For what is supposed to be a dull summer week, there was no shortage of topics to talk about, though for crying out loud, that’s been the case the entire past year. Some of us would like to pause under a shade tree, sipping a cool lemonade, or adult beverage of our choice. But nooooooo.
President Barack Obama, for example, chose his vacation week to renominate Fed Chairman Ben Bernanke, Mr. Bernanke’s term expiring January 31, but Obama, recognizing it would be best to make a decision earlier than later went with the bearded one, citing Bernanke’s “calm and wisdom.”
Well, Bernanke clearly blew it before everything began to unravel a year ago, but most would agree he’s largely gotten it right since, at least thus far. And with unemployment high, capacity utilization historically low, and zero inflation, the Fed can keep interest rates near zero. The question of the day, however, is will this loose money policy eventually lead to new bubbles? The Fed is also now tasked with withdrawing all the excess credit before fanning inflation, while at the same time withdrawing too quickly can kill the recovery. It won\’t be easy.
But let’s start with the economy and a potential recovery. This was a week, like the prior one, that had some legitimate good news…not just “less bad”…as the S&P/Case-Shiller index on housing and 20 major metropolitan markets revealed that prices rose 1.4% in June over May, the second consecutive monthly gain, with 18 of the 20 trending positive. And in a separate barometer, median prices in California rose in July over June by a range of generally between 3% and 6%. As long-time resident Ronald Reagan would have said, “Not bad…not bad at all.”
New home sales for July also soared 9.6%, nationwide, far better than expected, in yet another sign of a bottom in this sector. And two readings on consumer confidence came in better than expected as well, though the markets misread one of them, frankly.
Then you had solid news from both Dell and Intel, late Thursday and early Friday, whereby Dell reported sales and profit for its recent quarter that beat estimates as PC and notebook sales came in better than expected owing to a consumer that has a bit of a bounce in their step, or so it seems. Business spending, on the other hand, remains punk.
Intel raised its revenue outlook for the current quarter on stronger than expected growth in its microprocessors, another good sign. This is exactly the kind of news we’ve been looking for. But then you have the pessimists.
Mortimer B. Zuckerman / Editor-in-chief, U.S. News & World Report
“The metrics show that all the drivers of the previous boom – consumers, housing, and easy credit – are in reverse gear and will stay that way as a drag on the growth of the economy even when it moves technically out of the recession.
“The most important signal of any recovery is an increase in employment. We are not likely to see that soon for a number of reasons. Before hiring new workers, companies will increase the hours of temporary workers and move workers they kept from part time to full time. Had employers not been forced to reduce the workweek to slightly over 33 hours, we’d have another 3 million out of work now. Equally disturbing is that the number of people out of work 27 weeks or longer has reached a record 5 million, suggesting that job losses have been caused by structural changes in the economy that may be permanent….
“We can’t look to government to get us going again. The current budget deficit of about 13 percent of GDP substantially forecloses that option, so if we are to have a sustained recovery, it will have to come from the revival of private demand.
“Just consider what the average American is facing: a huge erosion of net worth via losses in financial equities and in housing wealth, the end of easy and cheap credit, a jobless recovery. And oil prices are rising. Households still have a lot of debt in relation to disposable income and a long way to go in deleveraging before they open up their wallets. The poorer two thirds of U.S. households are virtually broke. The wealthier ones are facing substantial tax hikes. Taken together, it’s a lethal combination for consumer spending. Without any fundamental improvement in either income or wealth foreseeable in the household sector, consumer spending will stay weak. These are the reasons I think forecasters relying on an inventory-led bounce in growth may be whistling in the dark. If we have one, it will most likely stall.
“The government spokesmen are constantly indulging in happy, confidence-building public talk. While this is understandable, the statistics cited above reflect a need for caution on their part lest their credibility be undermined. Surely, they understand that this financial crisis is unprecedented and hence unpredictable. Therefore, we must be positioned to brace ourselves for the long haul.”
Last week I told you the Obama administration was going to hike its long-term deficit forecast by $2 trillion which it proceeded to do on Tuesday. Tax revenues are also estimated to be 17% lower in 2009 than 2008.
“Earlier this year when President Obama was selling his first budget blueprint, he promised to end years of ‘borrow and spend’ budgeting. Yesterday, reality struck….
“A burst of sustained economic growth, which we’d love to see, would substantially boost tax revenues and reduce future debt. But there’s nothing in the Obama budget that nurtures or rewards growth or small business. Most of the major policy initiatives, such as the $1 trillion cap-and-trade energy tax, are a drag on growth. Mr. Obama wants to raise capital gains, dividend and income tax rates, which will reduce risk taking, innovation and investment. The House health-care bill would impose an 8% payroll tax on millions of small business owners, which will destroy jobs.
“The White House issued a statement yesterday that the President is ‘very concerned about these out-year deficits.’ But apparently not so concerned as to stop pushing for a new $1 trillion health-care entitlement that is conveniently not included in these latest budget forecasts.
“Obamanomics has turned into an unprecedented experiment in runaway government with no plan to pay for it, save, perhaps, for a big future toll on the middle class such as a value-added tax.”
Separately, the Journal opined on the reappointment of Ben Bernanke.
“A striking fact of the last two years of financial trouble is how accountability has differed in the public and private spheres. On Wall Street and across the country, decades-old firms have failed, fortunes have vanished, and some former captains of finance face jail or fines. In Washington, meanwhile, most regulators and members of Congress remain on the job, often with enhanced power.
“That’s certainly true of the Fed and Mr. Bernanke, whom the President praised yesterday for ‘bold action and outside-the-box thinking that has helped put the brakes on our economic freefall.’ In a speech last week to a gathering of central bankers at Jackson Hole, Wyoming, Mr. Bernanke offered his own crisis narrative that also cast the Fed as the hero. Wall Street seems pleased as well by the re-appointment, as it once again makes money from the Fed’s accommodative policy and near-zero interest rates.”
Stephen Roach, chairman Morgan Stanley Asia / Financial Times
“Barack Obama has rendered one of his most important post-crisis verdicts: Ben Bernanke will be nominated for a second term as chairman of the Federal Reserve. This is a very shortsighted decision. While America’s head central banker deserves credit for being creative and courageous in orchestrating an unusually aggressive monetary easing program, it is important to remember that his pre-crisis actions played an equally critical role in setting the stage for the most wrenching recession since the 1930s. It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure. Maybe the patient needs a new doctor.
“Mr. Bernanke made three critical mistakes in his pre-Lehman incarnation: First, and foremost, he was deeply wedded to the philosophical conviction that central banks should be agnostic when it comes to asset bubbles. On this count, he stood with his predecessor – serial bubble-blowing Alan Greenspan – who argued that monetary authorities are best positioned to clean up the mess after the bursting of asset bubbles rather than to pre-empt the damage….
“Second, Mr. Bernanke was the intellectual champion of the ‘global savings glut’ defense that exonerated the U.S. from its bubble-prone tendencies and pinned the blame on surplus savers in Asia. While there is no denying the demand for dollar assets by foreign creditors, it is absurd to blame overseas lenders for reckless behavior by Americans that a U.S. central bank should have contained. Asia’s surplus savers had nothing to do with America’s irresponsible penchant for leveraging a housing bubble and using the proceeds to fund consumption….
“Third, Mr. Bernanke is cut from the same market libertarian cloth that got the Fed into this mess. Steeped in the Greenspan credo that markets know better than regulators, Mr. Bernanke was aligned with the prevailing Fed mindset that abrogated its regulatory authority in the era of excess. The derivatives’ explosion, extreme leverage of regulated and shadow banks and excesses of mortgage lending were all flagrant abuses that both Mr. Bernanke and Mr. Greenspan could have said no to. But they did not. As a result, a complex and unstable system veered dangerously out of control….
“Ultimately, these decisions boil down to the person – in this case, Mr. Bernanke – who is being charged with the awesome responsibility as America’s chief economic policymaker. As a student of the Great Depression, he should have known better. Yes, he reacted strongly after the fact in taking actions to avoid the pitfalls highlighted by his own research. But he lacked the foresight and courage to resist the most reckless tendencies of the era of excess. The world needs central bankers who avoid problems, not those who specialize in post-crisis damage control. For that reason, he should not be reappointed. Let the debate begin.”
Taking a look around the world, China continues to dominate discussion as the Bank of China wants to ensure “reasonable and ample” liquidity, with Premier Wen Jiabao weighing in that the government will maintain its fiscal and monetary policies as the economy’s recovery isn’t stable. But then there were further statements that the central bank wants smaller financial institutions to cut back on lending due to overcapacity in some areas, such as in the steel industry. As Premier Wen put it, China needs to be cautious against being “blindly optimistic,” while in the case of the banks being concerned with a ton of bad loans on their books.
In Japan, exports rose 2.3% in July over June, a solid positive, while the jobless rate hit a new high of 5.7% and consumer prices fell 2.2% in July over a year ago, further evidence of deflation though the energy components, when viewed versus a year ago, are too negative when measured with today’s realities.
In Europe, all manner of measures of both business and consumer confidence continue their uptrends, but eurozone retail sales fell for a 15th consecutive month.
–As noted above, the news for the week was largely good but we’ve come so far, so fast, further strong gains require something even better. That said, while almost everyone is calling for a correction after a 50% run-up since the March 9 lows, stocks managed to eke out further gains with the Dow Jones crossing 9600 before finishing the week at 9544, up 0.4%. The S&P 500 added just 0.3%, while Nasdaq tacked on 0.4% and is now up 28.6% on the year.
For my part, I really don’t care how we get there, just as long as we do as I haven’t deviated one iota from my prediction for 2009 that the Dow and S&P finish up 20% and Nasdaq 30%. I am, however, still concerned about Iran and H1N1 as potential game-changers, with September being a critical month for both.
–U.S. Treasury Yields
Bonds rallied anew thanks in part to continued solid acceptance of the Treasury’s auctions.
–The FDIC identified 416 “problem institutions” in the second quarter, up from 305 in the first, and while chairman Sheila Bair said there were distinct signs of improvement in the economy, many more banks will fail as the institutions move from the housing collapse to problems in the commercial real estate market, along with the ongoing issue of high unemployment. But, at the same time, 96% of banks were deemed ‘well capitalized’ by regulators.
The FDIC’s balance to deal with further bank failures is down to $10.4 billion but Ms. Bair said the fund is in better shape than it looks, though it will have to levy another special assessment by the end of September to help replenish it, and many say that this will of course hurt the banks’ profits as they attempt to grow out of their problems.
At the same time, no one has ever lost a dollar in an insured account and as I’ve written before, look how seamless the failures to date (81 in 2009 heading into the weekend…oops, make it 84) have been. Yes, we have a problem, but it’s manageable and the losses miniscule compared to some of the outlays we see coming out of the Obama administration. This issue does not keep me up at night. The Armageddon scenario is out the window. The system, in this respect, works.
–On the H1N1 virus front, there was disagreement between an administration panel looking into the risks and the Centers for Disease Control. The White House warned that there could be 90,000 deaths from swine flu compared to 36,000 in a typical flu season, with 300,000 ending up in intensive care, thus overwhelming the hospitals.
But the new head of the CDC, Dr. Thomas Frieden, basically said there was no reason to panic and that the figures were too high.
–On the issue of health care, I just have to note that last week I pounded the table, again, on former Treasury Secretary Paul O’Neill’s focus on preventing infections and then on Tuesday the Wall Street Journal had an extensive piece by Laura Landro titled “Hospitals Own Up to Errors: Some Find That Confronting Mistakes Reduces Litigation – and Future Mishaps.” To wit:
“(The) federal Agency for Healthcare Research and Quality reported in May that the rate of adverse events – a key measure of patient safety defined as unintended harm during medical care – has risen by about 1% in each of the past six years, in part because of a rise in hospital infections. The old and the young are especially vulnerable: One in seven hospitalized Medicare patients experience one or more adverse events, and one in 15 hospitalized children are harmed by medication errors, other studies show.”
–Owing largely to steep reductions in manufacturing during the recession, natural gas prices hit another seven-year low as inventories continue to pile up, with the price dropping to below $2.70 per 1,000 cubic feet at one point, a price not seen since Aug. 2002, before finishing the week at $3.00.
–Toyota Motor Corp. is shutting an assembly plant for the first time in its 72-year history, a joint venture with GM in Fremont, Calif., a big blow to 5,400 workers there, with Toyota shifting production to Ontario, Canada, and San Antonio. Toyota is expected to produce 7.2 million vehicles globally this year, compared with 9.7 million in 2007. In its home market, production is slated to fall to 3.3 million vehicles vs. 4.9 million in ’07.
–Meanwhile, cash-for-clunkers is over, at least temporarily, and sales exceeded 690,000, with the cost approximating $2.9 billion. But now traffic in the showrooms is back to a crawl, as expected.
The top vehicle purchased was the Toyota Corolla, followed by the Honda Civic and Toyota Camry. The top trade-in was the Ford Explorer, followed by the Ford F-150 pickup and the Jeep Grand Cherokee.
–GM is projecting U.S. sales of 10.5 million vehicles for this year and 12.5 million in 2010 as consumer confidence returns. If they are right about 2010, I can guarantee stocks would then finish higher on the year.
–Shares of AIG have soared as the highly-regarded Robert Benmosche takes over as CEO, and as Benmosche offered that he has been in discussions with former CEO Maurice “Hank” Greenberg, with Greenberg saying “If Bob Benmosche seeks any assistance, whatever he needs me to do, I’ll be glad to give him.” It’s hoped that Greenberg could help facilitate new private capital investments in the company.
–Deflation Alert: Microsoft has cut the price of its high-end Xbox 360 console by $100, matching Sony’s earlier $100 price cut for its PlayStation 3.
–The newspaper advertising business continues to worsen. In the second quarter, revenues were $2.8 billion short of year ago levels, which were hardly good either in what is now a three-year slide of sickening proportions. But at least there are tepid signs the worst is over, though the industry needs a rapid recovery, not just stabilization.
[Separately, most magazines saw newsstand sales fall 15% to 20% in the first half of ’09 vs. ’08.]
–Inflation Alert: Everyone is raising beer prices; Heineken, Foster’s, Anheuser-Busch, MillerCoors….I’m tellin’ ya, us beer drinkers can’t get no respect. The brewers are blaming rising commodity prices.
[Speaking of beer, Malaysia granted a Ramadan reprieve to the first Muslim Malay woman to be sentenced to caning for drinking beer, but once the month-long fast is over, Kartika Sari Dewi Shukarno will indeed be lashed. Malaysia, known to be a moderate Muslim nation, nonetheless has Shariah law that forbids Muslims from consuming alcohol and Kartika was arrested in a hotel lounge. Drinking is legal for non-Muslims.]
–The Postal Service is hoping 30,000 employees will take a buyout offer of $15,000 as a way of trimming costs some $500 million over the next two years. The majority of those targeted work in the processing area. Letter carriers are in different unions and weren’t offered the buyouts because the number of addresses the post office must service is growing.
–This hasn’t been getting any play in the United States, but there have been at least half a dozen cases in France of “exploding iPhones, with victims saying the screens either cracked in their hands or suddenly shattered.” One teen suffered an eye injury. Apple has previously been accused of trying to hush up 15 cases of iPod music players heating up and bursting in flames in the U.S. and Britain, all apparently due to overheating lithium ion batteries. While none of the injuries has been serious, Apple was forced to defend itself before the European Union this month.
Granted, vs. the 1.2 million iPhones sold in France, for example, the number of cases, if true, are highly isolated but from a PR standpoint the issue bears watching.
–Foreign direct investment in Russia plunged 45% the first six months of the year, a bad thing. Without it, Russia will increasingly fall behind on the competitiveness front. I didn’t realize that today more than half the stock market is controlled by the state. Actually, consider that the largest foreign investor in Russia this year is the Netherlands, followed by Cyprus and Luxembourg; the latter two not exactly your big powers.
–Facebook is looking to boost its staff by 50% by year end, this as rival MySpace previously announced it was cutting 30%. That’s all you need to know in the battle between the two.
–And now…Casino Chat! The New York Post is reporting that the Mashantucket Pequot Tribal Nation could be defaulting on a $700 million credit line it holds with a syndicate of banks for the tribe’s Foxwoods casino in Ledyard, Conn. But the owners claim any filings won’t impact casino or hotel operations.
And then there is the case of the ‘whale.’ As reported by the South China Morning Post’s Neil Gough:
“A Japanese-American gambler who lost more than $110 million in Las Vegas casinos is waging a Nevada court battle….
“Terrance ‘Terry’ Watanabe, who lost the money in casinos owned by Harrah’s Entertainment, is asking a Las Vegas court to throw out charges that he defaulted on gambling debts. He alleges the casinos plied him with alcohol and prescription drugs to keep him intoxicated while playing….
“If successful, Mr. Watanabe’s move could prompt a rethink of the way that Las Vegas casinos have, for decades, enforced gambling debts via the courts….
“By all accounts, Mr. Watanabe, 52, was a ‘whale,’ or a gambler of epic proportions. His lawyers estimate his play at Harrah’s Caesars Palace and Rio casinos in Las Vegas accounted for around 20 percent of revenue at both properties in 2006 and 2007.” [Good god!]
Watanabe lost $112 million in 2007, playing at seven of Harrah’s establishments. “About half of that amount was from playing slot machines.” Slots?! And he also bet extensively on horse races in Hong Kong as well as in Macau’s casinos, but nothing on the level of his Vegas adventures.
Well, needless to say, Watanabe was bouncing checks all over the place and his credit ‘markers’ weren’t good.
–The real estate market in the Hamptons is picking up, a good sign for all of us, even if, like me, you couldn’t care less about the rich and famous that call this area home. For instance, there were 104 real estate transactions there in the first quarter, and 142 in the second. But, from June 19 to Aug. 19, 236 either closed or were in contract. [Crain’s New York Business]
–I love it…the Financial Times reports that Germans, Austrians, and Hungarians are hoarding traditional light bulbs, with sales rising 34% in Germany. In the UK, however, where retailers and energy companies voluntarily agreed to phase out incandescent bulbs nine months ahead of an EU ban, sales dropped 22%, though the UK had seen similar old-style sales last year. I continue to hoard them myself.
Foreign Affairs
Afghanistan: The past month it’s felt like the place is totally imploding as this week there were growing accusations the presidential election was rigged by incumbent Hamid Karzai (undeniably true), while a series of simultaneous car bombs in Kandahar killed at least 40 in one of the deadlier attacks of the war. Additionally, the number of foreign troops killed in 2009 has now exceeded 300, with over 65 in August, including at least 45 Americans, a new monthly record. Defense Secretary Robert Gates’ claim that NATO forces must show progress over the coming year or the American people would abandon the effort was backed by Senator John McCain.
Back to the election, preliminary results show that there will be a run-off between Karzai and leading rival Abdullah Abdullah (sic), Karzai’s former foreign minister, assuming Karzai didn’t rig the vote enough to gain 50%. Abdullah said, “I will try to control emotions and avoid anything which can lead to violence. From the other side, I will try to fight it legally in whatever way possible.”
As for the Taliban, it’s no surprise they are exacting revenge. As Anand Gopal of the Wall Street Journal reports:
“In Wardak province, west of Kabul, local officials say the insurgents have been setting up checkpoints to look for voters who are easily identifiable by the blue ink marks on their fingertips. In one such incident in Saydabad district, the Taliban killed three voters, according to witnesses. Also in Wardak, insurgents chopped off the fingers of four people who had voted at the provincial capital….
“In at least three provinces, insurgents also intercepted convoys carrying ballots and burned the papers.”
Last Saturday, I wrote “I guarantee that Afghanistan, not some domestic issue, including health care and the economy, will be the prime debating topic in Washington in 2010.” Sunday’s New York Times than had a lead story by Peter Baker, “L.B.J. All the Way?” with the side bar, “Maybe Barack Obama will win his domestic battles. Maybe the economy will bounce back. But his presidency may ultimately be defined in the rugged terrain of Afghanistan.” Obama is well aware it can derail his entire agenda.
David Ignatius / Washington Post
“Waffling won’t be possible much longer. The U.S. military commanders in Kabul want a commitment for more troops and additional resources next year. But Vice President Biden is leading a growing camp of skeptics within the administration who argue that it’s time to scale back the mission, not expand it. Meanwhile, the latest Post-ABC News poll shows growing public opposition to a wider war.
“It’s easy to describe the ideal outcome in Afghanistan – a military buildup that rocks the Taliban enough that it will be prepared to negotiate a deal allowing U.S. troops to begin withdrawing next year. And that’s the essence of the U.S. strategy. But to make it work, the enemy must be convinced that the president is politically strong enough to stay the course, despite domestic opposition.
“Sound familiar? That, of course, was the dilemma that President Bush faced in Iraq. Now that Obama is commander in chief, he faces a similar challenge. A few months ago, when he was at the height of his popularity, Obama made it all look easy. Now, we get the political reality check – and Leadership 101.”
Iran: The large public protests may have stopped, but the political crisis continues. Curiously, Supreme Leader Ayatollah Khamenei said he does not accuse opposition leaders of being tools of the U.S. and Britain, “since this issue has not been proven to me” (though he did still warn the two nations not to interfere in Iran’s internal affairs). Following the election, President Ahmadinejad pounded away at the opposite thesis, however inaccurate.
At the same time, Hashemi Rafsanjani, who one month earlier said the Islamic Republic was “in crisis,” suddenly gave a speech calling for unity. This occurs as one of the opposition / presidential candidates, Karoubi, continues to allege that some of the protesters were raped in detention.
Meanwhile, at least 7 of President Ahmadinejad’s 21 nominees for cabinet positions are being challenged by parliament, while the fourth round of show trials was held and on Friday, Ahmadinejad called for the prosecution of opposition leaders without naming them.
And then you have the nuclear weapons issue. There are reports Iran has slowed the uranium enrichment process as some believe the sanctions are biting and that Iran can not come up with the requisite ore and other materials. But there was another report that Ayatollah Khamenei has rejected calls by pragmatists to temporarily suspend uranium enrichment to better relations with the West; if true, a further sign of divisions in the leadership ranks.
Then there is outgoing International Atomic Energy Agency chief Mohamed ElBaradei, whose term expires Nov. 30. ElBaradei is holding a detailed dossier on Iran’s nuclear program but has refused to divulge the details since September of ’08, according to reports. On Friday, though, he presented a summary to an executive committee of the IAEA that showed Iran was still lacking in disclosure. The U.S., Britain, Germany and France, however, are furious he hasn’t released further details. The IAEA is holding two separate meetings in September at which ElBaradei will be pressed again.
Which leads me to President Barack Obama, who has already said that Iran must begin serious negotiations with the West by late September or face “crippling sanctions.” But with all the turmoil in the Iranian leadership, just who is the White House and the West supposed to negotiate with?
Iraq: Just as there is a seeming leadership vacuum in Iran, Iraq’s political situation is worsening ahead of January’s parliamentary elections. A new Shia alliance has emerged that does not include Prime Minister al-Maliki, while one of the two or three leading Shia power brokers, Abdul Aziz al-Hakim, succumbed to cancer; Hakim being the leader of the dominant political party, though it became part of the new alliance that includes the anti-American cleric Moqtada al-Sadr. Hakim’s Badr Brigades have been absorbed into the Iraqi military and security forces.
But while Hakim was liked by the United States (or at least found useful), he had close ties to Iran, witness that he was treated in a Tehran hospital.
Israel: Prime Minister Netanyahu is supposedly close to an agreement on the settlements issue with the White House that would then pave the way for talks with the Palestinians; that is if the Palestinians think it’s enough. They have been steadfast in saying there is no use in negotiating if Israel doesn’t cease with its settlement activity, as is the Arab states’ view, but Israel has insisted on “natural growth” in existing settlements while halting ‘new’ construction. Evidently the latter is a position the Obama administration appears to be moving towards which will not be enough for the Palestinians. Germany and France have also weighed in on the side of the Palestinians regarding this specific issue.
[As for Israeli attitudes, back on May 17, a poll conducted for the Jerusalem Post found 31% believed Barack Obama was pro-Israel, while 14% considered him pro-Palestinian and 40% were neutral. In the latest survey, only 4% thought the president’s policies were pro-Israel, while 51% said he was pro-Palestinian and 35% were neutral.]
Lebanon: Prime Minister-designate Saad Hariri said Hizbullah would be part of the next government “whether Israel likes it or not.” Previously, Israeli Prime Minister Netanyahu had stated that if Hizbullah was in the government, and then attacked Israel, Israel would consider it an attack by the government in Beirut.
But it’s been over ten weeks since the June 7 election and Hariri still hasn’t formed a coalition.
Separately, there are fears that the tribunal that has been investigating the assassination of Saad Hariri’s father, Rafik, since 2005, will be issuing its first indictments shortly and it could accuse Hizbullah of complicity. Hizbullah’s Sheikh Nasrallah has previously said that if his group is named there will be a severe backlash and this could reignite civil war. [Personally, I think Syria acted alone…not Hizbullah.] Druse leader Walid Jumblatt said the tribunal report is more explosive than “Ein Rummaneh’s bus” – referring to a 1975 attack on a bus that precipitated the 15-year civil war.
Libya: The furor over the release of Lockerbie bomber al-Megrahi continues to grow and as I wrote last week before some of the details became clearer, “Scotland need(s) to understand there could be an economic impact.” That’s just the start of it. Scotland’s government itself is rightfully under fire and this case has struck a nerve in the U.S. unlike any I can remember. You’d be hard-pressed to find a single, educated American who does not vehemently disagree with the decision to release al-Megrahi for “compassionate reasons.”
And how many times do you have the likes of Admiral Mike Mullen, the Chairman of the Joint Chiefs of Staff, and FBI Director Robert Mueller blast the Scottish government as they have. Both are not known to issue the kinds of statements they did in reaction to this travesty, as Mueller accused Scotland of “making a mockery of the rule of law” and giving “comfort to terrorists around the world.”
Remember, the Scottish government has a large degree of autonomy from its British counterpart and the Brits are taking threats of an economic boycott on behalf of Americans very seriously.
Of course the situation has been compounded by questions directed at the British over whether there were commercial interests involved in Megrahi’s release. Business Secretary Lord Mandelson, for example, met twice in the past four months with Saif Gaddafi, the son of the Libyan leader, and as Megrahi was being flown home last Friday, Saif Gaddafi reportedly told him: “You were on the table in all commercial, oil and gas agreements that we supervised in that period. You were on the table in all British interests when it came to Libya.”
Prime Minister Gordon Brown himself apparently discussed details of the release with Colonel Gaddafi six weeks ago while there are further reports the British government put pressure on Scotland to release Megrahi. Gaddafi himself congratulated the Scottish authorities for “their courage and for having proved their independence despite the unacceptable and illogical pressures they faced.” Then Col. Gaddafi said:
“And I say to my friend (Gordon) Brown, the prime minister of Britain; his government’ the Queen of Britain, Elizabether; and Prince Andrew [ed. Andrew was supposed to go on a trade mission, since scrapped], who all contributed to encouraging the Scottish government to make this historic and courageous decision, despite all the illogical objections.”
Editorial / Washington Post
“Mr. Megrahi’s joyful airport homecoming…is proof that the government of Moammar Gaddafi feels not the slightest trace of remorse for the slaughter at Lockerbie, despite having admitted its complicity in the bombing and paid $2.7 billion in compensation to the victims’ families. It makes a mockery of Washington’s decision to elevate Libya’s status from international pariah to the community of civilized nations. If the Libyan regime does not heed the U.S. demand that Mr. Megrahi remain under house arrest until his death, the Obama administration should consider reinstituting sanctions.”
“The Brown administration knew the release of the bomber would be massively controversial. That is presumably why the Libyans were begged not to give Mr. Megrahi a hero’s welcome – attracting Mr. Brown’s only comment so far, that he was ‘repulsed’ by the reception. That Libya took no notice of his plea for seemliness has helped turn the release into a public diplomacy gaffe of epic proportions.
“Across the Atlantic, the decision in Edinburgh has produced a consensus that embraces pretty well everyone from President Barack Obama to Rush Limbaugh. It has hugely damaged our reputation with the U.S.”
[A poll conducted for the London Times reveals 61% of Brits disagree with the decision to release Megrahi, with 27% agreeing. And by a two-to-one margin, respondents believe the release had more to do with oil than Megrahi’s illness.]
North / South Korea: South Korean President Lee met with a North Korean delegation in Seoul for the memorial service for former South Korean leader Kim Dae-jung and a personal call for improved ties from leader Kim Jong-il was delivered to Lee. Later, the two sides reached a deal on resuming reunions of families separated by the Korean War. Some say the charm offensive is because the North is low on food.
Separately, the South attempted to become the 10th nation to launch a satellite into space but the mission failed and the satellite overshot its orbit. Previously Seoul had launched 11 satellites but all from foreign-made rockets sent from overseas sites.
On the nuclear front, Pyongyang invited the U.S. envoy overseeing ties between the two for a visit to address the weapons program. Heretofore Stephen Bosworth has been ignored.
Russia: For the first time, Russian prosecutors accused Ukrainian soldiers and nationalists of fighting alongside Georgia in last summer’s war. Ukraine denies its soldiers were involved, but didn’t deny other nationals may have been.
On the missile defense front, the outlook for an agreement between Moscow and Washington is bleak and a basic lack of trust is the reason. For the Obama administration’s part, should there be a joint operation, the fear is that Moscow would have the power to “veto” any proposed action in the event of an Iranian missile launch. The U.S. is also concerned technical information on any deployed systems would be leaked to third parties “either for political reasons or for sale,” according to a Russian analyst at the U.S. Naval Postgraduate School. [Global Security Newswire]
China / Taiwan: Taipei’s government has approved a request for a visit by the Dalai Lama, a move that will rile Beijing amidst growing signs of a thaw between the two. The move was precipitated by local officials seeking the Dalai Lama’s help in dealing with the catastrophic typhoon that hit earlier in the month. This would be his first visit to the island in eight years. Taiwanese President Ma stressed the visit is for religious reasons only, and Beijing’s response was surprisingly muted, saying it “resolutely opposed” the visit “in whatever form and capacity,” but this was nowhere near as harsh as past reactions.
[Separately, President Ma pledged $4 billion to reconstruct the areas most damaged by Morakot, as Ma’s approval rating has plunged to below 20 percent from 50 just three months ago. Many in the opposition also took note of the risks in the Dalai Lama visit, with a spokesman saying, “When people from all sectors on the mainland are lending a hand to help Taiwan reconstruct and overcome the typhoon disaster quickly, some (in Ma’s party) have taken the chance to plot the Dalai Lama’s visit to Taiwan. Obviously this is not for the sake of disaster relief. It’s an attempt to sabotage the hard-earned good situation in cross-strait relations.”]
Japan: In Sunday’s big election, the opposition Democratic Party could win as many as 2/3s of the seats in parliament according to the latest polls, thus ending more than 50 years of almost unbroken rule by the conservative Liberal Democratic Party (LDP).
–I have the music for the original Broadway version of “Camelot” in my car CD-changer and play a few of the tunes each week, as I imagine some drivers that pull up alongside me may wonder why I’m trying to imitate Robert Goulet.
Alas, the Kennedy version of “Camelot,” which ended this week with the death of Sen. Edward Kennedy, was a deeply flawed one; idealistic but tinged with tragedy, some of it self-inflicted.
I was not a fan of the senator, but at times like these that’s not important. Better to remember his contributions, which were many, to America’s political tableau.
“The last time I saw Ted Kennedy he was, in Tom Wolfe’s phrase, ‘A man in full.’ It was Labor Day, 2008, on Cape Cod, and he was singing and laughing hugely through one of those parody songs that folks compose for friends’ birthdays. He was great. He lit up the place.
“He was free at last, I thought. He had the right job and the right wife. He was free of the presidential ambitions forced on him by others, especially by his dead brothers. He was free of being a Kennedy. He was what he was meant to be, a great senator. The great senators stand for something, and they stay a long time and get things done. He had a mission, making health care an American right, and too many friends to count.
“I followed him in the 1970s, at a time when people still thought he would be president one day. I was not one of those people; my gut told me that he believed the job would crack him, or get him killed. Looking back at my notes then, this is what I found:
“ ‘No scholar, he has people to do that for him. BUT…on any given day he can absorb two 20-pound briefcases of memos and background papers, take a couple of dozen verbal briefings ranging from 30 seconds to an hour, handle a dozen confrontational situations with other senators, reporters or bureaucrats trying to make their bones by trapping him, juggle the egos of 50 talented staffers and ex-officio advisers, interrogate the presidents of four drug companies and their counsel about their business, debate Sen. John McClellan about the death penalty and Sen. Jesse Helms about handgun production in the South, read a half-dozen newspapers, remember 500 faces and names and be canny and witty at dinner. You try it.’
“He had many faults, too, and because of who he was we learned a great deal about them. He tended to feel sorry for himself, particularly when he was younger, telling me once he had to work four times as hard as anyone else because he was a Kennedy. But I always remembered and agreed with something another senator, a Republican, said to me in those days: ‘Whatever you think of Teddy’s personal morality, he is a publicly moral man.’”
“A common myth about politics is that centrists rule the day. The truth is that moderates typically cut their deals on ground taken by conviction politicians of the left or right who have already changed the terms of public debate. Edward ‘Ted’ Kennedy…was a conviction politician who achieved more than most modern Democratic Presidents….
“Kennedy was a great and effective champion of the political left, and his Senate career is a lesson for politicians of all stripes who want to make history, as opposed to sliding in history’s wake.”
George Will / Washington Post
“His two political brothers were young men in a hurry: John became the youngest elected president at 43; Robert died at 42, seeking the presidency as soon as possible after the murder of his brother. Ted came to embody the patience of politics. Charisma is less potent than the smitten imagine; endurance is not sufficient, but is necessary….
“In the Senate, as elsewhere, 80 percent of the important work is done by a talented 20 percent. And 95 percent of the work is done off the floor, away from committees, out of sight, where strong convictions leavened by good humor are the currency of accomplishment. There Ted Kennedy, who had the politics of the Boston Irish in his chromosomes, flourished. What Winston Churchill said about Franklin Roosevelt – that meeting him was like opening a bottle of champagne, and knowing him was like drinking it – was true of Ted Kennedy, too….
“Kennedy served in the Senate for almost 47 years, more than a fifth of the life of the Constitution. He arrived in 1962, before passage of the important civil rights laws and before the more humane sensibilities that those laws helped to shape. For most of his career he served with the only two senators whose tenures were longer than his – South Carolina’s Strom Thurmond and West Virginia’s Robert Byrd, still serving at 91. The latter was once a member of the Ku Klux Klan. The former was an unyielding segregationist until the Voting Rights Act of 1965 – which a larger percentage of Republican than of Democratic senators voted for – began changing Southern electoral arithmetic. Ted Kennedy participated in unmaking the society that made them….
“Let us pay the Kennedys tributes unblurred by tears. Although a great American family, they are not even Massachusetts’s greatest family: The Adamses provided two presidents, John and John Quincy, and Charles Francis, who was ambassador to Britain during the Civil War, and the unclassifiable Henry. Never mind. It diminishes Ted to assess him as a fragment of a family. He lived his own large life and the ledger of it shows a substantial positive balance.”
“All I have to say about Ted Kennedy is I don’t give a damn.”
My own favorite Kennedy memory is his eulogy for brother Bobby, June 1968.
“My brother need not be idealized or enlarged in death beyond what he was in life, to be remembered as a good and decent man, who saw wrong and tried to right it, saw suffering and tried to heal it, saw war and tried to stop it.
“Those of us who loved him and who take him to his rest today, pray that what he was to us and what he wished for others will some day come to pass for all the world.”
–President Obama’s approval rating in the Gallup poll hit 50%, far below its 69% peak. It took President Eisenhower five years to fall to the 50 level.
–Attorney General Eric Holder appointed John Durham as special prosecutor to investigate allegations of abuse of terror suspects, against the previous wishes of President Obama. The appointment came about because of a 2004 report that was released with far more details than when it was first published. Holder said: “I fully realize that my decision to commence this preliminary review will be controversial. In this case, given all of the information currently available, it is clear to me that this review is the only responsible course of action for me to take.”
CIA Director Leon Panetta, though, was furious and said the report was “in many ways an old story,” and that it was clear the CIA had “obtained intelligence from high-value detainees when inside information on al-Qaeda was in short supply.” Panetta added his primary concern was “to stand up for those officers who did what their country asked and who followed the legal guidance they were given. That is the president’s position, too.”
Former Vice President Dick Cheney said, “The people involved deserve our gratitude. They do not deserve to be the targets of political investigations or prosecutions….
"President Obama’s decision to allow the Justice Department to investigate and possibly prosecute CIA personnel, and his decision to remove authority for interrogation from the CIA to the White House, serves as a reminder, if any were needed, of why so many Americans have doubts about this Administration’s ability to be responsible for our nation’s security.”
A senior White House official said Obama did not personally allow Durham to expand his inquiry.
–Kansas Republican Congresswoman Lynn Jenkins said the GOP was searching for a “great white hope” to stop President Obama’s policy agenda. Doh! Jenkins apologized, saying she “was unaware of any negative connotation.” And so we nominate Lynn Jenkins for the “Idiots Hall of Fame.”
–Speaking of idiots, another Hall of Fame candidate is New York Democratic Gov. David Paterson, who the other day claimed his political woes, like being down 60-15 in the polls to Attorney General Andrew Cuomo, are due to the white-dominated media, adding, “The next victim on the list – and you see it coming – is President Barack Obama, who did nothing more than try to reform a health-care system…only because he’s trying to make change.” For its part, the Obama administration was furious that Paterson dragged them into his mess of state.
–You know what hackneyed phrase I can’t stand? “Joe Blow has taken some ‘well-deserved time off.’” What’s so well-deserved? Our economy sucks. Seems to me a lot of us did a lousy job, either at work and/or in handling our personal finances. Ergo, it’s time to work harder, not take time off.
–Now that I’ve ticked everyone off…according to the federal Office of Special Counsel, there was “little logical justification” for the Army Corps of Engineers decision to spend $430 million to buy “untested” hydraulic pumps for New Orleans. The special counsel concludes that a “proven” direct-drive pump design would have been less prone to corrosion and breakdowns and was clearly the more viable choice. [Peter Eisler / USA TODAY]
But I saw another report on how tourism is returning in a big way to the Crescent City, so I just want to take the opportunity to remind everyone heading down there to save three hours for the World War II museum, the best of its kind.
–Congress is on the verge of killing funding for Nevada’s Yucca Mountain nuclear waste repository, which means we still have 77,000 tons of high-level nuclear waste being held in surface storage facilities at 131 sites in 39 states. Of course we’re the same nation that talks of nuclear power as being a major solution towards achieving energy independence, yet I can guarantee that in my lifetime (I’ll give myself another 30 years) we will not see a new nuclear power plant.
–Related to the above, one-quarter of U.S. nuclear weapons are stored at Naval Base Kitsap in Washington state and the Navy Times reported that the captain in charge of managing the weapons assembly and storage site was dismissed by a superior who “lost confidence” in the officer’s ability. Rear Adm. Stephen Johnson assured all that there was no danger to the surrounding area. Back in 2003, the then-commander of the facility was let go after the site failed an inspection. Beforehand, I’m sure he was taking “well-deserved” time off. [Global Security Newswire]
–Back to Nevada, it appears that Democratic Senate Majority Leader Harry Reid is down in the polls to two Republican candidates for his seat in 2010. Yippee! I might have to send some poker chips to whoever emerges in the GOP primary.
–Uh oh…Jimbo reports the dreaded zebra-striped mollusks that I wrote of last time have invaded Lake Champlain.
–In 60 Minutes’ profile of producer Don Hewitt last Sunday, I loved the line from friend Alan Alda as Hewitt finally saw service in World War II.
“Don had seen so many World War II movies that when he finally got on the ship, he thought, ‘Where’s the music?’”
–The American Heart Association issued new guidelines on the amount of sugar we should be consuming and women need to limit their intake to 100 calories, or six teaspoons, while for men it’s nine teaspoons; both of which seem like an ungodly amount. But according to the most recent data, the average American consumes 22 teaspoons of sugar a day!!! Not ever drinking soda myself, it being the biggest culprit, I find this hard to believe, but a 12-ounce can of cola has eight teaspoons. Goodness gracious.
So stick with beer, sports fans. Though don’t drink it at work nor when driving.
–Speaking of food and drink, I have been distraught over my inability to purchase wild salmon from my favorite mail order company in Alaska due to restrictions on the catch, and if you read what I have about farmed salmon, you’d be totally grossed out. In fact I’m increasingly leery of ordering salmon in a restaurant because I have zero confidence when they tell me it’s wild. The biggest liars in the world are restaurants and their fish claims.
Anyway, the top five best fish to consume, according to a detailed study in a past issue of Best Life magazine, are sardines, trout, mackerel, arctic char (love this one), and skipjack tuna (the light variety).
–In the latest study of SAT results, Asians scored an average 587 in math, compared to 536 for whites, 461 for Hispanics, and 426 for blacks. But whites, blacks and Hispanics always get well-deserved time off, while we know Asians are busting their butts at all times.
Pray for the men and women of our armed forces, and all the fallen.
Bears 19.8 [Source: Chartcraft / Investors Intelligence…current ratio represents extremes not seen since the market top of Oct. 2007.]
Have a great week. I appreciate your support.
See you, when the summer’s through
Saying goodbye at the station
Have a good time, but remember
There is danger, in the summer moon above
Will I see you, in September
Or lose you, to a summer love….
Drat! Another summer’s over!
