[Posted 7:00 AM ET]
Iran, Iraq and Israel
The five permanent members of the UN Security Council (U.S.,
Britain, France, Russia and China) agreed on a statement
demanding Iran cease its uranium enrichment activities within 30
days. But Russia and China were adamant that the International
Atomic Energy Agency handle the issue and so after this period
the IAEA will report back for possible action among the full
Security Council.
In other words, don’t hold your breath looking for sanctions and
the threat of military action. Iran is sitting pretty and their
brilliant delay game has worked to perfection; especially since
the IAEA’s Mohamed ElBaradei said on Thursday that the
country’s nuclear program did not represent “an imminent
threat” and that it was time to “lower the pitch” of debate. [L.A.
Times] ElBaradei went on to tell a forum in Qatar:
“There is no military solution to this situation. It’s
inconceivable. The only durable solution is a negotiated
solution.”
But earlier in the week, the Los Angeles Times reported that
IAEA officials, in briefing the Security Council, said Iran was
less than three years from having the bomb, not the 5-10 so many
claim. The key is centrifuges and the role they play in the
enrichment process.
I’ve been meaning to point this out the past few weeks but on the
centrifuge issue I wrote the following August 13 of last year.
“The mullahs ripped the seals off the vats, right in front of the
eyes of the International Atomic Energy Agency, and, thumbing
their noses at the rest of the world, restarted the uranium
enrichment process at Isfahan. Iran called the Euro-3’s proposal
‘unacceptable’ and then the IAEA adopted a resolution
demanding immediate cessation of all nuclear weapons-related
activity, but for now it failed to recommend going to the UN
Security Council.
“An exiled dissident, who exposed the nuke activity in 2002 that
Iran had been hiding for 20 years, now says Iran has
manufactured 4,000 centrifuges the IAEA doesn’t know of. The
agency basically admitted as much this week in calling for more
time to snoop around.”
Two weeks later, 8/27/05, I quoted noted weapons expert Gary
Milhollin from an op-ed in the New York Times.
“Consider this: American intelligence agencies completely
missed Saddam Hussein’s giant machines for processing uranium
to weapons grade before the Persian Gulf War in 1991. Then,
overreacting to that mistake, these agencies wrongly reported
that there were weapons of mass destruction in Iraq before the
2003 invasion. Now, they appear to be overreacting to their last
overreaction by underestimating the threat from Iran.”
Milhollin’s conclusion last summer was that Iran was within two
years of having the bomb. I then wrote the following from my
own observations.
“The explanation is too technical for this space but I’ve seen the
Iranian government’s own video of their nuclear program and on
this promotional tape they actually show the ‘cascading effect’
(from the centrifuges) that is a necessary step in the process.”
The past few weeks I’ve been trying to remember exactly where
I saw this tape but it was during my overseas travels. The point
being we keep hearing from some quarters that Iran is not far
along on the centrifuge front and I’m here to tell you they are.
And yet here we are…seven months later and still far from a
consensus. That’s pitiful.
Equally pitiful have been Iraqi efforts to form a government and
for now the key here is that the Bush administration does not
want to see Ibrahim al-Jaafari remain as prime minister, while
Jaafari is adamant he stay in telling the New York Times that
Washington should stop interfering.
The issue here is the fact Jaafari has an alliance with Ayatollah
Khomeini wannabe Moqtada al-Sadr and his Mahdi Army.
Sadr’s militia peoples the Iraqi police and security forces; not
exactly the kind of relationship we wanted at the top of the
political structure when we went nation building.
And when it comes to infiltrating the security forces,
increasingly gunmen, wearing military uniforms, have been
going into businesses, taking out the employees, and shooting
them. The U.S. military’s worst fear is another large-scale attack
on American personnel, perpetrated by impostors.
There’s another big problem looming on the horizon. Kurdish
unrest in southeastern Turkey has been rapidly increasing and
this past week at least three died in demonstrations surrounding
funerals of PKK (Kurdish separatists) after Turkish troops killed
at least 14.
Kurds in Turkey, Syria and Iran see how well their brethren are
doing in Iraq in moving towards an independent state and they
want to be part of a larger Kurdistan. Of course neither Turkey,
nor the other two, is about to let that happen and any broader
conflict here spells defeat for a united, however loosely, Iraq.
Lastly, I’m disturbed by the level of incidents being investigated
concerning the conduct of U.S. operations, such as the attack
from last November that killed 15 Iraqi civilians. It’s a touchy
subject and I think about it every week in writing this
commentary. Our men and women, and those of the coalition,
are fighting under conditions never before encountered on the
battlefield and the military is also forced to rely on imperfect
intelligence. Other aspects bother me but I need to keep those to
myself.
Meanwhile, in Israel, the political party that Ariel Sharon
founded, Kadima, didn’t do nearly as well as expected in
Tuesday’s election; capturing just 28 of 120 seats in the Knesset.
So just as in the case of Ukraine (see below) a messy coalition
will be the result with acting Prime Minister Ehud Olmert forced
to bring in partners such as Labor, ultra-Orthodox Shas, and the
Pensioners, a new party representing the elderly that stunned
political observers in capturing 7 seats in its first election.
Olmert will thus lead a centrist, center-left coalition committed
to withdrawing from much of the West Bank and unilaterally
redrawing the borders, the policy of “disengagement” from the
Palestinians.
Speaking of whom, Hamas formally took the reins of
government and showed no signs of wanting peace; so, Hamas
will continue to receive just a trickle of the aid it desperately
needs as Israel, the European Union and the U.S. cut off the flow
of funds except for the barest of humanitarian reasons.
Wall Street
Last week I noted some remarks of mine from last August (WIR
8/13/05) when I was musing whether or not we were “in a race
against time,” referring to the global economy. Would others
step forward to pick up the ball from the U.S. and China if the
two of us were to stumble? The economy in both today is just
fine, but, yes, now Japan and Europe are rebounding as well.
Japan’s unemployment rate is down to 4.1% and consumer prices
rose for a fourth straight month. Deflation here is but a memory
and the Tokyo Nikkei index is at a 5-year high, over 17000.
While in Europe, business and consumer confidence is soaring,
despite France’s issues.
The World Bank weighed in with its forecast for growth in Asia,
ex-Japan. Indonesia / Philippines / Malaysia / Thailand, up an
est. 5.3% in 2006; China up 9.2% (the government is targeting
8.9%); Vietnam’s GDP up 8%; Hong Kong 5.3% (slip from
7.3% in ’05); South Korea 5%, Singapore 6% and Taiwan 4%.
Pretty solid prospects. And look at the early 2006 equity
performance in some world markets through March 30
(Thursday).
Argentina +17%, Brazil +12%, India +20%, U.K., France and
Germany +10 to +12%, Spain +12%.
The Dow Jones World index, ex-U.S., was +9.5%.
So what’s not to like?
How about energy and interest rates?
Well, yours truly was one of those once saying ‘$40 oil will kill
the economy.’ Then it was ‘$50 oil will kill the economy.’ Then
it was $60. Sure, it hurt, especially for the developing world in
East Asia and the airline industry. But damage has obviously
been limited.
What about interest rates? Despite the recent moves up in yield,
in the developed world they are still at historically low levels.
Here in the U.S., if you asked Corporate America or a
homebuyer 10 years ago if they’d like to see a 10-year Treasury
with a yield of 4.85%, as it is today, they’d have said “Sign me
up!”
But these days it’s the trends that are disturbing and global
interest rates are rising as inflation ticks up. Those increases in
Japanese consumer prices, for example, spell the end of zero
short-term interest rates for that nation, and the European Central
Bank will keep raising its benchmark rate because euro-zone
inflation is running above the ECB’s 2% target.
And then there’s the Federal Reserve. Chairman Ben Bernanke
oversaw his first meeting and took the opportunity to raise the
funds rate a 15th consecutive time, another ¼-point to 4.75%.
But it was the accompanying statement everyone was looking
for. Would the new chairman change the language used by his
predecessor, ol’ what’s his name? [We have fleeting memories,
you understand.]
“Some further policy firming may be needed to keep the risks to
the attainment of both sustainable economic growth and price
stability roughly in balance….The run-up in the prices of energy
and other commodities appears to have had only a modest effect
on core inflation.”
But the Fed also added:
“Possible increases in resource utilization, in combination with
the elevated prices of energy and other commodities, have the
potential to add to inflation pressures.”
Put it all together and the market now expects yet another rate
increase to 5% on May 10 and possibly one on top of that in late
June. If you’re a saver and/or investor in “cash,” you enjoy
seeing your money market fund yields continue to rise; as is
the case with yours truly. Staying ultra short on the yield curve
has been a good bet, in other words. But those investing in
longer maturity paper are getting whacked.
So about now you might be thinking, hey, Mr. Editor, what about
your long-held ‘deflation’ forecast? Looks pretty foolish, you
moron. [It’s a rough crowd I have to deal with.]
For now, yes, particularly as commodities rocket to either record
or 20+ year highs as in the case of gold, silver and copper. I look
pretty darn stupid.
But the higher we go, the harder the fall and when this economy
flips, and it will, it will do so with a vengeance. Deflation will
yet reenter the lexicon, of this I’m sure.
And for those of you playing the emerging markets game, I have
two thoughts.
First, congratulations. Second, consider this item I read in the
Santiago Times.
“The average Chilean owes 7 ½ months pay in credit cards, a
staggering financial toll for many.” 42% are “unsure” whether
they will ever be able to pay the debts, an equally staggering
percentage. [In contrast, the average American has built up less
than three months of credit card debt; though still way too high
for comfort.]
The point being Chile is the best overall economic story in Latin
America in terms of both growth and stability, so imagine what’s
happening elsewhere, including in parts of Asia where the
consumer is beginning to spend again. Believe it or not, credit
cards are a pretty recent phenomenon in much of the world. In
other words, there’s a lot of future pain out there.
Plus there’s this. China has now passed Japan in foreign
currency reserves, some $850 billion worth thanks to its soaring
exports. We don’t want to tick them off too much on the trade
front. As much as China might deserve it, those talking of
protectionism and tariffs can’t possibly be contemplating the
consequences should Beijing decide to play hardball with their
reserves, thus roiling both the dollar and our bond market.
No, this nirvana global environment of soaring equity markets
and strong growth does have a downside. But the experience
with $40, $50, and $60 oil should leave most experts scratching
their heads as to what level of interest rates, or oil prices, will
finally translate to real damage, not just here but abroad.
And here’s where I attempt to come full circle. We know
housing is stagnating, though any damage is thus far contained.
We also know that those holding adjustable rate mortgages are
going to be shocked at the increase in their monthly payments.
But Japan and Europe are beginning to pick up their share of the
load and if they buy more of our products and help keep
Americans employed, that certainly limits the damage from any
serious decline in housing, even if Americans retrench in their
own spending as a result of seeing their primary asset lose value.
In a nutshell, unless you’re a pigeon in France, constantly getting
bombarded by water cannons, it’s not that bad a time,
economically speaking. In fact it’s pretty darn good for a lot of
people. Just make sure your parachute has been packed
correctly for when it’s time to jump.
Street Bytes
–What a first quarter. It was the best since 1999 for the S&P
500, +3.7%, and the best since 2000 for Nasdaq. If you’re an
optimist, opt for the 1999 example because that means this rally
has further to run. If you’re a pessimist, recall that first quarter
of 2000 was it.
But how about the Russell 2000, up a gigantic 13.7% to yet
another all-time high. It was the small cap index’s best opening
performance since 1991.
So now that the quarter is over, what do we have to look forward
to on the earnings front? Another double-digit gain, something
in the order of 11%, which also happens to be the estimate for
profit growth on the S&P for all of 2006. Or so they say.
–U.S. Treasury Yields
6-mo. 4.81% 2-yr. 4.82% 10-yr. 4.85% 30-yr. 4.89%
Yields soared over the prior week with the 10-year increasing 18
basis points. They would have been higher still had it not been
for a so-so February number on consumer spending.
–The big business story on Friday was auto parts supplier
Delphi’s request of a bankruptcy court judge to void its labor
agreements. While anticipated, it is still a harsh reminder of the
new global environment for the American work force; the days
of cushy contracts and benefits are history. Delphi receives half
its revenues from GM and for its part GM is required to meet
some of Delphi’s pension obligations. The court, though, won’t
be ruling on Delphi’s request until around May 10 and
negotiations will continue in the interim. Any strikes on the part
of Delphi workers, who face huge cuts in wages and benefits,
could cripple GM with one expert estimating the automaker’s
losses at $130 million per day should they be unable to receive
parts and have to shut down production.
–Russia’s Gazprom wants to boost its share of the European
natural gas market from 25 to 30 percent; just what Europe does
not want. Gazprom, in an internal report, is seeking to
accomplish this through acquisitions. More on this topic below.
–Migrant workers from Latin America and the Caribbean sent
home $53.6 billion to families in 2005, up 17% from 2004.
–The Transportation Department issued only modest new fuel
economy standards to be in place for 2011.
–The following is from a commentary in the Daily Star of
Lebanon by Dr. Eckart Woertz, an economist in Dubai. I
thought he had an excellent example of what is going on in the
derivatives market, in this case gold.
“Apart from scrap supplies, the most important filling of the gap
(between supply and demand) comes from the central banks,
which sell and lease gold into the market. The latter activity is
especially tricky and has led to a huge derivative short position in
the gold market: Western central banks mainly lease gold to
commercial banks, which sell it into the market, the central
banks earn a lease rate and the commercial banks invest the
proceeds of the sales in higher-yielding assets like bonds.
Everybody could be happy, but there is one problem: the gold
still exists as an asset on the books of the central banks and as a
liability on the books of commercial banks or hedge funds, while
the actual physical gold has left the vaults a long time ago and
now hangs around the necks of the women of the world, who are
the ‘ultimate longs’ in the market without even knowing it. It is
inconceivable that this short position can be covered at current
prices and the market seems to reckon that at some point the
central banks won’t be able to cover the supply gap because they
will run out of gold or won’t be willing to sell more of one of
their most valuable assets. First signs in this direction are
already discernible: An increasing number of central banks like
Russia, China and Argentina are actually buyers of gold in order
to diversify their currency reserves and Western central banks
appear to be increasingly reluctant to enact further sales (e.g.
Germany) or have sold or leased out most of their gold (e.g.
England and Portugal).”
Dr. Woertz conclusion is that we are at the beginning of a secular
price rise rather than near the end.
I offer the above not as an endorsement of this thesis, since I
don’t offer specific investment advice, but rather to ask the
question, “Did the above confuse some of you?” In some
respects does it look like a giant Ponzi scheme? Do you think all
these players really know what’s going on and who owns what?
Of course not. Just another accident waiting to happen in
derivatives land.
–The European Union warned Microsoft over incorporating too
many prepackaged features in new Vista software. The U.S.
government told the E.U., ‘Leave Mr. Softie alone.’
–Yes, Virginia, I concede there is inflation. Not only did my
beer go up 11% the other week, but my paper at Staples just rose
10%. If I had my own consumer price index, the core rate would
have to be ex-beer and paper.
–United Airlines, having emerged from bankruptcy, is looking to
hire up to 4,000 workers. Good news, for a change.
–According to a Federal Reserve study and the New York
Times, for all the talk about the amount of money baby boomers
will be inheriting from their parents, the median inheritance in
2004 was just $29,000. In other words, sports fans, keep
working.
[Of course when you’re talking “median” that still leaves a ton
for the top 10% in particular, where the average estate is
$244,000+.]
Then again, looking at the amount of money migrant workers
are sending home, you could adopt a migrant as your kid, move
to Mexico, and collect checks.
–From the London Times and reporter Michael Sheridan:
“One by one, hundreds of Chinese workers are starting to die of
an incurable lung disease contracted in appalling conditions
inside factories supplying the international jewelry trade.
“The epidemic of silicosis, caused by inhaling fine dust, has
turned into a scandal that the jewelry industry fears may cause
more damage to its reputation than the outcry over ‘conflict
diamonds.’ …
“The victims of silicosis tell of laboring in factories where the
windows were sealed, a few fans substituted for air-conditioning
and workers had no face masks to protect them from a fog of
lethal particles.”
–I wrote a while back that one of the least likeable men on the
planet was former Disney CEO Michael Eisner. Well I guess
I’m not the only one with that attitude. According to the Drudge
Report, Eisner’s ratings for his new interview show on CNBC
were zero…as in 95,000 households.
–As if France didn’t have enough problems, its share of the
global wine market has declined to 19 percent from 25 percent in
1999.
–The “Today” show had a segment on how difficult it is to cash
in frequent flyer miles, let alone how much it takes to get a
reward. Here’s a personal example for you. Five years ago I
went to Micronesia, a rather long trip, and used my miles on
Continental to fly business class the entire route. It was 80,000.
I’m headed back in about three weeks and it is taking 240,000 to
travel in style without dying of deep-vein thrombosis.
Foreign Affairs
Ukraine: Well, my pre-election analysis was darn good, if I may
say so myself, and the final vote tally for the key parliamentary
election here last Sunday showed that Viktor Yanukovich’s pro-
Russian Regions Party finished first with 32%, while President
Viktor Yushchenko’s Orange Party ended up a dismal 3rd (14%)
behind rival Yulia Tymoshenko (22%). Tymoshenko is claiming
she should be prime minister (a position with greatly increased
powers under recent amendments to the constitution) and
Yushchenko is being coy as to whether or not he will join forces
with the woman he fired as prime minister last year, or, align
himself with Yanukovych, the ex-con (two stints in prison for
hard crimes) who was responsible for the Orange Revolution in
the first place by rigging a 2004 vote when he was running for
president, as then prime minister.
It’s a mess, and as in the case of Iraq and Israel, two others with
recent elections, forming a viable coalition won’t be easy.
However, the vote was free and fair and there’s a lot to be said
for that.
Former Czech Republic president Vaclav Havel, the man I’ve
long touted to replace Kofi Annan as Secretary General of the
United Nations, had the following in an op-ed for the Daily Star.
“All revolutions, in the end, turn from euphoria to disillusion. In
a revolutionary atmosphere of solidarity and self-sacrifice,
people tend to think that when their victory is complete, paradise
on Earth is inevitable. Of course, paradise never comes, and –
naturally – disappointment follows. That seems to have been the
case in Ukraine, where President Viktor Yushchenko, who best
embodied the so-called Orange Revolution last year, suffered a
serious defeat at the hands of his political rivals…
“Post-revolutionary disillusion, especially after the revolutions
against communism – and in Ukraine’s case revolution against
post-communism – is rooted in psychology. New circumstances
imposed new challenges for most people. Formerly, the state
decided everything, and many people, particularly in the middle
and older generations, began to see freedom as a burden, because
it entailed continuous decision-making.
“I have sometimes compared this psychological ennui to my own
post-prison situation: for years I yearned for freedom, but, when
finally released, I had to make decisions all the time. Confronted
suddenly with many options every day, one starts to feel a
headache, and sometimes unconsciously wants to return to
prison.
“The depression is probably inevitable. But, on a societal scale,
it is eventually overcome, as new generations grow up. Indeed,
15 years after the disintegration of the Soviet Union, a new
catharsis seems under way, and Ukraine’s Orange Revolution
was part of that.”
[Part II of Havel’s comments next week.]
India: Defense News reports that India was training Iran’s navy
as part of a three-year agreement, but the U.S. is willing to look
the other way on this (as would I), saying Washington’s beef
with Iran is not about oil and India’s deal with Iran and training
is about India ensuring its supply of energy.
Of course the much bigger issue concerns the recent nuclear
agreement between the U.S. and India and there was more talk
this week that Congress is ready to scuttle the deal unless
changes are made.
Defense News editorialized:
“Among the goals of the Pentagon’s recently issued Quadrennial
Defense Review is to influence other countries at ‘strategic
crossroads.’ The names of these countries are left unstated, but
their identities can be deduced. China is one; India is another.”
But Defense News, in commenting on the “ground-breaking
nuclear agreement” between Washington and New Delhi, opines
(and by way of background for those not familiar with it):
“In an apparent upending of logic, the deal puts 14 of India’s
civilian, power-generating reactors under the scrutiny of the
International Atomic Energy Agency, and exempts eight military
facilities from inspection. The deal even allows India to install
additional fast-breeder reactors, which can make weapons-grade
plutonium, at these inspector-free military facilities.
“All this for a country that refuses to sign the Nuclear
Nonproliferation Treaty (NPT).
“In return, the United States gets, well, nothing that particularly
advances the administration’s self-proclaimed effort to counter
nuclear proliferation. If India gets the same rewards as NPT
signatories – nuclear fuel and technology – without submitting to
the pact’s restrictions, what incentive have the rest of the world’s
countries to adhere to their promises?”
The U.S. gets weapons sales, but more importantly it is seeking
warmer relations with the largest democracy on earth and an
emerging economic juggernaut that also happens to border
China, another economic powerhouse with a not so free
government. You know where I stand. The United States must
have India in its corner.
At the same time, I can understand why some, including former
senator Sam Nunn and former president Jimmy Carter, are
expressing misgivings. Last week I wrote of Nunn’s angst, this
week Carter weighed in.
“It must be remembered that there are no detectable efforts being
made to seek confirmed reductions of almost 30,000 nuclear
weapons worldwide, of which the United States possesses about
12,000, Russia 16,000, China 400, France 350, Israel 200,
Britain 185, India and Pakistan 40 each – and North Korea has
sufficient enriched nuclear fuel for a half-dozen. A global
holocaust is just as possible now, through our mistakes or
misjudgments, as it was during the depths of the Cold War.”
No argument here. Carter adds:
“The five original nuclear powers (U.S., Russia, China, France
and Britain) have all stopped producing fissile material for
weapons, and India should make the same pledge to cap its
stockpile of nuclear bomb ingredients. Instead, the proposal for
India would allow enough fissile material for as many as 50
weapons a year, far exceeding what is believed to be its current
capacity.”
Of course the argument Carter and others of his ilk make is that
the U.S.-India deal will only encourage proliferation and soon
we’ll have a world where Japan, Brazil and South Africa, to cite
a few examples, let alone Iran, Syria, and Saudi Arabia, will be
part of a new arms race. Carter writes, “Why should they adhere
to self-restraint if India rejects the same terms?”
It’s all very logical…but it simply doesn’t address the facts of
today’s world. China and Pakistan, in particular, are going to
slave away making one bomb after another regardless of this deal
and, in the case of China, any prior commitments. You think
they’d stop, just because India one day woke up and said,
“OK…40 is enough”? Heck no. And remember, one bullet to
President Musharraf’s head and India better hope it’s kept up.
You don’t have to like it, but this is reality.
As Kaushik Kapisthalam, a defense analyst, wrote in an op-ed
for Defense News, “Indian leaders were shocked to see recent
reports of a Chinese effort to supply nuclear reactors and missiles
to Bangladesh,” for crying out loud.
“It is in this context that the Indo-U.S. nuclear accord may be
viewed as a hedge against China. First, the NPT of 1970 allows
China to possess and expand its nuclear arsenal as a recognized
weapons state. This means that despite several egregious
violations of the treaty, China is still able to expand its arsenal
and buy civilian nuclear reactors and uranium in the open market
with perfunctory safeguards….
“India, on the other hand, failed to test a weapon before the NPT
cutoff date and had a choice of either joining the treaty as a
second-class citizen or be an outlier. It chose the latter.
“However, India never tried to undermine the NPT and exhibited
exemplary proliferation behavior, even in the face of repeated
provocation in the form of Chinese nuclear transfers to Pakistan.
Meanwhile, even in isolation, Indian nuclear scientists were able
to master the nuclear fuel cycle, reprocessing and fast-reactor
technology.
“After India tested nuclear weapons in 1998, its leaders believed
that China would sit down and talk mutual restraints with New
Delhi. That did not happen. China refused to extend its ‘no-
first-use’ nuclear doctrine to India and stepped up its nuclear and
missile proliferation to Pakistan.”
[I will have more from Mr. Kapisthalam next week.]
The White House and India are going to have to make some
concessions to get the agreement through the U.S. Congress and
it’s going to take an intense diplomatic effort. To yours truly, it
is absolutely critical it succeed.
Afghanistan: Abdul Rahman, the fellow who converted to
Christianity and was threatened with death for it, was declared
mentally unfit and in an underrated gesture of support for the
U.S. and the coalition, Italy took him in since Rahman’s
remaining in Afghanistan would have spelled death within 24
hours. The consequences for President Hamid Karzai, though,
are far from over. Too many people wanted Rahman dead and
they won’t forgive Karzai for pressuring the clerics to accept a
watered down ruling.
Belarus: The government has arrested about 1,000 protesters,
according to best estimates, including #2 opposition leader
Alexander Kozulin who now faces up to six years in prison. In
his case, though, it probably wasn’t a smart thing to say at a
rally, “Let (President) Lukashenko leave the last bullet for
himself.” Nope, not exactly prudent. Separately, the former
Polish ambassador here was also arrested and allegedly beaten,
while Canada is demanding the release of a journalist covering
events in Minsk. The main opposition leader, Alexander
Milinkevich, is calling for a large protest in late April.
But on the gas front, Russia’s Gazprom now wants to hike the
price charged Belarus by five times in order to bring it in line
with the rest of Europe. Talk about gratitude. Here Lukashenko
rigs the election to do Vladimir Putin’s bidding and this is what
he receives in return?
Belarus, of course, has had heavily subsidized gas for being such
a loyal Kremlin butt-boy, though now it’s all about Russia
gaining control of the entire natural gas apparatus. What
Gazprom really wants is control of the pipelines coursing Belarus
which then feed parts of Western Europe.
Lebanon: Talk about another mess…it only gets worse here in
terms of a totally dysfunctional government and a country with
divided allegiances.
On Thursday, Hizbullah chief Nasrallah vowed his party will not
disarm and that the resistance “will cut the hand and head of
those who attempt to disarm it by force and rip their souls out;
however, we are ready to discuss the issue on the table.”
Bring your gun.
Japan: In another significant move away from the nation’s
pacifist constitution, the ruling Liberal Democratic Party is
proposing legislation that would allow for the militarization of
space, self-defense only.
Bulgaria: An “ally of the week” candidate for announcing it will
allow the United States to use its bases for operations in the
region. Look at a map. It’s quicker to get from southern
Bulgaria to Damascus, for example, than to get there from Dubai.
France: According to an Ipsos poll, when asked “What does
globalization mean to you?” 48 percent of people between the
ages of 20 and 25 responded, “Fear.”
“Fear of what?” the Washington Post’s Molly Moore asks. “Just
about everything, according to Christophe Lambert, author of
another examination of contemporary France, ‘The Fearful
Society.’ The country, he writes, is paralyzed by ‘fear of the
future, fear of losing, fear of others, fear of taking a risk, fear of
solitude, fear of growing old.’”
Brian Duffy of U.S. News & World Report writes of the current
controversy over Prime Minister de Villepin’s labor proposal.
“The issue, of course, is jobs, and with nearly 1 in 5 young
people unable to find work in France, it’s hard not to be
sympathetic. And yet for all the alleged erudition they have
acquired at elite places of learning like the Sorbonne, it’s also
hard to fathom their inability to grasp the profundity of the
problems afflicting France and its antiquarian economic
underpinnings. They call themselves ‘the Kleenex generation,’
used and tossed aside. One understands the sentiment. But one
must also understand that the 35-hour workweek, the six weeks
of paid annual leave, the jobs for life are as endangered a species
as the dodo bird. None of the kids outside Napoleon’s tomb
want to hear it, of course, but change happens. Just ask the folks
at GM.”
[On Friday, President Jacques Chirac said he would sign the
controversial labor law, though with provisions in an attempt to
defuse tensions. It won’t work.]
Italy: Prime Minister Silvio Berlusconi, in the midst of a heated
campaign, said on state-run radio, “We don’t want Italy to
become a multiethnic, multicultural country. We are proud of
our traditions.” You know one thing I couldn’t get in Ukraine?
Veal parmigian. “Week in Review” continues…………….
Germany: There are growing concerns here about the security
risk posed by far-right, neo-Nazi groups in conjunction with the
holding of the World Cup which starts June 9. German officials
fear the Nazis will use it to increase their profile. Iran qualified
and this poses unsettling concerns.
Australia: The Aussies have had some problems recently with
Chinese fishing vessels, seizing two in an incident this past
week. One vessel from a previous operation had 600 tons of
fish, caught without a license. Unfortunately, the law is such that
it is virtually impossible to do anything to the individuals
involved but Australian officials fear a confrontation is looming
between foreign poachers and angry Aussie fishermen.
“Things are going to explode up here,” fisheries spokesman
Doug Rogers told (the South China Morning Post). “What are
our rights as Australians to defend ourselves in Australian waters
against people we believe are basically pirates?”
What’s different these days is where in the past Australia’s
problem was with boats from Indonesia, the latest incidents
involve ships formally registered to the People’s Republic of
China; ergo, it’s as if it’s government sanctioned poaching.
And so you shouldn’t be surprised I use this as yet another
example of my proposed U.S., U.K., Australia, India and Japan
alliance; the Fab Five.
In fact, wouldn’t you know that Prime Minister Tony Blair was
in Australia this week, warning again of the “madness” of anti-
Americanism in Europe.
“We need them involved. We want them engaged. The reality is
that none of the problems that press in on us can be resolved or
even contemplated without them.”
But, as the London Times reported, “The centerpiece of Mr.
Blair’s speech was a call for a new global alliance representing
universal values. The alliance did not end with America but
began with her, and it required an active foreign policy of
engagement, not isolationism.
“ ‘If we want to secure our way of life, there is no alternative but
to fight for it. That means standing up for our values, not just in
our own country but the world over,’ he said.
“Mr. Blair made plain that he wanted Australia on board.”
Yes, the alliance is taking shape. Unfortunately, as I noted last
time, while the leaders of the Fab Five are currently in synch, the
odds of this always being so when they leave office are not so
good.
Random Musings
–I imagine Secretary of State Condoleezza Rice regrets saying
the following with regards to Iraq in a Q&A at a forum in
Britain.
“I know we’ve made tactical errors – thousands of them, I’m
sure.”
To be fair, Ms. Rice continued:
“But when you look back in history, what will be judged is did
you make the right strategic decisions. I believe strongly that it
was the right strategic decision, that Saddam had been a threat to
the international community long enough.”
I’ll let the press, and the Democrats, take it from there.
–I said much of what I want to on the topic of immigration a few
weeks ago in quoting economist Robert Samuelson. But for this
week I agree with a comment of George Will’s, that border
control must be at the top of the agenda.
“(For four reasons). First, control of borders is an essential
attribute of sovereignty. Second, conditions along the border
mock the rule of law. Third, large rallies by immigrants, many
of them here illegally, protesting more stringent control of
immigration reveal that many immigrants have, alas, assimilated:
They have acquired the entitlement mentality created by
America’s welfare state, asserting an entitlement to exemption
from the laws of the society they invited themselves into.
Fourth, giving Americans a sense that borders are controlled is a
prerequisite for calm consideration of what policy that control
should serve.” [Washington Post]
–Jack Abramoff was sentenced to 70 months in prison and, with
his co-defendant, ordered to pay a tidy $21.7 million in
restitution in his Florida fraud case. Separately, a top aide to
Tom DeLay pleaded guilty and faces up to five years in prison
for his illegal lobbying activities. This investigation is far from
over.
–It will be interesting watching John McCain over the coming
months. Recently he has been critical of Russian President Putin
and has openly called for boycotting this summer’s G-8 summit
in St. Petersburg. But McCain has been assiduously courting
Bush supporters, even as the president remains a defender of
Putin. Will McCain thus back off the criticism? I’ll lose a ton of
respect for him if he does.
–Josh Bolten is replacing Andrew Card as White House Chief of
Staff. Whoopty-damn-do.
–New Jersey Governor Jon Corzine is putting up all manner of
roadblocks for settling on a proposal to rebuild the World Trade
Center site. The Port Authority of New York / New Jersey
controls it and thus New Jersey has a say in how it’s developed.
Therein lies the issue because New Jersey, thanks in no small
part to the first attack on the World Trade Center, has been
rapidly developing its “Gold Coast” across from Manhattan.
Corzine, and other New Jersey officials involved in the process,
obviously don’t want the competition. Forget looking after the
common good.
–You know, I was reading about Canada’s baby seal hunt and I
just may have to rethink this issue. This year’s figure is
estimated to come in at 325,000, the 2nd-highest ever. But Prime
Minister Stephen Harper pointed out it’s necessary to control the
population; as in there are now 6 million seals in Canada, triple
that of the 1970s.
In other words, you could say it’s a situation similar to our deer
population in America. Here in New Jersey, there are at least 15
times more deer today than there were during George
Washington’s day; a fact many animal rights activists in my state
conveniently ignore. And on the seal front, I know some
California communities that would like to club a few, especially
boat owners.
Of course it’s the brutality of the seal hunt that offends those of
us outside Canada and obviously we wish there was a more
humane way. Not buying sealskin coats won’t do the trick
either; as the population would just keep exploding and soon
there’d be smelly, barking seals outside every home in North
America.
–Duke University had a good week……..NOT!
–So last time I talked of this conversation I had with a guide in
Ukraine concerning our two nations’ young people and their lack
of knowledge on the subject of history. The next day there was
this headline on the front page of the Sunday New York Times.
“Schools Cut Back Subjects to Push Reading and Math”
You guessed it. The teaching of history in our schools is
suffering as a result. We will pay a very dear price for this,
though now I know at least we’ll have company in Ukraine.
–My buddy Phil W. passed along a piece concerning South
Carolina’s basketball coach Dave Odom. Odom, who used to
coach at Wake Forest, has had an unusual amount of success at
the NIT, the second tier tournament where all the rejects who
can’t get into the NCAA play.
Odom, though, has now won three NIT’s in the last seven years
and has a stupendous 21-3 coaching mark in the tourney.
Of course that’s not really news, per se, but I just liked this
comment of his, as told to the Winston-Salem Journal’s Lenox
Rawlings, when asked about his success.
“I’ve always been one to start the season with two, three or four
defined goals, one of which obviously is making the NCAA.
When I was young, my Eastern North Carolina mother back
home in Goldsboro taught me that when a goal is no longer
possible, you should turn your attention to a goal that is possible
and not bemoan what is not possible.”
–Finally, it’s time for another season of baseball and I’m fired
up…..XM Satellite Radio at the ready to pick up all the games.
Unfortunately, as we start the year it’s also about Barry Bonds
and his quest for immortality. Hall of Fame catcher Johnny
Bench was on CNBC Friday and stupidly said, “Everyone is
focusing on Barry Bonds…let’s leave him alone.”
Hell no. We’re not leaving him alone for one simple reason. He
is on the verge of becoming baseball’s all-time home run king
and he cheated to do it. No one cares about Joe Palooka, who
finishes his career with 400 home runs while injecting himself in
the rear with a growth hormone normally used on cattle.
It’s all about Barry for a reason. But Bench himself then added,
“A lot of pitchers use (steroids),” steroids greatly improving
recovery time between starts; which is why one fellow who
should be right up there with Bonds is Roger Clemens…..just my
opinion.
Anyway, now we finally have an investigation, led by former
senator George Mitchell, a highly-respected figure. It’s not what
a lot of us wanted….a Spanish Inquisition, quite frankly…but at
least maybe future generations of fathers will go to the Hall of
Fame with their kids and have an explanation for the home run
era, courtesy of asterisks, plaques or some other designation.
But to those who say nothing of any substance will happen, I’m
not so sure. No one I’ve read has picked up on a line Senator
Mitchell used in his press conference.
“I can tell you from past experience (in the Senate) that these
investigations start off in one direction and often go in another.”
It only takes one whistleblower, someone we haven’t heard from
yet, to truly blow the cover off. One Great American Hero who
says, “To hell with this code of silence among ballplayers.” We
deserve to know once and for all, for history, who the cheaters
were.
In the meantime……….PLAY BALL!
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $583
Oil, $66.32
Returns for the week 3/27-3/31
Dow Jones -1.5% [11109]
S&P 500 -0.6% [1294]
S&P MidCap +0.7%
Russell 2000 +1.5%
Nasdaq +1.2% [2339]
Returns for the period 1/1/06-3/31/06
Dow Jones +3.7%
S&P 500 +3.7%
S&P MidCap +7.3%
Russell 2000 +13.7%
Nasdaq +6.1%
Bulls 46.7
Bears 28.3 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
