[Posted 7:00 AM ET]
If you had to sum up the past week in one word I’d choose
“disturbing.” How else to describe the Iranian hostage situation
and the actions of House Speaker Nancy Pelosi? I watched the
press conference with the British Marines and sailors on Friday
and have more questions than before. But I was careful the past
two weeks to take my own advice and ‘wait 24 hours’ before
jumping to any conclusions and I’m still not exactly sure what all
the facts are. What I find unsettling is I think they are lying
about much of what really happened.
In the case of Nancy Pelosi, however, it is clear she not only did
the country harm, she is also incredibly naïve (I’m being kind)
and for a woman who is just a few steps removed from the
presidency, you can’t help but be troubled and disturbed by her
performance.
But first, the hostage ordeal. British Prime Minister Tony Blair
was adamant no deal had been cut for their release and we can
only take him at his word. But it was the words chosen by Blair
early on, as well as those of his foreign secretary, Margaret
Beckett, that were questionable; such as Beckett’s expression of
“regret” over the incident that precipitated the crisis.
As for Iranian President Ahmadinejad, it was a public relations
coup as in the end he offered the soldiers’ release as a “gift to the
British people done out of Islamic compassion.”
Earlier, Ahmadinejad said his government was seeking a
“confrontation” with the British when it intercepted their boat
“but the deplorable conduct of the British government led to the
prolonging of this incident.”
Ahmadinejad also scolded Britain for deploying the lone female,
Faye Turney. “How can you justify seeing a mother away from
her home, her children? Why don’t they respect family values in
the West?” This from a man whose goons recently beat on
hundreds of female protesters demanding human rights in
Tehran.
If there was any good to come out of the whole episode, it was
that the protest staged at the British Embassy last weekend was
comical. For starters you had to love how the government
supplied a wagon filled with rocks, which was more than a bit
symbolic by my way of thinking; read Stone Age.
More importantly, though, few bothered to show up. As a
strategist remarked to Robin Wright of the Washington Post, the
Iranian people weren’t exactly “frothing at the mouth” like back
in 1979-81. Herein lies a clue to Iran’s future if we would just
learn to play our cards right.
Ralph Peters / New York Post
“The greatest shock from the Middle East this year hasn’t been
terrorist ruthlessness or the latest Iranian tantrum. It’s that
members of Britain’s Royal Marines wimped out in a matter of
days and acquiesced in propaganda broadcasts for their captors.
“Jingoism aside, I can’t imagine any squad of U.S. Marines
behaving in such a shabby, cowardly fashion….
“You could put a U.S. Marine in a dungeon and knock out his
teeth, but you wouldn’t knock out his pride in his country and the
Corps. ‘Semper Fi’ means something. And our Aussie allies
would be just as tough.
“What on earth happened to the Royal Marines? They’re
members of what passes for an elite unit. Has the Labor
government’s program to gut the U.K. military – grounding
planes, taking ships out of service and deactivating army units –
also ripped the courage from the breasts of those in uniform?
“The female sailor who broke down first and begged for her
government to surrender was pathetic enough. But when Royal
Marines started pleading for tea and sympathy…Ma, say it ain’t
so!
“Meanwhile, back at No. 10 ‘Downer’ Street, British politicians
are more upset that President Bush described their sailors and
Marines as ‘hostages’ than they are with the Iranians….
“I’ve always respected the Brits and quite liked those I worked
with when in uniform…but I’m starting to wonder if I bought
into a legend. While criticizing our military’s approach to
everything, the Brits made an utter balls of it in Basra and now
they’re bailing out, claiming ‘Mission Accomplished!’ [OK, they
had a role model…] In Heaven, Winston Churchill’s puking up
premium scotch….
“John Bull has been cowed. By a pack of unshaven thugs. And
the Britannia that ruled the waves is waving goodbye.”
Niall Ferguson / Los Angeles Times
“Time and again, the Victorians meted out retribution to those
who had the temerity to deprive British subjects of their liberty,
the more terrible in cases where the lives and (worse) the honor
of Englishwomen were placed in jeopardy. Nemo me impune
laccessit was the ancient motto of the Scottish crown: ‘No one
messes with me and gets away with it.’ In effect, that became
the motto of the entire Victorian empire.
“I suppose a remnant of that spirit survived into the 1980s.
There was certainly something distinctly Victorian about the
Falklands expedition: the scale of the venture, the distance
covered and the relatively small number of Britons to be rescued.
“Yet today we live in a different world. Britain could not re-
fight the Falklands War if Argentina invaded the islands
tomorrow. Nor could a British strike force be sent to punish the
Iranian government today. If military action is going to be taken
against Iran this year, it will be initiated by the United States, not
Britain. And, to judge by Faye Turney’s conspicuous absence
from the front pages of U.S. newspapers, a British hostage crisis
won’t be the casus belli.
“As he approaches the 10th anniversary of his election as prime
minister, (Tony) Blair consciously invites comparisons to
Margaret Thatcher, the only other prime minister since 1827 to
endure so long. Yet this new crisis of captivity, like Blair’s
needless kowtowing over slavery, exposes the profound
differences between the nice guy and the Iron Lady.”
Editorial / Wall Street Journal
“Many will be tempted to interpret the release of the hostages as
evidence of Iran’s essential reasonableness, conveniently
forgetting who started the crisis in the first place. The lesson of
these two weeks is not to slip back into negotiations with Iran in
the hope of exploiting some division that may or may not exist
between ‘moderates’ and Mr. Ahmadinejad’s allies.
“The lesson is for the world to increase the diplomatic and
sanctions pressure in response to Iran’s threatening behavior and
continued nuclear program. That is what will produce more
fissures in the regime – as more and more Iranians understand
the price of isolation and conclude that the mullahs and their
Revolutionary Guards are leading them down a dangerous, losing
road.”
Charles Krauthammer / Washington Post…on Europe’s role.
“Britain asked the European Union to threaten to freeze exports,
$18 billion a year of commerce. Iran would have lost its No. 1
trading partner. The European Union refused.
“Why was nothing done? The reason is simple. Europe
functions quite well as a free-trade zone, but as a political entity
it is a farce. It remains a collection of sovereign countries with
divergent interests. A freeze of economic relations with Europe
would have shaken the Iranian economy to the core. ‘The
Dutch,’ reported the Times of London, ‘said it was important not
to risk a breakdown in dialogue.’ So much for European
solidarity.”
But Krauthammer and other conservatives also talk of how the
new multilateralism of the Bush administration’s second term
has gotten us nowhere, as if unilateralism worked before. This is
a dangerous slope.
Krauthammer concludes:
“The capture and release of the British hostages illustrate once
again the fatuousness of the ‘international community’ and its
great institutions. You want your people back? Go to the
European Union and get stiffed. Go to the Security Council and
get a statement that refuses even to ‘deplore’ this act of piracy.
[You’ll settle for a humiliating expression of ‘grave concern.’]
Then turn to the despised Americans. They’ll deal some cards
and bail you out.”
It’s far more complicated than this, however, and every situation
on the foreign policy front is different. But what has emerged
over the past five years in particular is you need competent
leaders and you’d have a hard time convincing me these are in
abundance around the globe today.
And speaking of competence, or rather the lack thereof, we have
House Speaker Nancy Pelosi. By now many of you have read or
heard of the Washington Post editorial on her trip to Damascus,
but it’s important I repeat much of it.
“House Speaker Nancy Pelosi offered an excellent demonstration
yesterday of why members of Congress should not attempt to
supplant the secretary of state when traveling abroad. After a
meeting with Syrian dictator Bashar al-Assad in Damascus, Ms.
Pelosi announced that she had delivered a message from Israeli
Prime Minister Ehud Olmert that ‘Israel was ready to engage in
peace talks’ with Syria. What’s more, she added, Mr. Assad was
ready to ‘resume the peace process’ as well. Having announced
this seeming diplomatic breakthrough, Ms. Pelosi suggested that
her Kissingerian shuttle diplomacy was just getting started. ‘We
expressed our interest in using our good offices in promoting
peace between Israel and Syria,’ she said.
“Only one problem: The Israeli prime minister entrusted Ms.
Pelosi with no such message. ‘What was communicated to the
U.S. House Speaker does not contain any change in the policies
of Israel,’ said a statement quickly issued by the prime minister’s
office. In fact, Mr. Olmert told Ms. Pelosi that ‘a number of
Senate and House members who recently visited Damascus
received the impression that despite the declarations of Bashar
Assad, there is no change in the position of his country regarding
a possible peace process with Israel.’ In other words, Ms. Pelosi
not only misrepresented Israel’s position but was virtually alone
in failing to discern that Mr. Assad’s words were mere
propaganda….
“[When criticized by President Bush for freelancing], Ms. Pelosi
responded by pointing out that Republican congressmen had
visited Syria without drawing presidential censure. That’s true
enough – but those other congressmen didn’t try to introduce a
new U.S. diplomatic initiative in the Middle East. ‘We came in
friendship, hope, and determined that the road to Damascus is a
road to peace,’ Ms. Pelosi grandly declared.
“Never mind that that statement is ludicrous: As any diplomat
with knowledge of the region could have told Ms. Pelosi, Mr.
Assad is a corrupt thug whose overriding priority at the moment
is not peace with Israel but heading off U.N. charges that he
orchestrated the murder of former Lebanese prime minister Rafik
Hariri. The really striking development here is the attempt by a
Democratic congressional leader to substitute her own foreign
policy for that of a sitting Republican president. Two weeks ago
Ms. Pelosi rammed legislation through the House of
Representatives that would strip Mr. Bush of his authority as
commander in chief to manage troop movements in Iraq. Now
she is attempting to introduce a new Middle East policy that
directly conflicts with that of the president. We have found
much to criticize in Mr. Bush’s military strategy and regional
diplomacy. But Ms. Pelosi’s attempt to establish a shadow
presidency is not only counterproductive, it is foolish.”
Editorial / Wall Street Journal
“Even Newt Gingrich, for all his grand domestic ambitions in
1995, took a muted stand on foreign policy, realizing that in the
American system the executive has the bulk of national security
power. He also understood he would do the country no favors by
sending a mixed message to our enemies – at the time, Slobodan
Milosevic….
“With her trip, Ms. Pelosi has now reassured the Syrian
strongman that Mr. Bush lacks the domestic support to impose
any further pressure on his country. She also made it less likely
that Mr. Assad will cooperate with the Hariri probe, or assist the
Iraqi government in defeating Baathist and al-Qaeda terrorists.”
Robert F. Turner, former state department official in the Reagan
administration, in an op-ed for The Wall Street Journal.
“House Speaker Nancy Pelosi may well have committed a felony
in traveling to Damascus this week, against the wishes of the
president….
“The ‘Logan Act’ makes it a felony and provides for a prison
sentence of up to three years for any American, ‘without
authority of the United States,’ to communicate with a foreign
government in an effort to influence that government’s behavior
on any ‘disputes or controversies with the United States.’”
This goes back to the presidency of John Adams, though Turner
himself admits that the last thing the White House is about to do
is attempt to enforce it.
But here’s the opinion of Daily Star (Lebanon) editor Michael
Young:
“We can thank the U.S. Speaker of the House, Nancy Pelosi, for
having informed Syrian President Bashar Assad, from Beirut [an
earlier stop], that ‘the road to solving Lebanon’s problems passes
through Damascus.’ Now, of course, all we need to do is remind
Pelosi that the spirit and letter of successive United Nations
Security Council resolutions, as well as Saudi and Egyptian
efforts in recent weeks, have been destined to ensure precisely
the opposite: that Syria end its meddling in Lebanese affairs.
“Pelosi embarked on a fool’s errand to Damascus this week, and
among the issues she said she would raise with Assad – when she
wasn’t on the Lady Hester Stanhope tour in the capital of
imprisoned dissidents – is ‘the role of Syria in supporting Hamas
and Hizbullah.’ What the speaker doesn’t seem to have realized
is that if Syria is made an obligatory passage in American efforts
to address the Lebanese crisis, then Hizbullah will only gain.
Once Assad is re-anointed gatekeeper in Lebanon, he will have
no incentive to concede anything, least of all to dilettantes like
Pelosi, on an organization that would be Syria’s enforcer in
Beirut if it could re-impose its hegemony over its smaller
neighbor….
“Unfortunately, foreign bigwigs come to town, their domestic
calculations in hand; then they leave, and we’re left picking up
the pieces.”
Meanwhile, in Iraq, Moqtada al-Sadr is back in the picture, once
again blasting the U.S. presence, while his boss, Shia cleric
Grand Ayatollah al-Sistani, who seldom speaks up on issues of
state, said he won’t allow Baathists to return to government
service, even as Prime Minister Maliki and President Talabani
approve of the plan.
As for the ‘surge,’ the Pentagon is still on schedule…20-30,000
by mid-June. It started in February.
Three thoughts. First, as Senator McCain said weeks ago, this is
pitiful. Second, Congress needs to give the surge a final chance
to succeed. Third, I said back in December that the American
people will begin to lose patience with it by June, not the hoped
for year end timetable of Bush and General Petraeus.
So you might be thinking, but if the troops won’t be in place
until then, how can you judge success or failure by June?
Because I’ve said there is one overriding issue, one guidepost,
that everyone should focus on here when considering whether the
government is making progress; that being the enactment of a
viable oil revenue-sharing law. I noted weeks ago it was hashed
out by the various powers but still has not been signed off on by
parliament. The other day in his press conference, President
Bush missed another opportunity. He chose to call the oil deal
an accomplishment instead of saying, “I call on the Iraqi
leadership and parliament to get together in the next 72 hours and
sign this damn thing!” I hate to repeat myself, but I frankly don’t
understand why every single American serving in theatre, let
alone their families back home, isn’t screaming with one voice:
“It’s been four years…we’re giving our lives and busting our
butts for you…so sign this freakin’ oil revenue legislation or
we’re out of here!”
I’m telling you, there will never, ever, be an Iraq that can
“govern itself, sustain itself and defend itself” without first
reaching an agreement on the source of 80% of the nation’s
income. We can worry about the inevitable massive corruption
that will follow enactment later.
So let me attempt to sum up all the above in laying out three
principals that I see as critical in discussing the Middle East
today.
1. Iraq’s parliament must work out the oil issue.
2. The U.N. Security Council must enact far stricter sanctions on
Iran to attempt to not only halt its nuclear weapons program but
also begin to bring down the government.
3. The U.N. Security Council must get a tribunal in place to
address the assassination of Lebanon’s Rafik Hariri and bring the
guilty to justice no matter how high up the chain of Syrian
command it goes.
These are all very doable, but then they should have been
accomplished a year ago.
—
Wall Street
In keeping with the recent pattern of one up, one down, this was
an up week for the major averages with the big three registering
solid gains; the Dow up 1.7% to 12560, the S&P 500 tacking on
1.6% to 1443, and Nasdaq advancing 2.1% to 2471. For the
year, they’re all up essentially 1%-2%, which means if you were
sitting in cash you’d have had similar success, he wrote
mischievously.
The stock market was closed for Good Friday, but the bond guys
went to work for a few hours to trade the March employment
report, and a strong one it was…up 180,000 in non-farm payroll
with the prior two months once again revised upward as they
always seem to be. The official unemployment rate ticked down
to 4.4%, back to the level of May 2001, while hourly wages are
now up 4% from year ago levels.
The bond market didn’t like the numbers, though, because it
makes it harder for the Federal Reserve to lower interest rates
anytime soon and on this I don’t disagree. But I will maintain,
until they pull the plug on my computers, the Fed can’t possibly
raise rates or this economy would roll over faster than a bunch of
Brits.
But just how strong is the economy? I have to remind everyone
that the rate of growth has been 2.6%, 2.0% and 2.5% the past
three quarters and no one anticipates anything better for the first
when it is announced. It also needs to be noted that the national
ISM readings on both manufacturing and the service sector came
in less than expected for the month of March, though both are
also still slightly above the 50 level, below which can be a sign
of recession down the road.
So I have to go back to the three-legged stool…housing, cap-ex,
and the consumer.
Housing is obviously still in the dumper, business spending is
punk at best (as corporations continue to opt to spend excess cash
on stock buybacks rather than plant and equipment), while the
consumer keeps skipping down the road singing “Zippity-do-da.”
And, again, until we see the unemployment rate actually rise, as
well as the lagging impact of the wealth effect on everyone’s
chief asset, their home, there’s no reason for the consumer to
slow up. Even I have to admit this. It’s the American way, after
all. Have coin…go shopping.
And to be totally fair, the mergers and acquisition game is still
very much in play, witness this week’s deals involving First Data
($25.6 billion) and Tribune Co. ($8 billion). That’s certainly a
sign not only of confidence but of liquidity.
But as for housing, yuck. Inventory figures continue to rise
across the country, up 12.8% in Los Angeles and 12.2% in San
Francisco, for example, just in March over February. Miami,
thanks to its dreadful condo market, has seen inventories rise
61% over the past year. There will be no recovery in housing
until you substantially wipe out inventory and on this count
we’re still headed in the wrong direction.
New Century Financial Corp., the 2nd-largest subprime lender,
finally declared Chapter 11 and instantly laid off 3,200, or more
than half its work force. Nationwide, when you include all facets
of real estate, 21,200 were laid off in the first quarter and the
pace will only accelerate. But if you tell me the economy is
generating jobs in other sectors to make up for the ballooning
losses in housing, well then I’ll have to shut up, won’t I?
But here’s the deal. Some economists I respect, like Mark Zandi,
are now calling for the median home price to decline 5% in 2007,
which would be the largest drop since the Depression, while
tougher lending standards are wiping out a large slice of the first-
time home buyer market. Or, as PIMCO’s Bill Gross put it, “As
past marginal buyers are forced to sell their home to prevent
foreclosures, so too will future marginal buyers be restricted
from buying them.”
We’re only in the 5th inning of the housing crisis, I imagine, but
remember, this game is destined for extra innings…as in
stagnation when we finally hit bottom.
Street Bytes
–It’s all about earnings the next three weeks and after 14
consecutive quarters of double-digit gains, if they come in better
than expected (the estimate is for only 4%) stocks will
nonetheless do well. If they just meet expectations or fall below,
and company guidance for the rest of ’07 is so-so, stocks will
decline.
6-mo. 5.09% 2-yr. 4.72% 10-yr. 4.74% 30-yr. 4.92%
The long end of the curve tanked with Friday’s strong jobs data,
but with a lot of market participants, including the international
crowd, out for Easter, the better test will be the market’s reaction
on Monday and Tuesday. And we’re still not out of the 4.50%-
4.80% range on the 10-year so I remain bored by it all.
–A spokesman for China’s Commerce Ministry, Wang Xinpei,
unsurprisingly slammed the Bush administration’s move to
impose steep tariffs on Chinese exports of coated paper.
“This action of the U.S. side goes against the consensus reached
by the leaders of both countries to resolve disputes through
dialogue. China strongly requires the United States to reconsider
the decision and make prompt changes….The decision brings
great harm to the interests and feelings of Chinese business
people and is not acceptable.” [David Lague / New York Times;
Bloomberg News]
From an editorial in China Daily:
“The anti-subsidy measure will increase the cost of Chinese
products sold in the U.S., but will not increase the
competitiveness of U.S. manufacturers. They will continue to
operate at a disadvantage in competition with low-cost Asian
rivals.
“The higher cost of U.S. manufacturing, together with the
country’s block on exports of its high-tech products, with their
high value-added prices, is a fundamental cause of the trade
imbalance.
“The differential reflects the reality of the division of labor as the
world economy develops, not the so-called unfair subsidy by the
Chinese, or whatever, government.”
Editorial / Wall Street Journal:
“(By) Commerce’s own admission it’s difficult, if not
impossible, to determine how much China’s government
meddling affects the price of coated paper exports. Commerce
also decries tax incentives and debt forgiveness handed out to
paper companies through China’s five-year plans. But while
such industrial policy is grossly inefficient, it isn’t necessarily
illegal under World Trade Organization rules. What’s illegal is
to give tax breaks to companies explicitly to promote exports,
which distorts international trade flows.
“In any case, the proper place for Washington to take its trade
complaints is to the WTO. In February, the U.S. Trade
Representative filed a case against Chinese subsidy programs
aimed at promoting exports. A few weeks later, China retracted
one of those programs rather than head to the WTO arbitration
board. The U.S. will not get China to play by global trade rules
by acting unilaterally itself. Meantime, in the name of punishing
China, the Bush Administration is punishing U.S. paper
consumers who will now have to pay higher prices than their
global competitors….
“Rather than be appeased by these China tariffs, Congress, Big
Labor and various business interests are far more likely to claim
policy vindication and demand more. The Bush Administration
is playing with matches, and we hope the economy doesn’t get
burned.”
–On the other hand, the U.S. and South Korea signed a landmark
free trade deal that could boost trade between the two by $20
billion. But it still has to be approved by Congress and Korea’s
National Assembly and a successful outcome is far from certain,
even as both sides protected key constituencies such as beef and
rice (South Korea) and small trucks (U.S.).
–The Wall Street Journal ran a front page headline on Thursday
titled “Mexico Tries to Save A Big, Fading Oil Field” that
concerned a topic addressed in this space before, the startling
production decline at the Cantarell Field; fully one-fifth in just
13 months.
Cantarell produces one of every 50 barrels of oil on the world
market and for some of us it further illustrates the peak oil
argument, one that then gets twisted around by its opponents to
make us adherents look a bit loony.
“There’s tons of oil in the ground to last us centuries,” they
argue.
On one hand that may be true, but it’s getting it out of the ground
that isn’t easy and for today, here’s the bottom line.
The world consumes about 85 million barrels every 24 hours and
despite conservation efforts and the advent of alternative sources
of energy, this total is expected to continue to grow well into the
future, unless you are talking a global depression.
At the same time, for various reasons, including both physical
and geopolitical, it’s not easy pumping 85mm barrels of the stuff,
and while those doubting the peak oil theory talk about great new
finds, such as the one in the Gulf of Mexico announced last year,
the fact is only one giant field has been discovered since the
1980s (in Kazakhstan). [The one in the Gulf will take years to
come on line and there are serious technological impediments
before we get there.]
So barring an economic collapse (a scenario I don’t rule out of
course), oil is not dropping back below $40. Obviously, though,
the relatively high prices of today have yet to impact growth.
–Meanwhile, 14 of the world’s largest natural gas producers are
meeting this coming week in Qatar to begin to lay the framework
for a new cartel. The 14 control about 42% of global output,
including Russia’s nearly 22% share, but the only folks who
should be concerned about the prospects for a cartel are
Europeans, as between Russia’s 22% and Algeria’s 3% the
continent receives a considerable share of its overall needs from
the two.
–The Big Three automakers continue to lose market share to
their Japanese rivals as GM posted a 4% sales decline for the
month of March in light-vehicle sales, Ford dropped 9% and
Chrysler Group’s fell 5%. By contrast, Toyota’s jumped another
12%, Honda’s increased 11% and Nissan’s rose 8%. GM did say
it was gaining further momentum in China as sales there jumped
25% in the first quarter.
–89-year-old Kirk Kerkorian and his Tracinda investment
vehicle launched an all-cash bid of $4.5 billion for Chrysler,
though others such as Canadian auto parts maker Magna as well
as private equity firms Blackstone and Centerbridge are said to
be interested. Back in 1998, Chrysler agreed to be sold to
Daimler-Benz for $35 billion when Kerkorian was the largest
shareholder. At first agreeing with the move, he later turned on
Daimler management.
–Ford CEO Alan Mulally was paid $28 million in his first four
months on the job, including a $18.5 million hiring bonus;
though $11 million of this was to make up for compensation he
was forfeiting by leaving Boeing. But considering contract
negotiations with the United Auto Workers union are upcoming,
and the fact Ford lost $12 billion in ’06, the compensation
package is unseemly.
–The U.S. Supreme Court ruled 5-4 that the Bush administration
is breaking the law by refusing to limit emissions of green house
gases, thus running counter to the Clean Air Act.
But while the decision will inevitably lead to increased
regulation of auto emissions, any new requirements are years
away from being enacted. Frankly, the administration has been
gutless for over six years on this topic and it’s not as if their
support of Detroit and U.S. auto makers has stopped the slide in
sales.
–The World Bank warned that despite Asia’s current strong rate
of growth, governments must step up spending on infrastructure
as well as face up to their staggering pollution problems;
reiterating that China, for example, has 20 of the 30 dirtiest cities
in the world. China’s dominance of manufacturing is also
creating “intense competitive pressures for other East Asian
economies.”
–A study of New York City found that it now requires an annual
income of between $75,000 and $135,000 for a family of four to
enjoy what it terms “a middle-class standard of living.” [New
York Daily News]
–Josh P. passed along an item from the San Diego Union-
Tribune that one of the big issues these days on the subprime
mortgage front is that “a majority (that were) closed during the
housing boom years carried no escrows for property taxes and
hazard insurance,” in stark contrast to the prime mortgage market
where such accounts are mandatory.
Many subprime mortgage holders have thus been failing to make
their property tax or insurance payments, which only hastens the
foreclosure process. Can’t say I ever thought of this one.
–Microsoft’s Bill Gates and others, particularly in the tech
world, have been decrying the lack of qualified help and the need
to increase the number of H1-B visas that are granted for
professionals. So I noted with interest this item from Crain’s
New York Business.
“The U.S. Citizenship and Immigration Services began accepting
applications for the H1-B visas on April 2. Normally, CIS keeps
granting visas to applicants on a first-come, first-serve basis until
the 65,000 stock has been exhausted, which typically takes
several weeks. This year, however, CIS received 150,000
applications on the first day, due to a big backlog of unsuccessful
applicants from last year.”
It turns out that CIS is overwhelmed and the selection process
will take weeks. Those then shut out have to wait until April
2008 in hopes of getting a work visa for 2009. What’s clear is
the cap must be raised.
–Sam Zell’s acquisition of Tribune will eventually lead to the
sale of the Chicago Cubs for an estimated $600 million.
–A judge ruled on Friday that Internet phone carrier Vonage can
not sign up new customers as punishment for infringing on
Verizon’s patents. I would suggest that Vonage begin to think
about what it wants for its last meal. I’d go for veal cutlet and
spaetzle, washed down with Pilsner Urquell, myself.
[Update, 7:30 a.m. Vonage won a delay of the federal ruling.]
–Financial aid administrators at the Universities of Texas and
Southern California, as well as Columbia University, were
suspended when it was learned they owned stock in “preferred”
lenders that are recommended to student borrowers and their
parents. This came about as a result of a wide-ranging
investigation by New York Attorney General Andrew Cuomo’s
office into potential conflicts of interest in the student-loan
industry.
–You know those “10b5-1” stock plans corporate executives
claim take away any conflicts of interest when it comes to their
sales of company stock? The SEC is investigating whether these
are yet another sham, as it would appear they are filled with
loopholes. Said Linda Chatman Thomsen, chief of the agency’s
enforcement division, “We want to make sure people are not
doing here what they were doing with (the backdating of) stock
options.”
A study by Stanford University’s Alan Jagolinzer claims that
“insiders started sales plans just before big drops in the stock
price. That could indicate they may have put the plans into place
to ward off charges that they were simply selling ahead of bad
news.” [Dionne Searcey and Kara Scannell / Wall Street Journal]
–A study published in the journal Science warns the American
Southwest faces a permanent drought by 2050 because of global
warming. It’s already essentially been in one since 2000.
–An industry report suggests that global demand for solar power
equipment will rise from $20 billion in 2006 to $90 billion in
2010. The demand for high-purity silicon required for solar cells
is projected to grow 10-fold by 2015. [Financial Times] See my
portfolio comment below.
–The British government got in a bit of hot water with the Saudi
royal family when months ago it announced it was investigating
BAE Systems, Britain’s largest defense contractor, for bribery in
handling future contracts with the kingdom.
Now it’s been revealed that BAE was paying tens of thousands
of dollars to two British actresses who befriended the man in
charge of approving Saudi arms transactions, Prince Turki bin
Nasser. Anouska Bolton-Lee, a former lingerie model, and
Karajan Mallinder, another actress, regularly partied at a hotel in
London with the prince and his entourage, according to the
London Times. Well whaddya know? Sounds like a pretty
familiar story line if you ask me.
–The New York Stock Exchange resets its “trading curbs” each
quarter based on the level of the Dow Jones Industrial Average,
so just know that if the Dow declines 3,700 points, the market
will close for the day, regardless of the time. Ergo, if you’re a
trader, working on the Street or at home, for example, and the
Dow drops 3,700 points in the morning, you could conceivably
get in 18 holes that afternoon!
–My portfolio: I now own two solar energy plays, the same
carbon fiber holding, and a biodiesel stock so I have an
increasing focus on alternative energy; plus I own two traditional
oil and gas plays and a water stock as well. Overall, though, I’m
roughly 70% cash, 30% equities; or above the 80/20 mix I’ve
been betting would beat the market.
Foreign Affairs
Israel: Prime Minister Olmert, he of the single digit approval
rating, called for a regional conference to discuss the 2002 Saudi
peace initiative [land-for-recognition], but then he set
preconditions such as the refusal to allow the return of a single
Palestinian refugee. No one expects Israel to, but as columnist
Robert Novak noted when you set preconditions it’s “a classic
mechanism for escaping talks altogether.”
Separately, Israel is warning that Hamas is building up its forces
rapidly in Gaza.
North Korea: Like Iran, Pyongyang will miss its deadline for
dismantling its nuclear weapons effort at the Yongbyon plant (in
their case, April 14). At the same time China and South Korea
are still trying to make headway in the dispute between the U.S.
and the North over $25 million sitting in Macau’s Banco Delta
Asia. The U.S. has agreed to free up the funds, which were to be
transferred to the Bank of China, but the bank is afraid to accept
the money out of fear it will affect its credit rating and future
business.
The six-party talks on North Korea’s nuclear weapons program
have now been going on since 2003.
China: Following is a bit from Jeff Bliss of Bloomberg News.
“For every person caught and accused of passing U.S. military
and trade secrets to China…scores of others go undetected.
Taking advantage of an outmanned counterintelligence effort
drained and distracted by the wars in Iraq and against al-Qaeda,
current and former officials say, China has systematically
managed to gain sensitive information on U.S. nuclear bombs
and ship and missile designs.”
Well, that’s been my complaint, as expressed again last week.
Joel Brenner, the top counterintelligence official in the office of
Director of National Intelligence Michael McConnell, said that
while 140 foreign intelligence services are attempting to
penetrate U.S. agencies, China’s is the most aggressive, which
Brenner describes as “an intensifying and troublesome pattern.”
Qin Gang, a spokesman for China’s Foreign Ministry, said at a
recent press briefing, “I wonder why people always feel
threatened by others and treat others as thieves. It indicates these
people have a chip on their shoulders and have fragile
psychologies.”
To which I’d reply, “I wonder why one country targets another
with over 700 missiles, even though the target itself presents
absolutely no threat whatsoever?”
Ukraine: Remember, this nation is still basically divided in two,
literally east and west with Russian and Ukrainian-speaking
bases; those favoring the West and integration into the European
Union, as exemplified by President Viktor Yushchenko, and
those seeking strong relations with Russia, symbolized by Prime
Minister Viktor Yanukovich.
But since the Orange Revolution of 2004 that brought
Yushchenko to power, Ukraine has been floundering politically
(though the economy has held up) and now Yushchenko has
dissolved parliament and called for new elections on May 27 to
break the gridlock caused by a standoff between the two long-
time rivals.
As the past week progressed, Yushchenko warned Yanukovich
not to revert to force, while lawmakers vowed to withhold the
money needed to conduct new elections.
But it’s really up to the Supreme Court at this point, the same
one that overturned Yanukovich’s victory within a week back in
‘04. This time Yushchenko has the loyalty of the military and
secret service, though as yet it’s not clear where the Court stands
on the election issue, even as the president has the power to call
them.
Pakistan: Fighting continues in Waziristan between Uzbek
terrorists and the various tribes in the region. It’s still far from
clear, however, what impact if any this is having on the
sheltering of the likes of bin Laden and Zawahiri.
It was the Musharraf government, you’ll recall, that signed peace
deals with tribal elders last fall in which the tribes agreed to
disarm or evict the foreigners who have been supporting al-
Qaeda and the Taliban. Now there’s a rumor the government
may be spreading negative propaganda against the Uzbeks to
stimulate the fighting.
Separately, former prime minister Benazir Bhutto could be
returning from exile following the dropping of a corruption case
against her. There are various angles being reported but I’ll go
with the London Times one that surmises Bhutto may be coming
back to help shore up President Musharraf ahead of planned
parliamentary elections by year end; with Musharraf having
dropped the case in return for her support. The U.S. and Britain
are supposedly in favor of such an alliance because it would
weaken radical elements, but it still all goes back to whether you
believe Musharraf has been a true ally the past few years.
[Survey says? No….]
Somalia: So much for preventing this hellhole from becoming a
safe haven for terrorists as the worst fighting in 15 years erupted
this past week. While it’s impossible to know how many have
died, it’s undoubtedly in the hundreds and everyone is involved,
from Ethiopian and Somali government forces to militias of all
stripes, with African Union peacekeepers often caught in the
middle.
Venezuela: People here have been largely indifferent to their
wacko leader, President Hugo Chavez, recognizing there isn’t a
helluva lot they can do to change their lot in life even if they
wanted to.
But this week there were chants of “Don’t Mess With My
Hooch!” as Chavez banned alcohol sales during much of Holy
Week. One bar owner told the Herald Tribune, “Holy Week is
the best week of the year because people don’t work, they go out
and spend.”
Actually, I didn’t realize Chavez is a teetotaler, joining two other
rather important world leaders in this regard. Sometimes I wish
the other two would start drinking again.
Random Musings
–Here’s my take on the announcements pertaining to how much
each of the presidential candidates raised in the first quarter.
When it comes to the dollar leaders – Hillary ($26 million),
Obama ($25mm) and Romney ($23mm) – I think the
significance is being way overblown, though admittedly I’m in a
distinct minority of one it would appear.
I just believe it is total garbage that even Obama’s supporters are
truly “energized.” Personally, I’m tired already and it’s April.
On matters like this I always feel like I can’t possibly be alone in
this regard.
I continue to maintain Hillary will begin to wither, Obama will
flame out, McCain has been a disappointment (and here age is a
definite factor), Giuliani has more skeletons in his closet than
that scene out of “Jason and the Argonauts,” and Romney may
have been a good administrator once but in my eyes he’s a total
lightweight in terms of this race.
So that leaves who? Understand I’m only musing, but Edwards
is looking better, Gore has to be salivating because he knows
Hillary and Obama will implode, and Fred Thompson could be
an instant frontrunner should he enter on the Republican side.
[Gingrich won’t run if Thompson does.]
And why am I so harsh when it comes to Obama? His crowds
thus far are the result of curiosity more than anything else, and
there is absolutely nothing there, after all. He is smart to run,
now, but people will eventually wise up. I also have to be honest
when I say I just don’t trust him.
In fact, I obviously can’t get fired up over any of the candidates,
nor would I necessarily be excited if Mayor Michael Bloomberg
ran as a third party entry, as much as I want that option these
days.
One last thought, I do hope Chris Dodd and Joe Biden stay in
long enough so they’re part of the fall debates. For starters,
they’d blow the frontrunners out of the water on various issues
and at the end of the day, until we get to 2008, I’m looking to be
entertained more than anything else because I’m bored to tears
thus far.
–I’m also continually amazed at how pundits still don’t get it
when it comes to the Internet. Tim Russert and others, for
example, are going on and on about how Obama has a lot of
small contributors through his Web site that will just keep giving
and I couldn’t disagree more.
And then there was this drivel from a piece in the Wall Street
Journal on Wednesday titled “New Outlets For Political
Junkies.”
“Yesterday, MySpace announced that it would hold a ‘virtual
election’ on Jan. 1-2 for its 168 million members to vote for their
favorite presidential candidate.”
168 million members? More than half of Americans have a
MySpace page? I don’t think so, unless you’re saying 125
million of them are under the age of 16. Regardless, only 4% of
MySpace members will end up voting in Nov. ’08.
But the Journal piece contained this other incredibly stupid bit.
“Jason Martell, a 25-year-old self-described political junkie in
Lena, Wis., is using MySpace to try to contact presidential
candidates about a plan he has posted on his MySpace page for
reducing energy consumption. Last week, he posted a note in the
comments section of Mrs. Clinton’s MySpace page urging
people – Mrs. Clinton included – to check out the plan. Mr.
Martell, who is unemployed, also has sent personal notes to
‘friends’ of Mrs. Clinton’s on MySpace, asking them to pass his
plan on to Mrs. Clinton.
“Mr. Martell, who hasn’t heard back from Mrs. Clinton or her
campaign, doesn’t think the candidates’ MySpace pages are
substantively different from, say, their own campaign Web sites.
‘I think they’re just advertising themselves,’ he says. Still, he
says he thinks the pages nonetheless improve his chances of
getting his message across to Mrs. Clinton and other candidates.”
Suffice it to say I’m rather unimpressed, nor would I hire the kid.
But he obviously knows someone at the Journal because that’s
the only reason why he made the article.
–With all the talk of how much money Hillary Clinton and
Barack Obama raised in the first quarter of ’07, I got a kick out
of a story in the Jerusalem Post discussing the take from an
annual gala for The Friends of the Israel Defense Forces that
raised $18 million in a single night two weeks ago in New York
City. 1,300 attended and the largest pledge was $3.2 million by
media mogul Haim Saban.
So consider what would happen if there were no limits on
campaign contributions. Some, such as George Will, say the
current ones shackle free speech and that McCain-Feingold is a
total bust.
But would it be better to have, for example, Wall Street honchos
and hedge fund managers giving $5 million at a single pop?
Somehow I don’t think that’s what we want either.
–David Rose of the London Times wrote a piece that if
distributed widely could be incredibly important in shaping
future debate.
“Everyday hazards such as inhaling polluted city air or other
people’s cigarette smoke are potentially worse for your health
than being exposed to the radioactive fallout of an atomic bomb,
according to new research.
“A study of radiation exposure caused by the atomic bombs
dropped on Japan in 1945 and the explosion at the Chernobyl
nuclear power plant has suggested that they have posed similar
or lower health risks to survivors than the more prevalent
problems of air pollution, smoking and obesity….
“Millions of people were exposed to potentially dangerous levels
of radiation when the former Soviet nuclear power plant in what
is now Ukraine, exploded on April 26, 1986. But the latest
findings suggest that the consequences of radiation exposure
suffered by survivors of the incident or the bombs dropped on
Japan may be much less damaging than previously thought.”
According to research in the BioMed Central journal Public
Health, those exposed to high levels of radiation within 1,500
meters of the hypocenter of an atomic blast could expect their
lives to be shortened by an average of 2.6 years, vs. ten years for
a lifelong smoker.
Think of the policy ramifications. I studied Chernobyl when I
went to Ukraine last year and it’s true that while the area
adjacent to the plant is still considered uninhabitable, the actual
incidences of cancer from the blast are far lower than anyone
expected. The only ones who died immediately were the heroic
firemen that were sent in with pitiful equipment. The museum I
went to exhibited the actual hazard suits worn and there is little
doubt virtually all of the 20 or so who perished would have lived
given modern safety outfits. But consider how we view the
whole Chernobyl accident, and how combined with Three Mile
Island it set back nuclear power efforts in the United States for
decades since. [Left unsaid is the whole nuclear bomb issue.
But you can discuss that amongst yourselves.]
–Sharon Cohen of the AP writes that the General Accounting
Office has referred more than 22,000 potential cases of fraud
linked to Hurricane Katrina. While the actual number is
undoubtedly far less, some of the cases documented run up to
$700,000 or more and the total amount is still projected to be in
the neighborhood of $1 billion. [In Mississippi, three people
pleaded guilty to falsifying records of Katrina debris cleanup in
billing the federal government $716,000 for their work.] Why
the heck can’t we just lock these folks up for life? Anything
premeditated like this is as bad as it gets in my book. Of course
in China or Saudi Arabia they’d be executed.
–Speaking of Katrina and New Orleans, NBC News ran a piece
on the continuing violence there. As of Monday, there were 53
murders thus far in 2007 vs. 17 for the first quarter last year.
Police say they get zero cooperation from the public in solving
the crimes.
I have to come clean on the topic of the Big Easy. At this point
I’m only concerned for one reason, and one reason only….the
fact the World War II Museum is located here. It’s so sad, in
hindsight, that it was placed in New Orleans, though the intent
was honorable, the city being the home of the Higgins Boat that
was so critical to Allied success in the war. I’m just afraid that
as the city dies, so to do the efforts to educate the public on this
conflict. [I will go to see the museum later this year.]
–Boy, Philadelphia isn’t a great spot these days, either. The
murder rate there is also skyrocketing.
–One of the more remarkable stories of the week concerned the
fate of the Greek cruise liner, The Sea Diamond, that sank off the
coast of Santorini after hitting some rocks. In a dramatic rescue,
all 1,600 on board were evacuated successfully (though two
French passengers are reportedly missing).
But do you think the captain will have a hard time finding
another job? Geezuz, talk about unemployable; this was a
gigantic screw-up.
–Former Grambling coaching great Eddie Robinson passed
away. What a tremendous American story he was, and an
awesome role model in so many respects. Another Great
American, Jackie Robinson, is being honored this coming week
on the 60th anniversary of his breaking the color barrier in
baseball.
So I couldn’t help but think of two others with the last name of
Robinson that are among the 10 or 20 greatest African-
Americans. Frank, a Hall of Fame baseball player who was also
the first black manager, and David, the great basketball star and
midshipman who is simply the greatest role model existing in
this country today, period. I wish David Robinson would run for
president. He certainly blows away any of the candidates we
have now.
–Lastly, it being Easter and all, in my WIR of 1/13/07, I
mentioned the case of Karl Szmolinsky, breeder of a gigantic
rabbit that could grow to 22 lbs, the size of many dogs. Recall
that Karl was approached by the North Koreans, who are always
looking for new food sources, having already utilized tree bark,
and he sent them 12 of the giant rabbits to start their own
breeding program. Karl was then to travel there as the
government’s guest in April.
But a North Korean official called him last week to say the trip
had been cancelled, so now Karl thinks Kim Jong-il ate the
rascally creatures. “North Korea won’t be getting any more
rabbits from me, they don’t even need to bother asking,” said
Karl when approached by the London Times.
Meanwhile, the North Korean Embassy in Berlin denied the
rabbits were turned into stew and sandwiches.
But consider that Karl first sold them eight females and four
males (for around $100 apiece) and these 12 could have created
60 new ones each year.
Now assume these first 60 were divided equally between male
and female, and that 16 of each class were eaten every year
thereafter (10 by Kim and 6 by his butler). How many would
you then have after ten years?
I have no idea; just thought if you had a kid who was acting up
maybe you could force them to solve this before they got their
allowance. I also apologize for not telling you ahead of time this
wasn’t necessarily a joyous bunny story.
–But, lastly, we celebrate the discovery of a rare Sumatran
striped rabbit, a photo of which has been confirmed as just the
third sighting in the last 35 years on the Indonesian island,
according to the Wildlife Conservation Society. No word on
whether it too was then eaten.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $679
Oil, $64.28
Returns for the week 4/2-4/6
Dow Jones +1.7% [12560]
S&P 500 +1.6% [1443]
S&P MidCap +1.6%
Russell 2000 +1.6%
Nasdaq +2.1% [2471]
Returns for the period 1/1/07-4/6/07
Dow Jones +0.8%
S&P 500 +1.8%
S&P MidCap +7.1%
Russell 2000 +3.3%
Nasdaq +2.3%
Bulls 50.6
Bears 25.8 [Source: Chartcraft / Investors Intelligence]
Have a great week. Happy Easter.
*Next week from Hong Kong, after a quick trip to the mainland.
Brian Trumbore
