[Posted 7:00 AM ET]
Wall Street…Happy 13000!
I can’t say I partied too much when the Dow Jones hit 13000 for
the first time this week, seeing as I’m calling for returns that by
yearend will basically be flat and we’ve now had a 10% advance
off the lows of early March.
For a fourth straight week stocks advanced, even though the
news was hardly good. Early on we learned that existing home
sales in March suffered their biggest drop (down 8.4%) since
1989 and the median home price fell for an 8th consecutive
month. New home sales, on the other hand, were up slightly, but
they only account for 12-13% of the total between the two most
months so I wouldn’t get too giddy over that.
Of more importance was the word from homebuilders such as
Pulte, Ryland, and Beazer that they were suspending earnings
guidance for the balance of 2007. They haven’t a clue how the
sector is going to pan out. And a survey from Case-Shiller,
increasingly important data these days, revealed home prices
declined in 17 of 20 major markets in February over January. I’ll
never forget a conference I attended about ten years ago where
the great Peter Lynch said home prices, nationwide, never go
down in any one year. Sorry, Peter. Time to rewrite the script.
The Federal Reserve’s survey of economic activity around the
country noted that residential real estate “continued to weaken”
and there is further data showing that the use of home equity
loans is finally beginning to dry up, which obviously means
reduced consumer spending down the road. Additionally, real
estate taxes are rising, even as the value of your home is at
best stagnating. Between home equity loans and this last item
alone, you can see how housing, broadly defined, is having a
negative impact on the overall economy.
This was borne out Friday with the release of first quarter GDP,
up a paltry 1.3% and far below the consensus estimate, which
means that the last four quarters we’ve now seen the following
growth on an annualized basis:
2.6%, 2.0%, 2.5%, 1.3%
Nothing to write home about, that’s for sure, and it can now be
said the United States is the weak puppy in the entire world when
it comes to economic growth, except for Zimbabwe.
So why then is the Dow at 13000? Normally, slow growth plus
low inflation is the perfect tonic for equities. It keeps the Fed at
bay while allowing for growth in earnings, and thus share prices,
over time.
Earnings have been coming in better than their beaten down
expectations thus far in looking back at the first quarter, but
when you see a GDP number like 1.3%, it doesn’t give one a
warm and fuzzy feeling about future reporting periods.
But why are earnings still hanging in there? It’s the growth
overseas, to a large extent, as U.S. multi-nationals sell more and
more of their product to the rest of the world. More than a few
big names, like IBM and GE, generate 50% or more of their
revenues outside America these days and with a weak dollar that
adds to further pennies per share when foreign sales are
translated back into greenbacks.
The other day the Journal asked whether the stock market is
providing reassurance or is it out of touch? I liked the two
economists they picked to offer differing opinions.
Merrill Lynch’s David Rosenberg thinks the market is too
optimistic. He says there is a “disconnect” between it and the
economy. After all, in 60 years we have never seen four straight
quarters with below 3% growth without being followed by
recession.
ISI Group’s Ed Hyman, though, says the Fed has raised interest
rates just enough to slow the economy and bring inflation under
control, which thus obviates the need for further increases that
may otherwise tip us into recession. As Hyman told the
Journal’s Greg Ip, the economy could weaken further but that
would allow the Fed to lower rates and this should more than
offset any drag from weaker growth and profits.
So who will be right? My guess is Rosenberg, but we may
muddle through for a while longer, and he himself is not
forecasting recession just yet. It just needs to be remembered
that housing impacted the GDP negatively a full one percent last
quarter and it’s going to continue to have a similar effect the rest
of the year.
Finally, gasoline futures finished the week at the $2.35 level,
meaning the average nationwide price at the pump will hit $3.00
in short order if we stay at this mark another week or so. With
demand still strong and maintenance issues at our rapidly aging
refineries, inventories continue to tumble. Thankfully, the
Saudis appear to have broken up a major terror network that had
its sights set on Saudi oil facilities, as well as the attempted
decapitation of the kingdom’s leadership, it would appear. Had
they succeeded we would have been talking $4.00 in the blink of
an eye. [Facts are still coming in on this last important news
item so I’ll defer further comment for now.]
Street Bytes
–For the week the Dow Jones picked up another 1.2% to 13120,
the S&P 500 gained 0.7% and Nasdaq 1.2%. Earnings were
once again generally above reduced expectations with companies
such as Texas Instruments, Apple, AT&T, 3M, Amazon and
even Ford beating the Street. It now appears first quarter results
will come in somewhere between 7% and 9%, when closer to 4%
was forecast. But the transport sector, including the likes of UPS
and various trucking stocks, weakened on cloudy guidance for
the balance of ’07.
–U.S. Treasury Yields
6-mo. 5.04% 2-yr. 4.66% 10-yr. 4.70% 30-yr. 4.88%
Once again little to say about the action in the bond pits. Rates
were virtually unchanged as the economic data points to a Fed
that will once again hold the line when it next meets.
–BlackRock CEO Larry Fink garnered a lot of press for an
interview he did with the Financial Times. Fink is concerned
about rising debt levels, falling risk premiums and loosening
credit standards in leveraged buy-out vehicles in particular.
“If I was chairman of the Federal Reserve, I’d be paying more
attention to that because, to me, this is going to be tomorrow’s
problem. Standards have deteriorated to levels that we never
even dreamed we would see.”
–Historically, it certainly has made sense to “sell in May and go
away” until November; May through October being a poor
stretch most years. Since 1945, for example, the S&P 500 is up
only 1.6% May through October, but up 7.1% November through
April.
–Euro-zone retail sales rose strongly in April and the
unemployment rate in France fell to a 24-year low, 8.3%. In the
euro region overall, the jobless rate is down to 7.3%, a solid
achievement considering where it was just 18-24 months ago.
–In another sign of the slowing U.S. economy, remittances back
home to Mexico are falling sharply thanks in no small part to the
slide in housing. 1 in 5 Latino immigrants are (were) employed
in the construction sector.
–Another note on housing, this one from Bloomberg News.
“U.S. homebuilders are in jeopardy of violating their lending
agreements in coming months because of a drop in sales,
according to Moody’s Investors Service.
“More than half, or 11, of the 21 builders that Moody’s rates
failed to generate more cash than they spent in 2006, analyst
Joseph Snider in New York said in a report today (Thursday).
Homebuilders often have to promise banks that they will have
twice as much operating revenue as interest expenses over a
given time or the bank can demand immediate repayment of a
loan, Snider said.
“The homebuilders’ situation is especially dire because cash
flows usually turn positive during a slump as they cut back on
starts and sell existing inventory, according to the analyst. The
housing market is so weak that homebuilders haven’t been able
to cut their inventories, leading many to ask their bankers for so-
called covenant relief. Ratings may also be in jeopardy, he said.
‘The next year or so for them is going to be pretty grim.’”
–Exxon Mobil reported net income of $9.28 billion, which once
again has some folks up in arms, but revenue declined 2% and
the company spent less on exploration and development as it is
increasingly difficult to find new sources either because of
regulations or, more importantly these days, political issues; the
latter best represented by the likes of Venezuela and Russia.
Bottom line, the world uses over 85 million barrels of oil per day
and it’s just tough to produce that much.
–China announced it will maintain only about 30 days of oil
reserves by 2010, even though the International Energy Agency
advises oil-consuming nations to keep 90 days of net imports.
China is afraid that by announcing it will stockpile more, current
prices could rise further. China’s crude oil consumption is
expected to grow by at least another 7% this year.
–One of China’s more influential investors said the market there
is “defying gravity.” Gao Xiqing offered “It’s got to come down
at some point…The market is making me nervous.” The
benchmark Shanghai index, after all, is up another 40% thus far
in 2007 after rising a stupendous 130% last year.
–China has become Japan’s top trading partner for the first time
since World War II, unseating the United States, even as the two
have strained ties. Japanese companies continue to shift more
production there. [The U.S., however, remains Japan’s largest
export destination.]
–Toyota Motor Corp. surpassed General Motors in quarterly
sales for the first time, thus making it number one in the world.
GM had occupied the top slot for more than 70 years. Toyota is
expected to maintain the lead the balance of 2007. [Technically,
GM is still first until it’s beaten for a full calendar year.]
–Royal Bank of Scotland launched a nearly $100 billion hostile
bid for Dutch banking giant ABN Amro, this after Barclay’s had
offered about $90 billion. Stuck in the middle is LaSalle Bank
Corp., which ABN was set to sell to Bank of America as part of
its deal with Barclays.
–Apple Inc.’s earnings continued to soar with revenues up
another 21%. But the news was overshadowed a bit by the filing
of civil charges against Apple’s former general counsel, Nancy
Heinen, for her involvement in the backdating of options, while
former CFO Fred Anderson, who settled with the SEC by
agreeing to pay $3.5 million for his role in same, said CEO Steve
Jobs was warned back in 2001 about the accounting implications.
Nonetheless, the SEC said it would not take any action against
Apple and it would appear Jobs himself is in the clear. It’s good
to be king.
–Unless you were HealthSouth Corp. founder Richard Scrushy,
that is, who settled with the SEC for $81 million to resolve
claims surrounding the massive accounting fraud at his company.
Scrushy received credit for $71.5 million he has already paid or
forfeited in related cases. A jury had acquitted him on all 36
criminal counts but the SEC pursued civil charges. Scrushy’s
attorney claims his client has incurred more than $30 million in
legal fees. The attorney said this from his Gulfstream IV, no
doubt.
–The Bank of Montreal reported on Friday that it lost $404
million from natural gas trading. Those responsible have been
fed to grizzlies near Banff.
–Federated Department Stores’ CEO Terry Lundgren gets 40%
off any merchandise he buys at his stores such as Macy’s and
Bloomingdale’s, or twice the rate offered to most of the 188,000
in the work force. Considering Mr. Lundgren received
compensation of $16 million last year, this is rather absurd.
–Vonage won a request to continue business as usual while it
appeals its patent-infringement suit with Verizon, thus allowing
it to sign up new customers after a trial judge had banned it from
doing so. But, ridiculously, the shares rallied to $4.43 on
Tuesday before wiser heads prevailed and took them back down
to $3.11 by week’s end.
–Amazon’s revenues rose a sterling 32% in the quarter and the
stock soared 20% on the news. Good for them. Jeff Bezos is
having the last (hearty) laugh.
–Microsoft manipulated its earnings announcement, as it does all
the time – dampening expectations so it looks better when they
are actually released – but its outlook for the coming fiscal year,
which begins July 1, is for earnings of $1.70 and the stock is
trading at $30. Is there much room for upside? Is Vista going to
do better than most now believe because regardless of your
opinion on the new operating system it’s being rammed down
your throat?
–In a highly significant move, an Indonesian court acquitted a
Newmont Mining executive of charges his company dumped
dangerous levels of toxins into a bay. Richard Ness faced 10
years in prison. It would have been too easy for the court to just
follow the whims of the people, but it’s a positive sign for
Indonesia and its developing democracy.
–No surprise here…headline in Wednesday’s Wall Street
Journal: “Fears Spread as Spanish Real Estate Stocks Plunge”.
According to the story, one I first touched on over a year ago,
“Spain’s central bank calculates that housing prices…are
overvalued by around 30%.” 95% of mortgages here are
variable-rate, in an environment where the European Central
Bank has been raising them.
–In a much talked about survey by Institutional Investor, as
reported by the New York Times, we now know that the top 25
hedge fund managers earned at least $240 million each last year;
topped off by James Simons’ $1.7 billion haul. Back in 2001
and 2002, you needed ‘just’ $30 million to make the list.
Combined, the top 25 hedge fund operators earned $14 billion.
J. Bradford DeLong, an economist at Cal-Berkeley, said “There
is some question as to what the hell they are doing that is worth”
that kind of money. “The answer is damned mysterious.”
A friend of mine from high school and I were talking about one
of our teachers back then, a great man, now retired, who
influenced many a life for the better and someone I see quite a bit
of these days because of some research I’m doing. My friend,
who is on Wall Street himself, correctly observed, “Who is of
more value to society, Art or a hedge fund operator?” It’s no
contest. [I asked Art what his starting salary at Summit High
School (N.J.) was in 1964; $5,100.]
–According to a study, women earn only 69% of what men earn
10 years after college.
–AT&T CEO Edward Whitacre, 65, will upon retirement in June
take home parting gifts of $158 million in cash and prizes. These
numbers are simply numbing these days.
–The three largest ports in the world in terms of shipping
volume: 1. Singapore 2. Shanghai 3. Hong Kong. [Shenzen
will surpass Hong Kong in 2008]
–My portfolio: I will not be talking about my biodiesel play in
China unless I decide to get out of the position. At least for now,
I’m viewing it as an 18-24 month hold.
–And we note the passing of Harold Max Mayer, former
chairman of Oscar Mayer and Company and grandson of the
company’s namesake. Mayer, 90, was a victim of pork
extenders.
Iraq
I love how the far-right is seemingly incapable of hearing any
voices but their own. At this point in the war in Iraq, for
example, how can anyone take President George W. Bush’s
comment “Politicians shouldn’t be telling generals how to do
their job” seriously? For a president who supposedly reads up on
his history and our nation’s great leaders, how can he not
understand that to a large extent the generals have failed him?
How can he not remember the ultimate example, the pathetic
General McClellan of Civil War infamy, who loved to parade his
troops and drill them but was reluctant to fight? How can Bush
not remember that an exasperated Lincoln finally said:
“If Gen. McClellan does not want to use the Army, I would like
to borrow it for a time, provided I could see how it could be
made to do something.” –March 11, 1862
I will say, however, that at least the current commander in Iraq,
Gen. David Petraeus, seems to get it. It’s his predecessors who
needed to be told how to conduct their job, and who failed to
give the president the truth.
But in dissent these days, Congress has failed those who seek an
end to the war. Our brave men and women of the armed forces
have suffered enough under dismal leadership only to have
Democrats compound matters with comments such as that of
Senate Majority Leader Harry Reid that “the war is lost.”
Both the House and Senate worked out their differences on
earlier measures and approved funding for the troops but called
for a timetable for withdrawal, starting in October and wrapped
up by April 2008. The vote in the House was 218-208 and in the
Senate 51-46, so President Bush’s threatened veto can not be
overridden.
But I have little respect for the debate that has been taking place
because it is not addressing the paramount issue. It’s not about
setting timetables for troop withdrawals, it’s about getting the
Iraqi government and the various factions to come together and
sign items like the oil revenue-sharing bill, or there is literally no
sense in us being there, period. I know I’m a broken record on
this but you can’t advance to second base until this one single act
is accomplished.
Believe me, I understand when Senator Joseph Lieberman says
the “battle of Baghdad is increasingly a battle against al-Qaeda”
as al-Qaeda attempts to reignite the sectarian violence.
But Lieberman then writes in a Washington Post op-ed:
“Al-Qaeda, after all, isn’t carrying out mass murder against
civilians in the streets of Baghdad because it wants a more
equitable distribution of oil revenue. Its aim in Iraq isn’t to get a
seat at the political table; it wants to blow up the table – along
with everyone seated at it.”
Lieberman goes on to say, “To me, there is only one choice that
protects America’s security – and that is to stand, and fight, and
win.”
But, senator, there still must be some political progress or it is
insane to continue as is. If, as is clear, Prime Minister Nouri al-
Maliki isn’t up to the task, replace him. I do agree with the
comment of Senator Chuck Hagel when he writes, also in the
Post:
“(The) administration and Congress must untangle themselves
from the debate over funding our continued involvement in Iraq.
The Iraqis must be jolted into understanding that America’s
continued commitment of troops and money is not open-ended.
Significantly, American leaders in Iraq told me that they believed
the debate on this issue in Congress had actually helped them get
Iraqi leaders to grasp this point.
“I do not like restricting our war policy with conditions or
timelines. They are blunt instruments in an area of policy that
requires flexibility. But they are some of the few levers
Congress has when the majority of Congress and the American
people have lost confidence in the president’s policy….
“I came home from my fifth trip to Iraq with one enduring
impression. The Iraqi government must make the tough choices
now to produce political reconciliation. If there is no such
reconciliation in Iraq, there will be no progress – no matter how
many American lives we lose and how much American money
we give. We will have squandered our resources and efforts,
undermined our interests in the Middle East and, however
unintentionally, produced a more dangerous world.”
But back to the U.S. military, I can’t help but discuss the way the
death of Pat Tillman was handled and needless to say his brother
Kevin’s testimony this week was both riveting and gut-
wrenching.
Scott Lindlaw / AP
“Within hours of Pat Tillman’s death, the Army went into
information-lockdown mode, cutting off phone and Internet
connections at a base in Afghanistan, posing guards on a
wounded platoon mate, and ordering a sergeant to burn Tillman’s
uniform.
“New investigative documents reviewed by the Associated Press
describe how the military sealed off information about Tillman’s
death from all but a small ring of soldiers. Officers quietly
passed their suspicion of friendly fire up the chain to the highest
ranks of the military, but the truth did not reach Tillman’s family
for five weeks.”
Kevin Tillman said the government’s use of his brother’s death
for public relations purposes and as a recruiting tool made a
mockery of his brother’s patriotic decision to enlist in the
military and forsake $millions in the NFL.
The fairy tale “inspired countless Americans, as intended,” said
Tillman, also a former Ranger. “There was one small problem
with this narrative, however: It was utter fiction….Revealing that
Pat’s death was a fratricide would have been yet another political
disaster in a month of political disasters, so the truth needed to be
suppressed.”
As Tillman’s mother, Mary, added, she believed former
Secretary of Defense Donald Rumsfeld had to have known the
details. As yet Rumsfeld hasn’t commented. All of us deserve
better, none more so than the soldiers and their families.
Foreign Affairs
Iran: Back on 3/10/07 in this space I told you to watch the latter
part of May, because it is then the Iranian government will be
hiking the price of fuel.
“Look for major protests, possibly bloody ones, if the
government follows through. The U.S. can benefit; but if you
knew this wouldn’t you be talking to the opposition today, as
I’ve advocated?”
From the London Times, 4/21/07
“Every conversation in (Tehran) last week seemed to revolve
around the imposition of petrol rationing on May 21. Subsidized
petrol will rise from 800 riyals to 1,000 riyals per litre. Far
worse in this sprawling traffic-choked city, only three litres a day
will be available at that price….
“ ‘It is one of the most sensitive decisions ever taken in the
history of the Islamic Republic of Iran,’ said Saeed Laylaz, an
Iranian economist. ‘There will be dissatisfaction, unrest and
more inflation. At worst, there will be an explosion in the social
structure.’”
Sounds like Mr. Laylaz and I see eye to eye.
Russia: What a pain in the butt Vladimir Putin is. In his annual
(and possibly last) state of the union message to both houses of
parliament, Putin announced he was suspending a critical Soviet-
era arms treaty with NATO. To thunderous applause, Putin
asked legislators to back a moratorium on Russia’s participation
in the Treaty of Conventional Armed Forces in Europe and
consider withdrawing altogether if NATO members refuse to
ratify an updated version.
But here’s the deal. The treaty regulated the deployment of non-
nuclear weapons around Europe, but NATO insists Russia make
good on a pledge to withdraw its troops from Georgia and
Moldova, two hot spots, though this demand was made eight
years ago. No one, including the United States, will ratify the
revised document until Russia complies with its commitments.
Putin also blasted U.S. plans to deploy components of a missile
defense shield in Czech Republic and Poland. “For the first time,
elements of U.S. strategic weaponry could appear in Europe. It
is evident that such U.S. plans…are not a problem in U.S.-
Russian relations only.”
The next day Putin went further, saying, “The threat of causing
mutual damage and even destruction increases many times. This
is not just a defense system, this is part of the U.S. nuclear
weapons system,” he reportedly told Czech President Vaclav
Klaus.
I haven’t spelled out before just why on this issue Putin is a crock
of borscht, but I’ll let Secretary of State Condoleezza Rice do the
honors.
“Let’s be real and realistic about this. The idea that somehow 10
interceptors and a few radars in Eastern Europe are going to
threaten the Soviet strategic deterrent is purely ludicrous and
everybody knows it.”
Yes, she accidentally said “Soviet,” for which she caught some
grief in the Russian press. But of course Washington is right on
this one. The deployment is aimed against the likes of North
Korea and Iran down the road. You also have to understand how
this works technically. If Russia fired a missile along its border,
I don’t believe the interceptors would even have enough time to
react. The debate is absurd.
But Putin wasn’t finished. On Thursday he also warned that
foreign financing of nongovernmental organizations was
meddling in the country’s internal affairs.
“There is a growth in the flow of money from abroad to interfere
directly in our internal affairs. Skillfully using pseudo-
democratic rhetoric, there are those who would like to return to
the recent past – some to loot the country’s national riches and to
rob the people and the state, others to strip us of economic and
political independence.”
Without actually saying it, Putin was blaming the U.S. I also
have to note again that if Sergei Ivanov, one of two in line to
replace Putin, is indeed the handpicked successor, watch out. He
would be worse than Vladimir, sports fans.
But this was a week when we bid farewell to Boris Yeltsin, a
titanic figure of the 20th century. Despite his mixed legacy, it
needs to be noted his funeral took place in a church. Before
Boris, that wouldn’t have been possible.
We’ll always remember Yeltsin on the tank, ending 70 years of
communist rule in Aug. 1991 as he rallied the people against an
attempt to overthrow Mikhail Gorbachev over the latter’s policy
of glasnost and perestroika. But then there was Chechnya and
the mass privatizations that led to the oligarchs, and of course his
now ill-fated decision to elevate Putin. Today, though, we
remember the positive.
Boris Nemtsov, former deputy prime minister in Yeltsin’s
cabinet:
“He gave Russia freedom. He gave millions of Russians
including myself the chance to realize themselves. He destroyed
censorship. He created political competition and he allowed
regional federalism to develop. He liberated Russia.
“His successor has cynically destroyed all that he did. Instead of
freedom we have censorship. Instead of political competition
there is the monopoly of the Kremlin. Instead of federalism
there is the abolition of elections for governors.”
Strobe Talbott, deputy secretary of state under Bill Clinton:
“I think history will judge Boris Yeltsin very positively. He was
instrumental in the most important and positive transformation of
our lifetime, which consists of the end of the Cold War, the end
of the Soviet Union and the beginning of Russia’s integration
into the west.
“He was a man of great complexity but also of huge courage…
One of his driving passions was to drive a stake through the heart
of the Soviet-era Communist party and make sure it did not come
back from the dead.
“It is a great irony on the day of his death that in speaking of
Yeltsin’s legacy we also have to look at Mr. Putin. That too is
part of Mr. Yeltsin’s legacy. But I am convinced that in picking
him, Mr. Yeltsin did not think he was putting Russia on a course
back.”
Yulia Latynina, Moscow political talk show host:
“It was because of Yeltsin’s passion for freedom that he fell out
of favor with the Party in the late 1980s, climbed up on a tank
during the putsch of 1991 and didn’t cancel elections or shut
down television stations.
“Comparisons make everything clear. Yeltsin was accused of
corruption, but the worst that history can get him for was the
dubious appointment of his daughter and son-in-law to head
Aeroflot. Billionaires Mikhail Fridman (sic), Mikhail
Khodorkovsky and Vladimir Potanin amassed their enormous
fortunes without Yeltsin’s patronage.
“This is in direct contrast to today, when all of President
Vladimir Putin’s former colleagues from his security services
and Ozero-Moscow dacha co-op days have taken major roles in
the country’s gas, oil, uranium and armaments industries.
“The media ruthlessly criticized Yeltsin for the war in Chechnya
and for drunkenly conducting oom-pah music in Germany. But
no journalists were gunned down for this and not a single
television station owner was jailed.
“How different from today’s Russia, where nobody dares
criticize Putin publicly.” [The Moscow Times, BBC News]
China: Last week I stated it would be a “mistake” to ignore the
nation’s “critical environmental issues” and two days later there
was all manner of talk on just this topic. A top official at the
National Development and Reform Commission, in addressing
the economy’s stupendous growth, said:
“If industrial production continues to expand, it will not only
accelerate economic growth, lead to over-consumption of
resources and energy, and increase emissions of pollutants, but
also make it more difficult to adjust economic structures, put
pressure on economic stability and therefore possibly lead to big
swings in the economy.” [South China Morning Post]
Power consumption of the six industries that consume the most
energy – steel, nonferrous metals, chemicals, power, petroleum
processing and coking and construction materials – increased
18% in the first quarter. The same official added “cutting
emissions remains a grim challenge.”
A report out of the National Climate Change Assessment, years
in the making, concluded on Monday that “Climatic warming
may have serious consequences for our environment and survival
as China’s economic sectors, such as agriculture and coastal
regions, suffer grave negative effects.”
But the government remains adamant that:
“If we prematurely assume responsibility for mandatory
greenhouse-gas emissions reductions, the direct consequence will
be to constrain China’s current energy and manufacturing
industries, and weaken the competitiveness of Chinese products
in international and even domestic markets.”
Coincidentally, the Ministry of Land and Resources also noted
on Monday that 10% of China’s arable land is “contaminated by
pollution and the situation is getting worse…Contaminated land
suffered from polluted water, excessive fertilizer, heavy metals
and solid wastes.” [China Daily] The ministry concluded metals
alone had contaminated 12 million tons of grain.
And the Yangtze River Fisheries Research Institute said
decreasing river levels and pollution have taken their toll on fish
stocks, with the number of sturgeon migrating to the river each
year down 75% in the last two decades.
I noted last week that the government was concerned about the
tainted pet food scare and the damage it could do to the
reputation of China’s food industry worldwide. In the last few
days, Beijing first allowed the U.S. Food and Drug
Administration to help in its own investigation into whether the
chemical melamine had been introduced into the food supply,
and then by week’s end Chinese authorities acknowledged that
melamine was indeed employed in the pet food production
process at the two companies in question. But it wasn’t ready to
say melamine was the actual cause of death for dozens (if not
hundreds) of pets.
Meanwhile, nine Chinese oil workers were among 74 killed in
Ethiopia in an attack on an oil exploration site. A separatist
group that had previously told foreign oil companies to leave the
area claimed responsibility.
And then there is the issue of the Olympic torch. Beijing claims
Taiwan and the mainland agreed on a plan, but Taiwan wants to
make sure the torch passes through “under the principle that
Taiwan is treated equally as a sovereign and dignified nation,” as
the vice-chairman of Taiwan’s Mainland Affairs Council put it.
The International Olympic Committee lists Taiwan as an
independent sports entity under the name “Chinese Taipei,”
instead of “China Taipei” as Beijing has called it in an attempt to
place the island under the mainland’s control. On Thursday,
China labeled the Taiwan leg of the flame relay as a “domestic
route.”
You have to picture that legislative elections are being held on
Taiwan this December and then next March is the presidential
vote. The ruling pro-independence party has insisted the torch
must not enter or leave the island via the mainland, Hong Kong
or Macau, because that would mislead others into thinking
Taiwan was part of the mainland. The government wants it to
first pass through a third country.
Israel: Not for nothing but the government here is a mess. The
finance minister was forced to step down amidst the latest
corruption scandal, this one involving allegations of fraud when
he headed a workers’ union, leaving Prime Minister Ehud Olmert
to act as finance minister along with his other duties. Next week
a report is released on the government’s handling of last
summer’s war with Hizbullah.
Turkey: Prime Minister Erdogan opted not to run for president
and instead, the foreign minister, Abdullah Gul, is expected to be
confirmed by parliament over the coming week or so. [He
missed by ten votes on the first ballot, Friday, though the
opposition is attempting to challenge the selection of Gul in the
courts.]
While Gul is liked by Western governments, he is part of the
ruling Islamist party machinery and his wife wears a head scarf.
For secular Turks this doesn’t sit well. Assuming Gul is
eventually confirmed, his party would then occupy the seats of
president, prime minister and parliament speaker.
But now there is late word the military is restless. Turkey has
witnessed five coups in the last 50 years.
France: As expected, Nicolas Sarkozy and Segolene Royal now
square off on May 6 after last Sunday’s first round of balloting.
Incredibly, 85% of the French people turned out as Sarkozy
garnered 31% to Royal’s 25%. [Bayrou 18%; Le Pen, in his
swan song, 11%.] Sarkozy will take it, but it’s going to be very
close. This week he threatened to tax Chinese companies if
China doesn’t cap its emissions, blamed Washington for not
signing the Kyoto Treaty, and threatened to pull France’s
remaining troops out of Afghanistan. But, in reality, he would be
a friend of the U.S., compared to Chirac.
Britain: No surprise, necessarily, but the head of Scotland Yard’s
counter-terrorism command said al-Qaeda remains a “deadly”
and “enduring” threat in Britain despite the nation’s best efforts
to dismantle it.
Canada: The House of Commons defeated a measure that would
have forced the withdrawal of Canada’s 2,500 soldiers from
Afghanistan by a 150-134 margin. The bill was the result of the
rising Canadian death toll, now 54. Opinion polls vary. One
showed that 52% continued to support the military role in
Afghanistan, while another found 61% believing the price has
become too high.
North Korea: One of the top generals and its highest-ranking
official to visit the United States is said to be dying. The Vice
Marshal’s death could bring about a realignment of those closest
to Kim Jong-il. On the nuclear weapons front, Japanese Prime
Minister Shinzo Abe and President Bush, at a summit meeting
this week at Camp David, reaffirmed there will be fresh
sanctions against Pyongyang unless the commies abandon their
program. As with Iran, this game grows old.
Somalia: 1/3rd of the population of Mogadishu fled the latest
fighting.
Random Musings
–According to an NBC News / Wall Street Journal survey, only
36% believe victory is possible in Iraq; 55% say it isn’t.
–I was unimpressed by the Democratic presidential debate on
Thursday, but with 8 on the stage it’s too unwieldy. NBC’s
‘crack political staff’ also did a poor job of preparation. Heck,
their own polling continues to show the #1 issue is Iraq (I still
maintain abortion will be #1A by summer 2008), but not one of
the candidates said anything detailed about the war because
either the format didn’t give them enough time or Brian Williams
didn’t ask the right question.
But everyone has an opinion and mine was that Hillary did OK,
Barack was mediocre, and Bill Richardson was a big
disappointment.
I also have to add that if you just watched it dispassionately,
Congressman Dennis Kucinich did alright. What gets me is how
he is so belittled despite the fact his own district keeps sending
him back to Washington. In other words he’s doing something
right and has as much of a right to be heard as anyone else out on
the hustings. [Interesting wife, too. For those who haven’t seen
her, she’s rather attractive.]
What Thursday’s debate further pointed out, however, is that this
political season is already excruciating in its length and we have
so much further to go. We need some good gaffes to make it
interesting.
–You know who really gained from the debate? New York
Mayor Michael Bloomberg, who once again has his people out
testing the waters for a third party run. With no one standing out
thus far, Republican or Democrat, his potential candidacy is
looking more and more viable.
He is also a true visionary; witness his ambitious plans for the
city laid out on Earth Day. The New York Post said of his 140-
page blueprint for the future, which focused on infrastructure and
environmental issues with a booming population:
“It’s (a lot) to swallow in a single gulp. It is so intricate – its
component parts so interrelated – that successful implementation
will require good luck and good will in equally large measures.
And even then it will be a crapshoot….
“(But the) mayor and his staff take a coordinated, deeply
coherent approach to achieve a practical – if politically
challenging – outline for where the city should be 23 years
hence, and beyond.”
Bloomberg also now has a $4.4 billion budget surplus to crow
about on a prospective campaign trail, thanks in no small part to
Wall Street’s spectacular earnings. But he recognizes tougher
times lie ahead and he’s building up a rainy day fund. He’s also
ordered every agency to cut costs over the next two years despite
the surplus funds. It’s the kind of financial acumen needed in
Washington. All in all, I now think he goes for it.
–Washington Post columnist Robert Novak on embattled
Attorney General Alberto Gonzales and the president’s reaction:
“That Bush went out of his way to support his beleaguered friend
from Texas confirmed other signals sent this week; the
president’s improbable praise for Gonzales’s pathetic
performance as a witness before the Senate Judiciary Committee
last week was no mere gesture….
“Vice President Cheney’s personal criticism Tuesday of Senate
Majority Leader Harry Reid in a rare statement just off the
Senate floor suggested that defense of Gonzales is not an isolated
act of defiance. Bush, never entranced with life in Washington,
detests dealing with a Democratic Congress. Reflecting
annoyance and fatigue, he is unwilling to withstand incessant
attacks from the likes of Reid and is ready to fight it out for the
over 20 months left in his term. Retaining Gonzales means Bush
has slipped behind the barricades.
“All the Republicans in Congress whom I contacted view this as
pure folly.”
–The Wall Street Journal told the tale of Republican
Congressman Rick Renzi of Arizona, who attempted to shake
down mining companies over legislation for land swaps with the
federal government (private for public). Renzi allegedly insisted
one company buy a parcel owned by his business partner.
Renzi’s chief of staff resigned and is cooperating with the FBI.
–USA Today reported that the 200th person in America was just
cleared by DNA evidence. The first such instance was in 1989.
But in the grand scheme of things, 200 is a “tiny number,” as one
chief prosecutor in Oregon said in reply to attorney Barry
Scheck’s claim “there are plenty of innocent persons still in
prison.” Thankfully, at least the tool is now part of the process.
–I want to thank “60 Minutes” for its report on how large
segments of the African-American community don’t believe in
“snitching” when it comes to aiding the police in solving crime.
If they don’t want to help themselves, then why should we care?
Recall, on 4/7/07, I noted the following with regards to 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.”
–Last weekend in Philadelphia, 11 were killed. Philly, with a
population less than 1/5th that of New York, has had more
murders than the Big Apple.
“(The) chronic problems remain the same: poverty, lax gun laws
and a culture of intimidation that keeps witnesses silent – and
shooters on the streets.” [Kathy Matheson / AP]
“It’s the community’s decision right now,” said police Capt.
Benjamin Naish (sic). “They are the people that must stand up
and get angry and say, ‘Enough is enough.’”
–Unfortunately, it takes a case like Virginia Tech to finally wake
up the U.S. Congress and close the mental health loophole that
exists in some states, whereby the state and FBI databases can’t
talk to each other.
–A fraternity brother of mine, Dr. Whit (a baby doctor) passed
along his thoughts on gun control, Whit owning six shotguns and
two rifles himself that he uses for hunting. [He destroyed his
handguns when his children were young.] Among his ideas, all
good:
“Make it a federal crime with stiff mandatory penalties to use
any gun for any crime. Also make it a federal crime to carry a
concealed weapon without a permit or to display the weapon
outside of your home without a permit or hunting license. If
you’re a rap star and wave it from the window of your Escalade
at the little old lady that cut you off on the Garden State
Parkway, that would cost you a mandatory five years in prison.
Discharge the weapon and it’s ten years. Injure someone and it’s
20. Kill someone and it’s automatic life in prison.”
It’s not about the Second Amendment, it’s about the fact 11,000
are murdered each year by guns in this country, with 17,000 gun
suicides. The deaths alone are more than the combined gun
related deaths in Australia, Japan, Korea, Canada and all of
Europe less Russia, according to the World Health Organization
and CDC, as Whit looked up. But as we saw after Virginia Tech,
neither political party wants any part of the debate these days.
–And a word about MySpace and other social networking sites.
Every few months I go on to see what’s up there and the other
day the first name that popped into my head to search was Fred
Rogers…aka the late Mr. Rogers. So on his MySpace page is a
“friend,” Jill Curran.
“About Me: I get drunk and play records while I trash my own
room.”
Good for you, Jill. And good luck.
–I was reading my High Plains Journal, a farming publication,
and I couldn’t help but note the Amish-Mennonite charity raised
$191 million in 2005 (the latest date available), 76th in the United
States, which I find kind of remarkable. [Think of the hundreds
on Wall Street and in Corporate America these days who could
contribute a similar amount to bettering society by themselves.]
They distributed 15 million pounds of food, medicine and seeds
around the world in ’05. An example for us all.
–Rainfall in the New York metropolitan area is now running a
whopping 25 inches above normal over the past 52 weeks. New
Jersey’s leadership vacuum, with Governor Corzine’s auto
accident, has hurt during this time; not that Acting Governor
Richard Codey doesn’t have the ability. But what transpired is
that the respective staffs were dueling it out over who is in
control. It was getting kind of interesting, only the governor
appears to have made a speedy recovery.
–I follow the weather in a few cities around the world every day,
one of which is Paris, and I’ve been musing what a spectacular
April it’s been there. Then on Thursday I read in the Herald
Tribune that Paris has not only had no rain (that was about to
change), but the temperature has been 10 degrees above normal.
Across much of Europe that’s been the case (while the American
Northeast and Midwest was freezing its butt off). In Germany,
April will go down as the hottest and driest since 1901, when
recordkeeping began. Bottom line, it has many in Europe
wondering just how hot it’s going to get this summer.
–The great journalist David Halberstam was killed in an auto
accident. An obituary had this line from a recent interview he
did with a local New York station.
“There’s a great quote by Julius Erving,” said Halberstam, “that
went, ‘Being a professional is doing the things you love to do, on
the days you don’t feel like doing them.’”
–Lastly, once again space provided some relief from the
everyday drudgery of this planet (it’s not required I be in a good
mood to write this column) with the announcement that 120
trillion miles away sits Gliese 581, a planet outside our solar
system that astronomers have concluded has a temperature range
between 32 and 104 degrees Fahrenheit, meaning it should be
perfect for supporting water and life.
Being 20.5 light-years away, however, it’s not as if Ryanair is
about to launch non-stop service for $39 (28 euros), though the
airline could certainly sell a lot of beer and sandwiches, which is
how they make their money…but I digress.
It does make you wonder, though. Do the Glieseans face a
subprime mortgage debacle like we have today? Do they turn in
criminals, or is there a no snitching policy there too? Is there a
Barry Bonds clone, with a gigantic head, who is about to break
some treasured sports record of theirs?
One thing we do know is a “year” on Gliese 581 is only 13 days.
At least that would make for shorter presidential campaigns.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $684
Oil, $66.46…highest weekly close since 9/1/06
Returns for the week 4/23-4/27
Dow Jones +1.2% [13120]
S&P 500 +0.7% [1494]
S&P MidCap +0.7%
Russell 2000 +0.1%
Nasdaq +1.2% [2557]
Returns for the period 1/1/07-4/27/07
Dow Jones +5.3%
S&P 500 +5.3%
S&P MidCap +10.2%
Russell 2000 +5.3%
Nasdaq +5.9%
Bulls 51.1
Bears 26.1 [Source: Chartcraft / Investors Intelligence]
Have a great week. Next time from Chicago.
Brian Trumbore
