[Posted 7:00 AM ET]
The Middle East
Iraq: In last week’s radio address, President George W. Bush
reiterated “we will lay the foundation for peace for our children
and grandchildren by completing the mission.” But the latest
ABC News-Washington Post poll shows 60% of Americans now
believe it was wrong to invade Iraq. 52%, though, still say we
should stay until there is stability.
It’s heartbreaking to see the deaths add up, day after day. 93
killed in October, the 4th highest toll since we went in. But the
key parliamentary election draws near and if a permanent
legislative body can be seated, there is no reason why some of
our troops can’t begin to come home at that time, their mission
accomplished. A substantial force will nonetheless have to
remain through at least 2006.
A few weeks ago, the Wall Street Journal’s Daniel Henninger
had a terrific idea. Bush should go to Iraq to give a speech on
democracy. [Despite Bush’s current problems in Latin America,
I should probably add.] Henninger compares the moment to that
of Ronald Reagan and his appearance at Moscow State
University in 1988. [“Hott Spotts,” 11/3/05] Don’t be surprised
to see the president go to Baghdad before the Dec. 15 vote.
Syria: The UN Security Council unanimously passed Resolution
1636, demanding Syria cooperate with the UN investigation into
the assassination of Lebanon’s Rafik Hariri. Syria “must detain
those Syrian officials or individuals whom the commission
considers as suspected of involvement…in this terrorist act.”
But to some the resolution is toothless because it doesn’t threaten
economic sanctions; this being the only way the U.S. et al could
gain support from Russia and China (as well as Algeria).
I’m of the opinion, however, that this is still a major step
forward. President Bashar Assad is feeling the heat, big time,
and even went so far as to release 190 political prisoners while
saying the UN could interview the top two suspects, Assad’s
powerful brother-in-law and brother.
But when Assad sought to rally support, calling for an
emergency meeting of the Arab League, his plea was ignored.
This alone speaks volumes.
In Lebanon, though, the big issue is Hizbullah. A UN official
said this week that their militant stand “can only be understood
as in opposition to the freedom of expression of the Lebanese
people and their representatives.” [Daily Star] Hizbullah’s
leader in turn blasted the U.S. and Israel, saying Washington’s
only interest in Lebanon was in “seeking profits.”
Iran: President Mahmoud Ahmadinejad has now removed 40 of
the more moderate, and experienced, diplomats, most of whom
were allies of former presidents Khatami and Rafsanjani, in
another sign Ahmadinejad is hell-bent on taking Iran to the edge.
Khatami, who was an abject failure as president, is suddenly
speaking up and accused the new leader of “using fascist
values…in the name of Islam.”
Israel: Prime Minister Ariel Sharon is now grouping Iran, Syria
and the Palestinian militants in almost every speech he gives. It
bears repeating; the withdrawal from Gaza was a brilliant move
as it now shines the light on the failed Palestinian leadership in
terms the world could not (nor cared to) see before. It’s put up or
shut up time for Mahmoud Abbas and friends. And it’s clear he
can’t control Hamas, which has declared its ceasefire with Israel
over at the end of the year.
But in wrapping up, back to Syria and Iran. Both regimes are in
convulsions and it can go either way. Islamic fundamentalists
could launch coups to take out remaining moderate elements
including, by this illustration, Bashar Assad. And recall from my
9/17/05 review that Ahmadinejad owes his position to Iran’s
Revolutionary Guard. It’s not a stretch to see coordinated
activities in both nations. That’s your worst case.
The best case is Assad pulls a midnight massacre of his own,
taking out the hardliners, and announcing to the world he wants
to be like Qaddafi, while Rafsanjani convinces the mullahs that
Ahmadinejad will destroy Iran if left to his own devices and he,
Rafsanjani, should be placed in power. This does not mean that
Iran would abandon its quest for the bomb, however. Rafsanjani
would push forward on this but, importantly, open up a dialogue
with Washington and by end of 2006 he’d have a meeting with
George Bush.
There, just some food for thought. You may want to wash it
down with an adult beverage.
Wall Street
Yup, it’s all about the weather these days. That cold snap a few
weeks ago turns out to have been quite timely for retailers as
evidently we all went piling into stores to buy winter clothing…
forgetting that as of five years ago we already had more than
we’d ever need the rest of our lives…but I digress. Wal-Mart
and Target, for example, reported solid October same-store sales
gains, while many specialty and luxury retailers did even better.
But that same early chill led to a spike in natural gas prices back
then to $14. We didn’t know how well the retailers were doing,
but we knew of the coming hurt when it came to our heating bills
later on.
Well, put the two together and, coincidentally, around that same
time we hit a bottom in the equity markets, at least for the
moment, as ever since milder than normal temperatures have
swept the land, natural gas and heating oil has plummeted, oil
dropped momentarily below $60 (but once again finished the
week above that level), and Karl Rove wasn’t indicted. Granted,
one of the preceding items probably doesn’t belong in such a list,
but it did help.
So where are we now? This current warm spell is significant.
While it’s only November, each warm day is one that isn’t cold
and sopping up energy. That’s about as simplistic as you can
make it. Inventory levels for energy products are just fine. But it
remains a fragile, hair-trigger market when it comes to this sector
and even a 4- or 5-day cold snap in the coming weeks could send
costs soaring anew and more than a few smiles turning to frowns.
As for retailers, since the weather has been mild does that mean
everyone started stocking up on spring clothes? I have enough of
those, too, in case you were wondering.
Overall on the economy, I respectfully submit it was a mixed
bag. The retail figures were good and a leading index of
manufacturing and the service economy was solid, too. But auto
sales for October were abysmal, interest rates continued to rise,
and I must be reading from a different scorecard because I fail to
see the euphoria in earnings others do. True, the 3rd quarter
represents the 13th-straight of double-digit gains, but strip out
energy and it’s not nearly so rosy. Earnings growth is
decelerating. Valuations may be reasonable, but I see limited
upside.
On the rate front, the Federal Reserve hiked for a 12th
consecutive time, another ¼-point, and the funds rate now stands
at 4%. Good for some of us in money market accounts, but bad
for those with lots of debt, or adjustable rate mortgages that are
about to reset.
In the Fed’s accompanying statement it offered that “energy and
other costs have the potential to add to inflation pressures.” But,
core inflation remains “relatively low” and longer-term it’s
“contained.” Nonetheless the Fed is going higher to teach us all
a lesson…because that’s what they do.
Regarding the energy sector and the debate over what some label
obscene profits, I don’t see it that way. Actual price-gouging
needs to be dealt with severely, and clearly there was some of
that going on when we were above $3 a gallon on gasoline. But
otherwise, I am against levying windfall profits taxes on the
energy industry. It didn’t work in the past and it will backfire
today.
I was watching the CEO of Rowan, an oil driller I’m very
familiar with, on CNBC the other day. In fact at arm’s length
from me is a coffee table book on the history of this company
and from time to time I’ve dabbled in the shares, though not
currently.
I remember years when Rowan lost lots of money and I also
remember the reports from then chairman C.R. Palmer; the best
written and most forthright annual missives I have ever read.
I remember how C.R., despite the tough times his operation was
going through, would always focus on the people of the company
and how he was doing everything possible to maintain
employment at existing levels despite mounting losses.
So if Rowan makes money today, as they are, good for them and
good for its shareholders and employees. And if Exxon Mobil
earns almost $10 billion but, importantly, it’s due to solid
management and market forces, so be it.
This supply / demand conundrum of today did not just pop up
overnight. We have only ourselves to blame, particularly the
Bush administration itself for not having a coherent energy
policy that may have alleviated some of the current price
pressures.
Americans have such short memories, and always selective ones
at that. Heck, oil was about $10 a barrel as recently as 1999 and,
coincidentally, that’s about when SUV sales were taking off.
No, I will not support any effort to levy special taxes,
recognizing I’m feeling the pain as much as anyone else with my
higher heating costs and expensive trips to the gas pump. As for
those who truly need assistance this winter, there is no way
slapping together a huge bureaucratic program today would do
any good for months to come. It just wouldn’t work. The poor,
though, deserve assistance but that is best accomplished at the
state and federal level with the help of block grants that can be
immediately placed in the appropriate coffers.
Just remember, this too shall pass, as it always does if you’ve
had any kind of life experience whatsoever. And at some point
energy prices will collapse, as they always do, and the cycle will
then start all over again, including another run on SUVs.
If you want to do something creative, though, that benefits many,
start by jawboning the energy companies to maintain existing
levels of employment when the next down cycle hits. It would
be almost criminal if they hadn’t saved enough for a rainy day
during this go-go period and instead started slashing jobs. I
imagine C.R. Palmer wouldn’t have had a problem with that.
Street Bytes
–It was another excellent week for stocks including Nasdaq’s
best gain, 3.8%, since Aug. 2004. The Dow Jones rose 1.2% to
close at 10530 and the S&P 500 advanced 1.8% to 1220, its best
level in five weeks.
One factor can’t be ignored, seasonality. I have my annual
review of the “best six months” on my “Wall Street History” link
(11/4) and suffice it to say, November and December,
historically, are the two best months for the Dow and S&P 500.
[April matches December’s average gain for the former.] It’s a
great time normally for Nasdaq as well.
But as I noted before I don’t see all the giddy news on the
earnings front that others do, though I’ll admit my eyesight is
going to hell because of the age factor. Esteemed economist Ed
Hyman of ISI Group believes the consumer will seize up in the
4th quarter, with a zero percent rate of growth in spending, and
I’ve learned never to discount his prognostications, though like
yours truly the slowdown has been slower to materialize than he
would have thought.
–U.S. Treasury Yields
6-mo. 4.26% 2-yr. 4.47% 10-yr. 4.66% 30-yr. 4.85%
Rates rose sharply as the Fed made it clear it was far from
finished. PIMCO’s Bill Gross, though, says the December 13
meeting of the Federal Open Market Committee could be critical
as Gross expects them to finally change the language from
“accommodation” and “measured pace” to something more
telling as to when the Fed may finally stop.
As for the ongoing debate concerning Fed nominee Ben
Bernanke, it comes down to this. Bernanke knows the Fed’s role
is to fight inflation, but Congress also wants the Fed chief to
stoke the fires of economic growth.
Bernanke believes in inflation targeting, say 1-2%, but Alan
Greenspan believes in allowing for flexibility should a crisis
arise.
What’s going to be different with each passing year is that
Bernanke will be forced to rely on other central banks to help
share the load, far more than Greenspan ever had to, for the
simple reason that foreign governments hold an increasing pile of
our debt.
–I’m not commenting on the employment number for October
because, like September’s, there is no way the Bureau of Labor
Statistics has figured out the impact of the hurricanes. It’s all
noise and nowhere near being accurate. By the time November’s
figures are released, I’m assuming it will be somewhat
straightened out.
–The dollar has been rising to an 18-month high against the euro
and a 27-month high versus the yen due to rising interest rates in
the U.S., while the European Central Bank has held its
benchmark rate at 2% for a 29th straight month. Loose money
also continues in Japan.
–General Motors and Ford reported October sales that were both
down 26% from year ago levels, though Chrysler Group’s were
off only 3%. Big SUV sales declined a whopping 50%, but here
there are some signs the recent fall in gasoline prices has folks
sniffing around again.
[Toyota’s October sales were up 1% and it is now within
shouting distance of Ford for #2 in the U.S. Nissan’s, however,
were off 17%. The overall market share for GM, Ford and
Chrysler Group is 52.2%, the smallest percentage ever.]
–The volatility in the energy sector remained chaotic. The OSX
oil-service / driller index has now gone from a 9/29 closing high
of 178.6, to a 10/20 closing low of 153.5, and then all the way
back to an 11/3 close of 177. [Then on Friday, 11/4, the index
dropped anew, finishing the week at 171.7.]
–Our periodic look at prices.
First the all-time high…then the 11/4 price:
Oil, $70.85(8/30)…$60.58
Gasoline futures, $2.92 (8/31)…$1.60*
Natural gas, $14.80 (9/28)…$11.41
*If we stayed around this level for a spell, this would eventually
translate to a price at the pump in the neighborhood of $2.20.
–A Senate deficit reduction bill allows for drilling in the Arctic
National Wildlife Refuge, but the fate of the legislation is in
doubt because about 25 House Republicans are against drilling
there.
–China’s exports are estimated to rise 20% in 2005 to $745
billion, with imports up 18% to $655 billion. Ergo, a $90 billion
trade surplus.
–Here’s your basic canary in the mine if you’re playing the
energy sector. Container ship freight fees are falling as capacity
increasingly exceeds demand. A record number of ships is
coming online after the export boom and record freight prices of
the previous few years. The corollary would be all the extra
production that comes on stream in the oil patch with the rush to
discover more product. It’s always about supply and demand,
sports fans, that and the free market.
–Hedge funds got taken to the cleaner in October with the
plunge in energy share prices. Like lemmings to the sea.
–The Nov. 14 issue of Business Week has a story on the benefits
of working for an oil company in Ecuador. Here the per capita
income is just $2,180, but by law all companies have to distribute
15% of local profits to employees. So Occidental Petroleum’s
350 lucky workers are taking home windfall pretax payments
averaging $130,000 to $150,000.
–President Bush announced his $7 billion bird flu initiative, one
that focuses on current vaccines which may not in the end be the
solution to tomorrow’s strain. But, collectively, the world is
coming together in an encouraging fashion. What we all need is
more time.
One particularly worrisome item, however, is the H5N1 strain
having been found in pigeons and sparrows in Indonesia, not
exactly migratory birds if I remember my Roger Tory Peterson.
Then again, I didn’t check to see if it was a carrier pigeon.
–Merck won the second Vioxx painkiller trial, this one in New
Jersey, after losing the first in Texas last August. But with all the
hyperventilating in the media following Thursday’s verdict,
understand this ordeal is far from over. For starters, it was well
known that this particular case for the plaintiff was a weak one
and the verdict obscures the facts.
While Vioxx benefited up to 20 million when it was on the
market, Merck clearly lied and covered up the health risks, as the
e-mails and internal studies prove. [Notice how I’m ignoring the
jury’s own findings.] There are hundreds of cases yet to be tried
(over 6,000 were filed) and if Merck insists on fighting them one
at a time, one verdict in their favor is hardly cause for
celebration, which is how in the end the market reacted as Merck
shares barely moved after an initial burst.
–Meanwhile, painkiller Tylenol celebrated its 50th birthday this
week. Sales have never been stronger.
–New York Attorney General Eliot Spitzer accused heart-device
maker Guidant of failing to inform physicians of potentially fatal
defects in some of its implantable defibrillators. In filing a civil
lawsuit, Spitzer said:
“We wouldn’t permit this type of conduct in connection with the
sale of cars or washing machines. It is simply unconscionable
that it occurred with a critical medical device.”
This comes at a particularly precarious time for Guidant as
Johnson & Johnson has refused to honor its original offer to
acquire the company following earlier announcements of
defibrillator problems and product recalls. Before Spitzer’s
move, J&J had lowered its initial bid about 20%.
–Pfizer’s Hank McKinnell has been at the helm five years and
done a lousy job. Analyst Barbara Ryan recently described him
as “smug” and “uncaring” regarding the destruction he’s
overseen in shareholder value. Well, I observed him on Larry
Kudlow’s program the other day and he’s worse than that. He’s
also immensely dislikeable. Someone show him the door.
–President Bush’s tax reform commission presented its
handiwork and was promptly panned. As I noted when it was in
the draft phase, it’s not a realistic proposal and it also doesn’t go
far enough. Most assume this is the one time for true reform so
why are they going about it half-ass? And one explosive item is
the plan to cap what will be a new credit on mortgages of under
$412,000 (even less in some regions). In other words, folks in
California, where the median home price is something like
$565,000, would be slammed and the impact devastating to the
housing market. You know, not too long ago a home of that
value signified you were wealthy. That’s no longer the case.
Home prices will eventually slide in some parts because of
market forces, yet the last thing you want to do is artificially
induce a crash, which is what this reform plan would do…
coupled with further Fed rate hikes.
–Dell’s earnings warning was awful and its problems are serious.
We’ve discussed in the past the growing product quality and
service issues and the company is now going to be closing some
offices. The sales trend is worrisome as price cuts simply
haven’t been taking hold. Shares traded to below $30 following
the announcement and finished the week at $29.75, off the 52-
week of $42.50.
–According to the World Bank, despite the recent economic
successes in India and China, the fact remains 1.5 of 2.3 billion
in both continue to earn less than $2 a day, with over 50% of the
labor force still in agriculture.
–The NASD cracked down hard on SG Cowen and RBC Dain
Rauscher, levying collective fines of $6.75 million for huge
markups the two placed on some junk bond issues; anywhere
from 5.5% to 40%! [A 3rd firm was involved but is now
defunct.] From my own experience in the industry I have to say
that unless you are an expert in identifying rip-offs, never, ever
buy an individual corporate bond, investment grade or otherwise.
You’ll get scalped. Just buy a good fund that meets your
objectives, though watch out for the expense ratios.
–Google’s ad sales are estimated to be $9.5 billion in 2006,
which would be 4th among American media companies in total
ad sales after Viacom, News Corp. and Disney…and ahead of
NBC Universal and Time Warner. [Source: New York Times]
Google’s shares closed at $390 on the week. The growth has
been so spectacular, who am I to question the valuation? You’re
playing with fire trying to guess when the first time will be that
Google truly disappoints the Street.
–Speaking of Time Warner, they beat Street estimates on
revenues and were two cents ahead on earnings, plus they
announced a large share buyback; all of which added up to big
headlines on Wednesday. You’d have thought the shares soared
that day. Instead they were up a whopping 33 cents and fell 26
cents on Thursday and Friday. Talk about much ado about
nothing.
–Tokyo’s Nikkei hit another 4-year high in finishing the week
over 14,000. And there was record volume, always a good sign.
Separately, under pressure from the United States, Japan relaxed
its import ban on American beef. 21 U.S. senators were
preparing legislation to threaten higher tariffs on Japanese goods
unless they relented.
–Airfares for the Thanksgiving holiday are up 15%.
–Deutsche Telecom announced a sweeping restructuring that
will result in ‘net’ losses of 19,000 jobs.
–FBI agents in Los Angeles arrested four Chinese nationals
involved in a scheme to steal military secrets from defense
contractor Power Paragon, a subsidiary of L-3 and a company
that develops advanced technologies for naval systems.
–A friend of former AIG CEO Hank Greenberg is orchestrating
a campaign to spruce up his image. This is detestable. State and
federal probes last spring revealed a “pattern of fraud,” as spelled
out in a lawsuit filed by Eliot Spitzer, in which AIG “painted an
unduly positive picture” of its results, using “sham transactions.”
Greenberg has insisted any infractions were minor. And of
course how often have I written that when the rich and powerful
get in trouble, they fall back on the philanthropy defense. One of
Greenberg’s defenders, Herbert Pardes, president of New York
Presbyterian Hospital, to which Greenberg has been a major
donor, said Greenberg was a “phenomenal philanthropist.”
This stuff makes me sick. But we are the ones to blame for
letting the situation get so out of hand as we fawned all over
these charlatans.
–Oracle’s CFO Greg Maffei resigned, the 4th Oracle CFO to do
so in two years. Evidently there were personality conflicts with
the co-presidents, let alone CEO Larry Ellison. But is there more
here than meets the eye? I know my friend Jimbo, who works
for Oracle’s rival, SAP, is licking his chops.
–The situation with hedge fund operator Jim Rogers and the
$360 million his operation has with Refco is heating up; with
Refco claiming Rogers’s firm knew the funds were being
transferred to an unregulated account and thus were unprotected.
Rogers has spent his lifetime cultivating his image and
accumulating vast wealth and now Refco threatens to unravel
much of what he worked for as he lines up with all the other
creditors.
–The portfolio manager for the $52 billion Fidelity Magellan
fund, Robert Stansky, was forced to walk the plank after a 9-year
run of incredible mediocrity. It’s amazing he lasted this long.
–Barrick Gold initiated a hostile takeover of Placer Dome, while
Spain’s Telefonica is acquiring British mobile-phone operator
O2 for $31 billion! Goodness gracious. That’s an awful lot to
pay for poor reception.
–My portfolio: Absolutely nothing going on. Still about 80%
cash and with equity holdings stuck in the muck.
Foreign Affairs
France: Over the years I’ve written countless pieces on the
problems facing Europe regarding immigration. Much of my
focus has been on Turkey and its European Union bid (you can
officially kiss that good-bye, incidentally), but I’ve also noted the
reemergence of the far-right in Germany, Austria, France, the
Netherlands and Greece, to name a few. This is where the real
clash of civilizations could take place.
This week the Paris suburbs have been hit with night after night
of violence between the authorities and a disaffected Muslim
youth that lives in the slums that tourists to Gay Paree never see.
The spark was the electrocution of two youths who ran into a
power sub-station after supposedly attempting to elude an
identity checkpoint.
But the rioting, which could easily spread to other major cities,
has major political overtones beyond what I’ve long been stating.
Prime Minister Dominique de Villepin and Interior Minister
Nicolas Sarkozy are rivals for the 2007 presidential election to
succeed Jacques Chirac. De Villepin has adopted a moderate
stance in dealing with the rioters, meeting with community
leaders, for example, while Sarkozy has added fuel to the fire
with his tough talk and tactics.
This is a sign of things to come across Europe, of this I’m
certain. The far-right’s recruiting efforts have been bolstered this
week, while the Muslim community will increasingly turn to
radical leaders of its own.
Latin America: President Bush is attending the “IV Summit of
the Americas” in Argentina and Mary Anastasia O’Grady of the
Wall Street Journal summed it up best.
“Surely Mr. Bush didn’t need to fly 11 hours to hear lectures
from politicians hell-bent on turning back the clock to the kinds
of policies that have consigned huge numbers of Latinos to a
permanent state of poverty. He would have been better off going
to Baghdad: It’s safer and the leadership there is actually
interested in democracy and development.
“As an Argentine friend wrote to me: ‘I really don’t know why
President Bush has accepted to come to this show of political
clowns where all of them will blame him for all the maladies that
we so cleverly produced in our countries. Americans have to
learn that they will never be loved but they have the
responsibility for being respected.’”
Of course the real star of the show is Venezuelan President Hugo
Chavez, who has vowed to block any attempt to resurrect talks
on a Free Trade Area of the Americas. And as of this writing
there has been violence fueled by Chavez’s appearance and a
speech he gave to his wayward followers upon arrival; one in
which he threatened to “bury capitalism in order to give birth to
21st century socialism, a new historic socialist project that the
people of the Americas are demanding.” El Loco is a gathering
danger.
China: President Hu Jintao traveled to Pyongyang for
consultations with North Korea’s Kim Jong il ahead of the latest
round of talks on the North’s weapons program that are
scheduled to start Nov. 9. Kim told Hu he was committed to
ending the nuclear bomb-making, but of course we’ve heard this
before and the devil will always be in the details.
But it’s better to have China and North Korea talking than not to
at this point as the last thing China itself wants is a conflict on its
border with millions of refugees streaming across. At the same
time, if you’re Washington you can’t expect Beijing to do you
any real favors.
Separately, Seoul and Pyongyang have agreed to have one
Olympic team in 2008. South Korea will know to be concerned
if 30 million North Koreans show up for qualifying in the ‘small-
bore rifle’ event.
And in Hong Kong, Chief Executive Donald Tsang has been
touring, including in Washington, in an attempt to assure the
West that Hong Kong will eventually have universal suffrage.
But of course his bosses in Beijing would have none of that, even
though the Basic Law signed when China took over Hong Kong
was to guarantee Hong Kong’s citizens the right to vote directly
for their representatives by 2008.
Japan: The military alliance with the U.S. is being reshaped as
Japan will participate in an expanded missile defense system as
well as joint military exercises, while Washington will withdraw
7,000 troops from Okinawa; a big boon to Guam who will
receive them.
Russia: Back to the above theme in France, Friday was Russia’s
new holiday, People’s Unity Day. No one seems to have figured
out just what this is all about, except it’s a day off and a 3-day
weekend. What has happened, though, is that it’s been hijacked
by the ultranationalists. A leader of the Moscow division of the
Eurasian Youth Union said “This march is to show that Russia is
on the edge of collapse.”
Meanwhile, preparing for his state visit to the Netherlands (the
first such trip here by a Russian leader in 130 years), President
Vladimir Putin told Dutch media he will not run for a 3rd term in
2008 but he also won’t allow “destabilization” following the
vote. Consider this another warning shot. Putin added he
expected the vote to be a “serious, difficult test for Russia.” No
doubt in my mind he will be president beyond the end of his
second term.
While in the Netherlands, Putin faced off against Dutch Prime
Minister Jan Peter Balkenende, when Balkenende raised
questions about Putin’s actions in Chechnya. Putin chastised
Western Europe for its overblown concerns about abuses against
Muslims in Russia.
“Sometimes it seems to me that certain European leaders want to
be more Muslim than the Prophet Mohammed.”
Germany: Christian Democrat Angela Merkel was to take over as
chancellor on Nov. 22, but the grand coalition she formed with
Gerhard Schroeder’s SDP has been crumbling as both a key SDP
official who was to be vice-chancellor and conservative Bavarian
leader Edmund Stoiber have walked out. The SDP vanguard is
being upstaged by a 35-year-old left-winger who has vowed to
shape up her party. But despite all these issues, supposedly a
business tax reform plan will be enacted; a good thing.
Indonesia: On the troubled island of Sulawei, scene of extensive
religious strife in the past, three Christian schoolgirls were
beheaded…beheaded…by Muslim militants. So expect this
conflict here to last another, oh, 840 years.
India: A series of coordinated attacks in New Delhi killed at least
60 last weekend and a heretofore unknown Kashmiri separatist
group claimed responsibility. Pakistan denied it had anything to
do with it.
Canada: Prime Minister Paul Martin was exonerated in an
investigation looking into the Liberal Party’s “elaborate kickback
scheme” that laundered public funds into party coffers in the late
1990s when he was Jean Chretien’s finance minister. Chretien,
though, has been exposed as having full knowledge of the
chicanery. Elections may be held here in April. Martin, while
touting his innocence, nonetheless is tarnished.
–Britain: British Prime Minister Tony Blair, a la George Bush,
is having major political problems of his own these days and
once again observers are wondering if he can survive. Blair has
said he wants to stay on until 2008, stepping down before a
general election is held the following year and allowing
Chancellor of the Exchequer Gordon Brown to finally slide into
the top slot.
But Blair’s reform plans are dead in the water and his minister
for welfare reform, a key ally, David Blunkett, was forced to
resign this week following a scandal tied to his personal business
interests.
Just as Bush crowed he had earned “political capital” and
planned on spending it following his reelection, Blair announced
a sweeping agenda following his reelection to a third term.
Neither looks likely to fulfill their promises.
Random Musings
–I got a kick out of President Bush’s statement on bird flu, how
every community must be ready. Kind of comical considering
not one community in America has a true evacuation plan for a
WMD attack as yet.
–I am not going to be commenting much on the Scooter Libby
case for the primary reasons that (1) I have no clue what the facts
really are and (2) I’m not sure that what he really did was wrong
because first and foremost, we still don’t know definitively what
the deal was with Valerie Plame.
On the other hand, I’ve made it very clear over the years my own
disdain for Karl Rove and I’d love to see him leave in favor of
some old Washington hand, a la Alan Simpson. There is no
doubt the entire Bush White House is a tired bunch, and at a
moment in world history where we need energy and enlightened
leadership more than ever.
As for the Democratic move this week to force the Senate into a
closed door session, I can’t really blame them. It’s true Senator
Pat Roberts’s intelligence committee has refused to submit a
final report on pre-war intelligence, though at the same time this
doesn’t mean the intel was misused.
Finally, the latest ABC News – Washington Post poll that reveals
58% of the American public no longer trusts President Bush is
politically deadly and far worse than mere ‘disapproval.’ This
one is much harder to reverse.
–As for the selection of Judge Samuel Alito to fill Sandra Day
O’Connor’s seat on the Supreme Court, this looks like a superb
choice to me. By all accounts he is fair and not an ideologue. As
George Will put it, when compared to Harriet Miers the
nomination of Alito is a “victory for excellence (and it shows)
qualifications matter.”
–U.S. News & World Report beat me to the punch. This week it
had a blurb on the buzz surrounding Virginia Republican Senator
George Allen concerning the 2008 presidential election. I’ve
really come to like him myself.
[But I’d still prefer to see John McCain run. Actually, McCain /
Allen would be an interesting ticket, with McCain announcing
beforehand he will serve only one term. Certainly more balanced
than McCain / Giuliani.]
–But when you talk politics these days and the vote this coming
Tuesday, there is no dirtier tussle than the gubernatorial race here
in my state of New Jersey. I mean to tell you, this has to have
been the worst campaign in state history. Each side is dropping
napalm on the other and voters such as myself are totally turned
off.
That said, I’m voting for Republican Doug Forrester. You
wouldn’t expect me to go for Jon Corzine after my trashing of
him the last five years, would you? Until his divorce in 2003,
Corzine lived in my home town of Summit and, it’s true, he told
the Star-Ledger that his favorite establishment is a restaurant that
is located right below my office building. [It’s way over-priced.
May I recommend “Wasabi” in Berkeley Heights or “Summit
Thai Cuisine” instead.]
But speaking of Corzine’s divorce, what a bombshell Joanne
Corzine dropped on her ex- this week in interviews with the New
York Times and the Star-Ledger. To wit.
“She said that when she campaigned by his side five years ago,
she urged him not to get involved with Democratic political
bosses, but he contributed millions of dollars to them to ‘buy
their loyalty.’
“ ‘It changed him. I think once you go down that road of making
deals, compromising your ideals to get somewhere, it’s easier to
do it the next time,’ said Joanne.
“For the first time, she also said her ex-husband’s affair with
Carla Katz, president of New Jersey’s largest state workers
union, led to the breakup of their marriage.” [“Week in
Review,” 8/6/05]
Joanne Corzine:
“We grew up together. We came from first grade on. And our
family was a unit and I think with the ambition that kind of took
over our life – his ambition – it really destroyed our family as we
knew it. …
“I just think that people should know who they are going to vote
for – or not….
“He was very Machiavellian in what he wanted. Whatever it
took to get there was what he was going to do.”
I’ve covered it all.
[Source: Jeff Whelan and Josh Margolin / Star-Ledger]
The Ledger, a very liberal paper, endorsed Forrester, shocking
the hell out of us Republicans in the state. Though I also have to
admit it reached the appropriate conclusion.
“Like many of you, we’ve come away from this gubernatorial
campaign with little affection for either candidate.”
–Dan L., an old friend from my PIMCO days and a loyal
Democrat, had a good point. He’s been disgusted with the
leadership of his party and as an example pointed me to the DNC
web site. So the last few days I’ve just checked out the home
page and Dan is right. Every lead story is negative. Nothing of a
positive nature re: an actual agenda. The Republicans, on the
other hand, almost always lead with a proposal of some kind.
Granted, much of this is a function of being the party in charge
versus the role of the opposition, but the Democrats continue to
be totally bereft of original ideas.
[Actually, Dan and I would both vote Independent if the right
candidate came along.]
–There was a time when I kind of liked Prince Charles. His
causes, such as the environment, were tough to knock down.
And being a traditionalist myself, I’ve supported the monarchy.
But I have to say I couldn’t care less that Charles and Camilla are
in the States, and a Gallup / USA Today survey showed only
19% of Americans wanted to meet them. 30%, though, want to
meet Prince William and Harry. [I don’t.]
So I’m watching that “60 Minutes” interview with Charles, one
of their better recent pieces I felt, and I’m thinking, what an a-
hole. Though I did like that little town he’s created.
–25% of the particulate matter in the skies above Los Angeles
can be traced to China. [U.S. EPA / New York Times]
–New Orleans once had a population of 485,000. It’s now
estimated maybe 250,000 will return. Ergo, Saints owner Tom
Benson has every right to move his team.
–A Russian lawyer paid $1 million for a violin once used by
Paganini. The instrument was crafted by Carlo Bergonzi and is
one of only 50 known to exist. So my advice to you all is…..
….check your attic!!!!
–Here’s another reason to go into fish-farming, if you have the
money and patience. Idaho, for example, is no longer just known
for potatoes. Now they’re into farm-raised white sturgeon caviar
in an attempt to fill the void created by the ban on caviar from
the Black Sea basin. Black Sea beluga goes for up to $200 an
ounce.
But the problem is it takes 8-12 years for a sturgeon to mature
before it can produce the eggs. So it’s not just the terrible twos
you have to worry about.
–The Wall Street Journal had tips on bird flu the other day and
one question was “Should I cancel plans to buy a pet bird?” To
me that’s pretty simple. If it’s a parrot, ask ‘em who they’ve
been in contact with. They’re parrots, they should know.
–In case you weren’t watching the NBC network this week, just
know that on your next trip to New York, you may want to
include the new observation deck that has opened at the top of 30
Rockefeller Center. They’ve been renovating the 69th and 70th
floors for almost 20 years and the views are simply the best in all
of the city. Plus they have a way cool museum up there.
But you should get your tickets, online, ahead of time. Order
thru ‘topoftherocknyc.com.’
–Radio City’s musicians went on strike the other day, but the
Rockettes still operated with canned music. Personally, I always
thought the best high-kicking line of girls was Kilgore College’s
Rangerettes. Vastly underrated in my book.
–Former ambassador Joe Wilson gives me the creeps. Any man
who spends more than two minutes a day on his hair can’t be
trusted.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $457…$18 drop on the week
Oil, $60.58
Returns for the week 10/31-11/4
Dow Jones +1.2% [10530]
S&P 500 +1.8% [1220]
S&P MidCap +3.6%
Russell 2000 +3.6%
Nasdaq +3.8% [2169]
Returns for the period 1/1/05-11/4/05
Dow Jones -2.3%
S&P 500 +0.7%
S&P MidCap +7.7%
Russell 2000 +1.0%
Nasdaq -0.3%
Bulls 46.4
Bears 26.8 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
*Next time from Amsterdam…though I will have just arrived.
Brian Trumbore
