[Posted 7:00 AM ET]
Israel’s Sharon Near Death
Almost 200 Dead in Iraq Bomb Blasts
Iran Snubs IAEA and Europe
North Korea Adds to Nuclear Force
Putin Plays Gas Card
Wall Street Rockets Higher! Happy Days Here Again!
—
What a world we live in. This was a horrible week for those
seeking peace in the Middle East and elsewhere there were other
troubling signs of global instability. While I normally steer clear
of making bold market pronouncements, week to week, and
recognizing what I’m about to say isn’t one of them, nonetheless
if you are heavily allocated in stocks you should think about
paring back your exposure soon. This week’s intense rally on
Wall Street showed signs of unwarranted euphoria and most of
you have seen this act before. No doubt, though, these periods
can last a while and I’ve looked foolish for long stretches, as I
did in 1999 and early 2000, but what’s different about today as
opposed to then is the geopolitical framework. There certainly
weren’t a lot of positives in this regard the past few days.
To begin with, Israelis are rightfully scared following the demise
of Prime Minister Ariel Sharon. This is a man with many
enemies, but he was the only Israeli leader capable of advancing
some semblance of a peace process. Sharon had also garnered
the respect, albeit grudging in many quarters, of other leaders in
this volatile region. Yet today it’s not an issue of Israel being
unable to defend itself – no one can ever doubt its resolve – but
rather who can now bridge the deep divides whose origins often
extend centuries or more? Certainly not Benjamin Netanyahu,
the early favorite to replace Sharon following March’s elections.
One of the more underreported stories of the week was the chaos
at the border crossing between Gaza and Egypt where hundreds
of armed Palestinians confronted Egyptian forces, surging
through a self-made breach in the wall and killing at least two
Egyptian soldiers. That’s hundreds of potential terrorists whose
identity Israel doesn’t have a clue on. And as the chaotic Israeli
election campaign gets underway, who will attempt to take
advantage of the power vacuum? How will acting Prime
Minister Ehud Olmert, a former mayor of Jerusalem, deal with it
all? What will Netanyahu say in the coming weeks to further roil
the political waters? He’s a master of manipulation and scare
tactics, but this is hardly a time to ratchet up the rhetoric.
Nonetheless, more so than ever, Israelis need to prepare for the
worst.
Like in dealing with Iran. Early in the week the mullahs
announced they would restart their nuclear program, including
uranium enrichment-related activity. Iran also continues to bar
International Atomic Energy Agency inspectors from some of
the most sensitive facilities. Then on Thursday, Iran failed to
show up as promised to a meeting of the IAEA in Vienna; an
incredible act of belligerence that warrants an immediate reaction
from the civilized world, though none is likely to be
forthcoming. Any analyst with half a brain has to assume Iran is
very close to having at least a rudimentary nuclear device. And
as I wrote last week Israel now realizes it will have to act alone
since the U.S. and Europe aren’t likely to. The question, as
always, is about intelligence. Can they target the right facilities?
And then there was the barbaric action in Iraq this week, as close
to 200 died between Wednesday and Thursday, including 11
American soldiers. The low-grade civil war that has been
ongoing now for about a year is escalating rapidly. One more
act, either a call to arms by a leading cleric or the assassination
of same, is all that’s needed to light a fire that could easily spill
over the border.
I’m tired of the sycophants on the right who write of how
security in Iraq has improved. I generally respect Ret. Lt. Col.
Ralph Peters, who writes an op-ed column for the New York
Post. Not the following analysis.
“Over the last 12 months, the pessimists called every major
development wrong. But that won’t stop them from doing
everything they can again this year to devalue freedom, discredit
democracy, drive Iraq toward civil war, encourage the terrorists
and, above all, embarrass the Bush administration….
“The Sunni Arab insurgents lost steam (in ’05). Attacks still
make headlines, but Iraq’s major cities are far more secure than
they were a year ago. Major combat operations moved from big
cities to smaller cities – and then down to dusty border towns.”
Obviously Mr. Peters wrote this a few days before this week’s
carnage.
Here’s something closer to the truth from Simon Jenkins of the
London Times.
“On December 22 Tony Blair paid his Christmas call on British
troops in Basra to tell them how much things were improving.
This time he said security was ‘completely changed’ from last
year. What he meant was unclear. It was as if Gladstone [ed. a
respected British prime minister in the late 1800s] had visited
Gordon during the siege of Khartoum. Did it not seem strange to
Blair that he could not move outside his walled fortress, could
not drive anywhere or talk to any Iraqis? Did he wonder why
British troops have withdrawn from two anarchic provinces?
Was he really told that security is transformed for the better? If
so he is horribly deceived.
“Reliable reporting from Iraq is now so dangerous that the level
of insecurity can be gleaned only from circumstantial evidence.
Baghdad outside the American green zone is now all ‘red zone,’
off limits to any but the most reckless foreigner. The death rate
and the number of explosions are rising. [ed. Jenkins also wrote
this before Wed. / Thurs.] While some rural areas are relatively
safe there is no such thing as national security. Iraq’s borders are
porous. Crime is uncontrolled. The concept of an ‘occupying
power’ is near meaningless.
“The Americans cannot even protect the lawyers at Saddam’s
trial, two of whom have been killed. Iraqis are meeting violent
death in greater numbers probably than at any time since the
Shiite massacres of 1991. Professionals are being driven into
exile, children are kidnapped, women are forced indoors or shot
for being improperly dressed. Those Britons who preen
themselves for ‘bringing democracy to Iraq’ would not dare visit
the place. They have brought three elections, but elections
without security do not equal democracy.”
Last week I wrote of how oil tanker drivers were being
threatened. This week a convoy of tankers was attacked with 20
destroyed. I did not see what the casualties were but you can be
sure new drivers aren’t exactly lining up for positions today.
And speaking of the brain drain Jenkins alluded to, and as I
addressed a while back when it comes to the dwindling Christian
community, Newsweek reported that physicians are increasingly
being targeted with 65 killed last year. Health care has never
been worse.
As for oil, the critical revenue source, in December average
production was less than half pre-war levels due to ongoing
sabotage and badly needed investment will not be forthcoming
without security.
So about now long-time readers are thinking, but Brian, I thought
you were a supporter of the war? I still believe in the cause but I
cannot escape the facts. At this point, though, one has to wait to
see what emerges when the government is finally formed.
I also can’t help but conclude this segment without commenting
on President Bush and his meeting Wednesday with his defense
team (as opposed to Thursday’s farce with the former
secretaries). There he was, standing with some of the generals,
when Bush said “I want to tell the American people how
impressed I was with the generals. They’re smart….”
It was shades of “Brownie, you’re doing a heckuva job.” History
will not be kind to the generals, starting with Tommy Franks. In
the meantime they’ll do all they can to burnish their images
before they pass on, because that is what historical figures do,
but eventually the truth catches up with them.
Lastly, there is Syria. The government of Bashar Assad is
demanding treason charges be brought against former Vice
President Khaddam, who claimed in an interview in Paris (where
he’s now probably hiding in the sewers) that Assad severely
threatened Rafik Hariri before the former Lebanese prime
minister was assassinated. The UN is demanding a meeting with
Assad himself for questioning.
From Rami G. Khouri of the Daily Star of Lebanon:
“None of this is new, but it is all very significant for two main
reasons. The information Khaddam provided corroborates
numerous facts and allegations already gathered from other
sources by the UN-run international commission investigating
Hariri’s murder. For corroboration to come from such a high
source inside the Syrian political system is a major push forward
for the investigation. Khaddam had been a senior political thug
in Syria for 35 years, but in such cases a thug’s testimony is very
useful – assuming it is factually correct….
“The second important thing about Khaddam’s behavior is that it
seems to represent the first major political crack or defection in
the top-level Syrian solidarity system that has long defined the
regime in Damascus. Whether this is the crack in the dam that
soon widens into a political torrent remains to be seen. However,
its significance should not be underestimated. Khaddam’s
pointing fingers at Assad and his security chiefs is the equivalent
of Dick Cheney in the United States saying in a press interview
that President George W. Bush knew all along that Iraq had no
weapons of mass destruction, but was determined to overthrow
the Saddam Hussein regime using any pretext.”
Michael Young, also of the Daily Star:
“The implications of Khaddam’s disturbing insinuation of
communal symbolism do not bode well for Lebanon. From the
moment the Syrians left the country last April, it became
apparent that two contending visions would come to define the
aftermath: one defined by the Saudis and Saad Hariri, speaking
for most Sunnis, which sought to complete what Rafik Hariri had
been unable to. Friendly to the West, impatient with militancy,
pursuing free markets, this vision clashes daily with a second
one, the more militant, statist, anti-Western outlook of Hizbullah,
which for better or worse speaks for many in the Shiite
community. This face-off transcends the Sunni-Shiite religious
dichotomy and involves broadly defining the post-Syrian
Lebanese state. It need not turn violent; however both sides will
have to make fundamental concessions to avert this….
“The Syrians should remember that while Lebanon is vulnerable
to sectarianism, it also has the means to absorb its worst
repercussions. But does Syria? From Paris, Khaddam
impertinently tossed that disturbing question Assad’s way.”
Meanwhile, Hizbullah hides out on the border with Israel,
plotting how best to take advantage of Israel’s political chaos.
Wall Street
Stocks soared following release of the minutes from the Federal
Reserve Board’s Dec. 13 meeting and never looked back as they
staged their broadest rally since last May. The major averages
are now all at 4 ½ year highs, the breadth of the advance being a
major positive, as the Dow Jones gained 2.3% to close at 10959,
the S&P 500 added 3% to the 1285 level and Nasdaq picked up
an even 100, 4.5%, to finish at 2305. Yes, it was an awesome
way to start the new year and as I’m not “short” the market, god
bless us, everyone. Even my three remaining equity holdings
have been acting better of late and it’s been premium beer more
often than not for the kid.
But back to the Fed minutes, the governors generally don’t see “a
significant weakening” in housing activity, they believe
inflationary pressures are easing, and the overriding debate was
over how much more tightening was justified at this point. Well
the market interpreted the discussion to mean just one more hike
of 25 basis points (1/4%) is in the offing on Jan. 31, Chairman
Alan Greenspan’s last day before retiring to the tub.
As for the hard economic data this week, the jobs report for
December, when combined with an upward revision for
November, was solid. Not great, but not dreadful…just the way
Wall Street likes it. [“Great” translating into further rate hikes,
“not great” presaging lower earnings.]
But I declare victory on my Christmas shopping season forecast
because it’s apparent we did not hit the 5-6% estimated sales
gains. Instead, three leading retail barometers had sales up 3.2%,
3.5%, and 4.4%, while Wal-Mart’s same-store figure for
December was just 2.2%. Some specialty retailers bucked the
trend, but the bottom line is Christmas was so-so at best.
The Wall Street Journal released its semi-annual survey of
economists’ predictions and the consensus is for 3.5% growth in
GDP for the first half of 2006 and 3.1% in the second. Should
this pan out and the geopolitical scene I worry about improve,
well I’ll probably be very wrong on my outlook for stocks this
year. But the economists reiterated what everyone else believes;
housing is far and away the biggest concern and it needs to be
repeated from time to time that ½ of the job growth we
experienced the last five years was housing related. So as
housing begins to take it on the chin, not only are many losing
their jobs (the process has already started with a vengeance in the
mortgage origination industry), home equity loans and
refinancings will no longer serve to bolster consumer spending.
And as I detailed last week, where the hot spots really come into
play is in CEO confidence and the willingness to give it up on
the capital spending front.
But this was a week for the bulls and I’ve already done enough
raining on their parade. Where I do admit I’m currently very
wrong is on growth outside the United States. That troubled me
in my forecasting last summer, you’ll recall, but I’ll cover the
topic in more detail next week.
For now, if peace breaks out all over the world and the
brotherhood of man forms a human chain of love, nay, a love
train, as the O’Jays sang, I’ll be the first one to place myself next
to a reformed Sunni terrorist.
“Can I buy you a beer?”
“Sorry, don’t drink. Want to smoke a water pipe?”
“Nah…don’t smoke…..Mets?”
“Yankees.”
You know, I don’t think this is going to work. Back to my
shelter.
Street Bytes
–Stocks totally ignored a soaring price for crude, back over $64,
with gasoline futures at $1.80, meaning rising prices at the pump
once again. But then you had natural gas which dropped
precipitously below $10 to $9.63; a major positive for those
heating their homes with the stuff. Why the divergence? On the
nat gas front it remains solely about the weather. I do a little
exercise myself each week in just glancing at the 10-day weather
forecasts for Winnipeg and Minneapolis and we’re going to be
well into January without the dreaded arctic cold wave. As for
the renewed rise in crude oil, it’s part speculation and part
geopolitics, but there are also legitimate concerns of potential
fuel shortages this coming summer as demand is once again
surging, thus the rise in gasoline futures.
And a note on the tech front. This week saw the big gadget show
in Las Vegas where all manner of companies were presenting
their wares; things most of us don’t need but if you have the money,
and a lot of people do these days, then what the hell.
Anyway, Intel is promoting a new chip, Viiv, that is part of a
“wave of creativity” for new consumer electronics that
coordinate all your other products into one easy-to-use remote
control. Whatever. And Motorola is promoting its new
cellphone with a Google function while Yahoo’s Go Mobile will
use its own content.
My point is; not exactly ‘the next big thing’ when compared to
the PC and the Internet. But lest you think I’m a spoil sport, it’s
increasingly clear where the real excitement lies and that’s in the
fields of medicine and biotech. For this we should all give
thanks.
–Google, by the way, closed 2005 at $415 and added another
$50 to $465 this week. At least I warned not to ‘short’ this one
all last year. Nor do I advise one to do so now.
–U.S. Treasury Yields
6-mo. 4.37% 2-yr. 4.35% 10-yr. 4.37% 30-yr. 4.56%
Despite the euphoria in equities over the Fed’s seeming vote of
confidence, the bond market’s reaction to the coming end of
Greenspan’s rate hike regimen was muted. Treasuries were
essentially flat on the week. As I noted last time, ignore the
inverted yield curve talk. It’s irrelevant for now and bonds are
responding far more to simple supply and demand factors as well
as to the belief inflation is tame.
But now China is strongly hinting it will begin shifting out of the
U.S. dollar. Currently, it is estimated 70% of its reserves are in
dollar assets. Of course this has negative implications, but for
now any transition should be reasonably orderly. What I have
argued in the past, though, is that just as you’ve seen Russia now
use natural gas as a political weapon, China could use its
reserves as one.
–Back to energy, oil stocks soared…9% for the oil service index
(OSX) and 7% for the major integrateds (the XOI).
–Ford and GM’s sales continue to decline, down 9% in
December for Ford and another 10% for GM. But
DaimlerChrysler’s were up 4% for the month. For all of 2005,
Toyota was the big winner, up 10%, GM was down 4.4%, Ford
off 4.7%, and Chrysler up 4.5%. The Big Three’s market share
for ’05 fell to another record low, 56.9%, and on Thursday, S&P
lowered Ford’s credit rating further into “junk” territory.
–In a positive piece of news, federal regulators monitoring
government-sponsored entities Fannie Mae and Freddie Mac say
both are adequately capitalized and that there are no new
accounting errors. A separate investigation reportedly is about to
issue a similar conclusion. Fannie’s accounting issues in
particular have long been seen as a ticking time bomb (and with
good reason as the company was forced to admit all manner of
deceitful practices), but defusing it should take a major worry off
the market in the event of a financial crisis. Derivatives
worldwide, however, remain an accident waiting to happen.
–According to an annual survey by the Heritage Foundation and
the Wall Street Journal, Hong Kong’s economy is the freest for a
12th consecutive year, though increasing interference from
Beijing will hurt its future rankings. Other surveys already
reflect this fact and have Hong Kong as low as #28.
–Update: I missed an item last week that is important to place in
the archives, if for nothing else. ExxonMobil sold its 25% stake
in a Venezuelan oil field to Spain’s Repsol which then agreed to
a joint venture with state-owned PDVSA. A few weeks back I
wrote that we were awaiting Exxon’s decision since Venezuelan
President Hugo Chavez has been forcing oil companies to give
up control, with Exxon being the last holdout among the major
players. Exxon in essence told Chavez to shove it.
–Margin debt is at its highest level in five years as speculation
returns to the market.
–Good piece in the Journal the other day on India and its
increasing difficulties in filling positions for its service sector.
Despite graduating millions from university each year, the
students are “uneven” and there is a dearth of qualified
candidates for employment. Wages are thus rising rapidly for the
attractive applicants, which in turn means that in today’s
competitive marketplace countries like Poland have been gaining
business at India’s expense.
–IBM announced it is freezing its pension plan in 2008, meaning
benefits will be locked in place at that time. While this does not
affect accrued benefits for current workers upon retirement (nor
current retirees’ checks), IBM will replace any further add-ons
with increased contributions to workers’ 401(k) plans. The
company claims it will save at least $2.5 billion between 2006
and 2010 by going this now popular route for Corporate America
and there is little workers can do about it.
–From time to time I’ve written on the topic of market volatility,
or lack thereof. The New York Times’ Floyd Norris had a piece
spelling out the latest through year end. In 2002 there were 52
days when the S&P 500 moved up or down 2%. In 2003 there
were 15 such occurrences. Incredibly, the last two years there
hasn’t been one. So much for my concerns over the vast
majority of daily activity being of the program trading variety,
but I’ll have my day in court yet.
–Broadway’s attendance was the highest in two decades and
sales rose 10% in 2005 over 2004’s pace.
–The average room rate in New York City is above $290 these
days. The highest is the presidential suite at the Mandarin
Oriental, $14,000 / night with a 75% occupancy rate. I’m
assuming the users still take the soap…….I would.
–A study by Britain’s Air Accident Investigation Bureau
discovered “widespread” safety issues on British Airways; not
that you should go out and change your plans, but if I was going
to be over water for five hours….
–Discount carrier Independence Air declared bankruptcy and
shut operations after just 19 months. At least these guys tried to
do the right thing with their customers up to the end.
–America’s, and the world’s, busiest airport is now Atlanta’s
Hartsfield International with 980,000 takeoffs and landings for
the past year vs. 972,000 at Chicago’s O’Hare.
–ABC and NBC are raking in the ad revenue with ABC’s Feb. 5
telecast of the Super Bowl followed five days later by the start of
the Olympics on NBC. According to Theresa Howard of USA
Today, ABC “is reportedly 85% sold out and on track for up to
$150 million. NBC says it’s 90% sold out and should hit its
$900 million target.”
A 30-second Super Bowl slot is going for $2.4 million, while the
Olympic ones are going for an average of $700,000 for prime
time. [The Super Bowl has an 88 million average audience, with
the Olympics normally coming in around 60 million in the U.S.
during prime time hours.]
–The Journal reported that Microsoft shut down a popular
Chinese blog site, run by a dissident, owing to Chinese
government pressure. A statement read:
“MSN is committed to ensuring that products and services
comply with global and local laws, norms, and industry practices
in China. Most countries have laws and practices that require
companies providing online services to make the Internet safe for
local users. Occasionally, as in China, local laws and practices
require consideration of unique elements.”
Yeah, like in China, if you rattle the cage too much, you could
get a bullet to the back of your head.
I have received a lot of criticism when I discuss how some
Taiwan businessmen clearly don’t act in their nation’s (Taiwan is
independent to me) best interests. They, like businessmen all
over the world, “sell out” when convenient. Microsoft, Google,
and Yahoo have proved to be no exception.
–Ben Stein, in an op-ed for the New York Times, on the legacy
of Alan Greenspan.
“I am beginning to think that (continuing to raise interest rates) is
his way of talking us down from the housing price ledge, and
maybe it’s working. Certainly, the housing boom is slowing.
But it’s pretty clear that the rising interest rate cycle is coming to
an end – at least I hope it’s clear. When it ends, Mr. Greenspan
will leave behind extraordinary prosperity, stable prices and
moderate interest rates.
“Of course, we still have giant problems of income inequality, a
staggering current account deficit – which probably has no cure
short of a genuine collapse of the dollar, but that’s for another
day – and a federal deficit that is too high but is falling. These
are real problems, but it’s hard to say that they are within the job
description of the Fed chairman. What he needed to do – keep
the economy on an even keel while moving forward and keep the
dragon of price increases in its cage – he did beautifully….
“Godspeed, Mr. Greenspan. We all owe you.”
More, from both sides, as we approach the chairman’s last day
and rate hike.
Foreign Affairs, Part Deux
Russia: As I wrote for the past few weeks, let alone years,
President Vladimir Putin has been gearing up to use energy, in
particular natural gas, as a political weapon. On New Year’s
Day he did just that after a dispute with Ukraine over
renegotiating a new contract for supplying it in light of the
changed pricing environment. Government-controlled behemoth
Gazprom shut off sales of gas to Ukraine and that set in motion a
chain of events that within 24 hours had threatened the supply for
much of Western Europe. Putin had long argued Russia could be
counted on to be a “reliable supplier” of energy and suddenly this
wasn’t the case. It was the first disruption in natural gas supplies
on the continent in four decades, but Putin was forced to back
down under intense pressure from all angles as Gazprom and
Ukraine cut a very complicated deal.
An editorial from the Washington Post:
“Western countries should absorb an important lesson. Without
a prosperous or technologically advanced economy and with
greatly reduced military strength, Mr. Putin hopes to restore
Russia’s world-power status through its control of gas. That
inevitably means manipulating supplies to other countries for
political ends. Western countries…should realize that
dependence on Russian gas is not consistent with ‘energy
security.’ Instead they should develop alternative sources of
supply, or a greater emphasis on nuclear energy.”
Neil Buckley and Thomas Catan of the Financial Times, quoting
Putin in year end remarks at a televised meeting.
“ ‘Our welfare at present and, to a great degree, in the future
directly depends on the place we will take in the global energy
context.’ He also issued an assurance – likely to be much
repeated during Russia’s current presidency of the Group of
Eight industrialized nations – that ‘energy security’ would be a
key theme.
“ ‘Russia treasures its much-deserved reputation of a reliable and
responsible partner in the market for energy resources,’ he said.”
Ha!
Another piece from the Financial Times:
“Russia provides about a third of the gas consumed in Germany
and over 40 percent of its gas imports. Experts expect this
dependency, already the highest among large western European
nations, to reach well over 50 percent by the end of the decade.
For months, the International Energy Agency in Paris, the
European Commission and the French and British governments
have been watching these figures with mounting concern. As
Angela Merkel, the new chancellor, prepares to visit Russia this
month, German voices are joining the chorus of warnings.
“ ‘For too long, Germany has only considered energy as an
economic and an environmental issue,’ [said an MP from
Merkel’s Christian Democratic Union.] ‘We must now catch up
with the rest of the EU and start thinking about it in security
terms.’”
On the topic of just how the new contract works, thankfully the
FT attempted to clear up this confusing issue.
“Gazprom will sell its gas for export to Ukraine for the $230 per
thousand cubic meters it demanded – though it will sell it no
longer directly to Ukraine but to an intermediary company,
RosUkrEnergo.
“Ukraine, by the same token, will not be paying $230…to
Russia. RosUkrEnergo will mix gas from Russia with larger
volumes of cheaper gas from Central Asia, mostly Turkmenistan.
“That means Ukraine will pay around $95…to RosUkrEnergo
for its imported gas. The $95 price, though more than 50 percent
above the price Ukraine was paying last year, is exactly what
officials in Kiev said they had been holding out for.
“As well as in future handling of all imports of gas to Ukraine,
RosUkrEnergo will take over all exports of Central Asian gas via
Russia.
“Gazprom had planned to buy that Central Asian gas and export
it itself to Europe, but sacrificed that aim to allow yesterday’s
deal to be stitched together.
“RosUkrEnergo will buy most of its gas in Central Asia for
$50….Since it will sell some into the European market beyond
Ukraine, where prices are more than $250…, it can afford to pay
the high price for Russian gas, sell to Ukraine at $95, ‘and make
a profit,’ said Wolfgang Putshchek, a RosUkrEnergo executive.”
Goodness gracious…need an aspirin? And know this about
RosUkrEnergo. It is peopled with organized crime figures. In
other words, my European friends, keep building those nuclear
power plants and putting up windmills.
One last item on Russia. 12 journalists have been killed here in
the past five years and not one of the cases has been solved.
[David Satter / Wall Street Journal]
North Korea: Pyongyang reiterated it won’t resume nuclear
weapons talks unless the U.S. first lifted sanctions. The Orcs,
deep in the bowels of Mordor, continue to slave away.
China / Taiwan / Japan: In a New Year’s message, Taiwan’s
President Chen Shui-bian, moving to shore up his base following
a poor showing in recent local elections, renewed his call for a
new constitution in 2007; one that would declare the “Taiwan
republic” to be an independent state. The opposition
Kuomintang immediately blasted Chen’s remarks as provocative
while Chinese President Hu Jintao said China will “push ahead
with the great cause of peaceful reunification, (but) never
compromise in opposing Taiwan independence secessionist
activities.” [South China Morning Post] For its part, the Bush
administration warned Chen about declaring independence; once
again proving what a farce the administration’s talk of spreading
democracy truly is.
Meanwhile, Japanese Prime Minister Koizumi is tired of the
criticism being leveled at him by China and South Korea over his
numerous visits to the war shrine where 14 war criminals are
honored with the rest of Japan’s soldiers. China and South
Korea responded that Koizumi just doesn’t get it.
But at least Japan tabbed a China expert to be its new
ambassador in Beijing in an apparent move to ease tensions, yet
at the same time Tokyo is seeking talks with India on a range of
diplomatic and security issues to counter China’s growing
military threat.
*And just a brief return to China’s past. Yao Wenyuan died. He
was the final surviving member of Mao’s Gang of Four that
terrorized the country during the 1966-76 Cultural Revolution.
From the South China Morning Post and Joe McDonald of the
AP:
“Led by Mao’s wife, Jiang Qing, the Gang of Four and its allies
inflicted physical and emotional damage that still reverberates in
Chinese society…
“Nearly every Chinese city dweller who was alive at the time can
tell of a relative or friend who was beaten, harassed or driven to
suicide, often by tormentors who took advantage of the unrest to
avenge grudges.
“The violence pitted neighbor against neighbor, wrecked the
economy and forced a generation of intellectuals to work in the
countryside.
“One month after Mao’s death in 1976, the Gang of Four
members were arrested, marking the end of the Cultural
Revolution….
“Evidence at Yao’s televised trial included a diary entry in which
he asked: ‘Why can’t we shoot a few counterrevolutionary
elements? After all, dictatorship is not like embroidering
flowers.’”
European Union: Austria is now president for the next six
months, which means there could be some rancorous debate over
Turkey’s candidacy. You’ll recall Austria sought to limit Turkey
to a “privileged partnership,” rather than full membership, but
acquiesced in the end when promised it would have the ability to
question Turkey’s progress in the long, 10+ year process, along
with advancing Croatia’s candidacy for membership, Austria
being its leading proponent.
Pakistan: The earthquake recovery effort has largely ground to a
halt as winter settles in on the Himalayas. Tens of thousands will
freeze and starve to death over the coming months.
Egypt: When I posted last week’s piece, some details on the
incident involving the Sudanese refugees in Cairo were lacking
and I wrote I needed another 24 hours. I’ve since decided while
Egypt is worthy of scorn more often than not, this instance is not
one of them.
Bolivia: Evo Morales’s first trip abroad found him alongside
Cuba’s Fidel Castro. Next he met with Venezuela’s Hugo
Chavez, with Morales saying he would join Chavez’s fight
against “imperialism.”
For his part, Chavez took the opportunity to say the two men are
building an “axis of good.”
“The axis of evil – do you know who the axis of evil is?
Washington – that’s the axis of evil. And their allies in the
world, who threaten, who invade, who kill, who assassinate. We
are creating the axis of good, the new axis of the new century.”
[BBC News]
Oh brother.
Morales later reassured his political supporters in Bolivia that he
would indeed nationalize the oil industry.
And then there is Spain’s leftist Prime Minister Zapatero, who
has made a point of cooperating with both Venezuela and Bolivia
recently.
Chile / Peru: There will be a bit of a tussle between these two
over the extradition of former Peruvian President Alberto
Fujimori. Fujimori made a surprise return to the continent from
exile in Japan and seeks to return to power in Peru, but on
landing in Chile a while back he was arrested and the Chilean
courts will not just hand him over without months of hearings on
the charges Peru has put forward. Peru wants him now.
Central America / MS-13…and the United States: I have written
frequently of the dangers posed by the street gang known as MS-
13, whose origins are in Central America. In Friday’s USA
Today, Kevin Johnson writes of how one group raided a rival
gang’s house in Houston. It was carried off with paramilitary
precision, using tactics “including perimeter lookouts, high-
powered weaponry (an AK-47 rifle was among the weapons
recovered later), and a quick, room-by-room sweep of the house
that was notable for its precision and sophistication,” said a
police spokesman.
“When the MS-13 suspects were challenged by authorities, the
result was an intense shootout that killed two suspects.” The
other four were arrested.
Johnson writes of the assessment of Bob Clifford of the FBI.
“The battle symbolized MS-13’s development from a smattering
of loosely organized cells across the nation to an increasingly
efficient and dangerous organization that has become a
significant threat to public safety.”
As the gang members are deported, they are sent back to Central
America where they simply recruit new members and rush back
across the border. Hopefully you saw the “60 Minutes” piece on
the group a few months ago. It’s both a serious domestic as well
as foreign policy issue. Imagine them linking up with al Qaeda
types…if they aren’t already doing so.
Random Musings
–Over the years I have ignored most accident stories and while
the Sago Mine disaster in West Virginia was ready made for
television, the bottom line is these things happen. And talk about
my mantra of waiting 24 hours, what the passage of time affords
us on this one is that the call for the heads of the mine operators,
outside of the obvious tragic miscommunication, appears to be
unwarranted. I give NBC News major kudos for the interviews
with the miners two days after the disaster who stepped forward
and said without hesitation that the mine was indeed safe.
For years I’ve written of the mine disasters in China that claim
5,000 or more lives a year and what an incident like this week’s
points out is the huge differences that remain between the United
States and the communist regime with the surging economy.
Thanks to a concerted effort to insure the safety of our own mine
workers, as much as possible, 2005’s death toll was 22 across
America. And when an accident occurs our media has full
access to the story, plus, should an operator have truly been
negligent the company is subject to the law and the families of
the victims are duly compensated. In China there may be one or
two lines, max, about a disaster in the state media, the victims’
families receive nothing, and the operators increasingly face the
death penalty…even if in some cases individuals are innocent.
–Of course our own system isn’t without its flaws…case in point
now disgraced lobbyist Jack Abramoff. Abramoff pleaded guilty
to fraud, tax evasion and conspiracy in both federal and Florida
courts and will serve 10 years in prison for activities that also
threaten to bring down countless members of Congress, most of
whom are Republican. The Republican response thus far has
been pitiful as they scamper about, trying to cover their butts and
the money trail.
What is not known is the impact this scandal will have at the
polls in November. In December, a USA Today survey revealed
that 55% of registered voters said the issue of corruption will be
the “most important” or “very important” factor in deciding who
to vote for. But a Washington Post / ABC News survey also
found that 71% said there is not much difference between the
parties on ethical matters.
–In a very serious development, three siblings have died in
Turkey of the H5N1 strain of bird flu, the first victims outside
eastern Asia.
–In a further comment on gang violence, this time in my state of
New Jersey, a professor of criminal justice had the following
thought on the increasing murder rate in the state’s leading cities.
“What we’re seeing in many jurisdictions is a slow reawakening
of the core urban street violence that was driving everything so
seriously 10 years ago….
“Its very tense, and it’s only a flashpoint away from taking off.”
[Star-Ledger]
–Memo to Vince Young, superstar quarterback of the Texas
Longhorns. Go pro. By the way, the ratings for the Rose Bowl
were spectacular…21.7% of U.S. households tuned in. And
what a game we all saw.
–Edward Alden of the Financial Times writes that President
George W. Bush is already totally contradicting himself on the
issue of torture.
“In a statement attached to Mr. Bush’s signing of a defense
spending bill last week, the White House said it would construe
the bill’s ban on ‘cruel, inhumane and degrading’ treatment of
detainees ‘in a manner consistent with the constitutional
authority of the president’ and his powers as commander-in-
chief.’”
In other words, “it appears to contradict directly the agreement
between the White House and Senator John McCain…sponsor of
the anti-torture legislation.”
McCain and Senator John Warner, chairman of the Senate armed
services committee, are challenging the administration’s
interpretation of the law.
Attaching a statement to legislation has been part of our process
for decades now, with Congress issuing its own interpretation as
well, but it is becoming increasingly apparent the White House is
using the statements to then justify its actions in one case after
another, far in excess of the historical norm. Put another way,
the administration is operating in a manner that conflicts with the
generally accepted interpretation of the constitution.
–Former Pittsburgh Steelers wide receiver Lynn Swann is
running for the Republican nomination for governor of
Pennsylvania. Good hands are a plus in accepting campaign
contributions.
–Mayor Michael Bloomberg is a rather generous billionaire. He
doled out $millions in bonuses to his campaign staff, including
$400,000 to his campaign manager.
–We already have a strong candidate for “Jerk of the Year,”
Amtrak. Unbelievably, after a train from Florida to New York
suffered two separate delays of 12 hours each, and the tired,
haggard and hungry passengers arrived at Penn Station, Amtrak
said it “will compensate on a case by case basis.” Actually,
upgrade the company to “dirtball” status.
–Finally, we note the passing of Hugh Thompson, aged 62.
Thompson was the helicopter pilot who helped stop the massacre
at My Lai in Vietnam back in 1968. 30 years later, Thompson
and his colleagues were honored for their bravery.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $540…up $21 on the week.
Oil, $64.21
Returns for the week 1/2-1/6
Dow Jones +2.3% [10959]
S&P 500 +3.0% [1285]
S&P MidCap +3.4%
Russell 2000 +3.9%
Nasdaq +4.5% [2305]
Bulls 55.7
Bears 23.7 [Source: Chartcraft / Investors Intelligence…volatile
the past few weeks, not normally the case.]
Have a great week. I appreciate your support.
Brian Trumbore
