[Posted 7:00 AM ET]
What Do We Stand For? Part Deux
I was tempted to just rewrite my opening few pages from last
week, because, as I concluded then, “our system has become a
joke.” How else to describe the mortgage bailout plan, which in
some respects isn’t exactly a bailout, it being “voluntary,” we’ve
been told, while in actuality the plan to save America will have
zero impact on the economy. The stock market loved it, though,
and at the end of the day that’s all that really matters, sports
fans….isn’t it?
So what are we talking here? USA Today had a good Q&A on
some of the specifics.
Q: How many will benefit?
A: The program covers subprime adjustable-rate loans that were
made from Jan. 1, 2005, to July 31, 2007, and will reset from
Jan. 1, 2008, to July 31, 2010. Industry officials estimate that of
the 1.8 million loans in this category, 600,000 borrowers can’t
afford their loan even at the initial rate.
Of the other 1.2 million borrowers facing resets, about half are
likely to be able to refinance their loans, and the rest qualify for a
freeze or modification. Borrowers with more than 3% equity in
their homes are candidates for a refinance, possibly under a
government program.
Q: How do borrowers know if they qualify for a rate freeze?
A: To be on the fast track for a five-year or longer freeze,
borrowers must live in their homes, be current on the loans and
not missed more than one mortgage payment in the previous 12
months. Other criteria qualifying for fast track include
borrowers with credit scores under 660 who face a reset that
would boost payments more than 10%.
[To which Democratic Congressman Barney Frank said, “Talk
about moral hazard. We’ve all told people, don’t go any more
deeply into debt. Now we’re saying that people who go more
deeply into debt will have an advantage over people who don’t
go more deeply into debt.” – New York Times]
The bottom line is the plan will impact far fewer homeowners
than we are led to believe, so some of us are thinking, why
bother? That doesn’t mean a majority of Americans today, upon
hearing the details, are heartless. We certainly realize that just
one foreclosure in a neighborhood can spell big-time trouble for
everyone else, and some urban areas are being particularly hard
hit these days as the foreclosure wave turns into a tsunami.
But the rules of the game have changed; that’s what upsets us the
most. Following are a few examples of sentiment across the
country.
“Rather than over-leverage themselves with a risky mortgage,
[Casey and his wife] rented an apartment in La Jolla and waited
patiently for the housing market to drift back to earth, hoping
they hadn’t missed their chance to become homeowners.
“But now the government-brokered plan unveiled Thursday by
President Bush to ease terms on some subprime mortgages feels
like a ‘slap in the face.’
“Many people who prudently sat out the housing bubble – or
resisted the urge to cash out their home equity to help finance
their standard of living – share that visceral reaction. In part,
they resent on principle the rush to help a segment of society that
may not have acted responsibly. But they also fear that any
effort to prevent foreclosures could keep home prices from
falling to an affordable level….
“(The) undercurrent of antagonism to the program is strong and
is lent support by an economic principle that says people tend to
act more recklessly if they know they’ll be protected from the
consequences.” [Walter Hamilton / Los Angeles Times]
Economist Michael Darda: “Should you and I be bailing out
people who lied about their incomes, bit off more than they could
chew or were too lazy or ignorant to understand what kind of an
obligation they were entering into? I understand there are sleazy
people in the mortgage area, but what I don’t hear from
politicians is: ‘Does the individual bear any responsibility for this
problem?’”
Renae Merle of the Washington Post wrote: “The agreement has
sparked bitterness and anger among those who either sat out the
housing boom or endured friends’ snickers when they stuck with
a traditional mortgage and a smaller house. To some who
watched prices rise out of their reach or who moved to cheaper
cities, the agreement looks like a penalty for those who didn’t
gamble.
“ ‘What about those of us who played by the rules? Can we get
six months of free gasoline? Isn’t there something for the rest of
us?’ asked Tim MacKinnon.”
Then there is the political aspect. As Renae Merle wrote,
“[Politicians] need to appeal not only to people at risk of losing
their homes but also to those such as Ben Sullivan, who sees the
agreement as an undeserved bailout. After the 2001 technology
stock bust, many people lost significant value in their retirement
plans, Sullivan said. ‘No one was offering to pay for their 401(k)
losses. Why should they do it for their housing losses?’”
Look. This bailout, even if voluntary, is a mess. And not only
was the whole situation preventable, to a large extent, in terms of
Federal Reserve policy under Alan Greenspan, but there were
some very simple things the President of the United States could
have done early on; that is if he had had a clue in the first place,
and we all know by now he didn’t…on so many different levels
these past seven years.
What frustrates me to no end is the president has the ultimate
tool…the bully pulpit. How many times have I written that
instead of promoting some new retirement savings scheme and
messing with Social Security, we just need our public officials,
starting with the resident of the White House, to get on the
airwaves and promote IRAs and 401(k)s?! It has never, ever
happened in my lifetime. We’ve had public service
announcements for anti-drug campaigns, but never one to
promote savings. Just what the hell am I missing?
In the same respect, if we had had leaders who were worth a
damn, they would have known that a bubble was developing and
that as nice a goal as homeownership is, it’s not for everyone.
And if you don’t think that millions of Americans wouldn’t have
listened to the president, then you just haven’t followed the
history of this country. Think FDR, to cite one obvious example.
Oh, sure, there will be those reading this thinking, well, that
would have done a number on the homebuilding industry; talk
such as that. Well look what the consequence of our inaction
was. A few warnings on affordability and overstretching would
have worked wonders. We talk all the time about economic
literacy, and then do zero about it.
But here’s my bottom line. The Speculator/Ignoramus Bailout of
2007 is meaningless when analyzing the Big Picture. It is way
too small and slowing the rate of foreclosures in some
neighborhoods, while a noble gesture, doesn’t begin to address
the main point of this column for years now.
We are in the midst of a GLOBAL real estate bubble that has
popped or is close to doing so just about everywhere that matters.
Whether you are talking Spain, Russia, Britain, China, Australia
or the U.S., hundreds of millions have seen, or will see, their
number one asset not only decline in value, but then sit there for
an extended period of time whenever each respective market hits
bottom. This, in turn, will of course impact consumer spending
in a big way. And when the United States starts sneezing and
hacking (we’re still in the sniffle stage…but with a rising
temperature that has Mom feeling our foreheads), the rest of the
world will indeed catch cold. We are already seeing European
authorities, as well as U.S. economists and the Organization for
Economic Cooperation and Development (representing 30
developed nations), ratchet down growth forecasts. And no
amount of rate cuts is going to help the situation. That’s been
my position…and I’m sticking to it.
Street Bytes
–Stocks posted solid gains for a second straight week as the rally
off the lows continued with the Dow Jones adding 1.9% to
13625, while the S&P 500 gained 1.6% and Nasdaq picked up
1.7%. Traders pinned their hopes on an economy that may be
stronger than expected, though all I see are earnings estimates
continuing to be lowered for the fourth quarter and beyond.
And while Friday’s jobs report for November showed modest
growth of 94,000, there seem to be an increasing number of large
companies such as Home Depot and Dow Chemical announcing
cuts of about 1,000 employees each, while Bristol-Myers Squibb
said it was slashing its payroll by 10 percent, or about 4,500 jobs.
–U.S. Treasury Yields
6-mo. 3.27% 2-yr. 3.11% 10-yr. 4.11% 30-yr. 4.58%
For the record, the two-year Treasury note fell 80 basis points,
0.80 percent in the month of November, the biggest monthly
drop since June 1989, when the Fed was cutting rates
aggressively. This week yields rose some as money continued to
flow back to equities. But this Tuesday, the Fed weighs in again
on rates and another cut is a lock, though the Street is split on the
size…25 or 50 basis points.
–From PIMCO’s Bill Gross:
“What we are witnessing is essentially the breakdown of our
modern day banking system, a complex of leveraged lending so
hard to understand that Fed Chairman Ben Bernanke required a
face-to-face refresher course from hedge fund managers in mid-
August. My PIMCO colleague, Paul McCulley, has labeled it
the ‘Shadow Banking System’ because it has lain hidden for
years – untouched by regulation – yet free to magically and
mystically create and then package subprime mortgages into a
host of three-letter conduits that only Wall Street wizards could
explain.
“As I’ve noted before, it is certainly true that this shadow system
with its derivatives circling the globe has democratized credit.
And as the benefits of cheaper financing became available to the
many, as opposed to the few, placating and calming waves of
higher productivity and widespread diversification led to
accelerating economic growth, incomes, and corporate profits.
Yet, as is humanity’s wont, we overdid a good thing and the
subprime skim milk has soured.” [pimco.com]
–The economists at UCLA, who have done some great work on
real estate, do believe the U.S. economy and California will
escape recession in 2008. The UCLA Anderson forecast
concludes in part:
The loss of 3 million manufacturing jobs early this decade means
there is little room to cut more positions.
Most of the damage to the economy from the housing slump will
be over by the end of next year.
The weak dollar will help U.S. exports, aiding manufacturers in
Southern California.
Consumer spending will drop, but much of the effect will be felt
by other countries as U.S. imports of their products decline. [Los
Angeles Times]
–Then again, Morgan Stanley analysts concluded in a report this
week that U.S. home prices could slide another three years or
more.
“The property derivatives market seems to be suggesting that we
are in a very different environment, on the heels of market events
that could force a housing recession like none ever imagined or
experienced.
“The fundamental argument for going long housing is that
history has never seen such extended periods of house price
declines. We think that such arguments have limited credibility
because of limited periods of data and over-reliance on analysis
using national level data.”
[Delinquencies in America are now at an all-time high; a
whopping 5.6% in the third quarter as reported by the Mortgage
Bankers Association.]
–Noted economist Martin Feldstein, in an op-ed for the Wall
Street Journal, said “the probability of a recession in 2008 has
now reached 50%. If it occurs, it could be deeper and longer
than the recessions of the recent past.”
–A strategist I have a lot of respect for, Doug Cliggott, told
Barron’s “I think we’re very early in the economic slowdown.”
–I had the opportunity this week to speak to 120 members of the
Summit Old Guard, a delightful group of retirees. While the
focus was on foreign policy, I couldn’t help but ask if they all put
20% down when they purchased their first home. I didn’t need
to ask for a show of hands.
–I got a kick out of Ben Stein’s column in the Sunday Times,
particularly his broadside against Goldman Sachs, seeing as how
I had similar thoughts the day before. But Stein should have
talked about broader conflicts of interest rather than go after
Goldman economist Jan Hatzius.
Stein concludes, “Maybe it’s time for an investigation of just
what Wall Street and Goldman did to make money as they
pumped this mortgage mess into the economic system, and
sometimes were seemingly on both sides of the deal.”
It’s far more than mortgages, Mr. Stein.
–UK home prices fell for a third straight month, the longest such
stretch since 1995. In response the Bank of England cut interest
rates as concerns over the economy trumped any inflation fears,
as will undoubtedly be the case with our own Federal Reserve.
–OPEC opted to hold the line on production at existing levels.
–Tom Raum of the AP wrote a highly publicized story this week
on the national debt, which is expanding by about $1.4 billion a
day. Of course my favorite part of this amazing debacle is that
we are now paying out $430 billion in interest on it, the third
largest budget item behind Social Security / Medicare and
defense. Yet this figure still gets nowhere near the publicity it
deserves and it will just continue to grow and grow, along with
the debt, which itself will hit the $10 trillion mark around
January 2009.
Separately, Raum reports that foreign governments and investors
now hold $2.23 trillion – or 44 percent – of all publicly held
debt, estimated at $5.1 trillion. Japan is first with $586 billion,
followed by China at over $400 billion. Oil exporters, including
Saudi Arabia and the UAE, are at $125 billion and rising.
Between China and the oil kingpins, it’s a national security issue.
–The House and Senate continue to be at loggerheads over a
solution for the alternative minimum tax mess. Democrats in the
House pledge to pay for the fix by raising taxes elsewhere, while
Republicans, and the Senate as a whole, do not offset the lost
revenue.
A solution, even if another temporary one, will be found, but
regardless the IRS needs to reprogram its computers before
sending out the appropriate tax forms, which in turn means
substantial delays in refunds.
–Mortgage giant Fannie Mae cut its dividend 30 percent and
announced it would sell $7 billion of preferred stock to shore up
its capital base amidst the housing slump. The shares, which hit
$70.50 on Aug. 22 before plummeting to $26 by Nov. 20, have
since rallied back to $37.
–We note the passing of legendary oilman Robert O. Anderson,
90. From an obituary in the New York Times by Douglas
Martin:
“It was Mr. Anderson’s insistence on drilling one more
exploratory well on the North Slope (of Alaska) in 1967 – after a
succession of failures – that led to the discovery of what is still
the largest oil field yet found in North America; it has produced
billions of barrels of crude and accounts for a fifth of domestic
oil production.”
As Anderson told The Los Angeles Times in 1989, “There’s no
question that if we hadn’t made a discovery, it would have been
the last well drilled on the North Slope for a good many years.”
Anderson was also one of the first to warn about global warming
caused by fossil-fuel consumption back in the 1980s.
–An internet security company has noted the number of attacks
on Apple Macs has picked up considerably. There are now “100-
150 variants” of malicious code, or “malware,” floating around.
F-Secure adds that, overall, it has detected 500,000 viruses,
Trojans and worms in 2007, compared with 250,000 last year.
[Kevin Allison / Financial Times]
–The Organization for Economic Cooperation and Development
reported that international trade in counterfeit goods is $200
billion or 2 percent of world trade; not including fakes produced
for domestic consumption or digital piracy. India is now
challenging China for the top position, especially in fake
pharmaceuticals. And Russia is a strong third. Congratulations
to all for hoodwinking the rest of us.
–Former UnitedHealth Group CEO William McGuire has settled
with the federal government in the largest stock-option-
backdating case. The penalty starts at $466 million, including
$448 million of all equity-based pay and cash bonuses he
received from 2003 through 2006, which will go to
UnitedHealth, but the final figure could exceed $600 million.
–A test of about 1,200 children’s products by a Michigan-based
environmental health organization found that more than one-third
of the items contained lead and other dangerous chemicals,
including arsenic. Most of the products identified were not on
the Consumer Products Safety Commission list.
–The world’s most eligible bachelor, Google co-founder Larry
Page, is getting married today on Richard Branson’s private
Necker Island, next to Virgin Gorda. 600 guests are being flown
in on private planes in what promises to be a total nightmare.
Last May, Page’s partner Sergey Brin gave up bachelorhood.
–My portfolio: I still love being 80% cash / 20% equities, and I
have not done anything with my holdings the past few weeks.
–Business Week had a blurb on the success of “A Charlie Brown
Christmas.” First shown in 1965, it has been aired twice each
season by ABC since 2004 and last year pulled 21 million
viewers and $8.7 million in ad sales, according to TNS Media
Intelligence. That’s $218,000 for a 30-second spot, comparable
to any other prime time shows.
–Lastly, on a personal note, I was saddened to see that long-time
market watcher Larry Wachtel died. He was 77.
When Thomson McKinnon Securities’ brokerage arm was
picked up by then Prudential Securities in the fall of 1989, I
moved onto Pru’s national sales desk for about six months where
I was seated next to Larry, who had his own bullpen area from
which he would read the newswires for stories that he then
passed onto the brokerage force over the squawk box system.
What a character. Especially in the New York area, where he did
a spot three times daily on news radio WINS-AM with his
distinctive Brooklyn accent, Larry was one of the Street’s
legendary figures. Anyone that had the opportunity to work with
him loved the guy, including yours truly. Larry Wachtel will be
missed.
Foreign Affairs
Iran: In an absolutely stunning development, the National
Intelligence Estimate – a consensus view of all 16 U.S.
intelligence agencies – concluded that Iran stopped its nuclear
weapons program in 2003 and has not restarted it since. Just two
years ago, 2005, the NIE stated with “high confidence” that Iran
was in the development stage for producing nukes. This past
October, President Bush warned of “World War III.” Today, the
administration is flailing and the situation has actually become
far more dangerous. Opinion:
Gerard Baker / London Times
“This just in: the Third World War has been cancelled. Iran, a
founding member of the Axis of Evil, once deemed to be bent on
world domination at the point of a nuclear weapon, turns out to
have been about as threatening as a teddy bear. Well, an
inoffensively named, non-Sudanese teddy bear, I should quickly
emphasize.
“There we were, all thinking that Mahmoud Ahmadinejad, the
Iranian leader, was painstakingly fashioning a nuclear bomb to
further his dreams of a new caliphate, when it turns out that he
and the peace-loving mullahs of Tehran were actually busy
beating their swords into ploughshares. That at least was the
startling verdict of the National Intelligence Estimate on Iran,
released to widespread shock on Monday.
“The publication of this NIE may come to be regarded as a
latterday, real-world, but timelier, equivalent of that famous
graffito once scrawled on a bathroom wall: ‘Archduke Ferdinand
Found Alive: First World War All a Big Mistake.’
“The document, the studied conclusion of the work of [the intel
community], said that Iran had been pursuing a nuclear weapons
program but suspended it in 2003. Though it retains important
know-how and still seeks civilian nuclear power, Iran is many
years away from having a military capability, it added….
“(While) welcome news, the latest intelligence should be treated
with at least as much skepticism as America’s critics have
directed at almost every other piece of U.S. intelligence to have
become public in the past few years.”
John Bolton / Washington Post
“Rarely has a document from the supposedly hidden world of
intelligence had such an impact as the National Intelligence
Estimate….Rarely has an administration been so unprepared for
such an event. And rarely have vehement critics of the
‘intelligence community’ on issues such as Iraq’s weapons of
mass destruction reversed themselves so quickly.
“All this shows that we not only have a problem interpreting
what the mullahs in Tehran are up to, but also a more
fundamental problem: Too much of the intelligence community
is engaging in policy formulation rather than ‘intelligence’
analysis, and too many in Congress and the media are happy
about it. President Bush may not be able to repair his Iran policy
(which was not rigorous enough to begin with) in his last year,
but he would leave a lasting legacy by returning the intelligence
world to its proper function….
“[Many] involved in the drafting and approving of the NIE were
not intelligence professionals but refugees from the State
Department, brought into the new central bureaucracy of the
director of national intelligence. These officials had relatively
benign views of Iran’s nuclear intentions five and six years ago;
now they are writing those views as if they were received
wisdom from on high. In fact, these are precisely the policy
biases they had before, recycled as ‘intelligence judgments.’
“That such a flawed product could emerge after a drawn-out
bureaucratic struggle is extremely troubling. While the president
and others argue that we need to maintain pressure on Iran, this
‘intelligence’ torpedo has all but sunk those efforts, inadequate
as they were. Ironically, the NIE opens the way for Iran to
achieve its military nuclear ambitions in an essentially
unmolested fashion, to the detriment of us all.”
Editorial / Wall Street Journal
“Mr. Bush implied yesterday that the new estimate was based on
‘some new information,’ which remains classified. [Ed. the ‘new
information’ was later reported to be phone intercepts and
documents from meetings within the Iranian military.] We can
only hope so. But the indications that the Bush administration
was surprised by this NIE, and the way it scrambled yesterday to
contain its diplomatic consequences, hardly inspire even
‘medium confidence’ that our spooks have achieved some epic
breakthrough. The truth could as easily be that the
administration in its waning days has simply lost any control of
its bureaucracy – not that it ever had much.
“In any case, the real issue is not Iran’s nuclear weapons
program, but its nuclear program, period. As the NIE
acknowledges, Iran continues to enrich uranium on an industrial
scale – that is, build the capability to make the fuel for a potential
bomb. And it is doing so in open defiance of binding UN
resolutions. No less a source than the IAEA recently confirmed
that Iran already has blueprints to cast uranium in the shape of an
atomic bomb core….
“The larger worry here is how little we seem to have learned
from our previous intelligence failures. Over the course of a
decade, our intelligence services badly underestimated Saddam’s
nuclear ambitions, then overestimated them. Now they have
done a 180-degree turn on Iran, and in such a way that will
contribute to a complacency that will make it easier for Iran to
build a weapon. Our intelligence services are supposed to inform
the policies of elected officials, but increasingly their judgments
seem to be setting policy. This is dangerous.”
Iranian President Mahmoud Ahmadinejad
“This report…is announcing a victory for the Iranian nation in
the nuclear issue against all international powers….If you want
to start a new political game, the united Iranian nation will resist
you and will not retreat one step from its program. We will
continue our nuclear program and we will not give it up.”
Iran’s Foreign Ministry spokesman, Mohammad Ali-Hosseini
“This report proves many facts, the most important being that the
statements of (U.S. President) Bush and other United States
officials, who always speak of the serious danger of Iran’s
nuclear program, are fabricated and unreliable.”
Iranian government spokesman, Gholam-Hossein Elham
“U.S. officials have so far inflicted…damage on the Iranian
nation by spreading lies against the country and by disturbing
public opinion, therefore, they have to pay the price for their
action.”
U.S. Secretary of State Condoleezza Rice
“[It would be] a big mistake [to ease diplomatic pressure on Iran
despite the new findings.] I continue to see Iran as a dangerous
power in international politics. At this moment, it doesn’t appear
to have an active weaponization program. That frankly is good
news. But if it causes people to say, ‘Oh, well, then we don’t
need to worry about what the Iranians are doing,’ I think we will
have made a big mistake.”
Ironically, China appeared ready to support a third round of
sanctions against Tehran until the NIE estimate. China’s UN
ambassador, Guangya Wang, then said “I think we all start from
the presumption that now things have changed.”
But German Chancellor Angela Merkel, meeting with French
President Nicolas Sarkozy, said “Iran continues to represent a
threat. We and our partners would like to continue with the UN
process.”
Nicolas Sarkozy added, “Notwithstanding the latest
developments, everyone is fully conscious of the fact that there is
a will of the Iranian leaders to obtain nuclear weapons.”
But then Sarkozy, and President Bush, for that matter, said
“What made Iran move up to now, it was sanctions and
firmness.”
That’s just not accurate, if you are then referring to the NIE,
which speaks to 2003 and supposed suspension of the weapons
program, years before sanctions were introduced.
And then there is Bush himself. From his press conference on
Tuesday:
“In August, I think it was Mike McConnell [Director of National
Intelligence] who came in and said, we have some new
information. He didn’t tell me what the information was; he did
tell me it was going to take a while to analyze.”
And as you all know by now, President Bush, if we are to believe
him, didn’t ask Mr. McConnell what that information was and
instead went right ahead with his hard-line rhetoric. If it wasn’t
so serious, it would be almost laughable.
Personally, I do not for a minute believe the NIE, and frankly my
talents of deduction are as good as those of the 16 intel chiefs
that put the report together. President Bush is indeed right to
remain concerned, as are Angela Merkel and Nicolas Sarkozy.
The damage already done, though, in credibility, yet once again,
is crippling.
But what are people now saying louder than ever? Talk to Iran.
What has your editor said for years? Talk to Iran. What would
Gen. David Petraeus do if given the opportunity? Talk to Iran.
Why have I kept saying Bush should accept the invitation to
speak at Tehran University? To make Ahmadinejad look like a
fool when he turns it down. Who looks like the fool today?
George W. Bush.
Robert Kagan / Washington Post
“Beginning talks today does not limit American options in the
future. If the Iranians stonewall or refuse to talk – a distinct
possibility – they will establish a record of intransigence that can
be used against them now and in the critical years to come. It’s
possible the American offer itself could open fissures in Iran. In
any case, it is hard to see what other policy options are available.
This is the hand that has been dealt. The Bush administration
needs to be smart and creative enough to play it well.”
In the end, though, it really doesn’t matter what I, the
administration, the hawks, Merkel, Sarkozy, Russia or China
believe. With the NIE’s release, it’s now all about Israel. If Iran
is enriching uranium it can eventually weaponize it. Israel will
not let that happen. The White House can still opt to end-run
Ahmadinejad and engage Iranians like Hashemi Rafsanjani
(Ahmadinejad being No. 3 in the power structure, anyway), but
an Israeli strike in 2008 appears a certainty. There are actually
quite a few players in the Middle East who wouldn’t mind this,
though the blowback is unknowable.
Russia: As expected, Vlad the Great romped in last week’s
parliamentary elections as the party he headed, United Russia,
claimed 64 percent of the vote. Coupled with the 16 percent
garnered, collectively, by two other pro-Kremlin parties, Putin
has control of over 80 percent of the seats (proportional
representation hikes it further), with the Communists in
opposition. Not one member of the new Duma will be a pro-
West supporter. [7 percent was the threshold required for a party
to receive any seats.]
So Putin handily has control of over 2/3s of parliament should he
want to change the constitution to allow him to stay in office,
though he has vowed not to do that.
A declaration of a state of emergency could yet fit the bill, but by
December 23, Putin needs to nominate his handpicked successor
for the March 2 presidential vote. As I’ve noted before, 66-year-
old current Prime Minister Viktor Zubkov could be tabbed. The
two deputy prime ministers, Sergei Ivanov and Dmitri
Medvedev, are also candidates, though at this point I’d be very
surprised if Ivanov was named. [Remember, Ivanov could be
more dangerous than Putin.] One thing is for sure, Vlad has his
mandate, even if it was tainted by ballot stuffing and other
methods of trickery and deception. He certainly couldn’t care
less what a bunch of observers and Western pundits say. As
dissident Garry Kasparov noted, “[The Kremlin] is raping the
democratic system.”
Meanwhile, Russia, as announced earlier, formally suspended the
country’s participation in the 1990 Conventional Forces in
Europe treaty; one that limits the number of battle tanks, heavy
artillery and combat aircraft deployed and stored between the
Atlantic and Russia’s Ural mountains; plus it contained
confidence-building measures such as two weeks notice of any
troop deployments and missile launches.
And former President Mikhail Gorbachev gave a presentation in
Cambridge, Mass., wherein he said the U.S. and Russia are
headed towards a clash on the nuclear front unless there is an
aggressive move to reengage on arms control. Nuclear weapons
expert Graham Allison, speaking at the same conference, said “If
we remain on our current course, then we are going to go over a
cliff. There will be not just nuclear arms proliferation, but
eventually nuclear terrorism and even nuclear wars.”
As if that isn’t enough, Newsweek had a story addressing the
rivalries inside the Kremlin, involving former KGB or other
security services. As one political adviser to the Kremlin said,
“Nobody but Putin can provide the balance between the different
factions.” One wonders when clan warfare will break out.
Lastly, Ken S. passed along a story on how a Kremlin insider
bought up a blog site that was widely used by dissidents right
after the election. Putinism continues to spread. But as I alluded
to last week on the issue of inflation and growing labor tensions
in Russia, it is not going to be clear sailing for Vladimir in the
years ahead.
Venezuela: Not for nothing, but your editor told you last week
that President Hugo Chavez’s referendum to extend his powers
and the socialist revolution was “too close to call,” this as the
vast majority of pundits said that Chavez would romp to victory,
even if it meant fixing the result.
As it turned out the announced defeat was 51-49, though in
keeping with earlier opinion polls the actual tally was probably
more like 67-33.
Editorial / Wall Street Journal
“The stunning defeat Sunday…is more than a setback for
Venezuela’s messianic strongman. It is a victory for the ideal of
liberty across Latin America. What an affirmation of that ideal it
would be if the U.S. Congress now did its part to keep it alive by
voting to liberalize trade with Venezuela’s neighbors [such as
Colombia]….
“[The joy] this defeat has produced is warranted. But all
democrats in the region should be forewarned that Mr. Chavez
isn’t likely to stop his efforts at revolution inside or outside the
country. The president still has control of all the country’s
political institutions. Indeed in the early hours Monday morning
he warned the nation that his defeat is only ‘for now.’ He
pledged that he will get his reforms accomplished without
changing a single word of what he put before them on Sunday.
“Mr. Chavez remains a threat to the region. He is in a race
against time to impose his will before his star fades, as it already
has in Peru, Brazil and Mexico. His expansionist agenda has the
potential to undermine Colombia’s democracy, and has already
destabilized Bolivia and Ecuador.”
Chavez remains in power until 2012. On election night he said
“I have listened to the voice of the people and I will always be
listening to it.” Unfortunately, we’re still going to have to listen
to him for a while longer.
Iraq: Gen. David Petraeus said progress is being made but added
the military was still far from any “victory dance.” “Nobody in
uniform is doing victory dances in the end zone.”
Accompanying Petraeus was Defense Secretary Robert Gates,
who concluded that with the reduction in violence to date, the
“goal of a secure, stable and democratic Iraq is within reach.”
[Separately, in a story ripped from the sports pages with front
page potential, 3,000 fans showed up at a soccer game between
two Baghdad clubs. The stadium was ringed with both U.S. and
Iraqi forces, but only a week earlier just a few hundred showed
up.]
North Korea: President Bush sent a letter to Kim Jong-il.
Dear Lil’ Kim:
How are you? I’m lighting the White House Christmas tree
tonight. What do you all do for the holidays? How’s the tree
bark harvest going?
Anyway, give my regards to the mistress.
Best wishes,
George
—
It would seem that Pyongyang is slipping on its yearend deadline
to give a full accounting of its entire nuclear weapons program,
including whether it is enriching uranium (long suspected) as
well as the known plutonium program.
The White House seems to be bent on removing North Korea
from the terrorism blacklist if the information that is divulged
meets its requirements, but Japan is adamant the North not be
removed until Kim comes clean on some 13 Japanese abducted
in the 1980s. And also, just what was North Korea doing with
Syria?
Israel / Syria: A leading Israeli expert on nuclear weapons
programs, Uzi Even, one of the founders of the reactor at
Dimona, commented on the recent bomb attack on a suspected
Syrian weapons facility.
“I suspect that it was a plant for processing plutonium, namely, a
factory for assembling the bomb. I think the [North Koreans]
transferred to Syria weapons-grade plutonium in raw form, that
is nuggets of easily transported metal in protective cans. I think
the shaping and casting of the plutonium was supposed to be in
Syria.” [London Times]
Pakistan: Former prime minister Nawaz Sharif had already
vowed to boycott the January 8 parliamentary election, but
Pakistan election authorities barred him anyway, citing his
criminal record. Columnist Robert Novak weighed in on
Monday.
“Diplomats at the U.S. embassy in Islamabad could hardly
believe what President Bush said to anchor Charles Gibson on
ABC ‘World News’ Nov. 20. He described Pakistan’s President
Pervez Musharraf as ‘somebody who believes in democracy’ and
declared: ‘I understand how important he is in fighting extremists
and radicals.’ Was the president issuing Musharraf a free pass to
rig next month’s Pakistan elections?
“That was not Bush’s intention. But lavishing such praise on the
general who has ruled through military force led to assumptions
in Pakistan that America would blink at election-rigging.
Plotters in Islamabad seeking to undermine Benazir Bhutto’s
third try as premier can claim that U.S. diplomats demanding
democracy in Pakistan don’t represent what Bush really wants.”
As for Sharif, it’s clear to me he is plotting a coup, post-Jan. 8.
Lebanon: Even though Gen. Michel Suleiman is acceptable to
all sides for the empty presidency, there have been further delays
in formalizing it because the parties can’t agree on how to amend
the constitution to allow him to take the position. A key figure,
Christian opposition leader Michel Aoun, is demanding that the
next prime minister be a neutral figure, rather than a Sunni, as
the constitution now mandates.
[I also have to note this story out of the Daily Star: “A hailstorm
last week caused hundreds of cluster bombs to explode in the
South. Israel dropped around 4 million cluster bombs in the
southern region in the last 72 hours of the 2006 war. Around 1
million of the devices remain unexploded, according to the
United Nations.” Unreal.]
Saudi Arabia: Editorial / Washington Post
“Saudi Arabia’s foreign minister, Saud al-Faisal, basked in praise
and attention from the Bush administration at last week’s
Annapolis peace conference. He was thanked repeatedly for
deigning to attend the kickoff of Israeli-Palestinian talks;
national security adviser Stephen J. Hadley said he told the
prince that ‘I know it must have been a very difficult decision.’
Reporters took note as Prince Saud lambasted Israel and
explained why he could not possibly stoop to shake the hand of
Israeli Prime Minister Ehud Olmert. Thank goodness one
journalist thought to ask about the ‘Girl of Qatif.’
“The Girl of Qatif, as she is known in the Saudi press, is a 20-
year-old married woman who was gang-raped, together with a
male acquaintance, by seven men last year in her eastern Saudi
town. A judge sentenced the rapists to prison sentences – and
also condemned the woman to 90 lashes with a whip, for being
alone in a car with a man to whom she was unrelated. When the
women’s lawyer, one of Saudi Arabia’s most courageous human
rights advocates, appealed the case, another court increased the
woman’s penalty to 200 lashes and six months in jail….After
human rights groups and the State Department protested the
barbaric punishment and called on the Saudi government to
annul it, the Justice Ministry responded with a defiant statement
justifying the court’s decision….
“For several years [post-9/11] the Bush administration pressed
the Saudi regime for reforms; the regime responded with half
steps that didn’t change its essential nature. Most of the suicide
bombers in Iraq have been Saudis. Yet in the last year, led by
Secretary of State Condoleezza Rice, the Bush administration has
abruptly returned to describing Saudi Arabia as a ‘mainstream’
and ‘moderate’ state and a staunch U.S. ally. Once again the
Israeli-Palestinian conflict is treated as the Middle East’s most
critical problem and Prince Saud as a statesman who is to be
congratulated for appearing in the same room as an Israeli. The
case of the Girl of Qatif ought to be a reminder of what the Bush
administration has chosen to forget.”
Kosovo: We’re getting closer to violence here, as Serbia’s prime
minister said on Wednesday that “The State has no recourse
other than war when someone does not respect the UN Security
Council,” alluding to the efforts of the UN, the EU, Russia and
America to accommodate Serbia’s demands that Kosovo remain
part of its territory, as well as the majority Albanian population
who want Kosovo to become independent.
As reported by Richard Beeston of the London Times, “The
West is expected to propose ‘supervised independence’ that
would recognize Kosovo as an independent country, but under
EU supervision with NATO forces providing security.”
Serbia, and its ally Russia, disagree with the plan. We’re about
to learn a lot concerning the Kremlin’s agenda as Russia has
threatened to veto any UN proposal granting Kosovo
independence without the consent of Serbia.
Random Musings
–I’m invoking my ’24-hour’ rule on the CIA’s
acknowledgement that it destroyed some videotapes of
interrogations until there is more information as to who was told
what and when.
–Former Senator Warren Rudman, who co-authored a report on
U.S. domestic security vulnerabilities, pre-9/11, has called for
unlimited spending on port radiation detection efforts, as
reported by Jon Fox of Global Security Newswire. This comes
as the White House is looking to slash the budget for the
Homeland Security Dept., including for port security.
Rudman said, “I worry about a nuclear device coming in a sealed
container in the port of Miami or the port of New York or the
port of L.A., coming in with the seal never broken, never
inspected, put on the back of a truck, and off it goes to Denver.”
Rudman added the United States has completed just 20 percent
of the port security work he has advocated.
–UN Secretary-General Ban Ki Moon warned of coming wars
over water, with Asia of particular concern. As Leo Lewis of the
London Times reported:
“High population growth, rising consumption, pollution and poor
water management posed significant threats, adding that climate
change was making ‘a bad situation worse.’”
Mr. Ban blamed governments for ignoring the rapidly growing
crisis.
“Throughout the world, water resources continue to be spoiled,
wasted and degraded. The consequences for humanity are grave.
Water scarcity threatens economic and social gains and is a
potent fuel for wars and conflict.”
–According to the latest Des Moines Register survey of probable
caucus-goers, Barack Obama leads Hillary Clinton, 28-25, with
John Edwards at 23 percent. On the Republican side, Mike
Huckabee has pulled ahead with 29 percent to Mitt Romney’s 24,
Rudy Giuliani’s 13 and Fred Thompson’s 9. [A Newsweek poll
has Huckabee, startlingly, ahead of Romney 39-17.]
In New Hampshire, a Washington Post/ABC News survey has
Clinton at 35 percent, with Obama at 29.
Nationally, a Bloomberg/Los Angeles Times poll has Rudy
Giuliani with 23 percent and Mike Huckabee second at 17. For
Giuliani it is a big decline, down from 32 percent in the last
version of this survey. [Fred Thompson is at 14 and John
McCain at 11, while Romney only polls 9 nationally.]
On the Democratic side, the Bloomberg/L.A. Times poll has
Hillary Clinton with a wide lead, 45 to 21 over Obama, while
John Edwards only garners 11.
A USA Today/Gallup poll has Clinton ahead of Obama, 39-24,
nationally, but Clinton had been at 50 percent. For the
Republicans, Giuliani is at 25 to Huckabee’s 16, McCain’s 15,
Thompson’s 15, and Romney’s 12.
[All of these surveys were taken before Romney’s
groundbreaking speech on religion in America, Thursday. More
below.]
–Democratic fundraiser Norman Hsu was indicted on 15 counts
of duping investors out of $20 million in a Ponzi scheme, as well
as violating campaign finance laws. Mr. Hsu will haunt Hillary,
big time, if she grabs the Democratic nomination.
–Longtime reader Jeff S. and I were exchanging notes on Bill
Clinton and his motivations these days. As Jeff mused, “If she
loses in the general election or is a bad president, then Bill’s
legacy is tarnished. If she wins and is better (or as good) as he
was perceived to be, then does that dilute history’s view of Bill’s
presidency?” You just know Bill is thinking of this constantly.
–From an Editorial in New Hampshire’s Union Leader,
endorsing John McCain.
“We don’t agree with him on every issue. We disagree with him
strongly on campaign finance reform. What is most compelling
about McCain, however, is that his record, his character, and his
courage show him to be the most trustworthy, competent, and
conservative of all those seeking the nomination. Simply put,
McCain can be trusted to make informed decisions based on the
best interests of his country, come hell or high water.
“Competence, courage, and conviction are enormously important
for our next President to possess. No one has a better
understanding of U.S. interests and dangers right now than does
McCain. He was right on the mistakes made by the Bush
administration in prosecuting the Islamic terrorist war in Iraq and
he is being proved right on the way forward both there and
worldwide….
“We have known John McCain for many years….For now, we
leave you with this to ponder:
“When McCain was shot down and taken prisoner by the North
Vietnamese, he was repeatedly beaten. When his captors
discovered that his father was a top U.S. admiral, they ordered
him released for propaganda purposes. But McCain refused,
insisting that longer-held prisoners be released before him. So
they beat him some more. He never gave in then, and he won’t
give in to our enemies now.”
–I read all the stories on Rudy Giuliani and expenses incurred
while Judith Nathan was his mistress and I’ve got to tell you,
while I am not supporting Rudy, it’s old news.
–This is funny, especially for us New Jerseyans. Governor Jon
Corzine wants very badly to be president one day, so on
Thursday he traveled to Iowa to spend a day campaigning with
Hillary; a great chance for Corzine to get some national exposure
in light of the media train following her. Alas, Hillary opted at
the last minute to spend the day in New Hampshire, instead,
leaving Corzine to hit some diners alone, “escorted by a couple
of young aides from Clinton’s local staff,” as reported by the
Star-Ledger. Better luck next time, Governor.
–The Rev. Jesse Jackson was in Newark this week, speaking at a
high school, and in addressing the plight of our urban youth said,
“You must become odds busters and dream makers. You must
outdistance your odds and dream above your circumstances.”
Somehow, someday, this message must get through.
–I have disparaged Mitt Romney’s candidacy in the past, but I
watched his speech on religion Thursday and in terms of pure
political oratory, it ranks up there with the convention speeches
of Jesse Jackson and Mario Cuomo, to cite two examples from
the other side.
An example:
“We separate church and state affairs in this country, and for
good reason. No religion should dictate to the state nor should
the state interfere with the free practice of religion. But in recent
years, the notion of the separation of church and state has been
taken by some well beyond its original meaning. They seek to
remove from the public domain any acknowledgment of God.
Religion is seen as merely a private affair with no place in public
life. It is as if they are intent on establishing a new religion in
America – the religion of secularism. They are wrong.
“The founders proscribed the establishment of a state religion,
but they did not countenance the elimination of religion from a
public square. We are a nation ‘Under God’ and in God, we do
indeed trust.”
But in initially praising Romney’s address, New York Times
columnist David Brooks then said the following.
“When this country was founded, James Madison envisioned a
noisy public square with different religious denominations
arguing, competing and balancing each other’s passions. But
now the landscape of religious life has changed. Now its most
prominent feature is the supposed war between the faithful and
the faithless. Mitt Romney didn’t start this war, but speeches
like his both exploit and solidify this divide in people’s minds.
The supposed war between the faithful and the faithless has
exacted casualties.
“The first casualty is the national community. Romney
described a community yesterday. Observant Catholics,
Baptists, Methodists, Jews and Muslims are inside that
community. The nonobservant are not. There was not even a
perfunctory sentence showing respect for the nonreligious. I’m
assuming that Romney left that out in order to generate howls of
outrage in the liberal press.
“The second casualty of the faith war is theology itself. In
rallying the armies of faith against their supposed enemies,
Romney waved away any theological distinctions among them
with the brush of his hand. In this calculus, the faithful become a
tribe, marked by ethnic pride, a shared sense of victimization and
all the other markers of identity politics.”
And so the debate will continue.
–Japanese whale hunt update:
Peter Heller, author of “The Whale Warriors: The Battle at the
Bottom of the World to Save the Planet’s Largest Mammals.”
“The killing of a whale by the most modern methods is cruel.
An exploding harpoon, meant to kill quickly, rarely does more
than rupture the whale’s organs. The animal is winched to the
side of the kill ship, a probe is jabbed into it and thousands of
volts of electricity are run through it in an attempt to kill it faster,
though it often takes 15 or 20 minutes for the whale to drown.
“Why are the Japanese targeting these fragile species? Why are
they whaling at all?
“Surveys by the British polling outfit MORI show that only 1
percent of Japanese regularly eat whale meat. Only 11 percent
support whaling at all. More than 4,800 tons of surplus whale
meat is being stockpiled in freezers. Last year, the five large
seafood companies that owned the whaling fleet and operated it
for the Institute of Cetacean Research divested and got out of
whaling, citing poor consumer demand….
“Japanese officials often decry the cultural imperialism of
Western nations that hunt deer and slaughter cows and yet
condemn Japanese whaling. They point to a long tradition of
whaling in Japan and say they limit the hunt to a sustainable
level – about 1,400 whales this year.
“I asked noted marine biologist Sylvia Earle what she thought of
sustainable whaling. She responded, ‘Whales are long-lived,
slow-growing wildlife, unlike domesticated animals that convert
sunlight via plants to protein in less than a year. It defies logic to
think that mobilizing large ships consuming large amounts of
fuel with large crews traveling large distances to satisfy the tastes
of a small number of consumers qualifies as a reasonable use of
resources, let alone as a ‘sustainable’ enterprise.”
But as Heller points out, the Japanese are really concerned that if
whaling is limited, other controls on fisheries may follow and
they depend on seafood for 40 percent of their protein.
“Like fish, marine mammals the world over are struggling for
survival. Resource management policies based on cultural
traditions or national pride need to become a thing of the past.
The oceans face a tenuous future. Right now is a good time for
all of us to rethink how we use them.” [Los Angeles Times /
Star-Ledger]
–Green Bay Packers quarterback Brett Favre was named
“Sportsman of the Year” by Sports Illustrated. Favre said the
following on leadership and finding ways to raise his team’s
level of play.
“You do that by setting an example, by doing things the right
way. I’ve always shown up, I’ve always been prepared, I
practice every day. I practice hard. I study. No matter what
happens on the field, I never point blame at anybody else.
Everything I do comes back to leadership, the example I want to
set.”
–My sister-in-law asked me what I wanted for Christmas and I
said “world peace.” Of course that’s more than a bit
disingenuous, I then told her, because without global chaos, what
would I write about? [Neither answer helped Cindy, so at this
point I’m just hoping for a six-pack of premium.]
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $800
Oil, $88.33
Returns for the week 12/3-12/7
Dow Jones +1.9% [13625]
S&P 500 +1.6% [1504]
S&P MidCap +2.9%
Russell 2000 +2.3%
Nasdaq +1.7% [2706]
Returns for the period 1/1/07-12/7/07
Dow Jones +9.3%
S&P 500 +6.1%
S&P MidCap +10.1%
Russell 2000 -0.3%
Nasdaq +12.0%
Bulls 49.4
Bears 27.6 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Next time I’ll be coming to you from Berlin. Off to Deutschland
today.
Brian Trumbore
