For the week 12/8-12/12

[Posted 7:00 AM ET]

 

 

Perhaps, but it’s grim out there if one looks beyond his particular precinct and glances around the world. I’ve been keeping spreadsheets full of handwritten stats since March 1990 and as I wrote in a recent “Wall Street History” piece, one figure I track is steel production. Each week I mindlessly write it down from Barron’s, but I noted in the column it was falling off a cliff, as you’d expect, though I was just pointing out the speed of the decline. That was three weeks ago.

 

Well I should’ve held off another month because the collapse in production, even since then, has been staggering…off about 45% in ten weeks. 

 

There was a story in the Financial Times on clothing that was equally distressing. From Jonathan Birchall:

 

“The slump in U.S. clothing sales since the summer has led to a precipitous drop in the number of overseas factories shipping to the U.S., import documents show.

 

“Panjiva, a firm that analyzes information drawn from shipping manifests filed with U.S. Customs, said the number of global suppliers actively serving the U.S. market fell from 22,209 in July to just 6,292 in October, a decline of more than 70%.” Since July! And that was as of October. We all know how dreadful November and December have been.

 

Panjiva added that 40% of the suppliers listed as active had seen “year-on-year drops of 75% or more in the volumes they were shipping to the U.S.”

 

In the month of November, China had a decline in both exports (the first time since 6/01…last November they were up 26%) and imports, as higher-end product is suffering along with the lower-end ones such as the much talked about toy manufacturers. Many are reporting declines in orders of up to 60%.

 

Japanese machine-tool orders (as good a barometer as you can find) declined a stupendous 62% in November, the biggest fall in two decades.

 

UK manufacturing is at its worst level since 1980. India’s industrial production fell in October for the first time in 15 years. And an economics minister in Moscow said “The recession has started already.”

 

On the employment front, Dow Chemical is slashing 5,000 jobs and shutting 20 plants in announcing the “world economy has deteriorated sharply.”

 

3M is laying off 1,800…in case you thought Post-its were recession resistant.

 

Stanley Works…2,000; Wyndham…4,000; Swedish steelmaker SSAB…1,300; Sony…8,000; and mining giant Rio Tinto…14,000, amidst the “unprecedented rapidity and severity of the global economic downturn.”

 

Elsewhere, Bank of America affirmed that its layoffs will be at least 30,000 over the next three years, Texas Instruments drastically slashed 4th quarter estimates, and FedEx warned again.

 

Estimates for global growth continue to be ratcheted down, and some currency markets are in turmoil, such as in Russia, where a plunging ruble (capital flight) is causing Russians to hoard hard goods ranging from jewelry to electronics, just to be able to have something tangible, as well as exchanging rubles for dollars.

 

A report from a unit of German insurer Allianz projects that 200,000 businesses alone in Europe will go under in 2009 along with “an explosion” of bankruptcies in the U.S., an estimated 62,000 (compared with 42,000 this year).

 

This was also a week that saw three-month T’bills go negative, as in investors were willing to accept a negative return for the first time, in yet another sign we have a long ways to go before issuing the all-clear in the credit markets as part of the financial community’s willingness to write loans. All anyone wants to do these days is squirrel away cash.

 

Of course this isn’t good for corporations looking to roll over debt and finance operations. Mexican cement giant Cemex, for example, had rallied strongly on talk of the Obama stimulus plan and its emphasis on infrastructure projects. But investors were ignoring the fact Cemex has huge debt issues and, sure enough, it wanted to swap $418mm of short-term commercial paper for longer-term notes this week and couldn’t. Cemex needs to figure out a way to pay $6.5 billion by the end of 2009. Shares in the company fell back to earth on the news.

 

I was reading in Crain’s New York Business of a typical real estate story these days, a developer, Broadway Partners, that faces a January deadline of repaying a loan of $750mm, one of many owner Scott Lawlor has outstanding that helped fuel a 23-building buying binge in New York and elsewhere. Lawlor’s situation is being watched closely because he is evidently first in a line of heavily leveraged developers “who are likely to default on their debts in 2009.” When it comes to this industry, the story is being repeated over and over again around the world.

 

State governments continue to take it on the chin. California is having to move funds earmarked for infrastructure projects over to cover short-term obligations. After S&P downgraded $5 billion of short-term debt sold by California less than two months ago, Treasurer Bill Lockyer said “Our budget problems have become so severe and so noticeable that investors want better securities.” And they’re increasingly willing, it seems, to accept close to zero percent in return.

 

Yes, it’s ugly out there and I won’t bore you again with my talk of the past two weeks that I understand Wall Street is a discounting mechanism. I’m also trying to keep a little powder dry for my yearend review and outlook for 2009 as I filter through the last wave of information before we close out 2008.

 

Two other items, though, both of which I can’t say too much about at this point. First, the eleventh-hour effort to salvage some sort of rescue plan for the Detroit 3 and push the problem into the Obama administration continues as I write. The issue of funding arm GMAC is as much a problem as any because in its failure thus far to convert to bank holding company status, it can’t accept TARP funds even if they became available through the Bush administration.

 

And then you have this sickening story concerning a Wall Street legend, Bernard Madoff, 70, a founder of the Nasdaq market, market maker and money manager, who told his sons on Wednesday that the money management side of the business was “all just a big lie” and “basically a giant Ponzi scheme.”

 

While the facts are still dribbling out, it is initially estimated the investor losses total $50 billion. Some of the names that are emerging are high-profile, including the Wilpon family that owns the New York Mets. Madoff was big in country club circles and charitable foundations, as he hoodwinked everyone with consistent returns of on average 1% a month, with just a handful of negative periods. It appears he was making it all up as he went along. The Securities and Exchange Commission alleged it was “a stunning fraud that appears to be of epic proportions.” If the initial stories are true, Bernie Madoff should go straight to Hell and not pass Go. In China he’d be executed.

 

What is clear from this episode, however, is it’s yet another example of how we not only need more regulation, the SEC also requires more funding, and, obviously, vigorous leadership. Christopher Cox has been an unmitigated disaster, but we won’t have him to kick around much longer.

 

When it comes to Cox, it’s kind of been like President Bush after Katrina saying “Brownie, you’ve done a heck of a job.” Bush has praised Cox’s efforts in the past in similar fashion, leaving many of us scratching our heads.

 

Speaking of our president (for another five weeks), a Wall Street Journal/NBC News poll asked the question “will you miss” him? A pitiful 18% said they would. Good luck with the work on your legacy, Mr. President. 

 

 

–Stocks finished mixed, which despite the continuing awful news was viewed by some as highly encouraging. JPMorgan Chase’s Jamie Dimon threw in his two cents on the economy and his industry and said November and December were “terrible” and that 2009 “was not looking good.” No surprise, but financials reacted poorly for a spell afterwards. November retail sales declined 1.8%, the fifth straight month of negative performance. And the weekly jobless claims number was dreadful, 573,000, with the four-week moving average in this category now at its highest level since 1982.

 

But in the end the Dow Jones finished off just a few points to 8629, while the S&P 500 gained 0.4% and Nasdaq 2.1%.

 

–U.S. Treasury Yields

 

6-mo. 0.20% 2-yr. 0.75% 10-yr. 2.57% 30-yr. 3.04%

 

PIMCO’s Bill Gross wishes he had been in the Treasury market all year, but notes “The question going forward is ‘Is it the winner over the next 12 to 14 months?’ We don’t think so. Treasuries have some bubble characteristics, certainly the Treasury bill does. A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk? There is no return.”

 

Well, Merrill Lynch economist David Rosenberg thinks Treasuries will do just fine the next ten years. And that’s what makes a market. Maybe even an honest one. The Federal Reserve meets this coming week and is expected to lower the funds rate further from its current 1.00% level. The language in the accompanying statement should be interesting.

 

–Anyone want to talk about the deficit? Remember, the government’s fiscal year begins Oct. 1 and for the first two months, the deficit already stands at $401.6 billion, including the largest ever for November, $164.4bn. Depending on how the funds are expended on the various government programs out there, including the rest of the $700 billion initial rescue package, it seems a certainty the deficit will hit $1 trillion by Sept. 30, 2009. Such a debt would equal 6.7% of current GDP and surpass the previous postwar high of 6% in GDP terms set in 1983. Merrill’s Rosenberg projects the deficit will hit $1.5 trillion.

 

–The tale of the bankruptcy of Tribune Co. is so representative of the times on a number of levels. For starters, you had the hubris of billionaire real estate mogul Sam Zell, who took Tribune private last year and saddled it with $13 billion in debt in a classic example of the worst of the private-equity industry.

 

But the media business was already sliding precipitously as advertising revenues dried up and Tribune was on the hook for about $1 billion per year in loan payments as a result of Zell’s move. 

 

So Tribune’s fortunes, post-deal, went south immediately, but as Andrew Ross Sorkin of the New York Times points out, others involved in the private transaction did just fine.

 

“Tribune’s board was advised by a group of bankers from Citigroup and Merrill Lynch, which walked off with $35.8 million and $37 million, respectively. But those banks played both sides of the deal: they also sent Mr. Zell the money to buy the company. For that, they shared an additional $47 million pot of fees with several other banks, according to Thomson Reuters. And then there was Morgan Stanley, which wrote a ‘fairness opinion’ blessing the deal, for which it was paid a $7.5 million fee (plus an additional $2.5 million advisory fee).

 

“On top of that, a firm called the Valuation Research Corporation wrote a ‘solvency opinion’ suggesting that Tribune could meet its debt covenants. Thomson Reuters, which tracks fees, estimates V.R.C. was paid $1 million for that opinion.”

 

In the end, while Zell will obviously lose some serious cash in the bankruptcy process, it’s the employees who really take it on the chin. No doubt, due to the sour environment throughout the entire media sector they would have felt pain regardless of whether Zell had become involved or not, but I can’t imagine it would have been nearly as bad as the situation they face now.

 

—Energy: OPEC meets on Dec. 17 amidst calls for a further production cut, though it hasn’t been able to adhere to an already established one of 2mm barrels per day. Demand around the world continues to plummet, with China’s imports falling a whopping 17% in November over October, and now the U.S. Energy Department is projecting demand will drop globally in 2009 as well.

 

Separately, Russian President Dmitry Medvedev indicated for the first time that Russia might be ready to join OPEC and coordinate its exports with the oil cartel, a reversal from the Kremlin’s long-held policy of independence. [Few actually believe this.]

 

–New York Mayor Michael Bloomberg is requesting his department heads slash their budgets another 7%, this after asking just a month ago for 7.5% cuts by 2010. Even with these moves, the City faces a massive deficit thanks to the carnage on Wall Street.

 

–60% of CFOs say they don’t expect the economy to recover before the 4th quarter of ’09.

 

–The Wall Street Journal reported that AIG, already the subject of a massive government bailout, faces $10 billion in further losses on bad trades.

 

“The speculative trades, engineered by the insurer’s financial-products unit, represent the first sign that AIG may have been gambling with its own capital.”

 

AIG denies it’s in trouble, but the Journal notes the following.

 

“AIG’s problem: The rescue plan calls for a company funded largely by the Federal Reserve to buy about $65 billion in troubled CDO securities underlying the credit-default swaps that AIG had written, so as to free AIG from its obligations under those contracts. But there are no actual securities backing the speculative positions that the insurer is losing money on. Instead, these bets were made on the performance of pools of mortgage assets and corporate debt, and AIG now finds itself in a position of having to raise funds to pay off its partners because those assets have fallen significantly in value.”

 

–Former Bear Stearns CEO Alan “Ace” Greenberg, 81 and still an employee of JPMorgan Chase after its acquisition of Bear, told Bloomberg “There’s no more Wall Street. That model just doesn’t work because it’s at the mercy of rumors.” The entire makeup of Wall Street has changed “forever,” he said. “Rumors can start and turn into a self-fulfilling prophesy.”

 

If the business was clean in the first place, Mr. Greenberg, you probably wouldn’t have that problem.

 

–It was all so predictable, and I did, part XXX: Christopher Dickey / Newsweek (12/15/08) on the economic woes facing Dubai.

 

“ ‘It’s a tragedy in the making,’ said a senior official with one of the city’s biggest real estate development companies as he peered into his champagne. ‘A lot of people are going to get hurt. A lot of dreams are going to be shattered.’ Already, imported workers are being exported, jobless, back to their homes in Manila and Mombasa. Skyscrapers stand unfinished. ‘Have you seen all those ships lined up on the horizon?’ he said, gesturing toward the open gulf. ‘They’re stuck out there full of steel and concrete nobody wants anymore.’ Real-estate prices are falling. Just a few hundred yards from the Atlantis, the owner of a Mediterranean-style villa dropped his asking price from $4.9 million to $3.6 million, then $3.13 million, and offered to throw in his Bentley as well.”

 

–An example of the implosion in Russia, from the Moscow Times:

 

“Panorama Estate acquired a chunk of land along Novorizhskoye Shosse in Moscow’s western outskirts for $33,000 per 100 square meters a few months before the crisis.

 

“Now, the Moscow-based real estate company is pushing hard to sell the plots for $5,000 apiece.”

 

Like everywhere else in the world, banks have stopped offering loans and developers are frantically cutting back on their investment plans.

 

–Like a developer I once worked on a project with, Forest City Enterprises [the Millender Center in Detroit], which announced it will halt new projects and focus on reducing debt and managing its existing portfolio.

 

–The New York metro area has been the last to get hit hard by the real estate crash, but on Long Island and Queens, the median home price declined 11% in the month of November over the year ago period. The situation is really far worse than this, though, with many homes that have been put on the market seeing bids of 20% or more lower than asking price, if there’s a bid at all.

 

–Morgan Stanley’s top three, including CEO John Mack, are opting out of bonuses in 2008, with the 14 members of the operating committee seeing their compensation reduced an average 75% from last year. For Mack, it’s the second straight year he gave up a bonus, as he said in a company-wide memo: “Indeed, the unprecedented turmoil we’ve seen over the past few months has shaken global markets, fundamentally reshaped the competitive landscape and led to unprecedented government action in the financial sector.”

 

Then there is Merrill Lynch and CEO John Thain. Thain and four deputies are also going without bonuses, but this is after Thain was reportedly upset the Merrill board, hours before the vote formally merging the firm with Bank of America, didn’t award him $10 million for engineering the marriage, even though he had already received $15 million to take the helm less than a year earlier. Thain backed off under the ensuing criticism but has hurt himself in the eyes of BofA.

 

–Household net worth declined a fourth straight quarter in Q3, down 4.7%.

 

–Ecuador is defaulting on its bonds again. Don’t lose sleep over this one.

 

–Len Berman is a long-time sports reporter in New York with WNBC who rarely makes editorial comments but when he does you know he’s upset, and so the other day, after the Yankees had signed pitcher C.C. Sabathia to a $160mm contract, he observed, “You have to wonder when the fans will say ‘enough’” and then answered his own question, “My guess is soon.”

 

I think we’d all have the same opinion these days. Some sports owners and athletes continue to have their heads in the sand as to the future, but others have seen the light, whether it’s all forms of auto racing (a sport in deep, deep trouble) and the N.F.L., which is cutting its staff by 10%.

 

The fans themselves may still show up, at least, I’ll guess, until mid-season when it comes to baseball in 2009, but the franchises and racing are feeling the pain already, especially in terms of advertising.

 

Molly Neal of the Journal had a piece wherein she noted:

 

“Global sports sponsorship doubled in the past 10 years to about $30 billion annually…enabling stars such as David Beckham, Tiger Woods and hundreds of lesser-known sports personalities to become fabulously wealthy. But now this well of corporate money is drying up….

 

“Take AIG, which is paying ($83.3 million) over four years to slap its logo on Manchester United soccer shirts.

 

“Sure, its brand is exposed to a global audience, as Premiership soccer is broadcast to 200 countries. But the benefit on AIG’s bottom line is impossible to measure.”

 

Speaking for myself, I have a ManU shirt that I acquired a year ago and now I have no desire to wear it. It’s frankly embarrassing.

 

–David P. passed along a Reuters interview with hedge fund legend Michael Steinhardt, who is seething that while some on Wall Street have been bailed out, those responsible for the mess haven’t been prosecuted.

 

“Something really went wrong here. We’re about to enter a period where our budget deficit will dwarf anything we’ve seen before. What we really needed a long time ago was a recognition that there were villains apace. The evils of the financial system should have been recognized long before this.”

 

On Ben Bernanke. “When you see what Bernanke said five, four months ago, it’s laughable. So Bernanke is not a villain but was he prepared for what has happened here? Not in the slightest.”

 

On Bob Rubin. “Is Bob Rubin a villain? Still at Citibank? Is he a villain? You can’t name a villain? Is this a villain-less debacle?”

 

And Steinhardt concluded, “It seems to me that the intellectual level that we are surrounded with both in government and in the industry is exceptionally low at the moment, it makes me angry.”

 

–The other day I was at my accountant’s and there’s a McDonald’s next door, so at 10:50 a.m. I go into Mickie D’s and ask if it’s too early for burgers. No problem; my day was made as I scarfed down two Big Macs. With all the gloom, doom, and hurt in the world these days, I also love seeing that McDonald’s same-store sales increased 7.7% in November, globally. [13.2% in Asia-Pacific.]

 

–Great line by Peggy Noonan in her Journal op-ed column in describing the mood this Christmas. Will people “go for some last big-ticket items, sliding the platinum card along the counter with a ‘We who are about to die salute you’ flair?”

 

–I have to admit I’m fired up about Jay Leno’s move to prime time next September. I can’t remember the last time I stayed up for a late-night show on a school night. But of course aside from NBC wanting to prevent Leno from going to ABC, the move was made for economic reasons, as was pounded home this week, though it was interesting to see that Leno’s show will cost about $350,000 a night, one-tenth that of a typical drama. No doubt he’ll do well in the ratings game and the profits should be huge.

 

–I have a pretty good story, if I may say so myself, on the transition between Hoover and FDR on my “Wall Street History” link. You’ll notice more than a few similarities between then and now, and one or two key differences. By the way, in my reading I saw that during the 1932 campaign, Roosevelt was railing about the prospects for a $1.6 billion federal deficit in ’33. We should be so lucky!

 

–And if you are wondering what to give that certain special Republican in your life this holiday season, may I recommend William F. Buckley’s episodes of “Firing Line” now available on DVD through Amazon for a low price of $8-$10 each. I bought myself tapes of his interviews with Goldwater and Reagan, for example. Hot time this coming New Year’s Eve at my place, I tell ya. Might have to crack open some premium, despite the hit to my portfolio in ‘08.

 

Iraq: Britain let slip it was withdrawing its last troops from the Basra theater (save 300 or so that will remain for training) by March. At the start of the war, the Brits sent in 46,000.

 

The conflict over Kirkuk erupted again as a suicide bomber there took out at least 55, evidently targeting Kurdish officials and Arab tribal leaders attempting to reconcile their differences. The Kurds have long wanted to annex Kirkuk and the surrounding oil-rich region into their own self-ruled portion of northern Iraq, while the Turkomen and Arabs want the province to remain under central government control. Thus, without a power-sharing agreement, Iraq’s parliament has exempted the Kirkuk area from next month’s provincial elections.

 

Afghanistan: NATO disputes a think-tank report that the Taliban hold a permanent presence in 72% of the country. In Pakistan, 106 vehicles used to supply NATO and U.S. troops in Afghanistan were torched on Sunday at a staging area in a brazen Taliban attack.

 

Iran: According to a report in Lebanon’s Daily Star, thousands of students protested against the rule of President Ahmadinejad at Tehran University. Iran’s news agency said it was only 150. I still maintain President Bush missed a huge opportunity here. He should have accepted a student invitation to speak at the university and then watched as Ahmadinejad mishandled it. [If I were Obama, I’d play the same card. We’re talking the potential for revolution.]

 

India / Pakistan: The ruling Congress Party in India did surprisingly well in local elections following the Mumbai terror attacks, a good sign for them heading into national elections next spring.

 

In Pakistan, suspected ringleaders were arrested, including top figures in the terrorist group Lashkar-e-Taiba; this as a New York Times report has Pakistan’s spy service, the ISI, assisting the group’s activities. [Lashkar was founded with ISI help some 20 years ago to challenge Indian control of Muslim-dominated Kashmir.]

 

Pakistani President Zardari is determined to be seen as cooperating with India, but he won’t extradite those arrested, and the Muslim “street” is upset at the government’s crackdown, including on charities fronting Lashkar and other terrorist groups. 

 

Fareed Zakaria / Newsweek

 

“When one speaks of the Pakistani government, it’s necessary to be precise. The elected, civilian government appears to be something of an innocent bystander in this affair. Initially, President Zardari denounced the terrorists and offered full assistance to Indian investigators. His prime minister offered to send the head of Pakistan’s Inter-Services Intelligence agency to New Delhi to help. Then, after the Army weighed in, the offer was withdrawn. If anyone wondered who actually ran the country, it soon became clear.”

 

My point would be that while the arrests this week look good, I’ve seen the accompanying “they’ve been placed under house arrest” used many a time before. Pakistan has a history of staging arrests for consumption in the West and then letting the prisoners go when the spotlight is off.

 

Max Boot / Wall Street Journal…on both Pakistan and the Somali pirates

 

“If NATO won’t do enough to win the war in Afghanistan, its highest priority, there is scant chance that it will commit troops to police Pakistan’s tribal areas or Somalia’s coast. And if NATO members won’t act, who will?….

 

“If we suffer another 9/11 or worse and the culprits can be traced to Pakistan, then the U.S. and its allies would summon the wherewithal to act. But not until then.

 

“Given that dismal reality, it makes sense to think of second-best alternatives. In the case of the Somali pirates, creative solutions can include using air and naval power to hit the bases from which they operate, and employing Blackwater and other mercenaries to add their protective efforts to those of the world’s navies. In Pakistan that means continuing air strikes and providing assistance to tribal militias which have their own grievances against jihadist interlopers. In both places, the U.S. should be doing what it can, in cooperation with allies and multilateral organizations, to bolster central authority.

 

“But we should not fool ourselves into thinking that any of these measures has much chance of success. Until we are willing to place more ungoverned spaces under international administration, evils such as piracy and terrorism will continue to flourish.”

 

China: Some researchers believe China’s urban jobless rate is 12% and could grow to 14% in 2009, which could lead to massive social unrest. And with such concerns over the speed of the collapse in the economy, the U.S. can expect little cooperation on the currency front, as Beijing looks to help exporters as much as possible.

 

I’ve always said that should China face mass demonstrations against the government, Beijing would then attempt to stoke the nationalist juices by going after Taiwan. Towards that end, Beijing reiterated this week that the U.S. should immediately cancel arms sales to Taipei and stop all military ties with the island.

 

Meanwhile, former Taiwan President Chen Shui-bian was indicted on corruption charges on Friday.

 

North Korea: After four days of negotiations in Beijing, North Korea refused to agree to a system of verification for identifying it had ended all nuclear activity. It is now apparent the issue will move on to the Obama administration in a last blow to the Bush presidency, the White House desperately seeking a resolution in its waning days. And as one expert commented to the New York Times’ Steven Lee Myers, remind us again just why it was that the North Koreans were removed from the state sponsors of terrorism list?

 

On the Kim Jong-il health front, a French doctor who had treated him said Kim had indeed suffered a stroke but was recovering.

 

Zimbabwe: I’ve run out of things to say about this one. It’s absolutely pitiful how six years after the fact, the White House can do no better than President Bush’s statement “It is time for Robert Mugabe to go.” Condoleezza Rice echoed the sentiment several times. Whoopty-damn-do.

 

This as Mr. Mugabe proclaimed on Thursday that his government had stopped the cholera outbreak. The UN begged to differ and it’s commonly believed that hundreds of thousands are at risk. Mugabe added the West was prepared to invade his country and topple his government. Just do it, mused the editor. 

 

At least Nobel Peace laureate Desmond Tutu showed more backbone that Bush or Rice in telling a Dutch TV station that African leaders cannot stand by any longer. “If they say to [Mugabe], step down, and he refuses, they must go in…militarily.”

 

And a South African bishop, Joe Seoka, said on Friday that Mugabe is a “person seemingly without conscience or remorse, and a murderer. I believe it is now an opportune moment for all the church leaders…to call on God to cause the removal of Mugabe.” Now you’re talkin’. [Bishop Seoka is thus our irregular “Person of the Week”.]

 

Finally, a respected voice in opinion circles, the Washington Post’s Richard Cohen, wrote:

 

“What I would like to do…is have a Predator drone circle over Robert Mugabe’s luxurious villa until this monster of a dictator who has brought such misery to Zimbabwe runs screaming from his home and into the arms of his own people. What happens after that is none of my business….

 

“Over the past eight years, agricultural production has fallen by four-fifths, and just about every economic catastrophe known to man has taken hold. Unemployment is so high (85 percent) that there is almost no such thing as employment, and the inflation rate, while a state secret, is estimated at beyond estimation – in the billions of percent. In case you’re not good with figures, that’s high.

 

“These calamities are certainly the work of one man. If Mugabe were gone, chances are the situation would improve – although I am aware that removing Saddam Hussein initially made things worse in Iraq. I am aware, too, that deposing foreign leaders breaks all sorts of international understandings. Still, the man’s a thug, and thugs should be dealt with….

 

“Condi Rice routinely condemns Mugabe. Much of the rest of the world does, too. Yet he persists, using his security forces and the wise dispersion of graft to remain in power. The example of Iraq forbids the United States to act. We are all realists now. Our grand cause is to have none at all. Still, a single Predator could do wonders. At the very least, it would lift the shame.”

 

Meanwhile, in the past few weeks, Mugabe’s goons have abducted at least 20 pro-democracy politicians. None have been heard from since.

 

Greece: About a week ago, a bunch of youths in Athens threw some rocks at a police car, police then fired warning shots (they claim), and a 15-year-old boy fell dead. Witnesses say the police fired directly at the youth, an initial investigation said it was a ricochet.

 

What followed was deeply disturbing as the tragedy was used by anarchists to precipitate widespread rioting throughout some of the bigger cities. These are nothing but low-life thugs, and some of their union brethren. No doubt, the center-right government of Prime Minister Karamanlis leaves something to be desired, as the poor economy and corruption have been sources of criticism for years, but you can’t go around looting middle-class storeowners in response to a shooting incident of this kind.

 

What’s troubling is this kind of behavior is likely to be repeated around the world as one economy after another collapses, with each set of dirtballs looking for an excuse to start trouble.

 

Belgium: 14 Islamist militants were arrested, some linked to radicals in Pakistan and Afghanistan according to officials in Brussels. They were charged with conspiracy to commit a terrorist attack and the arrests came within two days of a key European Union summit where the leaders of 25 nations were going to attend (and since have). One would-be suicide attacker had recorded a goodbye video. Due to lax immigration laws, Belgium has been seen as a haven for potential terrorists. Alleged ‘shoe-bomber’ Richard Reid once bought a fake passport near Brussels.

 

Ireland: As the economy implodes, and the country deals with a pork contamination scare that temporarily laid off thousands, the Republic is also recognizing it needs all the help it can get and that now might be a good time to consider another referendum on the EU’s reform treaty that it earlier rejected. Funny how these things work.

 

One other item of note here. Up to 1,300 Polish immigrants who had set up shop in Ireland are now heading back home every week. About 50% of 200,000 Poles estimated to be living in Ireland are now expected to return over the next two years.

 

Mexico: For the first 11 months of this year, the death toll in the drug war here hit a staggering 5,376, with a record 943 killed in November. By comparison, the U.S. has lost 4,200 in Iraq.

 

–A Wall Street Journal/NBC News survey showed 73% approve of Barack Obama’s handling of the transition thus far and give him a 66% overall approval rating, pretty startling, though the polling was done before the Blagojevich scandal broke in full.

 

That said, I watched Bill O’Reilly on Thursday for the first time since the election and let’s assume that Obama is not tied to the Illinois governor, as would appear to be the case as of this writing. I got a kick out of watching O’Reilly, though, try to then tie a 2002 interview where Obama said he was supporting the governor in his race back then as meaning there was something sinister about the relationship between the two. Then Laura Ingraham gets on and blasts Obama for not showing more emotion and outrage when the Blagojevich story broke.

 

C’mon, my fellow Republicans. You can do better than these pitiful attempts to tarnish the president-elect.

 

What Obama needs to concern himself with, however, aside from what his staff may or may not have done in the Blago matter, is the Rezko case.

 

As for Rev. Jeremiah Wright, O’Reilly did show a most humorous tape of a few days ago where the reverend is blasting the United States for killing 80,000 Japanese on “Dec. 7th.” Wright seems to have mixed up about six different historical events in his diatribe, yet the congregants could be heard in the background going “that’s right” and “amen.” God help us. Half the nation is a bunch of idiots.

 

–Back to Rod Blagojevich, is that a wig he’s wearing, or a small farm animal? I thought it was just a dye job, initially, but then I once thought Marv Albert’s hair was real back in the day.

 

Anyway, for the archives and our running history, Hot Rod was responsible for, in the words of U.S. Attorney Patrick Fitzgerald, “a political corruption crime spree.”

 

Timothy Egan / New York Times

 

“For some time now, the most unpopular governor in the United States, Rod Blagojevich of Illinois, has been treated like a flu virus at a nursing home.

 

“ ‘He’s kryptonite,’ one state representative called him in a Chicago Magazine profile last February. ‘Nobody wants to get near him.’

 

“But it wasn’t until Tuesday, and the filing of a 76-page criminal complaint centered around the auctioning of a Senate seat, that we got a full X-ray of politics at its sickest.

 

“Putting aside the peculiar dialect of desperation that made the governor sound like a John Malkovich character in a David Mamet play, the complaint showed a man trolling the depths of darkness.

 

“The beloved Cubs, the sainted Warren Buffett, editorial writers from the Chicago Tribune, even financing for a children’s hospital – all were targets or leverage points for a shakedown.

 

“The surprise is that he didn’t offer to sell out exclusive rights to deep-dish pizza….

 

“Abe Lincoln may have rolled over once in pleasant surprise at the election of Barack Obama, and another time in revulsion at Blagojevich’s arrest, as prosecutor Patrick Fitzgerald said. More likely, Abe did a triple lutz in his grave on Tuesday.”

 

Personally, in noting the transcripts of the wiretaps, Blagojevich read like one of Red Foxx’s or Buddy Hackett’s Vegas acts of yore, filled with expletives, only not nearly as funny.

 

As for “Senate Candidate 5,” Rep. Jesse Jackson Jr., he denies offering favors in return for being appointed to Obama’s senate seat by the governor.

 

Jackson said “The (feds) shared with me that I am not a target of the investigation and that I am not accused of any misconduct,” and that he was not involved in any “pay to play” scheme. As always, wait 24 hours.

–Despite all the talk about Illinois this week, according to a USA Today study of Dept. of Justice statistics, on a per-capita basis, North Dakota is actually more corrupt, with Illinois just 18th in the number of public corruption convictions. With a 130-for-130 record in convictions under former U.S. Attorney Chris Christie, I would stick with New Jersey as the worst.

 

–Like most folks, I’ve been a Caroline Kennedy fan, going back to my youth, but I was disturbed how she feels she should be anointed by New York Gov. David Paterson to fill Hillary Clinton’s senate seat. As Democratic Congressman Gary Ackerman of Queens told a local radio host, “I don’t know what Caroline Kennedy’s qualifications are. Except that she has name recognition, but so does J. Lo.”

 

Well, I don’t know if I’d go that far, Kennedy having been involved over the years in the New York City public school system, but there are countless others who deserve the nod ahead of her. 

 

Anyway, not only would you think Hillary is dead-set against seeing Caroline take her seat, after Caroline and Uncle Ted threw their support to Obama at a crucial moment in Hillary’s campaign, but a final decision is probably weeks away, as Clinton herself isn’t resigning until she is confirmed to be secretary of state.

 

I’ll just guess Paterson selects current New York Attorney General Andrew Cuomo, a man who has come a long way in the eyes of some, including yours truly.

 

–Back to corruption central, few these days are as bad as Democratic Congressman Charlie Rangel of New York. Talk about arrogance and hubris, it’s been one revelation after another the past year. The latest was the Wall Street Journal’s story that Rangel had paid “$57,500 from a campaign account to a Web-design company owned by his son over two years, paying more for Internet services than any other House member during the same period, according to federal records.”

 

Using funds to pay relatives is legal, “as long as the products or services are priced at fair market value.” But the average House member buying Internet services spent just $4,500 on campaign Web sites during the period under study beginning in 2005.

 

Of course Rangel is already under investigation by the House Ethics Committee for failing to pay taxes on $75,000 in income on a vacation home in the Dominican Republic, as well as controlling rent-controlled apartments in Harlem, for using congressional stationary inappropriately to raise money, and other items.

 

But as Gerald Seib of the Journal points out, while the Blagojevich scandal seems worse, it’s so over the top that Barack Obama can just ask for the governor to quit.

 

“Not so Rep. Rangel. For Mr. Obama, the Blagojevich investigation and prosecution soon will be something going on back home. The Rangel drama will play out right in the president-elect’s new front yard. And while Gov. Blagojevich has little to say about the fate of the Obama legislative agenda, Rep. Rangel has a lot to say about that as long as he runs the Ways and Means Committee, wellspring of both tax and health legislation.”

 

–I loved Obama’s move to name retired Gen. Eric Shinseki to be the next Veterans Affairs secretary. Shinseki was vilified by then Defense Secretary Donald Rumsfeld and Deputy Paul Wolfowitz when Shinseki said the invasion of Iraq would require several hundred thousand troops to control the country after the invasion. Of course Shinseki proved to be right.

 

–It wasn’t a good week for Rumsfeld. A bipartisan Senate report released on Thursday concludes that his decisions were a “direct cause” of widespread detainee abuses, and challenges assertions by Bush administration officials that the most egregious cases of prisoner mistreatment were isolated incidents.

 

The report out of the Senate Armed Services Committee says “The abuse of detainees at Abu Ghraib in late 2003 was not simply the result of a few soldiers acting on their own.”

 

–Interesting piece in the Dec.15/Dec.22 issue of U.S. News & World Report on Edward O. Wilson, the “father of sociobiology” and a two-time Pulitzer Prize winner for general nonfiction. It seems Mr. Wilson is quite the expert on ants, having just finished his second book on the topic with another on the way.

 

Q: Are ants better at anything than humans?

 

Wilson: Human beings have not yet made an accommodation with the rest of life – whereas ants, whose history dates back more than 100 million years, have achieved that balance…Ants have reached some degree of sustainability, while humans have not. We’re not going to last 100 years if we don’t start settling down.

 

A: What shouldn’t we learn from ants?

 

Wilson: Do not go to ants for wisdom or moral behavior. Ants are the most warlike of all of the creatures on Earth. Their colonies fight one another routinely, even though there is mostly harmony inside the colony.

 

[Of course one problem if you’re a male ant; you’re disposed of after the mating season.]

 

–New Jersey is making progress on the gang front it would seem, arresting 1,800 since last summer as part of a new initiative. [In the interests of fair and full disclosure, this is Gov. Jon Corzine’s program; gang members not being likely to vote for him next year anyway.]

 

–Neil Howe, in an op-ed for the Washington Post:

 

“It is the prerogative of every generation of graybeards to look down the age ladder and accuse today’s young of sloth, greed, selfishness – and stupidity. We hear daily jeremiads from baby boomers who wonder how kids who’d rather listen to Linkin Park and play ‘Grand Theft Auto III’ than solve equations or read books can possibly grow up to become leaders of the world’s superpower. The recent publication of ‘The Dumbest Generation’ by Mark Bauerlein of Emory University epitomizes the genre. His subtitle – ‘How the Digital Age Stupefies Young Americans and Jeopardizes Our Future’ – says it all.”

 

But as Neil Howe points out, the data reveals a different truth. Which “age-slice of today’s working-age adults really does deserve to be called the dumbest generation?”

 

“The answer may surprise you. No, it’s not today’s college-age kids, nor even today’s family-starting 30-somethings. And no, it’s not the 60-year-olds who once grooved at Woodstock. Instead, it’s Americans in their 40s, especially their late 40s – those born from the late 1950s to the mid-1960s.”

 

It turns out that more specifically, those children born between 1961 and 1965 had the worst results on standardized test scores given at ages 9, 13 and 17, and the same group had the worst SAT scores, when it tested those born in 1963. By comparison, in 2005, teens born in 1988 scored better on the combined SAT than any teens born since 1956 – and better on the math SAT than any teens born since 1951. So there.

 

–Is it me or have astronomers made some incredible discoveries in just the past two years? This week’s was confirmation of a giant black hole at the center of the Milky Way. German scientists found this after tracking the movement of 28 stars circling the center of our galaxy, a black hole four million times heavier than our Sun.

 

Dr. Robert Massy, of the Royal Astronomical Society:

 

“Although we think of black holes as somehow threatening, in the sense that if you get too close to one you are in trouble, they may have had a role in helping galaxies to form – not just our own, but all galaxies.

 

“They had a role in bringing matter together and if you had a high enough density of matter then you have the conditions in which stars could form.”

 

The new discovery has been labeled Sagittarius A* (“Sagittarius A-star”), but lest you lose sleep over this one, it remains 27,000 light years away, or 158 thousand, million, million miles from Earth. Then again, I’m opting to sleep with one eye open just in case.

 

–Clint Eastwood’s new flick, “Gran Torino,” is getting some great reviews, especially for his own performance. “I finish things. That’s what I do.”

 

–Lastly, back in February 2001, I was granted a unique opportunity by the Jesuits in Manhattan to attend the elevation of the Cardinals at the Vatican, including those of Theodore McCarrick and Avery Dulles. It was a special moment, and as an aside it was also kind of funny that Jack Welch was seated right in front of me and we talked Irish golf. [Baltray is his favorite course.]

 

On Friday, Avery Cardinal Dulles passed away at the age of 90. I have a terrific picture of the two of us in my living room that I will always cherish, taken right after the Consistory, and now and then I glance at it (as well as the one of myself and Cardinal McCarrick) and wonder what Dulles would have thought of my own imperfect life had we really known each other.

 

You see, Avery Dulles had one of the truly more remarkable lives of any American of the 20th century. His father was the great Secretary of State John Foster Dulles, and his uncle was Allen Dulles, who led the CIA; both during the Eisenhower administration.

 

Avery, though, graduated from Harvard and joined the Jesuits after he was discharged from the U.S. navy in 1946. My good friend Father Scanlon used to tell me of how John Foster was none too pleased when son Avery told him he was going into the priesthood. For starters, Avery’s grandfather was a Presbyterian minister! You might say there was a bit of a conflict there.

 

Father Dulles then went on to lead the life of a theologian, one of the best ever, and authored 20 books. He was happy, in his element, and then Pope John Paul II ruined it all.

 

Now before you get upset with me, understand that at age 82 and not in the greatest of health, about the last thing Avery Dulles wanted to be was Cardinal, let alone travel all the way to Rome to be fussed over. But John Paul thought it was important to make him the first American Jesuit and the first U.S. theologian outside of a diocese to be so honored.

 

I have two of Cardinal Dulles’ books in my house somewhere and I’ve never made an honest attempt to read them, but while I’m not good with New Year’s resolutions I ought to be able to do this at least in 2009.

 

I see in the only obituary I’ve had time to read thus far that when Pope Benedict visited the United States last April, he made a special point to have a private meeting with Avery, who had been residing at Fordham University since 1988 as a member of the faculty there. Last spring, a colleague delivered the last lecture that Dulles wrote.

 

“The most important thing about my career, and many of yours,” he told the students, “is the discovery of the pearl of great price, the treasure hidden in the field – the Lord Jesus himself.”

 

Avery Cardinal Dulles, servant of God…and a great American.

 

—

 

Pray for the men and women of our armed forces.

 

God bless America.

 

—

 

Gold closed at $822…last 3 weeks; $819, $752, $822

Oil, $46.58

 

 

Dow Jones -0.1% [8629]

S&P 500 +0.4% [879]

S&P MidCap +1.9%

Russell 2000  +1.6%

Nasdaq +2.1% [1540]

 

 

Dow Jones -34.9%

S&P 500 -40.1%

S&P MidCap -40.9%

Russell 2000 -38.8%

Nasdaq -41.9%

 

Bulls  25.3

Bears  46.2 [Source: Chartcraft / Investors Intelligence]

 

Have a great week. I appreciate your support. Remember to give what you can to the Salvation Army…or the charity of your choice during these tough times for so many.

 

Brian Trumbore