[Posted 7:00 AM ET…from Berlin, Germany]
Wall Street…and Why Our System Is a Joke, part trois
I came across this editorial in the South China Morning Post [A
Hong Kong-based, not mainland, paper]. It reads in part:
“[On President Bush’s and Treasury Secretary Paulson’s rescue
package for mortgage holders], it is ironic that the plan has been
introduced by Mr. Bush, who came to office espousing the
principles of free markets, free trade and small government. But
his administration has repeatedly caved in to political and
economic pressure to help industries such as airlines and steel.
And Mr. Bush is not the first U.S. president to have done so.
During Bill Clinton’s administration, the U.S. Federal Reserve
supported a multibillion-dollar bailout of the hedge fund Long-
Term Capital Management to prevent a ‘fire sale’ of assets and
disruption to financial markets.
“Such intervention contrasts with advice given to Asian countries
during the Asian financial crisis from the International Monetary
Fund and the U.S. Treasury: raise interest rates, bear the cost of
massive defaults and improve transparency and regulation. For
some of the countries obliged to adopt such advice, notably
Indonesia, the social and political consequences were highly
damaging. But as Joseph Stiglitz, former World Bank economist
and Nobel laureate in economics, recently pointed out, a lack of
transparency is central to the subprime crisis….
“Supporters of Mr. Bush’s rescue package argue that the adverse
consequences of not bailing out U.S. subprime mortgage
borrowers outweigh those of allowing a financial meltdown to
take its course. That might be the case. But the international
community is entitled to take the world’s most sophisticated
economy to task for failing to manage its financial industries,
with all the implications this has for the health of the global
economy.
“Experience shows that troubled borrowers have a very high rate
of default, even after generous renegotiation of their mortgages.
The bailout might only delay the day of reckoning for people
struggling under a heavy debt burden and may lead to bigger
losses. Moreover, if investors in these mortgages are forced to
accept a smaller return they can be expected to demand a higher
risk premium in the future, making mortgages more expensive.
Moral hazard can therefore come at a heavy cost. It does nothing
for the efficient operation of free markets and the image of U.S.
financial professionals proferring their services all over the
world.”
We hold ourselves out to be the model? Of what, fraud? That’s
what lack of transparency really is, fraud. We have a dirty
system. Not capitalism itself. Nothing wrong there. But
capitalism is built on playing by some pretty simple rules. I’ve
been asking for weeks now, just what do we stand for, both in
economics and foreign policy? The United States today is a
throbbing blob of hypocrisy in so many respects. That comment
above on how we treated Indonesia? That should be ingrained in
every American college student taking economics or political
science, for starters, and every presidential candidate should be
asked to comment on it. Maybe we’d finally learn something
about their true character in the process.
—
What we learned this week on Wall Street was that the housing
crisis continues unabated… “sooprize sooprize,” as Private
Gomer Pyle would comment on CNBC if asked. And we had the
pitiful sight of former Fed Chairman Alan Greenspan scrambling
to defend himself in a Journal op-ed by now claiming it’s a
global real estate bubble, but he had nothing to do with it. At
least he has the global bubble part right. It’s only taking
everyone else in the world a couple of years to begin to catch on
to this rather simple theme of mine.
But for now, UBS took a $10 billion further writedown (while
selling a large stake to Singapore for $9.75 billion, along with a
smaller one to some $billionaire sheik sitting in a tent with his
harem). As UBS management said, “Conditions in the U.S.
mortgage and housing markets have continued to deteriorate…
and the ultimate value of our subprime holdings…remains
unknowable.” [Just a few weeks ago, UBS predicted a profit for
the fourth quarter. And these guys are paid $10s of millions.
Then again, so were Roger Clemens and Barry Bonds.]
Washington Mutual slashed its dividend 73% and said it foresaw
problems through 2008 as it closed over half its home loan
centers, which will result in some 2,600 job losses. WaMu is
also discontinuing all subprime operations. Wachovia and Bank
of America were among others talking of further writedowns of
their own, while Freddie Mac’s CEO said the crisis in housing
would “get tougher before it gets better.” Oh, and Citigroup
moved $49 billion or $58 billion (I saw two different figures)
from the Netherworld onto its books to better keep track of the
toxic waste that threatened all of the Caribbean.
Globally, Spain’s real estate crisis is threatening to take down the
rest of Europe. Did you know the inventory level of new homes
here is greater than that of the U.S.? We’re talking Spain! And
consider this. While U.S. home prices rose 50% in real terms for
the eight years ending late 2005, in Britain they were up 125%
and 120% in Spain. [Anatole Kaletsky/London Times; Financial
Times] Remember all the times I’d write of my chats in the
pubs, like in Ireland or other parts of Europe, where people
would tell me they have a second home in Spain? Remember
how I said that spelled trouble? It’s trouble in spades today.
Developers are going under left and right, leaving the banks
holding the bag. And if you think we have a debt crisis in
America, trust me, it’s far worse in much of Europe. Folks in
Britain, Ireland, France, Spain…they’re stretched to the max.
But then you should know all this by now.
And notice how I haven’t even mentioned the Fed’s move to
lower interest rates another ¼-point this week, which
disappointed Wall Street to no end, it wanting a ½. Why? You
know why. I’ve said for months the Fed is totally irrelevant at
this point. The market will eventually prove this to be so.
For the archives, I do have to note the Fed’s accompanying
statement read: “economic growth is slowing, reflecting the
intensification of the housing correction and some softening in
business and consumer spending.”
And while the Fed was slashing rates, inflation exploded back on
the scene with the producer (wholesale) price index soaring a
Zimbabwean-like 3.2% in November, the largest monthly gain
since 1973…a year in which about the only thing good you can
say is that the Mets came from out of nowhere to make the
World Series, only to crash and burn themselves in the end.
Granted on the inflation front, ex-food and energy the PPI was
up a more modest, though still high, 0.4%, but the consumer
price index rose 0.8% (0.3% ex-the stuff we use), also above
expectations. So weren’t you taught in kindergarten that the
Fed’s main mandate was to fight inflation? Ah, the hypocrisy.
Street Bytes
–Stocks took it on the chin as the major averages all tumbled at
least 2%, with the Dow Jones off 2.1% to 13339. Inflation and
further credit market jitters were to blame. Being away, I’ll
catch up on a few market issues next time.
–U.S. Treasury Yields
6-mo. 3.26% 2-yr. 3.30% 10-yr. 4.23% 30-yr. 4.66%
Yields rose on fears the inflation news will stall further rate cuts.
–A survey of 52 economists for the Journal notes, collectively,
there is a 38% chance of recession, though the average forecast
has GDP coming in at 0.9% in the fourth quarter and 1.5% in the
first. A separate survey for Bloomberg revealed lower figures.
PIMCO’s Bill Gross said the economy is moving towards zero,
but he’s not placing himself in the recession camp as yet. For the
record I’ve said since the end of 2006 that recession would hit in
’08. This doesn’t necessarily mean the stock market collapses,
though. I’m wrestling with this and have two weeks before
giving you my ’08 forecast. I will just say for now that if much
of the rest of the world rolls over as I expect, we certainly aren’t
going to see an up year for stocks.
–From Barron’s Thomas G. Donlan:
“The business of Wall Street is to introduce people who should
not borrow to people who should not lend, collecting fees from
both parties. It’s a good business as long as everyone keeps a
straight face.”
–According to a Federal Reserve study, the amount of equity
that homeowners hold in their homes (market value minus
mortgage debt) slipped to 50.4% in the third quarter. When it
drops below 50% the next quarter or two, it will be the first time
since the Fed started recording the data in 1945. Offsetting this
dire news, though, was the fact overall net wealth rose thanks to
the stock market. That now could reverse.
–China told Treasury Secretary Hank Paulson to basically take a
hike during talks this week. Mr. Paulson, whose legacy is
unraveling faster than the Mets’ did this past September, once
again looks like a stooge.
–According to a report in the New York Times, domestic
consumption among the five biggest oil exporters – Russia,
Saudi Arabia, Norway, Iran and UAE – was up 6% in 2006 over
2005. Ergo, don’t rely on them to fill any increase in demand
elsewhere should it develop.
–Goldman Sachs reportedly made $4 billion in profits betting
against the subprime sector; part of what will end up being its
best year ever. At least this will keep a few yacht-building
companies in business.
–Novartis is eliminating 2,500 positions as Big Pharm continues
to suffer with competition from the generics and fewer big drug
introductions.
–Student loan king Sallie Mae spurned a private-equity buyout at
$60 a share because Sallie’s chairman is an arrogant fool. Then,
when the credit crisis hit, Sallie was still offered $50. But the
man turned that down. Now the shares are below $27, as
defaults pile up in its portfolio, and shareholders are left asking,
“What the heck are you thinking?” [Late Friday there was a
management shakeup here…though the decision-maker was
given more authority it seems.]
–You know how some of us think the share buyback game is
nothing but a scam? Way back, like in the 1980s, a company
would announce a buyback and the shares would soar; the
feeling being you’re reducing the amount of stock in circulation
and thus earnings per share would rise. Over time, though, folks
caught on, especially to the game of making an announcement
and then never following through on the share repurchases.
Some might call that fraud.
So Barron’s had a piece by J.R. Brandstrader that referred to a
study by S&P showing how few companies initiating such plans
actually outperformed the S&P 500.
“The most startling finding, however, is that while the buybacks
[of companies in the S&P 500] removed nearly 20 billion shares
from the market, the total number of outstanding shares among
the repurchasers fell by only 4.4 billion. Where did the extra
15.6 billion shares come from?
“The researchers suspect the major culprit was heavy issuance of
stock-option grants to executives and other employees (and the
subsequent exercise of those options).”
I long stopped giving a damn when a company announced a
buyback. I’m assuming any others on the fence have now been
convinced to do the same.
–Merrill Lynch was planning on relocating its headquarters from
next to the World Trade Center [World Financial Center] to a
new midtown location in 2013. But with downtown/NYSE boss
John Thain taking over at Merrill, he’s rethinking the proposition
and may decide to keep Merrill right where it is, or one of the
new buildings at the Freedom Towers project. I bring this up
because with all of Merrill’s other problems, Thain could save
some money by staying put. How much? Try $1 billion. [But
isn’t it amazing how such large figures don’t faze us anymore?]
–Citigroup finally has a new CEO, Vikram Pandit, a former Citi
investment banker and about the 18th choice on the list to
succeed Chuck Prince. The search was going so poorly, even
NBA coaching vagabond Larry Brown turned it down. And
actor Michael Caine, who has a reputation for taking any project
for the money (see “Blame It On Rio”), did so as well.
–Lufthansa acquired a 19% interest in JetBlue, adding an avant
garde flavor.
–Someone is reading StocksandNews, I now have proof . None
other than Harvard and Yale announced this week that they are
taking some of the $gazillions in their endowments and
expanding their financial aid programs, especially to middle class
families; exactly what I’ve been calling for in this space.
Actually, Harvard thinks we should be impressed they’re adding
an extra $22 million a year. As Derrick Coleman, former NBA
star, used to say, “Whoopty-damn-do.” But it’s a step in the
right direction.
–Dirtball Conrad Black, former CEO of publishing giant
Hollinger International, was sentenced to 6 ½ years for stealing
$6 million. Using that scale, you could build a case that some on
Wall Street should be serving 30-40, at least.
–I never do these things, but because I like weather.com so much
I participated in one of their surveys. One question was, “Have
you ever clicked on an ad?” Nope. Why would I? And doesn’t
everyone feel this way? I keep saying the Web’s advertising
model is worthless and incredibly overrated and one day I’ll be
proven right. It’s just like the fact that as much as even I like to
shop online, such revenues are still only about 3% of the total,
and I just saw where sales growth online this holiday season is
under 20%; not good.
–I also see where Russians are now favoring euros over dollars
when exchanging or withdrawing foreign currency from bank
accounts. I’ve been feeling the same way these days. Plus the 2
euro coin, about $3 given today’s exchange rate, is a terrific
denomination. Perfect for bar tips, for example.
Foreign Affairs
Iran: Less than 24 hours after I wrote that President Bush was
made to look like a “fool” in the aftermath of the latest National
Intelligence Estimate on Iran’s nuclear weapons program, and
that the world was actually more dangerous, Secretary of
Defense Robert Gates, addressing a conference on Strategic
Studies in Bahrain said:
“Everywhere you turn, it is the policy of Iran to foment
instability and chaos, no matter the strategic value or cost in the
blood of innocents – Christians, Jews, and Muslims alike….
“There can be little doubt that their destabilizing foreign policies
are a threat to the interests of the United States, to the interests of
every country in the Middle East, and to the interests of all
countries within the range of the ballistic missiles Iran is
developing.”
Later in a tense press conference, Gates said it would be a “grave
misconception” to suggest the U.S. has been weakened by the
war in Iraq.
“Imperial Germany, Imperial Japan, Nazi Germany, Fascist Italy,
the Soviet Union – all made this fundamental miscalculation. All
paid the price. All are on the ash heap of history. As I have said
before, restraint should never be confused with weakness.”
Editorial / Wall Street Journal
“President Bush has been scrambling to rescue his Iran policy
after this week’s intelligence switcheroo, but the fact that the
White House has had to spin so furiously is a sign of how badly
it has bungled this episode. In sum, Mr. Bush and his staff have
allowed the intelligence bureaucracy to frame a new judgment in
a way that has undermined four years of U.S. effort to stop Iran’s
nuclear ambitions….
“What’s amazing in this case is how the White House has
allowed intelligence analysts to drive policy. The very first
sentence of this week’s NIE is written in a way that damages
U.S. diplomacy: ‘We judge with high confidence that in fall
2003, Tehran halted its nuclear weapons program.’ Only in a
footnote below does the NIE say that this definition of ‘nuclear
weapons program’ does ‘not mean Iran’s declared civil work
related to uranium conversion and enrichment.’….
“The result is that we now have NIE judgments substituting for
policy in a dangerous way. For one thing, these judgments are
never certain, and policy in a dangerous world has to account for
those uncertainties. We know from our own sources that not
everyone in American intelligence agrees with this NIE
‘consensus,’ and the Israelis have already made clear they don’t
either. The Jerusalem Post reported this week that Israeli defense
officials are exercised enough that they will present their Iran
evidence to Admiral Michael Mullen, the Chairman of the U.S.
Joint Chiefs of Staff, when he visits that country tomorrow….
“(The) NIE heard ‘round the world is already harming U.S.
policy. The Chinese are backing away from whatever support
they might have provided for tougher sanctions against Iran,
while Russia has used the NIE as another reason to oppose them.
Most delighted are the Iranians, who called the NIE a ‘victory’
and reasserted their intention to proceed full-speed ahead with
uranium enrichment. Behind the scenes, we can expect Egypt,
Saudi Arabia and Turkey to expand their nuclear efforts as they
conclude that the U.S. will now be unable to stop Iran from
getting the bomb….
“(The) ultimate responsibility for this fiasco lies with Mr. Bush.
Too often he has appointed, or tolerated, officials who oppose his
agenda, and failed to discipline them even when they have
worked against his policies. Instead of being candid this week
about the problems with the NIE, Mr. Bush and his National
Security Adviser, Stephen Hadley, tried to spin it as a victory for
their policy. They simply weren’t believable.
“It’s a sign of the Bush Administration’s flagging authority that
even many of its natural allies wondered this week if the NIE
was really an attempt to back down from its own Iran policy.
We only wish it were that competent.”
And you thought I was tough on the man.
But as I also noted last week amidst the uproar over the NIE, it
really didn’t matter what we or our allies thought on this issue
because it is more than ever all about Israel. So on Wednesday,
French President Nicolas Sarkozy said in an interview that there
was a danger of war erupting over Iran’s nuclear program if “the
Israelis consider their security is truly threatened.” Sarkozy
added France was more worried about tensions between Iran and
Israel than between Iran and the United States. Touche.
As for Israel itself, Prime Minister Ehud Olmert said it would
work with the International Atomic Energy Agency to expose
Iran’s plans to develop nukes, while an Iranian opposition group,
that has been reliable in the past, said Iran did indeed shut down
a weapons program in 2003, only to relocate and restart the
operation at another facility in 2004.
A new round of sanctions, meanwhile, is off the table until after
the first of the New Year, if ever. Yes, the situation has grown
far more dangerous, and we have a president who is flopping like
a flounder that has just been landed.
Russia: President Putin selected 42-year-old deputy prime
minister Dimitri Medvedev to be his handpicked successor in the
March 2 presidential vote. Medvedev, also the chairman of
Gazprom and an economist with no ties to the security apparatus,
then turned around and said Putin should become prime minister
after he leaves office.
The selection of Medvedev over 66-year-old Viktor Zubkov
probably means Putin won’t attempt to come back as president,
immediately, but instead will use the prime minister’s office to
consolidate power currently granted under the constitution to the
president. In most parliamentary forms of government, anyway,
it’s the prime minister, not the president, with the power.
As in here’s a question no one is asking. Who attends the
summits, post-March 2? Does Vlad the Great even let Medvedev
be the key figure at a single one? I’d be surprised if he did.
Meanwhile, in the latest independent poll, Medvedev would roll
to victory over his two closest rivals, Zubkov and Sergei Ivanov,
but these two might not even run, leaving only Communist leader
Gennadi Zyuganov to contend. In other words, Medvedev would
win with over 65%. Putin’s own popularity rating has hit a
staggering 87%.
Lastly, in an op-ed for the Washington Post, former Putin
economic adviser Andrei Illarionov blasts Secretary of State
Condoleezza Rice for immediately stepping forward to praise
Medvedev, before the man even starts campaigning! As
Illarionov so correctly puts it, if the U.S. wants more democracy
in Russia, why in essence interfere by acting as if Medvedev is
our preferred candidate…especially when this is hardly a
democratic process in the first place. It’s unbelievable how
incredibly inept the Bush administration’s foreign policy is.
Note to Condi…just shut up! Better yet, stay home and stop
using all that jet fuel. The contrails are raising the temperature
another degree.
Pakistan: 70% of the people here do not want to see the
Musharraf government win reelection in January, meaning there
will have to be a world class vote-rigging operation to keep him
in power. It also means that when Musharraf does declare
himself to be the victor, the opposition of former prime ministers
Bhutto and Sharif could lead to widespread violence. [His plan
to lift the state of emergency on Saturday is meaningless unless
he reinstates the fired Supreme Court justices.]
Separately, Musharraf rejected a U.S. call to send troops after
militants in Pakistan but said he would welcome intelligence
assistance, calling President Bush a “great, personal friend.” To
which Bush replied, “Check’s in the mail, Stash.” [You know,
Bush has a nickname for everyone.]
Lebanon: A probable al-Qaeda-based attack killed Lebanon’s
No. 2 general who was slated to take over for No. 1, Michel
Suleiman, should the latter finally be elected as the nation’s next
president in the ongoing constitutional crisis. Others blame
Syria, but this wouldn’t square with recent efforts to cooperate
on some fronts with the U.S. Al-Qaeda, though, has every
incentive to keep the crisis in Lebanon boiling with a return to
all-out civil war its goal. Just my opinion. Syria, to me, has
enough problems to deal with, and it wants the UN tribunal on
the Hariri assassination to go away. The U.S., in return for
cooperation in other areas, could largely make it disappear;
which would be a tragedy in its own right but I don’t trust
Washington one iota when it comes to its Lebanon/Syria policy.
Algeria: With the horrific attacks in Algiers, al-Qaeda has left its
mark in the region once again. Veterans of the Iraq War are
returning to the Maghreb – Tunisia, Morocco, and Algeria – to
set up shop. Europe is duly concerned due to its proximity to the
region.
Israel: So much for Annapolis. I thought it would be a waste,
but still don’t fault President Bush for getting everyone together.
This week talks restarted between Israel and the Palestinians, but
as they came one day after a major Israeli offensive in Gaza
claimed six lives, and the Palestinians retaliated by launching 17
rockets into Israel, let’s just say little was accomplished.
Iraq: Violence picked up some, but of particular interest to yours
truly was a story that Moqtada al-Sadr is on a crash study course
to become Ayatollah. With this title, which requires intensive
study in all things Islam, he would have a far greater influence on
the Shiites because his pronouncements would thus carry more
weight. Supposedly, he hasn’t been seen since May as he’s
holed up with clerics in Najaf.
Kosovo: Importantly, the EU has recognized a plan by its leading
powers whereby Kosovo will declare independence in February,
after Serbian elections are held, in what will become a rolling
recognition by all powers, led by the United States and an
Islamic coalition of nations. The plan is to minimize the risks of
a new Balkan war, but the key remains Serbia’s ally, Russia.
I have said this is a flashpoint worth keeping your eye on as one
of my predictions for 2007, not because it would be a market-
moving event, but rather it would sap resources from the war in
Afghanistan. That is the import I have yet to see anyone
mention. This EU-sponsored move, however, appears to be a
major step in the right direction. But let’s wait 24 hours.
Afghanistan: And the reason why the above is so important is
because this week you had Secretary of Defense Robert Gates
blasting NATO for its lackluster effort in Afghanistan; as in
many nations refuse to step up as they should. So, again, another
conflict in Kosovo would thus give Europe a further excuse to
cut back on its Afghan operations.
Britain: Prime Minister Gordon Brown could not have stepped in
a bigger pile than he did this week in blowing off an historic EU
treaty signing to attend to a parliament meeting he easily could
have rescheduled. Talk about poor form. One might say this
chap is off to a rather dismal start.
North Korea: Nuclear arms talks have suddenly bogged down,
but the New York Philharmonic is going to play Pyongyang in
February! Yippee! I know, I know…this is like ping-pong
diplomacy, I guess, but I have a compromise. Force the
Philharmonic to play some Shostakovich, which by the end will
have the Commies screaming, “We give up! Here are all the
details on our entire weapons program! They’re yours! Now
leave us alone!”
Random Musings
–The other day when I was speaking to the group of retirees in
my home town, I mentioned that all my travels confirmed a
pretty simple fact. Europeans and Asians, for starters, don’t hate
individual Americans, they just can’t stand President Bush.
So I noticed that in a survey of over 1,200 Aussies, 77% of them
are concerned about U.S. foreign policy. The majority, though,
still likes Americans.
What’s more worrisome, however, is that only 49% have a
favorable view of the U.S. system of government, compared to
62% back in 1986. A large part of the blame has to do not only
with the handling of many aspects of the Iraq War, but the
aftermath of Hurricane Katrina, which left an indelible mark on
people around the world. It’s certainly a view I get over and
over again when I chat up folks overseas.
–In keeping with the above, Al Gore harshly criticized both the
United States and China on the issue of climate change and
presenting roadblocks to any agreement on emissions cuts. But
as I go to post, I see the parties are still negotiating so I’ll wait
‘til next week for further comment.
–The Supreme Court added its voice to recent rulings that will
allow for sentencing of crack cocaine offenders that is more in
line with those handed down to powder users, thus finally
eliminating the disparity, which has frankly been racist.
–But on the issue of the death penalty, my state of New Jersey’s
Assembly has voted to repeal it, becoming the first state to do so
since it was restored in 1976 by the Supreme Court.
–On a related topic, just a word of thanks from over in Europe to
Jeanne Assam, the incredibly heroic New Life Church security
guard who saved countless lives in Colorado Springs. But on the
issue of gun control, while I believe in the right to bear arms, for
the life of me I don’t understand those who insist we have a right
to assault rifles. [See Colorado and Omaha as the most recent
examples.]
–I invoked my “24-hour rule” last week on the issue of the CIA
tapes and possible cover-up of waterboarding incidents and, once
again, this proved to be the right thing to do. Because 24 hours
later we learned that the likes of Democrats Nancy Pelosi, Jane
Harman, former senator Bob Graham, and Jay Rockefeller were
all apprised of their existence and what was on them back in
2002. This in no way makes it right, but it proves that the initial
reaction was in itself outrageous.
I do have to note Sen. John McCain’s position as well. McCain
said destruction of the tapes “harms the credibility and the moral
standing of America in the world again. There will be
skepticism and cynicism all over the world about how we treat
prisoners and whether we practice torture or not.”
Don’t you know it.
–Oprah turned out nearly 30,000 in Columbia, S.C., at a rally for
Barack Obama. The message was positive. Meanwhile, Bill
Clinton is scrambling on behalf of his spouse to get her house in
order. Let’s face it, we all understand politics is hardball, but
Hillary’s staff is replete with some of the most detestable
characters in the history of this loathsome profession, starting
with Howard Wolfson.
But in an ABC News/Washington Post national survey, Hillary
continues to rout Obama, 53-23. This is soft support, though.
Of more import today is Iowa and there it remains neck-and-
neck.
On the Republican side, the same national poll has Rudy Giuliani
struggling to maintain the lead with just 25 percent. Then it’s
Huckabee, 19; Romney 17; Thompson 14; and McCain 12.
Just a few months ago we all thought it was going to be over by
Super Tuesday in February. Now, some of us can actually dream
of a brokered convention, with Super Tuesday, ironically,
muddying the waters even more so when its intent was to do
otherwise. I love it! And once again we have rumblings that
because of all the sudden uncertainty, New York Mayor Michael
Bloomberg may dust off his third party candidacy plans. Could
Bloomie win New York and California, thus virtually
guaranteeing Congress elects the next president? OK, sorry, I’m
getting way ahead of myself.
–I just have to add a comment by Peggy Noonan in her Wall
Street Journal column to my thoughts on Mitt Romney from last
time following Romney’s speech on religious freedom.
“There was one significant mistake in the speech. I do not know
why Romney did not include nonbelievers in his moving portrait
of the great American family. We were founded by believing
Christians, but soon enough Jeremiah Johnson, and the old proud
agnostic mountain men, and the village atheist, and the Brahmin
doubter, were there, and they too are part of us, part of this
wonderful thing we have. Why did Mr. Romney not do the
obvious thing and include them? My guess: It would have been
reported, and some idiots would have seen it and been offended
that this Romney character likes to laud atheists. And he would
have lost the idiot vote.
“My feeling is we’ve bowed too far to the idiots. This is true in
politics, journalism, and just about everything else.”
Amen.
–The Wall Street Journal had a funny piece on how China’s top
leaders never go gray. Ye olde Grecian Formula, in other words.
I made a big mistake years ago myself. If I was ever going to
dye my hair, I should have done it at the first sign of the gray
stuff. Now it’s too late. And that’s a memo.
–Phony of the past decade? Major league pitcher Roger
Clemens, who has finally been ratted out after all these years
during which some of us suspected he was using steroids but
couldn’t prove it.
–Just a few thoughts on my trip. I went to Cologne to view the
Christmas markets, ostensibly, and get in the spirit, not having
been to Europe at this time of the year. It’s really very cool and I
highly recommend it.
Tuesday, I took the train to Berlin. While I was once in Cologne
as a kid, I had never been here and my impression is a good one,
as in this is the roomiest big city you ever experienced. That’s
literally the best way to describe it. Berlin is nine times larger in
acreage than Paris and it has large parks right in the middle that
are just terrific. If walking or jogging is your thing, this is an
awesome place to do that. [Marathoners…I can see why the
Berlin Marathon is the world’s fastest. It is totally flat…in case
you’re thinking of trying something new.]
But of course there is a certain foreboding about the place, as
much as the city tries to shake it off. I have to admit the gloomy
weather I’ve encountered may have a little to do with this, but
it’s that whole deal with the Wall, you understand, and a certain
Satan with a little mustache. Some awful things happened here,
let alone that the final Battle for Berlin at the end of World War
II saw some of the most intense, and incredibly stupid, fighting
of the entire conflict. You talk about the ultimate waste…
destroying this place when all Hitler had to do was see the light
and surrender, thus saving tens of thousands. Then again he was
in a bunker, doing God knows what in his final days and hours.
That said, it’s truly amazing what has happened to Berlin. First
the war leveled it, then the 40+ years as a divided city. I noted
elsewhere on this site my visit to Checkpoint Charlie and the
museum honoring those who sought to flee the East but were
gunned down. It’s incredibly moving, but at the same time while
at least 125 have been documented as being killed once the Wall
went up in 1961, over 5,000 escaped. The amazing power of the
human spirit.
As I do everywhere I go, I walked all over the past few days,
trying in this case to get my bearings as to where the Wall stood.
You kind of get twisted around at times, like my hotel is in East
Berlin, but 100 yards away, on the other side of the Brandenburg
Gate was the West. There is a little Kennedy Museum across the
street that has a terrific video of JFK’s June 1963 trip to
Germany, including mass at Cologne (Dom) Cathedral and his
historic speeches in Berlin itself. Kennedy was in the motorcade
with two other titanic figures, Germany’s Chancellor Konrad
Adenauer (one of the truly great figures of the century) and then
West Berlin Mayor Willy Brandt, who went on to greater heights
himself.
The crowds accompanying Kennedy in his four days through the
country were absolutely unbelievable, and as we all learned JFK
rose to the occasion, just as Ronald Reagan would in Berlin some
24 years later at another pivotal moment in time.
Two years after that, November 9, 1989, the Wall came down
but it’s tough to commemorate it because ironically it is the same
date as one of history’s darkest moments, Kristallnacht, 11/9/38.
But walking around Berlin, one of the more heart-warming
scenes is seeing a Menorah in an apartment window.
On a different note having to do with the geopolitics of the day,
when you walk the streets here you can’t help but think of
what it must have been like after the War with the spy games that
were played. There were some 8,000 spies between the two
sides back then, doing what they do, and the East was led by
Markus Wolf, “the man without a face.” Wolf headed East
Germany’s intelligence arm, the feared Stasi, from 1952-86, but
it wasn’t until 1979 that the CIA actually came up with a
definitive photo of the man. Pretty amazing.
But for all the evil talk about the spy game in general, especially
in those days with the 8,000 running around, collecting
information, the exercise proved to be invaluable in one respect
(without forgetting the awful deeds perpetrated by the Stasi); as
in think about this. There wasn’t one direct military conflict
between the U.S. and the U.S.S.R. in over four decades of the
Cold War. A lot of close calls, for sure, but it was the spies who
often played the deciding role between war and peace.
For example, in 1948, during the first Berlin Blockade, Truman
was told the Soviets were not poised to attack as many had
feared and thus his response was a measured one. In other
words, the spies often kept the two sides from blundering into
war.
So why bring this up now, aside from the fact it is good history?
Because contrast what was going on then with today and the
West’s total lack of solid intelligence when it came to Iraq, and
now, Iran. We certainly don’t have 4,000 on our side collecting
data. My ongoing discussion on Iran proves that, and with
regards to Iraq, we’ve learned a painful lesson.
So get some freakin’ human intel into these spots before we
blunder into another war. Or before we find out too late that Iran
is far ahead of the game compared to what some in our
government are telling us now.
And one other historical tidbit that if you’re cognizant of it, just
breaks your heart as you walk the streets here. I saw a
crippled gentleman, walking with difficulty, and remembered
that before Hitler started exterminating the Jews, he first killed
the handicapped and mentally disabled because they were a
waste, by his thinking.
So as I was typing up this review on Friday, I could see the sun
finally break out, the first time in Germany all week. I had been
meaning to take one more walk to Checkpoint Charlie later but I
had to take advantage of the sun then.
I saw another handicapped person at this point, an otherwise
normal gentleman, but couldn’t get it out of my head that years
ago, in a different time, he would have been put to death. Boy, if
that thought doesn’t grab you, you don’t have a pulse.
About a year ago, they placed a marker where Hitler’s final
bunker was. I read an article about this, about how the Russians
had immediately blown it up, but recently, during excavation for
a parking garage and an apartment complex, they kind of
stumbled on the complex again and part of me was curious, if
for no other reason than to get a sense of where he was in
relation to the rest of the geography. Today, I know I came
within about a block of it, though there was no way I was going
to stop someone and ask exactly where it was. It was also then I
saw the handicapped man, and I decided to head in the opposite
direction of the marker. I’ll come back to Berlin because it is a
fascinating place. But I don’t need to see where the Devil
himself took his last breath.
—
Pray for the men and women of our armed forces.
God Bless America.
—
Gold closed at $798
Oil, $91.27
Returns for the week 12/10-12/14
Dow Jones -2.1% [13339]
S&P 500 -2.4% [1467]
S&P MidCap -3.4%
Russell 2000 -4.0%
Nasdaq -2.6% [2635]
Returns for the period 1/1/07-12/14/07
Dow Jones +7.0%
S&P 500 +3.5%
S&P MidCap +6.3%
Russell 2000 -4.3%
Nasdaq +9.1%
Bulls 53.3
Bears 25.6 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
