Wall Street
The National Bureau of Economic Research, the official arbiters of the economy and the business cycle, said the Great Recession ended in June 2009. The NBER’s job isn’t to apply too many nuances to their final judgment, as you and I would do, and by the numbers they are right. The NBER committee also recognizes we are basically walking a tightrope today and many of us don’t feel like the recession has ended.
“We are still expanding, but disappointingly slowly,” Robert Hall, a Stanford University economics professor who heads the NBER committee, said in an interview with Bloomberg. “It’s still too early to tote up the cost, given that we are still far from recovered from its effects. It’s definitely the worst apart from the Depression, which was far, far worse.”
“In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007.”
Economic growth was just 1.6% in the second quarter of this year, down from 3.7% in the first quarter and 5% in the fourth quarter of 2009.
From the fourth quarter of 2007 to the second quarter of 2009, the U.S. economy shrank 4.1%. Household spending fell 1.2% in 2009, the biggest decline since 1942. [Bloomberg]
Most contractions have lasted just 10 months. So those are the important facts. But when dealing with sentiment, according to a poll of global investors by Bloomberg, three out of five say the world has weathered the crisis and has stabilized, though few believe the economy is recovering, with only one in six feeling we’re in expansion mode.
And a Bloomberg News survey of 58 economists revealed that 27 see growth in 2011 below the 2.5% to 2.8% the Federal Reserve is pegging, though many believe the Fed is going to lower their forecast in the next few weeks. 28 of the economists also see the jobless rate rising from the current 9.6%.
And none other than Warren Buffett told CNBC, “We’re still in a recession. We’re not gonna be out of it for a while, but we will get out.”
This was a week that saw the Federal Reserve once again hold the line on interest rates, adding it is “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time to levels consistent with its mandate [Ed. maximum employment and price stability].”
The Fed also said once again, “Inflation is likely to remain subdued for some time.” But in saying it sought “to return inflation…to levels consistent with its mandate,” the Fed was signaling that with still huge amounts of excess capacity in many industries, deflation was not out of the question if the economy took another header.
So the bottom line of all this was the Fed made it very clear it was prepared at a moment’s notice to launch quantitative easing for a second time, or QE II, and market watchers were guessing this would be the case right after the election, the Fed not wanting to be seen taking sides. Separately, the Bank of England echoed similar sentiments in saying it was prepared to act to boost the U.K. economy as many there are forecasting a double-dip in 2011.
Thus, with our federal reserve prepared to buy bonds to keep interest rates low, the bond market jumped ahead and Treasuries, for one, rallied all over again, with the yield on the 10-year falling back to 2.49% at one point before settling at 2.60% as money rushed back into stocks on Friday.
Ah yes, the stock market rally that has September, traditionally a scary month, currently with a gain that would represent the best month for the S&P 500 since March 2000. Of course you’ll recall what March 2000 represented. Does Nasdaq 5048 ring a bell? [3/10/00]
But what of this rally that has seen the S&P rise 7.9% the past four weeks, and 9.5% this month?
Yes, I’m a bit surprised, but not totally. I never said the market was overvalued and my whole thesis we would finish 2010 in negative territory is largely built on something happening on the geopolitical front that would sap investor and consumer confidence anew and nothing has.
That doesn’t mean we’re home free the next three months, I hope you understand. Issue one for me, as discussed below, is Lebanon. Issue two is the still-present threat of an Israeli strike on Iran’s nuclear facilities and President Ahmadinejad certainly didn’t help his cause this week; though in the case of both Lebanon and Iran, which are tied together through Hizbullah, it’s very complicated. Issue three is Pakistan, and whether the government there can hold together following the devastating floods. More on this as well below.
And then you have the very public warnings on the terror front from France and Britain in the past 7-10 days. But as the Washington Post’s David Ignatius put it in a column this week, why has the Obama administration said nothing? Britain and France are rather important allies, and they are sounding the alarm big time, and with increasing specificity. I know one Metro stop in Paris I’d try to avoid if I were there today.
My word to the wise would be don’t go crazy chasing the rally. Plus the fundamentals in our economy still suck…period.
On the jobs front, while I try not to make too much of one week’s jobless claims figures, they weren’t good, but next Friday we’ll get a little more clarity with September’s employment report.
And when it comes to housing, this week we had numbers for August existing- and new-home sales, which proceeded to come in at the second- and third-worst levels in history, respectively. [History going back about fifty years when beavers turned over the tallying of such data to humans.] Builder sentiment also came in at the lowest level since March 2009, yet many an analyst said we were home free. Not quite.
Last week I forgot to note the report on America’s net worth that showed a decline of 2.8% in household wealth for the second quarter. [The S&P is up 11.4% for the third quarter so far and this will help when looking at future data.]
The thing is, residential real estate accounts for 32% of the average individual’s net worth, individual stocks 13%, and the balance is retirement accounts, taxable mutual funds, bank accounts, bonds, possessions (car, jewelry, baseball cards, dinosaur bones, etc.)
So real estate is still a key, coupled with job growth and rising wages, when it comes to gauging future consumer spending and there is zero reason to believe housing values will rise significantly for years to come, barring a serious bout of inflation, which would cause problems of a different kind.
But I do not doubt for a minute that a rising stock market helps the psyche, and if the rally continues, holiday sales could end up being better than expected, for one. You can also be assured the Obama administration is praying…praying…for stocks to continue ever upward through Nov. 2.
Speaking of Obama and the election, a woman stood up at CNBC’s town hall meeting and expressed the frustration of many in the Democratic Party in saying, “quite frankly, I’m exhausted. I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for and deeply disappointed with where we are right now.”
Obama is drifting…like the orange crud on the surface following the BP oil spill. A leader he is not, and now Democrats won’t even vote on his tax cut proposal before Election Day because too many of them are vulnerable on the issue. So we are suffering amidst the uncertainty and now it looks very much as if we will head into 2011 not knowing what the hell the tax rates are! Well isn’t that special.
“The right’s sweeping indictment of Obama is wildly exaggerated. It is not, however, entirely misplaced.
“Confidence is crucial to stimulating consumer spending and business investment, and Obama constantly subverts confidence. In the past year, he’s undone some of the good of his first months. He loves to pick fights with Wall Street bankers, oil companies, multinational firms, health insurers and others. He thinks that he can separate policies that claim to promote recovery from those that appeal to his liberal ‘base,’ even when the partisan policies raise business costs, stymie job creation or augment uncertainty – and, thereby, undermine recovery. His health-care ‘reform’ will make hiring more expensive to employers by mandating insurance coverage. The moratorium on deep-water oil drilling kills jobs; the administration’s estimate of employment loss is up to 12,000.
“Obama’s proposal to increase taxes on personal incomes exceeding $250,000 ($200,000 for singles) is the latest example of his delusional approach. It satisfies the liberal itch to ‘get the rich.’ Well, the rich and most other taxpayers will ultimately have to pay higher taxes to help close budget deficits. But not now.
“Raising taxes in a weak economy doesn’t make sense. Just consider this astonishing fact: These affluent households represent almost a quarter of all consumer spending, according to (economist Mark) Zandi. Increasing their taxes, he estimates, would cost 770,000 jobs by mid-2012. Richard Curtin, director of the University of Michigan’s Survey of Consumers, says his data suggest that uncertainty about the extension of the Bush tax cuts has already caused affluent buyers to cut their spending.
“Some small businesses would also be affected, because many…file their taxes on personal returns. Higher taxes would discourage hiring and expansion. No one knows by how much, but the Tax Policy Center estimates that higher business taxes would affect 725,000 returns with about $400 billion of business income. Some of these are partnerships of doctors, lawyers and accountants. Others are contractors, restaurant owners, florists and plumbers.
“All the partisan rhetoric can be ascribed to ‘politics as usual.’ True. That’s the point. In an election dominated by the economy, the campaign discourse is strangely disconnected from underlying economic realities. The simplicities of the right collide with the simplicities of the left.
“In textbooks, elections clarify complex issues and help resolve social conflicts. In practice, they often sow confusion and create unrealistic expectations, as politicians peddle phony solutions and make unattainable promises. Americans face crucial economic choices. How to cut long-term budget deficits without threatening the present recovery? How to control health spending without damaging health care? How to adjust to an aging society and still retain a powerful economy? On these and other hard questions, the silence is deafening.”
—
And just a note on Europe. CNBC’s Jim Cramer really ticked me off when he said on Friday afternoon that those who think the European economy is still in danger are full of it, citing one measly data point from Friday, Germany’s business confidence figure for September which was up.
Mr. Cramer conveniently ignored the above noted news on Britain, where the Bank of England and many an analyst is worried about a double-dip in 2011, and the situation in Ireland where they were supposed to report an increase in GDP for the second quarter, only to release that it had fallen 1.2%, a huge miss and another sign of the awful situation on the Emerald Isle. Consumer spending there fell 1.7% in the second quarter, and as Ireland’s bond market was roiled, the IMF felt compelled to step forward once again to declare that Ireland will not default.
A composite index on the eurozone’s service and manufacturing sectors declined in September from August, far more than expected, to 53.8 (still growth but nowhere near as strong as August’s pace). GDP is expected to be at a lower pace in the third quarter vs. the second. PIMCO’s Mohamed El-Erian said the EU’s public sector bailout is not working. France saw a new wave of strikes over Sarkozy’s pension reform plan. These austerity programs being initiated across Europe will bite. [And heck, if the U.S. dollar continues to weaken, then Europe’s exporters, particularly Germany’s, will take another header.]
Lastly, I’d like Jim Cramer to tell me he has clarity on just what Europe’s largest banks hold, given there is little transparency.
Street Bytes
–Stocks rose for a fourth straight week with the Dow Jones adding 2.4% to 10860, while the S&P 500 tacked on 2.0% and Nasdaq 2.8%, yet virtually all of the week’s gain was on Friday as an influential hedge fund manager, David Tepper, whose office is but a two-minute drive from yours truly, gave a rare interview on CNBC and touted equities.
–U.S. Treasury Yields
6-mo. 0.18% 2-yr. 0.44% 10-yr. 2.60% 30-yr. 3.79%
Bonds rallied on the prospects for further quantitative easing, while former Federal Reserve Chairman Paul Volcker said of the Fed’s concerns about prices falling:
“I’m not worried about deflation. I think we’re on a path to price stability. I do not think we should be worried about and consumed by the problem of a potential deflation that doesn’t exist.”
I don’t disagree with Tall Paul. I’ve been saying we wouldn’t see a double-dip and prices are not falling outright without one.
[Volcker also offered that the financial system has yet to be repaired and that “We know parts of it are absolutely broken like the mortgage market.”]
–The Obama administration’s top economic adviser, Larry Summers, is stepping down to return to Harvard. He was a key architect of the disastrous $787 billion fiscal stimulus plan; disastrous because it did zero for the economy and has killed many a congressional Democrat’s prospects. He’s also just a royal pain in the ass, even as some argue he was a voice of reason when it came to the White House’s relations with Wall Street.
–Two retail surveys of the coming holiday shopping season provided gloomy news. Deloitte expects sales to rise just 2 percent, after last year’s 1 percent increase. And a survey from America’s Research Council finds that a record-breaking 43 percent of shoppers plan to spend less during the holidays than they did a year earlier, while only 11 percent plan to spend more. Personally, I am going to spend far less.
[Hint to the loved ones. Lower your expectations. But I will host Christmas Day and premium will be on tap. “Uncle, this is the finest premium I’ve ever had! Why it’s the best Christmas ever, too!” “You’re a good lad, Tiny Tim, err, Doug.”]
Meanwhile, Macy’s plans to hire 65,000 holiday workers, a slight increase from previous years as the company expects sales to increase 3% to 3.5% in the second half. Target and Wal-Mart have been more pessimistic in their outlooks.
–Gold hit $1300 an ounce as the 10-year rally continued, due largely to the Fed’s above noted statement that it would not hesitate to purchase more Treasurys and thus devalue the dollar. Gold also continues to be helped by increased foreign demand.
[My past two “Wall Street History” pieces, incidentally, have been on gold and silver and are worth a look.]
–At one point this week you had the following spreads on 10-year bonds in Europe:
Germany 2.46%
Ireland 6.32%
Greece 11.43%
–Depending on the initial public offering of General Motors and eventual sales of shares in AIG, the actual cost to the government, and taxpayers, for the troubled asset relief program, TARP, is going to be below $66 billion, the current Congressional Budget Office estimate. You can imagine, though, that no one is going to campaign on its success.
–Earnings estimates for Wall Street’s investment banks are being slashed as trading volume continues to suffer. Layoffs have begun in yet another sign that while the overall economy may not suffer a double-dip, putrid growth is going to be the order of the day well into 2011. Analyst Meredith Whitney sees the Street’s revenues from its main businesses dropping 25% in 2010. All you need to know is trading volume on the NYSE declined 11% in July over 2009 levels, and a whopping 30% in August.
–People keep piling into corporate bonds, but one big positive in investors’ favor is the plunging default rate, which Moody’s estimates will fall below 3% by year end from a peak of 14.6% in November 2009.
–Apple Inc. became the second-most valuable company in the world on Thursday, bypassing PetroChina, though it finished the day back in third. At one point with the stock at $292.75 (essentially it’s close on Friday), Apple had a market cap of $267.5 billion. ExxonMobil is No. 1 at $311 billion at Thursday’s close. Apple shares are up 56 percent the past 52 weeks.
–Shares in software maker Adobe Systems plummeted 19% on Wednesday after the company reported weakening sales of its flagship product.
–Dell plans on spending $100 billion in China over the next decade to accelerate its expansion in the second-biggest market.
–Japan’s public pension fund is the largest in the world at $1.433 trillion, and just as I mentioned last week, with pensions funds around the globe needing significant future returns to take care of future payouts, and with few such investments to be found these days, the Japanese government is looking to the idea of going out on the risk curve, including investing in emerging-market economies. Everyone else is going to have to do the same, or cut benefits.
–Brazil’s national oil company, Petrobras, raised $70 billion in the largest share offering in corporate history, $43 billion of which goes to the government (including the Development Bank), the company’s majority shareholder.
[Famed emerging markets guru Mark Mobius called the stock sale an “abomination and a terrible violation of shareholder rights…The whole idea of the government not putting any cash in and setting a price on (Petrobras’) reserves that’s questionable at best is unfair.”]
–NBC News and USA TODAY highlighted my haunt from this summer, Orange Beach, Ala., and its attempt to recover from the consequences of the BP oil spill. Kenneth Feinberg is being heavily criticized for not doing a good job in overseeing payouts from BP’s $20 billion claims fund, but long term it’s about winning back confidence in not just the seafood, but also the beaches; the latter not being revitalized by BP and federal officials, according to Orange Beach Mayor Tony Kennon. In fact my claims on the beach front have been spot on. And as noted in USA TODAY:
“More than 100 miles of Gulf Coast shoreline still have visible oil on the water’s surface,” and that will still find its way onshore.
–Mortimer Zuckerman, media mogul and real estate kingpin, wrote an op-ed in the Wall Street Journal that contains the following passage.
“About 11 million residential properties have mortgage balances that exceed the home’s values, notes (economist David) Rosenberg. And given the total inventory of homes and the shadow inventory of 3.7 million empty (foreclosed) homes, he notes that prices might fall another 5% to 10%. That would leave an estimated 40% of American homeowners with mortgages in excess of the value of their homes.”
But just as in so much of the inflation debate, the above is intellectually dishonest for one reason. Rosenberg doesn’t mention that in terms of the median existing home price, we essentially bottomed in April 2009 at $166,000 and even after this week’s August 2010 data reflected a decline for a second straight month in terms of the median price, we now sit at $178,600. Ergo, a 5% to 10% decline essentially puts us back at April 2009 levels, which has been my whole point, since Fall 2008…we’d bottom and just sit there for an extended period. But Rosenberg would have you believe we are facing further losses beyond existing lows. Clean up your act, Mr. Rosenberg. That’s careless work.
–Thoughts from Berkshire Hathaway Inc. vice chairman Charles Munger, from a discussion at the Univ. of Michigan that recently came to light.
Munger defended the financial-company bailouts of 2008 and told students the people in economic distress should “suck it in and cope.”
“Now if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, culture dies.”
Munger noted that Germany was unable to stabilize its financial system in the 1920s, and, “We ended up with Adolf Hitler.”
–Blockbuster Inc. filed for Chapter 11 bankruptcy after three decades and $1 billion in debt. As it reorganizes, it will shut down 500 to 800 of 3,300 U.S. stores. Senior debt holders would exchange their bonds for full ownership of the company, with Carl Icahn being the largest single shareholder and owner of a lot of the paper. Blockbuster’s failure was due in large part to ignoring the potential competition from Netflix.
–One nation not suffering from a collapse in housing prices is Australia, where home values continue to rise, which in turn has led to new highs in household debt, owing to higher mortgages.
–113,000 families in Ireland face being cut off from their utilities unless they sign up for special repayment plans. 2,500 households a month are being cut off.
–Note to the publishers of “Stock Trader’s Almanac,” the 2011 copy of which I received this week. I don’t understand your deadlines, like why send it out in Sept., with 2010 data only through April?! I can see sending it in November, and with September figures given the ability to instantly update the database. Year-end sports almanacs do a far better job with this kind of stuff.
–My portfolio: For those of you playing along with my China holding, management informed me the facilities did not suffer any damage from Typhoon Fanapi. I was on weather watch last weekend. Looking at the radar loop, I was fired up when the storm jogged south, thus causing death and destruction to another part of the country, but not mine…just kidding. But I was disturbed by the stock action at week’s end and for those of you holding shares, yours truly single-handedly defended the share price on Friday.
Separately, I’m holding onto my nat gas storm trade, it being a January call position. Every freakin’ storm that has developed in the western Caribbean has veered west, but that’s about to change, mused your editor.
Foreign Affairs
Iran: President Mahmoud Ahmadinejad appeared before the UN General Assembly and said there is cause to speculate that the United States was behind the 9/11 attacks, and he launched his usual vitriol on Israel, while speaking of nuclear energy as a “heavenly gift” that could end the world’s dependence on fossil fuels. Then he said, “The nuclear bomb is the worst inhumane weapon and which must totally be eliminated.”
Now this all was totally predictable, given the source, but seeing as earlier in the week Ahmadinejad had called for the resumption of talks on Iran’s nuclear program, it was rather stupid…even more so than other diatribes of his.
It was also dumb for a reason I brought up last week. Ahmadinejad faces fierce internal opposition from figures such as Rafsanjani, who had been blasting Ahmadinejad’s belligerent foreign policy before the UN address, and so I say for the 193rd time…President Obama, deal with Rafsanjani, though it is years too late in terms of what is now an irreversible quest for nuclear weapons, and it will be a main point of my book on the decade, 1999-2009, when I finally get around to writing it. [I just need 27 hours in a day.]
At least the Kremlin definitively said it would not deliver the S-300 air defense missile system to Iran because sanctions prohibited it.
[On a different note, the Financial Times reported on Friday that a highly malicious” computer worm, Stuxnet, “has infected an unknown number of power plants, pipelines and factories over the past year” and “is the first program designed to cause serious damage in the physical world.” Some say, however, that it has one primary purpose, to target Iran’s nuclear facility at Natanz.]
Israel: President Obama told the UN General Assembly that the world needs to unite behind his plan for a Palestinian state and a secure Israel within a year. Otherwise:
“The hard realities of demography will take hold. More blood will be shed. This Holy Land will remain a symbol of our differences, instead of our common humanity. I refuse to accept that future and we all have a choice to make. Each of us must choose the path of peace.”
But I’ll have much more on the Israeli-Palestinian talks next time after Sunday’s settlements moratorium deadline expires. As I go to post, it is not clear whether Palestinian Authority President Mahmoud Abbas will accept a compromise, as he’s hinted he would do. A potential deal would involve Israel agreeing to limited building in designated areas, probably close to the Israeli border and likely part of any final deal on a land swap. This is a classic case of my waiting 24 hours dictum and saving a lot of ink until something definitive is in place.
Lebanon: It’s unclear when the results of the Special Tribunal for Lebanon (STL), the UN-backed court created to investigate the 2005 assassination of Rafik Hariri, will be released, but the attempts to discredit what some regard as inevitable, the naming of members of Hizbullah as part of the plot, is roiling Beirut.
A member of Prime Minister Saad Hariri’s Future Movement accused Hizbullah of undermining the Lebanese judiciary in a bid to discredit the STL.
“The enemies of truth and justice, meaning [Hizbullah] and its allies, have brought down the Lebanese state in preparation to bring down the international tribunal.” Hariri supporters are also warning against attempts to try to unseat Rafik’s son.
“We refuse that Lebanon becomes a hostage to the games and schemes of politicians who do not have a clear national strategy. We feel that Lebanon will witness a new wave of insanity in the coming days and weeks because certain groups have failed to confront facts and realities.”
For his part, Prime Minister Hariri said he would not withdraw support for the STL amid demands by Hizbullah for the adoption of an official Lebanese position accusing Israel of the murder, as reported by the Daily Star. Hariri also stressed the importance of the recent Syrian-Saudi rapprochement and its positive repercussions on Lebanon’s stability.
“Walid Jumblatt has been apocalyptic in predicting what lies ahead for Lebanon. The Druze leader may be overstating things, but is legitimately worried about a Sunni-Shiite conflict over the Special Tribunal for Lebanon. He is also apparently defining a new role for himself: that of midwife to a Syrian military return to Lebanon.
“ ‘We’re heading toward civil war if things remain as they are,’ Jumblatt told me this week.
“ ‘We should stop this fixation on the Syrians. They can’t do anything if the situation begins deteriorating; they don’t have troops on the ground,’ he replied.
“ ‘And why not, I would support this,’ Jumblatt interjected; ‘This is not a nation but a collection of tribes. You can quote me.’….
“That the Syrians never abandoned the idea of returning to Lebanon militarily after 2005 is and always was evident. But it’s not easy, because those with the most to lose from Syria’s comeback are Iran and Hizbullah. Neither Damascus nor Tehran will enter into open conflict over Lebanon, since their interests coincide on many fronts. However, after five years during which Hizbullah took hold of the commanding heights of the Lebanese state, transforming it into an Iranian card in the Levant, the party has no desire, and Iran no intention, of reverting to the time when Hizbullah hewed to Syrian priorities.”
And as Young notes, relations between Syria and Saudi Arabia are not as good as alluded to above; that in the past month, after supposedly reaching agreement on the fate of Lebanon, the Saudis are upset Syria isn’t doing more to support Prime Minister Hariri…that nothing is more important than stability in Lebanon.
“Hariri is playing for time, awaiting the tribunal’s indictment, after which he possibly imagines that he can bargain with Hizbullah over the party’s weapons. That is terribly optimistic, especially as Syria will have demands of its own. But Syria’s ambiguity on the tribunal and on stability in Lebanon will persist – its playing both sides of the Lebanese coin. This worries everyone, and (Syrian President) Assad is delighted. Worrying everyone makes him more valuable, and it means he can raise his price on all comers, Iranian and Saudi.”
When I was in Beirut this past spring, Mr. Young and I talked of the next wave of violence in his country. I said it would come by year end. He disagreed with me. I’m guessing he’d say now that the odds are at least 50/50 I could yet be right, though he’d hasten to add it depends on the timing of the STL’s findings.
Afghanistan: Commanding Gen. David Petraeus stated that the July 2011 deadline for the start of a drawdown of U.S. forces is merely the start of a “process…not a date when we rush for the exit.” No word from President Obama on whether he necessarily agrees, but the December review is around the corner and we’ll learn soon enough.
As for last weekend’s parliamentary election, I have read a slew of articles, from all sides of the spectrum, and I couldn’t find one that said the thing went well. At least 17 were killed in 445 incidents of violence, for starters, though the 445 figure was a little under the number for last year’s presidential election. Isn’t that super?! Three poll workers were killed, and turnout, at 40%, sucked. Plus, everyone is talking of “extensive irregularities,” which is like last year.
None of this is good for Afghan President Hamid Karzai (nor David Petraeus or Defense Sec. Robert Gates when they try to build their case for Obama in a few months). In Bob Woodward’s new book, Karzai is described by those in the know as being a manic-depressive, let alone hopelessly corrupt.
Lastly, with the nine U.S. soldiers dying in a helicopter accident, the total number of NATO deaths this year is at least 530, the deadliest year yet of the war.
China: I couldn’t agree more with Morgan Stanley’s Stephen Roach that the argument over China’s handling of the yuan is a “bogus issue.” President Obama knows this…he has to…but politics are getting in the way and so Obama has been forced to increase pressure on China to revalue the currency, while for his part, Prime Minister Wen Jiabao basically said ‘in good time, like on our timetable.’ Of course our own Federal Reserve makes a statement that it is prepared to come to the rescue of the economy again, and what happens? Our dollar takes a header, which conveniently makes our exports cheaper and thus everyone is pissed at the U.S.
Obama knows he’s playing with fire and a destructive trade war, though China hardly wants one either so we’ll see what happens the next few weeks, this as Congress is beginning to weigh in because, you know, there are voters (most of whom do not have an earthly clue about the dynamics of the issue) to kowtow to.
What the president should be doing, however, is continuing to press China on opening its markets, irrespective of the value of the yuan, such as in financial services. We are certainly in our rights to do this much.
But on another major issue, this one involving China and Japan, last week I warned a dispute over a Chinese fishing vessel and its ramming of two Japanese patrol boats threatened to blow into something more serious and we were on the verge of that happening until Friday, when Japan decided to release the captain of the vessel. The day before, China announced it was investigating four Japanese citizens for ‘illegally” filming a military site in China, so it appears relations were indeed ready to blow, though we need to wait 24 hours before determining the diplomatic rift is really over, for I see as I go to post, China is still demanding an apology.
[See my “Hot Spots” link for the China side of the story, posted before Japan agreed to release the captain.]
On a different front, China’s Wen told Taiwan that Beijing would remove missiles targeting the island one day.
“The cross-strait relationship has entered the best period in the past two years, with both sides signing and implementing the Economic Co-operation Framework Agreement.
“Cross-strait relations should focus on the economy, then politics. Based on the easy bits, then the difficult issues…I believe we’ll be able to remove the missiles targeting Taiwan eventually and one day we’ll be able to realize peaceful reunification.”
1,600 missiles are aimed at Taiwan and it should be added that China won’t do anything until after Taiwan’s next presidential election in 2012; at least that’s my guess.
Finally, China announced it would launch a Mars probe by 2013 (wouldn’t mind being on that one, as long as it had cable), Venus by 2015 (not interested) and its first manned moon landing in 2025. And don’t you know these guys will hit their targets. Or perhaps that wasn’t a proper choice of words, seeing as how many see nothing more than China’s goal of dominating space militarily.
[Actually, the Martians will be pumped to get some solid economic advice from the Chinese, as opposed to what they’d receive from the U.S. “You’re advising us to throw $787 billion on what?!”]
North Korea: As the regime prepares to announce that power will be transferred from Kim Jong-il to his youngest son, Kim Jong Un, it has already been announced that the chief designer of the North’s nuclear weapons program, Kang Kok Ju, has been elevated to vice premier. [At some point you’re going to need to know Kang’s name so might as well be now.] The formal conference in which the younger Kim is to be elevated is now slated to begin next week.
Separately, Russian Deputy Foreign Minister Alexei Borodavkin said conflict could arise between North and South Korea at any moment, adding “the political tension on the Korean Peninsula has reached an extreme level, after which there can only be conflict.”
Russia: Big goings on in Moscow as Mayor Yuri Luzhkov was the target of an unprecedented smear campaign on state-controlled media accusing him and his wife of corruption and “negligence.” Anonymous Kremlin officials instigated it. On Tuesday, the mayor celebrated his 74th birthday with his wife in Austria (hope he had wiener schnitzel and spaetzel, this being my favorite all-time meal), where it turns out the wife owns a bunch of properties outside Kitzbuhl. As in, she’s a billionaire. Huh, never knew this.
But Luzhkov was prepared to fight back with a documentary of his own, featuring his friends, praising him, but the program was axed at the television station controlled by City Hall, a sign support for him was fading in his inner circle. We’re talking a guy who has been running things for 18 years. Even President Medvedev failed to acknowledge the mayor’s birthday.
One other unrelated item. According to the World Health Organization, the rate for violence-related deaths among people aged 10 to 29 in Russia is 15.85 per 100,000 individuals, or 34 times higher than the rate in Germany. Albania was second worst among 53 countries surveyed in Europe and Central Asia, at 11.2 deaths per 100,000. No wonder the latter kind of creeped me out.
Pakistan: More than 10,000 schools, 500 hospitals, and 2 million homes have been destroyed or damaged in the floods. And with debt already at enormous levels, it seems only a matter of time before civil unrest overwhelms the government of President Zardari. The country was $55 billion in arrears before the flooding and Prime Minister Gilani recently said the cost of reconstruction will be $43 billion. Inflation is expected to explode. The finance minister said in two months, they may not able to pay government employees, so watch this time period.
India: And what a disaster of a different kind, the staging of the Commonwealth Games in New Delhi. As Mark Magnier of the Los Angeles Time put it the other day:
“About the only thing beating expectations…here is the mosquito population, helpfully delivering a dengue fever epidemic that is expected to peak just in time for the opening ceremony early next month.” The site where 7,000 athletes will be congregating “is in a prime mosquito breeding area along the fetid Yamuna River.”
Yup, glad I didn’t get tickets for this one. I’ll take the U.S. Olympic Track and Field Trials in Eugene, Oregon, any day of the week, thank you.
India’s image is taking a mighty hit. Understand the living quarters for the athletes have duly been described as uninhabitable. You are talking toilets that are every bit Third World (I’ve seen the pictures). And a walkway connecting parking areas to the stadium collapsed the other day, injuring 23, because the cement hadn’t been poured properly.
I mean get this. India had seven years to prepare, yet the contract to feed the athletes, coaches and staff was just awarded last month! Organizers hadn’t even thought about the equipment needed to feed the visitors.
There are also serious holes in the security, which will force the Indian Army to move in, I have to believe.
Tajikistan: This could be a first for “Week in Review,” but the ambush of at least 23 Tajik soldiers by armed Islamist militants warrants a mention because it is a troubling signal that the Afghan war could be spreading, Tajikistan being a northern neighbor (along with Uzbekistan and Turkmenistan…it helps to have a world map in front of you as I do in my office).
France: Speaking of terror, France sent a team of 80 special forces and intelligence experts to West Africa to seek out al-Qaeda fighters holding seven French hostages in the lawless hinterland of Niger, Mali and Mauritania (as I go back to the map), all of which border Algeria, always a hot-bed of Islamist militants, as the French well know from their history.
This comes as France was alerted by Algerian authorities that it had picked up signs of a terror attack either on the Eiffel Tower or a main Paris Metro stop; possibly a female suicide bomber.
I admire President Nicolas Sarkozy for doing all he can to rescue the hostages. Hopefully, we can toast a successful mission down the road.
Sweden: In a first for this nation, a far-right party with neo-Nazi roots, the Sweden Democrats, captured their first seats in parliament, winning 5.7% of the vote. The foreign-born population of Sweden has risen to 13.8%, which led to the gains for this outfit. Center-right Prime Minister Fredrik Reinfeldt did not gain a clear majority, but said he would not work with them.
Britain: Pope Benedict XVI’s four-day visit went better than expected as even Prime Minister David Cameron felt comfortable praising the pontiff, saying in part:
“You have offered a message not just to the Catholic Church but to each and every one of us of every faith and none. A challenge to us all to follow our conscience to ask not what are my entitlements, but what are my responsibilities? To ask not what we can do for ourselves, but what we can do for others?”
And on a different topic, as part of Britain’s austerity kick it is cutting the defense budget, too, by up to 20%, but…it reassured the U.S. it would be keeping its nuclear deterrent and other specific military capabilities Washington wants to see continued.
However, Britain won’t have the capability to mount operations such as in Afghanistan, where 10,000 British personnel are involved. Instead, they will be able to provide manpower for operations of up to 6,000 troops in any campaign.
This is a huge deal…and is emblematic of how Europe is de-militarizing. Yet, of course, they don’t want us to, a fact you won’t hear them say publicly, but the United States is the defender of choice for Europe, to which an increasing number in America are bound to say “the hell with them. If they won’t defend themselves, why should we?”
Colombia: Colombia’s new president, Juan Manuel Santos, former defense minister, showed he is not to be messed with when Colombian forces killed the military leader of FARC, along with 20 other rebels, as Santos massed a force of 800 to go after Jorge Briceno Suarez. You da man, President Santos! Just destroy these dirtball drug-traffickers.
Zimbabwe: Speaking of dirtballs, one I’ve long argued should have been taken out a decade ago, President Robert Mugabe, is at it again as his thug supporters bludgeoned to death a pro-democracy activist in a sign Mugabe is about to re-launch his terror campaign.
Crispen Mandizvidza was walking home when 50 Zanu (PF) youths appeared and hit him in the stomach repeatedly with tire irons. So someone tell me why the U.S. or Britain (it should be the latter, seeing as it was once their possesion), can’t send a commando unit to snuff out Mugabe? The world would cheer, and, frankly, in toasting those who carried out such a mission, would provide a bit of economic stimulus.
Random Musings
–Homeland Security Secretary Janet Napolitano, testifying before a Senate committee, said, “Unlike large-scale, coordinated, catastrophic attacks, executing smaller-scale attacks requires less planning and fewer pre-operational steps. Accordingly, there are fewer opportunities to detect such an attack before it occurs.”
As Peter Finn of the Washington Post reported, “Terrorism experts have puzzled over al-Qaeda’s apparent unwillingness after the Sept. 11, 2001, attacks to use car bombs, improvised explosives and small arms to conduct assaults in the United States. The group appeared fixated on orchestrating another dramatic mass-casualty event, such as the simultaneous downing of several commercial airliners.” [Ed. or Madrid 2004, London 2005]
But the odds are increasing the United States will see single-target bombing or lone gunmen. Michael Leiter, director of the National Counterterrorism Center, testified, “The impact of the attempted attacks during the past year suggests al-Qaeda, and its affiliates and allies, will attempt to conduct smaller-scale attacks targeting the homeland but with greater frequency,” pointing to the attempted Christmas Day bombing, as well as plots against the New York City subway system, and the failed Times Square car bombing.
“Everyone’s angry. But anger is cheap and tired. Rode hard and hung up wet, as we say down South. Most Americans are also sad. The always bountiful America seems on the edge of famine, spiritual if not literal, though the latter seems all too possible as jobs disappear and businesses close.”
Parker writes of the new ad “Mourning in America,” a takeoff of Ronald Reagan’s “Morning in America.”
“Echoing closely the text of Reagan’s ad, the new one is shot in darker, more somber light. Here’s Reagan:
“ ‘It’s morning again in America. Today, more men and women will go to work than ever before in our country’s history.’
“The new ad, produced by Citizens for the Republic, a group of organizers who identify themselves as friends and fans of Reagan, is less sunny:
“ ‘There’s mourning in America. Today, 15 million men and women won’t have the opportunity to go to work. Businesses shuttered. Twenty-nine hundred families will have their homes foreclosed by nightfall. This afternoon, 6,000 men and women will be married, each of their children to be born with a $30,000 share of the runaway national debt.’….
“The ad is not subtle in blaming current circumstances on Obama. Quite the contrary, the narrator says that under the president’s leadership, the country is ‘fading, and weaker, and worse off.’ In a gesture of charity, perhaps, the ad allows: ‘His policies were a grand experiment, policies that failed.’….
“Whether this ad succeeds remains to be seen. Meanwhile, the more relevant question is: Is it true? Is Obama responsible for our near-dire circumstances?
“I have never been a fan of presidents who place blame on their predecessors or who accept credit for events that couldn’t have been engineered so soon in their tenure. Politicians will always massage the data to tell the story their way. Bill Clinton’s happy economy surely owed some credit to Reagan. George W. Bush’s ill fortunes surely had at least some of their roots in Clinton’s lack of attentiveness. Obama clearly inherited a load of fertilizer, but his policies also have exacerbated those effects. Obama’s successor most certainly will benefit or suffer to some degree from seeds the current president planted.
“Nevertheless, it is probably fair to say that Obama’s ideas were too big for America’s appetite. It would have been nice had he made a few incremental repairs to the economy and left the transformative events for a less stressful time.
“But this is not the way presidents operate. They want to make their mark, create a legacy, go down in history as having made a difference.
–Republican leaders in the House have issued a new “Pledge to America,” promising tax cuts and a big cutback in government spending to revive the economy. Republicans paint the Democratic-controlled Congress and White House as being an “out of touch government of self-appointed elites [that] makes decisions, issues mandates, and enacts laws without accepting or requesting the input of the many.”
“We will end the attack on free enterprise by repealing job-killing policies and taking steps to assure current businesses and future entrepreneurs that the government will not stifle their ability to compete in the global marketplace.”
The whole launch of the program looked goofy, with House leaders all in khaki uniforms, save one in jeans. And they have zero credibility after the Bush years.
–New Jersey Republican Gov. Chris Christie, campaigning for California’s GOP gubernatorial candidate Meg Whitman, confronted a heckler who said of Whitman, “You’re looking like Arnold in a dress,” referring to Gov. Schwarzenegger, not Green Acres’ Arnold Ziffel, just to clear up any confusion. Christie got off the stage and got in the guy’s face.
“Hey, listen. You know what. You want to yell, yell at me. It’s people who raise their voices and yell and scream like you who are dividing this country. We’re here to bring this country together.”
[Christie is trying to reform New Jersey’s public-sector pension system and six in 10 voters here support eliminating pensions for future workers.]
–I don’t know if I’ve ever seen this before. On Wednesday, a Quinnipiac poll showed Democratic candidate for governor of New York, Andrew Cuomo, up only 6 points on the GOP nominee, Carl Paladino. Immediately, as you’d expect, the Paladino campaign trumpeted the data and the Cuomo camp was beside themselves.
But then on Thursday, a Siena Research Institute poll had Cuomo up 33 points! 57% for him, 24% for Paladino and 8% for Conservative Party candidate Rick Lazio.
“ ‘We can’t wait until 2012 to get our country back on the right track,’ (said Sarah Palin). ‘We need to start now by electing strong Republican leaders who aren’t afraid to shake it up.’ Palin mixed folksy, informal asides with quotes from American icons Mark Twain, Thomas Paine and Ronald Reagan, the dinner’s namesake, during her 33-minute speech.’”
There is no way Sarah Palin really knows who Thomas Paine is.
But this is what also ticks me off. A line from a London Times article (that could be from any paper in America):
“Her victory [referring to Christine O’Donnell’s in the Republican primary in Delaware] highlighted the civil war inside the Republican party between the old Washington-based establishment and populist movements such as the Tea Party.”
Every article, every commentator (including the likes of O’Reilly and Hannity), say the same thing. Any one ‘outside’ the Beltway must act a certain way. That’s just idiotic.
Look, I would hope after all these years that you know where I stand. I agree with much of the Republican Party’s agenda, including that of conservative Senator Jim DeMint, who is shepherding the Tea Party movement from his high perch.
But we live in dangerous times, and while to most Americans the economy, not foreign policy, takes precedence these days, it’s foreign policy, and the war on terror, both here and abroad, that can shape confidence quicker than you can say “Bristol.”
The likes of Christine O’Donnell and Sarah Palin are the last people we need shaping that policy. And, c’mon, Tea Party…you cannot be serious if you believe O’Donnell would make for a better senator than Michael Castle.
But at the same time, Republicans are blowing away the Democrats on the passion front and that’s what will be translated at the polls Nov. 2.
Mississippi Gov. Haley Barbour is one of my favorites. From his Wall Street Journal op-ed.
“Tea Party voters have been incited to political action by the policies of the Obama administration and the Pelosi-Reid Congress. These include a heretofore unimaginable federal spending spree, a failed package of stimulus programs, a government takeover of our health-care system, and the Democrats’ insistence on raising taxes, particularly on job creators, even though job creation is our country’s greatest need….
“When the Republican voters of a state choose a party nominee in an open process like a primary, we Republican leaders must support the nominee. During my tenures as chairman of the RNC and RGA, neither organization endorsed candidates in primaries. That’s because the party’s role is to abide by the decisions of the Republican primary voters. We have no right whatsoever to substitute our will or judgment for that of the voters.
“Sen. Lisa Murkowski lost the GOP primary in Alaska to Joe Miller. Now she’s launched a write-in campaign to get re-elected. There is no excuse for this campaign, and Senate Minority Leader Mitch McConnell was right to demand her resignation from the GOP leadership.”
–Former President Jimmy Carter to NBC’s Brian Williams.
“I feel that my role as a former president is probably superior to that of other presidents,” referring to his post-presidency career that’s included his humanitarian work.
–Facebook Inc., founder and CEO Mark Zuckerberg, announced a $100 million donation to the Newark school system, which is just stupid. I’m tellin’ ya, the most overrated mayor in the country is Newark’s Cory Booker. I used to like the guy, but it’s about results and the past few months, each morning it seems like there is another fatal shooting in the city. Plus Zuckerberg has zero connection to Newark. And according to the Wall Street Journal, both Gov. Christie and Booker pressed the issue, after Zuckerberg had met Booker at some education symposiums.
So how will the money be spent? Well, for starters, a very good friend of mine was city basketball scoring champion, two years running, in the ‘90s, and he never received his jacket, per former Mayor Sharpe James’ promise, so I’d like to see him get his jacket, first. Then we can move on to bigger stuff.
Back to Zuckerberg, of course his move is all part of the damage-control going on ahead of Friday’s release of the movie, “The Social Network,” which does not depict the guy in a favorable light, including the long-held belief by some that he stole the idea for Facebook from fellow students.
–Speaking of New Jersey, the Star-Ledger had a story last Sunday on how “Local officers are the nation’s best paid, and those in towns with low crime make the most.” One very quiet community, Closter, has the sixth-highest paid force in the state, with 17 of the 20 officers making at least $100,000.”
“A Star-Ledger analysis shows the average municipal cop in New Jersey is paid 80 percent more than the average resident, and three of 10 made at least $100,000 last year….
“The median salary for the state’s 20,525 municipal officers was $90,672 last year, meaning half earned more and half earned less.”
Now I know it’s been a while since I myself was in the formal work force, but this is absurd. And after 20 years on the job, retiring cops get at least 50 percent of their base salary (though no health benefits). After 25 years, they get at least 65 percent and health benefits. Gov. Christie is trying to change this, but not too drastically.
Lastly, the average per capita income in New Jersey last year was $50,313.
–Eight city officials of Bell, California, were arrested for misappropriating $5.5 million in public funds. It was because of outrageous salaries for the likes of the city manager ($800,000) and the city council that Bell first gained national prominence.
–The Transportation Department said 5,474 people were killed in 2009 in crashes reported to have involved distracted driving, a 6 percent decline from 2008. I’m not in the least impressed. All I know is that you can tell the actual number of distracted drivers on the road is growing exponentially. I’d venture to say that half the people first in line at an intersection with a light are texting these days. It’s a rather obvious thing to figure out, as you are well aware. And many police reports don’t document whether distraction was the cause of an accident in the first place, so the problem is clearly far greater than the statistics show.
–In a report from the Organization for Economic Cooperation and Development, of 33 nations with advanced economies, the U.S. is the fattest, with 2/3s being overweight or obese. By contrast, in Japan, South Korea and Switzerland, only three out of 10 are overweight and fewer than one in 10 obese.
–Finally, on Friday I received my absentee ballot for November. Go Union County Clerk Joanne Rajoppi! I don’t care what party she is…oops, I see she’s on the ballot herself, she’s a Democrat. Well you know what? This will be the first lower office Democrat I ever vote for. We elected her to do a job and in my case she did it well. You go, girl!
[I’m also voting for my incumbent Republican congressman.]
Pray for the men and women of our armed forces, and all the fallen.
God bless America.
—
Gold closed at $1297
Oil, $76.53
Returns for the week 9/20-9/24
Dow Jones +2.4% [10860]
S&P 500 +2.0% [1148]
S&P MidCap +2.0%
Russell 2000 +3.0%
Nasdaq +2.8% [2381]
Returns for the period 1/1/10-9/24/10
Dow Jones +4.1%
S&P 500 +3.0%
S&P MidCap +9.6%
Russell 2000 +7.3%
Nasdaq +4.9%
Bulls 41.4
Bears 29.3 [Source: Chartcraft/Investors Intelligence…reminder, this is a contrarian indicator, giving the percentages of newsletter writers who are bullish, bearish, or, the balance, think the market will see nothing more than a “correction.”]
Your editor defeated Dr. Bortrum in the rubber match of their par-3 challenge at the historic Summit Muni. But neither of us displayed any great ability for the three rounds of the tournament. Then again, there’s always next year. I’m going to start working out today.
Next time from an undisclosed location in Rhode Island.
