[Posted 7:00 AM ET]
Iran and Iraq
The editorial board of the Wall Street Journal met with President
Bush this week. Following is an excerpt.
WSJ: Was there a moment in the war when you said we have to
make a major change in the way we’re doing things in Iraq?
GWB: Yes, there was.
WSJ: When was that?
GWB: September/October.
WSJ: Why?
GWB: Violence. It looked like it was uncontrollable. A young
democracy is not going to survive if its capital city is in sectarian
violence. I thought for example after the Samarra bombing that
we were going to be fine. I thought the Shias had looked into the
abyss of a civil war and pulled back. We thought they had, and
they didn’t.
Incredible. I spelled out last week how clueless President Bush
was over three years ago and now he says he thought that after
the bombing of the Golden Mosque at Samarra we’d be alright?
Here is what I wrote in this space last 2/25/06 following the
destruction of one of Shia Islam’s holiest sites:
“(The) bombing of the Golden Mosque was akin in many
respects to bombing St. Peter’s Basilica. Whoever did it (most
likely al Qaeda) perpetrated a crime of enormous magnitude and
the shockwaves will reverberate for years….
“The bombing of the Golden Mosque may have unleashed the
whirlwind.”
It did.
Arab affairs expert Fouad Ajami, looking for a bright spot:
“There is a ‘balance of terror’ today between the Sunni and Shia
protagonists. More and more Sunni Arabs know that their old
dominion is lost, and that they had better take the offer on the
table – a share of the oil revenues, the promise that the
constitution could be amended and reviewed, access to political
power and spoils in return for reining in the violence and
banishing the Arab jihadists. The Shia, too, may have to come to
a time of reckoning. Their old tormentor was sent to the gallows,
and a kinsman of theirs did the deed with the seal of the state.
From the poor Shia slums of Baghdad, young avengers answered
the Sunni campaign of terror with brutal terror of their own. The
old notion – once dear to the Sunnis, and to the Shia a nagging
source of fear and shame – that the Sunnis of Iraq were a martial
race while the Shia were marked for lamentations and political
quiescence has been broken for good.” [Washington Post]
Right now, however, with the troop surge moving forward
regardless of what Congress says (I’m uninspired by the debate,
incidentally), the bigger immediate story is Iran as the UN
Security Council’s 60-day deadline for Tehran to suspend its
uranium enrichment program draws to a close [Feb. 20-23].
I thought long ago Iran would announce sometime between Feb.
11 and 20 that it had upgraded its centrifuge operation. I was
basing that judgment on the anniversary of the Islamic
Revolution, Feb. 11. It now appears President Ahmadinejad is
preparing to make the announcement on installing a new
assembly of 3,000 centrifuges sometime next week instead.
Ahmadinejad:
“Enemies of the Iranian nation…must know that their wrongful
beliefs will be revealed once again during Feb. 11 rallies by the
great Iranian nation.”
The president then conceded that Supreme Leader Ayatollah Ali
Khamenei has the ultimate authority on the issue of the nuclear
program.
“The general policies of the system are made by the Exalted
Supreme Leader,” said Ahmadinejad “and the government is
required to carry them out.”
Earlier, President Bush told National Public Radio “If Iran
escalates its military action in Iraq to the detriment of our troops
and/or innocent Iraqi people, we will respond firmly.” Bush later
said “I have no intent upon going into Iran.”
Secretary of State Condoleezza Rice keeps saying there will be
no direct discussions with Iran unless it suspends the weapons
program, but Europe is cracking on the issue of enforcing stricter
sanctions should Tehran keep processing beyond the deadline.
Europe continues to conduct extensive business with the regime
and due to the risky nature of it, European governments
guarantee the loans needed. So according to the International
Union of Credit and Investment Insurers, the largest providers of
such credits in Europe in 2005 were Italy, at $6.2 billion;
Germany, at $5.4 billion; and France, at $1.4 billion.
Inside Iran, however, efforts to contain Ahmadinejad appear to
be gaining, witness his own recognition of Khamenei’s authority.
Today there is also increasing talk of new alliances.
Ralph Peters / New York Post
“At the strategic level, Washington is lining up regional allies –
Sunni Arab states – to face off with Iran. But in Iraq, the
administration continues to tilt toward Shia parties – hoping that
Iran can be excluded from a decisive role in Baghdad….
“For their part, our Sunni Arab ‘allies’ support the Sunni
insurgents and dread the prospect of a Shia-dominated
democratic government or a partition of Iraq.
“And now, in the worst American tradition, we’re in danger of
grabbing at short-term gains at an exorbitant strategic price:
Defaulting to our old habit of backing hard-line regimes, we’ve
dropped all pressure on the Saudis and Egyptians to reform their
political systems.
“Want to recruit more terrorists for another 9/11? Give Sunni
Arab regimes a renewed blank check to shut down all opposition.
“True, Shia terrorists have attacked us in the Middle East. But
the Sunni terrorists attack us globally – and on our own soil.
Shia extremists think regionally, while Sunni fanatics have
universal ambitions.
“Yes, Iran is the immediate strategic problem – but it’s a far
more complex matter than the kiss-the-Saudis’-sandals crowd
accepts. A violent rogue with a nuclear-weapons program, Iran
backs terrorists in Iraq, Lebanon and Afghanistan.
“Yet Iran also happens to be America’s natural ally in the region.
“We’re in a race against time. The Iranian people have tried
religious rule – now they’re sick and tired of it. They want to
move on. President Mahmoud Ahmadinejad’s allies lost the last
round of elections and the mullahs are getting nervous about his
excesses. Iranians want change, but don’t know how to get it –
and we can’t impose it.
“Could the Khomeinist regime fall before apocalyptic ayatollahs
get the bomb? There’s no more pressing strategic question….
“(We) have to make our bet. So here are the fundamental
questions the administration has to ask itself before pushing the
chips across the table:
“How do we defeat Iran’s government without alienating the
Iranian people?
“Do our long-term interests truly coincide with repressive Sunni
Arab regimes?
“By reinvigorating our ‘alliance’ with Saudi Arabia and other
repressive Sunni states, are we just setting ourselves up for
another round of ‘let’s you and him fight,’ with American blood
defending Arab oil wealth? Are we still the Saudi royal family’s
whores? ….
“Only one thing is certain: A return to yesteryear’s destructive
policies and faulty alliances won’t solve our long-term
problems.”
And this op-ed by Linda S. Heard for Gulf News (U.A.E.):
“The question is why does the Bush administration refuse to talk
to Iran? Tehran has made tentative approaches on numerous
occasions and has been constantly rebuffed….
“If Iran is perceived as a threat then surely the best deterrent
would be to bring it into the international fold. Put simply,
friends don’t normally bomb one another and economic partners
have nothing to gain from doing so….
“According to Dick Cheney the aircraft carriers, strike forces and
nuclear submarines dispatched to the neighborhood are there to
send ‘a very strong signal to everybody in the region that the
United States is here to stay, that we clearly have significant
capabilities, and that we are working with friends and allies as
well as the international organizations to deal with the Iranian
threat.’
“Wait a minute! Iran hasn’t threatened the U.S. and even if it
wanted to it doesn’t have the capability to rain missiles on New
York or Los Angeles.
“Moreover, (according to some), Iran is years away from
enriching uranium to specifications and quantities needed for
nuclear bombs and there is no evidence to suggest its ambitions
lie in that direction….
“If the White House wanted to defuse the situation it could do so
at any time by sending Secretary of State Condoleezza Rice to
Tehran with offers of economic cooperation and security
guarantees.
“In response, Tehran would undertake to lift its hand from Iraq
and suspend uranium enrichment. It may really be that simple.
“If Iran were to reject such overtures then at least the White
House could say it pulled out all the stops for diplomacy’s sake
and return to banging the drums.”
I don’t necessarily agree with Ms. Heard’s thoughts on the
weapons front, but how can you disagree with the conclusion?
Wall Street
It was a week filled with data and a Fed meeting and the
preponderance of it was positive. The first preliminary reading
on the gross domestic product for the fourth quarter came in at
3.5%, far better than the 2.6% and 2.0% pace of the previous
two. I have to admit this was far stronger than I thought it would
be, given the still punk housing and auto sectors and a so-so
Christmas shopping season, but employment remains strong and
as one report had it, we continue to spend more than we earn. In
fact the personal savings rate for the past year was negative 1%,
the lowest since the Great Depression. Now some argue this
doesn’t matter because at the same time the average American’s
net worth is increasing due to rising investment portfolios and
housing values (until recently). I don’t discount that, but
paycheck to paycheck we’re increasingly in the red and if and
when the economy finally seizes up, that’s when we see
consumer spending fall off a cliff.
There was some poor news on the construction and
manufacturing front as two leading indicators of the latter fell
below the 50.0 growth/recession level for the second time in
three months, normally a harbinger of tougher times ahead, while
construction spending was down in December.
But one big driver of our economy is exports and here the global
boom continues with few rough patches.
And there is no inflation. The Federal Reserve met for the first
time this year and in holding the line on interest rates yet again,
opined that growth is solid and there are “some tentative signs of
stabilization” for the housing market. As for its number one job,
the Fed offered “readings on core inflation have improved
modestly in recent months,” but then it always has to add “some
inflation risks remain” just to remind us all who’s still sheriff.
Sure, there may be some rise in food prices owing to incredibly
stupid governmental policies, as well as the weather, but overall
I’ve argued inflation hasn’t been an issue for years now and that
remains the case.
Back to housing, I said I’d give you all a break for a week or two
and I’ll stick to that; except to say while the Fed talks of
stabilization, officials at S&P, in examining their latest data, see
“no signs we’re bottoming out.” The issues in the sub-prime
mortgage market certainly aren’t going away any time soon,
while Josh P. passed along data from the Census Bureau that
notes the vacancy rate for owned units jumped to a record 2.7%
from 2.0% a year earlier. To put that in perspective, from 1965
to 2005 the homeowner vacancy rate had never been above 2%.
At least crack dealers have a wide selection of homes from which
to operate.
And just a word about China’s stock market bubble, which is tied
to the ongoing bubble in their economy. Recall that the main
Shanghai Composite rose 130% last year and now online trading
accounts are opening at a rate of 90,000 a day, or 35 times the
pace of ’06. Traders are using home loans and credit cards, and
money is flooding into mutual funds. Trading volume in January
exceeded all of 2005 and was already 1/3rd the pace of ’06. The
market equivalent of the S&P 500 is valued at 36 times earnings.
Twice this past week the Shanghai Composite declined at least
4% as volatility picks up. All of these are signs of a major top.
It’s like a tremor before the big quake and the government is
scared to death. The vice-chairman of the National People’s
Congress said “There is a bubble going on. Investors should be
concerned about the risks.” Can you imagine an American
political figure saying that? “Every investor thinks they can
win,” Cheng Siwei told the Financial Times. “But many will end
up losing.”
Of course the danger is the market totally tanks, as it has in the
past, only this time far more middle class Chinese will get hurt
and you have this issue of rising expectations due to the boom
years. Disappointment can lead to unrest if investment and
government spending dry up simultaneously.
Lastly, some words on crude oil, energy policy and ethanol.
Since bottoming at $49.90 on Jan. 18, oil has staged a stirring
rally to above $59 and it’s due in large measure to a return of
winter, as in the last three weeks the Midwest and Northeast, in
particular, have seen generally below normal temps as El Nino
weakened and the jet stream resumed it’s normal path. The
inventory picture isn’t even that bad, with higher builds and
lower drawdowns than expected. But if you tell me the economy
is growing at a 3.5% clip, and just about everywhere else in the
world is still chugging along, I’d tell you demand for crude, even
with our new emphasis on conservation, isn’t about to dry up.
Which brings me to President Bush’s energy policy and the
dumb idea of the decade, corn-based ethanol (as opposed to the
hoped for cellulosic kind).
The Wall Street Journal put it best when it said we are entering a
new era of Big Corn, with ethanol the “moonshine of the energy
world.”
Currently, as much as 20% of the U.S. corn crop is devoted to
ethanol and this percentage is skyrocketing. But to hit President
Bush’s target for ethanol use by 2017 as he spelled out in the
State of the Union would require the entire U.S. corn harvest.
Right now, thanks to a 51-cent-a-gallon tax credit for ethanol,
this ill-conceived policy is costing U.S. taxpayers $2.6 billion a
year (one study puts it at $6 billion) and as more and more of the
overrated fuel is produced the burden on Joe and Jill Six-pack
will increase in kind.
And for all of my fellow Republicans who tout free trade,
explain to me why we have a 54 cent tariff against imported
ethanol if we want to hike the volume up as much as we do.
Brazil is the only other nation with as large a focus on the stuff,
but Brazil’s is largely sugar-based (a fact way too many opinion
writers are missing, by the way) and as Brazilian experts note
corn-based ethanol is far less efficient.
Of course the flip-side of ethanol-blended gasoline is that for
every farmer that is profiting as corn goes from $2 a bushel to $4
and higher, there is another who is getting slaughtered by rising
feed costs, like my friends the Bakers in Oklahoma who raise
dairy cows and hogs. And it’s not just here, but on Thursday,
75,000 marched in Mexico City because corn prices have
doubled there as well and the staple of the Mexican diet, the
tortilla, now accounts for a staggering 1/3rd of the earnings for
those being paid the minimum wage ($4 per day).
Tyson CEO Dick Bond said “The dramatic rise in corn prices has
become a major issue for us and others in the food industry.
Companies will be forced to pass along rising costs to their
customers, meaning consumers will pay significantly more for
food. If left unaddressed, the bigger long-term issue will be the
availability of U.S. and global grain for protein and other foods.
We fully support efforts toward renewable energy; however, as
the food versus fuel debate unfolds, we must carefully consider
the negative and unintended consequences of over-using grains.”
But here’s the payoff. One day, “cellulosic” fuels, that use stuff
like switch grass and farm waste to make ethanol, not food
commodities, could be viable and that would be a clean
alternative.
Today’s ethanol isn’t. It is not as clean as it’s made out to be.
Aside from the fact it can corrode engines on older cars, boat
owners are finding it is destroying their engines, as Trader
George was telling me. That alone should tell you the stuff isn’t
good, at least in its current form. In fact, to have the size ethanol
industry some are calling for would require a massive investment
in new infrastructure, including for new, corrosion-resistant
pipelines.
Plus ethanol is simply less efficient than gasoline, which means
you need more gas to drive the same amount of miles. That kind
of defeats the purpose of becoming independent of Middle
Eastern sources of oil, doesn’t it?
About the only positive in this whole debate, as farm broadcaster
Ken Root points out in a column for High Plains Journal, is that
the migration out of many of the farm states, including Iowa, has
ceased.
“In the coming years, rural America is going to be treated well
by government. It is the rising star in our economy. The
landscape is wide open for growth, much of it tied to renewable
energy. There will be boondoggles and there will be investments
that don’t pan out. There will be families that will bring back
another generation to join in the family business and there will be
new industries that we haven’t even thought about yet.
“Rural America deserves this chance. With the advent of the
Internet, improved roads and the ubiquitous shopping mall, the
quality of life has risen to a level that some call superior to urban
living….
“But the key to success, as it always has been, will be old
fashioned capitalism and hard work.”
I can’t disagree with any of this, it’s just that corn-based ethanol
is one of the boondoggles.
Street Bytes
–The Dow Jones hit another new record high, 12673, before
losing a little on Friday. For the week the Dow was up 1.3% to
12653, the S&P 500 gained 1.8% to a new six-year high, 1448
(less than 80 points shy of its record mark) and Nasdaq added
1.7% to 2475.
–U.S. Treasury Yields
6-mo. 5.15% 2-yr. 4.93% 10-yr. 4.82% 30-yr. 4.92%
Rates headed higher following the strong GDP report that
basically wiped out any hope for a Fed cut the first half of the
year, but then we had the not so good readings on manufacturing,
along with the Fed’s announcement and a slew of tame inflation
readings so bonds rallied back to register small gains on the
week. Friday’s employment report for January, though solid,
had little impact and with the usual revisions for prior months,
the average jobs gain for Nov.-Jan. was 170,000. The
unemployment rate, though, ticked up to 4.6%.
–Exxon Mobil reported the largest annual profit in the history of
the world, $39.5 billion for 2006, though on an inflation-adjusted
basis Rome Waterworks would come in substantially higher, I
imagine. One thing that isn’t being mentioned though is that as
earnings for the energy sector peak and head down, assuming oil
prices don’t zoom back to $70 or $80, that means less tax
revenues for Uncle Sam. Remember, it’s been Big Oil that more
than anything else has closed the budget gap. Those incremental
receipts will be harder to come by in the future.
Separately, Royal Dutch Shell and Repsol of Spain have entered
into an agreement with Iran to continue work on a large field that
will eventually be converted to liquid natural gas; a big blow to
the White House which says the agreement could trigger
sanctions under a 1996 U.S. law that imposes them on companies
that invest more than $20 million in Iran’s energy sector.
Previously, PetroChina signed a deal with Iran’s national gas
exports company. Iran holds the world’s second largest gas
reserves next to Russia.
Then you have the reports that Iran and Russia may try to create
an OPEC-like organization for gas, this after I’ve been writing of
Europe’s concerns over a Russia-Algeria alliance that would
control 35% of Europe’s natural gas needs. Russian President
Vladimir Putin labeled a gas OPEC “an interesting idea” after
Iran’s Ayatollah Khamenei called for it. Together Russia and
Iran control over 40% of the world’s known reserves.
And then there’s the ongoing topic of Mexico’s largest oil field,
Cantarell; a subject I broached last week with the Journal
following up a few days later. Cantarell’s daily output fell to 1.5
million barrels in December compared to 2 million last January,
a staggering decline. Mexico’s exports are falling precipitously
as well, a huge blow to its economy since oil exports account for
37% of government revenues.
–Ford’s auto sales dropped 19% in January while General
Motors’ declined 17%. But DaimlerChrsyler registered a 3%
increase and Toyota picked up 9.5%, its 20th consecutive
monthly gain.
Ford and GM are in the midst of slashing the workforce by
70,000 workers and closing a combined 28 plants and facilities in
North America over the coming decade.
–According to the International Chamber of Commerce, far and
away the two worst offenders against intellectual property rights
are Russia and China. Rampant piracy is the main reason
Russia’s bid to join the World Trade Organization continues to
be blocked.
–India’s debt rating was raised to investment grade by Standard
& Poor’s, a big deal that can help spur further foreign direct
investment. India still attracts less than a tenth of what China
does even as growth has averaged over 8% the past four years.
The number of households earning an annual income of at least
$10,000 is rising more than 20% a year, according to McKinsey
& Co.
–After being overly concerned about bird flu a few years back,
you’ve probably noticed I’ve barely mentioned it since; but no
doubt it’s still simmering as this week Nigeria reported its first
human death from the deadly virus and there were further
incidents in Eastern Europe, particularly Hungary.
Thomson Financial recently did a survey of institutional
investors and their number one concern wasn’t terrorism but bird
flu. While I still believe it’s a risk, I can’t get hyped up about it
anymore until we see the first real outbreak outside of some
clusters in Indonesia. That’s why perhaps the Nigeria case is
significant.
–In announcing another quarter of stronger than expected results,
Google’s net income topped $1 billion and according to
ComScore Networks the company improved its lead in the Web
search game by capturing at least half the market. One forecast
also predicts Google may take 28% of the total U.S. Web
advertising market in 2007 vs. 17% for Yahoo. All spending on
Internet ads in the U.S. may hit $21 billion this year according to
Merrill Lynch.
Shares in Google fell some after the report, however, as it didn’t
beat the ‘whisper’ numbers for even better results. My point has
always been that while Google’s CEO talks about the number of
consumer clicks on its ads rising 61% from a year ago, the whole
game of advertising on the Web is going to be exposed for the
sham it is. Not just click-fraud but the worthlessness of it all.
I do have to admit, though, I finally clicked on some Google ads
this week tied to a search for a Celsius to Fahrenheit converter
and all three I clicked on didn’t help me one bit, let alone I don’t
know what possible product they were selling. Otherwise, I have
zero reason to click on ads and I never see myself as too different
from the mainstream in this regard.
But obviously some people do, or the likes of Google and Yahoo
wouldn’t be raking in the revenues they do. One day advertisers
will finally catch on.
–Amazon continues to do a great job on the revenue front, but its
profits shrunk 51% in the fourth quarter over 2005’s pace due to
its cost structure.
–Michael Dell finally canned CEO Kevin Rollins and put
himself back in control after Dell’s share price had fallen 31%
under Rollins’ watch and Dell had seen its market share shrink at
the expense of Hewlett-Packard’s resurgence. While I’ve always
liked Michael Dell, the product just isn’t as good as it used to be,
witness my struggles with it over the past few years. I do hope
he’s successful in turning the ship around, but after an initial
flurry of excitement, Wall Street’s response was to take Dell
shares down further.
–Ben Stein in an op-ed for The New York Times:
“Empires come and go. Economic systems come and go. There
is no heavenly guarantee that capitalism will last forever as we
know it.
“It’s built on man’s notion that he can trust his neighbor with his
money, and that if the neighbor misbehaves, the law will chase
him and catch him, and that the ladder of law has no top and
bottom, that even the nobles get properly handled once they have
been caught.
“If that trust disappears – if the system is no longer a system for
the ordinary citizen but only for the tough guys – how much
longer can the miracle last?
“Each day’s newspaper, it seems, brings more tidings of
unrestrained selfishness and self-dealing and rafts of powerful
people saying it’s good for us to be robbed if only we truly
understood the system.
“The problem is, we’re getting to understand it all too well. And
there is no one in Washington – absolutely no one – to help.”
–Bill Gates told leaders at the World Economic Forum in Davos,
Switzerland that “I’m stunned how people aren’t seeing that with
TV, in five years time, people will laugh at what we’ve had,”
noting the rise of high-speed Internet and the popularity of video
sites like YouTube. In the years ahead, we’ll abandon
conventional broadcast television, with its fixed program slots
and advertisements, he added. “Certain things like elections or
the Olympics really point out how TV is terrible. You have to
wait for the guy to talk about the thing you care about or you
miss the event and want to go back and see it. Internet
presentation of these things is vastly superior.”
Actually, some of us are continually amazed at how we survived
without real time box scores for baseball, basketball and football.
It wasn’t too long ago, after all, that many of us were calling
SportsPhone every ten minutes for updates on our favorite
college team. But I digress.
–Reporters Without Borders said China is spearheading an
increasingly sophisticated movement by repressive regimes to
restrict the Internet. According to the group, there are 52 cyber-
dissidents currently in jail in China, while there are only about 10
other people around the rest of the world in prison for posting
criticisms of government online. The group is concerned other
nations will mimic China’s techniques and impose Beijing’s
censorship and surveillance methods on its own people.
Foreign Affairs
Israel: The U.S. State Department issued a report finding that
Israel violated U.S.-Israeli arms agreements with its use of
cluster bombs during the war in Lebanon last summer. Cluster
bombs are to be used only in combat with organized Arab armies
and clearly defined military targets. UN humanitarian chief Jan
Egeland offered “What’s shocking and completely immoral is
90% of the cluster bomb strikes occurred in the last 72 hours of
the conflict, when we knew there would be a resolution.”
[People are being maimed and killed every day in Lebanon when
they inadvertently set off the unexploded bomblets.]
But just how far will the State Department go in its criticism of
Israel?
Editorial / The Daily Star (Lebanon)
“The same U.S. administration that was so publicly enamored
with Lebanon’s Democratic Spring in 2005 may soon
demonstrate yet again that it is colluding in the murder of
Lebanese civilians….every indication suggests that the U.S. will
not take a firm stand against a crime that has killed or maimed
nearly 200 Lebanese civilians (post-war).
“There ought to be no need to even question whether Israel’s
well-documented use of the weapons was unlawful and morally
reprehensible. Nearly half of the weapons failed to explode on
impact, and an estimated 1 million bomblets still litter streets,
homes and orchards in South Lebanon….
“Yet Israeli officials openly admit that while they expect a mild
and private chiding from the U.S. government over the use of the
weapons, they do not foresee a harsh public response. They, like
all people from the region, are aware that the U.S. tends to
blindly back Israel’s practices – no matter how barbaric or
inhumane….
“This is not to say that the U.S. administration has done nothing
to help Lebanon. It recently promised the country a hefty
financial aid package of $770 million at the Paris III donors
conference. [Ed. But only $5.5 million of this was for clearing
mines and cluster bombs.]….
“The current U.S. administration has often professed its support
for Lebanon, but President George W. Bush lacks the moral
fortitude of his predecessor Ronald Reagan, who in 1982 banned
the sale of cluster munitions to Israel for six years after a
congressional investigation found that the Israeli military had
misused the weapons during its war on Lebanon that year.
“What Lebanon needs from the U.S. more than financial backing
or empty words of friendship is genuine political support. The
Bush administration has had numerous opportunities to
demonstrate goodwill toward Lebanon by taking a firm stand on
issues such as daily Israeli overflights of Lebanon and the status
of Shebaa Farms, or by assisting – instead of blocking – efforts
to secure a cease-fire during the summer conflict. The issue of
cluster bombs represents yet another one of those opportunities
that Bush and his administration will likely miss.”
North Korea: Six-party talks on Pyongyang’s nuclear weapons
program are slated to resume Feb. 8. Kim Jong-il wants financial
restrictions lifted, including unfreezing $24 million in a Macau
bank that the U.S. contends was used to launder counterfeit $100
bills. But, again, it’s all about China and how much pressure
they will place on the North.
For a different view, Robert Carlin, a former State Department
analyst, and John Lewis, a professor at Stanford, offered an
interesting take in an op-ed for the Washington Post.
“If the United States has leverage, it is not in its ability to supply
fuel oil or grain or paper promises of nonhostility. The leverage
rests in Washington’s ability to convince Pyongyang of its
commitment to coexist with the Democratic People’s Republic of
Korea, accept its system and leadership, and make room for the
DPRK in an American vision of the future of Northeast Asia.
Quite simply, the North Koreans believe they could be useful to
the United States in a longer, larger balance-of-power game
against China and Japan. The Chinese know this and say so in
private.”
Perhaps, but to say North Korea could be useful vis a vis
Washington’s relationship with Tokyo makes little sense.
China / Japan: Meanwhile, Japanese Prime Minister Shinzo Abe,
whose approval rating has plummeted in his first four months in
office due to new scandals over alleged misuse of party funds
and bid-rigging in the construction industry, a big donor for his
LDP, lashed out at China for its recent anti-satellite test, saying it
broke international law.
A Chinese foreign ministry spokesman responded “We have
already stated our position. Since so many other countries are
concerned about the peaceful uses of outer space and oppose the
weaponization of space and an arms race, we call on them to
make common efforts with us to realize this goal.” Can you say
disingenuous?
Then there’s this from Canada’s former Secretary of State for the
Asia-Pacific region, David Kilgour, who along with a human
rights lawyer released a report this week on how China’s military
has indeed been harvesting organs from prison inmates as
rumored, mostly Falun Gong practitioners for large scale
transplants.
The Canadians interviewed Canadian hospital staff who
subsequently cared for hundreds of patients after they underwent
suspect transplant surgeries in China and Mr. Kilgour told a press
conference “The involvement of the People’s Liberation Army in
these transplants is widespread. Recipients often tell us that even
when they receive transplants at civilian hospitals, those
conducting the operation are military personnel.”
Russia: Vladimir Putin held his annual news conference and for
3 ½ hours fielded questions from the international press. Aside
from the above-mentioned feeling that a gas OPEC was “an
interesting idea” and that Russia was not using energy as a
weapon, he blasted U.S. plans for moving forward with missile
defense sites in former Soviet states such as the Czech Republic
and Poland, refuting Washington’s claims that the defense is
aimed at intercepting possible attacks from Iran and North
Korea.
“We consider such claims unfounded, and, naturally, that directly
concerns us and will cause a relevant reaction,” suggesting
Russia will continue to develop weapons meant to counter the
existing strategic imbalance.
Peter Brookes responded in the New York Post.
“(The) Russian ‘shoe-banging’ about the missile defense in
Europe remains shockingly hypocritical – when you consider all
the ‘destabilizing’ activity Moscow has willfully engaged in at
the expense of America’s security.
“How about Russia’s delivery of $1 billion in super-advanced
Tor-M1 air-defense missiles to Iran, encouraging Tehran’s
belligerence – and bolstering its confidence – as the world seeks
to rein in its nuclear program?
“Did Moscow really believe building Iran’s first nuclear reactor
at Bushehr (starting in the 1990s) – would stabilize the Middle
East? And what of its $1 billion in arms contracts with Syria?
“How about the irascible North Koreas? Pyongyang’s ballistic
missile and nuclear weapons programs got their start from – you
guessed it – the Kremlin.
“The Russians carp about the Poles and the Czechs but seem
conveniently to forget about Venezuela in our neighborhood.
Moscow inked $3 billion in arms deals with Castro-wannabe
Hugo Chavez for advanced fighters, helicopters and other
weapons.
“And China? Someday, China – using advanced Russian
weapons – might cross swords with the United States over
Taiwan’s future. Moscow sells billions in arms to Beijing, and
recently agreed to cooperate with the Chinese space program.
“The point here is that Moscow wants it both ways. Russia is
now the world’s biggest arms merchant to the developing world.
In some cases, these sales seriously undermine American
interests and security – and threaten U.S. forces.
“Yet Russia wants us to forgo deploying a defensive missile
system that will protect us and our allies from two countries –
Iran and North Korea – Russia had a hand in arming? That’s
downright outrageous.”
On the issue of the upcoming presidential election in March
2008, Putin said “I reserve the right to express my preferences.
But I will do it only once the election campaign starts.” In
Russia, candidates can’t kick off their official campaigns until 30
days before the vote. [One reason to love the place, eh?] The
frontrunners continue to be the two he promoted to first deputy
prime ministers in late 2005, Dmitry Medvedev and Sergei
Ivanov.
Then there is the case of former KGB officer Alexander
Litvinenko. Putin said only the courts and investigators could
determine who was responsible for his murder. Then he belittled
Litvinenko’s status, saying “He was not privy to any secrets.”
[Like the issue of the apartment bombings back in 1999,
Vladimir?]
A Washington Post editorial addressed the topic.
“(Scotland Yard now) believes it has cracked the case.
According to reports in several of Britain’s leading newspapers,
the police have concluded that two former KGB agents who met
Mr. Litvinenko at a hotel on Nov. 1 are prime suspects in his
death….
“Given the seriousness of the crime, a vigorous prosecution of
the Russians might be expected. Only they have a powerful
protector: Mr. Putin’s own government, which, while denying
any culpability in Mr. Litvinenko’s killing, is nevertheless
blocking British access to (suspects) Lugovoy and Kovtun.
During a visit to Moscow in December, British detectives were
not allowed to directly question the two men, who were then
staying in hospitals. Russian officials then opened their own
‘investigation’ and drew up a long list of Putin enemies in
London – from Chechen rebels to former executives of the
Yukos oil company. No evidence connects anyone on the
Russian list to the murder, but Moscow said it will not allow
Scotland Yard access to the real suspects unless it can interrogate
its targets in Britain.
“There’s no proof yet that Mr. Putin ordered or approved the
London dirty bomb, but the questions for him keep multiplying:
Why, if the Russian authorities are innocent, do they deny access
to Mr. Lugovoy and Mr. Kovtun? Why do they continue to
blame enemies of Mr. Putin without offering any evidence?
What explains the leakage of a dangerous quantity of polonium
which is produced and held almost exclusively in Russia? And
why, as a Polish newspaper documented last week, were pictures
of Mr. Litvinenko being employed for target practice last
November at a training center used by elite Russian special
forces? The director of the center, a founder of a special
operations unit, was accused by Mr. Litvinenko of being a KGB
agent whose facility prepared contract killers.”
Britain: Counter-terrorism police here arrested a cell that
allegedly was planning to kidnap a British Muslim soldier and
behead him live on the Internet. What has authorities equally
concerned is somehow this group got access to the names and
identities of at least 25 such targets.
Editorial / London Times
“In the cautious national conversation about Britishness that has
followed the July 7 bombings, one of the few qualities broadly
accepted as integral to the British way of life is tolerance. But
tolerance that allows the preaching of poison – and apparently
dulls the instinct of parents and elders to intervene in an effort to
prevent it – is not worthy of the name. It is simple negligence, as
a result of which a society that should still be proud of its
diversity is becoming apprehensive about it.”
Separately, Prime Minister Tony Blair was interviewed a second
time in the scandal involving seats on the House of Lords for
campaign donations/loans. Blair is leaving office in disgrace.
France: President Jacques Chirac still hasn’t formally said
whether or not he will run one last time in this spring’s election.
In the meantime, Nicolas Sarkozy is pulling away from the
increasingly erratic Socialist candidate Segolene Royal with
Sarkozy now commanding a 54-46 lead. Even some on the
infamous French Left are abandoning Royal.
But Chirac himself kept his name in the news by saying that if
Iran were to get the bomb and launch an attack on Israel, Iran
would be razed to the ground, adding “I would say that what is
dangerous about this situation is not the fact of having a nuclear
bomb – having one, maybe a second one a little later, well, that’s
not very dangerous.” This of course flies in the face of the
official position held by France, the other permanent members of
the UN Security Council and Germany which are pressuring Iran
(in various degrees admittedly) to abandon its uranium
enrichment.
So Chirac called reporters back and said he thought he had been
speaking off the record and thus withdrew his comments. Later
he reaffirmed in a statement that “France, along with the
international community, cannot accept the prospect of a nuclear-
armed Iran.”
But Chirac’s office also accused the American media of “using
any excuse to engage in France-bashing,” seeing as how two of
the three reporters privy to his first thoughts were the New York
Times and the Times-owned International Herald Tribune.
Mexico: One of my predictions for the year was that new
President Felipe Calderon would be a pleasant surprise, and in an
interview with Bloomberg News at the World Economic Forum
he did nothing to dispel my thinking in warning that Latin
America is splitting into two economic camps, one embracing a
failed past of state control, the other seeking growth with foreign
investment.
“Many countries in Latin America have chosen a move toward
the past, and among their most harmful decisions are seeking
nationalizations, expropriations, state control of the economy and
authoritarianism. Mexicans have decided to look to the future
and to strengthen democracy, markets and investment….Several
countries in Latin America are acting against foreign investors,
but we are thinking all the day, every day, how can we attract
more investment to Mexico.”
Calderon recognizes he desperately needs investment to buck up
his oil industry, per the above on the Cantarell field.
A few days later, Venezuelan President Hugo Chavez replied in a
seven-hour! televised speech.
“Here comes the president of Mexico saying that Mexico is the
hope of the future. I have doubts that being subordinate to the
empire and world capitalism is the way for Mexico. He goes to
Davos and says investors are coming to the Mexican economy. I
hope so, I hope Mexico advances. But it’s sad that a head of
state, to promote his country, has to criticize other countries.”
Well the facts are that in 2005, foreign direct investment into
Mexico was $17.8 billion, while for the first nine months of
2006, investors pulled out a net $778 million from Venezuela
with a lot more to come. Ten years ago Venezuela added a net
$5.9 billion. [Bloomberg News]
Calderon, incidentally, is being praised across-the-board in
Washington. As for Chavez, he received his sweeping new
powers this week allowing him to rule by decree for the next 18
months.
Thailand: $4 billion was spent on Bangkok’s gleaming new
airport that opened last year. It has the world’s tallest control
tower and largest hangar, among other features. But there’s a
problem. It’s sinking into the swamp it was built on and there
are so many cracks on the runways and at some of the gates that
the old airport could be pressed into service.
Random Musings
–I haven’t had time to read the full summary report issued by the
Intergovernmental Panel on Climate Change as yet, but the
bottom line is the over 2,000 scientists who worked on the
project have concluded it is a “virtual certainty” man is a major
contributor to global warming and that even if we all got our act
together, including you, China, the effects of the already released
heat-trapping carbon dioxide will be felt for the next century,
“just sitting there” as one contributor to the study said.
My bottom line is it’s also clear climate change is speeding up
even faster than the report acknowledges since the main body of
it was finished in 2005 and we’ve learned a lot more in the
succeeding 12 months, such as the fact the World Glacier
Monitoring Service, which continuously samples 30 glaciers
around the world, said the melting is now three times faster than
in the 1980s.
The climate change report actually wimps out, from the excerpts
I’ve read. The rise in sea levels, for example, is now deemed to
be less than a 2001 study had it, 7-23 inches plus another 4-8 if a
recent, surprising polar ice sheet melt continues; whereas the
2001 report said the it would rise up to 35 inches.
Now I’m not going to focus on sea levels the rest of my life, not
owning oceanfront property myself, but I care about the
increased severity of weather we’ve seen around the world the
past few years and whether killer bees will find their way to New
Jersey, let alone the more serious infestations and droughts that
could affect the world’s farmers.
But here are some random news items from just this week related
if not to global warming, then excessive pollution in general.
I saw a wire service story in perusing the Sydney Morning
Herald on Friday that Russia is checking out reports yellow and
orange snow has been falling in several villages in Siberia. The
snow is carrying a distinctive “musty” odor.
Speaking of Sydney, a scientific group in Australia has
concluded that over the next 65 years the temperature in Sydney
could rise 7 degrees Celsius. Now consider that in the
landlocked suburbs of Sydney, from time to time you can get a
95 degree reading (35 Celsius). No biggie.
But when I started playing with my Celsius to Fahrenheit
conversions, a 7 degree rise takes the projected temp to 107 and
some are saying this would be an average. Australia’s current
drought is so serious there are some calling for an immediate
reduction in water usage by 50%. While scientists and the media
like to talk of the ice caps and Greenland as ground zero, it
would be more appropriate to constantly note Australia. Of all
the nations of the world it is clear to me it is going to be the first
to suffer catastrophic changes to both its people and its economy.
There was another item this week on the broader issue of air
pollution and a study of the health of over 58,000 women. After
seven years researchers found the added risk of cardiovascular
death from living in the most-polluted parts of the United States
was roughly 150%. Breathing air filled with soot from autos and
power plants, for example, can significantly raise the risk of
death for older women at nearly the same rate as smoking
cigarettes. The worst spots? Pittsburgh, Riverside-San
Bernardino, CA, and Cincinnati. [Wall Street Journal]
Here’s another environmental tidbit, as reported by Elizabeth
Weise in USA Today. Almost 18 years after the Exxon Valdez
split apart on the Alaskan coast, oil continues to threaten the
ecosystem, long after experts said it should have dissipated.
Scientists from the National Oceanic and Atmospheric
Administration “found that oil levels in the sands around (Prince
William) sound are much the same as they were when tests were
done five years ago. The study says oil has seeped down 4 to 10
inches.”
“Seventeen years ago, scientists predicted that the oil would be
gone by now,” writes Weise. A NOAA researcher said “We
expected the natural decay rate was 25% a year. But very little
of the oil actually disappeared.”
And that, sports fans, is your depressing wrap-up of the
environment.
–Speaking of depressing, just how the heck can General George
Casey become U.S. Army Chief of Staff after his colossal
failures in Iraq?
Senator John McCain:
“While I do not in any way question your honor, patriotism or
service to your country, I do question some of the decisions
you’ve made in the past two and a half years. You were one of
the individuals who have been the architect of U.S. military
strategy in Iraq….things have gotten markedly and progressively
worse, and the situation in Iraq can now best be described as dire
and deteriorating. Yet in the face of this dramatic change in the
Iraq security environment, our military strategy remained
essentially unchanged. Instead of conducting a traditional
counterinsurgency campaign, our troops focused on training and
equipping Iraqis, hoping in vain that they could do the job.”
Nevertheless, Casey will be approved.
–Here’s my take on Joe Biden and his unfortunate slip of the
tongue. I like the guy. We don’t want him as president, but he’s
a good talk show guest and he knows a thing or two about
foreign policy, which puts him ahead of about 90 others in the
Senate by my way of thinking.
What irked me about the Obama comment, though, was having
Chris Matthews take the line that ‘how could Biden infer other
black political leaders are inarticulate?’ Matthews then went on
to praise the “articulate” Rev. Al Sharpton.
Al Sharpton? I cut this guy some slack the past few months
because of his ties to James Brown, but Al Sharpton? This is the
most inarticulate spokesman for Black America in existence.
Just what the heck is our definition of articulate these days,
anyway? I’m sick of all the jocks who pass for football analysts
on television, guys like Shannon Sharpe and Michael Irvin who
are incomprehensible. I’m sick and tired of listening to public
figures who can’t utter one sentence that is grammatically
correct. I’m sick of our president, who speaks as if he didn’t
pass 8th grade English.
On Thursday, I was out with a former work associate and the
conversation turned to Biden and his gaffe. You know who we
appreciate more and more as the years pass? The Rev. Martin
Luther King Jr., that’s who. Forget his politics and his personal
life, if you need to, but you have to admit he is among the top
two or three orators this nation has ever produced and a shining
example for both kids and adults on how to use the power of
words correctly. But these days we’re bombarded with people
who can’t speak a lick of plain, simple English.
–China’s Communist Party is warning cadres that too many are
guilty of gluttony, sex and other illicit pleasures, as officials gear
up for the Olympics. A front-page editorial in the People’s Daily
said “some officials have become morally degenerate and are
sinking into the morass of crime and disorder.”
“It always starts with small things like gluttony and pleasure
seeking and for many leads to the exchange of power for sex.”
Girl Scout Thin Mints have arrived in China.
–Chaos! Like many of you I forgot we are going onto daylight
savings time three weeks earlier than normal, March 11 vs. the
first Sunday in April. Some companies, such as the airlines, see
this as a major headache. But on a semi-serious note, IBM notes
on its Web site: “Any time-sensitive functions could be impacted
by this change.”
So I’m thinking the biggest issue is with the production of the
show “24.” What if Jack Bauer doesn’t realize his watch is
wrong?
–Former Italian Prime Minister Silvio Berlusconi was forced to
apologize to his wife after she demanded he fess up to his
flirtatious behavior in a front-page letter to the left-wing Italian
newspaper, La Republica. [Another slam as Berlusconi is far-
right in his politics.]
So Berlusconi’s statement read “Forgive me, I beg you. And
take this public show of my private pride giving in to your fury
as an act of love. One of many. I guard your dignity, like a
treasure within my heart, even when careless comments slip off
my tongue.”
And what would those comments be? According to press
reports, he told some women at a TV awards dinner: “If I wasn’t
already married I would marry you right away.” He allegedly
told another: “With you I’d go anywhere.” [BBC News]
–San Francisco’s Mayor Gavin Newsome apologized for his
shacking up with his long-time campaign manager’s wife.
–I wish Barry Bonds would apologize for making a mockery of
the home run record.
–Spanish police arrested 42 Nigerians and one Senegalese for
bilking about one hundred Spaniards in, you guessed it, an e-mail
scam involving the Spanish National Lottery. It seems the e-mail
told them they were winners, but needed to send a processing fee
of $4,000 first. My sympathies to the idiots’ families.
–Three female members of the Congressional Hispanic Caucus
accused the male leader, Rep. Joe Baca, of treating them unfairly
with Rep. Loretta Sanchez saying Baca called her a “whore.”
Ah yes, your Congress at work.
–Finally, we note the passing of Barbaro and our hats off to Dr.
Dean Richardson for his heroic work in keeping the horse alive
as long as he did. Otherwise, it was just another classic example
of how this sport can break your heart.
—
Pray for the men and women of our armed forces. This week I
was reading a newspaper from Micronesia (I have friends there)
and saw the story of an Iraq War casualty, a soldier from Saipan
who was the 15th son of Micronesia and the Marianas to die.
And so we note their sacrifice along with all the others.
God bless America.
—
Gold closed at $651
Oil, $59.10
Returns for the week 1/29-2/2
Dow Jones +1.3% [12653]
S&P 500 +1.8% [1448]
S&P MidCap +2.9%
Russell 2000 +2.7%
Nasdaq +1.7% [2475]
Returns for the period 1/1/07-2/2/07
Dow Jones +1.5%
S&P 500 +2.1%
S&P MidCap +4.8%
Russell 2000 +2.8%
Nasdaq +2.5%
*For the record, for those who follow the “January Effect”
(as January goes, so goes the year), the S&P 500 was up 1.4%
for the month.
Bulls 53.3
Bears 21.1 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
