[Posted 7:00 AM ET]
Iraq…but one piece of the puzzle
I have long pleaded guilty to being a neocon, believing that
success in Iraq could have a transformative impact on the entire
region. But I have also argued the past few years that some of us
in this camp feel abandoned with the incredibly inept
management of the postwar phase which cost us much of what
was gained by quickly removing the threat posed by Saddam
Hussein.
Where President Bush deserves credit today is in sticking with a
timetable for elections. Thursday’s vote was indeed historic,
though the question now is will we like the result? It will take
another ten days or so before we begin to know the composition
of the new 275-seat National Assembly, which then has to
choose a prime minister who in turn selects the cabinet. The
negotiations are going to be tense and no one knows for sure if
Iraq will hold as one nation or be split into three republics
(Sunni, Shiite, and Kurd) with a weak central government…or
none at all.
And while President Bush said this week that “2005 will be
recorded as a turning point for the history of Iraq and the history
of the Middle East,” there is little reason for optimism when
discussing the fate of other nations in the neighborhood.
I noted awhile back, as well, that history is likely to care more
about how the Bush administration fared in dealing with Iran and
North Korea than with Saddam for the simple reason that the
danger from these two is both immediate and potentially
catastrophic. We’ll pick up Pyongyang’s tale next time. Today,
Iran.
Just last week I wrote “There is little doubt 2006 will see action
of a military kind in Iran. Israel can ill-afford to wait much
longer as the West dithers.”
Less than 24 hours later we learned Israeli Prime Minister Ariel
Sharon had ordered his forces to be ready by the end of March
for strikes on Iran’s suspected uranium facilities; March being
when the International Atomic Energy Agency is slated to
release its latest findings on Tehran’s nuclear program. If there
is anything of a dire nature in it, and IAEA chief Mohamed
ElBaradei is already on record as saying Iran could have the
bomb in a matter of months (though he quickly adds there is as
yet no smoking gun), Israel could see it as a green light.
And if the West needed any further proof of Iran’s intentions,
President Ahmadinejad is supplying it almost daily as this week
he launched a few more attacks on Israel, calling the Holocaust a
“myth.”
The Washington Post’s Charles Krauthammer wrote a scathing
piece this Friday on Iran and the West’s inability to respond to
the growing danger, concluding:
“Negotiations to deny this certifiable lunatic genocidal weapons
have been going nowhere. Everyone knows they will go
nowhere. And no one will do anything about it.”
Krauthammer, though, failed to raise an issue I did when
Ahmadinejad was first elected last summer. He owes his victory
to the Revolutionary Guard, the true fanatics who control not just
the intelligence apparatus but also the nuclear and ballistic
missile programs. Some have suggested recently that the
president’s utterances undoubtedly have even the ruling clerics
on edge, almost as much as the West, and that Ahmadinejad’s
days may already be numbered. It’s possible, but this would not
please the Revolutionary Guard.
Iran isn’t the only other flashpoint in the region aside from Iraq,
of course. There’s Lebanon.
Following my trip to Beirut last spring, well-timed between
spasms of violence I must say, I told you I was not optimistic on
the political outcome here and I’ve gotten a kick out of those
opinion writers and talking heads who not only have been way
too sanguine, but just don’t get it.
I loved this fascinating place, and I think of the kids I met all the
time as Lebanon continues to be in the headlines for all the
wrong reasons. But this is a microcosm of the entire Middle
East, all in one tiny, tribal package with a Big Brother, Syria, that
just won’t let it alone.
This week another anti-Syria politician / journalist, Gibran
Tueni, was assassinated in a horrific car bombing just one day
after his return from Paris, where he had gone out of fear of
being killed. Syria’s fingerprints are once again all over the case
and Druse leader Walid Jumblatt said of the Damascus
thugocracy, “Such regimes don’t have any language other than
assassination.”
This ‘hit’ follows on the heels of at least 12 other recent
bombings that claimed among its victims three other prominent
figures opposed to Syria’s ongoing influence in Lebanon’s
affairs.
For Lebanese the “fear is back” and the newly elected
government is crumbling fast as both Shiite and Hizbullah
cabinet members threaten to leave the coalition.
All of this is backdrop for the UN’s ongoing investigation into
the assassination of Rafik Hariri last February. The inquiry has
now been extended until June 15, though now without the
leadership of prosecutor Detlev Mehlis, who in his last report to
the UN said he has 19 suspects, all Syrians or Lebanese generals
who took orders from Damascus. The day before Tueni was
killed, Syrian President Bashar Assad told Russian television that
any attempt by the international community to levy sanctions
against his country would destabilize the entire region.
After Hariri’s death, international condemnation led to Syria
being forced to withdraw its army from Lebanon (though the
agents and terrorists obviously stayed behind), with France and
the U.S. leading the charge. But today nothing, as Assad appears
to have weathered the initial storm.
Watch Lebanon and look for headlines on the status of the
government. In a land where Hizbullah is a fixture, this nation
can be as important a story as Iraq itself.
Lastly, we go back to Israel which has its own issues with
Lebanon because of the Hizbullah presence. Here, though, Israel
can stop violating Lebanon’s airspace. It’s one thing to clash
with Hizbullah over the disputed Shebaa Farms territory, but it’s
quite another to drop leaflets over Beirut using fighter jets and
attack helicopters.
As for the Palestinian issue, Israeli Prime Minister Sharon has
fought the good fight and did the right thing in pulling out of
Gaza. But the arrangement whereby Egypt was to help with
security at the border crossing between it and Gaza has already
fallen apart. As U.S. News & World Report’s Mort Zuckerman
wrote the other day, here the situation is dire as Hamas terrorists
are pouring in, unimpeded. [It’s technical but Israel is to have
immediate access to information on everyone passing through
and instead it’s taking eight minutes for them to receive it, by
which time the bad guys have already cleared.]
Hamas has declared its truce with Israel null and void as of Jan.
1, and the conflict here is about to take a turn for the worse in a
big way. It doesn’t help matters any that Palestinian President
Mahmoud Abbas, suddenly facing an internal power struggle in
his own Fatah party heading into parliamentary elections, and
with Hamas itself making political gains, is simply worthless
when it comes to cracking down on those who insist on dragging
their own people further into a cesspool of despair and waste.
Wall Street
After the terrific rally of mid-October through November, it’s as
if the markets are grinding to a halt at year end. Heck, most Wall
Streeters already know their bonuses and the hedge funds are just
trying to protect any gains they may have so they can pick up
their performance incentives. As for the rest of us, we’ve always
just been along for the ride anyway, so stop fretting.
Alas, the Federal Reserve isn’t letting any moss grow under its
conference table as it acted for a 13th consecutive time in hiking
the funds rate another ¼-point to 4.25%. Stocks rallied only
briefly over the accompanying statement, which some said stood
as further confirmation the Fed is one or two moves, max, from
calling it quits. Certainly the inflation data on both consumer
and import prices lent credence to the Fed’s own comment that
“core inflation has stayed relatively low.” Longer term the big
concern remains energy.
So Alan Greenspan has to pull himself out of the bath tub just
one more time, Jan. 31, at which point he’ll hike rates to 4.50%,
wink at his comrades, and exit stage left. Entering from the right
will be new chairman Ben Bernanke who may feel compelled
himself to raise rates the first chance he gets in March, just to
establish his bona fides. But PIMCO’s Bill Gross doesn’t
believe Bernanke will do so because in the interim “housing will
display extreme weakness.” PIMCO has nailed the real estate
market so you dismiss Gross’s comments at your own risk.
[Moi? By comparison I was far too early in declaring a top….
like by two years.]
The Fed itself has been determined to slow real estate for some
time now but the long end of the yield curve hasn’t been
cooperating. 30-year fixed mortgages can still be had for 6.30%,
for example, just slightly above year ago levels of 5.70%. But
it’s those holding adjustable and interest-only paper that are
going to be slammed come reset time.
Staying on housing, to be fair a report this week noted the
Southern California bubble hasn’t popped just yet but I have a
hard time believing in a “soft landing” here. Elsewhere, that
sound you heard in Loudon County, Virginia, is of a bubble
bursting, and I can tell you that when I was in Pensacola last
week the local paper screamed the condominium bubble had
popped in most areas along the Gulf Coast.
Turning to energy, it was looking pretty dicey as the cold air
spread across the country and oil and natural gas prices soared
early in the week, with the latter hitting intra-day and closing
records of $15.78 and $15.37, respectively. But by Friday the
energy sector had backed off amidst conflicting reports on the
near term temperature outlook.
Otherwise, the rest of the economic data was pretty good, with a
decent figure for November retail sales and solid numbers on
industrial production and capacity utilization. But I’m grinding
to a halt myself and there’s no stirring denouement this week.
I’m saving that for two weeks from today and the 2006 market
forecast.
Street Bytes
–The major averages finished mixed, with the Dow Jones
advancing 0.9% to 10875, still 65 points from its 4-year high,
while the S&P 500 gained just 0.6% to 1267. Nasdaq eased for a
second straight week, but only four points, 0.2%, to 2252.
–U.S. Treasury Yields
6-mo. 4.29% 2-yr. 4.35% 10-yr. 4.44% 30-yr. 4.65%
Interest rates rallied on the solid inflation news and the feeling it
just may be ‘one and done’ on the Fed front. This coming
week’s producer price report for November could move the
market some if it’s out of whack with expectations, up 0.2% ex-
food and energy, a la last week’s CPI.
–Economist A. Gary Shilling on the Greenspan legacy in an
opinion piece for Forbes.
“Greenspan is a master politician, while Bernanke has a lot to
learn about surviving and thriving in the Washington jungle.
Greenspan stayed on for so long because he skillfully avoided
fights with Congress and the White House. His public
statements are masterpieces of obfuscations; he can’t be pinned
down. His ad hoc approach to monetary policy is indefinable,
allowing him to foster the notion he is clairvoyant. He sagely
refuses to name an inflation target, thus giving himself wide
leeway when statistics jump around…
“(Greenspan’s) strategy has been not to prick bubbles but to wait
until they break, then clean up the mess. Greenspan did nothing
to curb the stock speculation building in the late 1990s. Massive
monetary ease before and after Sept. 11 kept speculation alive
despite the bear market. Aided by non-Fed actions like
exploding government spending, speculation simply shifted from
stocks to real estate.”
–Since I mentioned last week to keep your eyes on auto parts
maker Delphi and Delta with regards to their labor issues,
Delphi’s picture appears to be a bit brighter, though far from
settled, while Delta has reached a tentative agreement with its
pilots union calling for a 14% wage cut; however, Delta’s unions
are now pointing to March as a new potential flashpoint.
[Related to Delphi and its surrogate, General Motors, the UAW
has reached a tentative agreement with Ford on cuts in healthcare
benefits.]
–As Congress prepares to adjourn for the holidays, it appears a
solution for the alternative minimum tax will have to be found
when Congress returns in January, if at all, in order to prevent
millions from paying much higher taxes in 2006 and beyond. On
other issues I need a few more days to digest the last-minute
deals that were cut and we’ll review them next time.
–An Illinois Supreme Court reversed a $10.1 billion damage
award against Philip Morris, USA, a unit of Altria Group,
representing a huge victory for the tobacco unit. Previously, a
lower court judge had ruled that Philip Morris “intended to
deceive consumers” into believing its Marlboro Lights and
Cambridge Lights were safer than regular brands. Parent Altria
has been attempting to break up the company, which includes
Kraft Foods, and the suit, as well as two others still in court, has
been impeding its efforts.
–OPEC, which still controls about 40% of the world’s oil
supply, is opting to maintain production levels at existing levels
as it relies on U.S. and China demand to remain high. But the
next meeting is Jan. 31 and they may start talking of production
cuts in preparation for the historically weak spring period.
–ConocoPhillips is acquiring Burlington Resources for $35
billion in an effort to become a “super major” in the energy
industry.
–To give you an idea of how the oil service business is running
on all cylinders, my friends at Pritchard Capital tell me one
leading driller will see its ‘day rates’ rise a projected 230% from
2004 to 2006.
–There are certain well-publicized reports that you can ignore
the minute they come out, such as a release by the Energy
Information Agency that in 2025, crude oil will be $54. Who the
heck knows? There wasn’t anyone just two years ago, for
example, predicting $60 or $70.
–After 30 years with a nationalized oil industry, Kuwait will
begin inviting foreign companies in to help get production up,
assuming parliament gives its approval on Jan. 23.
–But concerning the general topic of energy, let’s discuss former
German Chancellor Gerhard Schroeder and his move to head up
a new subsidiary of Russian energy giant Gazprom, a pipeline
building operation that will focus on linking Russia with Western
Europe. The Washington Post had the following thoughts in a
lead editorial.
“It’s the sort of behavior we have – sadly – come to expect from
some in Congress. But when Gerhard Schroeder…announced
last week that he was going to work for Gazprom…he catapulted
himself into a different league. It’s one thing for a legislator to
resign his job, leave his committee chairmanship and go to work
for a company over whose industry he once had jurisdiction. It’s
quite another thing when the chancellor of Germany – one of the
world’s largest economies – leaves his job and goes to work for a
company controlled by the Russian government that is helping to
build a Baltic Sea gas pipeline that he championed while in
office. To make the decision even more unpalatable, it turns out
that the chief executive of the pipeline consortium is none other
than a former East German secret police officer who was friendly
with Vladimir Putin, the Russian president, back when Mr. Putin
was a KGB agent in East Germany. If nothing else, Mr.
Schroeder deserves opprobrium for his bad taste….
“Mr. Schroeder’s decision to swap his job with the German
government for a job funded by the Russian government should
raise questions for German voters about their country’s
relationship with Russia. During his seven years as chancellor,
Mr. Schroeder went out of his way to ignore the gradual
suppression of political rights in Russia and to play down the
significance of Russia’s horrific war in Chechnya. Throughout
his term in office, Mr. Schroeder thwarted attempts to put unified
Western pressure on Russia to change its behavior. We can only
hope that Germany’s new chancellor, Angela Merkel, uses this
extraordinary announcement as a reason to launch a new German
policy toward Russia, one based on something other than Mr.
Schroeder’s private interests.”
From an op-ed by Anne Applebaum, also in the Post.
“Even here in Washington – a city populated by lobbyists who
once held political office and government officials who once
worked as lobbyists – it’s hard to top the story of Gerhard
Schroeder….As one of his last acts in office, Schroeder signed
an agreement to build a diplomatically and environmentally
controversial Baltic Sea gas pipeline from Russia to Germany.
Now he’s working for the company that will build it. It’s as if
Jimmy Carter had negotiated the return of the Panama Canal to
Panama – and then signed a lucrative contract to manage the
shipping lanes.”
And right after Schroeder’s pitiful move, there were rumors that
former U.S. Commerce Secretary Donald Evans had been
offered by Putin himself the job of chairman of Russian oil
company Rosneft. This is the outfit that scooped up Yukos’
assets, while Yukos’ former chairman Mikhail Khodorkovsky
now languishes in a Siberian prison. Again, should Evans accept
the offer (though there were signs at week’s end he would turn it
down) it would represent the worst in trading off of one’s
influence.
In a similar vein it’s also why for years I have warned that many
of Taiwan’s business leaders, who have cultivated extensive ties
with the mainland, may not always have the best interests of their
countrymen at heart, let alone any others doing business with the
communists. Remember Bernard Schwartz of Loral?
–China’s industrial production in November rose 16.6% and
there is increasing talk of excess investment and capacity.
–Capital spending in Japan is picking up as business confidence
returns.
–The Environmental Protection Agency has levied its highest
fine ever, $16.5 million, on DuPont for withholding information
on chemicals used in making Teflon. A federal grand jury is still
reviewing possible criminal charges. In China, the executives
responsible would have been put to death.
–Speaking of which, a Chinese businessman was executed for
setting up fake operations and then swindling unwary customers.
He was evidently taken to the “execution ground” where one gets
a bullet to the back of the head. China executes more prisoners a
year than the rest of the world combined; an estimated 10,000.
[South China Morning Post]
–Moving right along, videogame sales were down a whopping
18% in November, despite the launch of the new Xbox console.
Further, the largest publisher, Electronic Arts, said sales in early
December were weak.
–The World Trade Organization talks in Hong Kong have gone
nowhere, outside of a symbolic gesture to the poorest of the poor,
and continue to be held hostage to the European Union’s refusal
to budge in any significant way on the issue of farm subsidies.
The developing nations and the U.S. are at wit’s end. Chile’s
foreign minister, Ignacio Walker, said “So many poor people
wish they would be at least as well off as an EU cow.”
–China now exports more information technology, including
portable phones, laptops and digital cameras, than the U.S. All
of this has military applications, by the way. It just goes to
follow, then, that 40% of Chinese undergrads are pursuing
engineering degrees, versus just 6% of U.S. students. In 2004,
China graduated 500,000 engineers, India 200,000, and the
United States 70,000. [Bank of America / Barron’s] But you
know what they say, we’re more interesting to sit down and have
a beer with.
–The Tokyo Stock Exchange admitted an error in its own
systems helped lead to Mizuho Securities revised $335 million
mistake. As opposed to practices in China, here you’d expect
someone to commit Hari-Kari.
–New York Attorney General Eliot Spitzer is looking into
former AIG CEO Hank Greenberg’s activities from 35 years ago
when he was disposing of assets at the Cornelius Vander Starr
foundation, one of the largest charitable organizations in the
country with assets of $3.5 billion. Mr. Starr, the founder of
AIG, died in 1968 and Greenberg was an executor of the estate.
Assets of the foundation were sold at ridiculously low valuations
and then placed in companies Greenberg and other directors of
his owned. For example:
“In one deal, Mr. Starr’s executors sold shares in a company
known as Far East for $1 million in cash to the company they
controlled, even though the holding was worth $7.2 million.”
[Gretchen Morgenson / New York Times]
If you’re wondering about a statute of limitations, it doesn’t
apply here because Greenberg is still in charge of the foundation.
Yes, it’s personal between Spitzer and Greenberg, but you know
whose side I come down on…the future governor of New
York’s. And isn’t it interesting, after all I’ve said about
executives abusing their charity connections, to see a story like
this? No one should be surprised.
–A survey of employers in New York City reveals fewer
companies plan on hiring in 2006, despite some of the
bullishness on the employment outlook you’re hearing from
other quarters. [Crain’s New York Business]
–Boeing has been on a roll, a great thing for all (unless you work
at Airbus), with orders this year at twice the rate of 2004.
–Google is evidently buying a 5% stake in Time Warner’s AOL
unit for $1 billion.
–Morgan Stanley chief economist Stephen Roach talks of the
business spending conundrum. Corporate America is loosening
the purse strings, but the spending is increasingly overseas, not
here.
–From the Associated Press: “The Ralph’s supermarket chain
was indicted Thursday on federal charges of hiring workers
under false names and violating numerous labor laws during the
2003 grocery strike in Southern California.”
Kind of makes you wonder if Ralph’s is the real name.
–My portfolio: Bad week for my carbon fiber play as the
company continues to jerk us shareholders around when it comes
to accounting issues. I’m ready to fly to headquarters myself,
abacus in hand, and set them straight. The potential for a home
run remains, but I grow weary.
Foreign Affairs
China: As I went to post last week, events in Guangdong
province were still unfolding regarding the protest over a power
plant that turned violent. Initially, there was talk of up to 20
killed by Chinese security forces, but the government claims
only three died. The truth is probably somewhere in between,
but nonetheless it is but another high-profile example of growing
unrest across the nation…the classic principle of rising
expectations and the dangers that can bring.
Japan: Tokyo’s Yomiuri newspaper had some interesting survey
results regarding relations between Japan, China and the United
States.
72% of Japanese don’t trust China.
53% of Americans don’t trust China.
76% of Americans trust Japan.
53% of Japanese trust the U.S.
Malaysia was host to the inaugural East Asia Summit, which
brought together 16 regional leaders. As Seth Mydans of the
International Herald Tribune described it:
“Japan and China were not talking. Russia was talking to
everybody. Australia was fending off bad press. The Philippines
was denying coup rumors. India was offering to teach English.
And the United States, for once, was looking in from the cold.”
The visits to a shrine that includes war criminals by Japanese
Prime Minister Koizumi continues to be a thorn in the side of
relations between Tokyo, Beijing and Seoul and at the summit
Chinese Prime Minister Wen Jiabao refused to meet with his
Japanese counterpart.
–Speaking of Australia, it was an ugly week here as race riots
broke out. 5,000 whites started it off by attacking Muslims at a
Sydney beach, with the latter being called “Lebs and wogs” for
people of Lebanese and Middle East origin. Neo-Nazi groups
were sprinkled in the crowd. Then the Muslims launched
revenge attacks in white neighborhoods and the violence spread
some beyond Sydney. The police have vowed to crack down on
the thuggery, which in and of itself has others worried that the
police will go too far. Could be time to release the crocs for
crowd control.
Russia: Amnesty International released a disturbing report
claiming every hour a woman dies in Russia at the hands of a
relative, a partner or a former partner. From the Moscow Times:
“Apart from keeping figures of killings by partners or relatives,
the authorities are doing very little to tackle the problem…The
author of the report noted ‘A woman we spoke to said she called
the police, but she was told that they would only go to her house
if there was a dead body.’
“Another woman called the police 16 times in one night, but they
did not come. And even when the police do intervene, the man is
usually released after a few hours.”
Stories like these reveal a lot about the health of one’s society
and it’s clear Russia is sick. It’s also no wonder the country is a
breeding ground for skinheads.
Egypt: Members of the Muslim Brotherhood, who now hold
about 20% of the seats in parliament following recent elections,
have said they would be willing to meet with members of the
U.S. Congress in order to reassure America of its intentions. I’d
take them up on the offer. We need to keep a running dialogue
here.
Chile: Socialist Michelle Bachelet will be in a run-off for the
presidency on Jan. 15 with multimillionaire Sebastien Pinera.
Bachelet fell just short of the required 50% to avoid one as she
captured 46%. Pinera took 26% in the four-way race, but 3rd
place finisher Joaquin Lavin has thrown his 23% behind Pinera.
Ergo, it should be close.
Bolivia: On Sunday, Hugo Chavez wannabe Evo Morales looks
to take the presidency here, which wouldn’t be a good thing for
the U.S.
Random Musings
–President Bush’s overall approval rating has ticked up to
between 39 and 42 percent, depending on the survey, but I’m
sure the White House is expecting a little more of a bounce
following the Iraqi election and further speeches. [Bush gives
another in prime time on Sunday evening.]
But for my new readers, I have to take the opportunity presented
the past few weeks to remind folks of how I started my 9/6/03
column, some 27 months ago.
“President Bush is being dragged kicking and screaming into a
debate over postwar Iraq. The reconstruction effort has been a
failure and I don’t want to hear, well, this part of the country is
quiet and this one has a hospital that actually is stocked with
medicine with current expiration dates. Some of us knew long
ago this would be a huge process and that ‘mission
accomplished’ wouldn’t be appropriate for years. What’s
surprising is that many of our leaders, namely Secretary of
Defense Rumsfeld, couldn’t see this, and for his part, amazingly,
the secretary is still looking to cut and run.
“What upsets me is that we never should have had the rancorous
debate we currently are witnessing in the first place. All
President Bush had to do was level with the American people on
the commitment and costs required, yet the administration is still
jerking everyone around.”
For the next 27 months the White House continued to do nothing
to buck up the people. We paid a steep price for this.
–When questioned on troop levels following the fall of Saddam,
President Bush told NBC’s Brian Williams “I relied on General
Tommy Franks.” That was your problem, Mr. President. You
should have known by then Gen. Franks was more concerned
with his book and playing golf.
–Senator John McCain held firm and got the president to back
down on the torture issue. With both houses of Congress having
defied the White House’s wishes, there was little Bush could do.
–I’m not commenting on the National Security Agency and
alleged eavesdropping until we all get more facts, i.e., wait 24
hours. As for the Patriot Act being rescinded, that’s a mistake
I’ve got to be believe will be rectified shortly.
–Another associate of lobbyist Jack Abramoff has pleaded guilty
to fraud and conspiracy, Adam Kidan, who will now provide
testimony against him. Abramoff’s trial is slated to begin Jan. 9.
This has the potential to dominate the national news should it go
forward.
–Notice how quickly everyone forgot about Tookie Williams?
Three cheers for Governor Arnold Schwarzenneger on this one.
–I’ve had it with Christmas. It’s far too stressful and the Pope
couldn’t be more right in saying that the season has become
polluted with consumerism, though Charlie Brown nailed it 40
years ago on this count; just another instance where my church
has been out of touch, sports fans.
–The sophomore class president at Lehigh University, a terrific
school in eastern Pennsylvania, decided to rob a bank the other
day. The “Today” show featured the episode, but for the wrong
reason. The kid’s an idiot for doing what he did but the sad
reality is he had wracked up $5,000 in online gambling debts. I
read a lot of stories on this topic but I’ve got to believe the
problem is still way underreported.
I had dinner with some of my old high school friends the other
night (we graduated in 1976) and we were commenting on how
none of us had credit cards in college. The average student today
has at least two. Then again our whole society is in debt up to its
eyeballs, so why should I be surprised?
–Did you realize the Turin Olympics (Italy) start Feb. 10? Has
there been a less publicized Games since the advent of
television? It also turns out half the tickets remain unsold as of
about ten days ago.
–Back to our noble friend the yak of Mongolia, I couldn’t help
but do a little research on the derivation of the name Yakima,
Washington, and it has to do at least in part with the Yakima (or
Yakama) Indians that settled the Columbia and Yakima River
valleys. But were the Yakama Indians originally yak-herders in
Mongolia that came across the Bering Strait eons ago? No
evidence of this that I can find…but I’m running with it anyway.
–I have to give my old friend Mark R. credit on a longtime issue
of his. Airline engine contrails pollute the sky and contribute to
greenhouse gases more than anything on earth. Scientists have
now been reaching the same conclusion in various reports over
the past few years and flying around last week, I observed quite a
few planes that were paralleling mine at 32,000 feet and, man,
they were spewing out garbage like you wouldn’t believe.
Which is why GE is smart to be advertising its cleaner jet
engines as this will be a bigger and bigger issue going forward.
–Finally, last week I made a little pilgrimage to the south to tour
some of the damage wrought by Hurricane Katrina and I can see
why a recent LSU survey said 53% of respondents in the region
were “depressed.” I purposefully waited three months to get a
better sense of any progress in rebuilding and at least in the area I
explored, Pascagoula and Moss Point, MS, to Biloxi, I didn’t see
too much of it.
I took Highway 90 along the coast and spent time in Gautier and
Ocean Springs, as well, detouring from time to time to get a
better sense of the devastation. There were moments I was
driving along, suddenly wondering why the traffic had thinned
out, only to discover a road or bridge washed out a half-mile
later. I never saw anyone working on them.
That said, one casino in Biloxi is slated to reopen this weekend,
the Imperial Palace, but what I saw of it wasn’t that great. Other
establishments are a long ways off from drawing big crowds.
I saw some very sad scenes, blocks of homes destroyed, lives
shattered, but occasionally I’d come across a place that had
somehow withstood the worst and where Christmas decorations
were up. I couldn’t help but smile at these displays of the human
spirit.
I originally intended to single out one family in an attempt to
make their day but it didn’t quite work out as planned. I stopped
first at Christus Victor Lutheran Church in Ocean Springs
because they seemed to have the most organized relief effort. A
woman here couldn’t have been more helpful in going over a
map with me to describe just what happened to each particular
neighborhood. So I gave the Lutherans a well-deserved
donation.
But as I drove around and around, stopping to talk with various
folks, as well as for a break at Gulf Islands National Park, I
hadn’t found a Catholic Church to direct me further. Finally,
with time running out on my day, I came upon St. Joseph the
Worker in Moss Point. [On MLK Blvd.] A crowd was
assembling for a funeral, which was a slight impediment…but
Father Dominick didn’t seem too perturbed at my untimely
appearance and I handed him what had been burning a hole in
my pocket. “This goes to a deserving family, Father. And you
have to promise me they’ll write later.” It’s not the way I usually
do these things, but at least I have more control than simply
writing the Red Cross a check.
As for the bigger picture, it’s so frustrating to see parking lots
full of unused FEMA trailers, knowing there are still tons of
families in need. But on the highway I did at least see some of
them being transported and we all know this is far from a
permanent solution anyway. Approximately 200,000
Mississippians remain displaced.
But one of the highlights of this little trip was a flight I took from
Pensacola to Houston last Sunday morning. It was a beautiful
day, the visibility was perfect, and we hugged the coast all the
way until we went up the Houston ship channel. In other words
the breadth of Katrina and Rita. Of course unless you were
looking for something it was an ordinary plane ride, but not for
me.
Let me just say that every single member of Congress should be
forced to fly that route before allocating another dollar for
reconstruction. You can look at pictures all you want but until
you’re up there and see a wide swath of the land, with the Gulf in
the background providing perspective, you can’t begin to
understand just how fragile some parts are. It’s amazing many of
the barrier islands ever survive, for starters.
I come away from the trip as a big fan of rebuilding the
Mississippi coast in a smart manner, and with new and returning
residents accepting full responsibility for the inevitable
consequences.
But when you fly over New Orleans (we went directly over the
Superdome), while at the same time seeing just how close to the
Gulf it is and how little land remains between it and another
disaster, you would think twice before allocating any further
funds.
New Orleans is unique…as we’ve all learned…and I’m talking
only about the geography. It is absolutely insane to spend
$billions on the levee system, even as the president just this week
approved another $1.5 billion, when we all now know another
CAT 3 or 4, let alone a 5, could bring it all down again years
before the project is completed.
Last Sunday’s New York Times had an editorial about how
we’re losing the city. “It’s rotting” despite the president’s
assertions it wouldn’t. Yes, it is. But what the heck does anyone
expect after three months when what is required is intense study
and input from experts around the world, in virtually every field
of endeavor. You can blame the government for not putting such
a group together, immediately, but beyond that it’s too soon to
just start throwing things up.
Instead, it hit me what should be done with the place; a lesson we
can appropriate from Iraq …“Clear, hold and build.”
Remove the debris, which has a depressing effect on all (a
negative force multiplier), establish those areas least impacted,
and then build out from where it makes sense given the
probability of more storms.
To just proceed with the rebuilding of the levees, however, at a
cost of $10s of billions and before we’ve reclaimed some of the
land fronting the Gulf that used to protect New Orleans to a
certain degree, is an undertaking that makes zero sense. Listen to
the scientists and researchers at LSU who have been studying the
issue for decades. Listen to the best sociologists in America and
around the world. Talk to the Dutch, who wrote the book on
handling such a disaster.
Unfortunately, President Bush once again put himself in a box.
It was politically expedient to promise to rebuild New Orleans in
those tragic early days. But it would not be a step back for
America if we decided now to take a different path. Future
generations would praise our foresight.
—
Pray for the men and women of our armed forces. I also want to
make special note of the Mississippi Vietnam Veterans Memorial
I came across in my travels. It’s incredibly moving, with great
pictures of the 670 heroes who so proudly represented the state.
God bless America.
—
Gold closed at $506…check out my “Wall Street History” link
where I have a terrific piece on the 1979-80 gold rush, if I may
say so myself.
Oil, $58.06
Returns for the week 12/12-12/16
Dow Jones +0.9% [10875]
S&P 500 +0.6% [1267]
S&P MidCap -0.3%
Russell 2000 -0.8%
Nasdaq -0.2% [2252]
Returns for the period 1/1/05-12/16/05
Dow Jones +0.9%
S&P 500 +4.6%
S&P MidCap +11.9%
Russell 2000 +4.8%
Nasdaq +3.5%
Bulls 58.8…getting up there, if you’re a contrarian.
Bears 21.6 [Source: Chartcraft / Investors Intelligence]
Have a super week. I appreciate the support.
Brian Trumbore
