Wall Street…and Europe
Let’s start out with the good news, shall we? The third quarter, and September, specifically, proved to be quite special for those in the bull camp. To wit:
Dow Jones…up 7.7% in September…up 10.4% for the quarter
S&P 500…up 8.8% in September…up 10.7% for the quarter
Nasdaq…up 12.0% in September…up 12.3% for the quarter
So much for September being the worst month for stocks. Basically, the economic releases for the month weren’t awful, save for still zero real job creation, but the Federal Reserve strongly hinted that if the news on the economy sours anew it is prepared to step into the breach again and keep interest rates as low as humanly possible as a way of jump-starting growth. Of course the fact savers, and retirees, continue to earn zero on their money market accounts and CDs is besides the point because the Fed doesn’t care about you. “Let them eat peanut butter!” say the Fed governors. And so we shall.
But the rapidly developing cross-currents in the global markets are fascinating, and highly dangerous. The data in Europe, for example, is all over the place. Take my beloved Ireland, which announced this week that at least on a temporary basis its deficit will explode to 32% of GDP…32%!…as the government announced it was once again expanding the bank bailout of state-owned Anglo Irish to as much as $48 billion, while taking a majority interest (nationalization) in Allied Irish Bank and injecting more cash into a third financial institution. I’ve been writing the past few months that no one knew what the real exposure for Ireland’s banks was as a result of the biggest real estate bubble in history (or certainly as bad as any, including our own), and sure enough the total exposure has risen by the week, though now the Irish are being told, ‘This is it…this is as high as it goes.’ [All together, one figure I saw said $68 billion.]
Eamon Ryan, Ireland’s Communication Minister, said: “This is a horrible legacy, the figures are numbing, and one would really wish we didn’t have this legacy from our property bubble and our banking system. But we had it, we have to deal with it.”
And in ‘dealing with it,’ the people are going to see even further austerity; more job losses, wage cuts, tax hikes, cuts in pensions, and cuts in services. You saw last week how Ireland surprised everyone by reporting a negative GDP in the second quarter. Why would you possibly expect any kind of serious recovery here for years given the ongoing pain and suffering?
It’s that word, austerity, that I and others have been claiming that, while necessary, and in the long-term interests of the countries most in need of it, short-term it is terrible and many Europeans are showing they won’t take it.
This was a week that saw massive strikes and protests in Spain (its first general strike since 2002), France, Greece and Belgium. If it isn’t job cuts or tax hikes, it’s a hike in the pension age, with reduced benefits. The party is over and the hangover is going to last a long, long time.
And as I’ve written of deep divisions in the eurozone, they have been exposed anew with Germany’s call for “quasi-automatic” sanctions for those exceeding their debt limits, to which France fought back, saying the politicians should have some say, as in how can you just make it automatic? Each nation’s circumstances are different, which has been my point. The European Union/IMF bailout fund of some $960 billion, accessed thus far only by Greece, is not a U.S. Congress/Federal Reserve hard number. In the end, it will require the various countries in the EU to pony up and with the Germany-France divide on sanctions you get a picture of how if the European economy doesn’t grow at a solid rate in the coming years, you’re talking fistfights in the various parliaments when debate turns to bailing out their neighbor. Not gonna happen, sports fans.
So some individual country notes in Europe. The IMF praised the U.K.’s deficit-reduction plan, but, again, you’re talking higher taxes, job cuts, reduced pensions and pay cuts. Not the stuff of which roaring recoveries are built.
France rolled out a severe budget for next year, highlighted by President Sarkozy’s pension reform, and you’ve seen the reaction to this. Consumer spending in France was down for the latest reporting period.
Spain’s credit rating was cut as the government here rolled out an austerity budget slashing expenses a whopping 16%! Why can’t we do that? It’s also raising taxes, and still talking of growth in the economy. The latter ain’t gonna happen.
But there was some better news. Eurozone inflation was up in September, to 1.8%, but hardly worrisome, and the unemployment rate in Germany fell to 7.2% (we’d die for that), while Italy’s jobless rate fell to 8.2% in August.
The trend in eurozone manufacturing as a whole for September was down, however, from August, 55.1 to 53.7, and the region’s overall jobless rate remained unchanged at 10.1%.
Elsewhere around the world, the big news was out of China, where its purchasing managers’ index for September came in at a reported 53.8, up from 51.7 the previous period. The more conservative HSBC index of manufacturing in China pegged it at 52.9, when HSBC had it slightly below 50 the prior month. This was big. HSBC’s economist said September’s activity marked “the beginning of a multi-month upswing…as Beijing strengthens its commitment to complete stimulus projects.” Auto sales are growing again here as well after a five-month slide. It would certainly appear that those screaming of a double-dip in China were wrong. [This obviously also makes me feel better about my large investment here as well.]
India’s PMI for September dipped a bit from August’s pace…57.2 down to 55.1, while Japan’s key Tankan quarterly business survey expressed pessimism and Japan’s industrial production for August was down from July’s level, a surprise, while exports here were up less than expected for the month.
Overall, though, the Asia Development Bank raised its forecast of growth in the region, ex-Japan, to 8.2% in 2010, up from 7.5% in its prior forecast. The ADB pegged China at up 9.6% for the year, and India at 8.5%.
But then you have the currency war issue, with the United States as big a culprit as anyone in wanting a weaker currency in order to improve the export market. At least ten nations are doing the same thing, seeing it as the only way to keep their economies afloat by juicing exports. It’s an issue that has come to a head, with the likes of the U.S. Congress, at least the House thus far, giving President Obama the flexibility to impose tariffs on Chinese imports to the United States. The bill passed with a surprising bipartisan margin, 348 to 79, including the support of 99 Republicans recognizing a cheap election issue. “Why those damn Chinese! We won’t take it anymore!” “Aarghhhh!”
Of course the Chinese aren’t blameless, far from it, but U.S.-Sino ties are critically important these days, on a number of fronts, including militarily, and the last thing we need is a trade war.
Others, such as economist Robert Samuelson, say maybe this is what we do need. Samuelson writes in his Washington Post column:
“No one familiar with the Smoot-Hawley tariff of 1930 should relish the prospect of a trade war with China – but that seems to be where we’re headed and probably should be where we are headed. Although the Smoot-Hawley tariff did not cause the Great Depression, it contributed to its severity by provoking widespread retaliation. Confronting China’s export subsidies risks a similar tit-for-tat cycle at a time when the global economic recovery is weak. This is a risk, unfortunately, we need to take.
“In a decade, China has gone from a huge, poor nation to an economic colossus. Although its per capital income ($6,600 in 2009) is only one-seventh that of the United States ($46,500), the sheer size of its economy gives it a growing global influence. China passed Japan this year as the second-largest economy. In 2009, it displaced Germany as the biggest exporter and also became the world’s largest energy user.
“The trouble is that China has never genuinely accepted the basic rules governing the world economy. China follows those rules when they suit its interests and rejects, modifies or ignores them when they don’t. Every nation, including the United States, would like to do the same, and most have tried. What’s different is that most other countries support the legitimacy of the rules – often requiring the sacrifice of immediate economic self-interest – and none is as big as China. Their departures from norms don’t threaten the entire system….
“The post-World War II trading system was built on the principle of mutual advantage, and that principle – though often compromised – has endured. China wants a trading system subordinated to its needs: ample export markets to support the jobs necessary to keep the Communist Party in power; captive sources for oil, foodstuffs and other essential raw materials; and technological superiority. Other countries win or lose depending on how well they serve China’s interests.
“The collision is between two concepts of the world order. As the old order’s main architect and guardian, the United States faces a dreadful choice: resist Chinese ambitions and risk a trade war in which everyone loses; or do nothing and let China remake the trading system. The first would be dangerous; the second, potentially disastrous.”
I just want the Obama administration to take each case to the WTO and let them decide, away from the glaring lights of the press and politicians scrounging for votes. The White House needs to make clear to Congress that they are handling the China relationship in the right way, and Obama should have a three-day summit with China’s leaders, including its generals.
Street Bytes
–The stock market’s four-week winning streak ended as the three major indices all registered fractional losses; 0.3% for the Dow Jones to 10829, 0.2% for the S&P 500, and 0.4% for Nasdaq. PIMCO’s Bill Gross reiterated his call for a “new normal” and investment returns for the foreseeable future, like the next decade, that will be putrid. I’ve noted the prior two weeks the difficulties on the pension front in earning the 8% most future benefits are pegged to, and Gross certainly concurs. No 12% a year in stocks that an average model would require to net out to 8% when including the bond component. It does need to be noted, though, that Mr. Gross has made some terrible equity calls over the years. As for me, I’ll continue to take it one year at a time.
The 10-yr. finished the quarter also at 2.51%, down from 2.95% on 6/30; a huge rally.
On the economic front, the first revision to second quarter GDP came in at +1.7%, up from 1.6%; while the Sept. ISM figure was 54.4, down again and reflecting a slowdown. [Chicago’s PMI, however, came in at a robust 60.4]
Separately, personal income for August was up 0.5% and consumption was up 0.4%, but much of this was government related, including for a renewal of unemployment benefits and various aid programs.
–The Case-Shiller 20-city housing index for July was a non-event (this thing is so dated, I just don’t care), while foreclosure sales are rising, which is going to continue to have an adverse impact on prices overall. However, the average sales price for a home in foreclosure is rising. For example, the nationwide median existing home price may be $180,000, but the price of a foreclosed property has risen from, say, $168,000 to $172,000. [These aren’t exact figures, rather for illustrative purposes.]
–The Economist had a story on corporate America’s disdain for President Obama. In part:
“Speculation that Barack Obama will appoint a businessman to a senior job in his administration reached fever pitch this week, after the White House announced that Larry Summers, the president’s principal adviser, will soon step down. It is hard to find an American boss nowadays with a good word to say about the current administration, and the absence of anyone with a business background in Obama’s inner circle is invariably mentioned as a reason why. The perception in corporate America that the president is actively anti-business, or at the very least doesn’t ‘get it,’ has started to ‘have a psychological effect on how firms invest,’ notes one well-informed insider, who used to see this as a ‘seven out of ten problem’ but now rates it as a ten….
“As for Mr. Obama, when he meets businesspeople at fund-raisers and the like, he too often shakes hands and moves on, leaving them feeling he was more interested in a photo-op than a conversation. He caused offense and disbelief a while back by turning up for a meeting with a group of prominent chief executives and then reading to them from a teleprompter.”
–Here’s a classic lead, from the Wall Street Journal, that kind of sums up the White House’s failings.
“The third-biggest U.S. wind-power developer will continue to cut spending, with no clear national energy policy in place and a continued slump in electricity prices.
“[Madrid-based] EDP Renovaveis SA, through its U.S. subsidiary Horizon Wind Energy, will reduce spending by more than half to less than $300 million in 2011 from around $700 million this year, with further cuts possible in following years, Chairman Antonio Mexia said in an interview Friday.
“ ‘What makes sense is postponing [projects],’ he said.”
Now I’ve followed this sector fairly closely, and at one time had a successful investment in it [Zoltek], and it’s true in parts of Europe growth in the industry was out of control, versus the realities of wind energy, but the point is there is zero strategy, even as Obama (and to be fair, every other president) has touted the need for a national energy policy.
–From the Business Roundtable, the third quarter outlook reveals that 23% of executives plan on decreasing their workforces, vs. 17% who said so in the second quarter. 46% expect no change. One simple reason; sales forecasts are down.
–A major cause for gold’s run-up in 2010 is the end of systematic sales of gold reserves on behalf of Europe’s central banks. For more than a decade, the sales helped slow any rally, even as gold has gone up in price each year during this period, but now central bank sales are down 96% this year to September.
It’s all about reassessing the shiny stuff during the financial crisis, and gold closed on Friday at another high, $1319.
–A Gallup poll of Gulf coast residents found that depression cases are up more than 25% since the BP oil disaster. Totally understandable. It’s just tough to cope when your small business is going under due to problems that were out of your control. I’ve made some incredibly stupid business decisions in my life (like buying a company that was connected to StocksandNews in the early 2000s), but that was totally my fault. The poor folks in the Gulf region, on the other hand, got royally screwed.
–In another sign of unintended consequences regarding Obamacare, McDonald’s stated it may drop mini-med plans it provides some 30,000 of its hourly employees because of new government requirements. I had no idea that a single worker can pay $14 a week for a plan that caps annual benefits of $2,000.
While I don’t in the least understand the rules for this, seems to me like that obviously pays for a physical and more than a few tests, which is all most of these folks need. And it seems as if McDonald’s has been exceedingly generous in yet another reason why it is one of the great corporations of all time.
–I have written little of the ongoing collapse of American banks, now at least 279 since Sept. 25, 2008, for one simple reason. The system has worked and within the FDIC insurance limits, no depositor has lost a dime so I’m not going to cry over a sector that was way overgrown. My friends and I would comment constantly how in our area of New Jersey, there was a new bank, or bank branch, every few weeks before the bubble burst, and you’d never see any customers in them. Keefe, Bruyette and Woods Inc. estimates that through failures and consolidation, the number of U.S. banks could fall to 5,000 from the current 7,900.
But, this does also mean more lost jobs, and higher fees for customers as competition is eliminated.
–AIG reached an agreement with the government on a plan to pay back its debt, with Treasury Secretary Tim Geithner saying it “dramatically accelerates the timeline for AIG’s repayment” and positions taxpayers to recover their investment, and maybe even turn a profit.
AIG received as much as $180 billion from taxpayers, and still owes $120 billion, including $20 billion to the New York Fed. Upon payment of this amount, the Treasury Department will convert $49 billion in preferred shares into AIG common and then sell them over time, though most agree this will pressure the stock price for existing shareholders.
But Treasury has also said it doesn’t want to set a price that would allow hedge funds and former AIG CEO Maurice “Hank” Greenberg to profit, so you can imagine Mr. Greenberg is none too pleased, he having built the company until his ouster in 2005 amid an accounting probe. Greenberg added that the government will not be able to sell down its stake in its intended 1 ½ years. “I think it’s going to take a decade or more,” he said.
–The SEC’s long-awaited report on the flash crash of May 6 targeted Waddell & Reed Financial as the primary culprit for a large trade in “E-mini futures” that mimic movements in the S&P 500 index, though the SEC doesn’t specify Waddell by name. It was also about a time when the European debt crisis was at center stage and the careless futures trade, one without limits, severely exacerbated the volatility. None of this should give us comfort because the SEC also offers zero solutions and it could easily happen again.
–September auto sales, when compared with year ago levels, soared, but last year’s were down because it was the first month post-cash-for-clunkers. Nevertheless, the following makes for good reading:
GM up 11%, Ford up 41%, Chrysler up 61%, Toyota up 17%, Honda up 26% and Nissan up 34%.
–The International Council of Shopping Centers released its holiday sales forecast and it’s slightly better than previous ones, up 3 to 3.5%.
–Airline fees are up by as much as 50%, according to an analysis by USA TODAY. Spirit Airlines, for example, now charges for carry-on bags, the bastards, while six big carriers have priority seating fees.
But while we don’t like it, the airlines brought in $2.1 billion in ancillary revenue for the second quarter, including $890 million from checked-bag fees and $600 million from changed reservations.
And get this, American Airlines now charges $300 for a change fee on coach for some international flights.
We’ve all noticed these fees. I’m furious I was charged $45 for an upcoming flight that was changed which totally screwed up an extensive trip I’m taking in two weeks. Continental changed it, not me, after I scheduled my entire trip around this segment, but they are charging me!
–Meanwhile, Southwest agreed to buy the former ValuJet Airlines, Air Tran, in a $1.4 billion merger, that combines two of the largest low-fare airlines and moves Southwest into 37 new cities. This comes as United and Continental Airlines have combined to create the largest airline in the world, besting Delta which was No. 1 the past two years after buying Northwest.
At least Southwest will drop Air Tran’s bag fees, as Southwest claims its campaign of not charging has been helping lure new traffic.
–Leo Apotheker, former CEO at software giant SAP, has been named CEO of Hewlett-Packard.
–The Postal Regulatory Commission turned down the Postal Service’s request for a new rate increase, saying the service hadn’t made a clear case for it.
–Wal-Mart has decided to make a play for South Africa’s retail market, acquiring the country’s third-largest retailer, Massmart, for $4.6 billion. Andy Bond, the Wal-Mart exec responsible for the acquisition, said: “We like South Africa. I think there is a definite confidence in it as a true emerging economy, and it also offers a platform for growth in southern Africa.”
Earth to Mr. Bond, Andy Bond. Whites continue to flee South Africa because they see no future. The government is in a shambles. Or don’t you read the news?
–Carl Icahn was king one day, but no longer. In fact, you might say he’s incredibly overrated. Just look at his purchase of the bankrupt Fontainebleau Las Vegas last January, when he picked up the proposed 3,800-room resort (70% completed) for $151 million. The cost to finish the project was estimated at $1.6 billion.
So now he’s holding a fire sale after deciding to fold; supposedly, as the New York Post reported, after he did zero due diligence before buying the property. Today, he’s literally starting to sell off the furniture.
–I have been making fun of the Segway since 2001. In fact in this space on 9/16/06, I noted a product recall, “because of a glitch that could cause riders to fall off and kill themselves.” Well, that wasn’t the case, actually, but there had been some injuries and I just thought the contraption was a joke.
Alas, out of nowhere, the owner of the Segway, Jimi Heselden, died when he had an accident on a souped-up version of the vehicle on his private grounds, going over a cliff. It was a tragedy in every sense. This is a man who once used severance pay upon being laid off as a miner in England to form a company that would go on to invent a form of “blast wall” that could withstand bullets, missiles and suicide bombers. As the London Times noted, his invention has protected soldiers in Afghanistan and Iraq, where his portable wire cages, filled with earth, replaced sandbags. He was also a major philanthropist. RIP.
[Segway had another product recall this past June for a software issue that threw the device into reverse unintentionally.]
–Up to 100 have been arrested around the world for a scheme that used computer viruses to hack into bank accounts throughout America. Once the e-mail was opened, a virus like Zeus Trojan would be activated that recorded keystrokes and passwords as unsuspecting users logged into their accounts. Yet another reason why I don’t bank online. At least $4 million was taken from victims throughout the states.
–Vanguard officially passed Fidelity as the largest asset manager as of July 31, with $1.31 trillion in assets to Fidelity’s $1.24 trillion. Industrywide, since the beginning of 2008, $301 billion has come out of actively managed equity funds, while $113 billion has gone into stock-index funds, Vanguard’s bread and butter.
–Owing to the economy, marriages among those 18 and older have hit an all-time low, 52%, vs. 57% in 2000.
–Crain’s New York Business had a story on inflation in New York…like in for breakfast. A gallon of milk, for instance, rose 24% from January to August. Coffee was up 10% since March owing to bad weather in South America. The price of wheat rose, and so did the average bagel, up 25 cents. Maple syrup is up 25% the past four years. Bacon is up 20% since January.
–This is interesting. As reported by the Financial Times, “Rapid growth in digital music downloads has ground to a halt in the U.S., suggesting the MP3 market is reaching saturation point.
“According to figures from Nielsen…630m tracks were downloaded in the first half of 2010 in the U.S., flat on the same period last year.”
This after the industry grew 13% in 2009 and 28% in 2008. It seems that everyone has already transferred their CD collection to MP3, leaving it up to new releases, which some would say are lacking in entertainment value, at least if you’re my age.
–A study for New York City pegs the cost of a proposed city law requiring paid sick leave at $789 million. The bill would give employees up to nine sick days a year! C’mon. Any decent employer would have no problem if there is a serious issue in giving an employee as many sick days as are necessary, and within reason. But nine for those who don’t need it? At least Mayor Michael Bloomberg is against the proposal.
–Fisher-Price is recalling more than 10 million tricycles, toys and high chairs over safety concerns. Good lord…sounds like a rollover issue when it comes to the tricycles, while 14 have been hurt in high chairs while imitating Karl Wallenda.
–My portfolio: Thankfully, my uranium play is kicking butt the past few weeks, which more than makes up for losses on my natural gas storm trade. Matthew went left, Nicole went right, and nat gas’ already bulging inventories brought the price down, though it does need to be pointed out that it clearly has bottomed in the $3.60-$3.80 range.
Foreign Affairs
Pakistan: Relations with the U.S. and NATO deteriorated significantly following NATO airstrikes on suspected insurgents inside Pakistan, one of which allegedly killed three Pakistani soldiers, even as NATO is forbidden from fighting inside Pakistan. NATO says they were under small arms fire and acting in self-defense. This is on top of increasing attacks by CIA-directed drones on al-Qaeda and suspected Taliban strongholds.
So in retaliation, Pakistan blocked NATO supply trucks from entering Afghanistan at a key border crossing, and then suspected Taliban militants torched a bunch of fuel trucks.
On a different topic, the military is upset with the civilian leadership, post-flood disaster, but has made it clear it does not want to take control as it more than has it hands full with the Taliban.
Iran: Last week in commenting on the Stuxnet computer virus, I said it may have been targeting Iran’s nuclear facility at Natanz. That could yet still be the case (I believe it is) but most feel the primary target is the new nuclear power plant at Bushehr. An Iranian official commenting on the malware (and it was rare he was so open about it…admitting Iran was being targeted), said, “When we look at the capacity of this worm, we see that it’s not made up by an ordinary hacker group. Rather it is designed by a series of organizations and countries.” The official did not name a country, though Israel is an obvious suspect. Then again, as I’ll discuss later, China feels like it may be the primary target.
A U.S. official, in addressing Iran’s many technical issues in its nuclear program, said “The Iranians are at kind of a plateau at the moment because of their problems. We can’t be complacent about it but we do have some time.”
Elsewhere, the government banned two opposition parties that had supported Mir Hossein Mousavi in last year’s presidential vote.
And, while Russia pleased the U.S. by not selling Iran the S-300 advanced anti-missile system, Moscow is doing all it can to circumvent the stricter sanctions placed on Iran by the U.S., Europe, Australia, Japan and Canada. Russia wants to make sure its commercial relations with Iran are not affected and it’s encouraging the likes of China and Turkey to plow ahead with their own dealings. These two, for example, have sold large amounts of gasoline to Iran, according to energy traders.
Israel: The week started with Foreign Minister Avigdor Lieberman saying ultimate peace between Israelis and Palestinians requires population and territorial exchanges, which gives you a further sense of this far-right wingnut’s views as the rest of Benjamin Netanyahu’s cabinet immediately sought to distance themselves from Lieberman, who I told you from day one was a dangerous figure.
But as the moratorium on settlements in the West Bank ended, Sept. 26, Prime Minister Netanyahu did not extend it and talks between him and Palestinian President Mahmoud Abbas broke off for a time out. The next deadline, this one on the Palestinian side, comes Oct. 6, when Abbas will decide whether to continue the talks after consulting with the Arab League, which delayed its own response to the moratorium ending to give the White House time to come up with a solution for keeping discussions going. Saudi Foreign Minister al-Faisal said we had reached the “moment of truth,” and called on Israel to put the freeze back in place.
As for President Obama, he is proposing that Israel continue with the moratorium for just two more months so that talks can resume and a one-year timetable for final negotiations be established. During this period, the U.S. would veto any anti-Israel resolutions that emerge from the UN, plus it would not ask Netanyahu to extend the moratorium further than the two-months. I give Obama credit for laying this on the table; a reasonable offer that should show once and for all whether both parties are serious, or whether we can just let the two go their separate ways.
Lebanon: The situation here appears to be getting more dangerous by the day as Hizbullah ratchets up the rhetoric on the Special Tribunal for Lebanon that is investigating the assassination of former Prime Minister Rafik Hariri. Hizbullah MP Moussawi said, “There will be no concessions when it comes to defending ourselves or facing false accusations and we have the absolute right to use what we see appropriate in that regard.”
Separately, Egyptian Foreign Minister Gheit voiced his country’s support for the STL as well as “Lebanese parties backing the court” against “internal and foreign voices that seek to drag the country into political and security confrontation to serve regional interest.”
Bottom line, Hizbullah is making it very clear it will not stay neutral if some of its members are indicted. They even sent armed personnel to the airport last week, which would have spooked me a bit had I been there at the time.
“The rhetoric of Hizbullah representatives lately has been so extreme, so contrary to the conventions of courteous political exchange in even semi-democratic Lebanon, that we have to wonder how long the country can survive without a showdown to settle its contradictions….
“More worrisome is that Hizbullah’s rhetoric is being internalized by many in the Shiite community. It’s one thing to criticize and disparage the state, long a favorite pastime of the Lebanese, but it’s another thing entirely to relentlessly strike against the very props of that state – whether the supremacy of its representative government, the sanctity of the judiciary and of other national institutions, regardless of which party controls them, or the right of all individuals or groups to express themselves freely, pluralistically, without being accused of treason….
“In a 1996 interview, (Hizbullah leader) Nasrallah remarked that the resistance could not depend on state authority, because in such a case ‘there would be no resistance on the ground at all…[Under] such conditions resistance would simply be pro forma – a resistance in name only, staged for publicity purposes, rather than genuine, serious and effective.’
“Here was a transparent statement from Nasrallah as to why the resistance must never and would never embrace the supremacy of the state. More chilling was his attitude toward the state itself, for which he reserved withering contempt as an entity inherently unserious, surely handicapped by its debilitating complexities, by the presence of divergences among its forces and the privilege to dissent. Nasrallah had spoken the words of enforced uniformity, the premise of his anti-state.”
Afghanistan: The U.S. opened an investigation into the financial dealings of President Karzai’s eldest brother, Mahmood, including possible income tax evasion, racketeering and extortion, so once again tensions between the White House and the Karzai government are high. It is suspected that Mahmood’s problems are tied to the collapse of Kabul Bank in which he owns 7% of the bank’s shares, with bank funds being used to buy up property in Dubai. Recall that Hamid Karzai’s other brother, Ahmad, is suspected of being a drug kingpin in the south of the country.
Iraq: Saturday marks 209 days without a government. Leila Fadel of the Washington Post reports:
“As politicians jockey for positions and broker deals in backroom meetings, many Iraqis now say they wonder why they risked their lives to vote on March 7.”
However, on Friday, Moqtada al-Sadr threw his support to Prime Minister Nouri al-Maliki so we’ll see if this is enough to gain Maliki another four years. The United States was far from thrilled by Sadr’s endorsement, let alone involvement, owing to his close ties to Iran and his prior deadly role in the insurgency against the U.S. This could be a huge development, as Sunnis are likely to feel more alienated than ever.
North Korea: Kim Jong Un, Kim Jong-il’s youngest son, said to be anywhere from 12 to 40 (though probably about 28), was made a 4-star general. Kim Jong-il’s sister, Kimmy Kimmy (actually, don’t know her name and don’t care), was also named a 4-star. Boy, you can imagine what Defense Secretary Robert Gates would say about this brass creep in the North Korean military?
But we did finally get a picture of Kim Jong Un (or Eun), and let’s just say if he’s 28, he’s not aging well. He really looks like crap.
He’s also kind of scary looking, which should scare us all, the kid being given the title of vice chairman of the central military commission, with, according to some reports, his first mission being to disrupt the G-20 meeting in Seoul in November (so keep this period in the back of your mind as a potential market-moving event). All of South Korea’s military, as well as the 27,000 U.S. troops stationed there, are going to be on high alert for any provocation from the North.
But who is actually in charge? Kim Jong-il, as long as he’s breathing, probably is, and there is a regent for Kim Jong Un. But that doesn’t mean the kid, who bears a resemblance to Pugsley of Addams Family fame, won’t be running things sooner than some think.
China: As stated above, some in Beijing believe the Stuxnet virus is attempting to infiltrate computers in China’s pillar industries, thus threatening its national security. Globally, the worm is targeting Siemens systems in Indonesia, India, Pakistan and China, as well as Iran.
But on the issue of China’s growing aggression, militarily…
“It is an extraordinary development, largely because, from China’s point of view, it doesn’t make sense. Why on earth should China shout, bully and push its neighbors around? Over the past decade, China has kept silent, lain low and behaved more like a multinational company than a global superpower – and garnered enormous political influence as a result.
“The fruits of this success are everywhere. Look at Afghanistan, for example, where American troops have been fighting for nearly a decade, where billions of dollars of American aid money has been spent – and where a Chinese company has won the rights to exploit one of the world’s largest copper deposits. Though American troops don’t protect the miners directly, Afghan troops, trained and armed by Americans, do. And though the mine is still in its early phases, the Chinese businessmen and engineers – wearing civilian clothes, offering jobs – are already more popular with the locals than the U.S. troops, who carry guns and talk security. The Chinese paid a high price for their copper mining rights and took a huge risk. But if it pays off, our war against the Taliban might someday be remembered as the war that paved the way for Chinese domination of Afghanistan.”
In Iraq, as Ms. Applebaum points out, it’s a similar situation. Americans brought down a dictator and Chinese oil companies have acquired bigger stakes in Iraq’s petroleum business. In Pakistan, “where billions in American military aid helps the government keep the Taliban at bay, China has set up a free-trade area and is investing heavily in energy and ports.”
And China has cornered the market in rare earth minerals, a topic that has come to the forefront as a result of the China-Japan fishing vessel dispute, with China still not shipping the important minerals to Japan, used in items as varied as computer screens and hybrid cars, to missiles (where the Pentagon also now finds itself vulnerable, stupidly).
But as Anne Applebaum concludes, why then would China want to play games militarily, forcing the U.S. to get scared and react?
“We still haven’t realized that the scariest thing about China is not the size of its navy or the arrogance of its diplomats. The scariest thing is the power China has already accumulated without ever deploying its military or its diplomats at all.”
Meanwhile, China is indeed building a Blue Water navy and by 2020, many believe they will be the equal of the United States when it comes to sea power. Not good. But at least the Pentagon is trying to restart stalled relations between our two countries, which is good.
Russia: Moscow and Beijing signed agreements to boost energy cooperation, with Russia saying it is prepared to supply China with all its natural gas needs.
Separately, Moscow Mayor Yuri Luzhkov was sacked by President Medvedev, in a reassertion of Medvedev’s power.
Venezuela: President Hugo Chavez suffered a defeat in parliamentary voting on Sunday as he lost the two-thirds majority that allowed him to ram through legislation at will. It was a key test of his popularity ahead of presidential elections in 2012. [2012 is going to be a titanic year for politics, globally…just to name four others of import…the U.S., France, Russia and Taiwan, off the top of my head.]
Mexico: The fifth mayor in six weeks was killed…this one beaten to death with rocks.
Ecuador: Armed forces were forced to rescue President Rafael Correa after a tense stand-off with police officers who had trapped him in a hospital as part of what appears to be a protest, rather than a coup attempt. Two were killed in the rescue effort, while five others died in clashes elsewhere. The police were protesting cuts to their bonuses, part of Correa’s austerity drive.
Random Musings
“President Obama made an astonishing claim this week that he has accomplished 70 percent of all the Hope and Change he promised us during his 2008 campaign.
“ ‘If you look at the checklist, we’ve already covered about 70 percent,’ he boasted to the crowd of mostly college kids, that one sector of Obama’s base most likely to fall for his magic tricks two elections in a row.
“The throngs applauded as Obama jumped from the bogus to the absurd when he explained why he hasn’t accomplished even more.
“ ‘I figured I needed to have something to do for the next couple of years,’ he said with a flash of his famous modesty.
“The truth is Democrats are in full retreat from Obama and their dismal record in Congress.
“Here are their top three biggest failures as they head into the November elections.
“The single loudest demand these days is that Washington be fiscally responsible. It is the backbone of the Tea Party movement.
“Nothing is more basic and fundamental to fiscal order than a budget, which Democrats failed to get done even though they firmly control both chambers of Congress and the White House.
“Despite their insistence that they will extend the Bush tax cuts for middle-class families, they failed to even offer a single bill to do so.
“Promising to get that done after the elections is a little like your used-car salesman – who has already screwed you repeatedly – promising to fix the car after you buy it from him.
“Even with total control of Congress, Democrats failed to pass the massive government health-care program they had sworn to push through.
“Instead, they settled for a whittled-down program that still costs a trillion dollars and heaps endless new regulations on businesses, doctors and insurance companies.
“Even that has proven so deathly unpopular among the weary and hostile public that most Democrats are running away from that ‘accomplishment.’”
–John Boehner, the possible next Speaker of the House, has collected nearly $7.1 million for his campaign and leadership committees – compared to the $2.9 million that current Speaker Nancy Pelosi has received. Another $2 million has flowed into a “Boehner for Speaker” fund. Insurance companies, pharmaceuticals, and Wall Street, all of which face substantial new regulation, are the main contributors. Pelosi is getting the bulk of her larger donations from the law profession.
–Running for governor of New York on the Republican side is Carl Paladino, who the other day said, “I’m sick and tired of people asking me about if I’ve had affairs,” Paladino having indeed had one that resulted in a now 10-year-old love child.
So he was talking to Politico and said, “Why don’t you ask Andrew Cuomo if he has had extramarital affairs.” Paladino later apologized, saying, “It’s not that I was accusing him.”
And Paladino also threatened a New York Post reporter, as Republicans and Conservatives sought to distance themselves from this nut job. Veteran GOP political consultant Ed Rollins, no shrinking violet, called Paladino’s attack on Cuomo “outrageous.”
–Paladino is a tea-party candidate, the worst kind, but a new Wall Street Journal/NBC News poll found that 71% of Republicans described themselves as tea-party supporters, saying they had a favorable image of the movement or hoped tea-party candidates would do well in the elections. I would not describe myself as a tea-partier, but rather a conservative who looks at each race on the merits and only once in a statewide race has voted Democrat (Bill Bradley when he was senator… “Bradley side jumper…yesss!!!” You see, he brought home two championships for me).
This same Journal poll, though, had a bit of worrisome news for Republicans in that the GOP now holds a 46-43 edge when likely voters are asked which party they would prefer to control Congress. This is down from a nine-point lead a month ago.
Bottom line, however, is the passion, and Republicans, led by the tea-party, will turn out in droves vs. a totally unenthused Democratic base.
[Obama’s overall job approval rating in the above is but 46%. Anything below 50 spells major trouble for the incumbent party in mid-terms.]
–Defense Secretary Robert Gates warned of a growing divide in America between the average Joe and the military. For example, while returning veterans of Iraq and Afghanistan are embraced, “for most Americans the wars remain an abstraction – a distant and unpleasant series of news items that do not affect them personally.”
“In the absence of a draft,” Gates continued, “service in the military, no matter how laudable, has become something for other people to do.”
Recruits these days come increasingly from the South, the mountain West and small towns, and less often from the Northeast, West Coast and big cities.
I’ll have my own findings from some work I’ve been doing related to the above in a future WIR; a look at those dying for us.
–On a different topic involving the military, I have written this year of the major drug problem among our enlisted men and women and now there is much consternation of the soaring suicide rate, including four recent cases at Fort Hood. In many instances these are also drug-related.
One drug I was totally unaware of until reading a piece in Army Times is “spice.” This is a designer drug that mimics marijuana and is legal in most states…available in smoke shops and online for around $50 for three ounces. Spice is also undetectable by urinalysis. Another drug, salvia, is a hallucinogen that is gaining in popularity.
Spice is also known by the names K2, “Red Ball,” “Blowout,” “Cahoots,” “Chill” or “Spike 99,” so parents if you overhear your kids using these terms (as the kids think Mom and Dad won’t have a clue) confront them.
Drug use appears to be the main culprit in the case of the members of the American Army unit that killed Afghan civilians and then attempted to cover it up. Those implicated in the heinous crimes concede they were abusing them.
–As noted above in the story of the Stuxnet computer worm, cyber espionage is growing steadily. According to NATO Secretary-General Anders Fogh Rasmussen, NATO headquarters alone are attacked at least 100 times a day. “It’s no exaggeration to say that cyber attacks have become a new form of permanent, low-level warfare,” he said.
–I received a criticism from a loyal reader and I just have to address it.
The other day I said of Gov. Chris Christie and his takedown of a heckler at a Meg Whitman rally in California, “Love it. That’s our boy!”
The criticism of me is that I acted like I was always a big supporter, but of course that isn’t the case. I told you straight up I voted for third party candidate Chris Daggett last November in my home state, and said at the time of Christie’s win:
“I can also tell you that I didn’t receive one single note from my Republican friends saying, ‘Thank god Corzine is out,’ or ‘We did it!’ Why? Because everyone knows Christie has the potential to be a dreadful governor. The lack of enthusiasm for his campaign was warranted.”
Well, I’m sorry…but that was the truth then! Christie did not run a great campaign, but enough New Jerseyans wanted change, including me by my vote for Daggett.
That doesn’t mean that as Christie has far exceeded expectations I can’t support the guy!
Hell, I’ve told you all many a time I once voted for Ross Perot, and was damn proud of that one, and in 1980, as a college senior who helped organize a campus visit by John Anderson, voted for Anderson, not Ronald Reagan. That doesn’t mean I’m not allowed to have Reagan’s picture prominently featured in my office these days.
I also support Barack Obama when he’s right, such as the drone attacks in Pakistan. I am not such a partisan that if he does something I agree with, I won’t say so. It’s why a president can start with 40% approval ratings and go to 60%, or 90%, as was the case with George W. Bush following 9/11. Speaking of whom, I voted for him twice and have had zero problem saying he will indeed go down in history as one of the worst in American history. [Soon to be joined by Mr. Obama, unless he undergoes a miraculous conversion.]
Along the lines of the above, the latest issue of The Weekly Standard has an extensive piece by Stephen Hayes on South Dakota Republican Sen. John Thune. Thune is being thought of as presidential material in 2012, and years ago, traveling in South Dakota during Thune’s race against then-Senator Tom Daschle, I stated in this space that I thought Thune was a lightweight. So perhaps I misjudged another.
–In the latest Los Angeles Times poll of the California gubernatorial race, Democrat Jerry Brown leads Republican Meg Whitman (who I am not a fan of) by a 49-44 margin, while Democratic Senator Barbara Boxer leads Republican challenger Carly Fiorina (don’t like her either) by 51-43.
But this week, Whitman faced a major allegation that she employed an illegal immigrant housekeeper, even as Whitman rails on the campaign trail about employers employing illegals.
–Eight Germans and two Britons are suspected of planning Mumbai-style attacks on major European cities, and some say there is a Bin Laden connection. One of the Brits is said to have died in a recent CIA drone attack in Pakistan, which officials say may have prevented the attacks from being carried out, though there is some question just how far along the plans were. Coincidentally, perhaps, the Eiffel Tower was evacuated a second time in two weeks because of an unspecified threat.
–What more can you say about the case of the Rutgers University freshman who was so humiliated by having a gay encounter secretly streamed live on the Internet that he leapt to his death days later from the George Washington Bridge? Tyler Clementi’s roommate, Dharun Ravi, and fellow freshman, Molly Wei, were arrested and they must be made examples of. Supposedly, all they can receive is five years…they deserve far more or this sickening stuff will continue.
Just imagine Tyler’s parents and two older brothers, who a family attorney said are “heartbroken beyond words.” May Ravi and Wei face the criminal justice system in its full wrath, and may their families disown them.
–Within a few days last week, Washington’s Reagan National Airport hit 99 degrees (Sept. 24), the highest on record this late in the year and the hottest temperature ever recorded after Sept. 8, and then on Monday, downtown Los Angeles recorded its highest temperature ever, for any day, 113! Kind of troubling.
–Dengue fever is spreading around the globe. I’ve read reports of outbreaks from New Delhi, to Hong Kong, and the Philippines, for starters. One culprit is the rich…yes, the rich…because the mosquitoes that carry the virus like to breed in clean water found in swimming pools. 500 have died in the Philippines this year vs. 369 in all of last year.
–New York City’s murder rate is up 13% this year, though it’s off an all-time low in ’09.
–But to lighten things up, we have this item from the New York Post’s Page Six:
“Glamorous French politician Rachida Dati made a public apology after confusing oral sex with inflation on national radio. The former justice minister – a onetime rival of Carla Bruni for the affections of Nicolas Sarkozy – said of overseas investment funds: ‘I see some of them looking for returns of 20 or 25 percent, at a time when fellatio is almost nonexistent.’ In French, fellatio is fellation, which sounds a bit like inflation, the same word in French and English. Apologizing on her Facebook site, Dati said, ‘This kind of thing happens if you speak too quickly on this kind of program.’”
–For those of you riding New York City subways, just know that theft of gadgets is rising sharply. Thieves are grabbing cellphones and iPods out of the hands of riders sitting near subway doors, then running off the train just before the doors close, according to the NYPD.
–And now for an endorsement. Awhile back, a good friend, Jeff B., said he and his wife had just been to the Ocean House at Watch Hill, Rhode Island. I immediately looked it up and booked a stay this week. I wasn’t going to mention the place for the simple reason it is rather extravagant, and part of me was kind of embarrassed I was staying here, but I’ve had five straight Honda Accords for a reason. I’d rather spend my money on big trips and stay at top notch hotels.
The Ocean House, which reopened this past May after a $146 million renovation, is indeed extravagant in terms of price, but if you can afford it, by all means go. And when you look up the place online, don’t be fooled by the diagram that makes the beach look small. You can walk for miles, which is one of my favorite pastimes that I don’t do enough of.
So, bank account willing, I’ll be back next year around this time, after Labor Day when the crowds are diminished but enough places are still open to offer some variety. And Mystic Seaport is all of 25 minutes away…and that’s cool.
Funny thing about the Ocean House is that it appears everyone is trying to keep it a secret for themselves because I told two old friends I was staying here this week and they both go, ‘Oh, we were there a few months ago!’ J.B., thanks for telling me. George and Ken were holding out on me.
“The White House turned the family of a Medal of Honor recipient away from an exclusive tour last week because the late veteran’s 10-year-old grandson was wearing shorts. Vernon Baker, the last surviving black Medal of Honor winner from World War II [Ed. The man whose autographed picture I have], was buried Sept. 24 at Arlington National Cemetery after dying in July at 90. On Saturday, his widow and grandson went to the White House for a special tour of the West Wing…The staff member who was to lead them was not sure whether 10-year-old Vernon Pawlik’s attire – shorts and a t-shirt bearing a picture of his grandfather – was appropriate, and turned him away, officials said. The White House called it an ‘unfortunate misunderstanding.’”
Incredible. Out of principle I hope the staffer was fired, and for Democrats, the screw-up just cost them a few more African-American votes next month…as in it is yet another reason for this segment of the electorate to throw up their arms and ask, ‘Why bother?’
–Sign of the Apocalypse, part deux…as well as a sign the era of U.S. superiority is history.
On Friday, in the first round of the Ryder Cup, it was raining hard and it was then the U.S. team realized its “waterproofs,” aside from looking incredibly goofy, didn’t help when it came to the rain. So, Captain Corey Pavin had to send some aides into the merchandise tent to buy up all the waterproofs there, which also happened to be the make the Europeans had contracted out for. Talk about humiliating.
Pray for the men and women of our armed forces, and all the fallen.
Gold closed at $1319…another big week
Oil, $81.72…ditto, best since Feb. But much higher and we have a real negative impact on the economy.
Returns for the week 9/27-10/1
Dow Jones -0.3% [10829]
S&P 500 -0.2% [1146]
S&P MidCap +0.9%
Russell 2000 +1.2%
Nasdaq -0.4% [2370]
Returns for the period 1/1/10-10/1/10
Dow Jones +3.8%
S&P 500 +2.8%
S&P MidCap +10.6%
Russell 2000 +8.6%
Nasdaq +4.9%
Bulls 43.3
Bears 27.8 [Source: Chartcraft / Investors Intelligence…if the bull/bear spread gets to about 20, then it would be time to worry]
