[Posted 7:00 AM ET]
America Weeps
It was a catastrophic week for America and while the situation in
some respects is slowly beginning to stabilize, the ramifications
for our nation, including the tearing of our very social fabric, is
likely to be with us for generations to come. As the Washington
Post put it we are now witness to “the largest displacement of
Americans since the Civil War” and I would submit that contest
influenced our lives for 100 years after.
Gerard Baker writes in the London Times:
“This massive disparity of suffering is bound to provoke a fresh
controversy about race and class inequality, the great open sore
of American society that bleeds profusely from time to time.
The spectacle of tens of thousands of indigent blacks, apparently
alone in being unable to save themselves from this horror, will
surely make it weep anew.”
This is the reality of it all, whether we want to face it or not, but
it’s obviously far more than that.
There was a massive, systemic breakdown of government this
week. It was an embarrassment, shameful and deadly. It is one
of the great black marks on our history. Countless officials, from
the president down to Mayor Nagin and across a myriad of
agencies, failed in one fashion or another with grievous results.
But we will have months and years to dissect this tragedy and
while I have much more below, for now I’ll focus on the
financial impact.
Wall Street
If you didn’t know how important the Gulf Coast region –
specifically New Orleans, its ports, refineries and the offshore
drilling industry – is to our nation’s economy you certainly do
now. Every school child capable of reading a newspaper (I’ve
given up on many adults) should be able to recite a litany of facts
by now, including how the Gulf region supplies ¼ of the oil and
gas consumed domestically, and that New Orleans and its
environs are home to 12% of our domestic refining capacity.
New Orleans’ ports are also critical to American agriculture as
60% of our grain exports, to cite but one example, flow through
here. New Orleans is vital when it comes to trade in
commodities like coffee, sugar, and even zinc.
And as energy prices soared for much of the week, one couldn’t
help but wonder if this was the death knell for the airline
industry. With the big change coming October 17 in our
bankruptcy laws, we’ll soon know the fate of Delta and
Northwest, for starters.
But as one who has written all year of the economy reaching a
“tipping point,” I’m as shocked as anyone that Katrina could be
the final nail in the coffin. We should know for sure whether this
proves to be the case in as little as a month, for it’s within that
timeframe that the Federal Reserve will have to make a critical
decision.
PIMCO’s Paul McCulley said Katrina will have a “profound
effect on consumer spending” and because of this he feels the
“Fed is finished” raising interest rates. The current funds rate of
3.5% was projected by most bond strategists to rise to 4% or
even 4.25% over the year’s remaining three Fed Open Market
Committee meetings [9/20, 11/1, 12/13]. The yield curve was
reflecting this and had narrowed to 8 basis points, intraday,
between the 2- and 10-year Treasury securities. An inverted
yield curve, the rate on the 2 higher than the 10 in this example,
would normally be a harbinger of tougher times economically.
But now we’re talking Katrina could slow the economy down to
a point where any remaining concern the Fed had about inflation
(expressed again most recently in its August minutes) is
misplaced, thus allowing it to take a pause until we all see how
the economy reacts to any energy price shocks as well as the
coming stimulus throughout the entire Gulf Coast region. I
certainly can’t draw any conclusions myself at this early stage.
And it was just last weekend that Fed Chairman Alan Greenspan,
in his farewell address to a group of economists, reiterated his
belief that we were at the end of a housing boom that will
“inevitably simmer down,” which in turn would reduce consumer
spending. As noted time and again, Americans have been using
their homes as a piggybank, but the times when home
appreciation outstripped wage growth are a changin’. Our
personal finances have long been stretched to the max and now a
shock like Katrina comes along to further fray the nerves.
So we wait to see what develops. The White House no doubt
wants us to spend like nothing happened, while the Fed would
like to see a gradual slowdown in activity so it wouldn’t have to
worry about raising rates further to tame inflation. As for you
and I, we’ll watch the gas gauge a helluva lot more closely, save
pennies somewhere else if gasoline at the pump remains in the $3
range, and prepare for winter and the heating bill shocks yet to
come.
Iraq
The tragedy surrounding the Shia worshippers, which included a
panic over a non-existent suicide bomber, a stampede and a
bridge collapse, combined to kill at least 750 while
overwhelming the nation and putting the fate of the constitution
on the back pages for a few days. But as for the October 15 vote
to ratify the document that supporters promise protects
democratic principles and human rights, it’s up to the Sunnis.
Back when the interim constitution was being formulated, the
Kurds asked for a provision whereby if three of the 18 provinces
voted down a final draft by a 2/3s vote, it would be null and void.
That was to protect their autonomy, if need be. Now, as it turns
out, this clause is a key to any Sunni effort to reject it. While it’s
impossible to know for sure, Sunnis evidently have a majority in
four provinces and the leaders not only have to turn out the vote
in droves, they have to convince far more than 2/3s of those
Sunnis who do cast ballots to vote it down, knowing there are
other sects that will be voting at the same time and in favor of the
document.
The Sunnis fear that Iraq will split into three states and they’ll be
left without any oil. It doesn’t matter that the constitution
expressly says oil revenues will be divvied up among the three,
or that the constitution cannot be amended for 8 years. The
Kurds and Shiites could one day wave bye and leave the Sunnis
hanging.
But when you think about it, if the constitution is voted down,
wouldn’t the Kurds just declare their independence? And
wouldn’t the Shia south then quickly do the same in a new
alliance with Iran? In other words, I see no way out for the
Sunnis. And to top it off, the moderate Sunnis need the
cooperation of the insurgents to keep the polls open and secure.
That’s an awful lot to pin one’s hopes on.
As for Washington and the political infighting, former General
Wesley Clark appeared on “Meet the Press” and I couldn’t agree
more when he noted none of the military leaders in the post-war
phase has stood up to Secretary of Defense Rumsfeld; “people of
character in high places” were nowhere to be found.
The New York Times’ David Brooks wrote an op-ed piece on the
strategy espoused by retired Lt. Col. Andrew Krepinevich, a
“blindingly obvious” one. Brooks:
“Instead of trying to kill insurgents, Krepinevich argues, it’s
more important to protect civilians. You set up safe havens
where you can establish good security. Because you don’t have
enough manpower to do this everywhere at once, you select a
few key cities and take control. Then you slowly expand the size
of your safe havens, like an oil spot spreading across the
pavement. [Ed note: This should have been done Tuesday in
New Orleans.]
“Once you’ve secured a town or city, you throw in all the
economic and political resources you have to make that place
grow. The locals see the benefits of working with you. Your
own troops and the folks back home watching on TV can see
concrete signs of progress in these newly regenerated
neighborhoods….
“The fact is, the U.S. didn’t adopt this…strategy because it
violates some of the key Rumsfeldian notions about how the U.S.
military should operate in the 21st century.”
[I will delve more into Krepinevich and his theory in the 9/8
edition of my “Hott Spotts” column.]
Along these same lines, it’s important that readers be reminded
of how I started off my “Week in Review” way back on 6/28/03.
“It was not a good week and it’s reality check time for some
Republicans. The United States and its allies are paying a dear
price for an ill-conceived post-war plan, if you can even call it
that. I have been highly critical of the Bush administration and
with good cause. This is one Republican who only seeks the
truth.
“America’s brave soldiers have been ill-served. They
masterfully secured the oil fields, for example, only to see them
plundered and sabotaged solely due to lack of manpower. The
electricity level in Baghdad is still below 50%, due to sabotage
and lack of security forces. And now one can’t help but be
extremely concerned that Iraqis aiding the coalition are being
targeted themselves.
“The U.S. has to get more forces in there, fast, and not hesitate to
seek the help of others….
“In the meantime, following are comments from other
Republicans I respect.
“George Will, weighing in on the issue of weapons of mass
destruction.
“ ‘Americans seem sanguine about the failure – so far – to
validate the war’s premise about the threat posed by Hussein’s
WMD, but a long-term failure would unravel much of this
President’s policy and rhetoric.’
“Senator Richard Lugar, visiting in Baghdad on Monday, urged
President Bush to describe the cost and commitment required to
rebuild.
“ ‘There now needs to be real truth-telling by the President.’
“Senator Chuck Hagel, also from Baghdad.
“ ‘The administration has got to really come forward and explain
the breadth and depth of our commitment here.’
“Let’s hope it does. The people are about to get restless.”
26 months ago I wrote that. I never changed my opinion after.
The people ended up being more patient than I thought, even as
our president exhibited an incredible lack of leadership. I would
go on that summer of 2003 to plead for Bush to tell us
something, anything. You should recall he went from May 1 to
Sept. 1 without addressing the people in ‘03.
I’ve been receiving some interesting notes the past few weeks. I
appreciate those of you who, while you disagree with my views,
took the time to write. Dave D., a Vietnam vet and long-time
reader, notes:
“(Brian), you have said that this war is being mismanaged and
has been from the very start. True, but it cannot be anything but
mismanaged and misguided if the reasons for its inception were
never moral and true to begin with. And the half-truths and
misinformation that come from the administration cannot justify
an immoral act of aggression.
“We will never see enough troops or materials committed to this
war, because there is no way to justify it to the majority of the
people.”
Just another thoughtful opinion.
Street Bytes…back to Wall Street
–The equity market broke its recent losing streak, with the
Nasdaq gaining ground for the first time in five weeks, up 1% to
2141. The Dow Jones picked up 0.5% to 10447 and the S&P
500 rose 1.1% to 1218.
The story was energy and the aforementioned Federal Reserve.
Crude oil soared above $70 on fears that Katrina had knocked
out production and refining across a wide swath. Pipelines to
other parts of the country were also impacted as power went out
across virtually the entire Gulf Coast region. Natural gas
climbed above $12 and wholesale gasoline prices hit $2.90 under
one futures contract. Tack on a minimum of 50 cents to that and
you begin to see why prices at the pump went haywire.
But by week’s end there was some good news amidst the sudden
shortages in selected cities. The International Energy Agency is
releasing some of its emergency reserves of crude, as have some
European nations, and tankers were streaming across the Atlantic
(granted, a tanker doesn’t exactly ‘stream,’ but we’ll take all the
help we can get). Plus the U.S. government is releasing some
crude from the Strategic Petroleum Reserve. In addition, as
power slowly returned in some spots, refineries came back on
line, as did pipelines. However, in many respects it’s still too
soon to get a full damage assessment. The picture on both should
become much clearer in another week.
Overall, though, one shouldn’t take too much stock (pun
intended) in the week’s market action. Many of the big boys
were on vacation and 60% of market volume is program trading
related, anyway, so in some respects it really doesn’t matter what
you and I think, does it? [Sarcasm and cynicism also intended
after a long week.]
–U.S. Treasury Yields
6-mo. 3.62% 2-yr. 3.75%% 10-yr. 4.03% 30-yr. 4.29%
What had been a rapidly approaching inversion of the yield curve
was by week’s end a more normal spread (for these times) of 28
basis points as the aforementioned continued Fed tightening was
called into question.
It also helped that there was some truly punk news on
manufacturing as figures on factory orders, the Chicago
Purchasing Managers Index, and the Institutional Supply
Management data was all less than expected. Friday’s report on
August employment was a non-factor as we wait to see the full
extent of Katrina on the labor market over the coming two to
three months.
–Consultant Risk Management Solutions estimates the cost of
Katrina, including uninsured losses, to be $100 billion.
–Some of you may finally understand why I have been
adamantly opposed to any Social Security reform that takes away
the safety net from America’s truly poor. It is the very least we
can do as a society. Katrina proves the point, forever.
–One story that is getting lost in the pile of debris is the potential
loss of $billions in the municipal bond market. The
municipalities of the Gulf region obviously have little in the way
of revenue generation to meet their debt service obligations.
“We are entering into uncharted territory,” said Steven Murray,
an analyst with bond rater Fitch. “I suspect we will be dealing
with issues that no one has thought of before. If whole
neighborhoods will be razed, what does that mean for tax
purposes?”
Leslie Wayne of the New York Times expounds on the problem.
“For instance, $500 million in bonds for the Ernest Morial
Convention Center in New Orleans as well as statewide bonds
supporting the Superdome are backed by a hotel tax – and the
hotels in the city are expected to remain closed for a long time.
Some $200 million in New Orleans water and sewer bonds are
backed by taxpayer revenues. Bonds issued by universities and
hospitals are backed by student tuition and hospital revenue.”
And then you have issues such as Mississippi’s loss of casino
revenues and cities that have seen their entire tax base wiped out.
–As energy stocks skyrocketed this week, it’s another excuse to
update my record of the two major industry indexes, the OSX
(oil service / drillers) and XOI (major integrateds like Exxon
Mobil).
OSX…122 (5/16, intraday)…175* (9/1, intraday)…170 (9/2)
XOI….722 (5/16, intraday)…1055* (9/1, intraday)..1040 (9/2)
*New highs
–General Motors’ August sales tumble 13%, while Ford saw
SUV sales plunge 40% (though overall Ford’s were up).
–70% of Americans now favor nuclear power vs. 46% in 1995.
[Business Week] However, the earliest one could be brought on
line is 2014.
–Nine former executives at KPMG have been indicted for filing
“false and fraudulent documents (with the intent) to deceive” in
the massive tax shelter scheme that threatened to bring another
accounting giant down, a la Arthur Andersen. KPMG, though,
was able to avoid AA’s fate for a cost of $456 million in
penalties and a mandated outside monitor.
–Tourism brings in about $5 billion to New Orleans and the city
contributes $158 million in state tax revenues.
–Business Week reports that Merck’s Vioxx tab is potentially as
high as $50 billion. The Justice Department investigation is
focusing on criminal wrongdoing.
–The SEC filed civil fraud charges against the two top
executives of the defunct KL Group hedge fund of Palm Beach,
FL, a situation I wrote of recently. $81 million in investor assets
is missing and the whereabouts of the two principals, Won Sok
Lee and Young Bae Kim are unknown. If you see these
gentlemen yourself, they should be considered armed with cash
and potential customers.
–And on a similar matter, last week I wrote of the Bayou Group
hedge fund fiasco and noted it was about to get bigger…and it
did. The CFO was the one who wrote the suicide note I alluded
to (before the Journal and New York Times had the story,
incidentally) and it turns out the founder, Sam Israel, is a Tulane
grad (thus the name Bayou). Apologies to all other Green Wave
alum, but there’s more than a bit of irony here…as both the
school and Bayou investors have now been wiped out.
We also learned that $160 million was moved out of Citigroup
accounts in July 2004, while Arizona officials seized $100
million that was being rapidly transferred between various
countries. The total exposure may be the $160 million, however,
not the $440mm figure stated in Bayou’s marketing material and
investor letters. Regardless, the moves jive with stories that
Bayou had greatly reduced its trading activity in ’04.
Finally, at least for now, a leading fund of funds player,
Hennessee Group, is a key figure in this case for raising a sizable
portion of Bayou’s funds in exchange for a large cut, while J.P.
Morgan fell prey to the scam as it placed multiple investors of its
own in JPM fund of funds products that were invested in Bayou
vehicles.
–Speaking of Citigroup, former CEO Sandy Weill has now been
fingered as having a leading role in Citi Asset Management’s
transfer agent scandal; a complicated affair that ended up costing
the investment bank $208 million in fines and penalties
following allegations Citigroup pocketed $millions illegally. But
Weill himself will once again escape charges because they would
be too difficult to prove. Doesn’t he lead a most charmed life?
–I meant to include this last week. $634 billion in cash is held
by non-financial companies in the S&P 500, up from $352
billion when the 2001 recession ended. So the question becomes
where will it go; for capital spending, stock buybacks, or
dividends? Or, will it just sit in a rainy day fund?
–It was criminal that the airlines stopped flying out of New
Orleans and other regional airports early on Sunday when the
storm didn’t hit for another 24 hours. I saw this on a much
smaller scale myself during my recent trip to Bermuda when
Hurricane Harvey popped up out of nowhere and skirted the
island. We tried to get out a day early, the weather was fine, but
the airlines canceled the flights anyway.
–Another quotation from Bill O’Reilly, idiot. “OPEC must
immediately lower prices $15.” Ah, Bill? That’s not how the
energy market works. But nice try.
–I’m not a big fan of New York Times opinion writer /
economist Paul Krugman, but I can’t help but agree with his
assessment of Alan Greenspan’s legacy. In speaking of the
housing bubble:
“What (Greenspan said recently), after emphasizing the recent
economic importance of rising house prices, was that ‘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.’ And he warned that
‘history has not dealt kindly with the aftermath of protracted
periods of low-risk premiums.’ I believe that translates as
‘Beware the bursting bubble.’
“But as recently as last October Mr. Greenspan dismissed talk of
a housing bubble: ‘While local economies may experience
significant speculative price imbalances, a national severe price
distortion seems most unlikely.’
“Wait, it gets worse. These days Mr. Greenspan expresses
concern about the financial risks created by ‘the prevalence of
interest-only loans and the introduction of more-exotic forms of
adjustable-rate mortgages.’ But last year he encouraged families
to take on those very risks, touting the advantages of adjustable-
rate mortgages and declaring that ‘American consumers might
benefit if lenders provided greater mortgage product alternatives
to the traditional fixed-rate mortgage.’
“If Mr. Greenspan had said two years ago what he’s saying now,
people might have borrowed less and bought more wisely. But
he didn’t, and now it’s too late. There are signs that the housing
market either has peaked already or soon will. And it will be up
to Mr. Greenspan’s successor to manage the bubble’s aftermath.”
–A UN agency said bird flu is likely to spread around the globe
and nations must prepare national emergency plans. [FEMA was
not invited to offer its expertise.]
–1 in 6 New Jersey homeowners live in homes worth $500,000+.
It was 1 in 20 in 2000. 29% are devoting more than 35% of their
income to mortgages, taxes and other housing costs. [Star-
Ledger]
–Health insurance costs for employers rose 12% in 2004.
Uncompensated care for hospitals and doctors equates to $45
billion.
–I’ve been doing a little series on an important market top,
September 1, 2000, for my “Wall Street History” link and it
reminded me of just how volatile the markets were back then.
For example, in all of 2000 there were 41 weeks where the
Nasdaq rose or fell 2% and just 11 where it didn’t. This year,
thru 9/2, Nasdaq has been up or down 2% just 8 weeks.
Foreign Affairs
Israel: Benjamin Netanyahu formally announced he was
challenging Prime Minister Ariel Sharon for control of the Likud
Party and it appears early elections will be held next spring.
Netanyahu’s main stance, as noted previously here, is that the
Gaza Strip is being turned into a base for terrorists such as
Hamas, Hizbollah and al-Qaeda.
Along these lines, Hamas’ military leader Muhammad Deif
issued a video warning the Palestinian Authority not to interfere
in Hamas’ promise that “all of Palestine will become a hell” for
Israel, adding, “Today you have left the hell of Gaza in shame
but have not gotten out completely, as you continue to occupy
Palestine.”
Deif and his followers are taking full credit for the Israeli pullout
from Gaza.
Separately, Mort Zuckerman, editor-in-chief of U.S. News &
World Report, had the following dire thoughts in his
publication’s Sept. 5 edition.
“The response of the Palestinians to (Sharon’s) heroic act of
statesmanship is contemptible. Not only have their leaders been
demanding more, but they have endorsed the baldfaced lie of the
extremist Hamas group that ‘the blood of our martyrs’ drove the
Israelis out of the Gaza settlements.
“The implication is that more bloodshed will produce more
Israeli concessions. [Abbas] has said all the right things in
English for a western audience, but what is he doing to counter
the notion that terrorism pays? Not a thing.”
Zuckerman adds that any aid for the Palestinians should be
conditioned on the following:
1. Will there be a decline in incitement to hatred or a change in
the rhetoric of Palestinian officials when speaking in Arabic to
their people?
2. Will the Palestinians continue to be directed toward the
destruction of Israel, or will they seek to build up their own
nation-state?
3. Will there be a stable government with real control of the
territory that will stop terrorism?
4. Will Palestinians continue to claim Israeli withdrawal as a
victory through terrorism, thereby justifying more terrorism?
5. Will the billions of dollars of new aid disappear into the
private bank accounts of their leadership groups, as it has for
years, or instead be put into programs for the welfare of their
people?
6. Will they dismantle the refugee camps that, despite all the
foreign aid, have been a permanent condition of Gaza life and
resettle their people in decent housing?
China: As President Hu Jintao prepares for his meeting at the
White House with President Bush on September 7, one that will
not include a “state dinner,” an incredibly stupid move on the
part of the administration, China is backing South Korea’s call
that North Korea be allowed to progress with a peaceful nuclear
program. President Bush is adamantly opposed. And this week
tensions between Washington and Beijing flared on another
matter as trade talks over China’s dumping of textile products on
our market collapsed.
Regarding the horrific problems with China’s mining industry,
the government suspended production in 7,000 coal mines, one-
third the total, until safety issues can be addressed. And on the
continuing topic of food safety, it has been determined that Hong
Kong’s freshwater fish are, indeed, safe to eat. But now there is
a different problem in the region relating to animals. Civet cats
have been found to have died in one of Vietnam’s national parks
from bird flu. This is important because it was civets that are
presumed to have passed SARS to humans in 2003.
[Just a further note on my ‘state dinner’ comment. You know I
have problems with the Chinese government, but to hold a lunch
for President Hu rather than a dinner, while a seemingly minor
issue to some, is an amazing breach of protocol and common
sense in dealing with a nation that the White House claims to
have a “constructive relationship.” It also shows an incredible
lack of understanding of the Asian sense of honor.]
Iran: French President Jacques Chirac warned Iran that it cannot
have a nuclear weapons program and that he will not hesitate to
take the issue to the UN Security Council. Washington concurs
and it’s an example of never slamming the door on an admittedly
ornery “ally” in this fast-moving world of ours.
Chirac’s call was made early in the week. Now we’ve learned,
through an International Atomic Energy Agency report, that Iran
already has enough enriched uranium to make one bomb. The
IAEA noted “Iran’s full transparency is indispensable and
overdue.”
Now what was it I’ve been saying about Iran’s program all
along? And how the heck can our intelligence believe Iran is up
to ten years away from having the bomb?
Lebanon: Four former pro-Syrian security officials were formally
charged with murder in the assassination of former prime
minister Rafik Hariri back on February 14; an attack that killed
20 others. Many in the government of that time, including
current president and Syria’s lackey, Emile Lahoud, had been
stonewalling until a UN investigation led by German prosecutor
Detlef Mehlis took charge. [You’ll recall how I told you when I
was there in April that my hotel overlooked the blast scene and
each day I went down to see what was going on and there was
nothing happening, fully ten weeks after.] We now await the
fate of Lahoud.
Egypt: President Hosni Mubarak holds his sham election on
September 4. Initially the White House put pressure on him to
hold a truly free vote but then the administration backed off.
So what exactly is Bush’s commitment to democracy?
Russia: It was a tough week in the country as Russians paused to
remember the tragedy of Beslan on its first anniversary. It also
marked the 25th anniversary of Poland’s Solidarity labor
movement and founder Lech Walesa had some interesting
comments for his fellow countrymen on how the West should
deal with Russia, specifically as it applies to the fate of Belarus
and strongman President Lukashenko. From a report by Roger
Boyes of the London Times:
“Mr. Walesa sounded an unusually nervous note. The Russian
bear, he said, should not be provoked by an over-ambitious West
keen to establish democratic governments on Russia’s
borderlands, be it in Belarus or Moldova, or in Central Asia.
‘Russia is at a crossroads,’ he said. ‘Will Russia in the future be
a threat or a friend? That is the question. Russia is needed by
every country – it has huge resources, but of course it is needed
not as a hegemonic system but as a developed, democratic
country.’ …
“Mr. Walesa fears that Poland is stumbling into a dangerously
anti-Russian policy. Were the regime in Belarus to fall soon,
with a helpful push from Poland, relations with President Putin
would deteriorate. ‘Belarus is propped up by Russia, so the
question is whether the European Union and the West are
prepared to compensate the Belarussians for what they lose.’”
Walesa was referring to the fact the Gdansk shipyards had been
dependent on orders from the Soviet Union and when
communism collapsed, so did the work.
On a different matter, it appears progress is finally being made in
efforts to dismantle Russia’s nuclear weapons. Senator Richard
Lugar called it an “important breakthrough” that U.S. officials
were allowed inspection of sites previously off-limits. But then
the State Department had to intervene to fly Lugar and his
congressional delegation out of the country as they were held up
at the airport for hours in a typical Soviet-era move.
Elsewhere, former Yukos chairman Mikhail Khodorkovsky
announced he is running for the State Duma in December
elections. Despite the fact he remains in prison, Khodorkovsky
can do this as long as his appeal process is ongoing. If he loses
at the last level, then he is removed from the ballot.
Lastly, there was an interesting survey in the Moscow Times.
89% of Russians can identify George Bush as the president of the
U.S., while only 53% can name Jacques Chirac, 48% Tony Blair,
and, surprisingly, only 8% can identify Hu Jintao as China’s
leader.
Venezuela: The Reverend Jesse Jackson paid a visit to President
Hugo Chavez and, outside of discussions on Pat Robertson’s
comment that Chavez should be assassinated, received a
commitment from Chavez to supply low-cost heating fuel to
America’s poor. [Details are to be worked out though here too
hopefully FEMA is not involved.] Chavez is also following
through on an earlier promise to take over the nation’s private
banks as part of his “socialism for the 21st century” agenda.
Paraguay: President Duarte denied Paraguay is about to become
a permanent base for U.S. troops, a rumor that has percolated
since Secretary of Defense Rumsfeld paid a surprise visit here
last week. He did confirm, however, that 400 U.S. troops will
hold maneuvers in Paraguay in 2006.
Zimbabwe: President Robert Mugabe’s government was granted
new sweeping powers, such as the ability to confiscate passports
of those deemed a threat to national security. Mugabe can also
now expropriate land for redistribution without any legal
recourse whatsoever. It’s not too late to ‘short’ Zimbabwe, even
at this stage.
Germany: Christian Democrat leader Angela Merkel has a 12-
point lead in her race against Chancellor Gerhard Schroeder with
this critical election just two weeks away, September 18. Merkel
has promised sweeping economic reforms and would no doubt be
a far better friend of the United States than the current occupant
of the chancellery.
Japan: Prime Minister Koizumi appears to be comfortably ahead
in his campaign to remain in power. The vote here is September
11.
Random Musings
–I caught Jesse Jackson on “Larry King” Thursday night and
Jackson said the impact of the snipers in New Orleans was
“exaggerated.” Hardly, Reverend. Having spent some time in
New Orleans, I have seen what a scary place it can be, and
knowing as I do how this city has long been known for extensive
corruption among its public officials, including the police, and
knowing as I do that our sick, despicable rap culture has fed the
violence that was on display before the entire world, and how
black leaders such as Jackson refuse to stand up against it,
helping to further perpetuate the violence, I’d say he couldn’t
be more off base.
–President Bush’s approval rating continued to plummet, down
to 45% in the latest Washington Post / ABC News survey, and
pre-Katrina. Only 37% approved of the Republican-controlled
Congress while self-identified Democrats are upset at their own
party’s lack of leadership. On the issue of Iraq, 54% still
maintain the U.S. should keep troops there until order has been
restored.
–Cindy Sheehan has an amazing recognition factor already as
one poll revealed 3 in 4 have either heard or read about her.
Sheehan’s commercial [“Mr. President, you lied to us…”] is
powerful, but she hurts her cause when she loses her self-
control at some of her speaking engagements. She is slated to
stage a rally in Washington on Sept. 24. President Bush will
have no one but himself to blame if this leads to a further
deterioration in his ratings, which after Katrina should be below
40.
–When I saw New Orleans Mayor Ray Nagin last Saturday, my
first reaction was “Uh oh, he’s not up to the task.” And like
many of you I later thought of Rudy Giuliani. From a political
standpoint, Giuliani supporters now have further ammunition and
despite his liberal stands on some key conservative issues,
Giuliani, and to a lesser extent John McCain, are helped by
Katrina in their primary bids in Iowa and New Hampshire, where
they would normally find a tough go of it given the traditional
voter who heads to the polls and caucuses in each case.
–Lt. Gen. Russell Honore, head of Joint Task Force Katrina, is
one of the true idiots our military has ever produced. I would
hope he’s replaced shortly.
–From a New York Times editorial, 9/2:
“One lasting lesson that has to be drawn from the Gulf Coast’s
misery is that from now on, the National Guard must be treated
as America’s most essential homeland security force, not as
some kind of military piggy bank for the Pentagon to raid for
long-term overseas missions….a homeland-based National
Guard that’s fully prepared and ready for any domestic
emergency.”
I addressed this issue on 11/15/03 in this very space.
“Here’s how I’d restructure the armed forces, briefly:
“Army (Navy, Air Force, Marines): Remain all volunteer, add a
few divisions.
“Reserves: Subject to a draft…though overseas deployments
would be limited, favoring peacekeeping duties…unless full war
breaks out on a second front, i.e., North Korea.
“National Guard: Subject to a draft…stay in the States to protect
the U.S. against urban unrest, domestic terrorism, and for greatly
increased border patrols.
“There should be little doubt going in what service in each entails,
unlike the present chaotic situation that is severely impacting
thousands of families.”
–I had the following thoughts on homeland security way back on
8/23/03:
“New York Mayor Michael Bloomberg continues to receive
praise for his performance during the blackout, but I think the
public is missing a far bigger picture.
“Last week I wrote of how I couldn’t help but notice how
100,000 were trying to get to New Jersey from Manhattan by
ferry because the trains were obviously shut down. But unlike
9/11, when a flotilla of some 500 ships, many privately owned,
came to the rescue in an heroic effort, this time it was left up to
New York Waterways, the operator of the ferry, with zero
assistance. Of course there are obvious differences between the
two occurrences…or are there?
“A while back I wrote of my visit to the Henry Ford Museum in
Dearborn, Michigan. One of the exhibits that I didn’t make
mention of at the time was of an early 1960s schoolroom, with a
recording of a teacher’s instructions for a popular drill of that
day, ‘duck and cover,’ that was designed to address the
possibility of a nuclear attack from the Soviet Union.
“Looking back, it was silly given what we now know of the
physical consequences of an atomic bomb, but I thought of it the
other day because, laughable or not, every American, from age 5
on up, was given specific instructions on what to do in the event
of an emergency. Air raid sirens were installed around the
country and civil defense shelters established, the signs of which
can still be found today.
“But if the blackout had been a chemical or dirty bomb attack in
midtown Manhattan, what would our instructions be? If it
occurred around Penn Station (33rd Street), who should go north,
south, east, or west? If 100,000 people show up at New York
Waterways’ piers, will anyone else aside from the company be
there to evacuate them? Is there an elite New York police force
ready to helicopter onto the massive Staten Island ferries for the
purposes of an evacuation effort? Are the gangplanks on board
adjustable to fit different piers? What if the attack was in the
Wall Street vicinity? Does everyone go south to Battery Park
where boats or decontamination facilities are located? Do you
just start fleeing north?
“What happens if a small nuke goes off in Denver, a very real
possibility given the porous border with Canada north of there?
Is traffic on I-70 (an east / west road) routed solely west over the
mountains where you would expect fallout to be lessened? Or is
everyone directed to the airport, which could possibly
accommodate a vast majority of the people in an environment
that has a chance of being sealed?
“Ludicrous? I hope you don’t think so. This is all part of the
perfect homeland security effort, aside from the more obvious
ones of securing the ports, strategic sites, etc. But today, we
don’t have a clue. You can also see just how much money it will
take to have as good a system as possible.
“Long ago, President Bush should have demanded that, for
starters, every single city and state in this country have an
evacuation plan that each resident and office tenant has a
personal copy of. It’s already in place for hurricane prone
regions, for crying out loud, why not for terrorism?
“Would our lives change for the worse merely because we are
better informed and prepared? Would the economy tank because
we’d be gripped by fear? Of course not, and we’ve already seen
examples of this. But we’d have a far better chance of survival,
as a nation, if we felt more secure that our leaders, both local and
national, knew what the hell they were doing.”
Sadly, I assumed that with regards to hurricane preparations
officials were truly prepared.
–No one ever talks about this, but consider the fact Iraq has a
huge brain drain going on. Anyone with half of one is getting
the heck out of there. That doesn’t bode well for the future.
–Columnist Dennis Hammill of the New York Daily News:
“It has been four years since Sept. 11, and all we have in the
place where 3,000 died is a hole in the ground. For shame.
“It is simply staggering, a failure of monumental proportions,
that we have not put one brick on top of another at Ground
Zero.”
Hammill wrote this for last Sunday’s edition, pre-Katrina.
There’s probably a lesson or two here when one thinks of the
rebuilding effort to come, certainly when it comes to the issue of
New Orleans.
–Allen H. wrote me a note about historian David McCullough’s
appearance on C-Span and McCullough musing about how
today’s media would have treated the effort in the American
Revolution. Coincidentally, last Sunday on “Meet the Press,”
Tim Russert blasted one of the lackey generals who blamed the
media for the way Iraq was being covered. “We are covering the
reality,” said Tim. Right on.
–From the Santiago Times, Chile.
“Eighty-two-year-old Leontina Verdugo was admitted to hospital
after suffering a heart attack that occurred moments after she
received a water bill for a staggering (US $2,380).
“Normally, Verdugo’s bill totals approximately (US $23). After
opening the bill, she managed to call a neighbor before losing
onsciousness and being rushed to (hospital).
“Further shock awaited her. After the error was reported to the
water company Essel, she received a new bill advising her that
her previous bill was still outstanding, and to her surprise, the
total had increased to (US $2,465).”
I couldn’t tell from the article, but I’m assuming the revision
killed her.
–As your children go back to school, make sure they get some
physical exercise. Kevin Helliker of the Wall Street Journal
writes, “A 2005 study in the Journal of Exercise Physiology
looked at how 884,715 fifth-, seventh- and ninth-graders scored
on a state-mandated fitness test in California. Then it compared
those numbers to the reading and math performance of those
students on a standardized achievement test.”
Yes, it shouldn’t come as a great shock that the fittest had the
best scores, some 25% better than those who were slugs.
–Back in 1982, two years out of college, I planned a trip for
Dave, Pete, Jeff and I to go to the ’82 NCAA Basketball
Championship game in New Orleans; the one that North Carolina
won on Michael Jordan’s jump shot. Afterwards, I selected a
place for us to do some golfing and chose Biloxi. This was
long before it became a city dominated by the casino industry
and frankly the golf was far from top notch in those days. Oh,
but we returned with some stories…like the day we chartered a
boat to go deep sea fishing in the Gulf and I was too naïve to
realize the captain’s son was picking up garbage bags filled with
drugs along the way. Actually, that’s about the only story I can
tell you from that trip.
–To those of us who follow the Washington scene, Haley
Barbour was always the ultimate political operative, but he’s
obviously one who will be the Rudy Giuliani of this crisis. You
can’t help but love the guy.
–Michael Chertoff told Larry King on Thursday, “The spirit of
the people of New Orleans is a wonder to behold.” This kind of
b.s. is exactly what we don’t need. They would have torn his
head off Thursday had he shown up, and rightfully so.
–I’ll forever have this image of last Sunday night, as the storm
was barreling down on the Gulf Coast; Paris Hilton at the MTV
Video Music Awards comparing her 30-karat diamond with
some jerk rapper’s bling bling. It was sickening.
–Hats off to the members of the media for an outstanding job in
getting out the story this week. And also to the Coast Guard, the
forgotten branch of our military that is laboring with archaic,
rundown equipment. Go back into that $286 billion highway
transportation bill and give them the resources now slated for
that freakin’ bridge in Alaska that connects a small town and an
island of 50.
–Maybe Americans will finally wake up and realize that they
need to do some homework before going to the polls. Some
men and women are getting elected to crucial decision-making
posts that impact the lives of tens of thousands or more.
–I love the fact that George W. Bush is telling me to conserve
energy. If it wasn’t so sad, it would be laughable.
–The man I’ll always remember is Harvey Jackson, the fellow
who was approached by a local television reporter in Mississippi
after just losing his wife to the storm surge. He just seemed like
a truly good man.
–Lastly, to the survivors of Katrina, you will forever be in our
thoughts and prayers and I will find a way to make a difference
in someone’s life there, as I’m sure many of you already are.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $447
Oil, $67.57
Returns for the week 8/29-9/2
Dow Jones +0.5% [10447]
S&P 500 +1.1% [1218]
S&P MidCap +1.3%
Russell 2000 +2.3%
Nasdaq +1.0% [2141]
Returns for the period 1/1/05-9/2/05
Dow Jones -3.1%
S&P 500 +0.5%
S&P MidCap +6.7%
Russell 2000 +1.8%
Nasdaq -1.6%
Bulls 51.1
Bears 27.3 [Source: Chartcraft / Investors Intelligence]
Let’s hope for a better week ahead. I appreciate your support
and all the notes and comments. [Dave D., I tried replying to
you but it was kicked back.]
**Note: I will be coming to you next week from Nebraska,
same time.
Brian Trumbore
