[Posted 7:00 AM ET]
Iran
It’s always important to know the enemy. This is what the West
is dealing with these days.
Iran’s Grand Ayatollah Ali Khamenei, in his annual message to
pilgrims making the Hajj:
“The Islamic world does not need the West’s deficient
prescription to achieve democracy and human rights…
“One should not doubt that the global arrogance considers the
awareness of the Muslims, Islamic unity, and the progress of
Islamic nations in all fields of politics and innovation and science
the greatest obstacle in the way of their hegemony over the entire
world, and thus stands against it.”
[Regarding the “post-modern colonial era”]
“We should learn lessons from our previous experiences and
should not allow the enemies to assume control over our destiny
for another long period.
“In those bitter, dark days, the hegemonistic Western countries
made use of all their cultural, economic, political, and military
means to weaken Muslim countries and nations and then
imposed poverty, ignorance, and division on them….
“The great Satan, which is the real image of cruelty and brutality
against the human race, has become the standard-bearer of
human rights and invites the Middle Eastern nations to
democracy….
“The United States’ favorite type of democracy is actually
realized if an obedient puppet government assumes power in a
country through a number of conspiracies, briberies, and
deceptive propaganda and through an apparently popular but
U.S.-led election. This new puppet government must definitely
be the U.S. agent in that country and must realize its ominous
objectives….
“The pretense of fighting against terrorism and violence on the
part of those who have promoted Zionist terrorism and
committed the most horrific crimes in Iraq and Afghanistan
seems very disgusting.
“The assertion of defending civil rights by those devils who have
always encouraged the crimes committed by a bloodthirsty
terrorist like Ariel Sharon against the Palestinian nation is a great
deceit that deserves to be cursed….
“The U.S. and British governments, which consider it
permissible to torture or even kill suspects in the streets, and
even allow themselves to eavesdrop on the telephone
conversations of citizens with no court order, have no right to
introduce themselves as the supporters of civil rights….
“Supporting the oppressed Palestinian nation, backing the aware
Iraqi nation, and upholding the stability and independence of
Lebanon, Syria, and other regional countries are common
duties…
“The current blind and brutal terrorism, which has been turned
into an excellent pretext for the occupiers of Iraq to not only
attack Islam and Muslims but also to continue the military
occupation of that Islamic country, is condemned and rejected by
the tenets of Islam.”
[Source: Tehran Times]
Later, Ayatollah Khamenei on Iran’s nuclear program.
“The Islamic Republic of Iran will not give up its undeniable
rights to peaceful nuclear technology, which has been achieved
by the talented youth of the country. The ones who are invoking
sanctions, have sanctioned Iran whenever they could…but these
sanctions have resulted in Iranian youth’s self reliance, therefore
such sanctions have no effect.”
Iran’s President Ahmadinejad:
“Unfortunately, a group of bullies allows itself to deprive nations
of their legal and natural rights. The Iranian nation is not
frightened by the powers and their noise.”
Former president Hashemi Rafsanjani, the man Ahmadinejad
defeated:
“If (the West) cause any disturbance, they will ultimately regret
it. Even if (the Westerners) destroy our scientists, their
successors would continue the job. It would not be easy for them
to solve the (nuclear) case by imposing sanctions or anything like
that.”
[Source: Daily Star]
I have long written it was too late when it comes to Iran’s quest
for the bomb. And now it’s become a matter of national pride,
uniting even otherwise foes such as Rafsanjani and
Ahmadinejad.
A survey published in the Daily Star of Lebanon may startle
some of you.
70% of Iranian students support the nuclear program. 50% said
Iran must not give into pressure from the U.S., Israel and the
European Union even if it meant war. The non-radicals are
increasingly falling in line, believing the U.S. seeks to punish the
entire nation.
To this last point, it’s why U.S. Secretary of State Condoleezza
Rice has been so careful to draw a distinction between targeting
Iran’s leaders and at the same time attempting to assure scholars,
musicians and athletes (like Iran’s Olympic team) that they
would not be penalized.
As Iran broke the seals the UN’s International Atomic Energy
Agency had placed on various facilities, British Prime Minister
Tony Blair told parliament:
“I don’t think there is any point in us hiding our deep dismay at
what Iran has decided to do. When taken in conjunction with
their other comments about the state of Israel they cause real and
serious alarm right across the world.”
So what now? The EU and United States seek to hold an
emergency meeting of the IAEA, which then needs to vote to
refer Iran to the Security Council. At this point, however,
despite Russia’s tough talk this week as they were snubbed by
Iran, too, in Tehran’s rejection of the Kremlin’s uranium
compromise (backed by the EU-3 and Washington), Russia
would likely back off from taking tough action and China has
already said it would not approve sanctions against Iran.
And sanctions could backfire, anyway; particularly with regards
to the price of oil. The World Bank has estimated that if 2
million barrels of oil were cut from global supply (by Iran,
Nigeria, Venezuela, terrorism or another natural disaster for that
matter) crude would hit $90 and cut world growth in half. The
White House and its allies understand this, thus this incredible
box we’re in.
This is going to be a lead topic for months and potentially years
to come, but for now I want to reiterate one thing. These reports
you’re hearing that talk of Iran not being able to physically build
a bomb for another five years or so are bunk. While I obviously
don’t pretend to know what the real truth is, I ask everyone to
just look at the facts and draw their own conclusion.
It was two years ago that Iran admitted to the IAEA it had been
cheating for 18 years…18 years. It’s now been 20. And we all
know Iran has potentially hundreds of facilities, scattered all over
the country, the biggest underground, that have been working on
this project.
We also know there are hundreds, if not thousands, of nuclear
scientists a la A.Q. Khan, around the world, such as in the
former Soviet Union, who could be bought off for their expertise.
And we also know the United States is in no position today to
take Iran on militarily and that Israel, as much as they are likely
to act unilaterally at some point, can’t possibly know which key
facilities to hit…especially taking into account the inevitable
retaliation that sends the entire region into a tailspin.
You could see the frustration on President Bush’s face on Friday
as he met with an equally exasperated German Chancellor
Angela Merkel. This is as complicated a situation as the
civilized world has ever faced and there are no answers as of this
moment.
Wall Street
“Investors have been lulled into a sense of complacency.”
–Morgan Stanley chief strategist Stephen Roach
The major equity averages hit new multi-year highs yet again,
but by week’s end the brakes were applied, thanks not just to the
disturbing news on the Iran front, but also the fact that the early
look at earnings, both actual and projected for the fourth quarter,
isn’t exactly sterling. From Alcoa to Dupont to Tyco to
downgrades on the likes of J.P. Morgan and Coca-Cola, all rather
large players I think you’d agree, the news wasn’t good and the
market needs time to digest the potentially rapidly changing
environment.
What if energy soars anew thanks to tension in Iran? What if
earnings growth starts to decelerate far faster than projected?
What if bird flu, still simmering, emerges as the long feared
pandemic? Some say the H5N1 virus is indeed mutating. What
if tension between the U.S. and China over how to deal with Iran
led to China dumping some of their Treasuries to send a
message? Plus countless other issues we discuss all the time in
this space.
And what to make of the continued strength in commodities?
Certainly some of it is simple supply and demand as the world
economy continues to chug along, including further signs that
Europe is finally getting its act together. But there is also a large
amount of speculation in the commodities markets as excess
capital sloshes to and fro, let alone the very legitimate concerns
on the geopolitical front, of particular interest for oil and gold
players.
I said my piece last week. Extreme caution should be exercised
these days.
But on a different topic, just a word on market history. What I’m
about to say will seem heretical for someone who pens a column
on the topic weekly as I do, but some traditional barometers such
as the “January effect” can really be tossed out the window. No
doubt, I’ll continue to comment on them since everyone else
does, but today’s markets are built on a foundation that is light-
years removed from the past, even of just 20 years ago where the
interconnectedness of today simply wasn’t a factor.
So, for example, why waste your time attempting to glean trends
from the 1950s and 1960s when you have unique problems such
as global terrorism, Iran, North Korea and China’s growing
economic power (and vaults of U.S. Treasuries) that past traders
and investors didn’t have to worry about? Sure, you had the
Cold War, but wouldn’t you rather have a Brezhnev-type figure
in Tehran rather than a certifiable nut case?
Where market history really comes into play is in looking at
individual behavior…and that’s why examples such as the tech
bubble of the late 1990s, and the roaring Twenties for that
matter, will always offer important lessons for future generations
of investors.
Then again, did you know that if the Super Bowl loser manages
to score at least 20 points, the market always goes up that year?
It’s true. And this is proprietary information, developed by your
editor, just for you.
Back to the bunker.
Street Bytes
–Stocks finished flat on the week, though technically all major
indices registered gains, including the Dow Jones, up a whopping
1/5th of one point. The Dow thus finished below 11000, at last
week’s 10959, but it spent most of its time above the figure and,
yes, of course Dow 11000 is important. Anyone who tells you
otherwise is full of it. For starters, you can’t get to 12000
without passing 11000.
–U.S. Treasury Yields
6-mo. 4.42% 2-yr. 4.33% 10-yr. 4.35% 30-yr. 4.52%
Overall, rates were little changed but that masked a late rally on
both tame inflation data and a flight to quality as Iran heated up.
Now there are those who will say the fact the producer price
index for Dec. rose 0.9% is hardly a cause for celebration, but
ex-food and energy the PPI rose just 0.1% and 1.7% for all of
2005. I feel obligated to repeat myself from time to time. Yes, I
believe the inflation data that the government feeds us is often
ridiculously out of whack with reality. On the other hand, it is
what it is, and it’s what the Fed uses to help in its decision
making process; not the pain you and I feel on items such as
property taxes, health care and education.
And I won’t be changing my own tune that when this economy
eventually flips, inflation will be a moot argument; rather we’ll
be suddenly discussing the opposite.
Finally, the White House is now projecting a budget deficit of
$400 billion for fiscal 2006. Hopefully, the world will continue
to help us in financing it. Otherwise, we’re in deep trouble.
–But the global growth outlook these days is rosy. A
government commission in China is reducing its forecast of
growth there to 8.5-9.0% for this year, but that’s still rather
healthy, to say the least, while the rest of Asia, ex-Japan, is slated
to grow about 7.5%, with Japan itself looking for 2%, still a
significant improvement.
As for Europe, it finally seems to be in a two steps forward, one
back mode. Euro manufacturing is generally on the upswing,
German employment is up, and retail sales on the continent are
running at their strongest pace in two years. There’s little not to
like as world stock markets rally in kind. Nothing, that is, except
everything else that matters.
–General Motors is slashing prices on 57 of 76 models as part of
their recovery plan. We wish them luck…they’ll need it.
–Heart device maker Guidant accepted Johnson & Johnson’s
sweetened takeover offer over Boston Scientific’s.
–Apple Computer sold a staggering 14 million iPods in the 4th
quarter, far exceeding expectations. Separately, the company
announced it was going to begin using Intel microprocessors in
its computers, making rival Microsoft’s Windows program more
accessible for those Apple users so inclined. But regarding the
iPod, I found it ironic that on the same day CEO Steve Jobs
announced the super sales, the Wall Street Journal had a story
that many experts fear iPod users will go deaf. If you’re a parent
you may want to put a little fear in your child and plant the seed
early to at least get them to turn the volume down…or take a
break from time to time.
–A Deutsche Bank derivatives trader in London covered up a
$50 million loss in collateralized debt obligations (CDOs); toxic
waste to some. There is $10s of billions of the stuff out there,
just waiting for a financial accident.
–Oppenheimer & Co. (a broker/dealer not affiliated with
Oppenheimer Funds) was charged by the NASD with
“knowingly producing inaccurate data” with regards to
“breakpoint” practices on mutual fund trades.
When the mutual fund scandal first hit a number of years ago I
had three main conclusions, having been heavily involved in the
industry before starting StocksandNews.
Market timing is not illegal as long as you follow the limitations
as spelled out in the prospectus. There is absolutely nothing
wrong with the practice and, assuming the fund is of decent size
and the portfolio manager knows about it, the cost to other
shareholders is literally pennies. [On the other hand, if $1
million is moving in and out of a $10-$20 million fund, you have
a problem.]
Late-trading of funds, though, after the cutoff, is illegal… period.
But to me the worst offense has always been not giving clients
the appropriate breakpoint on A shares when they hit certain
levels; say at $50,000 or $100,000. Broker/dealers like to say
it’s tough to track, administratively, but that’s no excuse. It’s
thievery, pure and simple. So be careful out there!
–The SEC has formalized its investigation into IBM’s
accounting, and public reporting, of its stock-option expenses
going back to April of last year when the company issued
conflicting statements that totally confused the Street. Some
analysts believe IBM jerked them around to damp down
expectations in order to cushion the blow when the actual
earnings for the quarter missed by 6 cents.
–According to the Wall Street Journal, AIG is expected to pay
more than $1 billion to settle various state and federal
investigations into its accounting scandal. A settlement would
put the whole mess behind the insurance giant, but it would not
include a deal with disgraced former CEO Hank Greenberg.
–I was watching a CNBC interview with Michael Eisner on the
former Disney chairman’s new program on the network and I
could only reach the following conclusion. This is one of the
least likeable people on the planet.
–Christopher Byron, New York Post columnist, on some of the
recent price targets being laid out there by analysts on Google.
“Will somebody please help me on this: Did the whole of Wall
Street manage to drop sideways through a trap door in the time
and space continuum six years ago?
“Apparently so, because I’m either now writing to you from
inside John Malkovich’s eyeball, or the last half-decade of stock
market history never happened.”
Shares in Google hit another high this week, $475, before closing
at $466.
–When discussing corporate retirement obligations, health care
costs often take a back seat to pensions. But Howard Silverblatt
of S&P has done some analysis and 337 of 500 companies in the
S&P 500 offer some kind of medical benefits for retirees. Only
282 of these provide sufficient information for estimates about
the retiree-health plans and Silverblatt says they are severely
underfunded, like by $292 billion to meet current obligations.
Health care costs aren’t binding, legally, like in the case of
pensions, unless they’re part of a contract, which is the case at
Ford and GM.
So the issue is what is a company’s legal obligation to fulfill its
promises? “If a company tells its employers, ‘You have to cover
99 percent of your premium,’ is that a breach?” Silverblatt asks.
No agency will step in and pay the costs, like the Pension Benefit
Guarantee Corp. does on traditional pensions. Further reason for
retirees to fret.
[Source: Associated Press]
–Steven H. Woolf, a professor of medicine, had the following
thoughts in an op-ed for the Washington Post on the wave of new
treatments and drugs being approved by the FDA. The issue
here is delivery.
“(The) promise of a cure requires an additional step: Patients
must receive the treatments promptly and properly. This step
requires a well-functioning system to deliver care, which our
country lacks. We spend far more money on inventing new
treatments than on research into how to deliver them. Last year,
Congress gave $29 billion to the National Institutes of Health,
most of it to devise better care, while the Agency for Healthcare
Research and Quality received only $320 million. Starkly put,
for every dollar Congress allocates to develop breakthrough
treatments, it allocates one penny to ensure that Americans
actually receive them.
“This imbalance in investment may cost more lives than it saves.
A recent analysis by our research team at Virginia
Commonwealth University demonstrated that developing new
treatments often does less good than ensuring the delivery of
older drugs to all those in need.
“For example, we estimated that reminding physicians to offer
cholesterol treatments to patients seen in the doctor’s office
would be seven times more effective in preventing heart attack
deaths than replacing older cholesterol-lowering drugs with more
potent medicines, such as those touted on TV. Even something
as simple as more reliably prescribing aspirin, which we have
known for a decade can prevent strokes, would prevent more
strokes than prescribing the slightly more potent new clot-
busting medicines that drug companies have spent billions of
dollars to develop.”
–Female employees at Dresdner Kleinwort Wasserstein filed a
$1.4 billion discrimination lawsuit. It’s essentially about lack of
promotions, but additionally, one managing director allegedly
brought prostitutes into the office at lunch time. If true, it’s
probably the worst thing I’ve ever heard, even for Wall Street’s
low standards.
–The other day I went out to buy a Sirius Satellite radio as a gift
and let’s just say it wasn’t easy, sports fans. The model I wanted
was sold out at the two Radio Shack stores I went to and,
frustrated, opted for a lesser one. But of course alarm bells were
going off in my increasingly overloaded brain (it’s short-
circuiting more and more recently). Howard Stern’s impact is
real and the subscriber numbers are obviously bearing that out.
–I was listening in on a conference call for my carbon fiber
holding and some of you may recall I had visited one of their two
facilities in Abilene, Texas, last spring. The other is in Hungary.
So it seems the company is having big problems finding
qualified workers in Abilene, but has an abundance of candidates
in Hungary. These are basic manufacturing positions (along with
some management types), which speaks well of Hungary and
opportunities in Eastern Europe, overall, but bodes ill for the
U.S., though I admit I may be making too much of it since
Abilene isn’t exactly the easiest place to meet your employment
needs.
Anyway, I purchased more of the stock this week…before the
rally, if you’re one who’s figured out what company it is.
–My friend Harry Koza up in Canada writes a column for Globe
Investor Gold and in a recent missive he was talking about the
old trading rule of selling a stock after it’s dropped 15 percent, a
very difficult discipline to adhere to as Harry and I can attest.
But I loved this saying of a friend of his, “If we didn’t break
rules, we’d be no better than ants.”
This year Harry vows to stick to the 15% limit.
–Lucent issued a revenue warning, not a good thing for an
already sick company. So Trader George asked me about the
lawn and I was embarrassed I hadn’t reported on this recently.
But TG, being on the commodities end of things and a long-time
resident of the general area I live in (remember I’m a few blocks
from Lucent’s headquarters), and I had a brilliant idea.
Lucent has a giant copper roof and with copper at all-time highs,
they could sell it for $millions. I’d then replace it with a FEMA
tarp, which would be appropriate given the company’s struggles.
–The Maryland Senate overrode a veto by Governor Robert
Ehrlich that requires companies with more than 10,000
employees in the state to pay a set amount for health care
benefits. The legislation, titled Fair Share Health Care Fund Act,
targets Wal-Mart, which employs 17,000 in the land of the
Terrapins. Wal-Mart already provides health care coverage for
most of its workers and now Maryland could lose a distribution
center employing 800 that the company was looking to open.
–Wall Street is passing out record bonuses this year of $21.5
billion. Many outside the industry will complain, but this is the
nature of the beast. And it’s also why the likes of Eliot Spitzer
have done investors a tremendous service in at least attempting
to hold the Street’s feet to the fire. As for New York state and
New York City, you won’t hear them complaining. The bonuses
translate into $1.5 billion in increased revenue for the former and
an extra $500 million for the latter.
–Finally, we note the passing of the great marketer Sidney
Frank, aged 86. Mr. Frank created Grey Goose vodka and
figured out a way to promote a once-staid liqueur, Jagermeister.
And the billionaire made the bulk of his fortune after turning 70.
Baby, you’ve gotta love it.
Frank was also extremely generous with various causes, as well
as total strangers from time to time.
Warning: Gratuitous Larry Ellison comment alert.
As opposed to Oracle’s Larry Ellison.
Foreign Affairs
Al Qaeda: Early in the week, Peter Brookes mused in an op-ed
for the New York Post about Osama.
“Osama bin Laden hasn’t made a single peep publicly in over a
year – his longest absence since 9/11. The ghoul’s eerie silence
is both disturbing – and odd – for the leader of a global terrorist
organization hellbent on changing world order.
“So what is Public Enemy No. 1 up to? Osama’s glaring absence
from the world stage means one of three things: a) We’ve been
closing in on him and he’s gone deeper underground; b) He’s
lulling us into complacency while planning another big terrorist
strike, or c) He’s dead.”
Brooks concludes the chances are strong it’s ‘c.’ Maybe.
But as I go to post, there is growing hope al Qaeda”s #2, Ayman
al-Zawahiri, was killed by a Predator aircraft that targeted him
in a Pakistani village on Friday. This would indeed be a huge
victory. We should know shortly.
Iraq: Back on October 15 when voters approved the Iraqi
constitution, the Sunnis were promised they would be able to
offer amendments following the Dec. 15 vote and the seating of a
permanent parliament. The move was made by the ruling Shia
and Kurds in an attempt to gain their cooperation and
participation.
So it was distressing to see Shia leader Abdul Aziz al-Hakim say
this week that there will be no broad changes to the document.
Hakim merely wants to strengthen the autonomy of the oil-rich
Shia south and the equally resource-wealthy Kurds in the north.
That of course leaves the Sunnis with some dirt and sand, instead
of a strong central government that shares the riches.
None of this is actually new, but amidst the negotiations we’ve
been told are taking place between all parties, Hakim goes out
and further roils the waters.
Meanwhile, the U.S. military is pinning its hopes on a possible
split in the insurgency as clashes have flared between al Qaeda
Iraq and various native movements. This is promising.
As for President Bush’s level of support, the ‘Military Times’
does an annual survey that reflected falling numbers for him
with only 54% of active duty soldiers viewing the president’s
performance in Iraq favorably. When you consider who’s being
polled, this isn’t good.
And it didn’t help that in a separate U.S. Army publication,
‘Military Review,’ a British Brigadier who has been leading
forces in Iraq has a story accusing the U.S. of “institutional
racism…and cultural insensitivity.” U.S. authorities strongly
dispute this but the timing was terrible.
Russia: Frankly, I was startled that an op-ed in the Wall Street
Journal by Russian defense minister, and deputy prime minister,
Sergei Ivanov, didn’t receive more press. One can’t help but
read it and be deeply disturbed. Excerpts:
“National security is a crucial task for Russia, a country so
greatly endowed with territory and natural resources. Our
military strategy is, therefore, focused on creating the ability to
respond to the external, internal and cross-border challenges of
the 21st century.
[That’s the opening paragraph. I’m immediately thinking this is
going to get ugly…and it does.]
“We have seen a steady trend pointing at a broader scope of use
of military force recently, not least because more challenges to
national security have emerged. Chief among them is
interference in Russia’s internal affairs by foreign states – either
directly or through structures that they support – and the attempts
of some countries, coalitions and extremist terrorist organizations
to develop or gain access to weapons of mass destruction. We
must also be prepared for the possibility of a violent assault on
the constitutional order of some post-Soviet states and the border
instability that might ensue from that. Arms and drugs
trafficking and other kinds of cross-border criminal activity must
be closely watched.
“None of these threats shows any sign of abating. Everyone
knows that when it comes to war and conflict-prevention, Russia
always goes first for political, diplomatic, economic and other
nonmilitary means. But maintaining a robust military capacity is
clearly in our national interests.
“The primary task for the armed forces is to prevent conventional
and nuclear aggression against Russia. Hence our firm
commitment to the principle of pre-emption. We define pre-
emption not only as a capability to deliver strikes on terrorist
groups but as other measures designed to prevent a threat from
emerging long before there is a need to confront it….
“Russia is not itching for a future war. War is never by choice.
Right now, there is no conflict or dispute outside the country that
could be seen as a direct military threat. However, to ignore the
future is irresponsible. We need to look several moves ahead –
on all levels, from future military planning to a strategic vision of
the future of armed conflict….Our top concern is the internal
situation in some members of the Commonwealth of Independent
States, the club of former Soviet republics, and the regions
around them.”
[No, this isn’t about Chechnya, friends. Ivanov is directing his
comments directly at the likes of Poland, as well as nations such
as Georgia, Moldova and Ukraine that have turned west.]
Ivanov also goes into some detail on Russia’s weapons
advancements and what’s on the drawing board. Then he
concludes:
“We are not saber-rattlers. Russia’s political and military leaders
perceive the use of force as a last resort, to be used only when
and if all other channels are hopelessly congested. Cooperation
with international institutions helps promote a foreign policy
agenda, though unfortunately it does not provide absolute
security guarantees. For those, a state needs a highly effective
military capability. Russia deserves a fighting force of the 21st
century, a force that will look into the future but will at the same
time continue its glorious military tradition.”
President Vladimir Putin recently selected Ivanov to be a co-
deputy prime minister and a possible (though not probable)
successor should Putin opt to step down when his term expires in
2008. Ivanov is said to be a humorless and nasty person, by all
accounts. [Similar to some descriptions of Putin, actually.]
With everything else going on in the world, the above is more
than a bit troubling. As are Russia’s ongoing maneuvers in the
energy field, even if Russia and Ukraine have reached a
temporary agreement on the natural gas front. The fact that it is
supposedly just for six months led to a vote in Ukraine’s
parliament to oust the government, though parliamentary
elections are slated for March anyway. Former Prime Minister
Timoshenko, who feels she was booted out unfairly, is causing
President Yushchenko big problems and admittedly Yushchenko
has been a disappointment.
Meanwhile, Gazprom shut off gas to Moldova on Jan. 1 and as of
this writing hasn’t resumed supplies, while Gazprom (read the
Kremlin) and Bulgaria are also in the midst of intense
negotiations since Gazprom wants to hike the price of gas here
from $87 to $257. [Gazprom in turn does pay a transit fee to
Bulgaria for gas moving on to Greece and Turkey.]
Here are two commentaries related to the above. First, Georgian
President Mikheil Saakashvili in an op-ed for the Washington
Post.
“Russia uses not only its energy supplies but also the vast energy
transportation network that former Soviet states inherited – and
depend on – to exercise energy control. For example, when
Russia demanded steep price increases in natural gas from my
country, we approached Kazakhstan and reached a preliminary
agreement to purchase gas from it at a genuine market rate. But
Russia’s Gazprom refused to allow shipment through Russian
territory, thereby scuttling the deal. It gets worse. The E.U.
should take note that in December 1999 Georgian natural gas
from Russia – our sole supplier – was cut off for no reason in the
dead of winter and was restored only through U.S. intervention…
“For Georgians, our path is clear. We are moving aggressively
to diversify our energy sources and transportation networks….
We are willing to work closely both with our European partners
and with Russia to make the whole system transparent,
predictable and immune to – or insulated from – political
shocks.”
And Irwin Stelzer of the Hudson Institute, an op-ed from the
London Times:
“Putin kept a straight face when he announced that his
willingness to restore gas supplies (in Ukraine) proved that
Russia was a reliable supplier. Never mind that it was on his
orders that Gazprom cut off supplies to Ukraine, and by
extension to Germany, France and other countries, despite
contracts that run until 2009.
“Remember: this dispute was not only about prices. Belarus, the
former Soviet republic that elected to stay within Russia’s sphere
of influence, has not faced the heavy price increases that
Gazprom has imposed on the more western-oriented Ukraine,
Georgia and Moldova.
“Putin’s message is clear: Russia’s energy resources, now
completely under state control, provide it with a new weapon,
petropower – and he will use it to restore Russia’s influence to
the level it enjoyed when it was a superpower….
“Cutting gas supplies to Europe had no direct effect on America.
But it served as a warning that what is left of the nation’s energy
security strategy is in tatters. The Bush administration had hoped
that Iraq would return to world markets as a large, American-
friendly oil producer. The Pentagon had predicted that Iraq
would ratchet up its production to more than twice the pre-war
level of 2 million barrels a day. In the event, output has stalled at
a little more than 1 million barrels….
“The second strand of Bush’s policy was to persuade Congress to
open up parts of Alaska for drilling. Congress refused.
“Finally, the White House sought to reduce its exposure to OPEC
by increasing purchases from Russia. That, too, has come a
cropper: Putin has invited OPEC representatives to a meeting to
coordinate their policies with his.”
Plus you have Venezuela, one of America’s top oil suppliers.
More on President Hugo Chavez and his maneuvering below.
Lastly, Putin’s good buddy, Belarus President Lukashenko,
moved up elections in his country by six months in order to
prevent the opposition from gaining momentum. Of course it
was illegal, but in Belarus totally predictable. After all, if you
just make fun of Lukashenko you can receive a two-year prison
term.
Israel: Not much to say here this week as Prime Minister Ariel
Sharon’s recovery is measured by brain wave activity for the
most part. We are less than two weeks away from the Palestinian
parliamentary elections and Israel is going to allow Arab
residents in Jerusalem to vote. With the Palestinian Authority of
President Mahmoud Abbas both financially and politically
bankrupt, Hamas is prepared to fill the void.
Lebanon: The following account on Lebanon’s cabinet crisis is
important in that Druze leader Walid Jumblatt launched a
blistering attack on Hizbullah, questioning its determination to
keep its arms forever.
“To those who hold the rifle today we say, ‘thank you, the South
is free.’ (But) to whom is your allegiance now, Lebanon or other
countries?”
“We don’t’ want to be in the middle of an axis that starts in the
Mediterranean and ends in Tehran,” referring to Shia-Hizbullah’s
relations with Syria and Iran.
Jumblatt blasted Shia ministers who walked out of a cabinet
meeting in early December and haven’t returned since.
“We tell them you left the meeting maybe to escape, because the
Syrian regime does not want an international tribunal,” he said.
“We knew when we asked for an international tribunal the ruler
of Damascus will not accept it. If they want the truth, why are
they dodging the call for an international tribunal?”
Then Jumblatt addressed the bombings.
“There are ‘security islands’ that harbor a load of wired cars…
and as we all know, the state cannot investigate or interrogate
people in some of the areas inside these security islands.”
These security islands are just a few miles from Beirut’s city
center.
Hizbullah MP Hassan Fadlallah decried Jumblatt’s statements. It
is necessary to refrain “from insulting institutions that enjoy
respect and admiration within a vast majority of the Lebanese.
No matter how stiff and tense the political situation gets, we will
maintain our national identity. No matter what happens, the
weapon of the resistance has one direction, and that is the Israeli
enemy.”
[Source: Daily Star]
China: Following are some musings on disparate issues.
This week Taiwanese prosecutors indicted two former officials
of United Microelectronics Corp, one of Taiwan’s most
prominent companies and a competitor of Taiwan
Semiconductor. And wouldn’t you know it, guess what the
reason was? One of my favorite topics. Allegedly the
executives helped set up another semiconductor company in
China.
From Jason Dean of the Wall Street Journal:
“The probe has mushroomed into a bitter public feud between
UMC and regulators, highlighting broader tensions between
Taiwanese executives eager to do business in China and officials
who are concerned the island is becoming overly dependent on
its political adversary.”
While prosecutors say they found no evidence UMC provided
funds to the mainland company, He Jian, they found “substantial
evidence” UMC provided the technical know-how.
This is a perfect illustration of my long-held concern and it
obviously extends to technology transfers (stolen or otherwise)
from U.S. companies to China as well, including during the
administration of President Bush’s predecessor.
Speaking of which, Defense News opined in an editorial about
the tremendous strides China’s military has made.
“After 25 years of concerted effort to improve its defense
industrial base, China is turning out products of a sophistication
and quality that have surprised American analysts.
“A new report by the RAND think tank…concludes that the
conventional wisdom that country’s defense industry is rife with
weaknesses and inefficiency is outmoded….
“There are several reasons for China’s gains, especially in
aviation, shipbuilding, missiles and information technology. Its
rapidly growing economy underwrites substantial defense
investment. Low labor costs make for a manufacturing haven
and magnet for sophisticated technologies. Chinese academics
and workers are schooled at the finest universities around the
world. And the country has had limited but consistent access to
defense technologies from Russia, Israel and other countries.”
This debate has much to do with our own defense industry, both
from a commercial as well as strategic standpoint. Defense
News:
“While once the U.S. market bulged with competition in nearly
every market, the future will look starkly different. A decade
ago, there were eight U.S. firms that built combat aircraft, but
now there are just two, and within a decade only Lockheed
Martin will remain.”
These days, Britain is an example of a country that recognizes it
needs more competition and is taking the steps to address this.
Washington needs to get its act together.
Then there’s the pollution issue in China. Communist leaders are
slowly beginning to realize they have a huge international
problem unless they take care of it quickly. China’s neighbors,
for example, are growing increasingly testy. And did you know
that half the world’s population lives in river basins which have
their source in China? [Reuters / Leo Horn of Britain’s
Department for International Development] Although most of
the major rivers such as the Mekong have escaped the worst of
the pollution thus far, the author of a book titled “China’s Water
Crisis,” Ma Jun, says “the sheer scale of our economic expansion
means that in remote areas, activities will increase and problems
will only get worse.”
Lastly, on a lighter note, though not really to some, you have this
flap between China and Taiwan over pandas.
Officials in Taipei accused Beijing of “disrespect” and “pro-
unification political warfare” after Beijing announced it was
giving Taiwan a pair of pandas.
So why is this an issue? Because China no longer gives pandas
to foreign countries, ergo, this move bolsters China’s claim that
Taiwan is sovereign territory.
Joseph Wu, chairman of the Mainland Affairs Council, Taiwan’s
cabinet-level China policy body, attacked the propaganda move.
“They unilaterally announce the pandas will be sent over here in
June, without having discussed the matter with Taiwan’s
government….That is very disrespectful.”
[Source: Financial Times]
Well, over the course of history wars have been started over
women, why not one over some cute and cuddly bears?
Venezuela: Related to my above discussion on U.S. energy
security, Mary Anastasia O’Grady commented on the growing
Tehran-Caracas axis, another worrisome development. But for
now, let’s just focus on how Venezuelan President Hugo Chavez
has mishandled his vast oil riches. Ms. O’Grady writes:
“That Chavez is making a hash of the Venezuelan economy
while he courts international notoriety is no secret. There are
shortages of foodstuffs that are abundant even in other poor
countries….
“Property rights are being abolished….
“(And last week) a bridge collapse on the main artery linking
Caracas to the country’s largest airport, seaport and an enormous
bedroom community is seen as a microcosm of the country’s
failing infrastructure. Aside from the damage to commerce, it
has caused great difficulties for the estimated 100,000
commuters who live on the coast, Robert Bottome, editor of the
newsletter Veneconomy, told me from Caracas on Wednesday.
The collapse diverted all this traffic to an old two-lane road with
hairpin turns and more than 300 curves. It is now handling car
traffic during the day and commercial traffic at night, with
predictable backups.”
[Just had to throw that one in for all you facing horrific
commutes of your own.]
Separately, Spain and the U.S. are now at loggerheads over the
Spanish government’s sale of 12 military aircraft to Chavez.
Chile: The nation’s runoff for president is Sunday, with center-
left Michelle Bachellet attempting to become the country’s first
woman president.
Bolivia: President-elect Evo Morales continues to startle some of
us, much like Hugo Chavez. Morales, who has been
globetrotting since his election, was in China looking to sell the
communists some of Bolivia’s natural gas. And so Morales felt
obligated to say he was a “great admirer of Mao and his
proletarian revolution.” Little Evo doesn’t have a real good
grasp on history, unless he wants to turn his own country into a
patch of dirt with Bolivians snitching on each other.
Haiti: What a mess. The Brazilian general who was
commanding UN peacekeeping forces here committed suicide
after failing to restore order following the rebellion of two years
ago. During Christmas week alone, there were 12 kidnappings a
day and 10 UN soldiers have now been killed in the line of duty.
Sri Lanka: Yet another troubling story because of what it says
about today’s threats. A Tamil rebel suicide bomber rammed an
Army gunship with a speedboat packed with explosives, killing
at least 13 sailors. I’m assuming all of our own naval forces
remain on full alert for such an occurrence, a la the USS Cole.
Or cruise ships.
Canada: Hey, there’s an election here in less than two weeks.
Sorry for not doing any homework on it.
North Korea: And last but far from least, Kim Jong il is on his
mystery train, supposedly somewhere in China and possibly
heading to Russia. He doesn’t get out much, but if you should
happen to bump into him, ask him how many nukes he’s up to.
I’d just be curious.
Random Musings
–Tom DeLay gave up his quest to regain his House majority
leader position as a result of the Jack Abramoff scandal. The
battle to succeed him is filled with lightweights.
–Sam Brownback, a conservative senator from Kansas, opined
on “This Week” that “the Senate did not give Bush authority for
surveillance” in the manner which the White House is alleged to
be conducting it. I only bring this up because I was shocked Sen.
Brownback said this without batting an eye. He’s a sleeper
candidate for president and a favorite of the evangelicals.
–Last week I criticized some of the commentary of Ret. Lt. Col.
Ralph Peters who pens an op-ed for the New York Post. This
week I can’t help but include his thought on eavesdropping.
“My fellow Americans, the real threats to your information
security are Google, eBay, chat rooms, credit applications, junk
mail, etc. And the Democratic National Committee holds vastly
more information about individual American citizens in its files
than do all of our intelligence agencies combined.”
In the interest of fairness I’d add the RNC, as well. But his point
should be well taken.
–Ordinarily I wouldn’t spend much time on a Supreme Court
nomination because it is already covered to death. But I thought
I’d share a few opinions from the major media outlets on the just
concluded hearings on the nomination of Judge Samuel Alito.
What an embarrassment this circus was.
Janet Hook / Los Angeles Times:
“Even without fireworks, a high-profile hearing such as this one
– held before a sea of cameras – is hog heaven for publicity-
conscious senators. Rare is the legislator who passes up the
chance to question the nominee on national television, even if the
question has already been asked.
“ ‘Since the politicians seem to have made up their mind, and the
rest of this is simply playing out, I suspect that if there weren’t
TV cameras, this part of the hearing would be over by now,’ said
Sen. Jon Kyl (R-Ariz.).
“Sen. Joseph R. Biden Jr. (D-Del.), who is thinking about
running for president in 2008, found a sure-fire gimmick to get
the cameras turned on him. Discussing a controversial Princeton
University alumni group of which Alito was once a member,
Biden clapped on a Princeton baseball cap. Every camera in the
room swung to him, and the sound of shutters clicking was
deafening.
“Sen. Charles E. Schumer (D-NY.) also understood the value of
props in a hearing as dry and legalistic as this one. He pulled out
and waved a pocket-sized copy of the Constitution. Again,
cameras clicked.
“Republicans had props of their own. Responding to Democrats’
claim that Alito was being evasive and refusing to answer key
questions, Kyl displayed a poster with quotes from the day’s
newspaper articles describing him as a forthcoming witness.”
And on and on and on.
David Brooks / New York Times:
“Then there were the old accusations of bigotry. Kennedy
misleadingly and maliciously asserted that Alito had never
written a decision on behalf of an African-American. But those
wild accusations don’t carry weight any more. Rich liberals have
been calling white ethnics bigots for 40 years.
“Finally, and most important, there is the question of demeanor.
Alito is a paragon of the old-fashioned working-class ethic. In a
culture of self-aggrandizement, Alito is modest. In a culture of
self-exposure, Alito is reticent. In a culture of made-for-TV
sentimentalism, Alito refuses to emote. In a culture that
celebrates the rebel, or the fashionable pseudorebel, Alito
respects tradition, order and authority.
“What sort of party doesn’t admire these virtues in a judge?
“The big story of American politics, which was underlined by
every hour of the Alito hearings, is that sometime between 1932
and 1968, the DNA of the Democratic Party fundamentally
changed. In 1932, the Democrats had working-class DNA.
Today, the Democrats have different DNA, the DNA of a
minority party.”
And then there was the Vanguard mutual fund issue. Alito, who
has some personal accounts with the fund giant, had pledged to
recuse himself from any case involving Vanguard going back to
1990, but then heard a case in 2002 involving the firm. I can’t
say I’m fired up when anyone breaks a pledge, but leave it up to
former Vanguard Chairman Jack Bogle himself to spell it out
correctly, as told to the Wall Street Journal.
“Could this bit of trivia conceivably disqualify a nominee for the
United States Supreme Court? My God! If this nation has lost
that much of its perspective and common sense, maybe such
idiocy would bring us to our senses.”
Lead editorial in the Washington Post:
“Democratic senators often seemed more interested in attacking
the nominee – sometimes scurrilously – than in probing what sort
of a justice he would be. Even when they tried, their questioning
was often so ineffectual as to elicit little useful information.
Republican senators, meanwhile, acted more as fatuous counsels
for the defense than as sober evaluators of a nominee to serve on
the Supreme Court. On both sides, pious, meandering speeches
outnumbered thoughtful questions. And the nominee himself
was careful, as most nominees are, not to give much away. The
result is that Americans don’t know all that much more about
Judge Alito than they did before.”
Well, I can’t say I agree with that last line, seeing as anyone
interested can read his voluminous pile of prior decisions, but I
just wanted to present all sides of the debate.
For us Republicans, Scott P. down in Florida put it best.
“One can only hope that the voting public witnessed the farce.”
Democrats were huge losers this week, particularly Joe Biden.
Goodness gracious, I’ve respected some of his work in the past
on the foreign policy front (when he’s not in the midst of an
election cycle), but this senator is totally out of control. And,
amazingly, he doesn’t see it himself. Then again, they never do.
— A growing body of research concludes that “people who play
violent (video) games are more aggressive, more likely to
commit violent crimes, and less likely to help others.” [Sam
Lister / London Times] Critics argue this can’t be proved, but
scientists at the University of Missouri purport to have the causal
links.
–The American College of Chest Physicians (is that a 4-year
school?) has concluded over the counter cough syrups don’t
work. So kids, be prepared to combat the force-feeding of it as
mothers are wont to do.
–I hope their baby is healthy when it arrives, but wouldn’t it be
funny if the offspring of Angelina and Brad looks like Marty
Feldman?
–Angelina is threatening to adopt a child from each continent, so
I’m assuming that includes Antarctica. In other words the whole
premise behind “March of the Penguins” is becoming clearer to
me. In their ongoing effort to steer clear of leopard seals, it’s
really a dry run for when Brangelina arrives to whisk one of
them away.
–My state of New Jersey has been looking for a new slogan.
And the winner is……… “New Jersey: Come See for Yourself.”
Granted, I couldn’t come up with anything better, but this will
only lead to more jokes.
I did, however, like one entrant I saw early in the process.
“New Jersey: How you doin’?”
–Incredibly, on January 10, a Louisiana delegation traveled to
the Netherlands to learn more about the flood protection and levy
system employed here. I say incredible because they should
have gone months ago.
–But President Bush just took his ninth trip to the Katrina zone
and was full of peppy talk. It proved to be another
embarrassment as the level of his cheerleading was totally
inappropriate.
And having recently traveled to the region myself, I feel slightly
qualified to comment. Rather, more to the point is the comment
in the Journal of Don Powell, the administration’s former FDIC
chairman and the White House’s point man on reconstruction.
“Once we get this debris removed, everybody will feel better…
The labor will come along if we get this debris stuff going.”
I’ve been writing about this since my return. We need a
Marshall Plan just to clear it. Nothing else can take place until
then. Today, any other talk is cheap. As for the trash dump fire
in New Orleans hours after the president left, that just wasn’t
fair.
Along these lines, I received a letter from a parishioner at
Christus Victor Lutheran Church in Ocean Springs, MS, the first
place I visited as I wrote at the time of my trip in December.
“Our children appear to have aged years in the few short months
since the hurricane. Everyone here that still has a job is now
working two full-time jobs. One during scheduled work hours at
whatever trade or occupation they work at. The other that
consumes just as much time and usually more energy than most
of us are used to expending is the job of filing insurance claims
and repairing our homes. Many of our local residents are also
making time to volunteer to help others still in need.”
Debra M. went on to say the most frustrating, and depressing,
thing is the mile upon mile of devastation, over four months
later. The loss of the main roads and bridges I wrote of is
hampering rebuilding efforts in a huge way.
But at least Debra concludes, “We may not have bounced back
yet but we are on our feet.”
–Finally, I’m one of those who always marvels at a full moon or
the stars on a clear night. So I was reading an AP piece in the
Star-Ledger on Friday about the New Horizons spacecraft that is
slated to lift off on Tuesday, destination Pluto and beyond.
It will take only nine hours for it to reach the moon, but then a
year to reach Jupiter and a full nine years before it approaches
Pluto…3 billion miles from earth.
And then the craft, if all goes well and it’s not commandeered by
Klingons, heads for the Kuiper Belt, the great unknown at the
outer limits of the planetary system.
I know NASA is under fire these days, and no doubt you can
have an honest debate on priorities as our deficits mount, but
you’ll never convince me that a robust space program isn’t in our
national interests, as well as those of human kind.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $556
Oil, $63.92
Returns for the week 1/9-1/13
Dow Jones +0.0% [10959…up a fraction of a point]
S&P 500 +0.2% [1287]
S&P MidCap +0.5%
Russell 2000 +1.3%
Nasdaq +0.5% [2317]
Returns for the period 1/1/06-1/13/06
Dow Jones +2.3%
S&P 500 +3.2%
S&P MidCap +3.9%
Russell 2000 +5.2%
Nasdaq +5.1%
Bulls 56.8
Bears 22.1 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
