[Posted 7:00 AM ET]
Wall Street…and the Global Bubble
I had a whirlwind trip to Ireland this week for a little golf and
good cheer (ahem), but I did have an opportunity to do some
more research on my global real estate boom/bust thesis. In fact
when I arrived Sunday morning, the newspapers were filled with
headlines such as:
“It’s a case of boom not bust, say the real experts…Celtic Tiger
isn’t facing extinction, though some want us to think it is;” “We
need these expert scaremongers…like a hole in the head:” “The
economic wake-up call Ahern must answer;” “If there is a slump,
who talked us down?”
What sparked the excessive coverage were the musings of two
commentators/authors, George Lee and David McWilliams, who
I’ve been trying to come up with appropriate comparisons to and
I’m stuck with Joseph Granville and Robert Prechter from the
Wall Street of the 1980s, both of whom were influential market
pundits then during a volatile time.
Lee and McWilliams over the prior days and weeks had appeared
on some highly-rated television programs in Ireland and
pronounced the Irish economy was going down the tubes, and
fast.
But they based their explanations on the end of cheap oil (Mr.
Lee) and a comparison to Uruguay at the beginning of the 20th
century (McWilliams). Huh? Heck, I can come up with
something far easier to understand, but first I’ll throw out some
opinion from the Irish papers.
From Finance Minister Brian Cowen: “The economy is stronger
today than at any point in its history. More people are at work,
incomes are high, opportunities for people here to get on have
never been better. In the last 10 years, the hard work of the Irish
people, responding to the policies of this party in government,
has built a platform of prosperity.”
No doubt, Ireland has had a great 10-year stretch, but I read this
and could only think of another shill, U.S. Treasury Secretary
Hank Paulson.
Marc Coleman, in an opinion piece for the Sunday Independent,
had a good history lesson.
“Alone amongst the countries of the world, Ireland’s population
is 50 percent lower now than in 1841 when 8.1 million lived on
the island and 6.5 million lived in what is now the Republic.
Although 1.5 million people died in the famine Ireland’s
population should have rebounded as did those of famine-
stricken countries at the time like Finland. But for over 100
years, Ireland was gripped in policy permafrost….As Europe’s
population trebled between 1850 and 2000, ours was cut in
half….
“Finally – 100 years after it actually happened – we started to
recover from the famine. [Protectionism was abandoned in 1957
and Ireland’s economic clock started to tick.] But although we’d
opened our economy, we started to go backwards in the
Seventies as state spending and taxation rose….
“In 1987, good fiscal management was added to economic
openness. We have never looked back and we have never had it
so good. And there is a reason why this should continue well
into the 21st Century. Outside of the far north of Europe, ours is
the lowest population density country in Europe.
“With globalization, hundreds of millions of people are on the
move, looking for a country like Ireland to make their home.
Land rich but people poor, Ireland is hurtling through history on
a journey back to the future. Last year the population of the state
reached 4.2 million, a number last recorded in 1861….
“But what kind of future is it? How can Ireland grow its
population when the 4.2 million here are suffering outlandish
property prices and growing congestion? Sadly, underpopulation
is not the only legacy of the famine. An obsession with land by
our people and a dysfunctional approach to its management by
our Government is blocking our progress. We are building a
diverse and high technology economy in the 21st Century. But
we are designing cities that look more like collections of small
villages. We are building out and down when we should be
building in and up. Rip-off house prices, long commutes and a
declining quality of life are just some of the consequences of
this. There are many others.
“The water crisis in Galway is another. Poisoned by tens of
thousands of one-off housing, it is yet another legacy of a stunted
past. Farms, sub-divided in the 1840s in a desperate attempt to
survive hunger, are now the foundations on which we build
population growth. Instead of clustering efficient close knit
communities, we are sprinkling our people all over the
countryside. We are building a country in which public services
– everything from public transport, sewerage, water supply,
healthcare and education – are impossible to deliver efficiently.
And despite a level of car ownership that is low by EU standards,
the resultant long commutes have turned us into one of Europe’s
most oil dependent nations. With the price of oil exceeding $81
a barrel…this is not a place we want to be.”
Frankly, in all my trips to Ireland, 16 since 1989, I hadn’t fully
thought out Marc Coleman’s thesis on land development and its
impact on the infrastructure. All I know is that Ireland’s
problems on this front, such as with sewerage and lack of
landfills, has always been a big issue.
But another commentator, Alan Ruddock, also in the
Independent, noted that “Inward investment, such a vital part of
our economic development over the past 15 years, is drying up.
Foreign companies may still come to Ireland, but the majority are
seeking cheaper and more productive European economies. The
danger signals from Intel, which announced last week that 200
jobs would go this year, are flashing brightly.”
In the end, though, it’s still about real estate, even if so
many in the country don’t want to admit it. Affordability?
Forget it. Ireland’s young people may not be subprime
borrowers in the U.S. sense, but as friends Martin and Joanne B.
told me, the two having been long-time residents of the Lahinch
area in County Clare, there have been an awful lot of “100%
mortgages” issued the past few years.
Yes, it’s a global phenomenon, this real estate bubble. A
professor at NUI Galway, Alan Ahearne, wrote in the
Independent:
“The market is seized up. It’s a classic symptom of the boom-
bust pattern. Sellers are trying to offload their houses but
demand has evaporated. There is no one around prepared to pay
the kind of money sellers are demanding. The problem is that it
takes a while for sellers to come to terms with the reality that
their houses are no longer worth what they think they are worth.
“I am hearing that banks are already putting the boot into
developers, who will have to repay the money they borrowed –
and that will mean cutting prices to shift stock.
“When interest rates rise it puts people under pressure, but
usually homeowners still make their mortgage payments. They
may have to cut spending elsewhere, but they don’t want to lose
their homes. However, when people lose their jobs, which could
be the result of the global recession, then they may default on
their payments. What kills a housing market, what turns a bust
into an all-out crash are big increases in unemployment.”
Sound familiar? Substitute just about any country in the world
these days. All in different stages, mind you, with perhaps a few
yet to peak, but the day of reckoning has arrived. And as
Professor Ahearne so correctly said, when the global recession
hits, and job losses begin to pile up, that’s when you have
something truly serious. Thus far in Ireland, it merely looks like
a garden variety correction.
But I know this place very well and it’s had an incredible run…
over 7% GDP growth, annually, for the past ten years. But so
much of the wealth has been fueled by soaring property values
and the access to credit off of this. Prices are already dropping
for the first time in the cycle and that’s just a beginning.
As for back here in the U.S., new- and existing-home sales for
the month of August plunged again, with the median price on
new-homes now down 7.5% year-over-year, while
homebuilders KB Home and Lennar reported dreadful earnings
due in part to massive writedowns of both land holdings and
housing stock. By one measurement, inventories nationwide are
up to ten months. There is no recovery, sports fans, until you put
a serious dent in that figure.
KB Home’s CEO said “oversupply of unsold new and resale
homes…has worsened,” citing “tighter lending standards, low
affordability and greater buyer caution…We see no signs that the
housing market is stabilizing.”
Lennar’s CEO echoed that there was “no evidence” of a recovery
and instead saw “further deterioration.”
And we are just entering the peak period for mortgage resets,
September thru December.
But, again, this is a global story. From Friday’s Sydney Morning
Herald, the country’s largest building materials supplier warned
of “the deepest downturn…in the history of Australia” and that if
things didn’t turn around, “we will then be looking back to the
Depression.”
“The crisis was so bad in Sydney that existing homes in some
pockets were cheaper to buy than vacant parcels of land,”
according to the paper. The managing director of the building
supplies company, Lindsay Partridge, said “Sales of vacant land
in Sydney are close to non-existent.” The Housing Industry
Association’s chief economist said, “The affordability issue is
very bleak in outer Sydney.”
Sarah Lyall of the New York Times had a great piece last week
on the coming end of Britain’s “borrow-and-spend era,” one that
had represented a drastic change in attitudes toward money, or as
one expert told Lyall, the “buy now, pay later, culture.” The UK
crash is coming to a pub near you as well.
Street Bytes
–The quarter is over and the S&P 500 was up 1.6% during the
period after a 3.6% gain in September; pretty impressive when
you include the 9.4% swoon 7/19-8/15. On the week, the Dow
Jones tacked on 0.5% to 13895, the S&P added one point, while
Nasdaq rose 1.1% to 2701. Both the Dow and S&P are now
within a two- or three-day rally of their all time highs. Stock
investors keep repeating the mantra; all is well, especially with
the global economy. They are sadly mistaken.
–U.S. Treasury Yields
6-mo. 4.06% 2-yr. 3.96% 10-yr. 4.57% 30-yr. 4.83%
Aside from the housing data, August durable goods were off a
larger than expected 4.9%, while construction spending edged
up, a key reading on Chicago manufacturing was still above the
50 mark that normally denotes contraction, and personal
consumption (consumer spending) was up a solid 0.6%. So once
again we had all the commentators say that the American
consumer is not dead…and who can argue? And for the record,
second quarter GDP had its final revision, up 3.8%. Most see the
third and fourth both coming in around 2%.
Treasuries were aided at week’s end by the release of a key
inflation figure, now up only 1.8% year-over-year, when you
strip out everything you and I use, eat, smell, touch, look at and
listen to.
–A Goldman Sachs analyst said Merrill Lynch could be forced
to write down as much as $4 billion in mortgage-related
securities (CDOs and the like) as well as buyout-financing
commitments.
–Inflation Watch: Wheat prices continue to soar to record highs,
above $9.00 a bushel and more than double the price from a year
ago, thanks to tight world supplies and rising demand.
Australia’s drought is a big reason and the global inventory
picture is the worst in 26 years. [Commodities overall had their
biggest monthly gain in 32 years.]
Separately, the USDA predicts that net farm income will be
$87.1 billion in ’07, up nearly 50 percent over 2006. Because of
this last point, more than a few are questioning some of the
outrageous subsidies still being paid.
–The SEC is investigating whether the brokerages “unduly
influenced” the rating agencies, such as S&P and Moody’s, by
paying for credit ratings on various mortgage securities. In a
congressional hearing Senator Jim Bunning described the process
as “like a movie studio paying a critic to review a movie and then
using a quote from his review in the commercials.” Executives
at the agencies denied the accusations but there is little doubt
they are true. Of course the issue is the rating of many subprime
mortgage pools, for example, as being investment grade when in
fact they turned into junk, with any subsequent downgrades
coming long after the fact because the rating firms were afraid of
losing future business.
–After a two-day strike, General Motors and the UAW reached
an historic agreement on healthcare that essentially takes $50
billion in future obligations off GM’s books, known as “legacy
costs,” thus allowing the automaker to better compete with its
Japanese competitors. This paves the way for Ford and Chrysler
to seek similar UAW contracts. GM also won the right to pay
newly hired employees less than existing workers, while union
workers will receive signing bonuses and lump-sum payments
over the next three years. I’ll comment further on the healthcare
aspect of the contract as I learn more details, but for now I don’t
underestimate the potential benefits for Corporate America
overall.
–Google can’t avoid the impact of the housing debacle from an
advertising standpoint, let alone rivals Yahoo and AOL, as
mortgage originators, brokers and other affiliated companies go
under or drastically reduce ad spending. Oppenheimer estimates
that financial services account for about 10% of total net online
revenue. One hedge-fund manager told Barron’s Mark Veverka,
“Google is far more exposed than the Street is letting on.”
–British Airways placed a huge order, over $8 billion, for both
Airbus’ flying A380 jumbo wiener and Boeing’s 787
Dreamliner. But both planes will be powered by Rolls-Royce
engines; a loss for General Electric and Pratt and Whitney.
–New York Mayor Michael Bloomberg left the company he
founded back in 2001, but he is getting some unwelcome
publicity nonetheless due to a suit that some former employees
and the EEOC have filed against Bloomberg LP for practices
going back to 2002. The suit claims the company discriminated
against female employees who announced they were pregnant by
demoting them, among other offenses.
–The Financial Times reported that Alcatel-Lucent CEO Pat
Russo has one month to present an emergency restructuring plan
to her board, but a source told the FT that her position is not in
question. What is in question is the logic behind the merger. An
analyst at Dresdner Kleinwort said “There is little doubt that the
merger has turned into a veritable fiasco. Key customers,
valuable employees, critical partners and influential lenders may
lose faith unless prompt action is taken and profitability restored
within a year.”
On my way back from the airport I passed ALU headquarters and
all the newly-planted trees along the main road are dead, while
the geese were resting under one of the few remaining shade
trees, plotting their next move on an already brown turf.
[Actually, the dead trees reminded me of my New York Mets, or
Mutts, as they are being called these days. Zero life in these
overpaid choke artists, that’s for sure.]
–According to researchers at Columbia University in New York
and Peking University in Beijing, the H5N1 bird flu virus can
pass through a pregnant woman’s placenta to infect the fetus.
The same scientists also found evidence of what doctors had long
suspected, that the virus not only affects the lungs, but passes
throughout the body into the gastrointestinal tract, the brain, liver
and blood cells; all of which explains the high fatality rate. At
least the collaboration in the research could one day lead to a
viable vaccine. [South China Morning Post]
–I’ve knocked the viability of Internet-phone service operator
Vonage in the past, wondering how it could continue, and this
week two different courts ordered Vonage to pay up over now
successful patent infringement suits filed by Sprint Nextel and
Verizon. Vonage stock, $15 back in May ’06, closed the week at
$1.
–My portfolio: The China biodiesel story of mine, which has
been moribund for months, sprang to life on Thursday. In two
days it rose 90%…yup…you read that right, which put a step in
my typing, and premium beer in the fridge. I have no idea what
the reason was for volume 30Xs normal on Friday, though the
issue all along has been securing financing for the planned
expansion that would grow production by ten-fold over the next
1 ½ years.
–In the latest sign of the apocalypse, check out actor Nicolas
Cage’s real estate holdings, as noted in the Journal.
He is relisting an 11,500-square-foot estate in L.A.’s Bel-Air
section for $35 million. He recently purchased a 25,000-square-
foot manor house in Middletown, R.I. for $15.8 million. He has
also purchased homes the last few years in San Francisco, Las
Vegas (a mansion he bought in ‘06 for $8.5 million), New
Orleans and Bath, England; plus his main residence is a
waterfront house in Newport Beach, Calif., that he bought for
$25 million in 2005.
Foreign Affairs
Iran: President Mahmoud Ahmadinejad addressed the UN
General Assembly, saying in part:
“In the last two years, abusing the Security Council, the arrogant
powers have repeatedly accused Iran and even made military
threats and imposed illegal sanctions against it. Previously, they
illegally insisted on politicizing the Iranian nation’s nuclear case,
but today, because of the resistance of the Iranian nation, the
issue is back to the agency [International Atomic Energy
Agency], and I officially announce that in our opinion the
nuclear issue of Iran is now closed and has turned into an
ordinary agency matter.”
Of course Ahmadinejad is relying on appeaser Mohamed
ElBaradei, IAEA chief, to help carry his water and the IAEA
announced in July it had given Iran until December to answer a
series of questions regarding its nuclear activity. Both Russia and
China have said they want to wait until year end and the IAEA
before instituting another round of UN sanctions through a third
(or 4th, depending on how you look at it) resolution out of the
Security Council. Then late Friday, all powers agreed to give
Iran another two months before further action.
Of course while this is going on, the fact is Iran continues to
enrich uranium, even though the Security Council has twice
demanded it stop.
It’s scandalous, yet French President Nicolas Sarkozy, not
President George W. Bush, seems to be the only one who truly
gets it. In his own speech to the General Assembly, Sarkozy
said:
“There will not be peace in the world if the international
community falters in the face of the proliferation of nuclear arms.
(The crisis) will only be resolved if firmness and dialogue go
hand-in-hand….Weakness and renunciation do not lead to peace.
They lead to war.”
What did Bush do with his time on the podium? Talk a lot about
Burma. Now don’t get me wrong, Burma is important,
especially when we view China’s reaction as a way of gauging
its own future intentions, but c’mon, Mr. President. You know
there is no more important problem in the world these days than
Iran.
The Wall Street Journal had an editorial detailing how the White
House has fallen down on the job with regards to Tehran’s tactics
and how Bush’s bark has been far bigger than his bite,
consistently talking of prices to be paid, though none has been.
“The Bush presidency is running out of time to act if it wants to
stop Iran from gaining a bomb. With GIs fighting and dying in
Iraq, Mr. Bush also owes it to them not to allow enemy
sanctuaries or weapons pipelines from Iran. If the president
believes half of what he and his administration have said about
Iran’s behavior, he has an obligation to do whatever it takes to
stop it.”
The conservative editorial page of the New York Post opined:
“Even the Bush administration at this point seems weary of
increased confrontation with Iran. The president, quite
noticeably, had little to say about Iran in his General Assembly
address. And Secretary of State Condoleezza Rice has stressed
the need for a diplomatic solution to Iran’s nuclear ambitions.”
And just what is Iran trying to accomplish in the region, overall?
Commentator Charles Krauthammer explains in his Washington
Post column.
“Ahmadinejad has chosen…to assemble, deploy, flaunt and
partially activate Iran’s proxies in the Arab Middle East: (1)
Hamas launching rockets into Israeli towns and villages across
the border from the Gaza Strip. Its intention is to invite an Israeli
reaction, preferably a bloody and telegenic ground assault.
“(2) Hizbullah heavily rearmed with Iranian rockets transshipped
through Syria and preparing for the next round of fighting with
Israel. The third Lebanon war, now inevitable, awaits only
Tehran’s order.
“(3) Syria, Iran’s only Arab client state, building up forces across
the Golan heights frontier with Israel. And on Wednesday (Sept.
19), yet another anti-Syrian member of Lebanon’s parliament is
killed in a massive car bombing.
“(4) The al-Quds force of the Iranian Revolutionary Guards
training and equipping Shia extremist militias in the use of the
deadliest improvised bombs and rocketry against American and
Iraqi troops. Iran is similarly helping the Taliban to attack
NATO forces in Afghanistan.”
Ahmadinejad is doing all these things to buy time while he gets
the bomb and as Krauthammer writes the message is this:
“If anyone dares attack our nuclear facilities, we will fully
activate our proxies, unleashing unrestrained destruction on
Israel, moderate Arabs, Iraq and U.S. interests – in addition to
the usual, such as mining the Strait of Hormuz and causing an
acute oil crisis and worldwide recession.”
I said years ago, even after the invasion of Iraq, that longer term
the Bush presidency would be judged on two issues, North Korea
and Iran and the ability to keep them from developing nuclear
weapons, perhaps more so than Iraq. The North already did, but
we’ll soon see whether diplomacy amounts to anything there.
Iran can still be stopped, but at this point only militarily.
Israel: So speaking of stopping Iran, in a detailed report from
Newsweek, 2008 is the year Israeli and/or the United States will
take action assuming diplomacy fails. Israel can ill afford to wait
any longer. [This is yet another reason why I have been gearing
my economic predictions towards 2008 as well. It’s not just
about the bursting of the bubble, it’s about a hot spot or two
coming home to roost, which in turn would cripple business
confidence and capital spending.]
According to Newsweek, Iran has established “crisis
committees” to draw up war contingencies, while the Bush
administration and Pentagon are not in lockstep with their Israeli
counterparts on how best to address the growing threat. Both
countries do agree taking out Iran’s nuclear program is not an
easy task and blowback is a serious concern.
Separately, when it comes to the recent Israeli strike on Syria,
one report I saw in Ireland said Israeli commandos had seized
nuclear material of North Korean origin prior to the attack.
Iraq: The Pentagon is requesting $190 billion to fund the wars in
Afghanistan and Iraq in 2008, up from $173 billion in ’07. [By
comparison, spending was $94 billion in ’04 and $122 billion in
’06.]
The U.S. military is also saying the Blackwater disaster in
Baghdad could seriously undermine efforts to stabilize the
country. If we are promoting the “rule of law,” then we need to
follow it ourselves. Or as the New York Post opined:
“A lot of goons are running around in Iraq on behalf of U.S.
diplomats. Failure to rein them in will have dire consequences…
“Exactly what happened still isn’t clear…But the massacre
remains a travesty – one that the United States needs to address
quickly if it wants to preserve the still-fragile progress in law and
order that is emerging as a result of the troop surge….
“The dangers of Blackwater’s continued lack of accountability
should be clear:
“It leads the swollen-headed among the contractors to think they
can do whatever they please – opening the door to possible
atrocities.
“It feeds the perception of Americans as arrogant occupiers.
“It fosters an atmosphere of recklessness – at the exact moment
when U.S. troops seem to be winning Iraqi trust….
“(How) can imams and tribal and party leaders – and their
gunmen – trust Petraeus, when, for all they can see, the U.S.
government is employing irresponsible ‘militias’ of its own, in
the form of private contractors?”
Meanwhile, Turkey and Iraq reached agreement on a security
pact aimed at curbing the PKK, the Kurdish separatist group, but
Turkish troops still aren’t allowed to pursue PKK fighters over
the border into Iraq.
Burma: I may not be an expert on Burmese history (I refuse to
use the junta’s preferred name of Myanmar), but President Bush
and everyone else seem to be saying the generals have been in
control 19 years. My knowledge says it’s more like 45 years,
with a worthless civilian puppet or two thrown in the mix.
80 percent of the 50 million residents here identify with the
Buddhist faith and it was something as innocuous as a fuel
increase, compared to far more egregious past abuses, that got
the country’s monks out into the streets to launch a series of
protests.
But now the government has cracked down in a situation
reminiscent of Tiananmen Square and by Friday had cut off
Internet and cellphone service, both of which it controls, as it
ringed the monks’ quarters and shrines. Activist Aung San Suu
Kyi, a 1991 Nobel Peace Prize winner who also won a 1990
election that the generals then disavowed, emerged briefly from
house arrest before being taken away again.
And while most of the world community has condemned
Burma’s thugocracy, little is being done. The Washington Post
opined:
“The problem is that the ‘whole world’ is not yet prepared to
prevent a massacre of monks. Several countries that like to think
of themselves as strategic partners of the West – in particular,
Russia and China – are blocking concerted international action
against the regime. China, which has taken advantage of
Burma’s pariah status to turn it into a virtual economic colony,
came out against UN sanctions yesterday (Wednesday). Russia’s
foreign ministry issued a statement rejecting ‘interference in the
domestic affairs’ of Burma and predicting that ‘the situation will
be back to normal soon’ – chilling words considering what the
troops in Rangoon would have to do to return the situation to
‘normal.’
“Yesterday, Russia and China prevented the Security Council
even from condemning the violence against protesters. In effect,
they have given the regime a green light for brutal repression.
We can hope that the generals will be deterred by the warnings
about the war crimes trials that could await them, or that their
officers and conscripts will refuse to carry out their orders. If the
repression proceeds, Russian President Vladimir Putin and
Chinese President Hu Jintao will have Burma’s blood on their
hands.”
They already do by this standard.
Pakistan: President Musharraf cracked down on opposition
leaders, but the Chief Justice of the Supreme Court ordered the
release of those arrested, once against pitting Chaudhry against
the leader that had fired him. The same court did, however, rule
Musharraf can stand for election while being head of the
country’s army, thus dismissing challenges to his right to hold
both posts. The presidential vote is on for Oct. 6, ahead of
former prime minister Benazir Bhutto’s return from exile. A
security ring has been thrown around Islamabad, and authorities
even prevented parents from taking children to school. That’s
our boy!
Lebanon: The election to select a new president was postponed
from Sept. 25 to Oct. 23 and the reason was they didn’t have a
quorum in parliament, as I wrote could be the case last week,
with Hizbullah and other Shia parties boycotting the opening of
the session. What a freakin’ mess.
North Korea: The nation’s No. 2 met with a Syrian delegation in
Pyongyang, thereby confirming talk of some kind of developing
alliance between these two. South Korean President Roh is
heading to Pyongyang for his summit with Kim Jong-il next
week and is already facing harsh criticism in Seoul because Kim
is hellbent on having Roh observe one of those precious North
Korean celebrations, only this one portrays the defeat of South
Korean troops.
China: Officials are conceding there are real problems with the
Three Gorges Dam, the world’s biggest hydropower project.
Experts have concluded the dam faces accelerating
environmental problems that “could lead to catastrophe.” The
issues include erosion and landslides, pollution and ‘ecological
deterioration’ caused by ‘irrational development’ along the river.
“We absolutely cannot relax our guard against…security
problems created by the Three Gorges project. We cannot
sacrifice our environment for short-term economic prosperity,”
said the director of the project’s construction body. [Sydney
Morning Herald]
But it’s too late, and the government has proven it won’t act.
On a related matter, Jim Yardley of the New York Times had a
story on Shijiazhuang, China, a city in the North China Plain of
two million people where water is drying up. The Chinese are so
ignorant, however, that “One new upscale housing development
is advertising waterfront property on lakes filled with pumped
groundwater. Another half-built complex, the Arc de Royal, is
rising above one of the lowest points in the city’s water table.”
It’s just another example of China’s water crisis. You need it for
crops and you need clean water to drink, but at the same time
China’s key growing areas are faced with drought, the water
table is plummeting, and what water is available is more often
than not polluted by industrial dumping and thus laced with
chemicals.
When I came back from my trip on Wednesday evening, I saw a
piece NBC News was doing on water in Africa and how about 1
in 3 don’t have access to clean drinking water on the entire
continent. What have I said since the start of StocksandNews?
“Clean water and good roads are the keys to development” and
that those who run around the developing world promoting the
use of computers where clean water isn’t yet available are truly
idiots.
Germany: Chancellor Angela Merkel met with and praised the
Dalai Lama, thereby infuriating China, whose ambassador
condemned the act in the harshest terms.
Ireland: I was surprised to see such a heated debate in the press
when I arrived here regarding the fate of Prime Minister Bertie
Ahern. Ahern was forced to testify for four days before a
tribunal examining his past finances, including allegations
concerning ill-documented sources of more than $140,000 in
cash dating back to 1994 and 1995, while Ahern admitted he
kept no personal bank accounts in Ireland from 1987 to 1993.
Some opposition leaders are urging Ahern to resign, but this
doesn’t look likely.
Random Musings
–In the world of politics, the Wall Street Journal, which broke
the Norman Hsu scandal, had an extensive piece on another
Clinton connection that is going very bad, this one involving 34-
year-old Douglas Band. Band was a former White House intern
who became President Clinton’s personal aide in 1998 and has
been by his side since. Band then brought in some 29-year-old
Italian pretty boy who claims to have connections with the
Vatican. This charlatan then raised $100 million for a fund
designed to redevelop Roman Catholic Church property.
But Clinton’s chief money asset, $billionaire Ron Burkle, got
swept up with the Italian in what turned out to be a scam and is
now suing the pretty boy. The president himself appears to be in
the clear….thus far.
Meanwhile, actor/director Rob Reiner, as influential in
Hollywood political circles as they come, is endorsing Hillary.
Yes, Reiner is a hardcore liberal and I’m a moderate/
conservative, I’d like to think, but I’ve always found him pretty
balanced. For example, as reported by the Los Angeles Times,
the other day Reiner said he found the MoveOn.org
characterization of Gen. David Petraeus as “General Betray Us”
to be “deplorable.” “This is a guy who is a military officer who
is working hard to do his job.” Too bad more responsible voices
from the Democratic side didn’t say the same. Reiner said he is
ready to go on the stump for Sen. Clinton.
–Meanwhile, us elephants have to deal with the likes of Sen.
Larry Craig, who just isn’t ready to leave.
And as for the latest polling in New Hampshire, Mitt Romney is
at 23 percent, Rudy Giuliani 22, John McCain 17 and Fred
Thompson 12. I’m sorry, but Thompson’s bid is a total joke.
Plus, the leading Republican candidates were idiots for skipping
the presidential minority forum the other day at Morgan State.
We’re just begging to lose 55-45 in ’08, or worse, and frankly I
really don’t care at this point. This isn’t the party I’ve long been
registered to.
–So I’m glancing at this story in the Oct. 1, 2007, issue of
BusinessWeek and some companies are looking at social
networking sites such as MySpace and Facebook as not only a
place to market their products, “But many are also adopting the
same Web technology to create internal networks. It turns out to
be an efficient way to mine for in-house expertise, discover new
recruits, and share information within their own walls.”
Why this has to be one of the stupidest ideas I’ve ever seen.
–Interesting piece in the L.A. Times concerning the decline in
homicides in some southern Los Angeles neighborhoods,
including Watts, off about 50% just this year. Police Chief
William Bratton has sought out gang intervention workers, many
of whom are former gang members. Said Deputy Police Chief
Charlie Beck, “For the first time, we’re requiring captains to call
the gang interventionists, give them the word on the shooting and
get out there and avert another homicide.” The interventionists
are good at “rumor control.” Not all of these folks are angels,
but it’s hard to argue with the bottom line and L.A., overall, is
looking at its lowest murder rate since 1970.
–For all the positives about the Irish economy, a local friend of
mine there was telling me the horror story of setting up a new
office 200 yards from the old one. It’s taken him over seven
weeks to get a simple phone line. “Why, because the demand is
that great?” “No, because they are so incredibly inefficient!”
[And allow me a travel plug. If you go golfing at Lahinch, make
sure you stay at the new Vaughan Lodge in town. It’s a five-
minute walk to the club and three minutes to the pubs. Proprietor
Michael Vaughan is the nicest hotelier I’ve ever come across and
the rooms have all the modern amenities, rare for this part of the
country.]
–From a story by Jonathan Leake in one of the Irish papers (I
clipped it out and forgot to write down the source…my bad):
“Scientists are considering a plan to combat climate change by
dumping millions of tons of iron into the ocean to alter its
chemical make-up.
“They believe the iron could act as a ‘fertilizer,’ promoting the
growth of tons of plankton that would soak up carbon dioxide
from the surrounding sea water. When the plankton dies, their
bodies would sink into the deepest waters and sediments, where
the carbon would be locked up indefinitely.”
I didn’t know dead plankton sank. Did you? Kids, don’t try this
at home, by the way. Let the professionals handle it.
–Vaclav Havel, former president of the Czech Republic, in an
op-ed for the New York Times on climate change.
“Whenever I reflect on the problems of today’s world, whether
they concern the economy, society, culture, security, ecology or
civilization in general, I always end up confronting the moral
question: what action is responsible or acceptable? The moral
order, our conscience and human rights – these are the most
important issues at the beginning of the third millennium.
“We must return again and again to the roots of human existence
and consider our prospects in centuries to come. We must
analyze everything open-mindedly, soberly, unideologically and
unobsessively, and project our knowledge into practical policies.
Maybe it is no longer a matter of simply promoting energy-
saving technologies, but chiefly of introducing ecologically clean
technologies, of diversifying resources and of not relying on just
one invention as a panacea.
“I’m skeptical that a problem as complex as climate change can
be solved by any single branch of science. Technological
measures and regulations are important, but equally important is
support for education, ecological training and ethics – a
consciousness of the commonality of all living beings and an
emphasis on shared responsibility.
“Either we will achieve an awareness of our place in the living
and life-giving organism of our planet, or we will face the threat
that our evolutionary journey may be set back thousands or even
millions of years. That is why we must see this issue as a
challenge to behave responsibly and not as a harbinger of the end
of the world.
“The end of the world has been anticipated many times and has
never come, of course. And it won’t come this time either. We
need not fear for our planet. It was here before us and most
likely will be here after us. But that doesn’t mean that the human
race is not at serious risk. As a result of our endeavors and our
irresponsibility our climate might leave no place for us. If we
drag our feet, the scope for decision-making and hence for our
individual freedom – could be considerably reduced.”
All I know is that when my flight from Ireland crossed the
southern tip of Greenland, I didn’t see a lot of snow and ice as I
have in past years, even at this time of the season. I did see a
polar bear, though, at what looked to be an outdoor café,
guzzling a beer. So there are plusses and minuses even for them.
–Lastly, I obviously missed “The War” but had long ago
ordered the DVD set. As reader Chris C. noted, one theme
shines through. “The WW II generation seemed to know how to
cut through the BS in mobilizing and dealing with these most
challenging of times.” Some of us aren’t so sure the current
generation knows how to do this.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $750
Oil, $81.66
Returns for the week 9/24-9/28
Dow Jones +0.5% [13895]
S&P 500 +0.1% [1526]
S&P MidCap +0.4%
Russell 2000 -1.0%
Nasdaq +1.1% [2701]
Returns for the period 1/1/07-9/28/07
Dow Jones +11.5%
S&P 500 +7.6%
S&P MidCap +10.0%
Russell 2000 +2.3%
Nasdaq +11.8%
Bulls 55.6
Bears 25.6 [Source: Chartcraft / Investors Intelligence…close to
an outright sell signal…which is generally around 60/20,
bull/bear. Reminder, this is a contrarian indicator.]
Have a great week. I appreciate your support.
And Martin, thanks for all you did this week. Joanne, welcome
aboard.
Brian Trumbore
