[Posted 7:00 AM ET]
Iraq…and the War on Terror
Following are excerpts from President George W. Bush’s speech
to the VFW on August 22, 2005.
“Our enemies have no regard for human life. They’re trying to
hijack a great religion to justify a dark vision that rejects freedom
and tolerance and dissent. They have a strategy, and part of that
strategy is they’re trying to shake our will….Their goal is to
drive nations into retreat so they can topple governments across
the Middle East, establish Taliban-like regimes, and turn that
region into a launching pad for more attacks against our
people….
“Our goal is clear: to secure a more peaceful world for our
children and grandchildren. We will accept nothing less than
total victory over the terrorists and their hateful ideology.
“Iraq is a central front in the war on terror. It is a vital part of
our mission. Terrorists like bin Laden and his ally, Zarqawi, are
trying to turn Iraq into what Afghanistan was under the
Taliban….Terrorists are trying to block the rise of democracy in
Iraq, because they know a free Iraq will deal a decisive blow to
their strategy to achieve absolute power….
“In spite of violence, the Iraqi people are building a nation that
secures freedom for its citizens and contributes to peace and
stability in that region…
“Producing a constitution is a difficult process that involves
debate and compromise. We know this from our own history….
So Americans understand the challenges facing the framers of
Iraq’s new constitution. We admire their thoughtful
deliberations; we salute their determination to lay the foundation
for lasting democracy amid the ruins of a brutal dictatorship….
“In Afghanistan, men and women have formed a free
government after suffering one of the most brutal tyrannies on
Earth. America is proud to call Afghanistan an ally in the war on
terror. In Lebanon, people took to the streets to demand their
sovereignty. They have now gone to the polls and voted in free
elections. As freedom takes root in these countries it is inspiring
democratic reformers in places like Egypt and Saudi Arabia.
Across the region, a new generation desires to be free, and they
will have it. And the world will be more peaceful because of
it….
“We owe (the troops)….We will finish the task that they gave
their lives for. We will honor their sacrifice by staying on the
offensive against the terrorists, and building strong allies in
Afghanistan and Iraq that will help us win and fight – fight and
win the war on terror.”
It’s hard to know where to begin in dissecting the above, but it’s
important to remind those who may not have been reading this
column the past few years just where I’ve stood.
I believed that the war on Iraq was justified, even without the
discovery of weapons of mass destruction. I place myself in the
neocon camp, believing that if we were successful in Iraq it
could have a transforming effect on the entire region. But then,
within weeks of the toppling of Saddam’s statue in Baghdad, I
saw real problems and have condemned the conduct of the war
ever since.
It’s so very sad and tragic. And in reading Bush’s speech, and in
hearing the president the very next day say the constitution
process in Iraq has been an “amazing event,” I can only shake
my head.
As I go to post, it appears the Shiites and Kurds are submitting
the draft constitution for a vote in the National Assembly without
Sunni participation. We are headed to a referendum in October
that the Sunnis are now going to do all they can to defeat. Recall
that if two-thirds of the voters in at least three of 18 provinces
reject the document, the constitution is shredded, a new assembly
would have to be elected, and they would start all over again. Of
course that’s in theory. If the constitution is rejected, civil war
follows.
As the Sunnis are adamant as of this date that the draft does not
meet their wishes, and with all sides having already
compromised as much as they wanted to, they are now
attempting to register every voter in the four provinces where
they are said to have a majority for the purposes of defeating the
constitution.
As for the Kurds and Shia, they have long desired a weakened
central government that allows the two to run independent states
in the oil-rich north and south. In addition, Islam “is a main
source for legislation and it is not permitted to legislate anything
that conflicts with the fixed principles of the rules of Islam,”
according to the last draft I saw, and with the advent of a new
parliament early next year (following another vote in December),
the chances of a Shiite theocracy, aligned with Iran, are strong.
Under this scenario the Kurds would be left alone, while the
Sunnis would be without any resources, tending their wasteland.
So one reads Bush’s speech and wonders. Yes, the president has
long said the United States would “stay the course,” and in this
regard the words are lifted from two years ago. While it all
makes sense on paper, the reality on the ground, not just in Iraq
but Lebanon, for example, speaks otherwise.
And even as the president is saying one thing, his own Pentagon
is often offering something else. General Peter Schoomaker said
the U.S. would retain 130,000 troops through 2009, but another
general on the ground said a substantial number would be
withdrawn in the next 12 months. The president says we will do
whatever it takes to ensure success in Iraq, but unless the mood
in this country changes quickly, Republicans will demand at least
a partial withdrawal or many face defeat in congressional
elections next fall.
Nebraska Republican Senator Chuck Hagel said this week that
“the dam has broken on this policy.” He’s right, though I
disagree with his call to withdraw.
For now, I conclude by saying I respect the opinions of those
reasoned souls who disagree with all I’ve written on this topic
these past few years. This is a cataclysmic moment, yet it is still
too soon to begin writing the history of it. We don’t know how it
will all end in Iraq but I continue to hope for the best so that the
brave men and women will not have died in vain.
Wall Street
In a speech at a symposium on economic and monetary policy on
Friday, Federal Reserve Chairman Alan Greenspan summarized
his 18 years at the helm. He discussed the importance these days
of “expectations” and “risk management.” Then he said:
“But arguably, the growing stability of the world economy over
the past decade may have encouraged investors to accept
increasingly lower levels of compensation for risk. They are
exhibiting a seeming willingness to project stability and commit
over an ever more extended time horizon.
“The lowered risk premiums…coupled with greater productivity
growth have propelled asset prices higher. The rising prices of
stocks, bonds and, more recently, of homes, have engendered a
large increase in the market value of claims which, when
converted to cash, are a source of purchasing power….
“Thus, this vast increase in the market value of asset claims is in
part the indirect result of investors accepting lower compensation
for risk. Such an increase in market value is too often viewed by
market participants as structural and permanent….But what they
perceive as newly abundant liquidity can readily disappear. Any
onset of increased investor caution elevates risk premiums and,
as a consequence, lowers asset values and promotes the
liquidation of the debt that supported higher prices. This is the
reason that history has not dealt kindly with the aftermath of
protracted periods of low risk premiums.”
Ergo, look out below, especially when it comes to the impact of a
real estate bubble that bursts; one that has been supporting our
high level of consumption as many pile on more and more debt.
This week, while new home sales for the month of July rose
another 6.5%, existing home sales fell almost 3%, along with
the news that the supply of homes on the market is the highest
since 1988. Condominium sales fell sharply. Put it all together
and it probably isn’t that bad, but it’s a further sign we’ve
peaked. For now I stick with my long-held belief that we enter a
period of stagnation, not necessarily a crash. But stagnation,
coupled with the problems we are facing on the energy front, will
be more than enough to slow down consumer spending in a
measurable way, and there are signs this is already the case,
witness statements from the likes of Wal-Mart and other key
retailers.
I remain convinced that my forecast for this year, laid out on
12/31/04, will pan out. It’s not the prettiest outlook, but damage
to equities should be somewhat limited.
As for oil and its cousin, natural gas, the picture for this winter is
bleak. I can argue all I want, as I have, that inventories are more
than adequate, but the facts are the heating oil contracts are being
drawn up and, as the Star-Ledger of New Jersey reported this
week, homeowners are going to be shelling out at least $1,000
extra in most regions. Coupled with the sky-high costs for air
conditioning this summer, plus the cost to fill up the gas tank,
and you have real dollars being sucked out of one’s wallet.
So as I’ve been writing all year, at some point this economy will
flip…and then the cycle will start all over again. Oil and natural
gas prices will tumble and, barring a true collapse in real estate
prices that leads to millions of foreclosures because of the risky
mortgages many hold, eventually we’ll all get back on our feet.
Finally, a word on earnings. They, too, will disappoint as we
move forward; of this I’m certain. But I’ve also been talking of
the games that are still being played by Corporate America and
Valerie Bauerlein wrote a terrific column in the Wall Street
Journal the other day that bears this out.
Ms. Bauerlein was discussing how some of our nation’s banks
fool around with the numbers in order to beat expectations.
KeyCorp was her prime example.
“So how did KeyCorp manage to increase its profit 22% in the
second quarter?
“It was easy. The Cleveland bank…slashed the amount set aside
for loans that might go bad. By adding only $20 million to its
loan-loss reserves, instead of $74 million in last year’s second
quarter, KeyCorp boosted the bottom line by about $39 million –
or eight cents of its per-share profit of 70 cents, or $291 million.
Without that, KeyCorp would have fallen about two cents short
of Wall Street profit targets.”
[KeyCorp shares thus rose after the announcement.]
As long as the economy is healthy, however, banks like KeyCorp
can get away with this and there are some who would say many
financial institutions have been too conservative in establishing
their loan-loss provisions. On the other hand, when the
inevitable economic downturn hits, those who have been more
aggressive will see their earnings crumble as borrowers default.
Street Bytes
The major averages all declined, including for a 4th straight week
in the case of Nasdaq. The Dow Jones lost 1.5% to finish at
10397, the S&P 500 lost 1.2% to the 1205 level, and Nasdaq
declined 0.7% to the 2120 mark. Technically, the market looks
sloppy at best these days as the key indices break below major
trend lines.
Early in the week the market was hit by the existing home sales
and a dour durable goods report. Then on Friday we had a poor
reading on consumer confidence and, coupled with Greenspan’s
sour notes and still high energy prices, equities limped into the
weekend. Plus Katrina lurking within striking distance of key oil
drilling areas and refineries didn’t help matters.
–U.S. Treasury Yields
6-mo. 3.80% 2-yr. 4.06% 10-yr. 4.18% 30-yr. 4.38%
Rates were basically unchanged except for the fact the spread
between the 2- and 10-year Treasuries continues to narrow. As
CNBC’s Rick Santelli put it, Alan Greenspan is chasing his own
tail. The Fed chairman wants the yield on the 10-year to rise to
help damper real estate speculation, but he’s really getting what
he’s been looking for anyway in the form of rising short-term
rates, through the Fed’s rate hikes, because so many of today’s
mortgages are pegged to the short end and thus far more
susceptible to ticks up in the funds rate. Of course the Fed’s rate
hikes also do a number on those with credit card debt and home
equity loans.
–For each hour that Iraq’s oil pipelines are shut down, it costs
the government $4.25 million.
–China’s President Hu Jintao is coming to Washington on
September 7 and energy will no doubt be at the forefront of
discussions. This week state-owned China National Petroleum
Corp. announced it is acquiring Canada’s PetroKazakhstan,
outbidding India in the process.
For its part India is increasingly concerned it will lose out to
China in other future deals and therefore wants to form a joint
venture for the two to work in tandem. India imports about 70%
of its oil needs and consumes over two million barrels a day,
while China imports one-third and is using around 6 million on
its way to 7 million plus in 2006.
–Russia’s Gazprom already has a monopoly in natural gas so it’s
now attempting to build one on the crude front as it goes after
Sibneft, which is responsible for 15% of Russia’s oil output. But
Rosneft, which recently gained control of Yukos’ main
production unit, wants Sibneft too. Either way, both are
Kremlin-connected in one form or another.
–It’s amazing how foolish some political pundits look when
veering from their normal fields of expertise. This week George
Will said oil is “not a problem” and Bill O’Reilly railed against
OPEC. “The cartel charges $66…we must find a way to get
OPEC under control” said Mr. Bill. Huh? We call them
markets, O’Reilly, and, yes, they don’t always act rationally. But
this crisis of ours is about supply and demand, with a terror
premium still tacked on. I don’t feel oil should be $66 either, but
all of you reading this space hopefully know by now this
particular bout of high prices can’t be solely laid at the feet of
OPEC.
–While Merck now appears willing to begin settling some of the
pending Vioxx cases following its crushing defeat in a Texas
court, it’s worth noting that over in the UK there are thousands
who are debating whether or not to join the U.S. class-action
suits. Many here supposedly took part in clinical trials without
being shown warnings and risk factors. Merck’s paper trail is
devastating.
–Kenneth Clarke, Conservative Party (Tory) leader in the UK
once favored adopting the euro. No longer. In an interview in a
banking journal, Clarke said he had been wrong in his
assumption of the euro’s impact.
“I thought it would lead to increased productivity, efficiency and
living standards and stimulate policy reforms. On that front so
far it has been a failure. I do not think there has ever been a time
when the British could have joined with complete security and
confidence.”
Clarke argues the European Central Bank needs to be more pro-
growth.
–Last week I wrote that Hong Kong and mainland authorities
were banning the sale of eels because they contained a cancer-
causing preservative. Well, it turns out the authorities don’t have
such power and according to the South China Morning Post,
Hong Kong diners, for one, were still devouring their eel despite
the warnings. They are also eating pork, even as China’s pig-
borne disease claimed its 40th victim. Meanwhile, five species of
freshwater fish from China were found to have cancer causing
agents, while Pizza Hut, which had been selling eel pizzas
(seriously), took it off the menu.
–Here is the estimated net income for selected airlines if oil
averages $45 or $65 in 2006.
Southwest…$585 million ($45 oil)…$433 mm ($65)
Continental…375 mm………………. -70 mm
United………695 mm……………… -420 mm
American……766 mm……………… -589 mm
Delta……… -425 mm…………….. -1623 mm
*Southwest is in such good shape because its oil costs are largely
hedged, though over the coming years this gradually comes off.
[Source: Wall Street Journal / Airline Forecasts LLC]
–I have to hand it to Northwest Airlines. They prepared far
more for the mechanics strike than I gave them credit for last
week and thus far the inconveniences to its customers have been
minimal.
–Ford and General Motors saw their long-tem debt cut to ‘junk’
status by Moody’s, a move that S&P had made back in May.
Separately, GM announced it was extending its employee
discount program through September and is including some 2006
models. It’s a hard habit to break, these discounts, and it’s
obviously not good for margins. Ford and DaimlerChrysler will
be forced to follow in one form or another.
–I have no real opinion on real estate investment trusts as an
investment, but I offer a viewpoint from an acquaintance, Doug
Lyon, who is a fellow Wake Forest alum and has a financial
planning business. Doug wrote the following in the Aug. 22
edition of Barron’s in response to a prior piece comparing REITs
to the tech bubble of 1999-2000.
“(REITs) have real assets, generate revenues and profits, have
customers, and pay cash dividends. Many companies in the tech
bubble had few if any of these qualities. Also few, if any, Wall
Street analysts or investment strategists are bullish on REITs. In
fact, most have been skeptical of REITS since their inception. In
contrast, at the top of the tech bubble, few of these investment
experts were bearish on tech.”
REITs have been struggling these days after a terrific run. But it
all boils down to how they are sold to the client. Responsible
brokers and planners will explain the risk factors given today’s
increasingly shaky environment for this kind of product.
–Google is aggressively going after AOL, Yahoo and Microsoft
in the instant messaging business.
–China is implementing an “anti-online game addiction system”
whereby after five hours online, players will be subjected to a
warning every 15 minutes, “You have entered unhealthy game
time…” Too lenient, make it two hours.
–For the first time, a Spanish language broadcaster, Univision, is
the top-rated prime time television network in New York City.
Aside from being a commentary on our rapidly changing
demographics, Univision is taking advantage of the ‘vacation’
the other networks are on by continuing to air first run soaps
with sexy babes. [Crain’s New York Business]
–When Howard Stern begins his show on Sirius Satellite Radio,
Sirius will attempt to garner as much as $20,000 for a live read.
Having participated twice in a similar effort with the Imus
program (2000-2001…$6,000 for 7-8 reads), I would just urge
any advertiser contemplating this to be careful. The first time it
worked for me, the second time was a disaster.
–The head of Citigroup’s consumer banking group, responsible
for 58% of the overall revenue, left due to dissatisfaction with
CEO Charles Prince, the second high-profile executive to do so
in just the past few months.
–Last week I wrote of the problem baseball clubs are having
selling out their luxury boxes due to oversaturation in the market.
In a similar vein, this week Bloomberg’s Joe Mysak writes of the
overbuilding taking place in the convention center arena. Cities
feel compelled to build massive structures for a market that isn’t
growing. Attendance at the top 200 shows, for example, was
down 20% in 2003 (the latest available data) over 1996.
–Sales of educational software for the wee ones were $498
million in 2000. In 2004 the figure was just $152 million. The
big reason for the huge drop is the prevalence of computers in
schools. 3-year-old Lizzy is burned out by the time she gets
home, let alone having to deal with soaring energy prices and
geopolitical issues.
–Coors is the “official beer sponsor” of the NFL, which means
the brewer can use the NFL logo in advertising and promotional
efforts. But Coors is beginning to wonder if the $300 million, 5-
year deal it signed in 2002 is truly worth it. After all, Anheuser-
Busch’s Budweiser and Bud Light individually sponsor 28 of the
32 teams as each club can cut its own deal. And Anheuser-
Busch has been the exclusive beer of the Super Bowl for the last
17 seasons. The NFL has an option in the arrangement with
Coors to look for a new partner after this year, the fourth of the
contract. I’m so confused!
–The SEC is investigating the probable collapse of a hedge fund,
Bayou Securities out of Stamford, CT, that reportedly had up to
$440 million in assets. As of this writing neither the executives
or any other employees have been reachable. Well, I used to
work in Stamford and was just curious what the local paper was
saying there. According to reporter Julie Fishman-Lapin of the
Advocate:
“On Aug. 16, Stamford police were called to Bayou’s offices at
40 Signal Road…
“Several minutes before, at about 4:15 p.m., a man called 911 to
report a suicide note that had been discovered there. The note
made mention of fraud at the investment firm, the caller
reported….
“Sgt. Gary Perna, who investigated the call, told an Advocate
reporter at the scene last week that the suicide note was
discovered by a person who was at Bayou for a meeting with the
man who wrote the note….
“After several attempts, Perna contacted the distraught man at his
home who was unharmed.”
Authorities can not release the name of the individual as yet.
Expect this story to become an even bigger deal shortly.
–My portfolio: Shares in my carbon fiber play have been
sliding. More sellers than buyers, as we say. I was pinning my
hopes on it not breaking below a key technical level and it did.
Doh! Oh well, it’s a long-term play, as well as another reason
why I refuse to list what I’m involved in. Overall, I remain
roughly 80% cash.
Foreign Affairs
Israel: Palestinian President Mahmoud Abbas called Israeli
Prime Ariel Sharon’s decision to dismantle the Gaza settlements
“brave and historic.” But then later in the week, Israeli soldiers
killed five suspected Palestinian militants wanted for planning
suicide attacks and the Palestinians vowed revenge.
Earlier, aside from the gut-wrenching pictures of the pullout if
you were an Israeli, the process proved to be essentially non-
violent despite dire warnings to the contrary. But Hamas
pledged to continue its campaign against Israel as a spokesman
said, “Gaza is not Palestine. As for Jerusalem and the West
Bank, we will seek to liberate them by resistance just as the Gaza
Strip was liberated.” [BBC News]
As it’s been for months now, since the death of Yassir Arafat,
it’s up to Abbas and his ability to rein in the terrorists. He’s not
up to the task.
Iran: Much is being made of the conclusion by the International
Atomic Energy Agency, and a group of scientists from around
the world, that traces of bomb-grade uranium found on
centrifuges two years ago came from Pakistan, not Iran; as if we
are to welcome the finding. Yet the simple fact is this is the
same Iran that previously kept secret for 18 years a nuclear
program. Gary Milhollin, one of the premier experts on weapons
proliferation, had the following thoughts in an op-ed for the New
York Times. Milhollin addresses something I discussed a few
weeks ago which you’ll readily recognize.
“Earlier this month Bush administration officials leaked to the
press what they said was a new official estimate of when Iran
might be able to build a nuclear weapon. Speaking
anonymously, they told reporters that American intelligence
agencies now believe it would take at least 6 and maybe as many
as 10 years before that fateful day arrives.
“Whew! Instead of worrying over the previous estimate of only
five years, we can relax. And if this administration can’t figure
out how to stop the Iranian bomb, there will be plenty of time for
someone else to do it. Right?
“Actually, no. We should be alarmed rather than comforted by
this latest prediction. Consider this: American intelligence
agencies completely missed Saddam Hussein’s giant machines
for processing uranium to weapons grade before the Persian Gulf
war in 1991. Then, overreacting to that mistake, these agencies
wrongly reported that there were weapons of mass destruction in
Iraq before the 2003 invasion. Now, they appear to be
overreacting to their last overreaction by underestimating the
threat from Iran.”
Milhollin’s conclusion is that Iran could have a bomb in less than
two years. The explanation is too technical for this space but
I’ve seen the Iranian government’s own video of their nuclear
program and on this promotional tape they actually show the
“cascading effect” that is a necessary step in the process.
This talk of almost giving Iran a pass, for now, is immensely
dangerous. For its part, new President Ahmadinejad had four of
his 21 cabinet selections turned down by the Supreme Council,
which gives you an idea of his somewhat limited influence thus
far, while Iran’s top nuclear negotiator now says more countries
should be taking place in any negotiations over its nuclear
program, not just the Euro-3. That would be a mess. But, this
also means the U.S. could get more directly involved and this
may not be all bad…and perhaps something Iran really wants.
China: Various reports –
“ ‘China’s growing income gap is likely to trigger social
instability after 2010 if the government finds no effective
solutions to end the disparity,’ the Ministry of Labor and Social
Security warned in the China Daily.”
Rural income is less than a third of the urban level.
“The income gap has become increasingly worrisome for the
government of once-egalitarian China, especially as low- and
middle-income earners are quick to accuse officials of pilfering
state assets in the country’s dash toward market capitalism.
“The National Bureau of Statistics said in June that 10 percent of
the nation’s richest people enjoyed 45 percent of the country’s
wealth while the poorest 10 percent had only 1.4% of the
nation’s wealth.” [South China Morning Post]
This past week, clashes over pollution at a battery factory (sounds
lovely) resulted in dozens being hurt; just another example of
rising tensions across the land.
From an op-ed in the Financial Times by Daniel Twining, former
adviser to Senator John McCain.
“As an engine of Asian economic growth, China’s role is
breeding conflict as well as cooperation: Asian states, concerned
about losing foreign investment to China, worry about the
hollowing out of their economies. Rather than helping shape a
shared regional identity, China’s ascendancy is in some ways
causing a clash of national identities and fuelling nationalist
sentiments. China is Japan’s largest trading partner, but violent
protests over the legacy of the Second World War have
accompanied shared prosperity. Taiwan is the largest single
investor in China – and the nation most likely to be attacked by
it.
“China’s authoritarian political system further constrains its
ambition to lead Asia. If democracies largely adhere to
international rules and norms because their societies are
governed by law, should China’s neighbors expect it to build a
rules-based regional order and respect their sovereign rights
when it does not treat its people with the same regard?
“Despite its meteoric rise, China may not become a new Middle
Kingdom to which its neighbors defer. Thanks to China, Asia
may be uniting economically, but strategically it may be coming
apart.”
And from the China Daily, the results of a joint China – Japan
opinion survey.
“74 percent of Japan’s general public and 84.9 percent of the
country’s intellectuals and experts regarded ties (between China
and Japan) as either ‘not very good’ or ‘not good at all.’
“In China, 54.7 percent of the general public view ties as at a low
point and 78 percent of students share the view.
“However, up to 65 percent of Chinese respondents and more
than 40 percent of Japanese respondents say economic ties
between China and Japan are still on track, and can benefit both
sides.”
Remember, China’s communists will play the nationalism card at
the drop of a hat should it feel threatened and it’s Japan and / or
Taiwan that are likely to feel the wrath first.
Finally, I don’t often comment on accidents, but this one was
particularly gruesome. A mainland bus swerved to avoid a
bicycle and ended up on a packed sidewalk, killing 19
pedestrians.
Venezuela: Evangelist Pat Robertson said of President Hugo
Chavez that he was using his country as a “launching pad for
communist infiltration and Muslim extremism.” Well, that’s not
far off base, in my estimation. But then Robertson crossed the
line, saying the United States should “take out” the Venezuelan
leader. This incredibly stupid statement couldn’t have come at a
worse time, seeing as Chavez has constantly accused the Bush
administration of trying to topple him, let alone the fact
Venezuela is a critical source of oil for the U.S.
Venezuela’s ambassador to Washington, Bernardo Alvarez
Herrera, had the following to say.
“Mr. Robertson’s call that US government covert operatives
murder President Hugo Chavez is a call to terrorism. His call
that President Bush violently impose the outdated Monroe
Doctrine on Venezuela is a call for American intervention in the
sovereign affairs of our democratic country.
“The United States may not permit its citizens to use its territory
and airwaves to incite terrorism abroad and the murder of a
democratically elected president.”
Turkey: October 3 represents the start of formal membership
talks between Turkey and the European Union. I have long
believed Turkey would not get in and Ankara’s plight has
obviously been exacerbated by the London bombings and the
anti-immigrant fervor sweeping parts of the continent. Gerard
Baker adds the following comments in The Weekly Standard.
“This now inevitable rebuff to Ankara’s ambition will be an
event of enormous global political significance. Realization by
Turkey that its European vocation – the defining point of its
foreign policy and national orientation for the last 20 years – is
over will lead to a radical reappraisal of the country’s external
direction and, quite possibly, its internal politics. Rejection will
also have large implications for the United States, for its aims in
Europe, its relations with Russia and the former Soviet bloc and
with the broader Middle East.
“Turkey is likely to respond angrily to the growing inevitability
that the European Union will never get to Yes. This will fit with
a Turkish-told narrative that is potent for radical shifts in
domestic politics and foreign policy. According to this narrative,
Turkey has been patronized and insulted by Europe despite
strenuous efforts by Ankara to please the Europeans.”
And on one of my favorite topics, the Kurds’ PKK militia, Baker
notes:
“The United States should do more to ease Turkish concerns
about the PKK in Iraq. A war on terrorism that does not extend
to the aggressive pursuit of this especially nasty brand of thugs is
less than worthy of the name. The Bush administration should
seek to relieve Turkish fears about Kirkuk and Kurdistan, since
there is little real strategic interest for the United States in seeing
movement towards an independent Kurdistan outside Iraq.”
This coming week Turkey’s National Security Council,
comprised primarily of its generals, gathers to assess the
country’s strategic position. It will not have kind words for
Prime Minister Erdogan and his recent overtures to the PKK, as
well as his kowtowing to the Europeans.
Afghanistan: There were more U.S. deaths here last week as the
Taliban continues with its offensive ahead of the Sept. 18
parliamentary elections.
Pakistan / India: According to Defense News, some Indian
military officials are voicing doubts about Pakistan’s claim it
produced a home-grown cruise missile. The missile is real, but
some are saying it could be a repainted Chinese one. Otherwise,
if you are to believe Pakistan’s accompanying statement on its
production capability, it would appear to be ahead of India in this
sphere.
Lebanon: I visited here this past spring and told you I wasn’t
optimistic about the future. The election process that followed
gave me no reason to feel otherwise and I get a kick out of the
White House claiming victory. True, Syria’s military is no
longer a presence but Damascus’ tentacles continue to be felt.
This week the Financial Times detailed how Lebanon’s leaders
are afraid to leave their homes for fear they will be targeted.
Three, including a leading journalist, have been assassinated
since Rafik Hariri’s death in February, and, incredibly, no one
was killed in an otherwise devastating bomb in Beirut this week
that blew apart a portion of a large hotel and shopping center.
Saad Hariri, Rafik’s son and rising politician, has been told to
stay out of Lebanon as much as possible while the speaker of the
parliament employs three decoy motorcades when he ventures
out on official business.
Singapore: Prime Minister Lee Hsien Loong, in an annual policy
speech, said the following of his nation’s future path.
“It must be a totally different Singapore, because if it’s the same
Singapore (as) today, we’re dead. We have to remake Singapore
– our economy, our education, our mindsets, our city.”
Lee said that his country needed to attract more foreign
investment in order to “foster innovation and enterprise.” Then
he added the island republic must look at Las Vegas for new
direction.
“Out of nothing in a desert, they have built a city. Forty million
people visit every year. We don’t want to become Las Vegas,
but we should learn from their spirit.” [Taipei Times]
Lee may not want to become Vegas but he has approved the
development of two large casino projects. And, having visited
here, in terms of the weather it’s Vegas’ dry heat vs. Singapore’s
stifling humidity. [But I still loved it and never felt safer in a
major city.]
Random Musings
–Pope Benedict XVI had some rather interesting things to say
the other day in Germany, including on confronting terrorism.
“Freedom is not simply about enjoying life in total autonomy,
but rather about living by the measure of truth and goodness so
that we ourselves can become true and good.”
“(If) it is pushed too far, religion becomes almost a consumer
product.”
To a group of Muslim leaders:
“I am certain that I echo your own thoughts when I bring up as
one of our concerns the spread of terrorism….Those who
instigate and plan these attacks evidently wish to poison our
relations, making use of all means, including religion, to oppose
every attempt to build a peaceful, fair and serene life together….
“Respect for minorities is a clear sign of true civilization…
“Terrorism of any kind is a perverse and cruel decision, which
shows contempt for the sacred right to life and undermines the
very foundation of all civil society. If together, we can succeed
in eliminating from our hearts any trace of rancor, in resisting
every form of intolerance and in opposing every manifestation of
violence, we will turn back the wave of cruel fanaticism that
endangers the lives of so many people.” [AP / New York Times]
–Newsweek released a survey on Americans and religion and
64% describe themselves as ‘religious,’ while 79% say they are
‘spiritual.’
33% call themselves Evangelical Protestants, 25% Non-
Evangelical Protestants, and 22% Roman Catholic.
–Harvard scientists claim they have successfully turned ordinary
skin cells into embryonic stem cells, meaning no human eggs or
embryos are used in the process. But as with everything else in
the medical field it will be years before any viable applications
are developed and approved.
–There have been at least 7,000 major fires in Spain and
Portugal this summer and both governments estimate about half
were set by arsonists. The rest of Europe is struggling to recover
from the 3rd series of catastrophic floods in just the past six years.
Many picturesque towns in the Alps suffered wide-scale damage.
–Dutch farmers have been told to bring all 5.5 million free-range
birds indoors to prevent mingling with their wild brethren that
could lead to the spread of bird flu. So I’m thinking we have a
potential revolt on our hands. “No! I don’t want to go inside!”
–Finally, Beloit College in Wisconsin releases an annual
“mindset” of its entering freshmen class. For example, most of
the students were born in 1987 so they never knew that “cut and
paste” once meant employing scissors. But NBC News
interviewed some of the students on campus last week and it was
more than a bit distressing. Some never heard of Jackie Gleason,
for instance, while to most other questions there was a one-word
answer, “Whatever.”
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $442
Oil, $66.13
Returns for the week 8/22-8/26
Dow Jones -1.5% [10397]
S&P 500 -1.2% [1205]
S&P MidCap -0.7%
Russell 2000 -0.6%
Nasdaq -0.7% [2120]
Returns for the period 1/1/05-8/26/05
Dow Jones -3.6%
S&P 500 -0.6%
S&P MidCap +5.3%
Russell 2000 -0.5%
Nasdaq -2.5%
Bulls 56.8
Bears 25.0 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
