain’s New York Business, “Applications are through the roof.” 

–Every day I pick up the state paper it seems thinner and thinner. The same can be said of the Wall Street Journal, let alone the traditional news magazines I subscribe to. Yes, the advertising market is totally cratering. 

–Related to the above, NASCAR faces a real crisis. General Motors, Chrysler, Sears and Chevron are among those cutting or dropping their sponsorships next season. The circuit could face real problems filling a 43-car field. 

–Hotel occupancy rates in Manhattan are plummeting. Crain’s New York Business reports it has been declining 11% each week in October. 

–Marcia Brady (aka actress Maureen McCormick) traded sex for drugs, according to her tell-all memoir. Hey, how did this sneak in here?! Who’s proofing this? 

–Can we please retire the line “Have you ever seen anything like this?” Of course no one in America has, unless you are in your mid-90s and of sound mind. Only those who were in their 20s and involved in the Wall Street of the early 1930s can know, so stop bringing it up in every freakin’ interview, CNBC! 

–The NFL announced that 25 percent of the tickets for the Super Bowl will be priced at $1,000 for the first time. Goodness gracious. It’s tough enough scrounging up enough coin for a six-pack of domestic these days. 

Iraq: Grand Ayatollah Ali al-Sistani, the key Shia figure behind the scenes, has assured Iraqi officials that Moqtada al-Sadr won’t block a long-term U.S. security deal if approved as long as there’s a timetable, and it would appear from reports that a final draft does have one in place for 2011. Any deal requires the approval of the Iraqi parliament. 

[On Saturday, Sadr\’s followers are holding thus far peaceful demonstrations against the continued U.S. presence.]

But I have to admit, after writing of the plight of Christians in Iraq last time, particularly in Mosul, the 3rd-largest city, and then hearing last weekend of 3,000 Christians being forced to flee, I was prepared to write this week that my support for the war had officially ended. “This is total b.s.,” I was ready to conclude. Alas, the Iraqi government stepped up and at least said the right things in calling for the protection of all Christian enclaves in the country. I was mollified. 

Iran: Russian Foreign Minister Sergei Lavrov said unilateral sanctions against Iran would be “counterproductive” in efforts to force Tehran to suspend its nuclear fuel work. 

David Owen, former British foreign secretary, in an op-ed for the London Times. 

“Some key decision makers in Israel fear that unless they attack Iranian nuclear enrichment facilities in the next few months, while George W. Bush is still president, there will not be another period when they can rely on the United States as being anywhere near as supportive in the aftermath of a unilateral attack. 

“In the past 40 years there have been few occasions when I have been more concerned about a specific conflict escalating to involve, economically, the whole world. We are watching a disinformation exercise involving a number of intelligence services. Reality is becoming ever harder to disentangle…. 

“If Israel were to attack Iran, one Iranian response would be to block the Strait of Hormuz. On September 16 Iran said its Revolutionary Guards would defend the Gulf waters. In the narrow strait just one oil tanker sunk would halt shipping for months. Insurance cover would be refused and owners would fear the risks of sailing even if the U.S. navy cleared mines. 

“The Revolutionary Guards are committed to a war against Israel and prepared, in the process, to take on the rest of the world. They have good equipment and operate from the land, sea and air. They will be suicide soldiers, seamen and airmen. If Iran is attacked, Russia and China will supply it with arms. 

“The circumstances surrounding Georgia’s decision to attack South Ossetia are worth remembering. The Georgian president was advised by Condoleezza Rice…not to attack but there were powerful voices in Washington that, by a nod and a wink, were encouraging action, so the Georgian government felt confident in going ahead. 

“Following an Israeli attack and Iranian countermeasures, the American military would be bound to follow Bush’s orders. The president-designate or, if before the election, the two candidates, would be wary of criticizing him. It is imperative that voices are raised in America and Europe to warn Israel off unilateral action against Iran. The experience of Georgia has given an amber, if not a green, light to Israel and only Bush can switch that to red. 

“Bush’s legacy would be best served by taking dramatic diplomatic action to prevent a war with Iran. He should publicly warn Israel that the United States will use its air power to prevent it bombing Iran, while announcing that he is sending Rice to Tehran to start negotiating a grand bargain whereby all sanctions would be lifted if Iran forgoes the nuclear weapons option. He could indicate that the negotiations would not continue indefinitely, but they would give his successor, as president, time to consider all the options, military and economic. It would also allow time for Israel either to negotiate a coalition to last until 2010 or to hold elections. It would replace the present multilateral negotiations, which are stalled with Russia and China unwilling to move on strong economic sanctions. Above all, it would be a last act of real statesmanship from Bush who is otherwise destined to end his term a miserable failure.” 

North Korea: Pyongyang said it will resume disabling its nuclear facilities following Washington’s move to take it off the state sponsors of terrorism list and allow international inspectors access to disputed sites as well. 

But many questions remain, such as will inspectors really be allowed to visit that which North Korea has never admitted? And now that sanctions have been lifted, will the North just jerk the U.S. around?  

Plus, Japan called the Bush administration’s move “extremely regrettable” because there still hasn’t been a resolution to the issue of North Korean abductions in the 1970s and 80s. 

South Korea, on the other hand, hailed the deal. So how did the North respond to its neighbor? It threatened to end all relations with Seoul, thus freezing civilian exchanges and activity at a joint factory park. 

“North Korea has now achieved one of its most-prized objectives: removal from the U.S. list of state sponsors of terrorism. In exchange, the U.S. has received ‘promises’ on verification that are vague and amount to an agreement to negotiate the critical points later. 

“In the Bush administration’s waning days, this is what passes for diplomatic ‘success.’ It is in fact the final crash and burn of a once-inspiring global effort to confront and reverse nuclear proliferation, thereby protecting America and its friends…. 

“The negative ramifications are not confined to Northeast Asia. In Tehran and the capitals of other terrorist states and aspiring nuclear proliferators, policy makers are doubtless ecstatic that Pyongyang has out-negotiated Washington once more, and they are considering ways to apply the North Korea model to their own situations…. 

“Having bent the knee to North Korea, Secretary Rice appears ready to do the same with Iran, despite that regime’s egregious and extensive involvement in terrorism and the acceleration of its nuclear program. Watch for the opening of a U.S. diplomatic post in Tehran within days after our Nov. 4 election, and other concessions on the nuclear front. Hard as it is to believe, there may be worse yet to come.” 

“The axis of evil lost a charter member this weekend, when the U.S. took North Korea off the State Department’s list of terror-sponsoring states. In return, Pyongyang promised to let international inspectors look everywhere except where its nuclear materials might actually be hidden. 

“Kim Jong Il, despite having broken every disarmament promise he’s ever made, has thus managed to persuade another U.S. President that he’s serious about giving up his nuclear program. President Bush’s agreement sends this message to Iran and other rogue states: Go nuclear and your political leverage increases…. 

“Pyongyang will permit the verifiers to have unfettered access only to its declared nuclear sites – all of which the IAEA has already combed over again and again. Access to any other location will be by ‘mutual consent.’…. 

“Since the disarmament deal was struck in February 2007, the North has refused to give a complete accounting of its plutonium program, disclose how many nuclear weapons it has and where they are, or come clean on its suspected uranium program. Now it has managed to wriggle out of its commitments on verification – all without having to wait for an Obama Administration. 

“A few hours before Washington announced it was taking North Korea off the terror list, the Pyongyang media released the first photographs of Kim Jong Il since he had been rumored to have fallen ill two months ago. He was smiling.” 

Russia: President Dmitry Medvedev, at the World Policy Conference in Evian, France, sought to spread the word… “Dump America,” as noted by Washington Post columnist Jim Hoagland. “Another invisible subtext ran like a television crawl line across Medvedev’s chest as he spoke: The Kremlin is back in the business of recruiting needy client states.” 

“But as I listened to the freewheeling discussions, I wondered if the widespread obituaries being written for American power and all that it stands for might not turn out to be premature. I did not hear the deep questioning of the American model of capitalism that I expected at this moment of financial terror, and Medvedev’s blatant attempt to drive wedges between Europe and the United States was effectively blunted by French President Nicolas Sarkozy. 

“We will be glad to discuss European security with you, Sarkozy responded directly to Medvedev, but we will be joined by ‘our friends and allies, the Americans…Such matters concern them, too.’ 

“Sarkozy also warned his guest that new security arrangements for Europe would not recognize ‘spheres of influence’ (a concept recently endorsed by Medvedev) and would have to be based on democratic freedoms and respect for human rights. ‘Balance-of-power politics cannot guarantee stability for our continent,’ Sarkozy added.” 

Over the years I have expressed dismay at some of the anti-French talk in America, pointing out in the days of the frustrating Jacques Chirac that new leadership was on the way and that Americans shouldn’t be so short-sighted. The above further proves my point to all those with small minds. 

So Russia can indeed be blunted in Europe, but it is still very much a danger to the region, witness the collapse in talks between Russia and Georgia before they even started. Georgian President Mikheil Saakashvili had the following observations. 

“The financial crisis could work both ways. It could make the Russians more realistic, down to earth and pragmatic. But there is a fair chance that, with their kind of mindset, it could make them more aggressive, in order to make public opinion less critical of economic developments.” [Financial Times] 

And, in case you still don’t get it, the lawyer representing the family of slain Russian journalist Anna Politkovskaya, who was gunned down two years ago, appears to have been a target herself as she became ill ahead of a pretrial hearing after discovering a mercury-like substance in her car. Human rights leaders in Russia said there is no doubt someone tried to kill her. The attorney also represents jailed Yukos tycoon Mikhail Khodorkovsky. 

China: 1,000 workers gathered outside a shuttered toy manufacturer in once red-hot Guangdong province on Friday, demanding unpaid wages while facing 100 police guarding local government offices. As China faces hardship due to the global financial crisis and thousands of factories shut down, how will the government handle the inevitable unrest? Certainly not the way the owners of this factory did, by posting a sign reading “Because business is bad, we are unable to give you your salaries.” 

Syria/Lebanon: Syria formally established diplomatic relations with Lebanon on Tuesday, for the first time since both gained independence from the French in the 1940s. This is a good thing, though there is still the big question of why Syria has significantly beefed up its military presence on the border with Lebanon, with Syria saying it is out to prevent “smuggling and sabotage.” So wait 24 hours. 

Canada: Prime Minister Stephen Harper’s conservatives picked up 16 seats in parliament in elections last week but, with 143 of 308, still lack a majority and will once again have to cobble together coalitions on each individual issue. The leading opposition party, the Liberals, lost 19 seats to 76. On the finance front, Canada has had 11 straight budget surpluses (I’m jealous) but that streak is now in serious jeopardy. It’s such a sacred issue, none of the five major political parties wanted to talk of deficit spending during the campaign. 80% of Canada’s exports are to the U.S. 

South Africa: Oh yeah…this is just a super place. From Ramita Navai of the London Times [Warning: Not for the squeamish]: 

“The man who hacked off nine-year-old Fortune Khumalo’s genitals struck as the youngster relieved himself in bushes. Using a machete, the attacker sliced off Fortune’s penis and testicles, to sell the body parts to the lucrative traditional medicine market. 

“Fortune had become a victim of a crime of the occult that has rocketed in recent years to supply a booming trade in human body parts. He survived the attack but most victims do not and the Government estimates that there could be more than 300 such murders a year.” 

–The presidential polls are all over the place. Barack Obama leads John McCain 53-43 in the latest Washington Post/ABC News survey; 50-41 in the Bloomberg/L.A. Times poll; and 53-49 in the CBS News/New York Times one. But then you have a Gallup tracking poll that gives Obama a mere two-point advantage.  

One thing is uniform in all of them, however; Americans are not happy with the direction of the country, with only 10% saying we’re going in the right direction according to the Bloomberg survey. 

As for Sarah Palin, she’s slated to appear on “Saturday Night Live” and this can only do her good, I imagine, as she battles a plummeting favorability rating, just 32% in the Times’ survey. 

–Anne Kornblut / Jon Cohen, Washington Post: 

“While there are few signs of progress for McCain, recent history suggests that mid-October leads are vulnerable, although turning around a late double-digit deficit would be unprecedented in the modern era. At this stage in 1992, Bill Clinton held a 14-point advantage over incumbent George H.W. Bush in Post-ABC polling, and it was as high as 19 points before the election, which he won by six points. In mid-October 1976, Jimmy Carter had leads as big as 13 points in Gallup polling; Carter defeated incumbent Gerald Ford by two points.” 

–The buzz is Colin Powell is going to endorse Barack Obama on “Meet the Press.” 

[Following are some extensive opinions, from all sides, as this historic campaign winds down.] 

–Fred Hiatt / Washington Post 

“(Honor) is at the core of McCain’s self-image. He’s been running for president, more on than off, for almost a decade, but his determination hasn’t had much to do with a highly defined ideology, program or set of policies. What underlies his ambition are values: service, patriotism, duty, honor. 

“It may be that it’s easier for such a campaign to get blown off course. In an exceptionally pro-Democratic year, against an exceptionally unflappable opponent, it’s not surprising that a campaign without bedrock policy goals would try first one thing, then another, with one of those things being character assassination. 

“I certainly can’t prove that a McCain campaign built on respect and attention to issues would be faring better than the real thing. Without Sarah Palin to rally the base, and without insidious questioning of Obama’s patriotism, McCain might be even further behind. 

“But he also might be doing better – and he might be happier, too. That, at least, is one way to interpret an intriguing exchange that took place at a rally in Minnesota on Friday. 

“A woman took the microphone to say that Obama could not be trusted because he is an ‘Arab’ – not a surprising misconception, given the Republicans who have taken to stressing Obama’s middle name, Hussein. But McCain rebuked her: ‘No, ma’am, he’s a decent family man, a citizen, who I just happen to have disagreements with on fundamental issues. And that’s what this campaign is all about.’ 

“It’s not what this campaign is all about, and as McCain was speaking, his campaign ads were calling Obama a liar. But it’s what the campaign could have been about, if McCain had really wanted it that way.” 

“The 2008 campaign is now about something very big – both our future prosperity and our national security. Yet the McCain campaign has become smaller. 

“What McCain needs to do is junk the whole thing and start over. Shut down the rapid responses, end the frantic e-mails, bench the spinning surrogates, stop putting up new TV and Internet ads every minute. In fact, pull all the ads – they’re doing no good anyway. Use that money for televised town halls and half-hour addresses in prime time. 

“And let McCain go back to what he’s been good at in the past – running as a cheerful, open and accessible candidate. Palin should follow suit. The two of them are attractive and competent politicians. They’re happy warriors and good campaigners. Set them free…. 

“McCain should stop unveiling gimmicky proposals every couple of days that pretend to deal with the financial crisis. He should tell the truth – we’re in uncharted waters, no one is certain what to do, and no one knows what the situation will be on Jan. 20, 2009. But what we do know is that we could use someone as president who’s shown in his career the kind of sound judgment and strong leadership we’ll need to make it through the crisis.” 

[The above was written before the Hofstra debate. I watched Fox’s post-debate coverage and Kristol was clearly despondent over McCain’s performance and what Kristol saw as more missed opportunities.] 

–Editorial / New York Post 

“An unscripted moment with an Ohio plumber produced a startling confession from Barack Obama Sunday: The Democrats’ ‘middle-class tax cut’ is in fact a scheme to ‘spread the wealth around.’
Obama dropped the mask long enough to tell the truth to Toledo plumber Joe Wurzelbacher – who had asked the Democratic nominee why he wanted to jack up his taxes just for ‘fulfilling the American dream.’ 

“ ‘I’m getting ready to buy a company that makes $250,000 to $280,000 a year,’ Wurzelbacher had told Obama. ‘Your new tax plan is going to tax me more, isn’t it?’ 

“ ‘It’s not that I want to punish your success,’ Obama replied. ‘I just want to make sure that everybody who is behind you, that they’ve got a chance for success, too…When you spread the wealth around, it’s good for everybody.’ 

“At last! The truth is out! 

“Obama’s plan isn’t about sinking hooks into Wall Street CEOs and other fat cats, as he usually says. Fact is, there’s not enough of them to raise the cash necessary to finance his other grand plans. 

“No, to do that, he’ll have to go after ambitious working-class guys like Wurzelbacher – who’s been a plumber for 15 years and is looking to better himself and his family while just maybe creating a few jobs. 

“Wurzelbacher personifies it – but Barack Obama seems determined to tax it to death and be done with it, period…. 

“Heretofore, Obama has sought to paint himself as a tax-cutter – claiming he’ll slash taxes for 95 percent of Americans. 

“As we noted yesterday, that’s a flat-out lie – not least because nearly half of all tax filers pay no income tax at all. So how can he ‘cut’ their taxes if they don’t pay any to begin with? 

“These aren’t to be income-tax deductions – which would be worthless to those who pay no income taxes. 

“These are to be checks from Washington – with the subsidies expected to grow to more than $1 trillion in 10 years. 

“While Bill Clinton campaigned, he tried to seduce his audiences. But at Obama rallies, the candidate is the wooed not the wooer. He doesn’t seem to need the audience’s love. But they need his. The audiences hunger for his affection, while he is calm, appreciative and didactic. 

“He doesn’t have F.D.R.’s joyful nature or Reagan’s happy outlook, but he is analytical. That’s why this William Ayers business doesn’t stick. He may be liberal, but he is never wild. His family is bourgeois. His instinct is to flee the revolutionary gesture in favor of the six-point plan…. 

“Though he is young, it is easy to imagine him at the cabinet table, leading a subtle discussion of some long-term problem. 

“Of course, it’s also easy to imagine a scenario in which he is not an island of rationality in a sea of tumult, but simply an island. New presidents are often amazed by how much they are disobeyed, by how often passive-aggressiveness frustrates their plans. 

“It could be that Obama will be an observer, not a leader. Rather than throwing himself passionately into his causes, he will stand back. Congressional leaders, put off by his supposed intellectual superiority, will just go their own way. Lost in his own nuance, he will be passive and ineffectual. Lack of passion will produce lack of courage. The Obama greatness will give way to the Obama anti-climax. 

“We can each guess how the story ends. But over the past two years, Obama has clearly worn well with voters. Far from a celebrity fad, he is self-contained, self-controlled and maybe even a little dull.” 

–Editorial / Washington Post 

“The nominating process this year produced two unusually talented and qualified presidential candidates. There are few public figures we have respected more over the years than Sen. John McCain. Yet it is without ambivalence that we endorse Sen. Barack Obama for president. 

“The choice is made easy in part by Mr. McCain’s disappointing campaign, above all his irresponsible selection of a running mate who is not ready to be president. It is made easy in larger part, though, because of our admiration for Mr. Obama and the impressive qualities he has shown during this long race. Yes, we have reservations and concerns, almost inevitably, given Mr. Obama’s relatively brief experience in national politics. But we also have enormous hopes…. 

“It gives us no pleasure to oppose Mr. McCain. Over the years, he has been a force for principle and bipartisanship. He fought to recognize Vietnam, though some of his fellow ex-POWS vilified him for it. He stood up for humane immigration reform, though he knew Republican primary voters would punish him for it. He opposed torture and promoted campaign finance reform, a cause that Mr. Obama injured when he broke his promise to accept public financing in the general election campaign. Mr. McCain staked his career on finding a strategy for success in Iraq when just about everyone else in Washington was ready to give up. We think that he, too, might make a pretty good president. 

“But the stress of a campaign can reveal some essential truths, and the picture of Mr. McCain that emerged this year is far from reassuring. To pass his party’s tax-cut litmus test, he jettisoned his commitment to balanced budgets. He hasn’t come up with a coherent agenda, and at times he has seemed rash and impulsive. And we find no way to square his professed passion for America’s national security with his choice of a running mate who, no matter what her other strengths, is not prepared to be commander in chief. 

“Any presidential vote is a gamble, and Mr. Obama’s resume is undoubtedly thin…. 

“But Mr. Obama’s temperament is unlike anything we’ve seen on the national stage in many years. He is deliberate but not indecisive; eloquent but a master of substance and detail; preternaturally confident but eager to hear opposing points of view. He has inspired millions of voters of diverse ages and races, no small thing in our often divided and cynical country. We think he is the right man for a perilous moment.” 

“ ‘Waving the bloody shirt’ was the phrase once used to describe the standard demagogic tactic of the late 19th century, when memories of the Civil War were still vivid and loyalists of both parties could be moved to ‘vote as they shot.’…. 

“The culture wars are the familiar demagogic tactic of our own time, building monstrous offenses out of the tiniest slights. The fading rancor that each grievance is meant to revive, of course, dates to the 1960s and the antiwar protests, urban riots and annoying youth culture that originally triggered our great turn to the right. 

“This year the Democrats chose Barack Obama as their leader, a man who was born in 1961 and who largely missed our cultural civil war. In response, Republican campaign masterminds have sought to plunge him back into it in the most desperate and grotesque manner yet.

“I can personally attest to the idiocy of it all because I am a friend of Mr. Ayers. In fact, I met him in the same way Mr. Obama says he did: 10 years ago, Mr. Ayers was a guy in my neighborhood in Chicago who knew something about fundraising. I knew nothing about it, I needed to learn, and a friend referred me to Bill. 

“Bill’s got a lot of friends, and that’s because he is today a dedicated servant of those less fortunate than himself; because he is unfailingly generous to people who ask for his help; and because he is kind and affable and even humble. Moral qualities which, by the way, were celebrated boisterously on day one of the GOP convention in September. 

“Mr. Ayers is a professor of education at the University of Illinois at Chicago (UIC), where his work is esteemed by colleagues of different political viewpoints….Mr. Ayers has been involved with countless foundation efforts and has received various awards. He volunteers for everything. He may once have been wanted by the FBI, but in the intervening years the man has become such a good citizen he ought to be an honorary Eagle Scout. 

“I do not defend the things Mr. Ayers did in his Weatherman days. Nor will I quibble with those who find Mr. Ayers wanting in contrition. His 2001 memoir is shot through with regret, but it lacks the abject style our culture prefers. 

“Instead I want to note that, in its haste to convict a man merely for associating with Mr. Ayers, the GOP is effectively proposing to make the upcoming election into the largest mass trial in history, with all those professors and all those do-gooders on the hook for someone else’s deeds four decades ago. Also in the dock: the demonic city (Chicago) that once named Mr. Ayers its ‘Citizen of the Year.’ Fire up Hurricane Katrina and point it toward Lake Michigan! 

“The McCain campaign has made much of its leader’s honor and bravery, but now it has chosen to mount its greatest attack against a man who poses no conceivable threat to the country, who has nothing to do with this year’s issues, and who cannot or will not defend himself. Apparently this makes him an irresistible target. 

“There are a lot of things to call this tactic, but ‘country first’ isn’t one of them. The nation wants its hope and confidence restored, and Republican leaders have chosen instead to wave the bloody shirt. This is their vilest hour.” 

[If you are not familiar with Mr. Frank’s work, he is a regular columnist for the Journal. Enough said.] 

–Well whaddya know? Democratic Congressman Tim Mahoney of Florida, who replaced disgraced Republican Congressman Mark Foley while running on a campaign of ethics and moral values and is now defending himself against allegations he has not one, but two mistresses, is the same Tim Mahoney who graduated two years ahead of me at Summit High School, Summit, N.J. And to think that in the town next door where I now live, New Providence, it was home to Andrew Fastow.  

“Anyone who is not too drunk with despair (or drink) right now knows that this all signals a bigger realignment, that our place – our significance – in the world is diminishing. Eight years of this wastrel, spendthrift administration has bankrupted us of our standing and our capital – it’s all gone. Apparently on Wall Street, the bankers now have a saying: ‘Dubai, Shanghai, Mumbai or goodbye.’ The future is no longer here. 

“This is a state of affairs that ought to leave not just us, but the entire world, deeply stricken with grief. In the history of empire – or superpower or hyperpower – no country has ever wielded its dominance as gently and judiciously as the United States has. Even those abroad and afar who feel they suffered as a result of American foreign policy ought to know that this planet as a whole will fare far worse under China or whatever country comes next, and would have suffered greatly had the Soviets won the Cold War. The American century from World War II on – really only about 60 years old – has been a very good time for everybody. The world is about to be a much sorrier place.” 

–San Francisco officials have decided to put up a stainless-steel netting beneath the Golden Gate Bridge to catch would-be suicide jumpers…and not a moment too soon. [2,000 have jumped since the bridge opened in 1937…19 thus far this year.] 

By the way, the cost of the steel netting? $50 million…or higher than the payroll of the Tampa Bay Rays, come to think of it. 

–George Will / Washington Post 

“Gettysburg, Pa. – In 1863, 11 major roads converged on this town. Which is why history did, too. 

“The founding of the American nation was the hinge of world history: Popular sovereignty would have its day. The collision of armies here was the hinge of American history: The nation would long endure. Which is why 200 or so generous private citizens recently gathered here for a quiet celebration of their gift to the nation – a sparkling new Museum and Visitor Center that instructs and inspires.” 

[Will writes of the Gettysburg Foundation and its heroic work to save the battlefield, raise over $100 million for the new center as well as the restoration of the historic Cyclorama, and the purchase and recovery of various battle sites from urban encroachment.] 

“Recently, a Gold Star mother finally visited Gettysburg, after driving by it often en route to visit the Arlington grave of her son, who was killed in Iraq.  She was especially moved by these words from a Gettysburg newspaper published four days after the battle: ‘Every name…is a lightning stroke to some heart, and breaks like thunder over some home, and falls a long black shadow upon some hearthstone.’ Gettysburg still stirs, but not as it used to, or should. 

“In ‘Intruder in the Dust,’ William Faulkner wrote: ‘For every Southern boy fourteen years old, not once but whenever he wants it, there is the instant when it’s still not yet two o’clock on that July afternoon in 1863, the brigades are in position behind the rail fence, the guns are laid and ready in the woods and the furled flags are already loosened to break out and Pickett himself with his long oiled ringlets…’ Faulkner’s sentence continued; you have just read less than half of it. To continue in his style: 

“Ours would be a better nation if boys and girls of all regions, and particularly the many high school and even college graduates who cannot place the Civil War in the correct half-century, could be moved, as large numbers of Americans used to be, by the names of Gettysburg battlefield sites, such as Devil’s Den, the Peach Orchard, the Wheatfield, Culp’s Hill and Little Round Top, instead of being like the visitor here who said it is amazing that so many great battles, such as Antietam and Chickamauga and Shiloh, occurred on Park Service land; and another visitor who doubted that the fighting here really was fierce because there are no bullet marks on the monuments. 

“Ten years ago, this column asserted that disrespect for the national patrimony of Civil War battlefields should be a hanging offense, and said: ‘Given that the vast majority of Americans have never heard a shot fired in anger, the imaginative presentation of military history in a new facility here is vital, lest rising generations have no sense of the sacrifices of which they are beneficiaries.’ Today, at an embarrassing moment of multiplying public futilities, private efforts, in collaboration with the National Park Service, have done something resoundingly right that will help a normally amnesiac nation to long remember.” 

–We note the passing of the great Levi Stubbs, lead singer of the Four Tops. 

–Lastly, this weekend mementos from 70 years of Bob Hope’s showmanship are being auctioned off in Beverly Hills. Saturday and Sunday sales are being streamed online and could raise as much as a half million dollars….all to be turned over to veterans’ organizations. And now you know why so many still have a special place in their hearts for the great comedian. 

Returns for the week 10/13-10/17 

Dow Jones +4.8% [8852]
S&P 500 +4.6% [940]
S&P MidCap +0.9%
Russell 2000 +0.8%
Nasdaq +3.8% [1711] 

Returns for the period 1/1/08-10/17/08 

Have a great week. I appreciate your support.