[Posted 2:00 AM ET…from Moscow]
Wall Street
Recognizing I may have missed a few issues, being far from
home base, this was another week where banks and brokerages
of all stripes attempted to convince the rest of us they had a
handle on the mortgage securities crisis, while a few titans of
Wall Street exhibited unusual candor.
The writedowns continued, with Bear Stearns coming clean on
$1.2 billion and Barclay’s $2.7 billion, among those weighing in,
while you also had the following:
Wells Fargo’s CEO said the housing sector was undergoing its
worst decline since the Great Depression.
HSBC said problems in bad debts were spreading to other
segments of the economy outside housing and the mortgage
business.
Blackrock’s Laurence Fink said “Many institutions don’t
understand what the credit crunch is going to do to earnings and
their balance sheet.”
Blackstone President Tony James added, “The mortgage black
hole is, I think, worse than anyone saw. Deeper, darker, scarier.
[The banks] are now looking at new reserves and my sense…is
they don’t have a clear picture of how this will play out and
confidence is low.” [Blackstone CEO Stephen Schwarzman,
though, is still worth about $5.5 billion and paying $400 for a
crab claw. And it better be fresh!]
So it should be no surprise that the likes of UBS could be facing
further carnage in the fourth quarter on into next year. [UBS is
rumored to be writing down $7 billion in Q4.]
Plus, as in the case of Bear Stearns, the lawsuits are beginning to
pile up with Bear accused by the state of Massachusetts of self-
dealing, at the expense of its clients, in the two hedge funds that
blew up a while back.
Even Rupert Murdoch chimed in this week, saying the subprime
crisis will continue to rock the world economy, with “quite a few
more shocks, particularly in Europe.”
[The European Union’s executive arm, the European
Commission, this week issued a specific warning about the
housing sector in those countries that have seen the fastest
growth; Spain, Ireland, the UK, and France. Sound familiar?
While declines have been orderly thus far, the EC fears
something far more volatile, “the historical experience suggests
that major housing downturns have also had a substantial
macroeconomic impact.”]
But wait…there’s more! You also had the distressing issue of
Bank of America, Legg Mason and others admitting to shoring
up their money market funds, to the tune of at least a collective
$500 million, to replace some structured investment vehicles
(SIVs) that were in the portfolios and have since defaulted. Any
firm letting a money market fund “break a buck,” the sacred
$1.00 net asset value, would spell the kiss of death for that
brokerage or fund family.
And we all await to see what Wall Street and its banking
brethren scattered around the country are going to do with their
Level 3 assets under new accounting rules…the “mark-to-make
believe sort.”
Goldman Sachs, for example, has 6.9 percent of its $1.05 trillion
in assets that fall into this category, though to be fair to
Goldman, its CEO, Lloyd Blankfein, reassured investors that the
investment giant’s subprime exposure is manageable and that, in
fact, they have continued to make money playing the other side
of the trade.
But there’s another issue out there, a rather serious one, and that
is emerging inflation…around the world. It’s about rapidly
rising fuel and food costs, particularly, of the kind that most
severely and immediately impact the developing world. Whether
you’re talking Indonesia, Vietnam, China, Nigeria, or Latin
America, those governments that have been heavily subsidizing
some of these costs can do so for only so long before it severely
impacts their own budgets, with the result being price increases
on a people already stretched to the max. Last weekend in one
western Chinese city, for example, three people were killed in a
stampede for low-priced cooking oil after the retailer Carrefour
offered a 20 percent discount on the product.
China is ground zero, it would seem, as inflation hit 6.5 percent
in October, with food prices up 17.9 percent over the past year.
The government hopes it’s a temporary shock due to issues such
as pig disease that have led to a surge in price for a staple of the
Chinese diet. But on the fuel front, Beijing has to keep weighing
the impact of further increases on natural gas and gasoline
(including diesel). For now in the case of the former, the
increase is only at the commercial level, but soon will have to be
passed onto an increasingly restive population.
[China also continues to deal with a speculative boom of
mammoth proportions as capital spending, despite the
government’s efforts to rein it in, soared another 26.9 percent in
October. This time, you can blame the real estate bubble as
much as factory and road construction projects. Property prices
rose 8 percent in the third quarter in China’s 70 largest cities, just
over Q2 levels.]
So when will the global slowdown hit? It already is, at varying
rates of speed. In the 13-nation eurozone, for instance, while the
figure on third quarter growth, up 0.7 percent, was better than
expected and an increase from the second quarter’s 0.3% rise,
everyone knows this is backwards looking and the pace of future
growth will be far slower.
The 27 nations using the euro currency also face an inflation rate
far above that normally acceptable for the European Central
Bank.
Back in the U.S., there are obviously signs of inflation all over
the place, with but one everyday example being another 6.9
percent hike by UPS for its standard air packages in 2008,
equaling 2007’s increase. Blame higher fuel costs here. [Rival
FedEx is blaming higher fuel costs for a significantly reduced
earnings forecast.]
Is it any wonder then that retail sales in the U.S. are punk? I’ll
spare you further doom and gloom, though. It’s nearing happy
hour in Moscow.
Street Bytes
–The major averages advanced, mildly, while small and mid-cap
issues declined again. For the week the Dow Jones added 1.0
percent to 13176, while the S&P 500 and Nasdaq each added 0.4
percent to close at 1458 and 2657, respectively. As in the above
FedEx situation, earnings news was mixed at best, though Wal-
Mart provided a big lift on Tuesday with its own improved
forecast as it appears ready to gobble up the competition this
Christmas and beyond as we all seek low prices.
–U.S. Treasury Yields
6-mo. 3.56% 2-yr. 3.34% 10-yr. 4.17% 30-yr. 4.54%
Bonds rallied again on the feeling that the slowing economy has
to trump any inflation fears when it comes to future Federal
Reserve decisions on interest rates. That said, one Fed governor,
Kroszner, says further rate cuts aren’t necessary.
–The International Energy Agency reduced its fourth quarter
outlook for global demand, as well as 2008’s, with $90+ oil
finally starting to bite, per the above. OPEC is showing no signs
of increasing production further, despite the pleas of non-
producing nations, and there is a question just how much OPEC
can increase output, anyway. They next meet Dec. 5.
–The Energy Information Agency estimates that crude oil
revenues for OPEC nations will reach $658 billion this year, up 9
percent from 2006, and rise another 16 percent to over $760
billion in 2008. Since 1998, oil income is up five-fold. Of
course the issue of the day is where do these petrodollars flow?
Into which currencies, stocks and bonds, as the sovereign wealth
funds seek high-profile acquisitions that will present all manner
of issues for governments such as the United States.
–There is much talk of Brazil’s new oil and natural gas finds, but
just as in the case of a recent Gulf of Mexico discovery, these are
at least five years from adding to global output and not worth any
more ink until then. Plus in both instances there are immense
challenges to get drop one.
–Related to the above, the Financial Times reports that the Big
Five international oil companies, ExxonMobil, BP, Chevron,
Royal Dutch Shell and ConocoPhillips have reduced spending on
exploration and development between 1998 and 2006, despite the
incentive of significantly higher prices. 56 percent of their
operating cash flow has been used for share buybacks and
dividends. In a report by the James A. Baker III Institute for
Public Policy, the authors conclude “The oil majors are not
replacing reserves and, therefore, are seemingly slowly
liquidating their long-term asset base.”
–Amid all the doom and gloom, Wall Street is still poised to
record its second-most profitable year after a record performance
in 2006, as noted by the Herald Tribune’s Christine Harper,
which some say means once all the garbage on the books is
written off, the Street’s giants will soar yet again. Point taken, I
just feel the overall global economy will have something to say
about this.
However, an announcement by UBS that its investment bankers
and traders would have their cash compensation capped at
$750,000 for 2007 is bumming out a lot of folks. Better to have
cash in the hand than stock, they say, the latter which will now
make up an increasing portion of their bonuses. As a consultant
told the Wall Street Journal, it’s about conserving corporate cash
in these uncertain times. But those who pay out more cash, such
as Goldman Sachs, it would appear, will continue to have the
pick of the best talent.
–And in keeping with the above, the Times’ Gretchen
Morgenson quotes Northern Trust’s Paul Kasriel, whose own
research shows that “profits from the financial sector now
account for 31 percent of total U.S. corporate earnings – up from
20 percent in 1990 and 8 percent in 1950.” Or as Morgenson
adds, “Profits from this country’s financial engineers now far
exceed those generated by mechanical engineers.”
Overall, Kasriel, a noted bear, says “What (I know) is that we
have never had a more highly leveraged economy than we have
today. We have never had a more highly leveraged household
sector and we have never had a more highly leveraged housing
sector than we have today.”
In other words, don’t rely on business spending to make up for
the slack when the consumer tightens their belt.
–It shouldn’t come as any great surprise that the foreclosure rate,
as measured in large metropolitan areas, is by far the highest in
California, Florida and Ohio. In Stockton, Calif., fully 1 in 31
households is going through the process; a staggering figure
when you think about the knock-on effects throughout an entire
neighborhood when the first property goes down.
–Shares in Fannie Mae hit a 10-year low at one point on Friday
as the mortgage king said it was announcing a new accounting
change that some analysts believe allows Fannie to hide bad
loans.
–Japan’s GDP for the third quarter came in positive, up 0.6
percent, meaning it avoided two straight negative quarters, the
classic definition of recession. I said the other week that Japan
was already in recession, so I stand corrected. But Japan is not
about to boom.
–What a mess in South Korea over the largest conglomerate,
Samsung. President Roh’s government is now engulfed in the
corruption scandal and his top anticorruption chief faces
allegations of accepting bribes himself from Samsung. So you
might say the fellow was ill-suited for the job. Roh is only in
office another few months as he staggers to the finish, which is
why he is so desperate to cut deals with North Korea to secure
some kind of legacy.
–Maybe I’m imagining things, but it seems to me the language
used on the global warming front is changing per my long-held
belief that it is really a global war on pollution rather than
warming. It makes it easier to identify and not one right-thinking
individual can disagree.
Case in point, China, part XXVI.
The South China Morning Post reports that a record 30.5 billion
tons of industrial, farming and human waste were dumped into
the Yangtze River last year. As a scientist described it, coupled
with the increasingly catastrophic Three Gorges dam project, the
waste in the Yangtze is creating a “giant toilet bowl” of trapped
sewerage.
–The most dangerous strain of bird flu was found on a poultry
farm in Britain, and probably entered the country via the
Netherlands.
–Shares in E*Trade nose-dived after a Citigroup analyst
essentially told customers of the online brokerage firm to take
their assets out because E*Trade faced bankruptcy due to
problems in an investment portfolio loaded with bad mortgages.
The company denied bankruptcy was imminent.
–John Thain, Mr. Personality, is leaving the New York Stock
Exchange for Merrill Lynch. So today is Nov. 17, but we learn
that Thain is being paid a ‘bonus’ of $15 million this year by
Merrill. That’s $15 million to learn his way around
headquarters, as in find out where the coffee is, the toner for the
copy machine…that sort of thing.
–Over at Citigroup, ousted CEO Chuck Prince will still receive a
$12.5 million bonus for 2007, which has to upset investment
bankers to no end as they see their own bonuses potentially
reduced there.
–Larry Page, co-founder of Google and worth $20 billion, is
getting married, which means both mega-billionaires are now off
the market; Page’s partner Sergey Brin having tied the knot six
months earlier. So, girls, you’re just going to have to focus your
attention elsewhere. Sorry to break this to you.
–Speaking of the rich and famous, Saudi Prince Alwaleed
became the first individual to purchase one of Airbus’ A380
Flying Wieners for an estimated $300 million, because he can.
–Remember Mikhail Khodorkovsky, the former Yukos
chairman? Oct. 25 was the mid-point of his 8-year prison
sentence and he was eligible to be released, but instead he
received a “reprimand” over a violation of prison rules. Do you
think it had anything to do with the coming election?
–Thanks to growing commerce between Russia and Finland, as
well as with Latvia, the border crossings are so jammed it can
take a truck 48-72 hours to get through. Talk about a nightmare,
and it’s not like you’re waiting in line with, say, a bunch of
American truckers, if you catch my drift.
–Russia’s economy has been growing about 7 percent a year
since 1999, thanks to oil, but you’ve all heard the stories about
its declining population, now 144 million as of 2006 and down
from 149 million in 1992. The life expectancy for a Russian
male remains an unbelievable 59. [And it just struck me…you
really don’t see any elderly gentlemen walking the streets of
Moscow.]
Unemployment is 5.7 percent, but as in everywhere else in the
world the gap between rich and poor is widening. With the
decline in population, though, that means Russia has a real need
for migrant workers. I didn’t realize Russia is home to the 2nd-
largest number of migrants in the world next to the U.S.,
anywhere from 5 to 10 million, according to various estimates I
saw. Of course you’ve also heard about violence against these
same foreigners.
–Later today I’m walking up to Pushkin Square to take in what
is supposed to be the world’s most popular McDonald’s
franchise. Janet Adamy of the Wall Street Journal once did a
piece I saved notes from (actually, I forgot to write down if this
is recent or not) that each Russian outlet serves 850,000 diners
annually, twice the rate of other markets for the chain.
The first one opened here in January 1990, the Pushkin Square
location, and you all remember those pictures. 5,000 lined up
before the doors even opened. It’s not easy opening a
McDonald’s here, or any franchise for that matter. For one thing
it’s difficult to find good suppliers, so McDonald’s built their
own plant in country.
You also have to deal with the bureaucracy. Opening a single
store can take up to 200 signatures from local officials, and then
you have the issue of skyrocketing real estate prices.
Foreign Affairs
Pakistan: I started writing weeks ago, long before President
Musharraf declared his state of emergency, that it was almost
fruitless to write of this spot because the story changed literally
every 24 hours. But at least for today, Musharraf said he will
hold parliamentary elections by Jan. 9, while Benazir Bhutto is
attempting to gain support of all the opposition groups for a true
coalition to confront Musharraf and force him out of office.
For his part, Musharraf has vowed he will step down as army
chief by the end of November to concentrate on the presidency,
while he also installed a new interim, caretaker government to sit
around and drink tea until the vote for the next parliament takes
place.
Iran: The International Atomic Energy Agency issued its latest
report on Tehran’s cooperation, or lack thereof, on its nuclear
program and IAEA chief Mohamed ElBaradei conceded Iran
does indeed have 3,000 centrifuges, enough for industrial-sized
production of enriched uranium, though it is also currently
operating the centrifuges at far less power than required to attain
enough weapons-grade material for a bomb.
So it’s back to the Group of Six; the United States, Britain,
France, Germany, Russia and China to see if a new round of
sanctions, what would be the third, can be hammered out, though
it goes without saying that any discussions should initially center
around the fact Iran has refused to suspend its operations per past
UN demands!
Earlier, France’s Nicolas Sarkozy and Germany’s Angela Merkel
had agreed further sanctions were required (a big move by
Merkel, who faces pressure from German companies doing
business with Iran), but Russia and China continue to maintain
further sanctions are not the way to resolve the dispute. They all
meet this coming week in what could be make or break
negotiations.
As for the threat to use force against Iran, Admiral William
Fallon, head of Central Command which has oversight of the
Middle East, said a strike on Iran was not “in the offing.”
“None of this is helped by the continuing stories that just keep
going around and around that any day there will be another war,
which is just not where we want to go,” he told the Financial
Times.
“That said, we have to make sure that there is no mistake on the
part of the Iranians about our resolve in tending to business in the
region. There has to be some combination of strength and
willingness to engage. How to come up with the right
combination of that is the real trick.”
Iraq: The Washington Post reported that senior U.S. military
commanders are furious with the Iraqi government’s inability to
get things done on critical issues, now that some semblance of
security has been established in large parts of the country. But
who is spearheading the reconstruction effort for the Iraqis?
Ahmad Chalabi. Yeah, him. The SOB just won’t go away.
As for the funding of the war effort in the U.S. Congress, while
I’m not totally up on this week’s debate, and while I in no way
condone the Democrats’ efforts to cut it, I also am not in favor of
issuing the president a blank check. Every single American
should be sickened by the massive fraud that has taken place in
Iraq and it’s time for the president to not only acknowledge it,
but appoint someone of impeccable credentials to very publicly
put a stop to it. There are scores who should be locked up for
life…some of the worst scum on the face of the earth.
Israel: Hamas killed seven at a rally in Gaza commemorating the
3rd anniversary of Yassir Arafat’s death. Some 250,000 of
Arafat’s Fatah disciples showed their support for their former
leader, at which point Hamas opened fire.
But for the first time, Palestinian President Mahmoud Abbas
called for the overthrow of Gaza’s Hamas rulers. “We have to
bring down this bunch, which took over Gaza with armed force
and is abusing the sufferings and pains of our people.”
As for the scheduled peace talks between Israel and the
Palestinians in Annapolis, it’s pretty hard to see much being
accomplished when a rather important player, Israeli Prime
Minister Ehud Olmert, faces a series of criminal investigations
into corruption allegations going back to the time before he
became prime minister. 55 percent of the people believe Olmert
should be removed from office.
Lebanon: Sheikh Nasrallah of Hizbullah said no power could
force his government to give up his arms, labeling those in the
democracy coalition “thieves and murderers.” Lebanon, though,
needs to come up with a president, and soon, because under the
constitution, if no one has been selected by Nov. 24, Prime
Minister Siniora takes over, and for the pro-Syrian factions, such
as Hizbullah, this could be a call for civil war.
Georgia: President Mikhail Saakashvili’s move to defuse the
crisis here by calling for early elections on Jan. 5 is already a
farce as the international community understands they will not be
free and fair. For starters, the opposition is fractured, with three
or four candidates likely to split the vote, which was
Saakashvili’s reason for opting for the de facto referendum now.
And while he is attempting to appease the West by lifting the
state of emergency, the Bush administration, for one, looks
exceedingly foolish for backing a man who used force against his
own people. [For the record, I originally fell for this guy, too.]
And in the Kremlin, Vladimir Putin points to the chaos and says,
‘See, this is what happens when you back the West…instability.’
Germany: Chancellor Angela Merkel faces a real crisis as her top
coalition partner and key deputy resigned. While Merkel is still
popular among the people, it is now virtually impossible for her
to overhaul the welfare state as she had planned. [And both
Germany and France have been dealing with crippling transport
strikes.]
Denmark: Right-winger Anders Fogh Rasmussen’s coalition won
a third team. Rasmussen smartly called for an early vote because
he saw that the economy, currently very strong and with just 3.1
percent unemployment, would weaken by the time an election
was mandated under the constitution. Rasmussen is yet another
advocating a tough approach on immigration.
[Spain is also dealing with an increasingly anti-immigrant
movement, a la just about everywhere else in Europe, as the
government seeks to ban a march on Saturday by a far-right
party, the National Alliance, whose manifesto is to defend “our
country, Spain, our blood and our race.”]
Venezuela: At a meeting of Latin American leaders, which
included Spain, President Hugo Chavez was ranting and raving
about former Spanish Prime Minister Jose Maria Aznar, at which
point King Juan Carlos told Chavez to “shut up.” The rest of the
world cheered, while politicians of all stripes in Spain defended
their king because of a pretty simple principle. Regardless of
your beliefs, you don’t allow another head of state to disrespect
one of your own.
Burma: Democracy advocate Aung San Suu Kyi, who has been
under house arrest for 12 of the past 18 years, said she is now
“very optimistic” real change is going to take place after the
military’s violent crackdown on Buddhist monks and anti-
government protesters. Let’s hope she’s right.
Russia: And now a few thoughts. It hasn’t been quite as
exciting, politically, as I had hoped this week because Moscow
Mayor Yury Luzhkov (along with President Putin) is controlling
the size of any demonstrations in opposition to Putin and the
United Russia party that the president decided to lead into the
Dec. 2 parliamentary elections.
But a funny thing happened on the way to a landslide. Food
inflation, just as in my opening Wall Street discussion, wherein
the pensioners (over age 60) are most unhappy, according to the
only poll tracking popularity, and have allowed United Russia to
slump to 50 percent approval, way down from just a few weeks
ago. Putin’s own popularity remains somewhere over 70
percent, it would seem, but United Russia likes to portray itself
as a major force behind everything good that happens in the
country and now inflation is running close to 10 percent. It’s a
real political hot potato, as over the past year milk is up 16.5
percent, butter up 20 percent, and vegetable oil up 17 percent.
Along these lines, I saw a story the day I arrived where a gas
explosion killed three in Moscow and the residents had been
complaining of the smell of gas for days before. That’s awful.
With such blatant incompetence, endemic throughout the
country, Putin has to know the people can turn on a dime.
So it was that this week Putin criticized United Russia, for
lacking any clear political ideology and attracting “all kinds of
crooks,” saying he only chose the party because there were no
other options.
But Putin also said, in reference to the Constitution limiting him
to two terms:
“If the people vote for United Russia, whose list I lead, it means
that they trust me and, in turn, means that I will have the moral
right to hold those in the Duma and the Cabinet responsible for
the implementation of the objectives that have been identified so
far.”
Meaning what? When asked at a meeting with workers this
week about his plans upon leaving office, he replied:
“In what form will I do this? I will refrain for now from
providing a direct answer. But various possibilities exist.”
Doesn’t sound like he’s leaving.
And watch next week to see if Mayor Luzhkov allows an
opposition rally that has been rumored. There could be an evil
reason for doing so…as in it would give Putin’s youth groups –
the Nashi, Young Guard and Young Russia – a chance to flex
their muscles. When I arrived Sunday, I learned later there was a
training exercise in a park here, where the youth were told how
to help the police with crowd control, as well as to acclimate
outsiders to the layout of central Moscow. The opposition, by
the way, has its own youth brigades, but as the papers put it, they
are confined to chat rooms.
Former Secretary of State Henry Kissinger was in town last
weekend and had these thoughts on the U.S. and Russia in a
speech he gave at the U.S. ambassador’s residence, as reported in
the Moscow Times.
While the United States swings between isolationism and
assertiveness, “the belief that we have the right to improve
everybody abroad,” Russia’s problem was its obsession with
security. “No country can have absolute security,” Kissinger
said, because “absolute security for one country means absolute
insecurity for other countries.”
Or Kissinger could have said Russia is perennially insecure and
paranoid.
As for Putin, don’t put it past him to drum up a ‘state of
emergency,’ either over Georgia because of its restive provinces
where Russia is a supporter of the insurgencies, or, believe it or
not, Estonia, because of an energy issue.
But as it stands now, he will become prime minister, after United
Russia wins a substantial majority, which is still a certainty, and
then perform the essential duties of president (controlling the
armed forces and security apparatus, as well as the security
council), without amending the constitution. Current Prime
Minister Viktor Zubkov, 66, could then receive Putin’s blessing
for the March presidential vote and serve a brief period of time
before a “health crisis” forces him out, whereupon Putin goes
back to being president. The constitution only says a president
can’t serve more than two consecutive terms. Thus, if Zubkov,
or another handpicked candidate, leaves office, a new election
would have to be called within three months at which point Putin
wins in a landslide…with the youth patrols riding shotgun.
Random Musings
–Yes, I welcomed the indictment of Barry Bonds, but as some of
us have been screaming, it’s a year too late! The damage to the
sport is great but us baseball fans will get past it. Heaven help
the sport, though, if we ever find out A-Rod isn’t as pure as the
driven snow.
Speaking of driven snow, the first few days here in Moscow
that’s all I had, it seemed. Lots and lots of wind-driven snow.
But what a great job the city does in cleaning it up as well as
possible.
–The latest New York Times/CBS News poll of Iowa caucus-
goers shows a statistical dead heat between Hillary Clinton,
Barack Obama and John Edwards at 25, 23 and 22 percent,
respectively. And on the Republican side, Mike Huckabee is
suddenly a strong second to Mitt Romney with 21 percent to
Romney’s 27. In New Hampshire, though, both Hillary and
Romney retain their substantial leads, but you all know this could
change depending on the Iowa results, now just about six weeks
away.
–Separately, at two campaign events in Iowa, aides to Hillary
Clinton encouraged audience members to ask her specific
questions. For her part, Ms. Clinton said this was news to her.
[cough cough]
Meanwhile, John McCain was asked by a questioner in South
Carolina, “How do we beat the b—-?” It’s pretty safe to say
McCain’s campaign didn’t plant this one.
–I see in the Las Vegas Democratic debate the other night that
Hillary said, “I think the American people know where I’ve
stood for 35 years.”
Correct me if I’m wrong, but until 1990 or thereabouts, 99
percent of the people in this country didn’t have a clue who she
was. So halve it.
–I liked this comment from David Saltonstall in the New York
Daily News concerning Bernard Kerik. He’s a “walking political
attack ad,” as already employed by John McCain, with McCain
blasting Kerik’s handling of the nascent Iraqi police force in
2003 when after just two months on the job, Kerik up and left.
As for the Kerik indictment, it describes him as “a money-
grubbing liar,” in Saltonstall’s words.
–New York Mayor Michael Bloomberg described the UN
headquarters building as a firetrap and said he may ban
schoolchildren from visiting it.
–New federal sentencing guidelines may reduce prison time for
crack cocaine offenses, a move that could result in 3,800 being
released within a year. But, this is federal, not state. It’s also,
however, the start of a long overdue reevaluation.
–What a horrible week for the environment amidst the two big
oil spills; one in San Francisco Bay and the other in the Black
Sea. In the latter, Russian and Ukrainian officials are describing
the damage as “so huge it can hardly be evaluated,” while some
are saying the Black Sea may take up to 15 years to get back to
normal. What’s sickening is that it was so preventable, but
Russia allowed boats suitable only for river traffic to serve as
tankers in the Black Sea where big storms kick up from time to
time. In this case 11 ships went down and about 20 sailors lost
their lives.
–A Pew Research Center poll notes that only 1 in 5 blacks say
things are better for them now than five years ago. In 1984,
almost two in five said that. Black leaders blame issues such as
crime, unemployment and mortgage foreclosures, or in the case
of folks like the National Urban League’s Marc Morial, as well
as Jesse Jackson, they say it has to do with situations such as the
Jenna Six.
But at the same time, 53% of those polled view individuals as
responsible for their own condition. This is the first time a
majority of Black America has felt this way.
–Goodness gracious. 12 university presidents at private
institutions earned more than $1 million in the 2005-06 school
year. 81 earned more than $500,000. I could do that. You
know, go to football and basketball games and say ‘hello’ to all
the students on campus. As for the fundraising aspect, that I’d
have a problem with, because as you now know the endowments
are already too big! Give it back for tuition relief.
–Tidbits from Russia:
The people are finally fighting back against police corruption.
Cars have always been stopped on highways with the police
forcing you to pay them a bribe of $5 to $20. But after a popular
activist was severely beaten for talking about this, the
government seems to have heard the peoples’ anger.
Separately, three pedestrians were shot when an armed motorist
opened fire after complaining that they were walking too slowly
at a crossing in Moscow city center.
But while walking around town, I’ve been struck by the absence
of car horns. They’re far more polite than I remembered. Then I
realized if you honked your horn, you have no clue who the
target of your displeasure is…i.e., he could be armed. It’s a little
different in New York. There everyone just honks the horn as a
form of exercise.
Violence at football (soccer) games is rampant here, as it is just
about everywhere in Europe for that matter, see Italy, but the
other day 63 fans aged 13 to 16 were arrested amid drunken
clashes that left a dark-skinned man dead. However, no suspects
were held because the attacks didn’t appear to be racially
motivated, so said the authorities. As of October 20, 52 people
had been killed in Moscow as a result of hate crimes, higher than
all of 2006.
But some of you may remember when I was here last in 2002,
exactly five years ago, which was right after Chechen terrorists
had taken over the theater and 129 later died in a botched rescue
effort. I was amazed then that my hotel, as well as the theaters
and museums I went to, still had zero visible security weeks
after.
Well that situation has changed, and for the better. Everywhere I
went had metal detectors and guards this time. The guards at my
hotel haven’t smiled at me once as I’ve been running out to play
in the snow, two or three times a day (he wrote, tongue-in-
cheek). But I still can’t believe how last time I could walk into
the Bolshoi with a heavy coat and no security check
whatsoever…or into the famous GUM shopping mall nearby,
another prime target. [What an awesome mall, by the way. This
isn’t your father’s GUM, for those of you familiar with the
Soviet-era shopping experience there.]
For you classical music lovers, I saw pianist Andras Schiff in
concert. Have to admit, I had never heard of the Hungarian, but
he was terrific. [I also first checked my coat at the wrong
theater!]
To wrap this up, though, let me just say I loved my time in
Moscow and I was treated well, even if the security guards didn’t
smile. It helped that I was comfortable getting around town (I
hoofed it everywhere, but will try the subway later today) and I
didn’t get a deep sense of foreboding. The people are doing
better (thanks to Russia’s oil-driven economy), even if
increasingly stressed by inflation. Some of the neighborhoods I
walked in, with new townhouse developments going up and
classy looking office buildings, were as nice as any I’ve seen in
America or most parts of Europe. Then again, there is a terrific
bubble in the real estate sector here just like elsewhere. More on
this next time.
Of course every museum I went to I saw a ton of school kids on
class trips and they are as cute as you’ll find anywhere, and
incredibly well-behaved; far better than our own, I’m sorry to
say.
The problem is the kids grow up fast. I saw mostly what I
thought were third and fourth graders, meaning in another few
years many will get pulled over to the dark side and the far-right
youth groups, none of which are up to any good. And when you
walk through the underground passageways at night, you better
keep your guard up, though I don’t want to leave the wrong
impression. You have to do that anywhere in the world. Hell, I
have to keep my guard up walking through an alley to my own
office back home at 5:00 a.m. each morning.
I guess I expected more ugliness than I saw…as in I saw none
that was out of the ordinary. But this is Russia, and there is quite
a history here, and its current leader is a troubling sort. He has
that background, after all, as Sen. McCain correctly reminds
those who forget. I can’t forget myself because my hotel is next
to the old Lubyanka prison/KGB headquarters of Stalin era
executions. A few weeks ago, just about two hundred meters
away, they were digging up a street for some rebuilding and
found an underground room with 34 skulls. Since it was near
Lubyanka, it was easy to draw some conclusions. As a local said
in the paper, what’s tragic is no one knows their names… they
just disappeared. Imagine their families.
But on a cheerier note, and switching gears drastically, the
women of the Hotel Metropol staff have been most helpful. I’d
talk more about Russian women in general, the most beautiful in
the world, but I’d probably be fined by the International Web
Site Association.
I did have a hard time initially connecting with the bartenders,
though. Try as I might I couldn’t really get them to open up,
until one time when I was reading the paper and I saw a picture
of an old Russian favorite of mine, the Afghan War hero (the
only one) turned politician, Alexander Lebed, who died a number
of years ago. I thought this guy was great, so I asked the three,
“Did you like Lebed?” That got them talking. Lebed was a big-
time favorite of theirs as well.
And then on Thursday night, as I was leaving the bar, having
polished off my nightcap, one of the bartenders goes, “Here…we
all wanted to give you this,” a large mug of beer for the room, as
the three smiled. That this was the last thing I needed then was
beside the point. Score another for Beer Diplomacy. In terms of
U.S.-Russian relations, I did a better job than our president has
done lately.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $787
Oil, $93.84
Returns for the week 11/12-11/16
Dow Jones +1.0% [13176]
S&P 500 +0.4% [1458]
S&P MidCap -1.1%
Russell 2000 -0.4%
Nasdaq +0.4% [2657]
Returns for the period 1/1/07-11/16/07
Dow Jones +5.7%
S&P 500 +2.9%
S&P MidCap +5.9%
Russell 2000 -2.3%
Nasdaq +9.2%
Bulls 51.1
Bears 26.7 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
