[Posted 7:00 AM ET]
Iraq and the War on Terror
It could not have been a worse week on the constitution writing
front as the Sunnis left the drafting table following the
assassination of two of their members. There are also strong
hints that the Shia-dominated panel is looking to promote
Muslim (if not outright Sharia) law as a basis of the legal code,
which for starters would severely limit the rights of women in
society. Also, the Kurds are seeking autonomy of one form or
another, another huge sticking point.
Grand Ayatollah Ali al-Sistani, the Shia spiritual leader who has
been a tremendous force for moderation, is losing confidence in
the Iraqi government and showing signs of despair. Sistani has
called the slaughter of civilians in the suicide bombings “this
genocidal war” and his anger and that of many of the people is at
a boiling point. In other words, the low-grade civil war of today
could erupt in a massive fireball were he to give the word.
Meanwhile, the Pentagon spreads more happy talk on the state of
the Iraqi army and security forces, though it also admits we are
nowhere near the day when American forces can come home in
any great number.
But those opposing the war in Iraq, particularly in Britain these
days, have been attempting to tie the recent terror attacks there to
Britain’s support of the United States, arguing Iraq has given “a
boost to the al-Qaeda network’s propaganda, recruitment and
fund-raising” and provided an ideal training ground for the
terrorists, implying that were Britain to leave Iraq, the threat
would be over. [The Royal Institute of International Affairs and
the Economic and Social Research Council]
Britain’s Defense Secretary John Reid countered.
“The idea that somehow by running away from the school bully,
then the bully will not come after you is a thesis that is known to
be completely untrue by every kid in the playground and it is
also refuted by every piece of historical evidence that we have.”
Foreign Secretary Jack Straw:
“The time for excuses for terrorism is over. The terrorists have
struck across the world, in countries allied with the United
States, backing the war in Iraq and in countries which had
nothing whatever to do with the war in Iraq.”
Britain was also finally successful in getting its largest Sunni
Muslim group to issue a binding religious edict, or fatwa,
condemning the suicide bombings as the work of a “perverted
ideology.”
The Sunni Council and the Quran forbade suicide attacks.
“Who has given anyone the right to kill others? It is a sin.
Anyone who commits suicide will be sent to hell,” said Mufti
Muhammad Gul Rehman Qadri, the council chairman. “What
happened in London can be seen as a sacrilege. It is a sin to take
your life or the life of others.”
The council added that Muslims should not use “atrocities being
committed in Palestine and Iraq” to justify attacks.
“We equally condemn those who may have been behind the
masterminding of these acts, those who incited these youths in
order to further their own perverted ideology,” Qadri said.
[Ed Johnson / AP]
Arab affairs expert Fouad Ajami commented on the broader issue
of Europe and the Muslim threat, as spelled out in an opinion
piece for U.S. News & World Report.
“The vulnerability of Europe to the furies of this malignant
Islamism is a defining feature of its contemporary life. There are
the young men ‘next door’ in Leeds and Madrid, and there are
the burning grounds of the Middle East and North Africa hurling
their disinherited young people across the Straits of Gibraltar to
an aging European continent. We are not in ‘Eurabia’ yet; that
great city is still London and not ‘Londonistan,’ and no reverse
reconquista of the Iberian peninsula by the Moors of North
Africa looms on the horizon. Still, liberty is not a suicide pact.
We should be done with the search for ‘explanations’ that
dignify the hatreds; that attribute them to western deeds and
policies. We should see the new hatred dressed in religious garb
for what it is: a war against the very order of contemporary life.
A man of Moroccan origin, Muhammad Bouyeri, who killed the
Dutch filmmaker Theo van Gogh, shot him, then slit his throat,
and with his knife attached on his body a message of unadorned
barbarism. ‘I knew what I was doing,’ Bouyeri said. ‘I
slaughtered him.’”
Finally, last Saturday British Prime Minister Tony Blair told
supporters:
“In the end it is by the power of argument, debate, true religious
faith and true legitimate politics that we will defeat this threat.
“What we are confronting here is an evil ideology. It is not a
clash of civilizations – all civilized people, Muslim or other, feel
revulsion at it. But it is a global struggle and it is a battle of
ideas, hearts and minds, both within Islam and outside it.
“This is the battle that must be won, a battle not just about the
terrorist methods, but their views. Not just about their barbaric
acts, but their barbaric ideas. Not only what they do, but what
they think and the thinking they would impose on others.”
[New York Times]
Wall Street
No doubt, the bulk of the economic data that has been released
recently points to a strong economy and in his semi-annual
testimony to Congress, Federal Reserve Chairman Alan
Greenspan spoke of “sustained economic growth and contained
inflation pressures.”
But when Mr. Greenspan talks about the threats to the current
environment, he mentions high wages, energy and housing.
Regarding the latter, Greenspan is referring to the threat posed by
the mortgage ponzi scheme best known as the interest-only
variety. Of course those in such vehicles could be hit severely if
interest rates rise and, not coincidentally, the Fed chairman is
telling you he’s going to do just that, continue to hike rates,
inflation or no inflation.
Well, I’m on record as saying there is no inflation…in fact I’m
talking ‘deflation’ down the road. And I stick by this because of
the global slowdown I still see coming down the pike.
But as the equity markets have been marching higher the last few
weeks, I can’t help but question my thesis for 2005 as forecasted
last December. So I continually jot down some key words.
Inflation: Again, not an issue. Should oil soar anew, however,
well above $60, it could yet trickle down the production chain.
[It hasn’t as yet.] But I see any big spike helping to slam the
brakes on the overall economy. [Oil would then collapse under
this scenario and the cycle eventually starts all over again.]
Earnings: The 2nd quarter numbers are solid, but they continue to
decelerate and will do so through 2006. If you tell me earnings
are going to be gangbusters then I’ll say I’m way off on inflation
because you’ll need pricing power to generate bigger than
expected gains. At the same time, were this to be true, interest
rates would be rising rapidly and the housing bubble would burst.
Interest rates: While the Federal Reserve may take the funds rate
to 4% (from its current 3.25%) after all, I like my 4.30% year
end forecast for the 10-year as much as ever. Sure, we could go
substantially above that level for a few months, but as evidence
of a slowdown mounts, rates on the longer end will fall back.
Energy: I sold my last position here too soon, witness Friday’s
stupendous rally in the oil and gas sector. But I can’t be an
aggressive buyer if I believe the global economy is closer to the
tipping point, because if I’m right we have more than adequate
existing supplies for the upcoming winter.
Consumer spending: If the housing sector holds up, yes, we’ll
keep spending. To me, this is still more of a factor than the
excellent job market. If housing reverses, the consumer pulls in
their horns.
[I just read the following in glancing through the August 1 issue
of Business Week. Economists Karl Case , John Quigley and
Robert Shiller argue that declines in housing wealth have “no
effect at all” on consumption. Case says: “People spend and
borrow on the way up but don’t pay off loans when things fall.
They get locked into patterns of spending.” Columnist Michael
Mandel thus adds: “Good news for the economy; bad news for
household budgets.” Ah duh. The household, under this
scenario, collapses under a sea of debt. How the heck can they
then maintain their level of spending?!]
Capital spending: This year it seems the mood has changed
monthly on this front. Currently, corporate executives appear to
be more bullish. But they are influenced by geopolitical events
more than the little guy, in certain respects, and I don’t believe
the positive sentiment lasts much longer.
Housing: There is more and more evidence the slowdown,
stagnation, is fast approaching and already here in many parts of
the country. [See the Sunday New York Times piece, 7/17, on
the flat Denver housing market.] As stated above, stagnation
leads to reduced consumer spending. A true bursting of the
bubble leads to recession in this highly-levered economy of ours.
China: Was I surprised China reported GDP growth in the 2nd
quarter of 9.5%? Yes. Was I surprised the number was 9 point
5? Of course not. As I’ve been writing it’s always 9, or 9.5%, or
9.4%, or 9.6%. Yup, the exact same amount of goods and
services has been produced every damn quarter here for years
now. It’s a joke. But at the same time one would be an idiot not
to recognize that the China boom is still in play. One area I don’t
question is the government’s announcement that retail sales rose
about 14% in the quarter, year over year, as Beijing has tried to
emphasize consumer spending over investment. Yet according
to the figures, fixed-asset investment rose another 25%. This is
all going to end badly.
So those are a few of the standard themes I question myself on
each week. But I suppose you want to read about China and its
decision to remove the yuan’s peg to the U.S. dollar, thereby
letting it strengthen which thus makes U.S. exports cheaper and
China’s imports here more expensive; at least in theory. Frankly,
we’ll have ample time to discuss this over the coming years, yes,
years, and China’s move to revalue its currency 2.1% is simply
not a big deal, yet. Will it become one over time? Yes. Will
China buy fewer U.S. Treasuries, thus pressuring our bond
market because China will now peg the yuan to a basket of
currencies, not just the dollar? Probably. But as for right now,
don’t get too exercised over this. There were significant political
overtones in the move and protectionist legislation has been
avoided for now, a good thing. More next week, including the
impact on other Asian nations.
Finally, just a thought on a recent call by Prudential Financial
market strategist Ed Keon and his decision to go to 100%
equities. I forgot to note this when Keon first made the call the
week of July 11, but then I heard him on Bloomberg Radio this
past Monday and there wasn’t one word about risk. In other
words, this call goes down as one of the more irresponsible ones
in financial markets history.
I understand when Mr. Keon says that stocks represent better
value over real estate and bonds, but to totally ignore the
geopolitical situation and the ongoing terror threat is absurd.
And while I truly hope he’s right as that would be good for all of
us, and remembering I seldom go ‘short’ and am not currently, I
just believe he’s not dealing in reality. Had Thursday’s
attempted attacks in London succeeded, for example, I can
guarantee our markets would not have been as resilient as they
were last time. Keeping some cash on hand for the dark, stormy
days to come, in whatever year, is the only prudent thing to do.
Street Bytes
–Were it not for the spectacular rally in oil stocks on Friday,
both the Dow Jones and S&P 500 would have broken their
winning streaks. Alas the Dow finished up 0.1% to 10651 and
the S&P hit another 4-year high, tacking on 0.5% to 1233. For
its part Nasdaq added 1.1% to close at a 4-year high of its own,
2179.
Aside from the big picture items of the week, the currency
revaluation and the second wave of attempted terror attacks on
London, it was all about earnings. And I’ve got to tell you, after
jotting down a slew of them, sure, they were largely OK, but
there also wasn’t a heck of a lot to jump through hoops over.
Citigroup, for example, missed badly. IBM may have beaten
expectations but revenues were down 4%. [The company talks
of restructuring being the reason but its main sources of business
are not exactly surging.] Dutch consumer-electronics king
Philips saw its revenues decline 3%. General Motors reported its
third straight quarterly loss. Lucent shares declined on poor
guidance. Motorola’s revenues were less than expected.
Microsoft’s sales were up 9%, but it was cautious on the current
quarter and in estimating earnings of $1.32 for all of 2005, it’s at
a 20 multiple for a company that hasn’t seen exciting growth in
years. Eastman Kodak disappointed. Intel’s revenues were
solid, but its margins were down.
On the plus side, eBay got back on track with bang up numbers
and, if you’re a technician…and aren’t we all at least junior ones
…the stock broke through a lengthy trading range. Merrill
Lynch proved you can succeed in a fixed income environment
featuring a narrowing yield curve. Ericsson impressed.
Broadcom did the same. And, significantly, AMR and
Continental returned to profits despite high fuel costs thanks to
strong traffic.
Finally, you had Yahoo and Google, both of whom failed to meet
perhaps unrealistic expectations though the actual numbers in
both cases were excellent. It comes down to this with both of
these Net giants. They are overvalued if you believe, as I do,
that online advertising revenues will one day plummet. C’mon,
how many of you click on a banner ad? How many of you
remember you saw an ad on the Net?
So bottom line on this week’s plethora of releases; the reported
results were generally solid, but the quality is always subject to
intense debate, and few are stepping out on a limb to say the
second half, let alone 2006, is going to be hunky-dory.
–U.S. Treasury Yields
6-mo. 3.61% 2-yr. 3.90% 10-yr. 4.22% 30-yr. 4.44%
The short end of the curve, as represented here by the six-month
T’Bill, rose sharply as it becomes increasingly clear Alan
Greenspan is raising rates the next few meetings. But despite a
sell-off on Thursday following China’s revaluation, the long end
then rallied back to finish with minimal losses (minimal
increases in rates) on the week.
As I’ve said on many occasions, however, personally I am not
going to make a big deal of any spike in the critical 10-year as
long as it remains below 4.50%. Much above that, however, and
you will begin to see an impact on housing activity. Those with
interest-only mortgages won’t receive their comeuppance for a
few more years, under most terms for this vehicle.
–With Friday’s mammoth rally in energy stocks, I thought I’d
lay out some key numbers I’m constantly looking at. The OSX
index is of the oil service companies. The XOI represents the
large integrateds such as Exxon Mobil.
OSX…123 (12/31/04)…145 (3/4)…122 (5/16-I)…159 (7/22)
XOI….721 (12/31/04)…889 (3/4)…772 (5/16-I)…939 (7/22)
You can see the volatility in the numbers thus far in ’05. These
are closing figures except for May 16, which is the intra-day low.
Of course I’m kicking myself for not getting back into the sector
that has been so good to me over the years when I had the chance
to do so. Can’t chase it now given my global economic outlook.
–Some rather large layoffs accompanied the earnings
announcements from the likes of Kimberly-Clark (6,000…10%
of the work force), Hewlett-Packard (14,500…10%), and
Eastman Kodak (10,000…on top of a previously announced
reduction of 15,000). Ford is also rumored to be slashing its
white-collar staff by more than initially estimated.
–Mark Magnier of the Los Angeles Times had an excellent piece
on China and oil last Sunday (7/17). For starters, back on 7/2/05,
I wrote of the CNOOC bid for Unocal, “Where the heck was the
State Department and the White House, this being far more than
a mere commerce issue?” Magnier writes:
“Before the Unocal bid, Beijing’s activities had attracted
relatively little attention from a U.S. administration focused on
Iraq, Washington’s war on terrorism and other foreign policy
priorities.”
“ ‘We’re still trying to get a handle on what’s happened on our
watch,’ said a senior State Department official who asked not to
be identified… ‘More work needs to be done on this.’”
Oh brother.
China, of course, has been pursuing oil everywhere the U.S.
isn’t, such as Iran and Sudan. China has also reached extensive
agreements with Venezuela and its dictator Hugo Chavez. China
is working with Brazil on hydroelectric and natural gas projects.
“The U.S. is not…giving attention to the strategic partnership
with Brazil,” said a key Brazilian minister. “We cannot stay free
waiting for what Washington decides.”
Said the State Department official, “We’re not going to go across
the globe trying to head off China every time we see them going
after natural resources.”
“ ‘Karen Harbert, assistant Secretary of Energy for policy and
international affairs, says Beijing’s quest does not pose a ‘threat
to U.S. interests or a threat to U.S. companies.’” [Mark Magnier]
Au contraire, mon frere. Meanwhile, of China’s oil imports 45%
comes from the Middle East these days and, on a related topic,
the number of automobiles in China is expected to grow
sevenfold in the next 15 years.
–Staying on the subject of the United States and its having its
head in the sand, Harry K. passed along a piece from his
compatriot at Globe Investor, Paul Sullivan, concerning a recent
trip to Canada’s oil sands by U.S. Treasury Secretary John Snow.
Sullivan writes:
“The scope and breadth of the development around Fort
McMurray took Mr. Snow’s breath away, much the way oil
workers become instantly starved for oxygen when they find out
the average price of a house in Fort McMurray is north of
$440,000, up almost 100K since January…
“Mr. Snow’s reaction to what he saw isn’t going to lead to a
housing slump in Fort McMurray any time soon. ‘I hadn’t
realized until these briefings I’ve had just how vast these
facilities are and what potential they have for the future.’”
An estimated 174.5 billion barrels of oil can be extracted from
the sands which as Sullivan notes would make it the second
largest reserve on the planet. Others say the figure could be as
high as 300 billion.
Of course months ago I said that with regards to Canada’s huge
resources and our seeming ignorance of them, most of the
pipelines will be heading west, to China, not south, unless
Washington acts quickly. The arrogance displayed by our
officials (excluding Sec. Snow) is mind-boggling.
–My friends at Pritchard Capital passed along a tidbit from
energy consultants Poten & Partners. They did a study of five
oil-producing nations and regions; Colombia, Egypt, North Sea,
Indonesia and the U.S.
“Taken together, production from these five…peaked in 1996 at
17.4 million barrels per day and their 2004 combined production
was 14.9 mmbd, a decline of 2.5 mmbd.”
Those of you who are energy bulls should get a warm and fuzzy
feeling from stuff like this.
–Years ago, I started writing of how China blocked access to the
Internet and how companies like Yahoo were complicit.
Following are some thoughts from Washington Post columnist
Anne Applebaum.
“Without question, China’s Internet filtering regime is ‘the most
sophisticated effort of its kind in the world,’ in the words of a
recent report by Harvard Law School’s Berkman Center for
Internet and Society. The system involves the censorship of Web
logs, search engines, chat rooms and e-mail by ‘thousands of
public and private personnel.’”
It also involves Microsoft and others.
“Yahoo is one of several companies that have signed a ‘public
pledge on self-discipline,’ a Yahoo search in China doesn’t turn
up all of the (politically sensitive) results. Cisco Systems Inc.,
another U.S. company, has also sold hundreds of millions of
dollars of equipment to China, including technology that blocks
traffic not only to banned Web sites, but even to particular pages
within an otherwise accessible site.
“Until now, most of these companies have defended themselves
on the grounds that there are side benefits….or on the grounds
that they can’t control technology anyway….
“But as U.S. companies become more deeply involved in China,
and as technology itself progresses, those lines may begin to
sound weaker…
“Beyond legality, of course, there’s morality. And here the
judgment of history will prove more important than whatever
Congress does or does not do today. Sixty years after the end of
World War II, IBM is still battling lawsuits from plaintiffs who
accuse the company of providing the ‘enabling technologies’ that
facilitated the Holocaust. Sixty years from now, will Microsoft,
Cisco and Yahoo be doing the same?”
–Citigroup chairman Sandy Weill wants to leave before his April
2006 contract expires to start his own private-equity fund but the
board won’t let him because of a dispute over perks Weill wants
to maintain, such as use of the corporate jets and his private
security detail. With all the bad press Citi has received the past
few years, the board is of the mind to make him stay through
next April so as not to have a benefits flap.
Meanwhile, regarding Citigroup’s earnings miss, the CEO
Charles Prince cited “challenging conditions (amidst) one of the
worst (capital markets environments) seen in years.” Citi’s fixed
income area was especially hard hit by the flattening yield curve,
but as noted above, others such as Merrill Lynch did just fine in
this arena. In other words, Citigroup’s traders didn’t measure up.
–According to two surveys, PC sales worldwide for the 2nd
quarter rose between 15 and 17 percent, year over year.
–UK GDP in the 2nd quarter came in at its lowest annualized rate
in 12 years, 1.7%.
–The Aussie market hit an all-time high this week. OI OI OI…
AUSSIE AUSSIE AUSSIE!!!
–Guidant issued further warnings concerning its pacemakers
made between 1997 and 2000 (28,000 remain implanted
worldwide) and said replacements might be needed. Earlier,
Guidant had recalled some defibrillators. But, the company said
its merger with Johnson & Johnson would go forward…J&J
appeared to be less than enthusiastic, however.
–Whirlpool is making a play for Maytag, two months after
Maytag had agreed to be sold to a private equity firm,
Ripplewood. But Haier, a Chinese conglomerate that had raised
Ripplewood’s bid, dropped out and is now said to be looking for
a manufacturer of washboards instead.
–Author J.K. Rowling earned about $36 million as 6.9 million
copies of the latest Harry Potter installment were sold the first
day. Her royalties are said to be in the 12% range. As for
publisher Scholastic, the book is still just about 7% of its overall
revenues.
–President Bush’s tax advisory panel is recommending
abolishing the alternative minimum tax, but there’s no word on
how the $1.2 trillion in lost revenue, over 10 years, would be
made up.
–Maria Piccolino, a former legal assistant at Lehman Brothers
subsidiary Neuberger Berman, is suing for sexual harassment.
Ms. Piccolino names a number of senior executives at
Neuberger. But the following from a New York Post story on
the case had me scratching my head.
“In the office, Piccolino says, chief administrative officer (K.H.)
spotted her bending down to plug in a hair-dryer and said….”
Hey, what the heck is a woman doing drying her hair in the
middle of an office environment?!
–And here’s a good one, as reported by Susanne Craig and John
Hechinger of the Wall Street Journal. Various market authorities
have been looking into the March 2003 bachelor party for one-
time Fidelity Investments trader Thomas Bruderman because it
wasn’t your typical affair.
Bruderman, who was getting ready to marry Dennis Kozlowski’s
daughter, was feted down in South Beach (Miami) as revelers
were flown in a private jet down from Boston. Entertainment
included a dwarf…for whatever reason. As Craig and Hechinger
report:
“But what really made this a memorable party is that it is now a
focus of an investigation into possibly improper gratuities from
Wall Street trading firms eager to get Fidelity’s business. The
National Association of Securities Dealers and the Securities and
Exchange Commission are examining which Wall Street firms
kicked in money for the weekend party….
“Meanwhile, the party now figures into a broader criminal
investigation by federal prosecutors. The U.S. attorney in
Boston has impaneled a grand jury to determine whether some of
the money flowing from brokerage firms to Fidelity was used to
pay for prostitutes and drugs at the party and other events.”
Bad traders…….baaaaaaaad traders.
Actually, us veterans of the business know that the 1980s were
far worse when it came to this kind of behavior.
Foreign Affairs
North Korea: Six-party talks resume on Tuesday in Beijing and
one hopes it’s the story of the next few months, in a positive
vein. Pyongyang, though, said it wants a peace treaty to replace
the armistice that marked the end of the Korean War in 1953;
while the talks are supposed to be about nuclear disarmament
and nothing more. Kim Jong il and Co. also said they won’t deal
with Japan.
China: Foreign Minister Li Zhaoxing sought to reassure the U.S.
following General Zhu’s remark on July 15 that China would use
nukes against the United States if Washington interfered in an
attack by the mainland on Taiwan. Mr. Li said China “will not
first use nuclear weapons at any time under any condition.”
But the Pentagon issued its highly anticipated report on China’s
defense program and said not only is it spending 3 Xs more than
what it is telling the world ($90 billion), it is making great strides
in improving its nuclear weapons capability, much of which is
now mobile. Plus, the number of missiles targeting Taiwan is
said to be up to 730, while China has 700 aircraft that can fly to
Taiwan without refueling.
Finally, Beijing is aggressively courting the new mayor of
Taipei, who is also the leader of the Kuomintang opposition
party, in the hopes he wins the next presidential election in 2008.
In an unprecedented gesture, President Hu Jintao sent a
congratulatory note. Current President Chen Shui-bian was none
too pleased.
India: Prime Minister Manmohan Singh met with President Bush
at the White House as the two nations move closer together.
Bush proposed ending four decades of sanctions barring
cooperation on civilian nuclear energy programs, as the U.S.
desperately needs India to be a counterweight to China. As for
India’s bid for a permanent seat on the UN Security Council,
how the heck can the largest democracy in the world not be
granted one? Would it always vote the way Washington wants it
to? Of course not. But we’d certainly have a better chance at
getting India to vote with us than the existing structure with
Russia, China and France often voting against. I’d also put Japan
on the Council. [Oh, what the heck. Add Germany and Brazil as
well.]
Lebanon: A new government was officially formed including for
the first time a seat for Hizbollah as part of the 24-member
cabinet. The U.S. immediately said it would work closely with
the new leadership, all except Hizbollah. The UN has been
demanding Hizbollah disarm, but in granting them power you
can write that off until Israel reaches some wide-ranging peace
agreements with its other neighbors, namely Syria. Lebanon’s
first priority these days is coming to grips with its debt, almost
200% of GDP.
Secretary of State Condoleezza Rice paid a surprise visit to
Beirut on Friday and hours after she left a bomb went off in a
popular café area, one where I had some great meals a few
months ago, wounding at least 12.
Egypt: As I go to post the death toll in the Sharm el-Sheikh
bombings exceeds 60. This al-Qaeda sponsored attack, at least
that is the presumption this morning, not only targeted foreign
tourists but the regime of President Hosni Mubarak as well.
Russia: According to an independent think-tank in Russia
(Indem), bribery is 10 Xs greater today than just four years ago
and the amount of money extracted has reached $316 billion.
In a report by the Financial Times, “The size of an average bribe
paid by companies has gone up 13-fold from $10,000 to
$136,000 (over the same period). Health, fire and safety
inspectors, tax police and law enforcement agencies are the most
egregious bribe-takers.”
Along the same lines, Marietta Chudakova adds the following
from a FT op-ed.
“Apathy extends right across the population. Most Russians are
no longer interested in politics or anything outside the sphere of
their own personal interests. There are few personalities of
sufficient moral standing around whom the society can coalesce.
“Russia is no longer – if it ever was – a civil society; it is just an
amorphous mass of residents. This could become the foundation
for very serious and negative events – in the event of a
referendum, for example. The Russian majority now (in sharp
contrast with the early 1990s) would happily vote for radical
leftist or fascist policies or leaders….
“Most Russians, long accustomed to endless queues, shortages of
food and clothes and buying their winter boots from under the
counter, do not understand why the country had to change….
“The words ‘freedom’ and ‘democracy’ have become swear
words, symbolizing the sins of the new society and the growth of
social divisions. Hatred of the rich by the poor has once again
reached the levels of the first years after the Bolshevik
revolution. The recent sentencing of Mikhail Khodorkovsky,
and the anti-Khodorkovsky protests organized by the political
masters of his trial, both echo and help sustain one of the longest
lasting Soviet myths: the poor are good; the rich are crooks.”
On a totally different topic, the Moscow Times reports that the
U.S. and Russia may be close to an agreement on a liability
dispute that has blocked implementation of the nuclear threat
reduction program in Russia for more than two years. If so, it
would pave the way for the disposal of excessive stockpiles of
weapons-grade plutonium and other materials that could end up
in the hands of terrorists, long my own number one priority. I’ve
also said it’s probably already too late.
Philippines: President Gloria Arroyo is hanging on as 120,000
turned out in support last week, while opponents pursue
impeachment proceedings in Congress (the numbers probably
aren’t there). For her part Arroyo has proposed a truth
commission to investigate the charges she helped rig the 2004
presidential vote.
Random Musings
–In an extensive study of water samples from around the
country, a scientist has concluded that there is a 10 Xs greater
risk of picking up E. Coli from sand on the beach (both lake and
oceanfront) than in the water itself thanks to all the fecal matter
deposited, like from geese. [Newsday] So keep your kids’ hands
out of their mouths after they’ve been playing in the crap. I’ll
also never understand why we aren’t killing the Canada geese
that have opted to make America their home.
–And parents, be aware of a new fad sweeping the country; one
in which kids as young as 9 or 10 are playing a choking game
whereby the goal is to induce a drug-like high. Deaths are being
reported. [USA Today]
–Secretary of State Rice almost choked her Sudanese
counterpart to death after the thugs manhandled some of the
secretary’s aides, as well as NBC reporter Andrea Mitchell. Of
course the Sudanese had no idea who they were messing with
when it comes to Ms. Mitchell, wife of Fed Chairman Alan
Greenspan. Look for Sudan’s short-term interest rates to
skyrocket in retaliation. [“Hey, how did that happen?!”]
–Once again, it’s an incredibly hot summer in parts of America
and Europe with Spain’s record temperatures playing a role in
the deaths of 11 firefighters who were trapped in a blaze caused
by folks having an illegal barbecue.
–Sorry, sports fans, I’ve totally lost interest in the Karl Rove /
Valerie Plame situation.
–This week, a Newark police officer assigned to guard students
at summer school attempted to break up a fight between two
girls. One of the girls called her brother, a Bloods gang leader
who had recently been released on a murder charge after the lone
witness backed out of testifying. The guy and an associate
arrived on the scene and the result was a dead cop, shot in the
head. When are we going to wake up and just start executing
these killers? And the issue of witness intimidation, as was the
case here, is widespread across the country. It’s sickening.
–On a far lighter note, the existence of the once thought to be
extinct ivory-billed woodpecker is now being questioned
following the recent supposed discovery in Arkansas. It could be
the birdwatchers saw the smaller pileated woodpecker, according
to researchers who now have their doubts. Or it could be a crow
dressed up as an ivory-billed woodpecker, crows not only being
smart but quite mischievous.
–Scott P. in Melbourne, FL, comments on NASA’s failed
attempt to return to space because of a faulty fuel gauge. “I
figured it would come down to three seconds before launch
before it got scrubbed. How presumptuous I must be to think
that the fuel sensors could be tested while the tank was being
filled, or at least before the Shuttle was ever moved to the launch
pad! After all, this IS rocket science and I’m just an
accountant!”
[We wish NASA better luck this week.]
–Lastly, you’d think when it comes to Canada’s own Miss
Universe, Natalie Glebova, they’d at least get it right. Alas, the
mayor of Toronto was forced to apologize because Miss Glebova
was barred from attending a festival in the city in her official
capacity. She could participate, she was told, only if she
removed her Miss Universe sash and crown.
According to the BBC, “City officials cited a by-law which
prohibits activities encouraging sexual stereotyping and
degradation.”
Now discuss amongst yourselves.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $425
Oil, $58.65
Returns for the week 7/18-7/22
Dow Jones +0.1% [10651]
S&P 500 +0.5% [1233]
S&P MidCap +1.3%
Russell 2000 +2.1%
Nasdaq +1.1% [2179]
Returns for the period 1/1/05-7/22/05
Dow Jones -1.2%
S&P 500 +1.8%
S&P MidCap +7.9%
Russell 2000 +4.0%
Nasdaq +0.2%
Bulls 52.7
Bears 23.1 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
