Wall Street…and America
The Census Bureau reported the poverty rate in the country rose to 14.3% last year from 13.2% in 2009, and now stands at its highest level in 51 years. It was also the third consecutive increase. And the inflation-adjusted income of the median household fell 4.8% between 2000 and 2009, which is depressing.
It thus shouldn’t be any mystery that a majority of Americans feel the country is headed in the wrong direction, and, further, the growing feeling that the next generation won’t have it as good as past ones.
But in the here and now it remains all about housing and jobs, both of which impact the consumer, who continues to de-lever at a record clip, with one prime example, credit card usage, down 6.3% in July.
As for housing, it is virtually impossible to come up with a scenario in which we don’t continue to scrape along the bottom. Some analysts believe that another 12 million properties will be forced on the market as the banks take back more of them to clean up their books, only to later put the houses back on the block. We’re talking years before you will see any significant nationwide appreciation again.
Granted, each market is different and I guess you could build a case that some just can’t get any worse. Research firm CoreLogic, for example, estimates that 68% of homes in Nevada were underwater in July. Staggering. At the same time, however, only 7.1% of properties in New York State were underwater. But when it comes to Detroit, Las Vegas and Fort Myers, Florida, CoreLogic said it will take until at least 2020 before homeowners see positive equity again.
So forget housing. The piggy bank of the past is now lying on the kitchen floor, shattered into a million pieces, the last penny having been extracted.
As for jobs, there’s nothing positive on this front either. FedEx certainly didn’t help the mood when it announced it would be consolidating some operations that will result in the loss of approximately 1,700 full-time employees. Aside from a below story on Deloitte (which is really an Asian growth story), I can’t think of too many companies who have announced they are hiring save for Cisco Systems. This far into a recovery, we should be having growth rates of 4%+ and payroll additions of 250,000 to 300,000 a month, not the dreck we’ve been seeing.
Then there’s the stock market, the one-time vehicle for long-term wealth. I said for years the market was nothing more than a casino and the latest AP-CNBC poll of investors has 61% saying they are less confident about buying and selling individual stocks due to the volatility, especially the flash crash of the spring. 55% say the market is fair only to some investors.
But are we headed to a double-dip? I’ve said we’d avoid one. This week Warren Buffett proclaimed a double-dip wasn’t in the cards because, “I see our businesses coming back almost across the board.”
At the same time, though, the latest survey of economists by the Wall Street Journal has them ratcheting down their growth estimates for the third and fourth quarter, with GDP now projected to come in at 1.9% in Q3 and 2.4% in Q4. Just 3 months ago, it was 3% for both.
The picture remains far from rosy in Europe, too. Retail sales in August for the U.K. fell amid concerns over the impact of the austerity program, and German investor confidence hit a 19-month low. The EU did actually raise its growth estimate for 2010, but to 1.8%, and there is still a ton of uncertainty on the sovereign and bank debt issues. I wrote the other week about Ireland and the distress there and this week we had stories about the nation soon needing to seek support from the EU and/or IMF to stem the losses being generated by their banks, while it seems a certainty Allied Irish Bank will be the next to be nationalized, joining Anglo Irish. Said a strategist in Dublin, “AIB is like Cinderella at the ball and we are getting close to midnight.” [Bloomberg] No one has any real clue how much more red ink is to be spilled here.
I repeat…while default in any one nation may not be imminent, and the European Union and the IMF can claim that the $960 billion bailout fund they cobbled together would prevent this, the problems on the continent are far from over, unless you tell me growth is going to average 3%-4% the next five years. $960 billion is one thing. Getting the citizenry of each nation to want to pony up to help a neighbor is quite another, especially when Europe’s austerity programs will produce wrenching changes.
Speaking of the banks, just a word on the just-concluded Basil III accords that raised the capital requirements on banks as a way of preventing another financial crisis. In a nutshell, it’s a joke, due to the length of time financial institutions have to fully comply, up to 8 years.
By January 2019, the banks have to get their “tier one” capital up to 7%. They have five years to get it to 4.5%. The current requirement is just 2%. Some wanted 10%. [There are new restrictions on what is now going to be defined as tier one so some say this could effectively raise the capital requirement to 8%-8.5%, but 7% is the official number.]
The difference between 7% and 4.5%…2.5%…is the “buffer.” If the bank doesn’t hit 7%, it is not allowed to pay dividends or discretionary bonuses.
What it all means is that in the short-term, the new rules could restrict lending as banks begin to scramble to raise needed funds, though it’s not as if they have to do it today, or even tomorrow.
[To my banker friends out there, I realize I’m glossing over some important details but, if necessary, given the parameters of this column, I’ll flush them out later.]
On the China front, the U.S. really needs to be careful. President Obama is meeting with Chinese Premier Wen this week in New York, according to reports, though I wish the two sides’ generals were also sitting down at the same time. The latter has to do with unnecessary saber-rattling over waterways such as the South China Sea. The former is about the economy. We need each other, but China needs to understand that when the U.S. has a legitimate beef, it will send the issue to the World Trade Organization, where all such items should be arbitrated, not in the press. History has shown the WTO to be fair. But the U.S. and China should have a meeting of the minds on how to proceed with our disputes without the temperature getting too hot.
That said the United States filed two cases against China with the WTO, claiming “unfair trade practices” involving access to China’s credit card industry, as well as steel, and the number of other potential issues is growing. Cooler heads need to prevail, including on the status of the Chinese currency. U.S. exports to China have been growing, now 6.8% of the total, and the dual trade between our two nations should only grow exponentially, but it requires delicate diplomacy, and soon.
One side note on China. I gave you all the important data points last time, though many of the papers didn’t pick up on them until Monday, but this week we also learned fixed asset investment rose 24.8% year-over-year, with railroad spending up 21.7%. You don’t have to believe all the numbers, so call it 16%, if you wish; the point being infrastructure spending on roads, bridges, railways and airports is continuing, and it’s needed. Some of the garbage I read on China amazes me. And while I cannot officially declare victory yet, I told you there would be no double-dip here. [I was never more confident on my very large investment here as well, unless you tell me the global economy is truly going to crap out again, at which point I’m part of the poverty calculation. And once again I’m on storm watch with Typhoon Fanapi looming on the horizon.]
But China did report a rise in inflation, with food prices up 7.5% year-over-year owing in no small part to its massive flooding, while India’s central bank raised interest rates a 5th time this year because of food price inflation concerns, too, so what is the deal on the inflation front?
I want to make it clear my inflation comments in the past have concerned only the U.S. Worrying about other nations’ food prices is normally beyond the pale of this column. I just don’t care…unless it’s really impacting markets in a big way, such as massive unrest generated by food shortages that threaten to destabilize a government, i.e., my main concern with any talk of China and rising prices.
So on 8/7/10 in this space, I had my inflation rant, citing a further comment from 1/2/10.
“More time has been wasted on this single topic over the past years than just about anything else.
“I’ve said ad nauseum you have to be intellectually honest. There are two things going on here. Just as in housing where you have to look at hard, national, figures such as the NAR’s median home price gauge, in terms of inflation, you can’t just strip out one set of numbers or another, unless you’re talking food and energy. We all have to state our case through the same dataset….
“So right now, inflation, as measured by the consumer and producer price indexes, is dead in the water. From time to time, though, when you strip out volatile food and energy (in Japan they just strip out food), the inflation numbers can spike.
“But for years we’ve had zero to little inflation using these gauges and in case you haven’t noticed, sports fans, this is what the all-important bond market reacts to, as well as various gauges of economic activity, both here and abroad, and you see where bond yields have been headed this year, even as some continue to cry ‘Inflation is coming!’
“Now…if you’re talking about rising commodity prices, or college costs, or state and local, or federal, tax rates rising, that’s a totally different story. These are but components of official inflation gauges, but, they have everything to do with consumer behavior. What ticks me off to no end is how so many don’t draw this distinction….(Yes), the little guy continues to get squeezed on all sides, but separate this from the official inflation picture….
“And one other point…As I’ve said for years, don’t talk to me about inflation until we begin to see wages increase.”
That was then, this is now. This week we received the August readings on producer and consumer prices and the core rates, ex-food and energy, were up 0.1% for the PPI and unchanged for the CPI. The core CPI is up just 0.9% the last 12 months, the lowest rate in 44 years. The RJ/CRB index, which looks at 20 commodities, is also still down, slightly, for the year.
Food prices rise and fall due to harvests. There are good years and bad ones. What should concern us all, however, is the extreme weather we’ve had, this year in particular, across the globe. I am not a climate change alarmist, but at the same time you have to face facts. And those facts are we’ve seen floods of biblical proportions in the likes of China and Pakistan, and the hottest weather on record in Russia’s wheat belt, for starters. So it bears watching.
For now, on the overall inflation picture, I’m a believer in a muddle through scenario and no one has much to fear in terms of the official numbers and the impact on the bond market. And no one is going to see any big increases in their paychecks anytime soon, either. I also told you my health-care premium went up 19%, so I’ll find something to cut back on. But deflation, as some continue to forecast? I don’t see it.
Americans bitch and moan about the political process, deficits, and crooked leaders, but when it comes to entitlements, don’t try and take them away! As the Journal noted this week, we’re just gorging ourselves on them.
“ ‘Vicious cuts.’ ‘Savage cuts.’ ‘Swinging cuts.’ The language that the British use to describe their new government’s spending reduction policy is apocalyptic in the extreme. The ministers in charge of the country’s finances are known as ‘axe-wielders’ who will be ‘hacking’ away at the national budget. Articles about the nation’s finances are filled with talk of blood, knives and amputation.
“And the British love it. Not only is ‘austerity’ being touted as the solution to Britain’s economic woes, it is also being described as the answer to the country’s moral failings. On Oct. 20, the government will announce $128 billion worth of spending cuts, and many seem positively excited about it. Okay, the trade unions are not so excited [Ed. they are calling for an autumn and winter of unrest and this is part of my muddle through story], but Nick Clegg, deputy prime minister and leader of the Liberal Democrats…is overjoyed. Recently he gave a speech in which he explained that tough choices had to be made, so that ‘we will be able to look our children and grandchildren in the eye and say we did the best for them.’….
“Austerity is what made Britain great. Austerity is what won the war. It cannot be an accident that several British television channels are running programs this year with titles such as ‘Spirit of 1940,’ all dedicated to the 70th anniversary of that ‘remarkable year’ of rationing, air raid sirens and hardship….
“Sometimes the depth of the Anglo-American cultural divide reveals itself in unexpected ways, and this is one of those moments: No cooking show featuring corned beef hash and powdered eggs would stand a chance in the United States. Perhaps for similar reasons, nobody is talking about ‘austerity’ in the United States either. On the contrary, Republicans are still gunning for tax cuts, and Democrats are still advocating higher spending. Almost nobody – not Paul Krugman, not Newt Gingrich – talks enthusiastically about budget cuts. Instead, our politicians use euphemisms about ‘eliminating waste’ or ‘making government more efficient,’ as if no one had ever thought of doing that before.
“Despite the deep shock the United States supposedly experienced during the banking crisis of 2008 and the resulting recession, we are, in other words, still far from Clegg’s ‘long-termism.’ Hardly anyone in America is talking about cuts in Medicare, Medicaid or Social Security, for example, the biggest budgetary items (even though ‘private’ pensions now look a lot safer, even when taking stock market fluctuations into account, than those who will depend entirely on a bankrupt federal budget 20 years hence). In Britain, by contrast, everything is on the table: pensions, housing benefits, disability payments, tax breaks.
“Politics explain some of this difference, but I reckon history explains more of it. The last period of real national hardship Americans might remember is the 1930s, too long ago for almost everyone alive today. But rationing in Britain lasted well into the 1950s, long enough to color the childhoods of many politicians now in power. Nostalgic Brits, longing to re-create their country’s finest hour, remember postwar scrimping and saving. Nostalgic Americans in search of their own country’s finest hour remember postwar abundance, the long consumer boom – and, yes, a time when even instant gratification wasn’t fast enough.”
Street Bytes
–Stocks rose a third straight week and all the major averages are now in the black for 2010. The Dow Jones and S&P 500 each gained 1.4%, with the Dow closing at 10607, while Nasdaq picked up 3.3%. Nasdaq was aided by solid earnings news out of Oracle and Research in Motion (maker of the BlackBerry), with both handily beating earnings expectations for their recent quarter. Oracle said, “Customers are buying from us and are buying more.” Former Hewlett-Packard CEO Mark Hurd made an appearance on the earnings call, not that your editor gives a damn. Oracle’s share price, the ultimate bottom line, moved sharply higher on the week.
I should also note that stocks were helped by a slightly higher than expected reading on August retail sales, but the market’s gains were tempered somewhat by a poor reading on September consumer sentiment. Otherwise, volume on the exchanges has been putrid, which doesn’t bode well for future job prospects on the Street.
–U.S. Treasury Yields
6-mo. 0.19% 2-yr. 0.46% 10-yr. 2.74% 30-yr. 3.90%
Little movement except on the two-year, which declined 10 basis points.
–I was surprised by this one. Silver futures hit their highest level since 1980, the year of the Hunt Brothers’ attempt to corner it. [When you Google “Hunt Brothers / silver market,” a piece I wrote way back is the number one entry…though it’s not as extensive as other versions I did, which are floating in the ether somewhere.]
Silver settled Thursday at $20.74 a troy ounce, the highest since Oct. 15, 1980, and closed the week at $20.87. [On an inflation-adjusted basis, however, silver should be around $56.] The Hunts had actually gotten it up to $48.70 in January 1980, according to the Wall Street Journal, though I stick with the $50s, achieved on an intra-day basis.
And gold hit a record high, finishing Friday at $1277. It’s not about perceived inflation, as so many keep saying, it’s simply about uncertainty over governments’ ability to stave off a double-dip, and how the United States, Europe and Japan will handle their mammoth deficits; the debasement of currencies. It’s also about central banks stocking up on it as a hedge. In fact they will be net buyers this year for the first time in two decades.
–Republican Senator Bob Corker of Tennessee called President Obama’s decision to name Elizabeth Warren to an interim position to launch the Consumer Financial Protection Bureau, thus bypassing the confirmation process, “inappropriate” and an “overreach.” “This is…the czar of all czars,” said Corker.
Obama is concerned that Warren’s nomination would be held up indefinitely as some of his other picks have. Warren is a strong consumer advocate who first came up with the idea for such an agency. Wall Street can’t stand her.
–In the critical California home market, sales fell a second consecutive month in August, and home prices declined 3% from July, though up 4.4% from August ’09.
–California’s unemployment rate rose back to 12.4% for the month of August. It hasn’t been below 12% in 12 months.
–Various analysts told Bloomberg that China needs to spend 2 to 4 percent of GDP to clean up 30 years of industrial waste. One said, “The cleanup can’t catch up with the speed of pollution” if spending is less.
Just one example of the monumental task (some of which I’ve seen firsthand). More than a quarter of the country’s surface water is unfit for human consumption.
Or this…a recent spill from a flooded plant in eastern Fujian province (the province my investment is in), led to acid-laced waste being dumped into a local river, “killing enough fish to feed 72,000 people for a year.”
I had lunch with the CFO of the specialty chemical/biodiesel holding of mine this week in New York (all is well, fellow shareholders…at some point the market will recognize the value) and he talked about all the obsolete, pollution-belching plants in his area that the government is shutting down, just as you’ve heard is the case nationwide.
And of course protests are increasing exponentially and local governments do understand what needs to be done, having been given the marching orders from Beijing. It’s just that the task is overwhelming.
–OPEC celebrated its 50th anniversary, Sept. 14, 1960, in Baghdad. The mission statement then was essentially:
“The stabilization of prices in international oil markets with a view to eliminating harmful and unnecessary fluctuations.”
At least in recent months, it’s managed to do so, with the price fluctuating in a narrow band this year as the cartel got a handle on production cuts and limited cheating on assigned quotas.
But as the Financial Times points out, the wild-card for the future is Iraq, currently producing about 2.5 million barrels per day, but looking to expand to up to 10 million by 2020. That’s a ton of excess production to throw on the market.
–IBM CEO Sam Palmisano ripped Hewlett-Packard, and former CEO Mark Hurd, saying of his estimated severance package of $34.6 million, “They spent a lot of money to keep him for an hour. That to me was not handled in the best interests of shareholders.”
Palmisano then said of H-P’s recent acquisition strategy: “We’d never do a 3Par or the one [ArcSight] yesterday. We don’t have to,” citing IBM’s philosophy of providing value for shareholders through dividends and share buybacks.
–Cisco Systems Inc. said it would begin paying a dividend in 2011, enough of one to yield 1 to 2 percent. The tuna fish is on me!
–Gambling revenues in Macau totaled more than $14.7 billion in 2009. By contrast, revenues on the Vegas Strip were just $5.5 billion, a decline of 9.4% off of 2008’s pace. It’s expected Macau’s 2010 revenues will end up exceeding $20 billion.
–August was the first full month in which Atlantic City’s 11 casinos were competing against table games offered in Pennsylvania and AC’s revenues were $347.5 million, down from $391.7 million in August 2009.
“According to new research, (80-year-old hedge fund king George) Soros has produced $32 billion for his customers since setting up in 1973, an average of over $900 million a year. Put another way, Mr. Soros and his team of 300 have made their investors more than the total earnings of Apple, which employs 34,300, or Alcoa, one of America’s 30 largest manufacturers.”
–The Association of American Medical Colleges reports that the average 2009 graduate entered the working world owing $156,456 and facing monthly payments that range from $1,718 up to well over $2,000.
–7% of college students now default on their federal student loans. At “for-profit” schools, like DeVry, the rate is now up to 11.6% for the year ended Sept. 30, 2008, so imagine what it really is now; and this ahead of tougher lending standards being imposed by the Obama administration.
–With the gloom on the labor market, some good news from “big four” accounting firm Deloitte Touche, which said that because of increased demand for its consulting services, especially in Asia, it would hire an average of 50,000 workers a year during the next five years. It’s about greater regulatory scrutiny as well as the need to best integrate technology.
–Chinese officials seized tens of thousands of fake Tiffany jewelry pieces with a value estimated at about $12 million, as authorities used Hong Kong-based investigators to monitor one particular ring that preyed on customers there and in the United States, Canada and Britain. Buyer beware…especially online.
–With its much-hyped “Boardwalk Empire” about to premiere on Sunday, HBO has seen its subscriber base fall for the second quarter in a row in the three months ended June 30, to its lowest level in four years, according to the New York Post’s Claire Atkinson.
I know, personally, there has always been something to keep me on board; “The Sopranos,” “Deadwood,” “Curb Your Enthusiasm,” “Entourage.” But they are barely holding onto me now. I’ll give “Boardwalk…” a shot, but with “Entourage” wrapping up, I really want “Curb Your Enthusiasm” back. Then again, this year I got back into “Mad Men” on AMC…awesome season.
–My portfolio…now if Hurricane Karl had headed northeast instead of west, my natural gas play…sorry, I’ll keep all such thoughts to myself. My uranium holding had a surprisingly strong week on no news, just the way investors like to see it.
Foreign Affairs
Afghanistan: The week started with deadly protests in Kabul over the Koran burning that never was, a key example of how rumors become fact these days. Pastor Terry Jones had his 15 minutes of fame. It was also a week where the government took over Kabul Bank after the run on its assets, the bank being responsible for the paychecks of 250,000 salaried government workers.
But today, Saturday, we have parliamentary elections that the Taliban has vowed to disrupt (and as I go to post, seven were killed in one attack). Some 300,000 Afghan soldiers and police are expected to guard the polls, backed by 150,000 foreign troops.
Defense Secretary Robert Gates and Gen. David Petraeus expressed guarded optimism on the surge, though both caution it will take months for sustained progress. While I respect their opinions, some of this is obviously posturing ahead of the December review that President Obama has requested. Gates and Petraeus must show some quantifiable improvement in the security situation, which is why the handling of the Afghan election is so important. It’s also important for President Hamid Karzai and his credibility, especially after the fraudulent presidential vote of last year.
Pakistan: Related to the above, I was reading a piece in Defense News on the role of the U.S. Joint Special Operations Command, based at Pope Air Force Base, N.C., which is targeting the Haqqani terror network. While the JSOC is not going directly into Pakistan, where Haqqani is based, the 5,000 special ops forces are targeting those who have slipped across the border into Afghanistan. In June, July and August, JSOC killed or captured 235 insurgent leaders, killed 1,066 insurgents and captured another 1,673.
As for the drone attacks, which are coordinated by the CIA, there have been a minimum of 63 this year already, compared to just 35 in 2008. Obama deserves credit for this. Recently, there were 12 separate attacks on the Haqqani group in Pakistan.
But on a different issue, Kashmir, Pakistan and India face a growing threat to peace between the two as Indian-administered Kashmir has seen violent anti-government protests the past few months that have killed at least 80.
And then there was the murder of an exiled Pakistani politician in London on Thursday, Imran Farooq. Farooq was a founding member of the MQM, a former opposition party that is now part of the ruling PPP-led alliance, however, it seems MQM does have a violent past and he was in exile because Pakistani security forces sought him. Nonetheless, Karachi was shut down on Friday, where most of the MQM supporters live.
Iran: In a serious development on Wednesday, security forces attacked the offices of opposition leader Moussavi, and seized his computers. It was earlier this month that the other main opposition leader’s home, that of Mehdi Karroubi, was also ransacked. There are some reports the two will be put on trial.
But there was an interesting development on the commercial side as South Korea’s Kia Motors suddenly suspended shipments to Iran, Kia being a leading model here. It’s a big blow to Tehran’s leadership, even as Seoul is concerned Iran could retaliate against it with South Korea receiving 1/10th of its oil from Iran. Iranian leaders were furious.
But another who was unhappy recently was Iranian politician Ali Akbar Hashemi Rafsanjani, the man years ago I said the Bush administration should have been cutting deals with to circumvent Ahmadinejad, Rafsanjani being Iran’s richest man and concerned with his business interests. [Yes, he has also been linked to some major terror attacks, such as in Latin America…but it’s a dirty war.]
So Rafsanjani criticized Ahmadinejad for failing to counter the impact of the economic sanctions, a further sign of division amongst the ruling elite. Rafsanjani has expressed some support for the reform effort in the past as well.
He is also head of the powerful Assembly of Experts, and in a meeting of its members this week he said: “Gentlemen, you should be vigilant and careful. Do not downplay the sanctions…people should not be tricked.”
But this coming week is the U.N. General Assembly and Ahmadinejad will be making an appearance. Oh joy. It’s also a reminder to avoid New York City because of the gridlock that often results from this gathering of incredibly overrated leaders.
Israel: The first round of formal peace talks was held in Egypt and Jerusalem between Palestinian President Abbas and Israeli Prime Minister Netanyahu. Secretary of State Hillary Clinton said on Thursday that the leaders are committed and serious about making peace, calling it “within reach.” But the fact is peace is far from imminent.
It’s still all about the settlements, the moratorium on which expires Sept. 26, and Netanyahu said this week it wouldn’t be extended, but he could limit some construction. The settlers have warned the prime minister that they will “declare war” on him should the freeze continue. At least 13,000 units on the West Bank are ready to go once the moratorium is lifted, with 2,000 already having foundations in.
For his part, Abbas has always said there will be no further talks unless the moratorium is extended. Meanwhile, Hamas, which long said Abbas doesn’t represent its interests, stepped up its attacks on southern Israel.
[On critical Lebanon, my contact in Beirut is predicting Hizbullah leader Sheikh Nasrallah’s demise. It’s complicated, as is everything else in this fascinating country, but I just throw it out there.]
China: Beijing is none too pleased with Japan after the latter released 14 crew members from a Chinese fishing vessel that had collided with a Japanese coastguard ship, but Japan didn’t release the captain.
The dispute is really over the fate of various small islands in the East China Sea claimed by both sides, and China has now canceled planned talks on joint exploration for natural gas in the region. These two sides need to behave themselves, lest it blow up into something far more serious. Watch to see if Japan decides to try the captain. [There were anti-Japanese protests in China on Saturday.]
Separately, Chinese Premier Wen Jiabao pledged to treat foreign businesses more fairly, acknowledging the recent debate about his country among investors “is not all due to misunderstanding by foreign companies. It’s also because our policies were not clear enough.” Wen added: “Foreign companies registered within China’s borders all enjoy national treatment.”
And this week China announced it had granted approval to four Taiwanese banks to set up branches on the mainland, this as the landmark trade agreement between the two took effect.
Back to Japan, the government “is making urgent plans to deal with the prospect of three powerful earthquakes striking at the same moment; a natural disaster that could kill 50,000 people, destroy cities and unleash tsunamis across Japan’s most densely populated regions.” [Richard Lloyd Parry / London Times] Seismologists believe this is a distinct possibility in the next ten years.
Turkey: In a critical referendum, voters said “yes” to changes in the constitution by a 58-42 margin, a big win for Prime Minister Tayyip Erdogan and his Islamist AK Party. The main changes involve the military’s role in government affairs that would make it more answerable to civilian courts, which few can argue with given the past history here, while the far more worrisome change could lead to a loss of independence among the judiciary.
Voters awarded Erdogan as much for his success in handling the economy as anything else, it would seem, with the average annual growth rate being 6.1% from 2004 to 2008. Turkey’s exports in 2009 were $102 billion, up from $36 billion in 2002, Erdogan having assumed office in 2003.
Saudi Arabia: The White House is set to notify Congress of a huge arms sale to Saudi Arabia, in fact the largest ever at $60 billion, including 84 new F-15 fighters, and 70 Apache and 72 Black Hawk helicopters. Boeing Co., which makes the F-15s and Apaches, said the Saudi package would directly or indirectly support 77,000 jobs across 44 states.
Some in Congress, however, are not fired up over the prospect of the sale. New York Democratic Rep. Anthony Wiener said:
“Saudi Arabia has a history of financing terrorism, is a nation that teaches hate of Christians and Jews to their schoolchildren, and offered no help to the U.S. as gas prices surged during the spike in oil prices.”
Opposition forces are not expected to have enough support to derail the sale, however.
France: President Nicolas Sarkozy was furious after the European Commission compared his government’s expulsion of Roma Gypsies to Nazi tactics. The chairman of the Commission said there would be an investigation of France’s policy of flying Roma back to Bulgaria and Romania.
“Prohibition of discrimination based on ethnic origin is one of the EU’s fundamental values and the EU will do whatever is necessary to ensure respect for these principles,” Jose Manuel Barroso told reporters.
A German spokesman said, “Freedom of movement with the EU applies without conditions, ethnic minorities should not be discriminated against…and basic rights apply.”
More than 1,000 Roma have been expelled from France since August when Sarkozy called for unauthorized Gypsy camps to be dismantled, and foreign-born Roma to be sent back to their Eastern European homelands. Those who agree to go voluntarily receive about $400 to restart their lives.
Meanwhile, the National Assembly voted 329 to 233 to raise the retirement age from 60 to 62, as proposed by Sarkozy, a nice victory, with the Senate expected to do the same.
The Senate itself voted 246 to 1 to approve the banning of burqa-style Islamic veils in public.
Cuba: The government said a million workers would lose their state jobs, 500,000 by next March, meaning as many as one-in-five workers could be forced to seek employment in the private sector. The labour federation said:
“Our state cannot and should not continue maintaining companies, productive entities, services and budgeted sectors with bloated payrolls and losses that hurt the economy.
“Job options will be increased and broadened with new forms of non-state employment, among them leasing land, co-operatives, and self-employment, absorbing hundreds of thousands of workers in the coming years.”
As many joked this week, Cuba is embracing the free enterprise system more than the Obama administration.
Britain: According to a poll, 2/3s of Brits are upset over Pope Benedict’s visit, not that they really feel strongly about the event, but rather because the taxpayer is funding it.
Mexico: Score one for the government as Mexican soldiers killed at least 40 suspected drug gunmen in two separate battles.
Chile: The first of three drilling operations broke through to the 33 trapped miners, meaning that by early November, they could be pulled out. The initial hole is too small but at least more supplies can be passed down through it while it is expanded.
Random Musings
–Just last week, posted Saturday, I wrote the following:
“What Republicans, particularly its leadership, have to do is avoid a major mistake.”
About 26 hours later, House Minority Leader John Boehner stepped in it. Appearing on CBS’ “Face the Nation,” Boehner said that “If the only option I have is to vote for those at 250 and below, of course I’m going to do that.” I saw the clip later that day and couldn’t believe it.
As the Wall Street Journal then editorialized on Tuesday:
“The Republican immediately added that he’d ‘fight to make sure that we extend the current tax rates for all Americans,’ but by then the damage was done.
“Democrats and the press corps pounced and will now focus all of their attention on ensuring that Mr. Boehner and Republicans go along with extending the lower tax rates for the ‘middle class,’ even if it excludes the lower rates for those making more than $250,000 ($200,000 for singles, by the way, and only $125,000 for married couples filing separately)….
“Republicans scrambled yesterday [Monday] to regain their footing, with House Minority Whip Eric Cantor returning to the winning GOP argument that any tax hike on ‘working families, small-business people and investors’ is a ‘non-starter.’ We hope so. As for Mr. Boehner, this stumble on the easy issue of taxation in the best GOP year since 1994 makes us wonder if he’s ready for prime time.”
–Following Tuesday’s primary vote in a number of states, seven members of Congress have already been thrown out this year – four Republicans and three Democrats. The highest profile Republican given the boot on Tuesday was Delaware Rep. Mike Castle.
“Tuesday in Delaware was a bad day not only for Republicans but also for conservatives. Tea Partyer Christine O’Donnell scored a stunning victory over establishment Republican Mike Castle. Stunning but pyrrhic. The very people who have most alerted the country to the perils of President Obama’s social democratic agenda may have just made it impossible for Republicans to retake the Senate and definitively stop that agenda.
“Bill Buckley – no Mike Castle he – had a rule: Support the most conservative candidate who is electable.
“A timeless rule of sober politics, and particularly timely now. This is no ordinary time. And this is no ordinary Democratic administration. It is highly ideological and ambitious. It is determined to use whatever historical window it is granted to change the country structurally, irreversibly. It has already done so with Obamacare and has equally lofty ambitions for energy, education, immigration, taxation, industrial policy and the composition of the Supreme Court.
“That’s what makes the eleventh-hour endorsements of O’Donnell by Sen. Jim DeMint (R-S.C.) and Sarah Palin so reckless and irresponsible.”
Krauthammer goes on to note that “Of course Mike Castle is a liberal Republican,” but would the party rather have a Democrat who bats .000 on legislation from the Republican perspective, or one who votes .667.
“Castle wasn’t only electable. He was unbeatable. Why do you think Beau Biden, long groomed to inherit his father’s seat, flinched from running?”
“They told me we couldn’t win in Pennsylvania with a conservative – Pat Toomey is ahead. They said we couldn’t win in Florida with a conservative – Marco Rubio is ahead. They said Rand Paul couldn’t be competitive in Kentucky – he’s ahead…Everything they said has been wrong. I’m counting on them to be wrong in Delaware.”
“(At) this moment we are witnessing a shift that will likely have some enduring political impact. Another way of saying that: The past few years, a lot of people in politics have wondered about the possibility of a third party. Would it be possible to organize one? While they were wondering, a virtual third party was being born. And nobody organized it….
“So far, the Tea Party is not a wing of the GOP but a critique of it. This was demonstrated in spectacular fashion when GOP operatives dismissed Tea Party-backed Christine O’Donnell in Delaware. The Republican establishment is ‘the reason we even have the Tea Party movement,’ shot back columnist and Tea Party enthusiast Andrea Tantaros in the New York Daily News. It was the Bush administration that ‘ran up deficits’ and gave us ‘open borders’ and ‘Medicare Part D and busted budgets.’….
“For conservatives on the ground, it has often felt as if Democrats (and moderate Republicans) were always saying, ‘We should spend a trillion dollars,’ and the Republican Party would respond, ‘No, too costly. How about $700 billion?’ Conservatives on the ground are thinking, ‘How about nothing? How about we don’t spend more money but finally start cutting.’….
“Nobody knows how all this will play out, but we are seeing something big – something homegrown, broad-based and independent. In part it is a rising up of those who truly believe America is imperiled and truly mean to save her. The dangers, both present and potential, are obvious. A movement like this can help a nation by acting as a corrective, or it can descend into a corrosive populism that celebrates unknowingness as authenticity, that confuses showiness with seriousness and vulgarity with true conviction. Parts could become swept by a desire just to tear down, to destroy. But establishments exist for a reason. It is true that the party establishment is compromised, and by many things, but one of them is experience. They’ve lived through a lot, seen a lot, know the national terrain. They know how things work. They know the history. I wonder if Tea Party members know how fragile are the institutions that help keep the country together.
“One difference so far between the Tea Party and the great wave of conservatives that elected Ronald Reagan in 1980 is that latter was a true coalition – not only North and South, East and West, but right-wingers, intellectuals who were former leftists, and former Democrats. When they won presidential landslides in 1980, ’84 and ’88, they brought the center with them. That in the end is how you win. Will the center join arms and work with the Tea Party? That’s a great question of 2012.”
–One Republican who appears to get it is New Jersey Gov. Chris Christie.
“Christie has been shaking up New Jersey since Day One, and now he’s done it again – proposing an unprecedented tightening of pension and health-care benefits for public employees, in order to shore up a system that’s teetering at the edge of bankruptcy.
“He wants to raise the normal retirement age for teachers and most state and municipal workers to 65, requiring 30 years service for early retirement instead of 25. Police would have to work 30 years for full retirement, but could retire early with reduced benefits.
“Contribute 8.5% of their salaries toward their pensions.
“Start paying 30% of the cost of their health premiums.
“Accept the rollback of a 9% raise in pension benefits granted in 2001 – an increase he admits was put into place by Republicans, who ‘shouldn’t have done it in the first place.’
“Naturally, this has the public-sector unions – and their Democratic legislative allies – screaming bloody murder.
“But, as the governor notes, ‘this isn’t about promises made and kept. This is about special interests squeezing benefits out of the government and taxpayers [that] we can no longer afford to pay.’
“Indeed, adds Christie, ‘we can’t shelter one special group of people – public-sector unions – from the ravages of this recession and have that shelter paid for by the very people who are getting hurt by the recession the most: the people in the private sector.’
New Jersey’s public pension system is underfunded by $46 billion. Without reforms, that gap could rise to $85 billion by 2025. And what if we are in an extended era of low returns for both stocks and bonds?
Christie, the Post concludes, has “the kind of political courage sadly lacking in both Washington and Albany.
–New York City voters failed to turn out Congressman Charles Rangel, who faces a trial in the House on 13 ethics violations, but this isn’t a surprise when you consider his main opponent, Adam Clayton Powell 4th has his own issues. And New York Republicans chose a bomb-throwing Tea Partier, Carl Paladino, to face off against Democrat Andrew Cuomo in the race for governor as Paladino defeated another very weak candidate, former Rep. Rick Lazio.
–Back in February, Democrats had a 49-37 percent advantage over Republicans on the party that voters want to see control Congress, according to an AP-GfK survey. But in the latest version of the poll, the GOP now leads 55-39 among likely voters, a stunning reversal. Republicans need to gain 40 seats to seize control of the House and it is said about 75 races are competitive.
But in a New York Times/CBS News survey, 55% of voters say it is time for new leadership and only 34% believe their lawmaker deserves reelection; an historic high for this question asked in each midterm year since 1990.
[In the Times poll, President Obama’s overall job approval is 45%; while only 41% approve of his handling of the economy, with 51% disapproving.]
–John Podhoretz / New York Post…on primary Election Day this past Tuesday in New York.
“At 8:20 yesterday morning, I arrived at my local polling place – the Church of St. Paul and St. Andrew on the Upper West Side of Manhattan…
“I went to my precinct table, where sat the same three women who’ve sat there on every Election and Primary Day since I moved here in 2004.
“There was a great hubbub because this was the first election in which New York State was deploying its new optical-scanner machines. Where we before never actually held or cast a ballot, because the names were preprinted on the machines, now ballots must be provided. And, of course, those ballots had to be separated by party, since this was a primary.
“The poll worker who looked up my name handed me a card indicating I was a Democratic primary voter. I said, ‘No, ma’am, I’m voting in the Republican primary.’
“She looked at me with a compassionate smile. ‘No, this is a Democratic primary,’ she said. ‘I believe the Republican primary is in November.’
“ ‘No, ma’am,’ I said, ‘there’s a Republican primary too today.’
“ ‘Trust me,’ I said. ‘Look, there are the Republican voter cards.’ There were three piles on the table – a pile of green cards for Democrats, a pile of gray cards for Conservative Party voters and a pile of red cards for Republicans.
“The Republican pile was still sealed, indicating that I was the first person in Precinct 89 to ask for one. The polls had been open for two hours and 20 minutes. This seemed a remarkable fact, until she informed me that I was voter No. 18 – the 18th person to vote in my precinct, for an average of seven an hour.”
Well, it went on and on for Podhoretz. The workers started yelling at each other, no one knew what to do, and then when he finally got his ballot, it was “at least an inch too wide to go through” (the scanning machine). But when he finally got the machine to work, it started giving out directions in Spanish.
“ ‘What did you do to my machine?’ demanded the poll worker at the scanner.
–Joint Chiefs of Staff chairman Adm. Mike Mullen, in talking about the cuts that must be made now to the defense budget in light of the national debt.
“If we do not figure out how to manage ourselves inside this growing challenge [of fiscal austerity] then I do worry that it won’t be too long before those kinds of cuts will be part of our future as well, and that would be very dangerous….
“What I am really speaking about is the need for those of us in the Pentagon to be very smart about how we approach this and recognize that we [account for] about 50% of the discretionary spending that’s available in this government. I am trying to send a message of getting this right now.”
Defense Secretary Gates has been sending a similar message, and both are talking about “brass creep,” with the Pentagon too top heavy.
–Michael Daly / New York Daily News…on the anniversary of 9/11:
“It is also a church and a synagogue and a temple and an ashram on ground made holy by those of all faiths who died there.
“The God of this hallowed place is the one to whom I heard even atheists appeal as the towers burned and innocents trapped in hell on high leapt to certain death.
“The jumpers kept falling, striking the pavement with the most unholy of sounds.
“As if in answer from above there then came a thunderous rumble that was no less terrifying when it was repeated 29 minutes later.
“The twin towers became twin hurricanes of choking, blinding dust later found to have measurable traces of pulverized human being, with no possible distinction as to denomination.
“As the air cleared, I looked at a dear friend’s crushed fire rig and I felt spared only by chance. To think I was spared by God was also to think God had not spared many much better people than myself. And to realize how many had not been spared was to wonder if there were a God at all.
“At that moment, this toxic mountain of rubble seemed less holy ground than the scene of a monstrous crime.
“Police Officer Moira Smith helped a bleeding executive from the south tower and went right back in and lost her life saving still others.
“Firefighter John Tipping was also in the south tower and his remains proved difficult to identify because they were mixed with those of a woman he sought to shelter with his body during the collapse….
“What came to be called Ground Zero was really Ground Hero, and the sacrifice of those heroes consecrated what had been a crime scene.
“The fact that they had given all for the sake of strangers of whatever faith made the lives of those strangers even more precious and the ground all the more holy….
“Each anniversary has been a victory for us and a defeat for the terrorists who hoped to divide us and incite us into being less than we are.”
“Just as he did with health-care and his other policies, the president regards opposition to his views of Islam as irrational or illegitimate. He sees the resistance to closing Guantanamo as simple ‘politics’ and declares we cannot let 9/11 and the fear of more attacks ‘completely distort us’ and ‘dominate our foreign policy.’
“He even drew George W. Bush to his side, saying he admired how the ex-president he blames for everything else was ‘crystal clear’ that we were at war with terrorists, not Islam….
“In fact, except for a few wing nuts bent on provocative, legal acts, the nation’s firm belief in religious tolerance is stronger than ever. The big difference now is that we have a president who sweepingly sees the millions upon millions of Americans who dissent from his orthodoxy as ignorant bigots.
“Obama’s views are no less dangerous for being heartfelt. He panders to Muslims but is ignorant about the true nature of the jihad movement. He puts pressure on Israel to compromise its security while turning a blind eye to the culture of death that drenches Palestinian society.
“In addition to a thumping in November, he needs a good lecture from Tony Blair about the expanding global conflict and its silent sympathizers. ‘What is producing this conflict is not something the West is doing,’ Blair said. ‘It is being produced by a religious view that is based, incidentally, on a perversion of Islam…that’s got too big a reach. And we’ve got to counter that.’
“You certainly don’t counter the perversion of Islam by pleading guilty to it. If Obama comes to that realization, he will be a better president. Who knows, he might even be proud of America again.”
–According to a book on France’s first lady Carla Bruni, the authors claim that Bruni asked Michelle Obama about being the president’s wife during a private discussion earlier this year, and Michelle replied, “Don’t ask! It’s hell. I can’t stand it!”
But the vacation spots aren’t bad, Michelle, right? Nor is the private plane.
–Drug use in America was up 9% last year to the highest level in nearly a decade. The director of the Office of National Drug Control Policy, said, “I think all of the attention and the focus of calling marijuana medicine has sent the absolute wrong message to our young people.”
About 9% of the population 12 and older reported using illegal drugs in 2009.
Ecstasy use rose 37% and the number of methamphetamine users climbed 60%. Not good, not good at all.
But cocaine use is now down 32% from its peak in 2006.
–Not for nothing, but when there is talk of Newark Mayor Cory Booker being a national figure, just throw out the fact that this summer, June 1 thru Aug. 31, was the deadliest since 1990 in his city, with 35 killed.
–The summer of 2010 was the hottest on record for the Earth’s land areas, besting 1998. For the period January-August, Earth is going through its warmest year since records began, this according to the climate center of the National Oceanic and Atmospheric Administration.
–And here’s another reason to get out your “Leave It to Beaver” DVD set. An Israeli expert said this week that nations must ready themselves for the increasing threat of acts of chemical terrorism in the years ahead. Boaz Ganor, executive director of the International Institute for Counterterrorism, said:
“We know that today, terrorists can download cookbooks from the Internet. They have primitive labs to prepare IEDs (improvised explosive devices), and can use the labs to prepare toxins rather than IEDs. Modern nonconventional terror is knocking on our door.”
–Some friends said I had to work in TV Azteca sports reporter Ines Sainz into the conversation, seeing as how she was all the rage in New York for about 48 hours, so as Joanna Malloy of the New York Daily News wrote, it’s all about Sainz’ “pulchritudinous posterior.” And so it is that Ines Sainz has made “Week in Review.”
–Lastly, about a week ago, New England Patriots quarterback Tom Brady was in a scary car accident when a driver hit his vehicle after running a red light. But Brady was unhurt. The lesson he learned?
“Man, wear your seat belts. That’s all I can tell everybody. You never know.”
—
Pray for the men and women of our armed forces, and all the fallen.
God bless America.
—
Gold closed at $1277…zoom zoom!
Oil, $73.66
Returns for the week 9/13-9/17
Dow Jones +1.4% [10607]
S&P 500 +1.4% [1125]
S&P MidCap +2.2%
Russell 2000 +2.3%
Nasdaq +3.3% [2315]
Returns for the period 1/1/10-9/17/10
Dow Jones +1.7%
S&P 500 +0.9%
S&P MidCap +7.4%
Russell 2000 +4.2%
Nasdaq +2.0%
Bulls 36.7
Bears 31.1 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
