[Posted 7:00 AM ET]
Wall Street…and China
No mystery why the Dow Jones hit one new all-time high after
another, while the S&P 500 is within striking distance of its own
record level. Earnings have been coming in better than expected
and the March reading on core consumer prices (ex-food and
energy) was tame and is now up just 2.5% year over year. So
you can argue all you want that this isn’t a true indication of the
pricing picture, especially in as much as it ignores gasoline, beer
and Cheetos, the things we really consume, but tough. From a
market standpoint there is absolutely no way the Federal Reserve
is hiking interest rates, as I’ve been saying for some time now,
especially given the latest CPI data.
And while earnings are decelerating from years of double-digit
growth, so far they aren’t bad. Yes, I’m a cynic and it’s easy to
manipulate expectations, but sometimes you might want to forget
earnings per share and just think of the fact a company like
Google just earned $1 billion. Those of us who sometimes get
down on America should be simply smiling at this. It’s further
proof that despite all our problems, somehow we keep coming up
with ideas that the world is envious of.
Of course this doesn’t mean that everyone is participating in the
boom, around the world for that matter. But I thought I’d share
some thoughts from my favorite economist, Robert Samuelson
(Washington Post).
“(The) inequality debate is misleading. Up to a point, inequality
is inevitable and desirable. The prospect of doing well
encourages people to work hard, develop new skills and take
risks. It anchors America’s entrepreneurial spirit and economic
success. Most of today’s rich have earned – not inherited – their
status. Among the top 1%, more than four-fifths of income
comes from salaries and self-employment. In 1916, the top 1%
relied far more heavily on income from dividends, interest and
rent.
“The question of whether the rich pay their ‘fair’ share of taxes
has triggered one of those debates in which both sides are half
right. It’s true, as liberals say, that the Bush administration
pampered the rich. Tax cuts on capital gains (stock profits) and
dividends weren’t needed as incentives. Ending the estate tax
would be similarly unwise. But it’s also true, as conservatives
say, that liberals popularize the fantasy that taxing the rich more
will solve most budget problems.
“It won’t. The richest 10% already pay half of all federal taxes,
including the 25% paid by the top 1%. Just how much these
taxes could be raised without dulling economic incentives and
stimulating massive tax avoidance is unclear. But increasing the
taxes on the top 1% by 25% wouldn’t cover even today’s budget
deficit, let alone pay for new programs (universal health
insurance, more school aid) or baby boomers’ retirement costs.
“It would be healthier if the trend toward greater economic
inequality reversed itself spontaneously. The poor aren’t poor
because the rich are richer. Their poverty reflects low skills,
poor work habits or bad luck. But if the middle class thinks the
rich are grabbing most of the gains from economic growth, they
will feel resentful. The result could be a self-defeating debate
over income redistribution, not growth. To paraphrase
economist John Maynard Keynes: The rich are tolerable only so
long as their gains can be held to bear some relation to roughly
what they have contributed to society.”
And don’t you know they have problems of income inequality on
an enormous scale in China these days. You know how you can
be doing the same thing, over and over again, when suddenly
something clicks and you have your “Ah ha!” moment? I’ve
been to Asia five times since 2001, from Singapore to Seoul, and
aside from the fact in about 40 days over those journeys I’ve
seen the sun for all of five hours total (more on this in a
moment), after my last trip I feel like I’m finally getting my arms
around the story.
A lot of this has to do with an investment I’m involved in now in
Fuzhou, China, one that I continue to buy into in drips and drabs
(because there is virtually no volume in the darn thing), and part
of the story is a large piece of land, 35 miles from the main plant,
where far more capacity is to be built. [It’s in the biodiesel
business, you may recall.] In my trip there ten days ago it was
impossible to check out the new site but management laid out the
plans on the table for me, though it requires a leap of faith on my
part. Will this company expand in 2008 as they’ve told
investors? If they do, it’s a home run. If they don’t, I may have
to sell my place in New Jersey and live in a hovel in Fuzhou
because I won’t be able to live here.
And so last Sunday, after describing to you my trip to Fuzhou, I
hopped on the high-speed ferry from Hong Kong to Macau to
check out a place I was last at three years ago. I wanted to see
for myself the incredible development I’ve been reading about
and let me tell you, it’s happening. Aside from the fact Macau
has surpassed Las Vegas as the gambling capital of the world,
you just can’t believe how quickly the projects are going up.
Even more so than Shanghai, Macau is a microcosm of the
incredible China boom. If Sheldon Adelson, Steve Wynn or
Stanley Ho says a casino resort is going up by first quarter 2008,
it will be completed by then. None of this screwing around, five
years after 9/11, to figure out what to do down at the World
Trade Center, for example. In China, and elsewhere in Asia,
bureaucracies, government regulations, and town councils be
damned. If you want to put a skyscraper on the corner, just do it.
[Watch out for the little lady living in the last building you’re
about to bulldoze, however. No reason for a senseless loss of
life. And be prepared to grease more than a few palms.]
I couldn’t stand Macau, by the way, but adding up my
experiences from 2004 and 2007, I decided to take the leap of
faith back in Fuzhou. If they say the plant is going to get built, it
will. After all, for starters, labor costs aren’t a problem. I left
some $40 tips with those who helped me there and I learned later
I matched their weekly salaries.
So when I see 11% GDP growth, such as that announced for the
first quarter by China this week, it’s no longer a shock to me. It
also shouldn’t be a shock to hear that tax revenues are up 25%.
[More for China’s military…take note, Secretary Gates.]
But there are so many problems to talk about. Aside from the
issue of rich and poor, something I now worry about more than
ever because I wonder about the plant I’m investing in and labor
relations as a subset of the potential for overall unrest in the
country, the paramount risk is bird flu. I’ve been through the
live poultry markets in Hong Kong, and others like them in Asia,
but there was something about seeing the duck farms in Fuzhou
that crystallized the risks from an economic standpoint. It’s
certainly not comforting to read this week that China has not
shared samples of human bird flu cases with the World Health
Organization in over a year, according to a WHO spokesman on
Wednesday. I read from a piece in the South China Morning
Post that “Telephones at Beijing’s Health Ministry rang
unanswered.”
There is also the troublesome issue of the tainted pet food. It
increasingly appears that two Chinese manufacturers
intentionally added a chemical, melamine, to falsely boost the
nutritional content. What should scare everyone is that so little
of China’s product is inspected, unlike here in the U.S. I think
about all the steel plants that introduce metals into the food
chain as but one danger.
On the industrial side, what an incredibly awful accident took
place this week. 32 workers were killed when they were buried
in white-hot molten steel at a factory in Northeast China.
According to the London Times, “The mishap was triggered
when a 30-ton-capacity steel ladle sheared off from the blast
furnace, spilling liquid metal onto the factory floor three meters
below. The molten steel engulfed an adjacent room where
workers had gathered for a routine shift change.” They say the
liquid reached a temperature of 2,732 F., and the incident is
further proof of the simply dreadful industrial safety record here.
Then there is this one from the South China Morning Post.
“About 450 people were hospitalized in southwest China after a
fertilizer plant discharged a ‘huge amount’ of sulfur dioxide,
state media said on Wednesday.” Thankfully, all were said to be
in stable condition.
Which brings me back to the issue of pollution. The
International Energy Agency said by 2008, China will have
surpassed the U.S. in terms of greenhouse gas emissions; a full
12 months earlier than a recent estimate. Per capita emissions
may be small, but it’s about the giant coal plants and an
economy chugging along at 10% that is using up a ton of it.
Of course the world is going to see for itself just how bad things
are during the Beijing Olympics next year. Or, hopefully, we’ll
get a sense of improvements. The government knows it has huge
issues to deal with, but first and foremost it has to keep a restive
population employed, so it’s a wicked tradeoff…progress vs.
clean air and water.
When I was in Hong Kong, the Chinese government released its
first ever report on the health of the largest river, the Yangtze,
and the diagnosis was “critical.” Typical of the country on the
water front, though, was the conclusion of the chief scientist on
the project. “The impact on human activities of the Yangtze
water ecology is largely irreversible.” Of China’s 660 largest
rivers, about 275 are so contaminated the flows can’t even be
used for agriculture. [Which is related to the pet food story.]
It turns out that when I was writing my column from Hong Kong
last Saturday, it was the worst day for air pollution there since
March 22, 2001. “Environmentalists said the sources of
yesterday’s pollutants were largely local and provided strong
proof that the government’s Action Blue Sky program lacked
substance.”
There’s a big debate in Hong Kong right now on the building of
12 new high-rises in a dense area (as if the whole city isn’t). 12
buildings, 33 to 46 stories high, on an area 1/10th of a square
kilometer. Those in the know say this creates a canyon effect,
“under which air would be trapped and pollution would stay.
The effect is seen in urban areas such as Hong Kong when the
height of the buildings is twice the width of the streets.” [I never
knew this.] Of course you junior climatologists out there
probably know that all these skyscrapers lead to well above
normal temps at night since the areas just don’t cool. [Good if
you like it warm. Bad for further straining utilities.]
Well, I know I’m rambling, but sometimes I need to clear the
deck on a few issues and this is one of them. What I’m leading
up to is not necessarily the global warming story, but pollution
control.
Friends, like I said in all my time in Asia I’ve never really seen
blue sky. I remember long stretches growing up in New Jersey
when the pollution was awful, let alone the stories that our
California friends could tell us. These days we have a ton of
gloriously sunny skies of blue where I live. But this Sunday,
Earth Day, just take two seconds (if you can stomach it) to thank
Richard Nixon, because whether you hated the guy or not (I liked
him, at least then), he was responsible for the Clean Air and
Water Act of 1970. He did it for political expediency, no doubt,
but today he deserves the credit. We’ve gone through some real
peaks and valleys with the environmental movement since then,
but we had to start somewhere and, personally, clean air and
water is indeed our birthright. Today, though, how do we
convince the developing world it must be a focus of theirs too?
If you don’t believe in the whole global warming issue, so be it.
But you can not deny for a moment that we must do all we can to
protect the skies and water. And that spells opportunity.
CNBC had United Technologies CEO George David on the other
morning and alternative energy projects are taking off like
gangbusters at his global operation. Going green is officially
irreversible. Sometimes I feel like I myself needed to be hit in
the head with a brick to understand this, but on the other hand the
investment returns haven’t necessarily been there. Today, they
are emerging, and so I have investments in two solar companies,
one big, one small, the biodiesel operation in China, and my
small holding (once large) in the carbon fiber operator (think
wind power).
You still have many detractors out there, no doubt. Last
Sunday’s New York Times had an article on how solar is simply
uneconomical. But the economics will change and, coupled with
government subsidies, at least initially, the survivors will thrive.
[Ethanol, however, is a totally different topic on a number of
levels.]
But to attempt to complete the circle, and going back across the
Pacific, yes, China is overheating, in more ways than one. They
must face their critical environmental issues immediately. In
some areas the land is literally dying, including in critical regions
where the water table is dropping at unbelievable levels.
China’s attempts to go green thus far have been virtually
nonexistent, and when they’ve tried to do the right thing, more
often than not they fail. Such as in one area of the North Plains,
where desertification is rushing in. About six million fir tree
saplings were planted and guess how many survived? Zero.
Beetles immediately ate them.
So in light of all the above, why then would I invest so heavily
here? I guess I’m like all the Chinese gamblers I saw packed
into the Sands Macau casino. It’s a crapshoot, in some respects.
I see a window of opportunity from an investment standpoint,
albeit perhaps a narrow one. If it hits, I hope to be smart enough
to get out before the day of reckoning, which is coming. Friday
afternoon I caught Larry Kudlow’s program on CNBC and in a
panel discussion on China, not one of five guests mentioned
China’s environmental issues. What a mistake.
Street Bytes
–It’s pretty hard not to go up when the likes of Coca-Cola,
Johnson & Johnson, Eli Lilly, Schering Plough, United
Technologies, JP Morgan, Honeywell and Caterpillar report solid
earnings. Throw in confirmation of a $25 billion merger, such as
that of Sallie Mae, and a respectable retail sales figure for March,
plus the aforementioned tame inflation reading, and you have the
makings of a rally. The weak dollar is also aiding U.S. exporters
(while hurting our European brethren shipping their goods over
here), and markets worldwide have been soaring; sloughing off
another hiccup in China.
The Dow Jones now sits at 12961, while the S&P 500, at 1484, is
just 43 points shy of its all-time mark set back in 2000. Even
Nasdaq is back to 2526.
–On the housing front, some critical data is coming out over the
coming week but for now the news still isn’t good, nor will we
be able to describe it as such for quarters to come. If you’re a
bull, you first need to start hearing the term ‘stability’ month
after month. Homebuilder D.R. Horton’s CEO Donald Tomnitz
said “I don’t see stabilization in very many markets,” adding “It
will get more challenging, certainly, in the next six to 12
months.”
Foreclosures, nationwide, are up 47% from year ago levels, with
the biggest damage continuing to be in California, Florida,
Texas, Michigan and Ohio. When it comes to those entering the
foreclosure process, in California the figure is up…now get
this…800% from a year earlier. [Take a moment to clean up the
coffee you just spit up.] But when it comes to the subprime
market, Washington Mutual is emblematic of the ongoing
problems, as it cut lending to the sector by 51%. However, the
big guns such as Freddie Mac and Fannie Mae, as well as WaMu,
are exploring ways to help out those in dire need by reworking
some of their mortgages.
–U.S. Treasury Yields
6-mo. 5.04% 2-yr. 4.65% 10-yr. 4.67% 30-yr. 4.85%
Rates rallied across the board on the better inflation news and
weren’t impacted by a continued slide in the dollar.
–A study of Iraq’s potential oil reserves reveals they could be
double what had been thought, with much of it in the western
desert of Anbar; obviously where some of the worst violence has
been in the war. But of Iraq’s 78 oilfields identified as
commercial by the government, only 27 are currently producing,
according to the Financial Times.
–My friends at Strategic Energy Research passed on a note from
China National Petroleum Corp. that the country’s reliance on oil
imports will rise 60% by 2020, far higher than earlier estimates.
–Thank god the British pound hit $2 for the first time since
1992, thus making currency translation far easier as some of us
read British publications. [Of course I’m being rather selfish. If
you travel overseas these days, it’s just further confirmation of
how grossly expensive that cup of coffee or pint of ale is.] The
inflation rate in the U.K. has been running hotter than expected,
thus the fear the Bank of England will continue to raise its
interest rates.
Meanwhile, the stronger pound has been super news for visitors
to the U.S., where the Brits are coming over with empty suitcases
and returning with new cars and such. The downside, aside from
the prospect for higher rates in the U.K., is in potentially weaker
exports as British goods become more expensive.
–Blackberry users suffered from a blackout on Wednesday due
to maker Research in Motion’s failure to test some new software
before installation. Now I’m not a Blackberry kind of guy, but I
get a kick out of how indispensable these devices have become to
many of us. If they are so great, and make everyone so
productive, then why are we about to report our fourth straight
quarter of below normal growth in the U.S. economy? [Just
kidding…………or is he?]
–In the battle of the search engines, Google continues to wipe
Yahoo’s face all over the monitor as Google reported yet another
spectacular quarter, while Yahoo fell short of expectations.
Google is now handling 48% of all U.S. search queries
(according to ComScore Inc.) vs. Yahoo’s 28% and Microsoft’s
11%, and that translates into advertising dollars, sports fans.
–Yahoo faces troubles of a different kind, too, as a Chinese
political prisoner sued it in U.S. court (well, his wife did…hubby
being in jail and all), accusing the company of abetting torture by
helping Chinese authorities identify political dissidents who were
later beaten and imprisoned. This is an old charge against
Yahoo, and an important debate, but as a spokesman said,
“Companies doing business in China are forced to comply with
Chinese law (and when the company is presented with a request
for information about a Yahoo user), Yahoo China will now
know whether the demand for information is for a legitimate
criminal investigation or is going to be used to prosecute political
dissidents.” [Miguel Helft / International Herald Tribune]
–EBay’s revenues increased 27%, thanks in no small part to the
weaker dollar as the online auctioneer saw international revenues
climb 38%.
–In keeping with my earlier comments on alternative energy,
New York Gov. Eliot Spitzer announced a significant campaign
to cut the state’s electrical consumption 15% from current
forecasted levels for 2015. As Tom Fredrickson wrote for
Crain’s New York Business, “The state’s ’15 by 15’ plan is more
aggressive than any other state’s plan to reduce global warming.”
One item Spitzer is highlighting, aside from potentially greater
use of solar and wind power, is more efficient appliances; from
residential furnaces and boilers to freezers.
–Spitzer is one of many who recognize the realities of today’s
world. According to a new poll by the Washington Post, ABC
News and Stanford University, a third of Americans now say
global warming ranks as the world’s single largest environmental
problem, double the number of just last year. Seven in 10 want
more federal action, and half believe the government should do
“much more” than it is doing now. [Washington Post]
Also in the same poll, more than half say weather has become
more unstable where they live. I couldn’t agree more with that
conclusion. Here in New Jersey, some state officials are saying
we just had a 500-year storm…not 100…500. With all the other
news of the week, one of the more underreported stories is the
severe flooding we witnessed out of an 8-inch rainfall on
Sunday. [Far more in some communities.] Damage is estimated
in the $100s of millions. My own observation is that it’s simply
the increased intensity of the storms we’ve seen over the past few
years that is amazing, and obviously in other parts of the country,
and the world, it’s the intensity of the droughts.
I have been saying for months now that the real Ground Zero for
climate change is Australia and this week Prime Minister John
Howard said the nation’s key growing regions have all of six
more weeks to receive substantial rains or basically all is lost, not
just for this year, but well into the future…the damage done is
that great. And the water tables, like in China, are declining
precipitously.
–One of the true dirtballs of the Enron era, Joseph P. Nacchio,
former CEO of Qwest Communications, was found guilty on 19
counts of insider trading, dating back to his actions in 2001 when
he sold $100 million worth of stock before the company reported
disappointing earnings news, this after Nacchio fraudulently
hyped the company’s financial condition.
–Russia is the most dangerous place to fly, according to the
International Air Transport Association, with an accident rate 13
times the global average.
–Casino revenues in Macau surged 45% in the first quarter to
another record haul, about $2.32 billion if I have my currency
translation right; thus consolidating Macau’s hold at number one.
Macau is up to 25 major properties. If you want a good little
synopsis of the business here, check out my “Wall Street
History” link.
–Inflation Watch: Brad K., president of International Swimming
Pools, your neighborhood steel pool maker for over 350 years,
said prices for his product have doubled in the last 12 months.
Brad notes that those of you looking for high-end steel grills
should expect huge price increases as well. [Brad also concedes
the housing slump will impact his business. I still expect some
premium beer for the free plug, however.]
–Speaking of which…and now…the beer report…an irregular
feature of “Week in Review.”
Dutch brewers Heineken and Grolsch have been fined a
collective 250 million euros by European regulators for price
fixing. Bavaria beer, not a favorite of yours truly, was also
clipped. But the ruling means individual consumers can seek
compensation! Road trip………
And Anheuser-Busch Cos.’ bid to register its Budweiser
trademark throughout Europe was rejected. Of course Budweiser
has always had problems with Czech brewer Budejovicky
Budvar, which was there first, as we say in the beer biz. You
might recall this was an issue at the World Cup last year.
–Intel announced its upcoming Penryn processors will boost
computer speeds by 40%…which means faster pirating! Is this a
great world or what?!
Iran / Iraq
I like Defense Secretary Robert Gates, though it’s clear some on
the right, including in Israel, are concerned he’s not hawkish
enough when it comes to Iran. Gates was in Israel this week and
stressed diplomacy on the issue of Tehran and its bomb works,
offering no sign the administration is prepared to launch a
military strike.
Just how far along is Iran’s program? The International Atomic
Energy Agency’s inspectors at Natanz (which may or may not be
the only facility attempting to produce weapons grade material)
concluded that Iran had only about 1,300 centrifuges up and
running, not the 3,000 President Ahmadinejad and his associates
spoke of the other week. IF this is indeed the only operation it is
significant since it’s unlikely without larger cascades Iran would
have enough enriched uranium for a bomb for at least a year.
What it does prove, once and for all, is Iran’s total defiance of
the UN Security Council. But nothing will be accomplished on
the diplomatic front without Russia and China’s full cooperation
and that simply isn’t forthcoming.
At a military parade, Ahmadinejad reminded us all where his
heart was when he said the Iranian Army will “cut off the hands
of any invader.” He added, Iran won’t oppress another country,
but also won’t tolerate being oppressed. Then he signed off on
an order for more weapons for Iraq and Afghanistan.
We’re running out of things to say on this topic. Actually we did
long ago. Despite possibly being further behind on the technical
front, thanks in no small part to U.S. and Israeli schemes to inject
faulty equipment into the process, Iran inches ever closer to
changing the region forever.
Sec. Gates eventually wound his way to Baghdad, where he
reiterated what I’ve been saying for a year now; Iraqis need to
push through legislation on sharing oil revenues, as well as
political reconciliation.
“It’s not that these laws are going to change the situation
immediately, but I think…the ability to get them done
communicates a willingness to work together…
“It is very important they make every effort to get this done as
soon as possible.”
So give them a deadline. I don’t blame Gates, of course, having
been thrust into an impossible situation, but he has to convince
Bush to go to Baghdad, get in Prime Minister Maliki’s face one
more time and say “Get it done!”
[If Senate Majority Leader Harry Reid had half a brain, he would
take this approach instead of his incredibly dumb remark “the
war is lost.”]
Meanwhile, Moqtada al-Sadr wants the Iraqi government to set a
deadline for U.S. troop withdrawal and he pulled his six cabinet
ministers. I liked this take from a New York Post editorial.
“Much of the media is treating as disastrous the news that
Cabinet ministers loyal to Moqtada al-Sadr quit Iraq’s
burgeoning government.
“The Associated Press said the development ‘highlighted
growing demands among Iraqi politicians and voters that a
timetable be set for a U.S. troop withdrawal – the reason al-Sadr
gave for the resignations.’
“Less cynical observers might note that Sadr pulled out his
ministers because he was incapable of strong-arming Prime
Minister Nouri al-Maliki into forcing a withdrawal of U.S. troops
– the very people providing the necessary security for this young
government.
“In other words, Sadr is abandoning the democratic path because
he was unable to use it to sabotage democracy itself. For those
favoring a peaceful, secular state in the heart of the Middle East,
this might be considered good news.
“Sadr owes his life to U.S. forces’ equanimity; even as he kills
them in scores, their leaders embraced the (absurd) belief that the
Shiite strongman would eventually accept Iraq’s democratic
status.
“Instead, Sadr on Monday unambiguously pronounced his
opposition to any form of constitutional, representative
government. Where Sadr used his political position to obscure
his role in fomenting massive violence, he has now dropped any
pretense of being just another political player.
“So now that he’s openly opposed to the Coalition’s objectives,
and Iraqi democracy itself, there’s little pretending that he’s not
the enemy. U.S. and Iraqi troops should treat him accordingly.”
For his part, Maliki said Iraq will be able to take over security in
all 18 provinces by year end (they just gained control of a fourth
this week). Fat chance of that.
But I need to touch on a highly important tangential issue, that
being Turkey and the Kurds. A longtime reader questioned my
comparing Kurdish terrorists to al-Qaeda in Afghanistan
following 9/11, and thus Turkey’s right to go after them in Iraq
just as the U.S. went after al-Qaeda. He has a point.
However, it’s important to quickly review the situation. In the
April 9 issue of Defense News, Edip Baser, a retired general in
Turkey’s Army and now special envoy for countering terrorism,
told the publication “Iraq’s future is the largest issue in our
relationship with the United States.”
Turkey is concerned over Iraqi Kurds’ designs on independence.
An independent Kurdish state could prompt restive populations
in Turkey to secede. The United States is urging Turkey to
reconcile with the Kurdistan Regional Government, a semi-
autonomous part of Iraq.
But the Kurdistan Workers Party (PKK) is a terrorist group,
recognized as such not just by Turkey, but by the European
Union and United States as well, and the PKK has been
launching attacks inside Turkey from safe havens in Iraq. Over
the last year, PKK attacks have taken 600 lives, many of them
Turkish soldiers. No nation would stand by while that happens.
Edip Baser told Defense News, “If the United States sends its
military to places more than 10,000 kilometers away from its soil
to protect its national security interests, we also have rights….
We don’t want the PKK threat to continue to hover over us like
the sword of Damocles. We want the problem of the PKK’s
presence in northern Iraq to be resolved once and for all.”
Instead, the White House runs around saying “I can’t hear
youuuuu.” Of course when it comes to Turkey we’re still paying
the price for not being able to launch a force into the north of
Iraq from Turkey at the start of the war. But this is a crisis, and
coupled with a non-binding resolution still pending in the U.S.
House calling for official recognition of World War I-era killings
of Armenians in the Turkish Ottoman Empire as genocide, one
that serves absolutely no purpose whatsoever in today’s world
except to win a few votes in selected congressional districts, you
have a situation where Turkey is about to shut off use of the vital
Incirlik air base; from which the U.S. has been basing much of
the force used against both Iraq and Afghanistan.
But there’s another mess of a situation in Turkey, internally, as
Islamist Prime Minister Erdogan has yet to indicate (he has just a
few more days) whether he will run for president. There have
been massive protests (200,000 strong) with marchers chanting
“We don’t want an imam.” The current president, Sezer, a pro-
secularist, said the threat Islamic fundamentalism posed to his
country has never been higher; as if we don’t already have
enough problems.
More Foreign Affairs
North Korea: North and South Korea held talks on food aid and
other issues, but when South Korea pressed the North to shut
down the Yongbyon nuclear program per the international
agreement, the North’s chief delegate stormed out of the room.
Kim Jong-il wants an unconditional commitment of 400,000 tons
of rice aid, while the North still hasn’t been able to access the
$25 million tied up in the Macau bank, though the U.S. says it
should be available. North Korea says that once it receives the
money, it will allow UN inspectors in. I’m taking bets. [I also
totally forgot to look for the bank when I was there.]
Russia: Should President Vladimir Putin opt not to change the
constitution and stay in power for a third term, as Henry Meyer
of Bloomberg News reports there are signs Putin may give
Russians a choice between First Deputy Prime Ministers Dmitry
Medvedev and Sergei Ivanov, in an attempt to present “the
appearance of democracy while guaranteeing a loyalist will
succeed him.”
This would be interesting, as Medvedev is liked by foreign
investors and is the banker type, while I’m long on record as
saying Ivanov, a career KGB spy before latching onto Putin’s
coattails, is a flat out dangerous man. But, as we’ve seen in
Putin’s soaring approval numbers, many Russians want a thug in
power. That’s Russian history, after all.
Nonetheless, this past week witnessed anti-government protests
in Moscow and St. Petersburg, with opposition figure Garry
Kasparov briefly detained after leading a march in the former.
[Kasparov was later questioned separately by the KGB on Friday
for some comments he made on radio. Picture the FBI picking
up Harry Reid or Nancy Pelosi for questioning…..no jokes.]
It’s all about the divide between rich and poor in Russia, just as it
increasingly is around the world. Said one protester, “Putin and
his team are sitting on sacks of gold, at the same time the country
is breaking apart in all spheres.” But, again, Putin has an 80%
approval rating.
One interesting sidebar is the Kremlin’s admission that the riot
police may have “overreacted” in pummeling demonstrators.
Separately, Russia’s deputy foreign minister was in Lebanon and
he expressed reservations about establishing an international
tribunal under Chapter 7 of the UN Charter for the purpose of
investigating the assassination of Rafik Hariri. This is so typical
of the situation we face today, as in Iran, where Russia and China
continues to block the West’s tough diplomatic efforts on various
fronts. Chapter 7 allows the tribunal to go ahead without the
Lebanese parliament’s approval and the Russian foreign minister
is saying it’s up to Lebanon’s legislative body to establish it. Of
course he knows the parliament is in turmoil these days and
there’s no way they can establish a tribunal. Needless to say, the
White House has been worthless.
Back to Sergei Ivanov, he told a NATO conference that Russia
was not interested in working with the U.S. on the proposed anti-
missile shield slated for Central Europe. “I honestly see no
grounds to talk about potential cooperation on strategic missile
defense,” Interfax quoted him as saying. Earlier, Ivanov told the
Financial Times in an interview, “Since there aren’t and won’t be
[Iranian] ICBMs, then against whom, against whom, is this
system directed? Only against us?”
What a piece of work he would be to deal with should he replace
Putin. The Dow Jones would fall 5% the day he’s elected, if
people fully understood the dangers.
Ivanov and Medvedev are “First” Deputy Prime Ministers, and
right below are some “Deputy” Prime Ministers, one of whom is
Alexander Zhukov. His son, 24, faces life in prison if convicted
of beating a man in London. Both Pyotr Zhukov and the victim
are investment bankers and the victim was trying to crash a
party.
But as the Moscow Times reports, this isn’t that rare. The eldest
son of Sergei Ivanov struck and killed a pedestrian while driving
in Moscow in 2005.
“Prosecutors found no grounds for charging Alexander Ivanov,
maintaining that he had been driving under the speed limit.
Witnesses said Ivanov was clearly speeding.”
Lastly, this weekend neo-Nazis celebrate Hitler’s birthday, so
foreign university students have been urged to stay in their
dormitories at some Moscow schools over fears of violence.
You want to know what Russia is really like these days? 22 have
been killed and 130 injured in hate crimes in Moscow just this
year. In 2006 the numbers were 53 and 460, according to a
human rights group.
Israel: Syrian President Bashar Assad told an Arabic newspaper,
“We always prepare ourselves (when it comes to Israel). Israel is
a fierce enemy. We have seen nothing from it but harm. We do
not know whether war will take place, but we should not
disregard the possibility.” [Jerusalem Post] War is not imminent,
but there is little doubt Syria is preparing its defenses.
Nigeria: Last weekend’s state elections were chaotic and this
weekend’s presidential vote promises to be even more so. Thus
far the cycle of violence has gone like this. A radical Muslim
cleric was assassinated, Islamic militants then stormed a police
station and killed 13, and then Nigerian government forces killed
25 of the Islamists. Now I’m not great at solving word problems,
but following this progression, at what point would the nation
reduce its population to zero?
[As I write, word is 60 million paper ballots are late in being
distributed. And Nigeria was supposed to be a model for the
continent.]
Zimbabwe: It appears my prediction that President Robert
Mugabe would be ousted by end of April will not come to
fruition, much to the dismay of the people there. But whereas
Britain and the United States are the only two countries who
appear to be putting any pressure on the government in Sudan,
here the two say little as Mugabe celebrated his 27th year in
power by proclaiming, “Our message remains clear: that we will
never hesitate to deal firmly with those elements who are bent on
fomenting anarchy and criminal activities.”
What a nightmare, and all so totally preventable. Now Mugabe’s
goons are going after aid groups, which means any badly needed
food from outside won’t get in.
And nice job, South Africa. Along with Russia and China, it is
blocking passage of stricter sanctions on Sudan and in the case of
Zimbabwe, its neighbor, it’s spineless. I wouldn’t invest a penny
in South Africa, nor will I visit there. [I’d get trampled by an
elephant, anyway.]
Somalia: This will be in the news this coming week. Over 130
have been killed in fighting and the nation faces another
humanitarian crisis.
France: Round one is Sunday in the presidential vote. It seems
clear Nicolas Sarkozy (the official StocksandNews candidate)
and Segolene Royal will emerge to then face off on May 6. I’m
interested to see how strongly right-wing extremist Jean-Marie
Le Pen polls. He’s at just 13% today, but pollsters here often get
things very wrong.
Morocco: Police in Casablanca must be pretty good because they
have confronted five suicide bombers in the past two weeks,
bomb belts strapped on, who then blew themselves up, taking
only two innocent lives in the process that I’m aware of, while a
sixth was shot by police before he could activate his belt. This
week, two of the bombers were caught near the U.S. consulate.
Spain: I’ve written over the years about the real estate boom
here, particularly in the second-home market with buyers from
the likes of Ireland and Britain, so I had to make note of a piece
by Sharon Smyth of Bloomberg News.
Spanish law lets local governments claim land for projects such
as schools and low-cost housing that benefit the community. But
as real estate prices have soared, the rule is being used to free
land for resorts and golf courses. You thought eminent domain
was bad in the U.S.? The land claims are hurting Spain’s
reputation, to say the least, and the process is rife with fraud as
town councils “have concocted urban development plans less
because of their real requirements related to population growth
and tourism, and more because of what often appears as their
greed and avarice,” according to the European Parliament’s
Committee on Petitions, which issued a laundry list of concerns.
Basically, if local officials mandate it, a homeowner is required
to give up 10% of their land and then help the developer pay for
infrastructure in cash or property, which can amount to more
than half the property. It’s absurd, and devastating for
unsuspecting homebuyers.
The overbuilding along Spain’s coast is also scandalous in terms
of its impact on the environment. Foreign investment is
beginning to plummet and the average selling time for new
properties is a staggering 35 months.
Random Musings
–The United States Supreme Court upheld a 2003 federal ban on
late-term abortions, thus reversing a lower court ruling that held
the federal law was unconstitutional because it lacked a health
exception for the mother. The vote was 5-4, with Justice
Kennedy writing for the majority, “Respondents have not
demonstrated that the act…is void for vagueness, or that it
imposes an undue burden on a woman’s right to abortion based
on its overbreadth or lack of a health exception.” [Justices
Roberts, Alito, Scalia and Thomas concurred.]
The case demonstrated the impact of the two Bush appointees,
Roberts and Alito, and the decision promises to make for an
incredibly intense, and ugly, debate during the 2008 presidential
campaign. This will end up being a greater issue than the war in
Iraq, certainly in terms of the public’s participation….and I’m
staying out of it.
–The Wall Street Journal’s Daniel Henninger echoes my
sentiments on the following.
“The killing of 32 students and teachers across the campus of
Virginia Tech in Blacksburg, Va., is as awful in its particulars as
virtually any of the stories of death on a large scale that have
struck the national consciousness. And yet it seems somehow
that the public’s emotional response to this event has been more
controlled than in times past.
“This is in no way to suggest that the response was inappropriate,
inadequate or lacking sympathy. Nothing of the sort. It just
seemed that the emotional surge was discernibly less than with
similar events in the past – such as Oklahoma City, the Beltway
sniper, Columbine, and the Branch Davidians. This was the sort
of event that normally would have caused one’s phone to ring off
the hook or email inbox to fill with alerts from friends. But that
didn’t seem to happen this time. [Ed. It didn’t with me.] If one
wasn’t watching TV, the news arrived with an uncharacteristic
delay.
“While the grief death visits on individuals remains an
emotionally devastating event, it may be that as a nation we’ve
reached tilt with tragedy. ‘Tilt’ is the famous metaphor drawn
from the old pinball machines, which shut down if one banged
on them too hard. Pinballs could survive plenty of random
shocks to the system. But there were limits. Of late, we have
been banged on hard.”
Henninger writes of our experience in dealing with the war in
Iraq, how we’ve been overwhelmed with the images, to the
detriment of our response in Darfur, for example. He then
concludes:
“For the foreseeable future, Americans may decide they don’t
wish to expose themselves to similar drainings.
“We are far from the events in Virginia. But we have been
putting emotional distance, in stages, between ourselves and the
Blacksburgs for some time. An event such as the mass murder in
Blacksburg will always elicit sympathy and a coming together of
what each speaker at its memorial service called ‘community.’
The pain of individual families closest to such death can never
diminish or be diminished. Still, we may be passing through a
period, as Europe did after World War I, when people became
hollowed out by repetitive exposure to violence and death – real
or manufactured. No one should be surprised if our shell-
shocked population is reluctant any time soon to revisit the
experience outside the realm of friends and family.”
Charles Krauthammer / Washington Post
“What can be said about the Virginia Tech massacre? Very
little. What should be said? Even less. The lives of 32
innocents, chosen randomly and without purpose, are
extinguished most brutally by a deeply disturbed gunman. With
an event such as this, consisting of nothing but suffering and
tragedy, the only important questions are those of theodicy, of
divine justice. Unfortunately, in today’s supercharged political
atmosphere, there is the inevitable rush to get ideological
mileage out of the carnage….
“Politico columnist Ben Smith has brought attention to a speech
that Barack Obama made in Milwaukee just hours after the
massacre. It must be heard to be believed. After deploring and
expressing grief about the shootings, he continues (my
transcription): ‘I hope that it causes us to reflect a little bit more
broadly on the degree to which we do accept violence in various
forms….There’s also another kind of violence…it’s not
necessarily physical violence.’
“What kinds does he have in mind? First, ‘Imus and the verbal
violence that was directed at young women [of Rutgers]…For
them to be degraded…that’s a form of violence. It may be quiet.
It may not surface to the same level of the tragedy we read about
today and we mourn.’ Good to know that Don Imus’s ‘violence’
does not quite rise to the level of Cho’s.
“Second, outsourcing. Yes, outsourcing: ‘the violence of men
and women who…suddenly have the rug pulled out from under
them because their job has moved to another country.’
“Obama then cites bad schools and bad neighborhoods as forms
of violence, before finishing with, for good measure, Darfur –
accusing America of conducting ‘foreign policy as if the children
in Darfur are somehow less than children here, and so we tolerate
violence there.’ Is Obama, who proudly opposed overthrowing
the premier mass murderer of our time, Saddam Hussein,
suggesting an invasion of Sudan?
“Who knows. This whole exercise in defining violence down to
include shock-jock taunts and outsourcing would normally be
mere intellectual slovenliness. Doing so in the shadow of the
murder of 32 innocents still unburied is tasteless, bordering on
the sacrilegious.
“Perhaps in the spirit of Obama’s much-heralded post-
ideological politics we can agree to observe a decent interval of
respectful silence before turning ineffable evil and unfathomable
grief into political fodder.”
I support NBC News, incidentally, in its release of some of the
photos and videos of Cho Seung-Hui. I also respect the other
side of the debate.
But I’ll tell you what struck me in seeing Cho’s pictures,
especially those where he is posing with his guns. I take you
back to this column, May 6, 2006, commenting on my trip then
to Seoul, South Korea. This is what I wrote.
“(It) was disturbing when a group of Canadians and I were
outside a store that we had shopped in, half-watching a bunch of
teenage boys in their school uniforms just horsing around, when
suddenly one whipped out a gun and pretended to shoot his
buddy in the head. I have no idea if it was real, but we all said to
each other at once, ‘What the heck was that all about?’”
–I’ve said my piece on Imus. I couldn’t care less what happens
to him, personally, but I’m upset about the process that resulted
in his firing. From your e-mails, you concur.
But to put this issue to bed, I just have to note the thoughts of a
few others.
Mike Lupica / New York Daily News
“At the start of this, before the movement to fire Don Imus
picked up an insane sound and fury, it seemed that the last word
on this terrible episode between Imus and the young women of
Rutgers basketball would come from the offended parties – the
young women of Rutgers basketball. But by the time it came on
Friday, it was treated as some kind of footnote. By then, it
turned out that votes cast by the Rev. Al Sharpton and the Rev.
Jesse Jackson and the bosses at NBC and CBS and Corporate
America and Cable America were more important.
“But why? This whole thing was supposed to run through
Rutgers University, or so I always thought. First we needed to
hear from Coach C. Vivian Stringer and her players last Tuesday.
We did. And when one of the things we heard from them was
that they would meet with Imus, that he would listen to them and
they would listen to him, it seemed that would be the trial that
mattered for him, and he would have to live with their verdict.
“It didn’t work out that way at all. By the time he went over for
a private meeting with Coach Stringer and her players at the
governor’s mansion in New Jersey on Thursday night….Imus
had lost his career, at least for now. It was just one more part of
this that was all wrong….
“(To) the end there was no proportion to this. The judgment on
Imus had already been handed down before the most important
judgment of all – at Rutgers – got handed down. How does that
work?
“ ‘We, the Rutgers University Scarlet Knight basketball team
accept – accept – Mr. Imus’ apology, and we are in the process
of forgiving,’ Coach Stringer read from the team’s statement on
Friday. She then added: ‘We still find his statements to be
unacceptable, and this is an experience we will never forget.’
“No one found his statements acceptable. No one will ever
forget what happened. Still: We needed to hear this judgment
from Coach Stringer and her players because anybody being fair
about this needed to hear from them. Only by the time we did,
Imus had been tried, convicted, sentenced. Only ‘Law and
Order’ episodes are wrapped up faster than this. It is ironic that
the last act of another rush to judgment – the one involving Duke
lacrosse, the one where three young men were falsely accused of
rape and a coach was fired because of that – had its endgame
while all this was going on with Imus and the amazing young
women of Rutgers….
“The Rev. Sharpton and the Rev. Jackson had a lot to say about
the Duke case, way back at the beginning, way before anybody
had enough facts. One night with Bill O’Reilly, Sharpton said,
‘The DA is probably not the one that is crazy.’ And the Rev.
Jackson rushed in to offer the accuser a full college scholarship.
He also offered to pray with her.”
Frank Rich / New York Times
“Familiar as I am with the warp speed of media, I was still taken
aback by the velocity of Don Imus’s fall after he uttered an
indefensible racist and sexist slur about the Rutgers women’s
basketball team. Even in that short span, there’s been an
astounding display of hypocrisy, sanctimony and self-
congratulation from nearly every side of the debate, starting with
Al Sharpton, who has yet to apologize for his leading role in the
Tawana Brawley case, the 1980s racial melee prompted by
unproven charges much like those that soiled the Duke lacrosse
players.”
Liz Smith / New York Daily News
“I don’t find the two reverends who engineered (Imus’) downfall
to their own greater glory to be much better. Many of us will
never take the Rev. Al Sharpton seriously until he repents for his
role in the Tawana Brawley fake rape matter. And I would trust
both Sharpton and Jesse Jackson about as far as I could throw
them to stand up for true righteousness. I don’t feel I need them
now to launch a dialogue against free speech.”
–Related to the above, we learned this week that Hillary Clinton
raised $800,000 through a fundraiser featuring the rapper
Timbaland, who sprinkles his lyrics with ‘ho’ and far worse.
And Barack Obama has had Ludacris headline a fundraiser or
two. Gotta keep it real with the brothers, you understand.
–The Wall Street Journal had a tally of first quarter political
fundraising on the Street and Goldman Sachs led the way with
$437,000. But as further proof that even at Goldman not
everyone is smart, the largest single amount at the investment
banker went to Mitt Romney.
–I have written a lot about New Jersey Gov. Jon Corzine and his
political career over the years, though last week I was
insensitive. But the man wanted to be in the public eye and he’s
subject to criticism, which he deserves more than ever today after
the latest facts came out on his horrific auto accident.
Arrogance, hubris, recklessness…the simple abuse of power…
was all on display in allowing his state trooper driver to hit at
least 91mph when his SUV went hurtling into a guardrail after
almost running over a car in front of it. What would people be
saying today if the chain collision his vehicle caused had killed
an innocent civilian?
Editorial / New York Post
“Regarding people who think they are above the law, consider
the latest disclosure about the auto accident that critically injured
New Jersey Gov. Jon Corzine…
“The state superintendent of police has confirmed that Corzine’s
official SUV – driven by a state trooper, no less – was hurtling
along the Garden State Parkway in heavy traffic at 91 mph when
it crashed…
“That’s 26 mph above the legal speed limit – good for 4 points
on the trooper’s driver’s license (out of the 12 needed for an
automatic suspension).
“Moreover, he had the SUV’s emergency lights flashing –
though the only ‘emergency’ was the governor’s anxious rush to
get to that nationally publicized meeting between Don Imus and
the Rutgers women’s basketball team.
“All this after it was disclosed that Corzine, sitting in the front
passenger seat, was not wearing a seat belt as required by law….
“As it happens, the governor is paying a grievous price for his
reckless behavior. He remains on a ventilator and faces months
of intense physical therapy…
“That’s a punishment no one deserves – no matter how
irresponsible they’ve been….
“But the fact remains that New Jersey spends untold sums each
year trying to get its citizens to obey some simple traffic laws…
“Jon Corzine apparently believed that, as the state’s chief
executive, he enjoyed a special dispensation from those rules.”
Did you know that as a U.S. senator, Corzine proposed having
the federal government direct states to pass laws requiring
children under age 16 wear seat belts?
New York Mayor Michael Bloomberg weighed in on the issue of
using lights and sirens in a non-emergency situation.
“I don’t think [using them] for an elected official who wants to
get someplace for a photo op is appropriate.”
–Goodness gracious, Alberto Gonzales is an embarrassment.
–Two new studies, one published in the Journal of Neuroscience,
the other in the Journal of Medicinal Chemistry, add their weight
behind evidence a diet rich in omega-3 can help prevent
Alzheimer’s disease, including discovery of a molecule that may
help block enzymes in the brain that lead to plaque formations.
Eat your salmon….preferably the wild variety, just as we do here
at StocksandNews every Salmon Sunday.
–Russia has unveiled plans to build the world’s longest tunnel
under the Bering Strait as part of a transport corridor linking
Europe and America via Siberia and Alaska. We’re talking a 64-
mile tunnel, or twice as long as the Channel Tunnel connecting
Britain and France.
So birds infected with H5N1 could save their last dying breaths
by just hitching a ride, in case you were wondering how bird flu
was finally coming to America.
–Former New Jersey Governor Jim McGreevey is teaching “law,
ethics and leadership” at a New Jersey college. The state
Republican chairman said it’s like “Dr. Kevorkian teaching
health maintenance.”
–Finally, in watching the Virginia Tech coverage, one NBC
reporter made the comment that social networks like Facebook
were “offering the support only a community can offer.” Maybe
this time, but both these networks and the Net in general are also
responsible for acts of incredible cruelty, especially when it
comes to schoolchildren.
Also, a note to those now scrambling to beef up campus security.
While you are working out all your little text-messaging systems,
don’t ignore the simplest and best method…..a siren.
—
Pray for the men and women of our armed forces, as well as the
victims of the Virginia Tech massacre.
God bless America.
—
Gold closed at $692
Oil, $63.38…OPEC’s productions cuts have been sticking for the
most part as inventories continue to slide…and watch Nigeria.
Returns for the week 4/16-4/20
Dow Jones +2.8% [12961]
S&P 500 +2.2% [1484]
S&P MidCap +1.4%
Russell 2000 +1.2%
Nasdaq +1.4% [2526]
Returns for the period 1/1/07-4/20/07
Dow Jones +4.0%
S&P 500 +4.7%
S&P MidCap +9.4%
Russell 2000 +5.2%
Nasdaq +4.6%
Bulls 52.7
Bears 25.3 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
