[Posted 7:00 AM ET]
In their earnings reports this week, Goldman Sachs, Bear Stearns
and Lehman all said their exposure to the subprime mortgage
market was small and any interest they maintained well hedged.
Good for them. But some of their own analysts aren’t as
sanguine when it comes to the rest of those holding the paper.
Jan Hatzius, chief U.S. economist for Goldman, said in a
research note, “Mortgage credit-quality problems go well beyond
the subprime sector. The underlying problem is not the subprime
market per se, but the reset of large quantities of adjustable-rate
debt – some of which is classified as subprime some as prime –
to higher interest rates in an environment of flat or falling house
prices in most of the United States.” Hatzius adds that there is
still a large segment of prime buyers with ARMs who are about
to experience their own reset issues. [Wall Street Journal]
Adam Topalian, fixed income strategist at Lehman, told a CFA
Society of Seattle dinner that the greatest risk facing investors is
for the troubled subprime lending sector to lead to a spiral of
falling home prices and further defaults. While Topalian added
there isn’t enough evidence this is happening yet, the risk of a
broader market impact is “very real.”
$900 billion in adjustable-rate mortgages is resetting over the
next two years, he allowed. “Any kind of sharp pullback in
lending could lead to a vicious spiral of continued housing price
depreciation and defaults. This does have the potential to feed
on itself and it’s a real concern.” [Reuters]
Merrill Lynch chief economist David Rosenberg, who has been
warning of housing’s difficulties for quite some time, says
tighter credit standards finally being implemented by mortgage
lenders could lead to a 10% decline in home prices. He worries
about the “knock-on effect” in sectors such as appliances and
furniture; which of course can severely impact employment.
A former Federal Reserve chairman (I said last week I wouldn’t
use his name anymore) weighed in on the side of Rosenberg this
week, even as current chairman Ben Bernanke last insisted there
will be no “spillover” from rising delinquencies. But the Fed
meets this week and we await the language in the statement
accompanying the certain move to continue to hold the line on
rates.
Speaking of delinquency rates, this week it was announced that a
staggering 13% of all subprime mortgage payments were late,
while the rate of foreclosure for all classes of mortgages hit an
all-time high.
Credit Suisse analyst Ivy Zelman, another who has been bang on
in calling the problems in real estate, sees another issue; a 20%
drop in new-home sales. Her argument is if you can’t sell your
entry level home, you can’t move up. Inventory levels will thus
continue to soar.
As for the homebuilders themselves, last week it was D.R.
Horton CEO Donald Tomnitz who told investors “2007 is going
to suck, all 12 months of the calendar year.” This week Toll
Brothers CEO Robert Toll said the start of the spring selling
season was “pretty much a bust,” adding “When will the market
rebound? Who knows? The Shadow knows. I have no idea. I
would’ve thought that it would’ve rebounded by now and I
would’ve been dead wrong, and I was.” [Bloomberg News]
Actually, with their recent choice of words, some of these CEOs
are beginning to lose it. And you’re still not hearing enough
about their tremendous exposure to land that they remain on the
hook for (and/or their banks).
All of the above spells ongoing troubles for the collateralized
mortgage sector, or CDOs; the packaging of which hit $918
billion last year. According to JP Morgan, $173 billion of this
paper was backed mainly by subprime mortgage bonds and
related derivatives. Well, remember the old mantra around here.
Many of those responsible for the coming debacle just aren’t that
smart.
In the end, though, it’s the little guy who is still the biggest loser.
As Countrywide CEO Angelo Mozilo told CNBC, his company
being a diversified operation and not subprime heavy, the
“concern is for the country.” The “rush to judgment in cutting
off programs first-time buyers have used” could be crippling.
The have nots lose another round to the haves, and the full
carnage has yet to be felt during this developing credit crunch.
Street Bytes
–It was the third losing week in four for both the S&P 500 and
Dow Jones, off 1.1% and 1.4%, respectively, with the Dow now
trading at 12110 and the S&P back below 1400 (1386). Nasdaq
lost 0.6% to 2372. There simply aren’t any reasons to be an
aggressive buyer these days.
–U.S. Treasury Yields
6-mo. 5.12% 2-yr. 4.59% 10-yr. 4.55% 30-yr. 4.70%
Treasuries rallied a bit despite hotter than expected inflation
news. The producer price index soared 1.3% in February, but
0.4% ex-food and energy, while the consumer price index rose
0.4%; 0.2% stripping out the stuff we use. The core CPI is up
2.7% year over year, higher than the Fed’s comfort level.
So you’d think bonds would have taken it on the chin, but a sick
retail sales figure for February, up just 0.1% when a 0.4%
increase was expected, led to the belief that there is no way the
Fed will raise rates anytime soon and now with the economy
softening it could lower them before summer.
As for Treasury Secretary Hank Paulson, he reassured us “the
consumer continues to be healthy.” Ah, but we’ve got the
sniffles, Mr. Paulson. Time to rest the pocketbook.
–The federal budget deficit for the first five months of the fiscal
year that began Oct. 1 is 25% less than a year ago as revenues
continue to stream in. For fiscal 2007, the Congressional Budget
Office is forecasting a deficit of just $214 billion, or 1.6% of
GDP. Last year it was $248 billion. But the rate of growth for
corporate profits is starting to drop precipitously, as are capital
gains.
–OPEC opted to hold the line on production, this as the
International Energy Agency warned that inventories of most oil
and gas-related products are falling unusually fast this year;
thanks primarily to unplanned refinery outages and continued
high demand around the world. But since the Saudis have the
most clout, it would appear they are quite satisfied with $60 oil.
“Good shopping, fair princes!”
–South Carolina Republican Senator Lindsey Graham warned
that the Democratic controlled Congress will clearly intensify
pressure on the administration to crack down on China to raise
the value of its currency. Graham himself supports most efforts
to create “pain” for the Chinese “when they cheat” on trade.
Graham had withdrawn a proposal to levy a 27.5% tariff on
Chinese imports last fall when he and Democratic co-sponsor
Charles Schumer of New York were convinced by the White
House that China would begin to comply with their wishes.
Trade remains a ticking time bomb. As the U.S. economy
weakens, Congress will be under increasing pressure from
constituents in many districts to go after China…at the worst
possible time for such action. And China holds $350 billion in
U.S. Treasuries, which some of us have long argued could yet be
used as a weapon of mass destruction if Beijing feels
Washington is going too far.
–It’s clear that the No. 2 subprime lender New Century Financial
was simply a house of fraud as the SEC and U.S. Attorney’s
Office in California quicken their investigations into accounting
errors and probable insider trading. New Century’s lenders,
including Bank of America, Citigroup and Goldman Sachs, are
demanding accelerated payment on New Century’s obligations to
buy back outstanding mortgage loans under certain
circumstances…like today’s.
[Shares in some of the other subprime lenders rallied on Friday
on word their bankers were extending lines of credit.]
–General Motors warned investors that its accounting controls
are “ineffective,” the same ones already under investigation by
the SEC. “The lack of effective internal controls could adversely
affect our financial condition and ability to carry out our strategic
business plan.”
Now this was in a filing that was part of its annual report and a
supporter of the company could say this is nothing more than
boilerplate. I would observe, why would you ever touch the
stock until you know GM has its books straightened out?
–Goldman Sachs had another spectacular earnings report, a
profit of $3.2 billion and far above expectations. But it was for
the three months ending Feb. 23, before the stock market slump
and the worst of the subprime lender news. CFO David Viniar,
though, was optimistic that Goldman’s future results would not
be hurt by the real estate debacle.
–As for rival Bear Stearns, while its own earnings were also
solid, an independent research firm specializing in corporate cash
flow analysis, CreditSights, says BS’s buying activity in the
subprime mortgage sector “aided and abetted the industry’s
collapse. They did nothing to ensure that the loans they were
buying were kosher. There was no ‘good guy’ here, no voice of
reason or advocate for conservative standards.” CreditSights
said the percentage of borrowers who were more than 90 days
delinquent in Bear Stearns’ mortgage pools was 4.57%, vs.
leader Countrywide’s 1.42%. BS executives dispute this.
[Bloomberg News]
–Viacom sued Google-owned YouTube for “massive intentional
copyright infringement,” asking for $1 billion in damages.
Viacom is also seeking for an injunction to prevent YouTube
from further infringement, though experts in copyright law do
not expect a court to comply with the latter demand. The latest
tussle between the two is a result of negotiations breaking down
over Viacom’s demand that YouTube remove over 100,000 of its
clips in February after failing to hammer out a licensing
agreement. For its part Google said it complied with the request,
but Viacom maintains thousands of clips reappeared just hours
after being removed.
–Microsoft CEO Steve Ballmer, talking to a group at Stanford,
criticized Google for failing to achieve significant traction
beyond its online business, adding that it’s “insane” to keep
trying to double its staff. “I don’t think anyone has proven that a
random collection of people doing their own thing has created
value.” You know what does work? Two young kids messing
around in a garage with some gizmos.
–Private-investment giant Blackstone Group plans on selling a
stake to the public and could file plans for an IPO over the
coming weeks. Blackstone would then take the proceeds,
leverage up 100 times, and take over every business west of
the Mississippi. Others, such as Apollo Management, KKR and
Carlyle Group are also reportedly looking at public offerings,
leaving them to divvy up the asset rich northeast and Europe.
–Wal-Mart has abandoned its plans to establish its own bank.
Too many roadblocks from regulators and Congress to maneuver
around.
–Mark R. notes that in Naples, Fla., developers are offering
Cadillacs to buyers of still overpriced properties. Josh P. says if
residential real estate is this year’s debt story, next year it’s
corporate debt. I don’t disagree.
–A California court dismissed all charges against former
Hewlett-Packard chairman Patricia Dunn who was forced to
resign under a cloud of controversy over a boardroom spying
scandal. Charges against four co-defendants were reduced to
misdemeanors. While I understand there was some sympathy for
Ms. Dunn, who is battling cancer, the fact remains that operatives
acting on behalf of HP’s board used false pretenses to obtain
private telephone records in an attempt to figure out the source of
a leak.
–Citigroup chairman and CEO Chuck Prince was paid $26
million in cash and stock for another job poorly done in 2006.
And the Chuckster even got a 13% raise over 2005.
–Are you rich? The Journal’s Robert Frank notes that these days
the richest 1% of U.S. households have at least $6 million in
assets, including homes, while the richest 1% of tax filers
(individuals or households filing jointly) required $314,000 of
income. [Both figures for the latest recording period, 2004.] As
part of the SEC’s efforts to regulate who can invest in hedge
funds, the commission is proposing that investors need to have
investible assets of at least $2.5 million, excluding equity in any
homes, to be eligible to sign up for one. Today the requirement
is a net worth of at least $1 million, including the value of
primary residences, or an annual income of $200,000 ($300,000
for couples).
–Talk about a dirtball, Christopher Palmeri wrote a piece in
Business Week on music mogul Louis Pearlman who is being
investigated by the State of Florida for orchestrating a Ponzi-like
scheme “that may have bilked some 1,800 investors out of $317
million.” Pearlman’s main company, Trans Continental Airlines,
sold money-market like investments offering rates slightly higher
than the banks. Pearlman then distributed brochures claiming the
funds were backed by the FDIC and insured by AIG and Lloyd’s
of London. Florida regulators say none of this is true. Pearlman
preyed on the state’s elderly, and he’s now also defaulting on
various commercial loans to the likes of Bank of America and
Washington Mutual. Pearlman until now was best known for
promoting the Backstreet Boys and *NSYNC. Thus far, the man
appointed by a Florida judge to oversee Pearlman’s businesses
says he’s recovered just $50,000.
–And then there is the case of former GOP congressman
Michael Oxley, he of Sarbanes-Oxley fame; the corporate reform
act that was in response to the collapse of the likes of Enron and
WorldCom. Oxley, like all the other dirtballs in Congress, is
now parlaying his former job into a lucrative career at, get this,
the Nasdaq, where he will be vice chairman and just another
high-powered lobbyist.
Foreign Affairs
Iran: President Ahmadinejad remains defiant against UN
sanctions and deadlines already past. But it appears the Security
Council is set to initiate a stronger set of sanctions, including the
ordering of an international freeze on assets of 13 Iranian
companies, including the country’s fifth-largest bank, Bank
Sepah. Plus the resolutions would impose an embargo on all
Iranian arms exports. The U.S. hopes this would help curb the
flow of weapons into Lebanon. Especially pleasing to the White
House are sanctions against three companies aligned with Iraq’s
Revolutionary Guards. The full 15-member Security Council
should vote sometime this coming week.
One sidelight to the whole Iran issue has been Russia’s sudden
loss of patience with regards to their work on the Bushehr
nuclear reactor. Russia now says the September launch date will
not be met and it won’t deliver needed shipments of nuclear fuel,
claiming Iran is still running behind on payments.
Iraq: Iran and the United States exchanged harsh words at last
weekend’s meeting in Baghdad, but at least they were talking.
Meanwhile, the Senate voted down another Democratic attempt
to force the withdrawal of U.S. combat troops in 2008.
On the ground, U.S. commanders are seeing some cooperation
from Moqtada al-Sadr’s Mahdi Army in Sadr City. 700 of the
more extreme elements, who for the time being posed a threat to
Sadr as he makes himself over yet again, have been arrested but
at any moment the relative calm could evaporate. [As in Sadr
has now called for new protests against the U.S. occupation.]
In the end, however, it’s still about a political settlement and for
all his talk, Prime Minister Nouri al-Maliki is worthless. The
White House keeps extending the timeline because Maliki talks
reform and then does nothing. For starters, the critical oil
revenue-sharing measure has yet to be passed by parliament.
Early in the “surge,” it would appear the U.S. military is
beginning to assert itself in Baghdad, despite the ever present
IEDs that continue to claim the lives of our soldiers. Gen. David
Petraeus is just trying to buy the government time to get its act
together. Now it’s also time to tell Maliki “Put up or shut up”
and give him a tight deadline to get key measures passed or send
him packing.
Israel: Hamas and Fatah supposedly agreed to another power-
sharing agreement, but Hamas still won’t recognize Israel so
no one outside the Palestinian territories gives a damn.
Separately, another report shows that over 30% of Israeli settlers
in the West Bank are living on property illegally seized.
Two other items. Israel is claiming Syria has been positioning
thousands of medium- and long-range rockets capable of striking
major towns across northern Israel, with many hidden
underground in new installations. And the plot thickens
regarding the high-level Iranian “defector,” Ali Reza Asghari, a
former leader of the Revolutionary Guards. Last week I wrote of
how he was spirited out with his family and was presumed to be
in the United States. This week, however, his wife, brother, two
daughters and a son surfaced in Tehran. They insisted their
father was abducted by the U.S. and Israel.
Rami G. Khouri, in an op-ed for the Daily Star, summed up the
recent action in the region.
“It is not a coincidence that serious political talks are taking
place simultaneously these days between top Lebanese political
foes, Saudi Arabia and Iran, the United States and each of Syria
and Iran, Israelis and Palestinians, the Europeans and Syria, and,
directly or indirectly, Israel and Saudi Arabia.
“For the past three years, since the situations in Iraq, Iran, Syria,
Lebanon and Palestine-Israel have all been conflated into a
consortium of conflicts, there has been frequent talk that one way
out of the region’s stressed conditions is to strike a Grand
Bargain that resolves all these disputes simultaneously. That has
always been a long shot. It is also obvious that these simmering
conflicts and active battles are all linked to one another to some
extent – especially as Syria, Iran, the U.S. and Israel have their
fingers in every one of these disputes. Therefore progress on any
of these disputes could trigger movement on the others….
“If talking is a small but important sign of possible progress,
more significant is the simultaneity of all these discussions, for
several reasons. It forces all concerned to clarify their positions
and thus construct a possible negotiating framework, especially
by identifying one’s minimum needs and most important
demands from the other side. It generates new possibilities to
push for reasonable negotiated agreements rather than savage
battlefield legacies. It increases the possibility that reasonable
tradeoffs and compromises can be made on more than one front
(in other words Iran and Syria might ease off in Lebanon if their
regimes were no longer threatened with removal by force, and
Israel might concede more to Syria and the Palestinians if it were
confident about Iran’s, Hizbullah’s and Hamas’ willingness to
coexist with it)…..
“Sampsons abound in the Middle East. On the other hand,
antagonists who discern the potential dangers of their macho
attitudes and militarism are also capable of acting more humbly
and reasonably, by exploring possible peaceful resolutions of
their conflicts.
“We shall soon discover if our decision-makers are the
irresponsible killers they often seem to be, or still have enough
sense and humanity left in them to pull back from the brink of
their own extremism. For the first time in many years, they have
the opportunity to choose from both options that are on the table
before them.”
Zimbabwe: Last Sunday, the Movement for Democratic Change
(MDC), the chief opposition for almost a decade to President
Robert Mugabe, staged a “Save Zimbabwe” prayer meeting. Riot
police then attacked the gathering and 50 MDC officials were
arrested and savagely beaten with rubber truncheons and iron
rods. The MDC’s leader, Morgan Tsvangirai, suffered a
fractured skull and broken wrist yet days after made a court
appearance.
Even ally South Africa finally scolded Mugabe (that’s as harsh
as the South Africans get when it comes to their neighbor), while
the 83-year-old dictator told his critics to “go hang.” What’s
increasingly apparent to me, however, is that it will soon be
Mugabe himself who is strung up like Mussolini.
North Korea: The International Atomic Energy Agency’s
Mohamed ElBaradei made his first visit to North Korea and Kim
Jong-il’s top nuclear negotiator called in sick and refused to meet
with him. Kind of early in the year to be thinking of using up
your sick days, isn’t it? ElBaradei, though, said his other
meetings were productive and he fully expects North Korea to
comply with the six-party agreement and shut down the
Yongbyon nuclear reactor by the April 14 deadline. At that point
the North would receive energy aid and political concessions.
But with exactly four weeks to go, South Korean intelligence is
saying there are absolutely no signs of activity around
Yongbyon, yet Seoul is reinstituting some aid programs.
Earlier, the U.S. Treasury Dept. ended an 18 month investigation
into a Macau bank that had been accused of being used by North
Korea for counterfeiting and money laundering, but it wasn’t
clear if Kim would have access to the $25 million in deposits.
As of Friday, the U.S. acted as if he would. But on Saturday,
North Korea announced the issue wasn’t settled to its
satisfaction.
China: Staying in the region, following is an excerpt from a story
by Ken Fireman and Allen T. Cheng of Bloomberg News.
“Last July, as North Korea prepared for ballistic missile tests,
Admiral William Fallon picked up the telephone to warn his
Chinese military counterparts of the U.S.’s deep concern, and
urge them to weigh in against the launches.
“There was just one problem: The commander of all U.S. forces
in the Pacific, who had spent two years cultivating ties with
Chinese leaders, couldn’t reach anyone to deliver his message: ‘I
just couldn’t get somebody to answer the phone,’ Fallon said.
‘Nobody wanted to talk.’
“His experience shows what analysts and security officials in
Japan, India, Taiwan and the U.S. say is China’s lack of
openness about its military plans, decision-making and actions
during crises. Those traits compound international concerns
created by its long-term military buildup….
“Says General Tetsuya Nishimoto, Japan’s former military chief
of staff: ‘We should consider the buildup as a threat, because
their goals and intentions are unclear.’”
On Friday, Prime Minister Wen Jiabao, in his annual press
conference, didn’t exactly allay any fears on the military front,
claiming the firing of an anti-satellite missile that successfully
destroyed one of China’s aging satellites in space was “an
experiment in outer space,” not the firing of a ground-based
ballistic missile into space. Wen also obfuscated on a number of
other issues, including China’s growing role in global warming
and soaring levels of greenhouse gas emissions.
Japan: Prime Minister Shinzo Abe’s approval rating dipped
below 40% for the first time since taking office in September.
Abe and Australian Prime Minister John Howard did sign a
defense cooperation pact this week, focusing on
counterterrorism, border and maritime security, and disaster
relief. It is Japan’s first defense pact with a country other than
the United States, but not a mutual defense treaty like with
Washington. Both Abe and Howard played down concerns the
agreement was directed at China….but of course it was.
Pakistan: There is a developing crisis here with a growing
backlash against President Musharraf’s suspension of the
country’s top judge, the chief justice of the Supreme Court,
Iftikhar Chaudhary. An official with Human Rights Watch
proclaimed “By brazenly and unlawfully dismissing, detaining
and humiliating the chief justice…President Musharraf has
created a constitutional crisis….Musharraf has undermined
judicial independence before and nothing could make that more
clear than his arrest of the Chief Justice.”
There is a real possibility that the growing protest, which turned
violent on Friday, could topple Musharraf unless it is
immediately resolved. Hundreds of lawyers continue to rally
outside the Supreme Court, supported by high-profile opposition
figures.
Chaudhry was suspended for alleged “misconduct,” though no
details have been released to the public.
India: 49 policemen were killed by Maoist rebels in the center of
the country. I have to admit I didn’t know this group had
attacked interests in 13 of India’s 28 states over the past few
years. Someone needs to tell them Mao is dead.
Thailand: The Islamic insurgency here is increasingly brutal.
This week rebels killed nine Buddhists riding in a commuter van
in the restive south of the country, execution-style.
Germany: Chancellor Angela Merkel, who President Bush once
massaged, has turned on her boyfriend as she vehemently
opposes Washington’s efforts to place components of a U.S.
missile shield into Poland and Czech Republic. “We…prefer a
solution within NATO and also an open discussion with Russia,”
she said. But then a NATO spokesman said the organization
would not interfere with any negotiations the United States may
be involved in.
This follows a pattern, as Gerard Baker points out in The Weekly
Standard. When Vladimir Putin “flipped a frosty Moscow
finger at the assembled Europeans and Americans” at a recent
speech in Munich:
“He attacked the United States as a bullying unilateralist that was
tearing up international law. But just as the Europeans in the
audience were nodding in approval, the Russian president turned
on them too. He denounced NATO’s expansion to Russia’s
borders and even found time to insult the Organization for
Security Cooperation in Europe, the stately body that has been
aiding and promoting democratic reform in the former Soviet
bloc, as a ‘vulgar’ institution.
“The initial reaction, even from Europeans, was hostile. But on
reflection, they seemed to decide that a supportive cringe would
be more appropriate. A senior German official told me that there
was much in what Putin had said that would resonate in Europe.
The Suddeutsche Zeitung, a supposedly sober newspaper,
blamed the United States for the new Cold War atmosphere,
saying it had created ‘the opportunity for Putin to set himself up
as the powerful voice of the growing number of countries and
peoples who are stricken by doubt in the wisdom of Western
policies.’ This, sadly, for all the continent’s boastful claims of a
new transatlantic partnership, is the true voice of modern Europe:
a Europe that refuses to fight a war, to which it has pledged
itself, against terrorists in Afghanistan; a Europe that declines to
stand up to a Russian president who condemns its efforts to
spread democracy even as his KGB friends eliminate their critics
in European capitals. The transatlantic partnership may be
together again [compared to four years ago and the debate over
Iraq]. Whether it stands for anything is much less clear.”
Britain: Prime Minister Tony Blair, as one of his last acts,
implored the members of parliament to approve a plan for a new
set of nuclear submarines that carry Britain’s existing Trident
missile force. “I think that is essential for our security in an
uncertain world.”
Ironically, this caused a major flap in his Labour Party but he
won the vote, 409-161, thanks to support from the opposition
Conservatives. Their leader, William Hague, said not renewing
nuclear defenses would force Britain to depend on France and
the U.S. “We should not think for a moment that if we were to
divest ourselves altogether of that arsenal, other nations would be
likely to follow suit,” Hague said.
But I have to laugh at a comment from Nigel Griffiths – who
resigned from the Blair government as deputy Commons leader
so he could vote against the project.
“We have led the world in decommissioning land mines, and
nuclear warheads, and the world is watching us now. Let us lead
the world for peace.”
Earth to Mr. Griffiths. “Can you say China? Or haven’t you
heard they are ramping up their own nuclear weapons production
at lightspeed?”
And this is almost comical. Britain’s Middle East minister, Kim
Howells, referred to former Israeli prime minister Ariel Sharon
as dead – and then tried to explain himself by saying it was “an
easy mistake to make.”
Mexico: Good for President Felipe Calderon for none too subtly
blasting President Bush upon the latter’s arrival into the country,
telling him basically that it was about time the Gringo paid
attention to his country. [OK, he didn’t use the term Gringo,
Venezuela’s Hugo Chavez did; but Calderon could have.] As for
Bush’s trip to the region, truly little was accomplished.
Venezuela: President Chavez, in an interview with ABC’s
Barbara Walters, said “There is no intention to reduce or
eliminate (the supply of oil to the U.S.), but we have said, in case
of any other aggression by the U.S. administration, we would cut
this oil supply, but we expect this is not [going] to happen.”
Random Musings
–Last week I wrote “the issue of the U.S. attorneys is potentially
explosive, especially if it is proved that Republican lawmakers
sought to influence pending cases.” Since then we’ve learned
this remains the case.
The problem is, as of this writing we still haven’t learned all the
facts. Here’s what we do know.
Attorney General Alberto Gonzales is yet another incompetent in
an administration that will go down as “the gang that couldn’t
shoot straight.” Not only did FBI Director Robert Mueller have
to apologize for some of his agency’s anti-terrorist intelligence-
gathering abuses, but Gonzales flat out lied in his initial
explanations of the handling of the firing of the eight attorneys.
This may yet be another Scooter Libby, however; nothing more
than politics perhaps. But as more and more e-mails are
revealed, it’s clear that Karl Rove was the mastermind of the
dismissals, with former White House Counsel Harriet Miers
riding shotgun. Gonzales, it would appear, was in the backseat,
pretending not to know anything about the scene passing before
his very eyes.
Yes, it is not unusual for U.S. attorneys, who serve at the
pleasure of the president, to be replaced. As we all know by
now, President Clinton’s Attorney General, Janet Reno, did just
that when she was approved in the spring of 1993. During
President Bush’s first year in office he replaced all but a few
himself.
What’s unprecedented is the firings coming in the middle of a
term, but that doesn’t mean there’s anything illegal.
What could be, though, is if lawmakers pressured prosecutors
about sensitive cases, as has been alleged by some of those
dismissed. We just don’t know if that’s the case yet.
The Democrats won last November and it’s their right to
authorize investigations, whether us Republicans like it or not.
But again, the issue is not that the attorneys were fired, it’s
become the intent behind the move.
–On “60 Minutes” last Sunday, Andy Rooney talked about his
time in World War II and today’s recruiting process where
educational and moral standards are being lowered. Last year,
for example, 8,129 “moral waivers” were given to men who
volunteered for the Army, but these are men and women who
have committed a crime or even gone to prison. Rooney asks
“Are these the people we want representing us? As American
soldiers, they’re going to give the people they meet around the
world the impression that they are what all Americans are like
and if they have been taken from the bottom of the barrel, they
are not what we’re all like.”
But Rooney notes most of the guys in his unit in 1941 were “high
school dropouts and the Army wasn’t using the term ‘moral
waiver’ yet, but a lot of them would have needed it.”
Then, “In 1942, we were at war with Germany and it wasn’t long
before drafted college students and high school graduates
dominated our military. It changed the United States Army for
the better and in two years made it the best fighting force there
has ever been. The Army and Navy were no longer made up of
losers.
“Now comes the part of this I never thought I’d hear myself say:
Whenever we, as a nation, decide to fight a war – in Iraq or
anywhere else – it should be fought by average Americans who
are drafted.”
On my “Hott Spotts” link I posted an essay by Sen. James Webb
from back in 1980 addressing this very topic. He also called for
a draft then. It’s worth a quick read.
–Great piece on “60 Minutes” on the plight of the Iraqi refugees,
specifically those working with the U.S. military as translators.
It’s despicable how our country is treating them. As Ret. Gen.
Paul Eaton noted, Eaton having recently served at a senior level
in Iraq, think of the message this is sending around the world.
It’s also a reminder of how courageous then President Gerald
Ford was in 1975 as Vietnam was descending into chaos.
America accepted 131,000 Vietnamese refugees in 8 months. By
comparison, today the U.S. has accepted a few hundred Iraqis.
–Never has the phrase “What was that all about?” been better
applied than to Republican Senator Chuck Hagel and his calling
the press to Omaha, only to say “I’m here today to announce that
my family and I will make a decision on my political future later
this year.”
Everyone had expected him to announce he was running for
president. Then this. I used to respect this guy. No longer. This
was the move of a man with serious problems requiring help
from Dr. Melfi.
–One reason why I offer lengthy quotes from time to time is that
I want the full story to be told, from all sides. Here’s a classic
example.
“Week in Review,” 3/10:
“Mary Matalin…compared the cases of Libby and former
Clinton national security adviser Samuel R. Berger who
smuggled out documents. ‘Scooter didn’t do anything. And his
personal record and service are impeccable. How do you make
sense of a system where a security principal admits to stuffing
classified docs in his pants and says, ‘I’m sorry,’ and a guy who
is rebutting a demonstrable partisan liar is going through this
madness?’”
New York Times columnist Frank Rich, 3/11:
“Mary Matalin, the former Cheney flack who served with Mr.
Libby…and is now on the board of his legal defense fund…has
been especially vocal. ‘Scooter didn’t do anything,’ she said.
‘And his personal record and service are impeccable.’ What Mr.
Libby did – fabricating nuclear threats…and then lying under
oath…[blah blah blah]”
Of course Mr. Rich doesn’t note Matalin’s comparison of Libby
to Berger. Which is why Frank Rich has so little credibility, as
opposed to his fellow columnist at the Times, David Brooks,
who isn’t afraid to give both sides on all issues.
–Yes, no doubt Valerie Plame is an attractive woman. Now why
was it she appeared before Congress on Friday?
–Paul Weyrich, one of the conservative movement’s leaders,
said he believes his followers will accept Newt Gingrich’s
apology for his past affairs, especially his admission the other
day that he was shacking up with his aide while blasting Bill
Clinton for his tryst with Monica Lewinsky.
“(Gingrich) says he has gone down on his knees to ask God’s
forgiveness for his weakness. Our people are very oriented
toward accepting that,” said Weyrich. [Wall Street Journal]
Frankly, I’m tired of forgiving people for acts such as this.
–Like former New Jersey Gov. James McGreevey, the “Gay
American.” He continues to torture his former wife, Dina
Matos, and now he is asking that their divorce agreement be
amended to grant him sole custody of the couple’s 5-year-old
daughter – and child support! I suppose Paul Weyrich’s people,
if they’re consistent, forgive McGreevey too.
–Our “Dirtball of the Week” award could have gone to
McGreevey but we opt for the mugger who within hours robbed
85- and 101-year-old women in New York. 101-year-old Rose
Morat said if this had happened when she was younger she
would have “killed him.” As it is the twin muggings have
prompted New York legislators to propose a new law that would
make it a felony to assault anyone older than 70, and send the
assailant packing for a maximum of four years with Bubba. It
would be seven years, though, if the victim is injured. Currently,
believe it or not, mugging someone without serious injury is a
misdemeanor. That’s absurd. [Police may have a suspect in the
above, a fellow who checked himself into a mental institution.]
–Last week I said the U.S. better get back to the moon before
China does. On Thursday, NASA Administrator Michael Griffin
told a House panel “it would be easily possible” for the Chinese
to put humans on the lunar surface “within a decade,” or before
the U.S. is likely to. I’m warnin’ ya….there will be nothing left
for the U.S. to mine once we return.
–A study by the National Center on Addiction and Substance
Abuse says that half of America’s college students abuse drugs
or binge drink. As Joseph Califano, the director of the report,
noted “the situation on America’s campuses has deteriorated”
since 1993 and the first survey by the center. Califano blames
college presidents. “We believe they have an obligation to
protect the health and safety of their students.”
The level of drinking has actually stayed about the same between
2005 (when the data was collected) and ‘93; 68% reporting that
they do at least occasionally. But it’s drug use that has basically
doubled in most categories.
–In a separate study, nearly 1 in 20 girls ages 12-17 report using
inhalants to get high in 2005, an increase from 1 in 25 in 2002.
Boys’ use of inhalants has stayed the same, also 1 in 25. Aerosol
sprays, such as air fresheners, and compressed-air computer
cleaners appear to be the latest items employed.
–In Europe, the issue these days is cocaine. While demand for
the drug worldwide has been stable or dropping, European usage
is soaring, especially in Spain, Great Britain, and Italy. To many
there, cocaine is a symbol of success. Personally, I always found
women with white powder smeared around their nostrils to be a
real turn-off.
–You know how the budget for the London Games in 2012
doubled since the city won the rights to hold them less than two
years ago? Now the revised estimate is approaching $19 billion
vs. the first figure of $5 billion. A slight miss.
So I ask again. Do you think the people of London really want
these Games? [Does anyone need them for that matter?] The
answer is increasingly ‘no.’ Let alone the fact that London’s
native population of extremists must be licking its chops, with all
this time to prepare.
–After finishing off my first large order of wild salmon from
conservationsalmon.com, I now realize that the old saying is
true. “Once you go wild, you never go back.” [To farmed, that
is.]
–Angelina Jolie and Brad Pitt adopted their 43rd child, the latest
hailing from Vietnam. Angelina named the kid “Pax Thien
Jolie,” which means “Peaceful Sky.” StocksandNews has a
different name for him… Small Pax.
–Jann Wenner, publisher of Rolling Stone and a director at the
Rock and Roll Hall of Fame, allegedly fixed the recent vote, thus
denying The Dave Clark Five a spot. Fox News broke this a day
after the Hall’s induction ceremony in New York. I have yet to
see Wenner’s response to the charges, but the sources are
insiders.
–And finally, as the snow and sleet falls heavily outside my
office, we learned that this winter has been the warmest on
record worldwide, despite the brutal stretch many of us went
through mid-January thru February. Overall in the U.S., the
winter temperature was near average thanks to December acting
like it was July in the eastern half.
But of bigger immediate concern is the issue of Antarctica,
which is baffling scientists. Snowfall has increased the depth of
ice on some parts of the continent, but the temperatures at the
tips closest to South America are rising faster than anywhere else
on the planet. This is causing some of the larger glaciers to lose
ice at a far greater rate than first anticipated. If the process
accelerates any further, both here and Greenland, the Washington
Post’s Marc Kaufman notes that “it could result in a substantial,
and highly disruptive, increase in sea levels worldwide.”
RUN FOR YOUR LIVES!
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $653
Oil, $57.11
Returns for the week 3/12-3/16
Dow Jones -1.4% [12110]
S&P 500 -1.1% [1386]
S&P MidCap -1.1%
Russell 2000 -0.8%
Nasdaq -0.6% [2372]
Returns for the period 1/1/07-3/16/07
Dow Jones -2.8%
S&P 500 -2.2%
S&P MidCap +2.4%
Russell 2000 -1.1%
Nasdaq -1.8%
Bulls 45.5
Bears 28.9 [Source: Chartcraft / Investors Intelligence]
Have a great week. Happy St. Patrick’s Day!
May the road rise to meet you.
May the wind be always at your back.
May the sun shine warm upon your face,
the rain fall soft upon your fields and, until
we meet again, may God hold you in the palm
of His hand.
Brian Trumbore
