[Posted 7:00 AM ET]
The Middle East
This Monday, Israeli Prime Minister Ehud Olmert, Palestinian
President Mahmoud Abbas, Jordan’s King Abdullah and
Egyptian President Hosni Mubarak are set to meet at Sharm El-
Sheikh, with Mubarak then holding talks with Saudi King
Abdullah the next day.
All parties have their own concerns, including Mubarak’s over a
Hamas stronghold in Gaza that could boost the Muslim
Brotherhood, Egypt’s strong opposition movement. They also
can’t be thrilled at Iran’s link to Hamas.
Some opinion on Hamas and Fatah.
Ralph Peters / New York Post
“Fatah’s security forces in Gaza outnumbered the Hamas
gunmen. Fatah had stockpiles of weapons and military gear
(now in Hamas’ arsenal). Fatah even had the quiet backing of
Israel and America.
“And Fatah folded like a pup tent in a tornado.
“Hamas won because its fighters are religious fanatics ready to
die for their cause. Fatah runs an armed employment agency
under the banner of Palestinian nationalism. Most of the latter’s
security men are on the payroll because relatives or ward pols got
them jobs. And they want to stay alive to collect their wages.
“The result was predictable. Our government pretended
otherwise. Now hairs should be standing up on the backs of
thousands of necks, from the White House to the Green Zone.
“Yes, Iraq is more complex than Gaza. But once you pierce the
surface turbulence and look deep, the similarities are chilling:
Iraq’s security forces do include true patriots – but most of the
troops and cops just want a job, or were ordered to join up by a
sheikh or a mullah, or are gathering guns until their faction calls.
“The al Qaeda in Iraq terrorists, the core members of Moqtada
al-Sadr’s Mahdi Army and the hard-line Sunni ghazis are willing
to die for the victory of their faction and their faith. They believe
they’re doing Allah’s will. It gives them a strength we rush to
explain away.
“The raw numbers suggest that Iraq’s fanatics don’t stand a
chance. The government has a far greater numerical advantage
than did Fatah. But numbers often mislead analysts during
insurgencies: Iraq’s government wouldn’t last a week without
U.S. troops.
“The lesson from Gaza is that such wars are neither waged nor
won by the majority of the population. A tiny fraction of the
populace, armed and determined, can destroy a fragile
government and seize power.”
Michael Oren / op-ed Wall Street Journal
“America and its Middle Eastern allies have every reason to
panic. The green flags of Hamas are furling over Gaza and the
Fatah forces trained and financed by the United States have
ignominiously fled. Fears are rife that Iranian-backed and
Syrian-hosted terror will next achieve dominance over the West
Bank and proceed to undermine the pro-Western governments of
Lebanon, Jordan, Egypt and the Gulf.
“To avert this catastrophe, the U.S. has joined with the Israelis
and the Europeans in resuming the flow of hundreds of millions
of dollars in financial aid to the Palestinian Authority under the
leadership of its Fatah president, Mahmoud Abbas, and
accelerating talks for the establishment of a West Bank
Palestinian state. The goal is to provide Palestinians with an
affluent, secular and peaceful alternative to Hamas, and persuade
Gazans to return to the Fatah fold. But the policy ignores every
lesson of the abortive peace process to date as well as Fatah’s
monumental corruption, jihadism and militancy. Indeed, any
sovereign edifice built on the rotten foundations of the
Palestinian Authority is doomed to implode, enhancing, rather
than diminishing, Hamas’s influence….
“In view of its performance over the past 14 years, the
Palestinian Authority under Fatah can be counted on to squander
most or all of the vast sums now being given to it by the U.S. and
the international community. More gunmen will be hired and
better weapons procured, but in the absence of a unified
command and a leadership worth fighting for, PA soldiers will
perform no more credibly than they did in Gaza. Mr. Abbas will
continue to denounce terror while ignoring the terrorist units
within his own organization, while PA imams will persist in
preaching their jihadist sermons.”
Ahmed Yousef, political adviser to Hamas leader Ismail Haniya
(the deposed prime minister) was given space in both the New
York Times and Washington Post. The following is from his
Times op-ed.
“Our stated aim when we won the election was to effect reform,
end corruption and bring economic prosperity to our people Our
sole focus is Palestinian rights and good governance. We now
hope to create a climate of peace and tranquility within our
community that will pave the way for an end to internal strife
and bring about the release of the British journalist Alan
Johnston, whose kidnapping in March by non-Hamas members is
a stain on the reputation of the Palestinian people.
“We reject attempts to divide Palestine into two parts and to pass
Hamas off as an extreme and dangerous force. We continue to
believe that there is still a chance to establish a long-term truce.
But this will not happen unless the international community fully
engages with Hamas.
“Any further attempts to marginalize us, starve our people into
submission or attack us militarily will prove that the United
States and Israeli governments are not genuinely interested in
seeing an end to the violence. Dispassionate observers over the
next few weeks will be able to make up their own minds as to
each side’s true intentions.”
Mr. Yousef’s comments, if the subject wasn’t so serious, would
almost be laughable, seeing as Hamas continues to call for the
eradication of Israel in virtually all other public pronouncements.
Yousef and his organization will no doubt continue their
offensive, even as new Israeli Defense Minister, and former
prime minister, Ehud Barak is preparing a massive counterattack
on Gaza.
Israel is now surrounded by Hamas, Hizbullah and Syria, with
Jordan’s own massive Palestinian population alongside as well.
But while there won’t be any kind of long-lasting peace in the
region in our lifetime, the best hope is lengthy truces. Towards
that end, it’s not a bad idea to appoint Tony Blair as special
envoy to represent the U.S., EU, UN and Russia in the region.
[These four are also meeting next week.] You still have to talk,
after all, though now it’s up to Abbas and Fatah to take
advantage of their last lifeline and become the “genuine partner”
Israel’s government has longed for.
As for Iraq, the U.S. military under General David Petraeus is
clearly on the offensive, and on a wide scale, leaving many of us
to wonder why we didn’t ‘surge’ years ago. But, as witnessed
this week, the casualties the U.S. takes could be substantial and
the strategy is running right into a political timetable; September
and Petraeus’ report to Congress on progress in Iraq. You
already know what he’s going to say.
“We have made substantial progress over the past four months in
dealing with both al Qaeda and the insurgency. Stability has
been brought to once violent provinces such as Anbar. But this
has come at a cost to the U.S. military. Unfortunately, this was
predictable as al Qaeda and the militants sought to influence
debate in America.
“There are no guarantees in this business, but if we pursue the
path we are on, we can continue to pacify the country, improve
the lives of the Iraqi people and give them hope for a brighter
future. Iraq can yet be a model for peace and stability in the
region.”
At which point Democratic members of Congress, as well as
some Republicans, will ask Petraeus about the lack of
commitment on the part of Iraqi leaders and whether or not there
can ever be a unified and stable nation without real progress
towards political reconciliation.
Petraeus will then say, “Senator, I’m a soldier and all I can tell
you is that real progress is being made with the charge I was
given. I can also say we’re creating the conditions for the
politicians to finally reach agreement on the issues confronting
them.”
But Petraeus and the Bush administration will not be given an
open-ended timetable as the pressures of the presidential
campaign, on both sides of the aisle, take precedence over a lame
duck, and unpopular, White House.
In George Will’s column for the Washington Post last Sunday,
Will related a tale from Oregon Republican Senator Gordon
Smith, who has lost faith in his president’s leadership.
“In Iraq last month, Smith was dispirited by the contrast between
meeting with inspiring U.S. troops and meeting with grim
members of the Iraqi parliament. When the parliamentarians
gave a dusty answer to his question about the length of the
summer vacation they might take, he said: I want you to go – if
you will first pass legislation allocating oil revenue. Their
response, he says, was to show pictures of people slaughtered in
the parliamentarians’ neighborhoods. They were, he says, bent
‘on revenge, not reconciliation.’”
Lastly, with regards to Iran, it seems inevitable that we are
headed towards military conflict, having reached the point of no
return in terms of Iran’s nuclear weapons program. You may
have noticed I stopped pleading for an end-run of President
Ahmadinejad months ago because it is too late.
That doesn’t mean the Iranian people couldn’t yet rise up and
take down the mullahs, but you’ve noticed a full-scale
crackdown on dissent across the country and any protests against
the ruling elite will be brutally repressed. [The government, by
the way, still hasn’t implemented the gasoline price hike and
rationing that I talked about. While it’s hard to get all the facts,
it appears rationing is only in place for government vehicles
while the price hike to date has been far less than anticipated.
Why? Clearly, Ahmadinejad and his allies are concerned about
civil unrest should they attempt to adopt sterner measures.]
Back to Israel, when it comes to Iran it cannot afford to let the
mullahs get the bomb, plain and simple. An attack is a foregone
conclusion; if not this year, certainly in 2008. To believe
otherwise simply isn’t dealing with reality.
—
Wall Street
Next week represents the end of the first half of ’07 and I want to
save some commentary for that time, but for now we have this
issue of Bear Stearns and two of its imploding hedge funds that
specialize in mortgage debt securities related to the subprime
sector as well as other types of paper, including toxic derivatives.
‘But, Editor, I thought the subprime mortgage debacle was an
isolated event,’ you might be musing. ‘At least that’s what all
manner of Federal Reserve and Treasury officials have been
telling us.’
Au contraire, mon frere. Aside from my dictum, ‘wait 24 hours,’
what are some of my other favorites?
“Not all of these guys putting these deals together are smart.”
“They don’t often know what they own and the securities haven’t
been stress-tested.” And, “They don’t know who’s on the other
side of the trade.”
In a nutshell that’s the world of derivatives and collateralized
debt obligations these days and every so often we all have to
relearn our history, just like the good folks at Long-Term Capital
did, and they had a few Nobel Prize winners on their staff to
boot.
As of this writing, I really have no clue myself what is going on
with the Bear Stearns fund positions as traders and portfolio
managers at the likes of Merrill Lynch, Lehman Brothers and JP
Morgan Chase run around like chickens without their heads,
attempting to place some of their holdings with other
unsuspecting schmucks, or hide it under the desk, hoping their
boss doesn’t ask about it.
“Nudnick? What’s that toxic paper burning the carpet?”
“Ah, just some Bear Stearns waste, sir. The fallout can be
contained…I swear.”
Of course the problem is, as alluded to above, no one knows
what the stuff is really worth, especially since it wasn’t designed
to be disposed of in a fire sale environment. For now, Bear
Stearns says it will provide up to $3.2 billion in financing in an
attempt to stabilize the situation in one of the two funds, with the
other still under severe stress. While we learn more over the
coming days, though, the broader question is whether this is just
an isolated event? The odds are it isn’t.
Steven Rattner of private equity firm Quadrangle Group wrote of
the coming credit meltdown in the high-yield sector in an op-ed
for the Wall Street Journal.
“The subprime mortgage world has been reduced to rubble with
no lasting impact on another, larger, credit market dancing on an
equally fragile precipice: high-yield corporate debt. In this fast-
growing arena of loans to business…lending proceeds as if the
subprime debacle were some minor skirmish in a little known,
far away land.
“How curious that so many in the financial community should
remain blissfully oblivious to live grenades scattered around the
high-yield playing field. Amid all the asset bubbles that we’ve
seen in recent years…the current inflated pricing of high-yield
loans will eventually earn quite an imposing tombstone in the
graveyard of other great past manias.”
The bottom line is junk bonds are trading at the smallest risk
premiums in history, less than half the normal margin, while at
the same time we don’t need a full-blown recession to wreak
havoc with some balance sheets. As Rattner notes, even “a mild
breeze could topple a few, causing the value of many leveraged
loans to tumble as shaken lenders reconsider their folly,” though
as he also concludes:
“We have little choice but to sit back and watch this car accident
happen.”
Don’t look for the Fed to come to the rescue on this one.
Speaking of bubbles, Kevin Duffy of Bearing Asset Management
had a great line in Barron’s in describing today’s global financial
environment.
“There are more bells ringing than at an Austrian downhill ski
race.”
Noted strategist Marc Faber picked up the ball in an op-ed for the
Financial Times.
“Asset prices have soared in value everywhere in the world since
October 2002. Prices of stocks, commodities, real estate, art, and
every kind of totally useless collectible have shot up. Even bond
prices have until recently gone up as interest rates fell.
“That all asset classes have increased in value simultaneously
around the world is most unusual. Previous asset bubbles were
concentrated in just one or a few asset classes….But the beauty
today is that every kind of asset is grossly inflated. How could
this happen?
“Already ahead of 2000, the U.S. Federal Reserve pursued an
ultra-expansionary monetary policy. Then, after the March 2000
peak in the Nasdaq, the Fed eased monetary conditions
massively. All asset prices soared, particularly for U.S. homes.
A subsequent boom in refinancing and home equity extraction
injected an overdose of adrenaline into consumption-addicted
U.S. households. Thus, the U.S. trade and current account deficit
soared from less than $200 billion in 1998 to above $800
billion….
“In a credit, and hence asset price-driven economy, money
supply and credit must continue to grow at an accelerating rate in
order to sustain the expansion.
“The moment credit growth no longer grows at an accelerating
rate, the economic plane loses altitude. This is now the case.
Not because the Fed has tightened credit but because the market
has done so by tightening lending standards for mortgages
because of the subprime lending collapse. Contracting liquidity
and less consumption in the household sector follows.”
And that’s where I’ll pick up the story next week as we look
ahead to the second half of 2007. It’s also report card time.
Street Bytes
–Volatility has picked up considerably the past month, witness
the weekly percentage gains and losses for the Dow Jones;
+1.2%, -1.8%, +1.6%, -2.1%…with the last figure being this
week’s action as the Dow fell back to 13360 while the S&P 500
lost 2.0% and Nasdaq declined 1.4%.
But I’d be remiss if I didn’t at least mention the Blackstone
Group’s IPO on Friday. Priced at $31 a unit, the shares started
trading north of $36 and settled at $35.10, for a still successful
opening day. CEO Stephen Schwarzman’s stake was worth
about $10 billion when he went home for the weekend. He
might as well throw himself another party….maybe get Paul
McCartney, Eric Clapton, Bono and Brian Wilson to do a little
jamming, just for the hell of it.
The Blackstone offering hit the market even as legislation
working its way through both houses of Congress would hike the
tax rate on Blackstone and similar firms to 35% from the current
15% level. But this move has a ways to go before anything is
enacted and there could be various transition periods and
exemptions.
–U.S. Treasury Yields
6-mo. 4.95% 2-yr. 4.91% 10-yr. 5.13% 30-yr. 5.25%
The yield curve steepened some between the 2- and 10-year as
there was a bit of a flight to quality in the former the latter part of
the week over the Bear Stearns situation.
But this coming week brings another Federal Reserve meeting,
and while no one expects a change in interest rate policy, a slight
modification in the accompanying statement could be in the
offing.
–Aside from the Fed meeting, next week also brings the latest on
new and existing home sales. Homebuilder confidence is at a
16-year low, while UCLA’s Anderson Forecast notes “weakness
in the housing market is finally spilling over into consumption
spending.” Upcoming mortgage resets will help keep the
housing sector down.
–World trade talks collapsed again. India and Brazil accused the
U.S. and the European Union of arrogance and inflexibility,
while the U.S. and EU said Brazil and India offered no real
access to manufactured goods markets in return for reductions in
farm subsidies.
–The Senate voted 65 to 27 to require car manufacturers to
increase fuel mileage standards; to 35 miles per gallon by 2020
for new cars and light trucks compared with 25 today. It’s about
time. But on the issue of increased use of renewable fuels, while
a target has been set, few tax breaks and subsidies were included
in a victory for the oil companies. Big Oil also avoided new
taxes on its operations. However, it’s not likely the House will
get around to its own version until later in the year and even
then, compromise isn’t certain.
–The U.S. Supreme Court ruled in favor of Wall Street and
against shareholders on two significant cases this week. On
Monday, the justices ruled 7 to 1 that securities underwriters
were generally immune from civil antitrust lawsuits in a case that
originated from the Internet bubble/IPO days. The court noted
the SEC was responsible for policing shareholder complaints.
This was a big win for the likes of Credit Suisse, Goldman Sachs
and Morgan Stanley who had been accused in a class action of
conspiracy to drive up IPO prices.
In the second ruling, this time by an 8 to 1 margin, the Supreme
Court ruled that investors must show “cogent and compelling”
evidence of intent to defraud; such as in a company’s earnings
projections. Both rulings relax some of the provisions of 2002’s
Sarbanes-Oxley Act and were supported by the Bush
administration in response to Wall Street’s complaints it was
losing business to overseas competition because of the costs
involved in class-action litigation.
–BP ceded its holdings in a $20 billion Russian natural-gas
project to state-controlled Gazprom in the Kremlin’s latest move
to take total control over all of its energy assets.
[Check my “Wall Street History” link for a summary of the
global supply and demand picture for crude oil. I’ll have much
more next week as well in this space.]
–Airbus finally received some good news in the form of major
orders at the Paris Air Show, some $45.7 billion worth, including
from US Airways. Airbus even received orders for its 555-seat,
twin-deck flying wiener, the A380.
–Treasury Secretary Henry Paulson, in his attempt to avert
protectionist legislation targeting China, said “As the world
opens its doors, we must resist the sentiment that favors
economic isolationism; this is not the time to retreat from the
principles which have made America so strong and competitive.”
But Congress has its own ideas and Paulson admits the pace of
reform in China has been slow. Morgan Stanley’s Stephen
Roach recently echoed a common refrain; that a trade war is the
biggest threat to global economic growth. The latest figures
show China’s exports expanding by 29%, while imports rose
19%. A key is to get the Chinese consumer to spend more,
which would help alleviate some concerns in Congress.
–The battle between growth and the environment continues to
heat up in China. The government is worried about restrictions
on growth resulting from changes in emissions standards, for
example, while your editor, owning shares in a biodiesel plant
there, is thinking “Cleaner gasoline for a cleaner future!”
[I am not going to keep commenting on my holding, as I’ve said
in the past, but just know I was in touch with the CFO this week
and I am not concerned by the price action. Nothing has changed
in terms of the company’s long-term prospects.]
–According to a Dutch study, China is now the #1 emitter of
greenhouse gases in the world. Chinese officials questioned the
findings.
–Yahoo’s Terry Semel was forced to step down as CEO after the
vote of no confidence in his leadership from shareholders. Co-
founder Jerry Yang assumes control.
–New Jersey is the nation’s leader in mortgage fraud. From Ted
Sherman of the Star-Ledger.
“The house in Manalapan went for more than $1 million. And
that was only the first time it was sold.
“Within days of the first deal, the same buyer and seller closed
on at least two additional mortgages on the house – each time
using different attorneys, title agents and banks who had no clue
the property was already mortgaged to the hilt – illegally
obtaining millions more in financing.
“The money was being wired out of the country when the
scheme came to light two weeks ago.”
Other cases of fraud involve obtaining home equity loans after
‘purchasing’ the property.
–Inflation Watch: A week after the Wall Street Journal
announced it was hiking its daily price to $1.50 from $1.00, the
New York Times said the price of its daily will jump from $1.00
to $1.25, with the Sunday edition rising from $3.50 to $4.00.
The Times is also going to be slashing the width of the paper.
–Deflation Watch: The average round-trip domestic airline ticket
has dropped 2% this summer from last year thanks to the fact the
airlines have added more seats while demand has been slightly
less than expected.
–In 1999, Jake Winebaum and Sky Dayton paid $7.5 million for
the domain name business.com; the highest price paid for a name
at that point. Now it’s reportedly on the auction block for $300
million to $400 million. The site is currently generating
significant revenue.
–GE abandoned talks with Pearson (publisher of the Financial
Times) about a possible joint bid for Dow Jones & Co., meaning
Rupert Murdoch’s News Corp., publisher of the tabloid New
York Post, is one step closer to treating Wall Street Journal
readers to screaming headlines such as this:
“Schwarzman Chokes On $400 Crab Claw!!!! Food Dislodged
By Butler!!!!………hovering heirs had been hoping for $billions
but are forced to wait”
–According to the Travel Business Roundtable, overseas visitors
to the U.S. have dropped 20% since 2000. The impact is felt in
places like Disneyland, where overseas traffic is down 21%.
From 2000 to 2005, the number of foreign visitors to Boston was
off 39%. [Commerce Department/L.A. Times]
–In case you wondered how much an English Premier League
football team costs, deposed Thai prime minister Thaksin is
purchasing Manchester City (not to be confused with Manchester
United) for $162 million. The military council that overthrew
Thaksin in a coup said the billionaire can do whatever he wants
with his money. English soccer has a new television deal worth
$5.3 billion over the next three years, with the 20 teams in the
league sharing the revenue equally. However, past owners have
paid up to seven times more just trying to stay competitive after
purchasing a squad. And that’s your football/soccer report for
the week.
–And in case you were wondering what Dick Clark’s assets were
valued at, Washington Redskins owner Daniel Snyder acquired
Dick Clark Productions for $175 million. So Snyder now
controls the likes of American Bandstand, The American Music
Awards, The Golden Globes, The Academy of Country Music
Awards and Dick Clark’s New Year’s Rockin’ Eve.
Snyder, who already owns the Six Flags theme park chain, sees a
tie-in with his Johnny Rockets’ restaurants and Bandstand
videos. Clark, 77, will continue to co-host the New Year’s Eve
show with Ryan Seacrest.
–Next week, it’s all about Apple and the rollout of the iPhone on
June 29. No doubt there will be an absolute crush at Apple
stores. Probably a good idea to wait a few days….you really can
go without it until the following week, you know.
–We note the passing of sausage/restaurant king Bob Evans.
Starting with a tiny diner in Gallipolis, Ohio, by 1953, Evans
formed Bob Evans Farms, specializing in quality sausage, and
expanded to 579 restaurants in 18 states (plus another 115 under
the Mimi’s Café name) which generate in excess of $1.6 billion
in sales. Evans was 89.
Foreign Affairs
North Korea: U.S. envoy Christopher Hill met with his
counterparts in Pyongyang for the first time since Oct. 2002.
After two days of talks, Hill said the North would “promptly”
comply with terms of the Feb. 13 deal to shut down the nuclear
facility at Yongbyon, supposedly in about three weeks. If so, the
North would receive 50,000 tons of fuel oil when confirmed. It
would not receive another 950,000 until it fully disables the
entire nuclear program.
But before you get too excited (not that I imagine any of you are
rushing to crack open the good stuff on the news), we’re still
dealing with North Korea here and there is little likelihood the
goons are going to give up their weapons anytime soon. Plus,
Japan does not want to participate in a new round of six-party
talks unless Pyongyang comes clean on a dozen Japanese
abducted by the North Koreans. And I saw nothing on the health
of Kim Jong il.
[Also remember…at some point down the road, either peacefully
or by force, North Korea will become the new low-cost producer
of goods in the world. This will create its own tensions.]
Afghanistan: Dreadful week here as the scale of the Taliban’s
attacks widened, including the largest suicide car bomb yet that
killed 35 in Kabul. NATO air attacks also killed 25 civilians on
Friday in the latest incident of this kind that obviously hurts in
the ongoing efforts to win over the hearts and minds.
Lebanon: The Army announced the siege of the Palestinian
refugee camp near Tripoli is essentially over, though at least 75
Lebanese soldiers lost their lives. On a broader scope, Peter
Brookes of the Heritage Foundation had some thoughts in a New
York Post op-ed that I tend to agree with.
“The United States, Europe and Arab states need to act
immediately to shore up the embattled pro-Western democratic
Lebanese government. Syria, which occupied Lebanon from
1976 to 2005, and Iran, which controls Islamist-terrorist
Hizbullah, with help from al Qaeda, already have Lebanon under
siege….
“And Syria and Iran have re-armed Hizbullah since last
summer’s war, too – so (Hizbullah leader) Hassan Nasrallah’s
thugs are ready to go against either Israel or the Beirut
government, if given the green light from their Tehran and
Damascus masters.
“Lebanon is clearly nearing a tipping point. The Siniora
government may be able to hold out, fighting on multiple fronts,
both politically and militarily, against determined foes sponsored
by rogue states.
“Or the joint efforts of al Qaeda, Hizbullah, splinter groups, Iran
and Syria could bring the country to its knees, putting an end to
the progress – albeit halting – Lebanon has made since throwing
off the shackles of Syrian occupation….
“States with a stake in Lebanon need to get on the stick – with a
lot more than rhetoric – to prevent Lebanon from succumbing to
Islamist/Syrian/Iranian aggression.”
Brookes has an excellent idea; have an aircraft carrier on the
Lebanese coast, preferably a French one, that would signal
French President Nicolas Sarkozy’s new foreign policy.
Russia: President Vladimir Putin blasted the West for attempting
to make Russia feel guilty about “black pages” in its history.
Putin said “Others cannot be allowed to impose a feeling of guilt
on us. Let them think about themselves.” Then he took a direct
shot at the U.S. in referring to the dropping of atomic bombs and
Vietnam.
“We did not use nuclear weapons against a civilian population,
nor did we pour chemicals over thousands of square kilometers
and drop seven times as many bombs as were dropped in World
War II on a small country, as took place in Vietnam. We did not
have other black pages, like, for example, Nazism.” [The
Moscow Times]
As for Sergei Ivanov, Putin’s possible successor, his approval
ratings are soaring, evidently, as Putin has sought to showcase
Ivanov in various forums. The two served together in the KGB
in St. Petersburg. But I learned in a London Times interview
with Ivanov that he is a Beatles, Pink Floyd and Led Zeppelin
fan, plus, unlike the teetotaler Putin, he favors red wine and
vodka. I would strongly suggest that the next president of the
United States be one who drinks as well because he or she is
going to have to deal with this man.
[Speaking of teetotalers, I see where French winemakers are
concerned that new President Nicolas Sarkozy doesn’t imbibe. It
hurts the image, you understand.]
Lastly, as Fred Hiatt writes in an op-ed for the Washington Post,
“If Putin is so popular, and Russia so content, why does the
Kremlin feel it must script the nightly news so tightly on national
TV? Why the striking lack of confidence?”
Pakistan: There are conflicting stories whether former prime
ministers Nawaz Sharif and Benazir Bhutto, both in exile, have
formed a power-sharing arrangement in case President Pervez
Musharraf allows them to return for upcoming elections. For his
part, Musharraf is convinced his party can win, regardless, nor
should anyone expect him to give up both the presidency and the
chief of army positions anyway.
Plus, Pakistan is building a new nuclear reactor that a U.S.
watchdog group, the Institute of Science for International
Security, said implies Pakistan has decided to “increase
significantly its production of plutonium for nuclear weapons,”
thus accelerating an arms race between itself and India.
Zimbabwe: Talks between President Robert Mugabe’s ruling
party and the opposition have broken off as once again there are
growing signs of a coup. It’s already too late, of course. While
the official inflation rate is now 4,500 percent, many say it is
closer to 12,000 percent and heading higher still. From Alec
Russell of the Financial Times.
“(The) market rate of the U.S. dollar is Z$300,000. At such a
rate diplomats point out it will soon be all but impossible for Mr.
Mugabe to continue to dispense patronage to his supporters by
offering U.S. dollars at the official rate of Z$250 to $1,
precipitating a possible showdown with senior figures in his
party.”
Industrial output is now half what it was in 2000, and only 5
percent of businesspeople are optimistic about the future.
Britain: I love Queen Elizabeth, but for the life of me I’m trying
to figure out why author Salman Rushdie has been knighted;
Rushdie, after all, being the source of totally unreadable books
that tend to offend Muslims.
It was Iran in 1989 that issued a fatwa against Rushdie and his
book “The Satanic Verses,” calling for his execution, but this
week Pakistan seemed almost as offended as the national
parliament passed a resolution condemning the award.
Granted, in 1998, the Iranian government said it would no longer
support the fatwa, but at this point in time I see zero reason to
give extremists yet another excuse to create mischief and recruit
miscreants. And sure enough, a group of hard-line Pakistani
clerics on Thursday bestowed a special title on Osama bin Laden
in response, the Sword of Allah.
Italy: In case you were wondering, the Mafia killed only 121 last
year, compared to 340 in 1992. Italian officials attribute part of
the decline to a shift toward less-violent activities such as money
laundering.
Random Musings
–Having mused on more than one occasion about a third-party
presidential bid by New York Mayor Michael Bloomberg, it
would certainly appear that this is closer to fruition with the
announcement he has officially left the Republican Party,
choosing the ‘unaffiliated’ designation.
There has been no shortage of publicity for Mayor Mike these
days, with the Time magazine cover and extensive articles in
virtually every serious publication. I certainly would welcome
his candidacy, and from the e-mails this week it’s clear many of
you would as well. Chris C. summed up the feeling among many
Americans, a point Bloomberg has been hammering home; that
being there is no difference between the candidates anymore.
Americans are “programmed with that reflexive feeling that there
is one, but there really isn’t,” Chris wrote. They struggle to
address real issues and virtually all of them are corrupt in one
form or another.
In an appearance at Google’s headquarters in Silicon Valley on
Monday, Bloomberg blasted the presidential election campaign
process thus far, starting with the debates.
“They have absolutely nothing to do with the job and the
qualifications. And they don’t tell you anything about whether
or not any of those candidates would be good or bad presidents.
What they really say is, did they memorize their notes of ‘What
to say if…’ and whether their staff was able to anticipate. If you
look at both debates, they pandered, what I would argue, the
same ways.”
I have stated before that with the way our primary season is
shaping up, no matter who the two parties select the American
people will be sick of them both by March, which is when
Bloomberg should formally announce. He will have done all the
spade work in terms of getting on the ballots and money can pay
for the volunteers necessary to meet key deadlines.
Mort Zuckerman / Editor-in-Chief, U.S. News & World Report
[Written before Bloomberg’s party affiliation statement]
“His hat is not in the ring, but the many New Yorkers who think
it should be point out that Bloomberg practices the bipartisanship
others talk about. He is the Republican mayor in an
overwhelmingly Democratic city, but you would never know it.
He has governed in a common-sense, adult, nonideological
manner. He has never used his office for partisan advantage. He
clearly has an aversion to confrontation and histrionics. His style
is pragmatic. He speaks directly but builds a consensus around
an ideologically neutral management style, appreciated by an
electorate less interested in rhetoric than results. He differs from
his predecessor Rudy Giuliani in his management style.
Appointing cabinet members on the basis of their expertise, he
took a chance on giving them the freedom to act, and it paid off.
Virtually all have remained in their posts over six years.
Symbolically, Bloomberg placed his own desk in the middle of
an open office section and seated his deputies and staff members
around him, with other aides at cubicles nearby, ensuring unity
of focus, ease of access, ready accountability, and the
understanding of lower ranking managers.”
Tom Lowry / Business Week, on Bloomberg’s management
style:
“Bloomberg sees New York City as a corporation, its citizens as
customers, its sanitation workers, police officers, clerks, and
deputy commissioners as talent. He is the chief executive. Call
him a technocrat all you want; he’s O.K. with that. ‘I hear a
disparaging tone, like there’s something wrong with
accountability and results,’ he says. ‘What was I hired for?’”
Bloomberg doesn’t suffer fools gladly. Last December, I related
the story of how he fired an employee from the Albany office
after the mayor paid a surprise visit and saw the fellow playing
solitaire on his computer. But I’ve also written of his incredible
generosity; not just in his philanthropic endeavors, but in the way
he rewards success. As Zuckerman alludes to above, Bloomberg
engenders fierce loyalty.
There is plenty of time to thrash out policy positions, but what’s
clear, in terms of the mood of the electorate, is 73% believe the
country is on the wrong track, and as Bloomberg said this week,
“Washington is sinking into a swamp of dysfunction.”
Maybe the mayor isn’t the answer, but I don’t think too many of
you would disagree that our political process needs to be shaken
to its core.
–In the latest Newsweek survey, President Bush’s job approval
rating hit another new low, 26%. Even Jimmy Carter never got
to that level at the height of the Iranian hostage crisis. Richard
Nixon’s low point was 23%. But Congress is only at 25%.
–I have to admit, I liked the Bill and Hillary “Sopranos” spoof.
And thanks to the fact an increasing number of Democrats are
viewing Barack Obama as vice presidential material, not
presidential, Hillary appears to be pulling away, leading him 39-
26 if Al Gore isn’t included, while John Edwards and his hair
have been cut to 13%, according to a USA Today/Gallup survey.
The same poll on the Republican side has Rudy Giuliani at 28%,
Fred Thompson at 19%, John McCain at 18% and Mitt Romney
at 7%.
But a Rasmussen survey has Thompson leading Giuliani, 28-27,
with McCain and Romney at 10 each.
–In the June 25 issue of U.S. News & World Report, Michael
Barone discusses the best idea I’ve seen for the presidential
primary process labeled the Delaware Plan, which was almost
endorsed by the 2000 Republican National Convention.
“It has four rounds of primaries or caucuses, with the 12 smallest
states voting in March, followed by the 13 next largest in April,
the next 13 in May, and ending with the final 12 largest states
voting in June. This would leave plenty of room for retail
politics, with candidates able to pick the states where they might
run best. Voters in later states would be able to judge how
candidates run the gantlet. The nominations could not be
clinched until June, since the 12 largest states have 60 percent of
the nation’s population. The parties could endorse this system at
their national conventions. Or if there was bipartisan consensus,
Congress could impose it as federal law.”
I’ve written before that I favor a national primary, but I have to
admit the Delaware Plan could be more exciting for us junkies.
–According to a study in Foreign Policy magazine, Iraq now
ranks as the world’s second most unstable country, ahead of
Somalia, Zimbabwe, Afghanistan, Haiti and North Korea.
Sudan, thanks to Darfur, is the world’s most unstable nation. 8
of the 10 worst are in Africa, in case you’re one of those hearing
what a great place it is to invest in these days. Look elsewhere.
–Thanks to Clint Eastwood’s two films on the battle for Iwo
Jima, the Japanese government has changed the island’s name
back to its original one, Iwo To. Both look and mean the same in
Japanese. Some U.S. survivors of the World War II battle there
are upset.
–The death rate in New Orleans is 47% higher than it was before
Hurricane Katrina, owing in no small part to the loss of seven of
22 hospitals and 4,486 doctors in the area, creating severe
shortages in care. [USA Today]
–Having traveled about four years ago on the QE2 for an
extended trip, and having been bored to tears on the days we
were at sea (but I had a blast when in port, sports fans!), I
couldn’t help but note that the 40-year-old cruiseliner has been
purchased by Dubai World and will be permanently docked at a
port there, where she will be transformed into a luxury hotel and
museum. The cost to both buy and refurbish the vessel for its
new use is estimated to be around $200 million, so I’m guessing
the QE2 will suffer the same fate as the Queen Mary…
bankruptcy.
–Finally, regarding the definitive study in Science magazine that
the oldest sibling is indeed smarter, it’s true my older brother is
better in history than yours truly and he’s a terrific artist. But
I’m better in math. Neither of us, however, inherited our father’s
science genius. In fact, let the record show we both graduated
from college Summa Cum Lousy.
—
Pray for the men and women of our armed forces. And for the
families of the nine firefighters who perished in Charleston, S.C.
God bless America.
—
Gold closed at $657
Oil, $69.14
Returns for the week 6/18-6/22
Dow Jones -2.1% [13360]
S&P 500 -2.0% [1502]
S&P MidCap -1.7%
Russell 2000 -1.6%
Nasdaq -1.4% [2588]
Returns for the period 1/1/07-6/22/07
Dow Jones +7.2%
S&P 500 +5.9%
S&P MidCap +11.4%
Russell 2000 +6.0%
Nasdaq +7.2%
Bulls 53.3
Bears 18.9 [lowest since 7/2/04…Source: Chartcraft / Investors
Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
