[Posted 7:00 AM ET]
Iraq…post-Zarqawi
I wrote the following in this space on 4/29/06:
“Al-Zarqawi brazenly appeared on video, unmasked, and I agree
with the Bush administration this is an act of desperation.
Desperate people, though, are still capable of incredible acts of
cruelty. But while our inability to capture him is mind-boggling,
Zarqawi may have just overplayed his hand.”
As it turns out, an insider simply helped direct U.S. special
forces to Zarqawi as he was terminated this week.
First, some mainstream opinion.
Gerard Baker / London Times
“The skies over Iraq have seen many false dawns in the past few
years….The hope engendered by each breakthrough has been
mocked so cruelly and so completely in subsequent months that
we have become steadily and increasingly desensitized to any
good news.
“And yet there are some events so singular and so innately
benign that they can still pierce the cocoon of cynicism from
which all but the most optimistic observers view events in Iraq.
The elimination of Abu Musab al-Zarqawi, the totemic
figurehead of the bloody insurgency, is surely one such….
“His death does not disarm the insurgency, of course. And who
knows what effect it has on their morale and organization. They
are, in the most obvious sense, a bottom-up as much as a top-
down bunch and he was only in the loosest sense a leader….
“So what is so important about this one man’s removal from the
battlefield? For a country and a world inured to the spectacle of
failure and shame in Iraq, this simple triumph has a number of
positive consequences.
“The most obvious immediate benefit is the improved morale
and standing of the fledgling Iraqi Government. The
serendipitous timing of this week’s operation – on the very day
that Nouri al-Maliki, the Iraqi Prime Minister, affixed the final
pieces to his Cabinet puzzle with new Defense and Interior
ministers – should bestow some much needed legitimacy.
“It should also inject a little élan into the spirit of the Iraqi armed
forces, themselves undermined by allegations of corruption and
brutality and constantly reminded of their continuing dependence
on U.S. forces to attain the most basic level of effectiveness….
“The second reason for muted celebration is the effect this
should have on the American military. Battered in the past few
weeks by allegations of murder and cruelty, U.S. servicemen
needed not only to demonstrate to the world concrete progress in
their thankless effort, but also to remind skeptics who is the real
enemy in this war….
“However, the biggest benefit, I suspect, will be in the effect of
this small but significant victory on the attitude of the American
people. Success in this war will in the end be determined not by
the insurgency’s ultimate lethality but by the limits of the
patience of the public back home. The task that the U.S. has set
itself in Iraq, made harder by the ineptitude of much of its
execution so far, requires a popular political willingness to see it
through. That U.S. troops, even in the hellish conditions of Iraq,
can overcome the military constraints on them is not in the end in
doubt. But if America’s patience is wearing thin, a vicious circle
takes hold….
“(The killing of Zarqawi) probably isn’t the turning point most of
us would like it to be – just as those other successes were not
turning points. It should not and presumably will not produce
another of those brief waves of euphoria, soon to be replaced by
renewed despair. It should evince, however, not our weary
cynicism but a satisfied, uncomplacent realization that in this
long war on its enemies, civilization just scored another
consequential victory.”
David Ignatius / Washington Post
“The new Iraqi prime minister, Nouri al-Maliki, would be wise if
he followed the suggestion that Zawahiri gave to his henchman
Zarqawi last year. ‘Fill the void,’ the al-Qaeda leader urged.
That’s what the Iraqis and Americans need to do now in the
moment of opportunity offered by Zarqawi’s death. Destroy his
networks around the country. Peel off his supporters among the
ex-Baathists and former regime loyalists; break his hold in towns
such as Ramadi and Baqubah; get the Iraqi government out of the
Green Zone and into the streets, where it can embolden ordinary
Iraqis to believe that the republic of fear has ended.”
Editorial / Washington Post
“With one airstrike, U.S. forces deprived Iraq’s insurgency –
diverse and fragmented though it is – of its sole widely
recognized leader, probably its biggest fundraiser and recruiter…
“The successful operation follows some of the darkest days of
the war, when the kidnapping and killing of civilians in Baghdad
seems to have reached new heights….
“The events of this week offer Iraq’s government a fragile
opening to assert its authority, win the confidence of Iraqis and
begin to restore order….With the most notorious Sunni terrorist
slain, Mr. Maliki should seize the opportunity to crack down on
the Shiite death squads waging war against Sunnis and launch a
long-planned effort to pacify the capital. He should also begin
the work of revising the constitution with the aim of achieving a
national accord on such divisive outstanding questions as
federalism and the sharing of oil revenue.
“To do all this, the Iraqi government desperately needs continued
U.S. military and economic support. That’s why it was a little
unnerving, in the middle of yesterday’s celebrations, to hear
President Bush speak of plans to hold high-profile consultations
early next week on ‘how to best deploy America’s resources in
Iraq.’ U.S. commanders have been eager to reduce American
troops from the current level of about 135,000 to 100,000 by this
fall; the Pentagon may seize on the good news to justify the
reduction. Both Americans and Iraqis would love to see U.S.
troops come home – and a redeployment might help Mr. Maliki
politically, not to mention U.S. Republicans facing this fall’s
elections. Yet officials from both countries were unanimous in
predicting yesterday that the challenge from the insurgency will
continue to be severe. Perhaps U.S. troops can be drawn down
without worsening that threat; but it would be tragic if, after so
much suffering, Iraq’s first democratic government were denied
the means to succeed.”
Editorial / London Times
“Abu Musab al-Zarqawi was a murderer, not a martyr. The
majority of his victims in Iraq were fellow Muslims. He openly
sought to trigger a civil war between Sunni and Shia followers of
his faith. In the case of Christians who fell into his clutches, he
combined the barbarism of centuries past with the tools of
contemporary technology. Via video and the Internet he boasted
that ‘cutting off the heads of the criminal infidels is
implementing the orders of our Lord.’….
“(Zarqawi) has operated in Iraq for the better part of three years
and no successor will have the same vicious standing with his
peers. He will be difficult to replace.
“Terrorist bodies are also, despite the claims they make of
popular backing, top-down institutions. They invariably depend
upon the charismatic and cunning leadership of a small number
of individuals. As Israel showed when it decapitated the
hierarchy of Hamas in 2004, the ‘military’ capacity of terrorists
can be decimated by the loss of a few crucial people. Al-
Zarqawi is in this category….His group will endure a period of
disarray.
“The new Iraqi government…has to exploit this opening
relentlessly….Terrorism took root in Iraq because zealots sensed
a political vacuum after the toppling of Saddam Hussein and
moved ruthlessly to fill it.
“There is today a new vacuum in the ranks of the extremists.
The administration in Baghdad must now use maximum force to
defeat its foes.”
Eliot Cohen / Wall Street Journal
“Will (Zarqawi’s death) make a strategic difference? More
broadly, how does the killing of key individuals in insurgent and
terrorist organizations affect the prospects for success in Iraq?
Some difference, surely, but not as much as one would hope,
because of the nature of insurgent warfare. In conventional
warfare, the origins of a war often have little bearing on how one
fights it. The personality of Hitler and the missteps of the
democracies in confronting Nazi Germany had little bearing on
the decision to invade Europe in 1944 rather than 1943. But in
irregular warfare, root causes and operational decisions are
intimately linked, and those basic causes of war can change over
time….
“Progress in Iraq will depend on many things: the creation of a
coherent government, to be sure, but also the development of
effective and honest institutions of governance; the provision of
employment to the angry young men in an impoverished land;
the securing of electrical power and clean water to those whose
lives have not improved noticeably in those respects since the
time of Saddam; the disciplined application of force by the Iraqi
military and police forces, and the purging of militias….nor
should the administration use this as a justification for
withdrawing troops because the war is going well. It’s not.
Until life for the average Iraqi, particularly in Baghdad, has
become more secure and prosperous than it is now, until Iraqi
security forces can manage the multiple threats that beset not
only their state but their sense of common identity, we will have
to keep large forces in Iraq, or admit that our mission has failed
and disengage altogether.
“The insurgencies are mutating as we wage the war: that is their
nature. The internal struggles will continue to attract the
participation of outsiders like Zarqawi; more sinister, however,
will be the role of those whose names are not so well known,
because they are not charismatic leaders of transnational
movements, but rather serve the interests of neighbors who have
no desire to see a unified and successful Iraq. Iranians, Syrians,
Saudis and Turks all have stakes, and will not shrink from
fanning violence if it suits their purposes. Still, in the final
analysis, it is Iraqi insurgents and not foreigners who are the
crucial problem for the U.S. and the Iraqi government.”
Editorial / Wall Street Journal
“As important as (Zarqawi’s) death is, no one should be
overconfident that this is the turning point for Iraq. It is, as
President Bush remarked yesterday, ‘an opportunity for Iraq’s
new government to turn the tide of this struggle.’ But it is only
that; an opportunity. And unless Iraqi Prime Minister Nouri al-
Maliki and his Coalition partners seize this chance to revise and
revamp what has been a failing security strategy, it’s an
opportunity that could pass quickly….
“Particularly troublesome is life in Baghdad, where common
criminality mixes with the political violence to create a feeling of
increasing demoralization. The Green Zone that shelters U.S.
and Iraqi government officials is more isolated than ever, and
there have been numerous reports of gangs attempting to enforce
Islamic law in various parts of the city – even the wealthy
embassy district of al Mansour….
“While some media outlets seized too readily on bad news in the
past, Baghdad is now so dangerous for reporters that the bad
news is probably undercovered. The latest Pentagon report to
Congress estimates that there are more than 600 attacks a week
in Iraq – more than in 2004….
“Countries can live with unstable hinterlands if they have to; ask
the Colombians. But security in a national capital is crucial for
confidence in the government and to prevent the flight of the
educated middle class, on whom the future so heavily depends.
Baghdad is also a multiethnic city, so its stability would carry a
symbolic message for the minority-dominated provinces.
“Any new military operation would entail a more aggressive role
for U.S. troops – and probably more casualties – as the
November elections approach. But history has shown time and
time again that Americans are willing to tolerate casualties in
service of what they believe is a winning cause. What
Americans have slowly been turning against in Iraq is the
appearance of helplessness in the face of the daily drip of car
bombings and stories of students slaughtered for belonging to the
wrong Muslim sect. Down this road lies more flagging public
approval, until some unexpected setback triggers a political
stampede for withdrawal….
“Zarqawi’s death is in particular a boost for Prime Minister
Maliki that will give him more public support for the tough
decisions that lie ahead. Now is the time to make them. If the
Maliki government can use this week’s momentum to go on the
offensive in Baghdad and the Sunni Triangle, then Zarqawi’s
demise really will be a turning point in the war.”
I flipped on Fox News Thursday night to see how Bill O’Reilly
and Sean Hannity handled the story. It had been weeks since I
put O’Reilly on and I think it was the first time all year I had on
Hannity and his sidekick. There was Tommy Franks with Sean,
the retired general who is in no small measure responsible for the
mess we are facing in Iraq, telling viewers that “the Iraqi people
see evidence every day of an economy that is coming along.”
Franks clearly believes we’re all morons.
And I got a kick out of seeing Bernard Kerik speaking from
Jordan where he is undoubtedly scamming someone on a security
contract, though once again playing the part of Fox News
analyst. Maybe you have to have lived in the New York area to
know what a despicable person this guy is, but if you’re from
Missouri and don’t understand where I’m coming from, trust me.
As for O’Reilly, he played his old cards over and over again, just
like in the first days of the war when he told us all “a few
casualties is no big deal.”
But no doubt, the likes of Hannity and O’Reilly did have some
good points when it comes to countering their bomb-throwing
equivalents on the Left. No, I don’t listen to “Air America” to
get their side of the story. I see enough of that kind of venom in
most newspapers.
My point is at times like these I just want rational discourse and
these days it’s seldom found. Of course Thursday was a great
day for America and the cause of freedom. Zarqawi goes down
as the worst terrorist of our lifetime, worse than bin Laden,
though there is a hot suite reserved in Hell for both of them.
But as cited by some in the above opinion pieces, we have to
press any advantage gained ruthlessly and it’s here that politics
can get in the way as it has throughout this war. President
Bush’s “war cabinet” worries me, for example. What the Iraqi
government needs is our military support, as much as we can
muster, and with no timetable; though at the same time there is
nothing wrong with the Bush administration standing behind
Maliki’s own stated goal of 18 months before Iraqi security
forces are ready to stand on their own.
Reality, though, continues to hit you in the face when it comes to
Iraq, and the reality is every government ministry, the army and
the police forces are filled with infiltrators, including from Iran.
It just takes a team of 2 or 3 to perpetrate an act that can kill
confidence both in Iraq and here at home.
But as I noted a while ago, to me if you’re going to look at one
item to gauge any improvement in the governing of the country,
look no further than the treatment of the oil revenues. Perhaps
Maliki has received promises of more Sunni cooperation in the
new government, and thus some influence in the streets (that is if
they ever get outside the Green Zone), but if the oil revenues are
not divvied up in some equitable fashion, then the U.S. and its
allies might as well go home because the insurgency would go on
at least for my lifetime.
And here is where I have to repeat myself. The oil is in the
hands of the Shia and their Iranian supporters in the south, and
the Kurds in the north. We’ve seen how the Kurds are already
lining up their own development contracts, outside of the central
government, so fat chance of them sharing the spoils. They’re
going to be independent anyway, in 5-10 years, or so that’s their
plan. And the Shia aren’t about to spread the wealth to their
hated enemies, either.
Finally, for this week, let me remind Tommy Franks, the man
who loved to golf when he went to War College, of the real
scene in Iraq…in Baghdad…none of which is likely to change
soon just because Zarqawi is dead.
I read a piece in the London Times that talked of the rules for
women in some districts, a la what the Wall Street Journal hinted
at above in its editorial. Women are told by the Islamist thugs
that they can’t drive, they can’t go out after midday, they can’t
walk with a man. Men in black enforce the rules and go around
shaving women’s heads. All the while police do nothing.
Until that dynamic is changed, until the last doctors in Iraq (I
think there are three left…four more were beheaded last week)
can operate in peace, until there is security so reconstruction can
resume, there is zero reason to be optimistic.
But we still have to give Maliki and his new cabinet one last
chance, and President Bush must be prepared to go before the
American people and explain why more troops, not less, may be
required over the coming months.
This is it. American special forces and their collaborators
achieved one of their prime objectives this week. But Zarqawi
unleashed the whirlwind when he bombed the Golden Mosque of
Samarra last February and it’s hard to just put it back in the
bottle. History is being written daily and it can still go either
way.
Iran
The mullahs will receive their package of party favors if only
they’d just play along and stop enriching uranium. Included in
the assortment of goodies are spare aircraft parts, so their planes
will stop crashing, as well as cooperation in developing a true
civilian nuclear capability. Plus their athletes would probably be
given passage to play a ‘friendly’ in Washington against DC
United and Freddy Adu.
But President Ahmadinejad, Ayatollah Khamenei and the rest
seek the bomb and to this end the International Atomic Energy
Agency is prepared to release a report this week that shows Iran
is once again operating full speed ahead after what appears to
have been a brief pause…or nap.
So we’ve entered the netherworld of negotiations; at least Iran
would love it that way. A world where the parties meet a few
times a month around a nice mahogany table, surrounded by
bottled water, fruit juices and some fresh muffins, with everyone
just kind of staring at each other, zombie like, while back at the
skunkworks, Iranians slave away some 100 feet or more below
ground in one of countless sites stirring their witches brew.
Ideally, Iran would love this to go on for at least another year.
The White House, though, maintains Iran has just a few weeks to
approve of the contents behind the curtain that Carol Merrill is
standing in front of and if it doesn’t, well, by gosh, the
administration and the EU-3 will take the whole issue up with the
UN Security Council and ram through some sanctions.
That is unless Russia and / or China veto the proposal, at which
point Condi Rice will take her European counterparts out for a
night on the town on the Upper East Side of New York to get
hammered; simply out of depression.
Then again, the White House, looking at the political calendar
here in the States, could decide that it’s time to cut some kind of
deal, a la North Korea and Bill Clinton; one that back then took
us a few years to discover was being broken left and right.
Lastly, Defense Secretary Donald Rumsfeld did say something I
agree with this week. Addressing a gathering in Singapore,
Rumsfeld questioned why Russia and China had allowed Iran to
participate in a new regional outfit, the Shanghai Cooperation
Organization. As reported by Michael Gordon of the New York
Times, the secretary said:
“It strikes me as passing strange that one would want to bring
into an organization that says it is against terrorism one of the
leading terrorist nations in the world: Iran.”
Yes, quite. And there, sports fans, is your answer to the
question, “Are Russia or China going to go along with sanctions
against Iran?”
Wall Street
Business Week’s Emily Thornton had a terrific piece titled
“Inside Wall Street’s Culture of Risk” in the June 12 edition. As
investors have been stretching for return, Thornton cites some of
the following potential problems.
“(The) biggest danger may be on Wall Street. As the banks trade
in ever-more-obscure products with ever-more-opaque clients
such as hedge funds, observers worry that they might not be able
to settle their trades in the event of a market shock, intensifying
the damage….
“It might not take a major meltdown to send bank profits
tumbling: Scandals might get them first. Suspicions are rising
that bank traders are acting on nonpublic information gleaned
from their clients.”
While this isn’t necessarily new, Thornton notes “with so many
different kinds of financial products being traded today, and so
many parties involved, the temptations are unprecedented. The
Securities & Exchange Commission has ‘very active
examinations and investigations under way,’ says Lori A.
Richards, an agency director.”
And…
“The New York Stock Exchange is investigating a major
investment bank to see if it’s giving a hedge fund it runs
preferential treatment. And the SEC is examining whether banks
have sufficient controls to prevent information about customer
positions from being passed on to traders. Fines aside, the hit to
banks resulting from the loss of their reputations could be far
bigger this time. It’s one thing for them to burn individual
investors in order to serve big clients; it’s another for the banks
to burn big clients to serve themselves.”
Or…
As one institutional money manager told Thornton, he used to
hold almost every investment bank stock but now he only holds
one. Why? “Investment banks are trading like there’s no risk in
the world,” he told her.
And after the past few weeks we certainly know that’s not the
case; zero risk, that is. It’s everywhere. And if you still don’t
believe Wall Street is nothing more than a casino, crazy days like
Thursday where the market fell 170+ points and then reversed
about 200 are all you need to know because there certainly
wasn’t a lot of news driving the markets…the Zarqawi killing
having been flushed out pre-opening in New York.
Overall, it was a rough week; the worst in over a year for the
Dow Jones as it took a 3.2% hit to fall to the 10891 level, or
suddenly 831 points below its all-time high. The S&P 500 lost
2.8% and Nasdaq tumbled 3.8% to 2135, it’s worst weekly close
since last fall and a mere 2913 from its peak of 5048. [Sorry.]
But the above doesn’t even begin to describe the carnage in the
emerging markets which by one leading measurement fell 8%
and are now off 20-25% from the peaks set in markets such as
India’s less than five weeks ago. No doubt, these same
destinations also soared up to 200% in the prior three years but
you know how these things work…many individual investors
don’t hop on board until long after the train has left the station
and often they’re in a such a hurry they’ve left their itinerary at
home and really don’t know where they’re going.
The real problem both this week and the past month has been the
realization that interest rates are rising across the globe in an
attempt by central banks of all stripes and political persuasions to
beat down any attempts by Ivan Inflation to make scrap out of
your take home pay, and eventually the economy.
It’s painful, especially if you’re not holding a lot of cash to begin
with, but picture the first-time buyer of stocks in one of these
emerging markets. Throw in a little debt and a family that was
eating out once or twice a week for the first time is back
munching on dirt. I’ve been writing how I wonder just how
much debt the newly emerging consumer class has been taking
on in, say, Asia and Latin America, and the stories should begin
trickling out soon.
As for the good folks at the Federal Reserve, Chairman Ben
Bernanke got the ball rolling early in the week when he said the
Fed “will be vigilant” when it comes to inflation and that recent
measurements on prices were “unwelcome.” Some Fed
governors then chimed in that they can’t wait for a slowing
economy to bring inflation down…they need to act now, by god!
Ergo, the Fed is poised to hike rates once again when it meets on
June 28-29; following on the heels of moves by the European
Central Bank, India, South Korea and Turkey. For those with
lots of short-term debt and adjustable rate mortgages it’s scary.
Add it all up and you have the additional fear that the corporate
earnings picture also isn’t going to be quite as sanguine as we
were led to believe.
Street Bytes
–U.S. Treasury Yields
6-mo. 5.06% 2-yr. 5.00% 10-yr. 4.98% 30-yr. 5.03%
For the second time this year the yield curve has inverted. [Long
bonds with lower yields than shorter maturity paper.] I scoffed
the first time, but I can’t help but accept the warning signal the
curve is sending this time. Per my forecast, the economy is on
the verge of rolling over and you’ll begin to see real signs of this
as early as the third quarter. Wait ‘til you see the next figures on
housing, for example.
This week promises more volatility as critical data on producer
(wholesale) and consumer prices is released Tuesday and
Wednesday. It’s going to be tension city. Of course the news
could be good…and the markets rally a bit…but Bernanke has
already told you he’s going to defend his manhood. Rates are
headed higher.
–From their recent market highs to Thursday’s lows, the Russell
2000 fell 12.4% and Nasdaq was off 11.4%, the second time both
broached the ‘correction’ threshold of 10%. The Dow was off
7.6% at its worst levels and the S&P 500 6.8%.
–Energy: A funny thing happened on the way to lower energy
prices…they fell for all of a day and then went back up above
$70 for a barrel of crude. And gasoline futures remain
stubbornly above $2.10, despite huge inventories. Even natural
gas, with its own storage facilities bursting at the seams, fell
below $6 only to rally.
So what gives? It’s the same old, same old. Iran, #1. And right
below that still reduced production in Iraq, ongoing tensions in
Nigeria, a little terror premium from Saudi Arabia, a dollar or
two because Venezuela’s Chavez is on the erratic side, and now
another few dollars because it’s summer and the Atlantic and
Gulf waters are heatin’ up.
–Porsche, previously best known for a really cool Corgi Toy, has
vaulted to the top spot in the annual J.D. Power & Associates
quality rankings. But in the more closely followed specific
category ranks, Toyota and its Lexus luxury line garnered 11 of
19 top slots. Corolla was the leading compact, for example, with
Camry the top mid-size auto.
–In a survey by TNS Sofres, 65% of the French people believe
their government is right to intervene to stop foreign bids for
native companies. For example, the government continues to
block Mittal Steel’s bid for Arcelor and President Jacques Chirac
is attempting to scuttle the battle over stock exchange Euronext.
As Peggy Hollinger writes in the Financial Times, “(It) seems
that (Chirac’s) efforts are appreciated by the public, raising the
risk that the government could intensify its interventionist efforts
in the months ahead of the election next spring.”
This isn’t just a French issue. If world equity markets continue
to unwind over the coming months, look for protectionist
pressures to intensify…plunging stocks being a probable
precursor to recession and increasing unemployment lines.
–A House panel investigating Fannie Mae’s accounting debacle
appears to be going after former chief executive officer and
chairman Franklin Raines. Rep. Richard Baker, R-La., said
“There seems to be clear evidence… that Mr. Raines perjured
himself” in 2004 testimony to Congress. Meanwhile, current
CEO Daniel Mudd, who was vice chairman when all the
accounting chicanery was taking place, offered to give up some
of his $26 million in compensation from 2000 through 2003 if
the board so rules. An internal investigation has found no
evidence Mudd himself was involved.
While all the talk recently has been of Enron and its guilty
executives, as well as the cases of Tyco and WorldCom before
that, when the history of this era is written it will be as much
about Raines and Co. as the others. Frankly, I don’t know what’s
holding Fannie Mae’s share price up.
–IBM is tripling its investment in India to $6 billion over the
next three years. Big Blue already has 42,000 employees here.
But I was just perusing the June 19 edition of Business Week and
Apple Computer has shelved plans to build a support center in
Bangalore. One source told BW that the decision was cost-
driven.
“India isn’t as inexpensive as it used to be. The turnover is high,
and the competition for good people is strong.”
In other words, the work can get done elsewhere…a major
warning flag for India and those expecting 8% growth here for
the next 50 years.
–Yoshiaki Murakami, Japan’s American-styled corporate raider
and leading shareholder activist (a rarity in a nation where cross-
shareholding has been the norm…a policy that stifles dissent),
was arrested on insider trading charges as a result of the
Livedoor investigation.
–So the other day I mentioned that China’s former chief copper
trader, Liu Qibing, hadn’t been seen since he lost $300 million in
2005 by shorting copper as the price of the metal was taking off.
Well it turns out the loss could approximate $700 million
because the government never did cover its position and at some
point it has to deliver the goods. [Jamil Anderlini / South China
Morning Post]
–With the soaring price of copper, even after its recent
correction, theft from construction sites has become a huge
problem. It’s particularly acute in Chile, the world’s leading
producer. Last month, 850 people were arrested for stealing or
attempting to illegally sell the stuff. [Santiago Times]
–A study in Hong Kong estimates that air pollution is costing
over 1,600 lives and at least $2 billion a year. The research
concludes that if Hong Kong could just improve its air quality
from “average” to “good” it would save 64,000 bed days in
hospital and 6.8 million doctor visits. From my own experiences
here, I have never come close to experiencing even “average.”
[Additionally, the World Bank reports mainland China has 16 of
the 20 most polluted cities in the world.]
–Uh oh….alert on my carbon fiber play as it pertains to
windmills and wind energy. Alan Levin reported in USA Today
that the Defense Department and the Federal Aviation
Administration have been holding up some major projects
because there is a concern windmill blades could confuse radar.
Drat!
The good news, however, for those of us owning shares in
suppliers to this industry is that the FAA, which has to approve
each application, received 4,343 of them last year, more than
double the amount in 2004. This year it expects more than
10,000.
But what’s this? The same June 19 Business Week also has a
story about how Boeing is having problems with the carbon-fiber
composite used in its Dreamliner 787 aircraft. Say it ain’t so,
Joe! [I’m not worried….they’ll fix it.]
–Google co-founder Sergey Brin acknowledged the search
engine had compromised its values by acceding to Chinese
censorship demands.
“We felt that perhaps we could compromise our principles but
provide ultimately more information for the Chinese and be a
more effective service and perhaps make more of a difference.”
[AP]
Well that’s just super, Sergey.
–And then there’s heart-device maker Guidant. The New York
Times’ Barry Meier reports that Guidant was prepared to tell
doctors about defects in certain models of defibrillators but failed
to send a letter to them warning of the risks of implanting the
devices into their patients…a letter that had already been
prepared.
–Jim Hoagland of the Washington Post writes that the decision
to select Henry Paulson as next Treasury Secretary was made
without either Vice President Cheney or Karl Rove’s knowledge.
–By August, Wendy’s will become the first major fast food
chain to switch to a healthier cooking oil that will reduce trans
fats by up to 95 percent. They are to be congratulated.
To tell you the truth, until recently I had no clue just how bad
trans fats were but I’m now checking every food package.
Research shows eating just 5 grams of the gunk a day raises your
risk of heart disease by 25 percent. A large order of Wendy’s
fries currently has 7 grams. McDonald’s and the others have
similar numbers.
–U.S. farmers will sell as much corn this year to ethanol plants
as they do overseas. Keith Collins, chief economist for the
Department of Agriculture, told the Associated Press “It’s the
most stunning development in agricultural markets today – I
can’t think of anything else quite like this.” [It also makes you
wonder how farmers can continue to defend the gigantic
subsidies many of them receive…a big budget issue come next
year; after the election, of course.]
Overall, the amount of corn used for ethanol amounts to 20% of
the nation’s entire crop.
–Frank Lanza, CEO of defense contractor L-3 Communications
and a fixture on CNBC, died suddenly. L-3’s shares soared in
response on speculation the company would now be sold.
You know, when I pass on I hope my friends are toasting me
with premium beer, but I’m not so sure I want everyone going
“Woo-woo!” a la Homer Simpson.
–80% of Northwest Airlines’ flight attendants rejected a contract
offer calling for a 21% pay cut…to an annual salary of $857.
–Hotel fortunes are soaring. Revenue per available room rose
11% in April from a year earlier; up 20% in Chicago. Fewer
rooms are being added compared to past years which adds to the
pricing power.
–Broadway had a record year in all respects; 12 million in
attendance for the 2005-06 season, total gross of $861.6 million
and an all-time high percentage of seats filled, 81.6%. [Crain’s
New York Business]
–Sharper Image continues to struggle, reporting a loss of more
than $12 million for its most recent quarter. I’ve always found
their products to be way over-priced and of poor quality.
–Flat-panel televisions will account for 20% of the 190 million
TV sets sold worldwide in 2006. By 2010 that percentage is
expected to soar to 60%. I’m still waiting for my Dick Tracy TV
watch.
–Stewart Richardson was sentenced to six years in prison for
ripping off eBay customers to the tune of $300,000. Richardson
ran a scam involving figurines, such as Hummels and Wee Forest
Folk. However, it’s possible the latter are simply in hiding.
Foreign Affairs
Israel: I was all set to write something mildly positive about the
region, until Friday’s horrific attack on Palestinians at a Gaza
beach. At least 7 were killed in an artillery attack of some sort
that clearly was a tragic mistake. By initial appearances, it
appeared a Palestinian family was simply enjoying a day at the
beach. Three children were among the victims.
In response the armed wing of Hamas asserted its self-imposed
truce with Israel was over and as I go to post Hamas has resumed
firing rockets into Israel.
Earlier, prior to this incident, Palestinian Prime Minister Hiniya
of Hamas said “There will be no civil war” as President
Mahmoud Abbas proceeds with his referendum on a two-state
solution for late July. Meanwhile, Jordan’s King Abdullah II
warned Israel not to reshape the West Bank without Palestinian
agreement.
“A unilateral step by Israel would raise question marks and a
sense of insecurity not only among the Palestinians, but among
all the partners of peace in the region,” he said, further warning
any such move could greatly harm relations between Jordan and
Israel.
Of course King Abdullah is deathly afraid of the Palestinians
fleeing to Jordan, where he already has his hands full of refugees.
Abdullah said “Jordan will never be a substitute homeland for
anybody. The Palestinians’ homeland and their state should be
on Palestinian soil, and nowhere else.” [Daily Star]
For his part, Israeli Prime Minister Ehud Olmert told Abdullah
he would do everything in his power to restart peace talks with
the Palestinians, including pursuit of the “road map,” but would
only do so if Palestinians, especially Hamas, renounced violence.
But now this is all just talk, it would appear.
The shame is that Israel was having a good week. President
Sezer of Turkey, the first Turkish head of state to visit the
country since 1999, was a positive presence and, importantly, as
far as Israeli-Turkish relations are concerned, Sezer declined to
meet with Hamas while in the region; a move which garnered the
praise of Israeli opposition leader Benjamin Netanyahu. Turkey
would be the perfect mediator for this dispute if they chose to
step up; the trust between Ankara and Jerusalem running deep
despite a few bumps along the way.
India: It’s curious to me that the United States and its European
allies are so eager to negotiate with Iran over its nuclear
program, including civilian nuclear power, yet when it comes to
India and the recent deal between Washington and New Delhi it
is in danger of failing to gain approval in Congress.
According to the Los Angeles Times, Senate Majority Leader
Bill Frist is blocking the proposed legislation; another reason for
me to loath this man.
The deal is critically important, particularly given the fragile
political climate in India these days, but lawmakers here are
concerned the accord would unravel existing international
agreements on the spread of nuclear weapons.
As I’ve argued before, while we’re all concerned about the
children…ahem…and while the agreement could easily be
negotiated to address some concerns on both sides…overall, the
behavior of a majority in our Congress is both hypocritical and
short-sighted.
Here’s a comment from the L.A. Times’ Paul Richter.
“Lawmakers focused on a better U.S.-India relationship tend to
favor the accord. But those concerned about nuclear
proliferation think the U.S. is giving away too much. They fear
the deal would encourage China, for example, to cooperate more
closely with Pakistan and Russia to expand its aid to Iran’s
nuclear program.”
Are these guys idiots? China is going to do that regardless.
Tom Donnelly and Vance Serchuk observed the following in The
Weekly Standard.
“Granted, India isn’t likely to sign up for an aggressive
containment regime aimed at Beijing any time soon; but then,
neither are we. Rather, India and the United States share an
interest in encouraging China to become a stakeholder in an
international system dominated by liberal democracies, while
maneuvering to hedge against any challenges that Beijing might
be tempted to mount….
“India’s location in the middle of a rough neighborhood also
makes its population more likely to appreciate that the defense of
freedom requires the taking up of arms. While Europeans have
let their defense establishments go to seed, India is pressing
ahead to develop a modern military capable of projecting power.
Delhi already commands one of the best navies in Asia, not to
mention the third largest air force and fourth largest army in the
world….
“The histrionic claims about Iran and other rogue states are
considerably flimsier. Tehran has a nuclear weapons program
because – surprise! – it wants nuclear weapons, and specifically
the freedom of action they will grant the regime against its
adversaries. The deal with India may give the Islamic Republic a
talking point or two at the UN, but it will not sway the behavior
of any country engaged in the real world struggle with Iran, or
the regime itself. That dispute is being shaped by hard-nosed,
and often crude, calculations of national interest and power, not
what happens between the United States and India….
“The resistance to the nuclear deal is made all the more ironic by
the fact that the White House’s Indian diplomacy cuts against
many of the stereotypes about President Bush’s foreign policy. It
is a step toward a long-term alliance, grounded in shared interests
and principles, not a temporary coalition of the willing. It is a
deliberate courtship of a rising power, not a shotgun marriage
with a client state. Most important, it is a rare instance of the
White House successfully closing the gap between ambition and
implementation that has dogged its initiatives, from democracy
promotion to the war in Iraq. If a balance of power in favor of
freedom is to come into being, it simply must include India.”
North Korea: The commies accused South Korea of making
repeated intrusions into North Korean waters and warned of
retaliation. South Korea said it was doing nothing wrong.
Actually, it’s probably as much about the fishing grounds as
anything else….seeing as fish finding themselves in North
Korean waters by accident are always frantically trying to swim
to freedom before they are hauled in by unfriendlies.
China: Hong Kong-based Cardinal Joseph Zen Ze-kiun, the
Vatican’s highest official in China, blasted the Chinese
government on the 17th anniversary of Tiananmen Square,
calling on it to open up a full review of the massacre. Cardinal
Zen defended the pro-democracy demonstrators from June 1989.
“All they asked for was a clean government – is that a sin? And
what they wished for was a strong nation – is that a sin? All
we’re doing is pursuing their aspirations.”
On the issue of China’s new prosperity, Cardinal Zen added:
“Yes, the economy has improved and some people have earned
lots of money, but corruption abounds, the gap in wealth is huge,
mines keep swallowing workers and fake milk powder and fake
medicines are flooding the market – is this considered an
improvement? If they had listened to the kind of advice of the
students and workers, would today’s country be a better
country?” [Keith Bradsher / New York Times]
This man has guts and will be a critical figure over the coming
decade, a la Karol Wojtyla…Pope John Paul II.
Separately, China announced that its process of “cloud seeding”
will be used, in reverse, to prevent downpours during the 2008
Olympics. The head meteorologist for Beijing, Nian Donglian,
told the South China Morning Post:
“We sometimes turn a cloudy day into a dry and sunny one by
shooting the clouds less intensively than when we make rain –
this makes them dissolve. We can even make it snow – but
that’s still undergoing testing.
“It depends on the thickness and the position of clouds. Before
we fire the ack-ack gun we have to call the airport to check there
are no planes in that part of the sky – the last thing we want to do
is shoot one down.”
Now understand 20 of these guns are employed, blast shells
packed with silver iodide. Let’s just hope those responsible
don’t accidentally load plutonium, know what I’m saying?
Russia: I keep telling you President Vladimir Putin will still be in
power come 2009, despite all his denials, and a recent survey
here adds further credence to my thinking as 59% of Russians
believe the constitution should be changed to allow him to stay in
office beyond when his second term expires in 2008. Only 11%,
incidentally, strongly disapprove of Putin.
Somalia: Islamists have apparently won the power struggle in
Mogadishu, a big blow to the anti-terror effort. From an editorial
in the Washington Post:
“Somalia demonstrates, once again, that rebuilding failed states –
especially in the Muslim world – must be a central U.S. interest
in a global war on terrorism. Nation-building is difficult, costly
and painful….But success is possible, as the international
missions in the Balkans have demonstrated. Remarkably, the
Bush administration still hasn’t absorbed this lesson: Rather than
try to build up a Somali government, it backed Mogadishu’s
warlords. Such cut-rate tactics sooner or later lead to a more
troubling and dangerous situation – like the one the Bush
administration now must face in Mogadishu.”
[Evidently, the CIA screwed up royally here.]
–Pakistan: There was an interesting story in Defense News by
Pierre Tran concerning arms sales to Pakistan. France is offering
Pakistan three patrol submarines, but Pakistan wants to outfit
them with Boeing’s Harpoon anti-ship missile, not France’s
Exocet.
The U.S. Congress had earlier been notified by the White House
that Boeing was going to sell Pakistan 130 of the missiles, but as
in the above “street byte” on France and protectionism, France is
raising hell over the selection of the U.S. weapon over a
European based one. It’s just a further example of the tough
competition in this business.
Australia: The Aussies possess 40% of the world’s known
uranium reserves, though coal has been the primary source of
energy. But now Prime Minister John Howard is saying his
country should finally explore nuclear power. Go for it, mates.
On a different matter, looking at the success of U.S. and British
special forces in Iraq, it’s a reminder of the critical role Australia
can play in the war on terror, as I’ve long maintained. So I was
encouraged to read that the Aussies have doubled the number of
their own special forces to 2,500 over the past five years. We
need their help in Southeast Asia.
Malaysia: The head of the military here is warning that terrorists
could use mines to destroy ships and disrupt trade in the vital
Strait of Malacca, through which one-third of the world’s trade
(and about one-quarter of the oil) passes through. Admiral
Mohamed Anwar Mohamed Nor said crude underwater mines
could be easily rigged by simply packing explosives in an oil
drum. [Agence France-Presse]
Peru: Alan Garcia was a truly pitiful president for Peru from
1985-90, but he’s staged a spectacular comeback thanks to a run-
off he was fortunate to sneak into as the anti-Hugo Chavez
candidate.
Peruvians thus chose Garcia as the lesser of two evils as enough
of them were disgusted by the fact Chavez openly backed
Garcia’s opponent. Many are thus hailing this as a further sign
of a backlash against Chavez, coming on the heels of Alvaro
Uribe’s solid reelection effort in Colombia. I’d say it’s way too
early to draw that conclusion. As growth slows across the
continent, Chavez’s populist message will continue to resonate.
The United Nations: Seeing as the United States foots about 25%
of the tab, you’d think UN officials would be careful in what
they say, particularly on American soil. But the other day the
UN’s deputy secretary general (#2), told a New York audience
the UN’s failures were largely the fault of the U.S.
“The prevailing practice of seeking to use the UN almost by
stealth as a diplomatic tool, while failing to stand up for it against
its domestic critics, is simply not sustainable….the UN’s ability
to respond is being weakened without U.S. leadership. There is a
perception among many quite moderate countries that anything
the U.S. supports must have a secret agenda, aimed at either
subordinating multilateral process to Washington’s ends or
weakening the institutions.”
To which U.S. ambassador John Bolton said, “This is a very,
very grave mistake. To have the deputy secretary general
criticize the United States in such a manner can only do grave
harm to the UN.”
The timing of Brown’s remarks couldn’t have been worse as the
U.S. and Japan were already threatening to cut off funds without
further UN reforms.
Random Musings
–The London Times had the following editorial on Haditha,
published before Zarqawi’s death.
“America-bashing is in fashion as it has not been since Ronald
Reagan accurately described the Soviet Union as an ‘evil
empire.’ Anti-Americanism is not confined to the usual radical
chic suspects of the Left; in Britain, it infects the High Tory
Establishment, ‘good Europeans’ and little Englanders alike. So
why are we all anti-Americans now?
“American stumbling on the rough road since 2001 has played
some part. Yet had there, inconceivably, been no wrong steps,
had America been positively obsequious in courting international
support (and it has done more on that score than its critics admit),
anti-Americanism would still be on the rise. The U.S. is never
less popular than when it is aroused and determined in defense of
democratic freedoms, never less trusted than when the world is
most reliant on its unmatched ability to project power.
“Democracies are psychologically ill-adapted to open-ended
confrontations where there can be no decisive victory, the
essence of the effort to subdue global terrorism. Eternal
vigilance is a wearisome business. The more vulnerable that
Europeans feel, the more liable they are to shift blame across the
Atlantic.
“The strength of disdain is a measure of Europe’s weakness.
Smugness is one of Europe’s great contemporary exports. We
may all think that we know America, its music, its culture, its
self-confident exceptionalism. We tend to forget that Americans
fight only with extreme reluctance. We overlook their penchant
for agonized self-criticism; everything bad we know about the
U.S., we know because Americans inexhaustibly rehearse their
society’s shortcomings. There has never been greater
transparency, whether than on the battlefield or the boondocks,
and there has never been more open debate about the country’s
virtues and vices – the Internet has transformed the quantity and,
at times, the quality of the conversation.
“Better than most, Muslims understand why Islamist terrorism is
war at its unholiest, an existential threat to societies. Iraqis may
resent occupation, but they fear a weakening of U.S. resolve.
Their fears should be ours. Were it to become politically
impossible for a president to keep America’s forces engaged
from its shores, then the backbone of international security
would be broken. America-bashing may be a popular sport, but
its adherents prefer not to contemplate its consequences.”
–The potential identity theft at the Veterans Administration now
extends to basically all active-duty military, Guard and Reserve
members – 2.2 million in total. A $26 billion lawsuit against the
government has been filed and while it would cost every citizen
in the long run, I’d love to see the government lose this one to
prove a point.
–As a resident of New Jersey who for years passed through the
World Trade Center as part of my daily commute, and as one
who has since observed the public actions of the 9/11 widows,
I’ve had problems with a few of them. But were it not for their
activism the 9/11 commission never would have been assembled
and valuable information would have remained hidden from the
American people.
I’ve also written that some in the nation’s heartland are disgusted
with the monies that have been distributed to the 9/11 victims’
families, citing the fact the U.S. government largely ignored the
victims of Oklahoma City, a place I’ve made two pilgrimages to
in the past.
These are facts.
At the same time, I was appalled by Ann Coulter’s despicable
performance on the “Today” show the other morning. But this is
the kind of bomb thrower a sizable portion of the public eats up,
another fact of our modern times I’ve had trouble with.
–I also have trouble with the issue of gangs in America. I saw
the other day where a Venice High School (Ca.) student was
fatally shot on campus; the victim of a gang dispute between
Latinos and blacks.
And New Jersey’s Star-Ledger reported that Newark Mayor-elect
Cory Booker has received death threats from the Bloods because
this bunch of dirtballs is scared Booker may stick to his
campaign promise to crack down on their drug trade. An
informant told Newark police that the Bloods had acquired an
AR-15 assault rifle with a silencer to take Booker out. This is
sickening.
–Of course Black America, in general, has huge problems these
days as Bill Cosby continues to spell out. And along the same
lines there was a story in the Los Angeles Times that just 2% of
the 4,852 incoming freshmen at UCLA are African American,
the lowest figure in decades.
UCLA Chancellor Albert Carnesale said “Clearly, we’re going to
have to meet this crisis by redoubling our efforts.”
But conservative Ward Connerly countered, “The problem…
starts with the small number of black students who are
academically competitive….I don’t think we solve this problem
by tinkering with the admissions criteria to make it easier to get
in.”
–I was also distraught by a NBC News story on Friday
concerning an upcoming auction of Dr. Martin Luther King Jr.’s
personal papers…some 10,000. The King family can’t wait to
collect but this deserves to be preserved for historians. The
family’s curator told NBC, “This is what he left to his children.”
Bull.
–In another classic example of my “24-hour” rule, we have the
ongoing situation at Duke University and the rape case involving
the lacrosse team. Sometimes it takes a while for the facts to get
out but invariably they do.
–I looked up smarmy in the dictionary and saw a picture of Al
Gore.
–U.S. scientists have discovered a humongous crater in
Antarctica that could have wiped out more than 90 percent of the
species on Earth 250 million years ago. If I didn’t know of the
timeline, I would have said it was probably just another example
of Barry Bonds and ‘roid rage.
–16-year-old Michelle Wie attempted to qualify for the U.S.
Open at Canoe Brook Country Club here in the town of our
headquarters, Summit, N.J. Michelle was criticized in some
circles for attempting to crash the men’s party, but in the end she
failed to qualify by five shots.
Mark McCormick is the head pro at a place where I play and was
a participant in the day’s events…unfortunately failing himself to
advance to Winged Foot. But I liked his observation in a first-
person account of his own experience that he wrote for the Star-
Ledger. In addressing Wie’s detractors:
“She’s going for her dream, and what’s wrong with that? It’s
good to know our youth still dream.”
Pretty simple…and well said.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $612…yikes
Oil, $71.63
Returns for the week 6/5-6/9
Dow Jones -3.2% [10891]
S&P 500 -2.8% [1252]
S&P MidCap -4.4%
Russell 2000 -4.9%
Nasdaq -3.8% [2135]
Returns for the period 1/1/06-6/9/06
Dow Jones +1.6%
S&P 500 +0.3%
S&P MidCap +1.0%
Russell 2000 +4.2%
Nasdaq -3.2%
Bulls 40.2*
Bears 31.5 [Source: Chartcraft / Investors Intelligence]
*Lowest since Aug. ’04…normally a good sign for contrarians.
Have a great week. I appreciate your support.
Brian Trumbore
