For the week 2/16-2/20

If you were wondering just what the heck I was talking about in saying Barack Obama’s 25-day honeymoon was over, last week, well, you certainly know now. And as I also wrote, a little Reagan optimism is in order, starting with this coming Tuesday as Obama addresses a joint session of Congress and the American people. As I note below, even former President Bill Clinton said as much recently. Anything to combat the Depression talk, which picked up in a big way the past few days as the likes of George Soros and Paul Volcker added fuel to the fire. Soros said, “There is no sign that we are anywhere near a bottom,” while Volcker explained, “I don’t remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world.” 

I don’t know about you, but so much happened this week I was overwhelmed by it all. Actually, we’ve been overwhelmed since mid-September of last year and it is amazing to think that less than two months into 2009, many of us are already exhausted, and certainly more fearful. For starters, a new AP poll revealed that 47% are worried about losing their job vs. 28% in February 2008. 65% are worried about paying their bills.  

There has been little let up in the carnage on Wall Street, nor the global economy. Stocks nearly closed at lows not seen since October 2002 (and 1997), while this week the Federal Reserve lowered its forecast for GDP in 2009 to a decline of 0.5% to 1.3% (while raising estimates for 2010), and hiked its estimate on unemployment by yearend to 8.8% from its current 7.6% level; blaming the downgrade on “further intensification of the financial crisis and its effect on credit and wealth, the waning of consumer and business confidence, the marked deceleration in global economic activity, and the weakness of incoming data on spending and employment.” 

Speaking of global economic activity, or lack thereof, Taiwan’s GDP fell 8% in the fourth quarter and is estimated to decline a further 3% in ’09 as exports fall 20%. 

Russia’s GDP is now estimated to decline 2.2% in 2009 as industrial production plunged 20% in January and unemployment hit 8%. 

In the U.K., GDP is projected to fall 3-4% this year, as debt across-the-board continues to explode and tax receipts plummet. Britain also has the same banking issues faced here, having already nationalized some of theirs. The opposition is in full throttle, particularly with regards to the Lloyds Banking Group / HBOS fiasco. Tory leader David Cameron decried the bonuses Lloyds was attempting to pay, even as its recently acquired HBOS unit reported a loss in excess of $10 billion. “People who work hard are seeing billions of pounds of their tax money being paid out and are rightly angry about it.” The Shadow Chancellor, George Osborne, said Prime Minister Gordon Brown “created the system of bank regulation that allowed this reckless risk-taking to run amok.” Sound familiar? 

And a new problem hit front and center. Eastern Europe and its banks. Specifically, we’ve learned Austria’s financial institutions have a staggering $278 billion on the line in the region, compared to Germany and Italy which both have $220 billion in exposure to the likes of Hungary and Poland. For their part Germany and France said they may have to circumvent the EU/EC and bailout nations employing the euro for the betterment of all.  

Then there is Japan, which saw its GDP plummet a stupendous 12.7% in the fourth quarter. But here, Robert Samuelson, in his Washington Post column, took issue with comparisons between the U.S. of today and the “lost decade” in Japan. 

“(Japan) did not, as some commentators say, suffer a ‘depression.’ Not even a ‘great recession,’ as others put it. Japan experienced a listless, boring prosperity. Its economy expanded in all but two years (1998 and 1999), although the average annual growth rate was a meager 1.5 percent. Unemployment rose to 5 percent in 2001 from 2.1 percent in 1990. Not good, but hardly a calamity. Japan remained a hugely wealthy society…. 

“Since the early 1980s, American economic growth has depended on a steady rise in consumer spending supported by more debt and increasing asset prices (stocks, homes). Just as the mid-1980s signaled the end of Japan’s export-led growth, the present U.S. slump signals the end of upbeat, consumption-led growth. But its legacy is an overbuilt and overemployed consumption sector, from car dealers to malls. The question is whether our system is adaptive enough to create new sources of growth to fill the void left by retreating shoppers.” 

In the U.S., data on manufacturing released this week was abysmal yet again, with regional indices from Philadelphia and New York hitting new lows on the level of activity, while, nationally, industrial production for January was down a worse-than-expected 1.5%. 

There was a bit of decent news on the inflation front, however, as in there was actual inflation, not deflation, with the producer price index for January up 0.8%, up 0.4% on core, while consumer prices for the month were up 0.3%, 0.2% ex-food and energy. Many of us would love a bit of consistent inflation. [We’ll worry about the runaway variety in 2010 and beyond.] But I’ll have a different take on the inflation picture down below. 

Then you have the topic of bank nationalization. Last Sunday, Republican Senator Lindsey Graham said on This Week, “We should be focusing on what works. We cannot keep pouring good money after bad. If nationalization is what works, then we should do it.” 

Alan Greenspan offered, “It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring. I understand that once in a hundred years this is what you do.” 

Economist Nouriel Roubini said, “Paradoxically, nationalization may be a market-friendly solution” to the crisis. “It provides a fair upside to the taxpayer…by allowing the government to sell the assets to private investors after a cleanup of the bank.” 

Rumors were rampant, dispelled by the administration, that one or two nationalizations were imminent, perhaps as soon as the weekend. For his part, Bank of America CEO Ken Lewis, his institution along with Citigroup the two leading candidates for the guillotine, insisted no one understood how healthy BofA was. Perhaps, but Mr. Lewis, isn’t it right to be skeptical after you yourself were surprised by Merrill Lynch’s $15 billion loss last quarter? 

My take on nationalization? It is not the end of the world in selected circumstances. As many point out, on a smaller scale it’s been happening virtually every weekend as the FDIC has shut down over 30 banks since the crisis began with nary a problem for depositors. As for common shareholders, well, that’s a different story but it’s not as if you haven’t had a chance to get out, particularly knowing the risks. [If on the other hand you were an employee at one of these institutions and lost your life savings, my heart goes out to you.] 

On the housing front, where this all started, President Obama rolled out his long-awaited Homeowner Affordability and Stability Plan in distressed Mesa, Arizona (where, incidentally, the median home price has declined from $208,000 to $138,000). We learned at the same time that housing starts for January hit an all-time low…just 466,000 when 530,000 was expected. In laying out his partial solution, Obama said: “All of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen.” 

Maura Reynolds / Los Angeles Times 

“The plan has two main elements aimed at the twin problems feeding the foreclosure crisis that is claiming more than 6,000 homes a day: ‘underwater’ mortgages on which the balance owed is more than the current value of the property, and unaffordable loan payments that are forcing homeowners into default…. 

“One part would allow borrowers whose homes have lost value to refinance their mortgages at today’s relatively low interest rates, even if the homeowner has little or no home equity left. To be eligible, borrowers must live in their homes and have a loan that is owned or guaranteed by Fannie Mae or Freddie Mac. 

“The opportunity to refinance will help ‘homeowners who have played by the rules [and] have been making their payments on time’ but have been unable to refinance because collapsing housing prices have eroded the equity in their homes, said Housing Secretary Shaun Donovan. 

“The plight of those borrowers, Donovan added, ‘just isn’t fair, and it’s something that we will help to fix.’” 

In lowering payments for many middle-class families, the administration argues it acts as a stimulus. 

“The second part of the plan is a loan modification program designed to keep troubled homeowners out of foreclosure and to keep ‘at risk’ borrowers from defaulting in the first place. It would accomplish that by offering new incentives to lenders and mortgage servicers to modify loans. 

“If the lender agrees to reduce the monthly payment to 38% of a borrower’s monthly income, the government will pay half of the additional cost of lowering the payment to 31% of the borrower’s income…. 

“What the Obama loan-modification plan does not do is mandate that lenders take part in either of the programs. But financial institutions that have received capital infusions under the $700 billion Troubled Asset Relief Program will be required to follow the government’s protocols, which will be issued March 4…. 

“The plan also does not help borrowers with ‘jumbo’ mortgages – generally those above $417,000 in much of the country, or as much as $730,000 in higher-priced areas. That could be a significant gap in parts of California, Illinois, Florida and other areas that had superheated home markets. 

“And the plan doesn’t address the problem of borrowers with second mortgages, such as home equity lines of credit. Any modification or refinancing would apply only to the primary mortgage.” 

Fannie Mae and Freddie Mac are given another $200 billion of additional financial backing to ensure plenty of credit is available on the refinancing front, while an additional $75 billion goes towards preventing further foreclosures among 3 to 4 million at risk homeowners. 

Economist Mark Zandi: “It’s a positive step in the right direction….I worry that it’s not going to be successful fast enough.” 

“President Obama yesterday announced his plan to prevent home foreclosures, saying he wanted to be ‘very clear about what this plan will not do: It will not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans…And it will not reward folks who bought homes they knew from the beginning they would never be able to afford.’ 

“We really do wish he were right. In fact, the details released yesterday suggest the President’s plan will do all of the above. The plan will help some struggling homeowners. But by investing in failure, the Administration will also prolong the housing downturn and make financing a home purchase difficult for future borrowers. Meanwhile, the plan isn’t likely to slow the continuing decline in housing prices…. 

“Mr. Obama’s mortgage plan is his third big economic rescue proposal in a month, and perhaps someone in the White House has noticed that financial markets haven’t exactly cheered. Yesterday’s end-of-day wrap from UBS put it this way: ‘Obama Speaks, Market Listens, Sells Off.’ 

“What investors, businesses and working Americans want to hear is a President with ideas to spur economic recovery. What they’ve been getting are plans for a long national Chapter 11 workout.” 

Obama has attacked the economy through 1) the remainder of the $700 billion TARP fund (part of which has gone to the auto companies), 2) the $787 billion stimulus program, and 3) the $275 billion housing plan. Yet to come, further details on Treasury Secretary Geithner’s bank rescue plan, parts of which will borrow from the remainder of TARP. 

It’s all incredibly confusing, and many of us are upset the plans don’t really seem to attack the two prime issues, housing and jobs, even as the Obama administration tries to convince us they do. 

Even Republicans are split. Some say do little, let the free market run its course (along with drastically lower taxes), while there are others, such as yours truly, who followed the path of conservative economist Martin Feldstein.  It was Feldstein who said initially that Obama should unleash a massive stimulus program, $800 billion or more, but then he backed off when he saw what the Democratic-controlled Congress came up with; a hodgepodge of spending programs, not a job-creating booster shot. 

And I’m of the camp that if you are going to do something on housing, go all in as well here. CNBC’s Rick Santelli had a point in his now famous rant from Thursday. The housing plan appears to ignore those who have conducted themselves in the right way; paid their bills, and didn’t live above their means. But the problems we face today shouldn’t be reduced to mere sound bytes. 

To sum up, from what I’ve seen out of the Obama administration thus far, I’m underwhelmed. I’m impressed how quickly he was able to enact a stimulus package. But the end result was pathetic. I appreciate the thought on the housing plan, but it doesn’t go nearly far enough, and is unfair. I await Geithner’s bank rescue plan (what we’ve seen thus far is smoke and mirrors), but I’m prepared to be disappointed here as well. 

To those fans of Rick Santelli, however, understand I’ve been preparing for revolution in my own way years before he has. If you only knew some of the Web addresses I took down, hidden from view, for now. I can be just as subversive as the next guy. 

But Barack Obama’s my president and for my own well-being, let alone the country’s, we need him to succeed. He gets another chance on Tuesday to reinvigorate his message. 

“I like the fact that (Obama) didn’t come in and give us a bunch of happy talk. I’m glad he shot straight with us…. 

“I like trying to educate the American people about the dimensions and scope of this economic crisis. I just would like him to end by saying that he is hopeful and completely convinced we’re gonna come through this.” 

“Mr. Obama’s analogies to the Great Depression are not only historically inaccurate, they’re also dangerous. Repeated warnings from the White House about a coming economic apocalypse aren’t likely to raise consumer and investor expectations for the future. In fact, they have contributed to the continuing decline in consumer confidence that is restraining a spending pickup. Beyond that, fearmongering can trigger a political stampede to embrace a ‘recovery’ package that delivers a lot less than it promises. A more coolheaded assessment of the economy’s woes might produce better policies.” 

“Which brings us back to disappointment and politics. It is in the nature of politicians to make promises; it is what they do. Some do so without the least intention of delivering on their promises. Some fully intend to deliver, but find the world obdurate, unwilling to go along with their fine intentions. Barack Obama now finds himself among the latter. With loony jihadists threatening from without, a crumbling economy terrorizing its citizens from within, Obama knew he needed straightaway to demonstrate utmost competence to stem fear and instill confidence. The reason for his wanting to assemble an able cabinet more quickly than any other administration in recent history was to show that, though the nation had major problems, they were under study and would soon be attacked by the most capable minds of our time. He needed to calm the country down, and show, in a measured but forceful way, that a strong hand was at the wheel. 

“This he has thus far failed abysmally to do. Very disappointing, to the country at large, and not least, I have no doubt, to Barack Obama himself. Viewed from Chicago, up whose greasy political pole the president has himself climbed, the jolt is a lot less jarring. ‘Them guys in the black suits and narrow ties, them Ivy League types, them goo-goos,’ the Chicago alderman Mathias (Paddy) Bauler long ago said, ‘they think the whole thing is on the square.’ Old Paddy, of unblessed memory, also said that ‘Chicago ain’t ready for reform.’ Were he alive today to witness the sad early beginnings of the Obama presidency, he might add: ‘And maybe the rest of the country ain’t either.’” 

Editorial / Washington Post 

“Unfortunately for Mr. Obama and the nation, the current economic situation does not allow for the usual margin of error; fairly or not, he will not be measured against normal historical standards.   Sooner rather than later, he will have to find the right balance between reassurance and alarmism.” 

–Just two weeks ago, the major averages were almost back to even for the year, with Nasdaq actually up. Two weeks later, it’s another round of death and destruction. I was struck by some of the following. Shares in Caterpillar, $80 as recently as June 23, hit $26, while General Electric has options with a $2.50 strike price, this as GE fell below $10. Then there was General Motors, hitting a 71-year low of $1.60. 

The only saving grace on the week was in the Dow Jones Industrial Average avoiding closing below its Oct. 2002 low of 7286, finishing the week at 7365, down 6.2% in holiday-shortened trading. The S&P 500 closed at 770, off 6.9%, but still above its November ’08 low of 752, significant, while Nasdaq lost 6.1% to finish at 1441.  

The financials, which were down 57% as a group last year, are already off another 40%+ in 2009, with the aforementioned Bank of America and Citigroup hitting 24- and 17-year lows, respectively, as shares in Citi traded at $1.60 before closing at $2.20. 

Two key players, JC Penney and Lowe’s, didn’t provide any soothing earnings news or forecasts, as same-store sales for both were off 10%-11%, with Lowe’s forecast for the balance of the year little better. 

More broadly speaking, with an S&P of 770, if Merrill Lynch is correct with its forecast of $43 for earnings on the index for all of 2009, that’s not good news. 

As for my own forecast, I received a thoughtful note from C.C. asking me to explain myself further as to why I went from 80% cash to 50/50. I explained at the time (yearend) and again end of January, that I just saw a sentiment shift before the actual fundamentals turned. I have no reason to change this feeling in general, except I am disappointed in Obama’s lack of leadership thus far, and coming poll figures will reflect this more widely. 

But I’ve proven to be stubborn in changing my forecasts over the years, and for the most part it has held me in good stead. 2009 is not even 1/6th of the way complete and I’ll be damned if I’m changing my outlook now. I’m a Big Picture guy. It’s why I spend so much time on the international scene. I know as well as anyone the global outlook is dismal, but I also know enough about market history that if, and when, we receive some solid good news, and divine a favorable trend or two, stocks will explode out of the gate like Secretariat. When will that happen? Who knows? I just hope it’s from levels approximating today’s, as opposed to Dow 6000 or S&P 600. 

–U.S. Treasury Yields 

Rates rallied slightly on the long end in a mini-flight-to-safety. 

Economist Mark Zandi: “I think we’re on the precipice of outright, full-blown deflation and that we’ll fall into that abyss by this summer. Given the pressures businesses are under to sell something, they’ll have to cut prices and I think they will….Right now millions of people are losing their jobs, and as painful as that is, it affects only a small fraction of 150 million workers. If you’re cutting wages broadly across 150 million people, that’s a far bigger problem for the economy.” [CNN] 

All manner of companies, from GM to Hewlett-Packard, are now slashing wages. 

–Alan Reynolds / Wall Street Journal…on the housing plan and the controversial “cramdown” issue. 

“(The) president’s proposed ‘cramdown’ would ‘allow judicial modification of home mortgages for borrowers who have run out of options.’ That would require federal legislation, and Congress would be well advised to put that plan aside in order to give the president’s new options a fair chance. 

“Any plan that compels mortgage holders to reduce the amount of money they are owed must in turn reduce the value of mortgage-backed securities held by banks, insurance companies, pension funds, Fannie and Freddie, and the Fed. By injuring the balance sheets of potential lenders, a cramdown would also injure potential borrowers. 

“The needless threat of inviting judges to rewrite mortgage contracts at whim helps explain why bank stocks generally fell on the plan’s announcement, while financial shorts rose.” 

–Thanks in no small part to discovery of the Bernie Madoff Ponzi scheme, the heat was turned up on Allen Stanford and his Stanford Financial Group / Stanford International Bank operation that claimed over $50 billion in assets with some 50,000 wealthy investors. Stanford was already the subject of an SEC investigation and, when embarrassed by its incompetence in the Madoff scandal, the SEC wasn’t about to make the same mistake twice. 

Stanford himself was served papers and forced to turn over his passport (reportedly) on Thursday, discovered by the FBI in Fredericksburg, Va., shacking up with his girlfriend and far from his Houston headquarters as well as his other base in Antigua. He is suspected of a fraud involving at least $8-$9 billion. [$8 billion in a scam related to the sale of CDs, plus potentially another $1.2 billion in a wrap account.] 

Stanford, who was reported to have a net worth of $2.2 billion and known to hob-knob with sports celebs, lied about his bank to gain investors’ trust. For example, he referred in his sales material to a 70-year tradition of serving clients, yet the bank didn’t exist before the 1980s. He talked of having 20 analysts, who invested in everything from large company stocks, to “stable governments,” to alternative investments, gold, hedge funds and real estate, all of which allowed him to generate consistent returns. But the 20 analysts? Try Stanford and his college roommate. So much more to come on this one, though the court appointed receiver for the Antigua-based bank may need a decade to complete the hoped for recovery of assets, owing to an international scope similar to the Madoff scam. 

Oh, and by the way, the Deputy Director of the FBI recently told Congress the bureau is conducting 530 fraud investigations. You can expect at least a few of these to be sizable. 

–As for the Madoff scandal, it’s been confirmed he never made one trade. That’s as pure a scam as you can have, sports fans. 

–The government of Latvia collapsed amidst the economic turmoil. 

–General Motors and Chrysler, in supplying mandated progress reports on revamping their operations, talked of needing another $16.6 billion and $5 billion, respectively, while the two may shed up to 50,000 additional jobs, worldwide (47,000 at GM), as well as eliminate or sell certain models, such as the Hummer and Saturn brands. The deadline for proving the two can become profitable is March 31 in order to retain the $17.4 billion in loans to date so much more on this topic in the weeks to come as both GM and Chrysler argue against bankruptcy. For now, President Obama has abandoned the idea of a car czar in favor of Timothy Geithner and Lawrence Summers overseeing the effort.  

–California’s legislature stepped away from the brink of bankruptcy by agreeing on a budget that hikes taxes, cuts spending and borrows money to plug a projected $42 billion budget deficit. Among the proposals is to shorten the school year five days, not exactly what’s needed to secure a better future. Illegal immigrants have fueled the trouble in placing unsustainable demands on social services, this as the more able leave the state in droves. But at least Gov. Schwarzenegger got it done so perhaps some semblance of stability can return to the state amidst the deepening recession. 

–Energy: Ken S. passed along a piece from Forbes concerning Peak Oil leader Matt Simmons, who I also caught on “Fast Money” recently, and I haven’t changed my own tune one bit in remaining a Peak Oil disciple. But I also haven’t invested in an oil stock since 2005 and while I stare at a bunch of energy issues on one of my screens all day, I’m still not ready to buy back in. I’ve written a number of times the past year in particular, though, that I just hope I have enough firepower left when I decide to take another plunge. [For new readers, I successfully rode the sector from 1999-2005.] 

One of Simmons’ primary reasons for remaining a fan of Peak Oil is his claim the Saudis continue to lie about their ability to come up with new finds and that decline rates from existing fields will overwhelm any new discoveries from the likes of Venezuela, Iraq or Nigeria. 

Meanwhile, the Merrill Lynch analyst who nailed the peak in the oil price last summer, Francisco Blanch, says that global output, currently about 84.5mmbd, could shrink by 30 million barrels by 2015 as a result of the combination of shrinking investment and difficulty in replacing depleting fields. 

This week, oil rallied slightly on a decent inventory report, while gasoline futures fell some, which should keep the national pump price below $2.00 at least into spring. 

–China has agreed to lend Russian energy giant Rosneft and pipeline monopoly Transneft $25 billion in return for supplies from huge new eastern Siberian oilfields. While the world turns inward, China is running around the globe grabbing future supplies of energy for the next boom cycle. Smart…very, very smart. 

–And in Beijing, thus far in 2009, 1,500 new cars are being added each day, according to state media, despite a nationwide decline in car sales. “Beijing registered 65,970 new vehicles in the first 45 days of the year,” Xinhua said. [But overall sales were down 8% in January.] 

–The U.S. Justice Department is claiming 52,000 U.S. customers hid their Swiss-based UBS accounts from the IRS and has filed suit against the bank seeking to force UBS to disclose the names. UBS said it will fight the case. But a day earlier it agreed to pay a fine of $780 million in a separate suit where it turned over 250 names it admitted to having helped evade taxes. 

The problem is in making the distinction between tax evasion, not a crime under Swiss law, and tax fraud, most definitely one. This is developing into a landmark case on privacy and crossing international borders. 

–Mining giant Anglo American PLC announced it was cutting 19,000 jobs, ten percent of its work force. The CEO said, “The breadth and severity of the global economic downturn and its impact on growth rates in key sectors and economies are difficult to overstate. From global automotive production to construction activity in emerging markets, there was a marked contrast between the first and second halves of 2008, when commodity prices fell sharply.” 

–John Malone of Liberty Media, owner of DirectTV, bailed out Sirius XM Radio in return for a 40% stake in the operation. 

“Bankers could face up to 10 years in jail for their involvement in the Anglo Irish Bank deposits controversy.” 

An Irish trade minister, John McGuinness (likes his pints), said that decisive action was needed to restore public confidence in the banking system. “If we need to sacrifice a sacred cow on the altar of good corporate governance, then that’s what needs to be done.” 

We need to see stories like this in the States, gosh darnit. Alas, no one has yet to walk the plank here. 

–Britain’s chancellor of the exchequer, Alistair Darling, said bonuses paid by the Royal Bank of Scotland would be slashed from 2.5 billion pounds in 2008 to 340 million this year. [According to exchange rates at the time, $5 billion vs. $485 million at current rates.] 

The government blasted RBS for spending lavish amounts on athletes such as Jack Nicklaus to serve as “global ambassadors” in its advertising and public relations campaigns. 

— From WIR, 11/22/08: “The news out of corporate America has generally been awful and, outside of Hewlett-Packard’s trying to pull the wool over our eyes by saying it knows exactly how well it’s going to do next year, no one else has a clue.” 

Well whaddya know. Hewlett-Packard didn’t succeed even three months in pulling the wool over our eyes (at least mine). While it matched analysts’ earnings target for the fourth quarter, revenues missed badly and the company adjusted them down for the full year. Needless to say, CEO Mark Hurd, as successful as he’s been, is a most arrogant sort. Of course he had to backtrack and on the earnings conference call said H-P doesn’t see improvement in its market for the rest of the year. 

–Goodyear Tire & Rubber is laying off 5,000 as revenue dropped 21% in the quarter. It also continues to get failing grades from its NASCAR relationship. Ask Tony Stewart. 

–In reporting a $1.6 billion loss for the fourth quarter, Sprint Nextel lost another 1.3 million customers. 

–Superstar banking analyst Meredith Whitney is leaving Oppenheimer to set up her own shop focusing on institutional research and, eventually, investment banking. “There has been a massive disruption in the marketplace, and that creates massive opportunity and I want to be a participant rather than a bystander,” she told the Journal. You go, girl! 

–Bank of America Corp. CEO Ken Lewis has been subpoenaed by New York Attorney General Andrew Cuomo on the issue of ‘what did shareholders know, and when did they know it,’ in terms of the paying out of Merrill Lynch bonuses and Merrill’s financial condition before the vote on the merger in December. Cuomo has written House Financial Services Chairman Barney Frank that BofA was complicit in distributing the bonuses before the announcement of Merrill’s $15 billion loss. 

–Guess which nation’s banks reported aggregate profits of $823M in 2008? Lebanon. The economy also grew at a 7% clip last year and is still expected to grow in 2009 as most experts there see a soft landing. 

–Another sign of the times. I see that annual giving to my alma mater’s athletic program at Wake Forest dropped 19% in January over a year ago. If we don’t make it to the Final Four, that’s it for me. 

–I haven’t been to Barcelona, so in reading a story the other day I was surprised to learn “Pickpocketing, theft and street crime are rife during the congress, leading to calls for the event to be moved to another city.” What congress?  The Mobile World Congress, where the topic of pickpocketing came up because a Telstra executive, carrying a phone containing Microsoft’s secret Mobile 6.5-operating system – had his pocket picked of said device. Microsoft isn’t concerned it has an industrial espionage situation. 

Actually, another Telstra exec was in hospital after being stabbed in Barcelona. You’re safer in Beirut. 

–At the peak of the office market in 2007, prime Midtown space went for $800 a square foot, on average. Today, it’s already down to $425. Nationally, office buildings lost an average of 20% of their value in ’08. [New York Times] 

–Related to the above, Crain’s New York Business had a piece by Amanda Fung on the problems faced by Mort Zuckerman, chairman of Boston Properties, the largest office landlord in the nation, with 50 million square feet of Class A space spread among 147 towers in five metro areas. It was last summer that Zuckerman acquired the General Motors Building for $2.8 billion in what he said was a fire sale price and the best transaction he had made in his 40 years in real estate. Needless to say, he is singing a different tune today. One leading attorney in town said, “Everything changed in New York real estate once Lehman fell.” 

–Greenwich, Conn., home to one-time hedge fund mega-millionaires, saw home sales plunge 84% in January from a year earlier. 100 hedge funds are located here. 

But wait! There’s more! The New York Post’s Melissa Klein reports “Almost 50 mansions built on spec for the hedge fund set – and priced from $5 million to upwards of $25 million – sit empty in Greenwich, where the real-estate market has tanked.” 

“A 22,185-square-foot Georgian mansion on 4.8 acres off prestigious Round Hill Road with eight bedrooms, elevator, butler’s pantry, home theater and fancy flourishes such as crown moldings in the closets. The sale price is $25 million, and it has been on the market since May.” 

–In Barron’s annual survey of money managers who were asked to gauge the degree to which they respected the world’s 100 largest public companies, as measured by market cap, No. 1 was Johnson & Johnson, No. 2 Berkshire Hathaway, and No. 3 Procter & Gamble. General Electric, No. 11 last year, plummeted to No. 43. 

–Jon Winkelried, co-chief operating officer of Goldman Sachs, along with Gary Cohn, is opting to retire, thus eliminating a source of tension between his spouse and Mrs. Cohn, as I’ve surmised in the past. Both men took down compensation of about $60 million in 2007. 

No doubt both Mrs. Cohn and Mrs. Winkelried own a lot of gold jewelry. William Rees-Mogg had the following comment on the yellow metal in the London Times. 

“I have been following the gold price since I published The Reigning Error, a short book on inflation, in 1974. I have not consistently advised people to buy gold – like all other assets, gold can become significantly overvalued, as it did in 1980. However, I have found that the movements of the gold price are one of the most useful pieces of evidence about the health of the world economy…. 

“People buy gold when they are nervous about the economy, and they are right to do so because gold is a unique commodity. It has to a high degree two qualities that are seldom found together: liquidity and reality. It has strong liquidity; it can almost always be bought, sold or exchanged. There are other liquid assets, of which the U.S. dollar is probably supreme, but they lack gold’s quality of real value. 

“Dollars do not constitute a real asset, such as property or ‘real estate.’ The dollar is simply a piece of paper. Gold has been a much better store of value than the dollar.” 

I have been posting the gold price in these reviews since Day One, just because. For years, of course, it didn’t matter, but I’m a creature of habit (like in my inclusion of the S&P MidCap index since Day One as well). 

There was a time, though, in my former career, where I was a huge proponent of a gold fund we had, a story I’ve told a few times, and then before I left PIMCO, against my wishes (I was national sales manager, after all, and was supposed to know something about sales), my superiors shelved the fund because it was too small. 

Oh, don’t you know PIMCO’s wholesalers wish they had it in their quiver these past few years (though they’ve done spectacularly well without it). PIMCO has some hard asset alternatives that are far from pure gold offerings. 

Anyway, I haven’t invested personally in gold, through shares, for years. I just can’t get into the story, as well as it has worked recently. And I’m not about to chase it now. 

–Donald Trump’s Trump Entertainment Resorts, of which The Donald owns 28%, filed for Chapter 11 protection after bondholders rejected his attempt to take the company (and its casinos) private. But he has experience at this game. Four years ago, Trump Entertainment went through the same process. 

Trump, in being rejected by the board in his attempt to run things, said “If I’m not going to run it, I don’t want to be involved in it.” 

Which reminds me of the famous line by former major league shortstop Garry Templeton, who in being named to the All-Star team said, “If I ain’t startin’, I ain’t departin’!” 

–Last time I wrote of the collapsing convention business in Las Vegas, and then in a story from the New York Times, the head of Chicago’s Convention and Tourism Bureau is quoted as saying “people aren’t going to raise their eyebrows” about a company holding an event in his city. 

Good point. No problem holding one in Cleveland or Detroit, either, I imagine, but I’ll still choose Las Vegas.   

–The number of billionaires in Russia has been halved to 49 from 101 last year, according to Finans magazine. Former Norilsk Nickel co-owner Mikhail Prokhorov tops the list at $14.1 billion. 

Or does he? The New York Post reports Prokhorov is trying to back out of a deal to pay $634 million for the world’s most expensive mansion on the French Riviera. [The Post, though, still says he’s worth $12 billion.] 

–Sales of Girl Scout cookies are down 19% in pre-order sales. 

–Playboy Enterprises’ said it will listen to sale offers. The mansion looks cool. I’m offering $45,000 for the whole shooting match. 

Israel: The 12 parties have been presenting themselves to President Shimon Peres and the No. 3 party in the recent election, Avigdor Lieberman’s Yisrael Beiteinu, threw its support to Likud and Benjamin Netanyahu. Peres then officially tabbed the former prime minister and now Netanyahu will go through the process of forming a government over the coming weeks. Kadima’s Tzipi Livni, whose party actually bested Likud by one seat, 28-27, vowed not to join a Likud-led coalition, while the No. 4 Labor Party of Ehud Barak said it wouldn’t endorse a candidate at this time. 

For his part, as noted previously, Lieberman is virulently anti-Arab, Arabs now making up 20% of Israel’s population, with this percentage destined to rise rapidly over the coming decades. 

Newsweek’s Fareed Zakaria writes: “For Israel, handling the relationship with its Arab minority is more crucial even than dealing with Hizbullah or Iranian President Mahmoud Ahmadinejad. Israel needs to decide how it will deal with the Arabs in its midst.” 

Well that is absurd if you focus on the next five to ten years. Hizbullah and Iran are of far more immediate import, though Zakaria may be correct looking at 2020 and beyond given future demographics. 

But when talking about Hizbullah, I’m continually amazed that while there is justifiable focus on the June election in Iran, few are mentioning the June 7 vote in Lebanon that could bring Hizbullah to full power. 

The other day Hizbullah leader Sheikh Nasrallah gave one of his video presentations to a mass ceremony in Beirut (he is seldom seen in public for fear of being assassinated by Israel) wherein he stressed that the resistance had the right to possess an anti-air defense system to confront Israeli threats, while calling for peace during the coming election campaign. 

Speaking on the one-year anniversary of the assassination of Hizbullah army commander Imad Mughniyeh, Nasrallah said, “If we win the elections, we will ask the parliamentary minority to join the government. But if they insist on refusing to join, our team will form a government on its own and govern with a national perspective.”  

As reported in the Daily Star, Nasrallah was “coy on reports that Hizbullah has recently acquired air-defense weapons. ‘The Israelis are worried about this possibility…I will not confirm or deny, but I care to stress that the resistance has the right to possess such weapons,’ he said.” 

To which the United States and the UN should be saying the Lebanese Army, not Hizbullah, has the right to possess them. And then I’d turn to Israel and say, “Stop violating Lebanon’s airspace. You’re only making it easier for Hizbullah to rally support.”  

Yup, just watch June 7. Hizbullah may not win an outright majority in parliament, but it will undoubtedly come close. Thank god oil is as low as it is because it’s impeding Nasrallah’s sponsor, Iran, from supplying him with even more arms than he’s currently receiving. 

One other note on Lebanon, the nation has been transfixed by the arrest of a spy for Israel, Marwan Faqih, who had been close to Hizbullah but was leading a double life as an undercover agent. As the Daily Star reported: 

“Faqih was accredited as a ‘safe’ supplier of vehicles to Hizbullah after winning the trust of party officials in Nabatiyeh by making regular donations to the group. During the summer 2006 war with Israel, he even handed control of his petrol station over to Hizbullah fighters. 

“No one suspected that every car he sold them was fitted with a satellite monitoring device that allowed Israeli intelligence agents to tract their every move.” 

It turns out a standard repair job on one of the vehicles revealed the device and a subsequent search of the party’s fleet of vehicles set off alarm bells. Faqih is now in the hands of the Lebanese Army. 

Iran: The IAEA believes Iran has enough enriched uranium for a bomb, but understand Iran is not likely to conduct a nuclear test, the first step, without having at least enough uranium for three or four bombs, unless as I wrote recently leadership sees a need to set off a crude device for purposes of rallying the nation prior to the election. The IAEA also claims Iran has slowed its enrichment for political reasons as it waits to see what the Obama administration offers in any upcoming negotiations. [I do not necessarily agree with this last assessment.] 

Significantly, Russia froze a sale of sophisticated S-300 anti-aircraft systems to Tehran until President Medvedev meets with President Obama. The S-300 would greatly complicate any strikes on suspected nuclear installations by the U.S. and/or Israel. 

Afghanistan: President Obama authorized an increase in U.S. forces of 17,000, below what the commanding general on the scene, David McKiernan, sought…30,000. Regardless, the hope is to stabilize the increasingly chaotic situation before the August vote. Total U.S. troop strength in Afghanistan will soon be at 50,000+. For his part, McKiernan said U.S. forces are currently “stalemated.” 

Secretary of Defense Robert Gates said the “allies must do more as well,” while envoy Richard Holbrooke said “victory, as defined in purely military terms, is not achievable.” McKiernan, in decrying the lack of additional NATO support, added, “It’s a region that is absolutely worth the commitment of the international community to ensure that it’s stable at the end of this.” 

As for Afghan President Karzai, he announced he is prepared to run a “Yankee Go Home” campaign for reelection. Needless to say, Karzai has zero friends in Washington these days and he is the one who needs to exit the scene. 

Pakistan: Meanwhile, if you wondered whether the Obama administration would relax the hardline stance taken by the Bush White House on going after the terrorists in the tribal lands, you should have had your doubts dispelled by now as we have seen one drone attack after another since Obama took office. The U.S. claims 11 of al Qaeda’s top 20 leaders have been killed or captured since August and there is little doubt some elements of Pakistan’s security apparatus are aiding U.S. efforts; just as there are others in the ISI playing against us in aiding al Qaeda and the Taliban. 

An example of the latter is the government signing a peace deal with the Taliban in the Swat valley whereby Sharia law will be enforced. This story was inaccurately portrayed in that Sharia has been the law of the land here since 1994. The difference now is that there will no longer be a “civil” court appeal process; and that is indeed a significant win for the Taliban. If you live there, forget watching television or dancing, unless you want your head lopped off. 

Finally, David Sanger’s new book claims that U.S. spy agencies tapped the phone lines of Pakistani generals which led to the discovery of the army’s dealings with the Taliban, as former President Musharraf played a ‘double game’ with the U.S. 

North Korea: As Secretary of State Hillary Clinton traveled in the region, the North threatened war with South Korea, while officials in Seoul labeled Kim Jong Il’s missile program a “serious threat” to international security, as well as its own; this as the North continues to prepare a long-range missile test while there is also the possibility it will shoot off some short-range bottle rockets into the Yellow Sea. 

On Thursday, Sec. Clinton candidly said the U.S. was concerned that a succession crisis is developing in Pyongyang. “If there is a succession, even if it’s a peaceful succession, that creates more uncertainty and it also may encourage behaviors that are even more provocative as a way to consolidate power within the society.” Clinton then told North Korea to basically ‘cut the crap’ with the “provocative” talk and get back to the negotiating table as she solicited suggestions from Seoul, Beijing and Tokyo on how to restart nuclear disarmament talks. 

[Some say Clinton screwed up by publicly speculating on Kim’s successor, a no-no. “Asia is all about face. What she’s done is to create a huge face problem for the North Korean Government,” an expert told the Sydney Morning Herald.] 

One thing is for sure, there is a lot of jockeying taking place in Pyongyang. About a week ago, Kim appointed a top nuclear weapons adviser to head the country’s defense ministry, 73-year-old Kim Yong Chun. An analyst in Seoul commented to Siam Daily News, “He understands his country’s nuclear weapons from A to Z,” while a change at the top is not likely to lead to significant nuclear policy reform. There is zero evidence of a faction in the government seeking bold economic reform. 

Selig Harrison is a former bureau chief for the Washington Post who has visited Pyongyang, at the government’s invitation, numerous times and was recently there in a highly-publicized visit. Harrison is being used to pass messages to the United States. In an op-ed for the Post this week, Harrison writes that Washington has to choose between two approaches, benign neglect and limiting the North’s arsenal to four or five weapons. 

“Benign neglect would mean a suspension of ongoing efforts to denuclearize North Korea by providing economic incentives and moving toward normalized relations. But it would also mean avoiding the hostile policies initially pursued by the Bush administration with their implicit goal of ‘regime change.’ 

“The strongest argument for this approach is that the United States has nothing to fear from a nuclear North Korea…. 

“Under the second approach, the six-party denuclearization negotiations would be continued with the goal of limiting North Korean nuclear weapons to the four or five warheads so far acknowledged. This would require, first, U.S.-orchestrated arrangements to provide the 200,000 tons of heavy fuel oil that have been promised…and, second, negotiating the terms for dismantling the reactor so that additional plutonium cannot be processed. [But the terms have toughened, including reciprocal inspections of U.S. bases in South Korea.]…. 

“While in Pyongyang, I found evidence that the hard-line shift in the North’s posture is directly related to Kim Jong Il’s health…. 

“The bottom line is that there is a continuing policy struggle in Pyongyang between the hard-liners in the National Defense Commission and pragmatists who want normalization with the United States. Continued U.S. engagement with North Korea leading progressively to economic and political normalization would strengthen the pragmatists.” 

China: Beijing went a full 100 days without rain, so the government began an aggressive cloud-seeding operation that led to heavy snow in the region on Thursday.  

Russia: With all the economic issues described above, it should be no surprise that Prime Minister Putin’s approval numbers are finally slipping, to 74% from the 80s. President Medvedev’s are down to 69% in the latest survey. 

It’s not going to help that a Moscow jury returned a not guilty verdict in the trial of three men accused of having a role in the murder of journalist Anna Politkovskaya. Politkovskaya was shot in the doorway of her Moscow apartment in 2006 and the trigger man has never been found. 

Meanwhile, the Kremlin, concerned over growing unrest, shelved plans to reduce the army by 280,000, as well as canceling a proposed reduction in the number of Interior Ministry troops, while also setting up a new command center in Moscow designed to deal with future street protests. [Owen Matthews and Anna Nemtsova / Newsweek] 

Venezuela: President Hugo Chavez triumphed in the referendum that removed term limits from the constitution by a 54-46 margin, thus enabling him to run for another term in 2012 as he continues with his socialist revolution. But the vote did point out there is a most viable opposition here, even though Chavez controls all levers of power. 

Japan: Finance Minister Shoichi Nakagawa was forced to resign amidst evidence he was drunk at a G7 news conference. Nakagawa said that while he had had some wine earlier, it was cold medication that caused him to slur his words and appear befuddled. The timing of the departure, though, could not have come at a worse time as Prime Minister Taro Aso’s popularity is already down to 10%. It’s so bad, Secretary of State Clinton had no problem meeting with the opposition leader, normally not done in a first visit by a key diplomat. Aso is Japan’s third prime minister in less than two years. 

Zimbabwe: This Sunday is President Robert Mugabe’s 85th birthday, so what do you give a Dirtball Maximus for a gift? Why might as well expropriate the remaining white-owned farms, that’s what, and so the few hundred left are being served summonses to force them to court and accept eviction notices. 

As for the celebration itself, supposedly it will include 2000 bottles of Moet & Chandon and ’61 Bollinger champagne, 500 bottles of Johnny Walker Blue Label, 400 portions of caviar and 8000 lobsters. 

Separately, new Prime Minister Morgan Tsvangirai said the cost of rebuilding his nation’s economy would run as high as $5 billion. And the World Health Organization announced 3,760 have died in the cholera outbreak. Maybe the 8,000 lobster will launch an attack on Mugabe before they’re boiled. 

“(The) plan to turn around the worst financial crisis facing the country in more than 50 years now carries not only enormous fiscal stakes but also political stakes that are nearly as large. 

“President Obama’s advisers are betting that the (stimulus package) will bear fruit quickly…. 

“(The Republican Party is making its own bet): that the stimulus package that Democrats rushed through Congress will have been deemed a failure by the time the 2010 elections arrive, leading voters to rebuke Obama and reward the GOP with much-needed victories…. 

“Republicans have made it clear that they intend to try to shift the economic debate toward concern about the federal deficit. 

“They are also preparing to use the ballooning deficit to renew their push for additional tax cuts…. 

“(But) Republicans rarely worried aloud about the deficit during the spending spree of George W. Bush’s presidency…Many conservative Republicans, including Sen. John McCain, blamed last year’s congressional and presidential losses on the lack of fiscal discipline shown by their party under Bush’s leadership…. 

“(Republican Congressman) Eric Cantor says bluntly that Obama and Democrats have decided to ‘assume ownership of the era of the bailout.’…. 

“But some Republicans worry that it could be their party paying that price…. 

“Karl Rove…predicted (in a Wall Street Journal op-ed)… ‘If history is a guide, sometime late this year or early next, the economy will rebound on its own. When that happens, Democrats will argue that their un-targeted, permanent spending actually revived the economy.’” 

–Last weekend, Republican Senator Lindsey Graham (S.C.) bashed the political process. “If this is going to be bipartisanship, the country’s screwed.”  

Bill Clinton offered his advice to Barack Obama on this topic, in an interview with ABC News. 

“Look, the American people, I think, know the president has tried to reach out to Republicans. And it takes two to tango. I think there are some who really believe that just-say-no politics is good politics. 

“It was – briefly, only briefly – in the ‘90s. It isn’t anymore. So, sooner or later, I think if he just keeps chugging along, just keeps the door open, invite ‘em to every economic conference, invite ‘em to every meeting, eventually, he’ll start getting some votes” in Congress.  

–Surprisingly, Congress’ approval rating hit 31% in the latest Gallup Poll, up from 19% in January. Of course this has to do with the stimulus plan, but look for the number to head back down once folks know more on the details. Among Democrats, 43% approve of Congress; Independents, 29%; Republicans, 19%. 

The all-time low point came in July 2008, when 14% said they approved of Congress’ job performance. [USA TODAY] 

–One rising star in the Republican Party, who probably should have been picked by John McCain to be his running mate (he was an early favorite), is South Carolina Governor Mark Sanford, who in an interview with the Wall Street Journal said, “We are at a real gut-check point on what drives our economy.” The U.S. is in jeopardy of creating a “savior-based economy,” with the federal government careening from “one ad-hoc decision to the next.” After the past few weeks, it’s hard to argue with this. 

–Roland Burris, U.S. Senator….I hope Mr. Burris enjoyed his 15 minutes of fame because any day now it will be over. Burris released an affidavit last Saturday wherein he acknowledged contacts last fall with former Illinois Governor Rod Blagojevich’s brother (and other staff members), who asked for help in fundraising for Blago in return for consideration for the Senate seat, an important fact not previously disclosed to a committee of the Illinois Legislature during Blagojevich’s impeachment hearing in January, nor before Burris was appointed to fill the seat in December. Ergo, it certainly appears Mr. Burris committed perjury.  

Two senators who are furious are Harry Reid and fellow Illinois Senator Dick Durbin, both of whom did not want to seat Burris in the first place, relented, and now look like fools. Durbin, upon learning of the news, said “This wasn’t a couple of questions that I can understand someone may forget, it goes way beyond that. To say that he wasn’t given the opportunity to explain himself is a load of B.S.” 

And as further proof Burris’ days are numbered, black ministers and other black politicians in Chicago and throughout the state are abandoning him in droves. 

–Can we talk? Pull out your world map and check out Secretary of State Clinton’s itinerary for her Asia adventure. Tokyo / Jakarta / Seoul / Beijing. Now I understand why she wanted to start with Tokyo, politically, but in going to Jakarta afterwards, she added the equivalent of a New York to Los Angeles segment to what should have been a trip ending in Jakarta. Seems like a major waste of money, if you ask me. But then no one did. 

–Chairman of the Senate Banking Committee Christopher Dodd (Conn.), received $5,948,568 in political donations from financial-services firms and their executives from 2007-2008, compared to ranking Republican Richard Shelby (Ala.) who received a mere $565,399. Of course Shelby hasn’t exactly been a friend of the industry, nor a proponent of the fixes for the financial crisis as proposed recently. [BusinessWeek] 

–During his confirmation hearings, Attorney General Eric Holder assured Republicans there would not be a wholesale criminal investigation of current or former government officials, though he wouldn’t rule out going after lawbreakers. 

Democratic Senator Patrick Leahy wants a “truth” commission to investigate Bush administration tactics, which would be a disaster. Fellow Democratic Senator Dianne Feinstein, head of the intelligence committee, is ‘reserving judgment’ on the topic. But Democrat Charles Schumer said he supports congressional restraint. 

–New York’s accidental Gov. David Paterson is trailing fellow Democrat, Attorney General Andrew Cuomo, 55-23, in the latest survey for the 2010 race. It doesn’t help when stories come out that as Paterson decries the budget emergency in New York State, he is giving big pay raises to selected aides, including a 46% hike to Cassie Prugh, “a confidential assistant,” raising her salary from $85,700 to $125,000. 

Fredric Dicker / New York Post 

“Gov. Paterson was being described as a dead man walking yesterday by even some of his closest advisers, who said the devastatingly low ratings in (the above noted survey), reflected a broad sense of an administration in meltdown…. 

“Words like ‘unprecedented’ and ‘unbelievable’ were being used to describe Paterson’s collapse in popularity – but many on the inside said they weren’t all that surprised. 

“Those who’ve known Paterson well for decades say he’s always been unfocused, self-centered, often lazy – and, at times, clownish and immature. More often that not, these traits have resulted in his having a disorganized and dysfunctional staff as a senator, Senate minority leader and now as governor. 

“Paterson…was also long known for his delight in extra-office activities including late-night partying, the excesses of which account for the bouts of dizziness and exhaustion that have dogged him for so long. 

“ ‘He’s a lifestyle politician: He loves the trappings, the planes, the Mansion, the bodyguards, the travel, the national TV time – not the work,’ said a Democratic activist who has known him well.” 

–The New York Times’ Maureen Dowd and I are channeling each other…yes, I was a bit surprised. Last week I wrote: 

“I’m a little disturbed at how Barack Obama treats Joe Biden in public,” saying the president was being disrespectful. 

“The etiquette breach was not widely noticed, swallowed by the cacophony over the economy. 

“But Joe Biden no doubt felt the sting when Barack Obama dissed him again in public…. 

“Joe is nothing if not loyal. And the president should return that quality, and not leave his lieutenant vulnerable to ‘Odd Couple’ parodies…. 

“(The) president should brush up on his Jane Austen. When Emma Woodhouse belittles Miss Bates, an older and poorer friend, at a picnic, Mr. Knightly pulls her aside to remonstrate. ‘How could you be so insolent in your wit?’ he chides, reminding her that it is unfeeling to humble someone less fortunate in front of others who will be guided by the way she behaves. 

–Walter Berns, a professor emeritus of government at Georgetown and resident scholar at the American Enterprise Institute, in an op-ed for the Journal. The topic is Abraham Lincoln. 

“We (remember) his second inaugural address, especially the concluding paragraph – the poignant beauty of it: 

“With malice toward none; with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan – to do all which may achieve and cherish a just, and a lasting peace, among ourselves, and with all nations.” 

“Six weeks later he was murdered. We say that a man can be known by the company he keeps. So I say that a nation, a people, can be known and be judged by its heroes, by whom it honors above all others. We pay ourselves the greatest compliment when we say that Abraham Lincoln is that man for us.” 

–It appears pilot error was the cause of the Buffalo plane crash that claimed 50 lives. I didn’t want to write the following last week because it was inappropriate at the time, but I was listening to a former pilot from Delaware in the hours after the crash on WCBS-AM radio, here in New York, and it seems he nailed it. He said then that the Continental Connection Flight 3407’s crew probably relied too heavily on the auto pilot and when they took over the controls for approach, the plane was compromised and they couldn’t handle it. I wish I could remember the fellow’s name and I apologize for that. 

–Of course the Buffalo crash is in such contrast to Chesley Sullenberger and Flight 1549. He commented on his own experience in a piece for Newsweek. 

“When I was very young, my father impressed upon me that a commander is responsible for the welfare of everyone in his care. Any commander who got someone hurt because of lack of foresight or poor judgment had committed an unforgivable sin. My father was a dentist in the Navy, serving in Hawaii and San Diego from 1941 to 1945. He never saw combat, but he knew many who did. In the military, you get drilled into you the idea that you are responsible for every aspect of everyone’s welfare. 

“During every minute of the flight, I was confident I could solve the next problem. My first officer, Jeff Skiles, and I did what airline pilots do: we followed our training, and our philosophy of life. We valued every life on that airplane and knew it was our responsibility to try to save each one, in spite of the sudden and complete failure of our aircraft. We never gave up. Having a plan enabled us to keep our hope alive. Perhaps in a similar fashion, people who are in their own personal crises – a pink slip, a foreclosure – can be reminded that no matter how dire the circumstance, or how little time you have to deal with it, further action is always possible. There’s always a way out of even the tightest spot. You can survive.” 

–Carbon emissions have been growing at 3.5 percent per year since 2000, up sharply from the 0.9 percent annual rate in the 1990s, as reported by Christopher Field of the Carnegie Institution for Science. Of course with the rise of China, and its widespread use of coal, this shouldn’t surprise anyone. No part of the world had a decline in emissions from 2000 to 2008. 

–Goodness gracious. “The U.S. space agency’s Fermi telescope has detected a massive explosion in space that scientists say is the biggest gamma-ray burst ever detected…. 

“The spectacular blast, which occurred in September in the Carina constellation, produced energies ranging from 3,000 to more than five billion times that of visible light, astrophysicists said.” 

Ah, but the blast occurred 12.2 billion light years away. By contrast, Pluto is 12 light hours away. And this is amazing. 

“Taking into account the huge distance from Earth of the burst, scientists worked out that the blast was stronger than 9,000 supernovae – powerful explosions that occur at the end of a star’s lifetime – and that the gas jets emitting the initial gamma rays moved at nearly the speed of light.” [Agence France Presse] 

I’m assuming if this had happened closer to Earth, it would have resulted in a day off from school for our kids. 

–Finally…TIGER WOODS IS RETURNING TO GOLF! Woods has chosen next week’s WGC-Accenture Match-Play Championship for his return, which could be a bit anticlimactic if he’s eliminated in the first or second round and doesn’t make it to the weekend’s television coverage, but it obviously provides a huge shot in the arm for the tour and its fans. This coming Masters Golf Tournament in April has the possibility of providing some incredible drama should Tiger prove to be all the way back from his knee surgery by then. Many of us are looking forward to having our minds taken off the drama provided by the global financial crisis, if even for a few hours. 

Dow Jones -6.2% [7365]
S&P 500 -6.9% [770]
S&P MidCap -7.7%
Russell 2000 -8.3%
Nasdaq -6.1% [1441] 

Have a great week. At least try to.  I appreciate your support.