[Posted 7:00 AM ET]
Wall Street
I’m holding off as much as possible on commentary this week
due to the fact I’m loading up the boat for next time and my 2008
forecast. For now, as the tug of war between the bull and bear
camps grows fiercer, I note the following.
Former Treasury Secretary Lawrence Summers:
“I believe that slow growth is a near certainty, that a recession is
more than a 50% chance, and that there’s a distinct possibility of
a more serious recession that will lead to the worst economic
performance since the late 1970s and early 1980s.” [Wall Street
Journal]
PIMCO’s Bill Gross:
“If I had to be bold I’d say we began a recession in December
[that will last] four to five months,” but could be far longer if
Congress and the administration failed to “take some rather
unperceived and unforecasted measures in terms of fiscal
stimulation.” [For his part, Larry Summers wants to see tax
cuts.]
Gross continued:
“What needs to be done is something fairly radical compared to
Republican orthodoxy, which means spend money and absorb
the deficit as opposed to pretending that you’re fiscally
conservative.”
In an interview with the Financial Times, from which the above
was taken, Gross also says over-leverage is a “dying concept”
that will “lead to an implosion at the edges…of this new
financial marketplace.” He then called hedge funds a “con.”
A hedge fund, said Gross, was “an unregulated bank. A bank
isn’t a con but a bank is a regulated entity. A hedge fund is not
…it’s been a con on the government in terms of their
unwillingness to regulate the industry.”
Mort Zuckerman / U.S. News & World Report:
“The problem for the Fed is that monetary policy may be no
match for the deep structural contradictions that plague the
financial system. We are dealing here with a whole new set of
credit instruments that are little understood and therefore
extremely difficult to price.
“The economy is clearly transitioning to much slower growth,
sharply tighter lending standards, a declining housing market,
and pressure on consumer spending. People and companies are
trying to cope with the debt accumulated during several years of
profligate lending and spending. The real danger from a credit
crunch is that everyone, from banks to corporations to
households, may retrench simultaneously.
“The collapse of values and the risks of the credit squeeze are the
worst since the Great Depression. We are going to put the
economy’s resilience to a severe test.”
This week the Federal Reserve, along with the European Central
Bank and those of a few other large nations moved to unfreeze
the money markets and salve the current funding crisis, including
the ECB’s $500 billion injection. The action undoubtedly helped
a little in restoring some modicum of confidence.
But otherwise, the story was about the financial sector and
Morgan Stanley’s $5.7 billion writedown (now $9.4 billion total)
and its $5 billion cash infusion from China Investment Corp., the
country’s sovereign wealth fund. In announcing his firm’s
results, CEO John Mack blamed the hedges a bunch of his
traders placed on a large illiquid position, as in they didn’t work
appropriately. Where have you heard this before? Here.
Starting years ago. All together now…. “These guys don’t know
what they own.”
As for the cash injection from China, Morgan thus joined
Citigroup (Abu Dhabi-led bailout), UBS (Singapore) and Merrill
Lynch (a rumored infusion from Singapore as well).
Is there anything wrong with this? Not at the announced levels
thus far. It’s not as if China is running Morgan Stanley, yet, and
as for Singapore, having spent some time there I love the place
and we could learn a thing or two on the discipline front from
these admittedly mildly authoritarian folks.
At the same time, you also can’t help but conclude that these
needed capital boosts for our nation’s leading investment banks
are downright embarrassing. And how serious is it? With
Merrill Lynch’s rumored upcoming further writedown of $8
billion, that would send its book value (assets minus liabilities)
down to $30 billion from $37 billion just this past June, and
without the cash from Singapore would call into question
whether or not it could maintain its regulatory capital levels;
which is another way of saying Merrill and many of its brethren,
for that matter, would face serious concerns over whether or not
they could even survive in their current form.
I’ve railed about our financial system the past few weeks and
caught some heat for it, but even President Bush in his press
conference, Thursday, brought up the issue of transparency and
how “Wall Street needs to…put it all out there for everybody to
see,” referring to the books, though the problem is, as Gross and
Zuckerman allude to above, that it’s not just about collateralized
debt obligations and bringing everything now off the balance
sheet onto the ledger. There are so many more of Warren
Buffett’s “weapons of mass destruction” out there in derivatives
land. John Mack now knows this and it’s why I say our system
today is a joke. Our leaders of all stripes, both on Wall Street
and in Washington, including the Federal Reserve and Securities
and Exchange Commission, looked the other way while this was
all going on. History will absolutely obliterate them. But then I
said I wouldn’t comment this week.
I do have to say something about a Bloomberg piece I saw this
week concerning Ireland’s slowing economy. One Dublin-based
analyst said “The construction slowdown [in housing] is
overshadowing the fact that the rest of the economy is doing fine.
The pessimism is overdone.”
But then another analyst commented “Ireland will suffer more
than any other in the euro area from a slowdown in the U.S.,
which is already happening, and in Britain, which will soon
happen.” This fellow, Bernard Connolly, called Ireland’s
prospects “simply dreadful.”
You can plug in just about any nation into the equation these
days and get the same debate. Some, including in the U.S., say
the damage from the popping of the real estate bubble will not
spill over into the critical consumer sector, while others like
yours truly beg to differ. It’s in 2008 that we declare a winner
once and for all.
Street Bytes
–Stocks staged a modest advance, with the market making up for
losses earlier in the week as a figure on consumer spending came
in higher than expected, thus reducing fears the economy was
falling off a cliff. This happens every year. Christmas suddenly
looks a little brighter and it’s only about mid-January that we get
the true picture. The Dow Jones added 0.8% to close at 13450,
while the S&P 500 gained 1.1%. But Nasdaq’s solid 2.1%
advance was indeed warranted thanks to strong earnings from
Oracle and BlackBerry maker Research in Motion.
–U.S. Treasury Yields
6-mo. 3.33% 2-yr. 3.20% 10-yr. 4.18% 30-yr. 4.59%
Initially, the 10-year Treasury traded back to the 4.00% level on
renewed credit fears, but with another strong reading on inflation
at week’s end, concerns once again arose that the Fed could be
finished cutting. Earlier, it didn’t help that top bond insurer
MBIA saw its shares plummet on talk its debt could be
downgraded. If MBIA or another top rival in the field, Ambac,
were to lose their triple-A rating, it would cause a repricing of all
bonds they insure and call into question the very industry itself.
S&P put MBIA on credit watch with a ‘negative’ outlook but
kept the triple-A rating, for now.
–Never mind…..the super duper bailout of troubled structured
investment vehicles, SIVs, has been squelched due to lack of
interest. This was Treasury Secretary Paulson’s idea. As the
characters in the Guinness commercial go, “Brilliant!”
–China’s central bank raised interest rates for a sixth time this
year to combat surging inflation, mostly as a result of soaring
food prices. An awful drought in much of the country isn’t
helping matters, especially in the south where millions now face
drinking water shortages.
–SunTrust Banks joined others like Bank of America and
Wachovia in announcing it was bailing out some of its money
market funds due to their exposure to investments in structured
investment vehicles. There’s absolutely no way of knowing just
how widespread this issue is but as you all know it’s the kiss of
death if a money market fund breaks a buck [$1.00 net asset
value] so the financial institutions have to defend that level at
almost any cost.
–Just a few real estate tidbits for the record. Foreclosures in
November were actually fewer than in October, but up 68% over
last year with Florida, Ohio and California leading the way.
Homebuilder Hovnanian wrote off another $168 million in land
charges and $105 million in predevelopment costs and land
deposits. One of these days I’m going to get more details on this
monstrous condo development going up blocks from me where
the developer hasn’t sold one unit that I can see. Us neighbors in
our well-established complex are praying they at least finish it or
it will be a nightmare for all of us…the same effect, almost, as
having a string of foreclosures on the block. I bring this up
because I saw where Hovnanian’s cancellation rate is back up to
40%, a staggering level, while the National Association of
Homebuilders is forecasting another 19% drop in new home
construction in 2008.
–U.S. wheat inventories are basically at a 60-year low at the end
of the current crop season, while global stocks have not been this
low since at least 1960, according to the U.S. Dept. of
Agriculture. And this means inflation, sports fans, simply
because of surging demand, especially in the developing world
as diets improve…wheat generally being a healthier food stuff
than dirt or insects.
–A study by the Center on Budget and Policy Priorities notes
that thirteen states face budget shortfalls of $23 billion for the
fiscal year beginning July 1. Said an author of the report, “We’re
really teetering on the edge. With the deficits this large already
before there’s actual evidence we’re in a recession, that seems
quite serious.”
Obviously not good for state employment and to compound
matters the “rainy day funds” are drying up rapidly as well.
The report adds, “This decline is another indication of the extent
to which states have used one-time resources to balance their
budgets in good fiscal times. It also leaves many states ill-
prepared to face an economic slowdown.”
California is addressing a deficit that could range from $10
billion to $14 billion, while New York faces a $4 billion deficit
for the fiscal year beginning April 1. [Andrew Welsh-Huggins /
AP]
Separately, according to the Pew Center on the States, almost
half of them have been underfunding their retirement plans for
state workers. The Pew study says the states have promised to
pay out $2.7 trillion in pension and health benefits over the next
30 years and while some are handling the funding well, others
like my state of New Jersey couldn’t be handling it worse.
–Commentator George Will / Washington Post
“[Treasury Secretary] Paulson has been criticized for saying that
some subprime borrowers ‘will become renters again.’ But some
borrowers put no money down on their houses, or took
mortgages with negligible ‘teaser’ rates, or accepted mortgages
requiring them at first to pay only interest, not principal. Such
borrowers are effectively renters.
“The president says: ‘The homeowners deserve our help.’ But
why ‘deserve’? The principles of ‘compassionate conservatism’
are opaque, but they might involve liberalism’s premise that
Americans are so easily victimized they must be regarded as
wards of government.
“Perhaps Washington’s intervention in the subprime problem
reveals the tiny tip of an enormous new entitlement: People who
voluntarily run a risk, betting that they will escape unscathed, are
entitled to government-organized amelioration when they lose
their bets. The costs of this entitlement will include new
ambiguities in the concepts of contracts and private property.”
–President Bush signed a new energy bill that is being called the
most extensive since the 1970s. The main item is the
requirement that cars and light trucks sold in the U.S. meet a
fleetwide average of 35 miles a gallon by 2020, which is
nothing! And the bill also requires that fuel producers ramp up
to at least 36 billion gallons of “biofuels” by 2022, a five-fold
increase over current levels; meaning a huge subsidy for the
ethanol industry.
Now the president likes to talk of how ethanol will not just be all
about corn over the coming years; instead we’ll be using
“switch- grass” and cow chips, or something like that.
But is it better than nothing? While I hate to use the phrase ‘time
will tell,’ that applies here. I do like the following comment
from a Wall Street Journal Editorial.
“Oh, and Washington officially joined the world-wide lightbulb
prohibition movement. The regular incandescent bulb has
worked fine since the 1880s, but Congress is dictating that it be
phased out starting in 2012 in favor of compact fluorescents.
CFLs may be more efficient, but here’s a textbook case where
the market is more illuminating than the dim bulbs on Capitol
Hill. Come to think of it, that sums up this whole exercise.”
[Truth be told, I’m beginning to stockpile the incandescent
variety. I’ll save energy elsewhere by continuing to buy small
cars.]
–Congress at least patched up the alternative minimum tax for
another year, thus sparring millions from a higher tax bill. But as
you all know by now, because Congress acted so late the IRS
won’t be able to send out millions of refund checks as early as
they otherwise would.
–Australia’s Centro Properties Group, the country’s second-
largest owner of shopping centers with some 700 properties in
the U.S. as well, saw its shares fall 76% in one day thanks to a
funding crisis exacerbated by enormous amounts of debt. Yet
another warning sign that the global real estate bubble will
eventually take out the commercial property sector.
–The New York Times had a piece on how home prices in South
Korea have stalled after a furious boom and asked whether the
next move is another leg up or a vicious decline? Reporter
Martin Fackler comments:
“If there is a bubble, it was created by economic growth and
higher living standards fueling a half-decade construction frenzy
that continues to chug along, even amid the drop in real estate
sales….In Seoul’s most popular neighborhoods, three-bedroom
apartments now routinely cost $2 million, about 100 times the
average national income.”
Whaddya mean, “If”? I wrote long ago how South Koreans hold
as much credit card debt as any in the world (an issue the
government has been trying to tackle) and these people are
obviously as overstretched in all facets as any others, so when
this bubble pops it’s going to be u-g-l-y.
–BMW plans its first large-scale job cuts, up to 8,000, with most
of the losses to come in Germany.
–Goldman Sachs earned an astounding $3.15 billion for its fiscal
fourth quarter, and Goldman employees are pulling out the good
stuff from their liquor cabinets and wine cellars this holiday
season as bonuses will be way up from already astronomical
levels. But Goldman’s CFO said, “The single thing that helps
drive our business more than anything is economic growth” and
if there was a recession, it would “affect us, too.” Thus,
Goldman’s shares were basically flat on the earnings news.
–Lehman Brothers and Bear Stearns are the among the first to
face lawsuits over the sale of high-risk collateralized debt
obligations (Lehman) as well as hedge fund shenanigans (Bear)
related to same in one form or another.
–Belarus is going to pay 19% more for Russian gas in 2008,
according to Gazprom, at the same time President Vladimir Putin
was announcing a $1.5 billion loan package to help Belarus’
economy. But while Belarus had been paying a far lower,
subsidized price for natural gas compared to Western European
nations, and the price increase was warranted (it was initially
thought to be as high as 60%), here you have a classic example
of the Putin/Gazprom/Medvedev alliance; Medvedev, the next
president, also being chairman of Gazprom, for now.
–Imports from China to Europe rose another 20% this year,
through September, compared to 2006, which is going to be an
ever-growing theme in ‘08 as Euro politicians, under increasing
pressure from their constituents, fight back.
–It was a super week for Larry Ellison and his Oracle Corp. as it
beat earnings expectations handily as sales of software licenses
were strong. [New licenses translate to a pipeline for future
revenue from product upgrades and maintenance.] And then a
software company backed by Ellison, NetSuite Inc., was priced
at $26 (after initial talk of between $13 and $16), yet proceeded
to still close its first day at $35.50.
–National Oilwell Varco agreed to acquire Grant Prideco in a $7
billion merger of two oil-services industry giants. But shares of
GRP had traded at $60 last June and the deal is generally valued
around $55 at today’s prices, so it doesn’t send the greatest
signal about future shareholder success with other mergers in this
arena, which are coming. For outside commentary we turn to
former NBA star Derrick Coleman. “Whoopty-damn-do.”
Thanks, Derrick.
–Last week I said Sallie Mae’s chairman/CEO Albert Lord was
“an arrogant fool.” This week, Mr. Lord appeared on a
conference call to discuss the student-loan company’s finances
and proceeded to raise further concerns over his leadership and
whether the company can even survive. Shares fell 21% that day
and declined further afterwards. It didn’t help that Lord ended
the conference call by saying, “Let’s go. There’s no questions.
Let’s get the @#$% out of here.”
–My friend Harry Koza, on advice to derivatives traders for the
coming year. “May all your counterparties be viable ones.”
–I got a kick out of a New York Times piece last weekend titled
“Toxic threat to China’s fish farms: Rapid growth and drug use
pollute inadequate water supply.” Yup, I warned you on this
long ago. But just a note from the piece, in case you’re still not
convinced.
“ ‘There are heavy metals, mercury and flame retardants in fish
samples we’ve tested,’ said Ming Hung Wong, a professor of
biology at Hong Kong Baptist University.”
[Along the same lines, Canada acted on a China-based seafood
company with U.S. safety inspection clearance after it found
cancer-causing antibiotics in frozen shrimp.]
–After posting last week’s column I took the train back to
Cologne from Berlin. On my previous trip the weather was
foggy and I didn’t see much. This time the visibility was good
and I spotted at least 20 wind farms during the four-hour
journey. Then on my flight home from Cologne I passed over a
ton more; so it’s safe to say windpower is entrenched in the
region, including Denmark and the Netherlands.
[I also can’t help but note that Saturday in Cologne, especially at
Christmastime, is party central. I shall be baaaaack.]
–Our own Dr. Bortrum has a good piece honoring the 60th
anniversary of the invention of the transistor, Dec. 16, 1947,
which happened right up the street from me at Bell Laboratories,
now Lucent. Bortrum knew those responsible for a milestone
that propelled the information age.
As for Lucent, what a freakin’ disaster.
–Lastly, I can’t help but note some facts from the IRS and the
Congressional Budget Office, as spelled out in a Journal
editorial. To wit:
For 2005 (the latest data point), the richest 1% paid about 39% of
all income taxes, the richest 5% paid around 60%, and the richest
10% paid 70%. Those below the median – half of all households
– paid just 3% of all income taxes in 2005. But whereas liberals
talk of the above as proof of a new “gilded age,” more than 13
million American households, or one in 10, had an income of
more than $100,000 a year in 2005. That’s the Journal’s spin,
which I have no problem with personally. It’s just that the reality
is the middle class in America is getting hammered from all
sides. That doesn’t mean the Democrats should in turn soak the
rich, but it still gives them a powerful political platform on which
to run.
Foreign Affairs
[Again, I’m holding off on most ‘opinion’ until next week. For
now just the facts.]
Iraq: Dozens of Turkish warplanes, aided by U.S. intelligence,
struck the PKK, the Kurdish rebels, deep inside the border.
Secretary of Defense Robert Gates said “we want to help the
Turks,” but the flip side was Secretary of State Condoleezza Rice
being blown off by Kurdish leader President Barzani when she
unexpectedly dropped in for tea and sand wafers.
Prior to this particular attack, a senior Turkish military official
told Defense News that “We are pleased with the U.S. position
regarding our strikes. They [the Americans] did what they
should have been doing for a long time.”
A senior Foreign Ministry official said, “If this positive trend
continues, then I think our valuable relationship will recover.
And if our relations get better, we can cooperate better with the
United States on Iraq, the Middle East and other matters.”
Sounds good to me. Meanwhile, the surge continues to bear
some fruit, but USA Today had a piece looking back at those in
the administration who prevented success earlier in the war.
Noted military strategist and neocon, Fred Kagan, said “What’s
astounding is how long we spent not applying traditional
counterinsurgency principles to fighting what obviously was an
insurgency. It’s not that we’ve solved the IED problem, per se.
It’s that we’ve begun to have success in defeating the
insurgents.”
Andrew Krepinevich, a military consultant who addressed
generals in 2004 and Vice President Cheney’s chief of staff
Scooter Libby in ’05, said the price of failure to change strategy
earlier was profound.
“One is the human cost, both in terms of the suffering of the
Iraqis and the Americans killed and wounded. Second is the
material cost. And third is the failure to accomplish the
mission.”
Krepinevich added, “The American military is on the clock in
this war, and the American people, in a sense, gave the
administration several years to make progress. Those years, to a
significant extent, were wasted.”
The above represents my own position exactly, and for newer
readers I must add I was consistently in the neocon camp before
the war and still consider myself one as others have abandoned
the label. I’ll have a further word on this next week as well.
For now, I agree with another neocon, Michael Rubin of the
American Enterprise Institute, that when it comes to the relative
calm of the surge and the seeming cooperation from some of our
erstwhile enemies on the ground in Iraq:
“Quiet doesn’t signify loyalty and quiet doesn’t signify
surrender. Quiet signifies that [they] get more from being quiet
[Ed. i.e., money] ….What we’ve gotten is a breather. It’s not a
permanent truce.” [Washington Post]
[With President Bush’s upcoming trip to the Middle East, you
just know Gen. Petraeus has been given the mission of finding a
‘safe’ part of Baghdad for Bush to pay a “surprise” visit while
he’s over in the Gulf States and Israel/Palestine.]
Iran: The Russians delivered the first batch of fuel for the nuclear
plant at Bushehr they helped the Iranians build but said the plant
wouldn’t be operational for another year. But as I’ve said, it’s all
about Israel. No one should be the least bit surprised if they
launch a preemptive strike on two or three key sites, including
possibly Bushehr, in as early as the first quarter.
Pakistan: The parliamentary election is still slated for Jan. 8 as
former prime ministers Bhutto and Sharif say the only question is
just how far President Musharraf will have to go to rig it.
Musharraf also told Newsweek that he would never return the
fired Supreme Court judges to their seats on the bench, a huge
issue, but that he could see Bhutto as returning to prime minister
for a third time even though the constitution doesn’t exactly
allow this. Friday’s suicide attack on an ally of Musharraf (the
target survived) that killed 48 gives you a sense of the chaos that
is coming post-election.
Russia: Vladimir Putin will indeed become prime minister when
Dimitri Medvedev is elected president in March. If Putin wants
he can then come back as president in 2012, though by then the
lines between the two offices will have blurred. President Bush,
at his press conference this week, did muse about a topic I
brought up last week; that being who will attend the first
summits and meetings following the March vote? Putin or
Medvedev?
Lebanon: French President Nicolas Sarkozy has called Syrian
President Bashar Assad a number of times the past few weeks to
pressure him on allowing Lebanon to finally elect a president.
President Bush, when asked at his press conference whether he
had called Assad said, ‘he knows what our feelings are.’ Guess
which tact I favor? Call the bastard and tell him, “If you want
better relations with us, cut the crap!” Click.
Israel/Palestine: The Palestinians received $7 billion in pledges
for aid at the latest donor conference, but Hamas wasn’t invited
to attend the Paris confab while President Mahmoud Abbas
challenged Israel to freeze its settlement activity, per the
roadmap.
South Africa: Important goings-on here as Jacob Zuma was
elected to take over as governing party leader of the ANC from
current President Thabo Mbeki, though Zuma can not stand for
election until 2009.
What’s worrisome to a few of us is that Zuma is a “poor-poor”
populist and some have gone as far to say that he is potentially
another Robert Mugabe. Zuma is also evidently going to be
indicted on a corruption scandal related to arms-buying, and he
was recently cleared of an unrelated rape charge. Zuma said he
will not relinquish his party boss role unless he’s convicted.
But who exactly is going to run South Africa the next 15 months
or so, assuming Zuma is acquitted? The reason why you should
care is best pointed out in a recent op-ed for the Washington Post
by Micah Zenko.
Back on Nov. 8, Zenko writes, there was a severe security breach
at a large nuclear facility where four armed men were able to
spend 45 minutes inside the plant without being detected. The
complex contains 25 bombs’ worth of weapons-grade nuclear
material but none was taken. [At the same time another group of
four was unsuccessful in gaining access from a different side of
the plant.] Authorities know of the intrusion because it was all
captured on camera, but no one was monitoring them. That and
the fact an off-duty officer was shot.
Zuma is bad news for South Africa and, if corruptible, could be
bad news for the rest of us; as in would he look the other way
and allow some of his weapons-grade material to be sold off to
the highest bidder?
South Korea: After ten years of liberal rule, conservative Lee
Myung-bak will be his nation’s new president after he destroyed
the opposition by the largest margin ever. Lee is a former
Hyundai CEO who ran as a pro-business candidate and should be
friendly to the United States.
But on the issue of relations with his commie neighbor, Lee has
vowed to take a hard-line on Pyongyang and Lil’ Kim after what
he called a too soft attitude by his predecessors. Lee said he
needs to be assured North Korea is indeed ending its nuclear
weapons development before he will rain new assistance on it,
plus Lee will further emphasize human rights.
In the here and now, the North is proceeding in its disablement of
the Yongbyon facility, but this is not the same as ‘dismantling.’
Disablement means they could resurrect the program in about a
year’s time should they choose to do so. And Pyongyang isn’t
going to come close to meeting the Dec. 31 deadline for
revealing its entire program beyond Yongbyon as mandated by
the Six-Party talks. [Though there are no penalties for being
tardy.]
Kosovo: The UN Security Council failed to break the impasse
with Serbia and Russia over Kosovo’s pending declaration of
independence, so we advance to plan B and the ‘rolling
recognition’ next spring by the U.S. and the EU; meaning a
direct conflict with Russia is still very possible.
Ukraine: Former prime minister and pro-West advocate Yulia
Tymoshenko, the braided one, is finally back in this office after
winning 226 seats in the 450-seat parliament, the exact number
needed. The previous week she lost by one seat. So
Tymoshenko is reunited with Orange Revolution partner Viktor
Yushchenko, the president, after they reconciled differences that
initially caused a split a few years ago. One big initial issue for
the two is the flow of Russian gas through Ukraine to pipelines
then passing it on to Western Europe.
Thailand: From the AP… “Scantily clad dancers were hired to
spice up a political rally ahead of Thailand’s weekend general
election, prompting the Election Commission to declare
Wednesday that ‘sexy shows’ are inappropriate campaign
events.”
Huh. Could you see Barack Obama doing that? I kind of can.
Huckabee? Probably not.
Random Musings
–A West Point study of captured al-Qaeda personnel records
reveals that 41% of their fighters are Saudi nationals and 19%
from Libya.
–Incredibly, we are less than two weeks before the Iowa
caucuses and a Washington Post/ABC News survey of the state
has Barack Obama ahead of Hillary, 33-29, with John Edwards
at 20.
Nationally, though, in an NBC/Wall Street Journal poll, Hillary
bests Obama 45-23, but in a Reuters/Zogby survey her lead is
only eight, 40-32.
On the Republican side, Huckabee continues to lead in Iowa,
while in New Hampshire, a Rasmussen survey has Mitt Romney
ahead of John McCain, 31-27. A CNN poll of the state has it 34-
22, Romney, however.
Nationally, the Republican side is a free-for-all.
NBC/Wall Street Journal
Mitt Romney 20
Rudy Giuliani 20
Mike Huckabee 17
John McCain 14
Fred Thompson 11
Reuters/Zogby
Rudy Giuliani 23
Mike Huckabee 22
Mitt Romney 16
As for President Bush, in the NBC/WSJ poll, his overall
approval rating has ticked up to 34 from 31 the month before. In
a USA Today/Gallup survey, Bush comes in at 32 and has been
mired in a 29-34 range since May in this one despite the
improvement in Iraq. [Of course the economy is why he isn’t
polling higher.]
In the USA Today survey, only 30% give Democrats in Congress
good marks but at the same time they still favor Democrats over
Republicans in ’08 by a 53-40 margin, and it’s this last figure
that is the cause of many a nightmare for Republican candidates.
–Mike Huckabee caught some heat from White House
supporters when in an article for the current issue of Foreign
Affairs, Huckabee criticizes the “Bush administration’s arrogant
bunker mentality.” Spot on, Mike. I’ll have more on
Huckabee’s foreign policy analysis in a future “Hot Spots”
column.
[Did you see that story by Michael Isikoff and Holly Bailey in
Newsweek on Huckabee’s son, David? Geez, what a mess that
kid is, or was, going back to a 1998 incident at a Boy Scout
Camp. The then 17-year-old counselor was accused of hanging a
dog, though no charges were ever filed. It wouldn’t be a story,
though, except there are allegations Governor Huckabee
interfered in the investigation.]
–According to a Zogby International and Lifetime Television
survey, Oprah had zero effect on primary voters in New
Hampshire by her support of Obama. One in three New
Hampshire women between the ages of 18 and 29 said her
appearances with him made them less likely to vote for the
senator, while 73 percent of all women polled said it made no
difference to their campaign choices.
In South Carolina, a separate survey by CBS found that 38
percent of likely Democratic primary voters were more likely to
back Hillary Clinton because of Bill’s involvement, while just 10
percent said Winfrey’s campaign stops make them want to line
up behind Obama.
Meanwhile, Bill Clinton said of his wife:
“The reason she ought to be president, over and above her vision
and her plans is that she has proven in every position she has
ever had in life, whether it was in elected office or not, that she is
a world-class genius in making positive changes in other
people’s lives.”
Goodness gracious. What more can you ask for?
–I watched Barack Obama on “Today,” Friday, and couldn’t
have been more unimpressed. From a purely political junkie
standpoint, I agree with his decision to run this time, but he’s as
ready to be president as Charlie Brown was ready when it came
time to direct the Christmas pageant. Actually, Charlie Brown
had a plan, but this ‘change agent’ didn’t go over real well.
Obama should take note.
–For those of you reading this Saturday or Sunday, Ron Paul is
on “Meet the Press” for what should be a most entertaining
interview. Paul raised $6 million in one day recently and has
taken in $17.5 million in the fourth quarter.
–I have to be honest. I haven’t a clue what was decided at the
UN Climate Change Conference in Bali except that the 187
nations in attendance, including the U.S., decided on a roadmap
for securing emissions cuts by 2009, a step towards replacing the
1997 Kyoto Protocol, which the United States is not part of,
expiring in 2012. I do know that as always it boils down to the
EU, China/India and the U.S. as the three major players and the
Bush administration argues that emissions targets must be line
with “national circumstances.”
Where the world is clearly headed, however, is towards a cap-
and-trade system. But as the Washington Post opines,
“governors are so fed up with federal inaction on the
environment that they’re forming their own binding regional
compacts for reducing greenhouses gases. This is the kind of
leadership the world and many in this country are looking for.”
Alas, this last bit was written a day before the Environmental
Protection Agency said the tailpipe restrictions California and 11
other states have are null and void and that federal regulations
take precedence.
–My flight home from Germany on Sunday crossed Labrador
and I’ve got to tell you, no shortage of ice there already in mid-
December.
–Japan has suspended its whale hunt after pressure from the U.S.
Due to migration patterns, such a halt would allow the whales to
flea to Sea World for safety until the next meeting of the
International Whaling Commission in 2008. Meanwhile,
Australia is monitoring the whaling fleet and could launch an
attack at any minute should Japan not comply before the
humpbacks get away. [OK….slight exaggeration, but I’m
working on an exciting screenplay.]
–So I’m reading my International Living newsletter and I didn’t
realize that in his memoirs, former Mexican President Vicente
Fox writes of President Bush that he is a “windshield cowboy” –
someone more comfortable driving his truck around his ranch
than riding a horse – and “he was quite simply the cockiest guy I
have ever met in my life.” I haven’t met Bush myself, but I have
to agree with Fox on that last one and his analysis provides a
window into how the rest of the world views the man.
–I see that Bill O’Reilly selected Gen. David Petraeus to be his
“Man of the Year.” An interesting pick. I’ll give you mine next
week. I thought Time magazine’s choice of Vladimir Putin was
outstanding. If you are looking for a person of real
“consequence,” there’s your guy.
–French President Nicolas Sarkozy has been dating former
supermodel turned singer Carla Bruni just two months after his
divorce from his second wife. You rock, Nickster! But be
careful…they say Bruni is a real man-eater.
–Each day I go to the newsstand near my office to pick up the
Wall Street Journal, at which time I check out the tabloid covers,
and so the other day there was Jamie Lynn Spears and the
announcement she was pregnant….after which I mused to
myself, “And why is this important?” I didn’t realize until later
that she was just 16. So, yes, it’s kind of a story.
[Coincidentally, the U.S. fertility rate is at its highest level since
1971. But the news networks really need to note that it’s only up
to 2.1, the replacement level. This is hardly another baby boom
as NBC News presented it on Thursday, but the start of a trend?
Maybe.]
–I see from a Los Angeles Times piece by Jerry Hirsch that
goose is once again becoming a staple on the holiday dinner table
and in restaurants. At the Ritz Hotel in Newport Beach, the
general manager said “By early November we take duck off the
menu and put goose on.” Good information for the two birds,
don’t you think? Like if I knew this, I’d probably lay low come
fall. Try and get a student deferment or something.
Of course some of us wish the craving was for Canada Geese, the
elimination of which in America should be part of any climate
change negotiations.
But in noting the piece, I have a confession to make. Every time
I’ve been to Europe recently I’ve purchased some foie gras in the
duty free shops on the way home and, alas, this last trip, to my
horror, I couldn’t find any. There are growing pressures in
Europe to ban it, just like here, so if you like the stuff, buy all
you can now.
[And there go my animal rights readers……………………just
remember I saved the humpback!]
–As to the economics of eating goose, did you know that the
main reason why it’s pricier is because the geese require 7
pounds of feed to grow one pound while it only takes 2 ½ pounds
of feed to grow a pound of turkey? Just a little tidbit for when
there is a lull in the conversation at the dinner table on Tuesday.
–In her letter to Santa this year, Sally Brown was asking for
“tens and twenties…in euros.” As for Lucy, recall she always
asked for “real estate” and I’m sorry to report she was swept up
big time in the subprime disaster; further proof that the industry’s
lending standards were rather slack, seeing as she was just 11,
but then faked being 30 on her mortgage application. Lucy had it
coming, I think you’d agree.
–Lastly, scientists at the Jet Propulsion Laboratory are projecting
that there is a 1 in 75 chance an asteroid, 160-feet across, will hit
Mars on Jan. 30. As the L.A. Times notes, that would be in a
class of the kind that hit Siberia in 1908, an impact which felled
80 million trees over 830 square miles. [Or 830 Hobokens…the
New Jersey community being a mile square.]
So I’m thinking that the tabloids on Mars are having a field day,
like in the Mars Post or Martian Chronicle.
“Mars Martials Forces To Knock Down Asteroid!!!!”
Of course if the scientists at Jet Propulsion then observe that the
asteroid is indeed knocked down, well, we’d have another
serious issue to add to the plate for 2008, that’s for sure.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $815
Oil, $93.57
Returns for the week 12/17-12/21
Dow Jones +0.8% [13450]
S&P 500 +1.1% [1484]
S&P MidCap +1.7%
Russell 2000 +4.2%
Nasdaq +2.1% [2691]
Returns for the period 1/1/07-12/21/07
Dow Jones +7.9%
S&P 500 +4.7%
S&P MidCap +8.1%
Russell 2000 -0.3%
Nasdaq +11.0%
Bulls 56.5
Bears 22.4 [Source: Chartcraft / Investors Intelligence]
Have a great week. Merry Christmas, friends.
Next time…I’m thinking way outside the box for 2008.
Brian Trumbore
