[Posted 7:00 AM ET]
Wall Street
It’s still all about housing.
“There is a strong need for urgent action,” said former Treasury
Secretary Robert Rubin. “I would be very, very seriously
considering the possibility of using public funds in one form or
another.” In an interview with Bloomberg News, Rubin added
“The Fed has done a very good job. The Treasury, working with
the Fed, did the right thing conceptually in rescuing Bear
Stearns.” But, “The credit markets themselves are really in
uncharted waters.”
Of course the discussion has become very political in an election
year and, agree or disagree, Hillary Clinton does have a good line
when she says “If we can extend a $30 billion lifeline to avoid a
crisis for Wall Street banks, we should extend at least $30 billion
in immediate assistance to at-risk communities and families
facing foreclosure.”
Liberal economist Jared Bernstein adds, “Some say, let market
discipline rule. But some banks are too big to fail, and some
homeowners don’t deserve to lose their shirts.”
But even if you wanted to develop a bailout program, how do
you ensure the aid only goes to those who are deserving, and
how do you avoid a backlash from those who rightfully believe
they played by the rules, thus, why should they have to pay for
those who in most cases probably exercised poor judgment?
In his story for the Los Angeles Times, reporter Michael A.
Hiltzik quotes a Palo Alto software executive who offers, “If
businesses don’t want to modify their own loans, then letting the
government do it just means the government is taking on the
risks that the lenders don’t want….Not letting people (suffer) the
consequences of their actions just means that there won’t be a
lesson for them, and 10 years from now we’ll be doing this
again.”
But PIMCO’s Bill Gross has long called for government
intervention. “If Washington gets off its high ‘moral hazard’
horse and moves to support housing prices, investors will return
in a rush to prudent government- and agency backed securities,”
thus helping unclog the pipes that have led to the credit crisis.
Personally, I’m just frustrated because some of us were crying
out for years during the bubble, though my take is a little
different than the rest in that I directly blame regulators and, yes,
the White House.
Us Republicans (of which I am going to be one in name only just
another few weeks, until I can find the time to change my
registration to ‘independent’) like to joke that the other side
always “blames Bush for all our ills.”
But let me tell you, friends, while a president has no business
discussing what to do in the stock market during a press
conference, for instance, when it comes to the average
American’s number one asset, his home, or the most important
financial decision an American may have to make, the decision
to purchase one, a president is in his right to warn his flock about
making prudent decisions and not overreaching.
I don’t expect more than two percent of you to agree with this
last point, but I also believe that even just last fall, when the
president and the treasury department began the ‘Hope Now
Alliance’ initiative, they should have been pounding away
through public service announcements to have homeowners call
their banks and mortgage lenders to try and work out better
terms. Yes, I know in many cases you don’t have a clue who
actually holds your mortgage these days, but the president and
treasury didn’t even take that simple step. If you didn’t watch
CNBC all day (and, thankfully, 99 percent of you don’t because
you have real jobs), you’d never see our leaders making these
pleas at all.
[Ironically, at 3:30 pm on Friday, President Bush was doing just
this, though in flipping around to see who was covering it,
CNBC did for a minute and that was it. How about a freakin’
prime time address that would have taken five minutes last fall,
Mr. President? Alas, now as I go to post, it appears the
administration is preparing some sort of rescue plan…details to
follow….though it’s certain the backlash will be swift and
severe.]
As for the latest actual data, the S&P/Case-Shiller home price
index of 20 U.S. metropolitan areas dropped 10.7 percent in
January from a year earlier and has now declined 13 consecutive
months. This seems, on the surface, to be as accurate a reading
as we have and of the 20 cities measured, only one showed a
price increase, Charlotte. Yet what have I been writing of the
past few weeks? Massive foreclosures in Charlotte. Draw your
own conclusions. I’ve drawn mine.
Two leading homebuilders reported earnings this week, Lennar
and KB Home, and revenues were down 40 to 60 percent over a
year ago. The CEO’s of both said the same thing; still too much
inventory and until it’s largely worked off you’ll have no bottom.
It doesn’t help that consumer confidence is at rock bottom levels
as well.
Separately, existing- and new-home sales for February both
exceeded meager expectations, but if you’re looking for a silver
lining, don’t bother. Go pet the dog instead if you want to feel
better.
Commercial real estate is obviously the next shoe to drop.
Goldman Sachs is projecting serious losses in $460 billion in
loans outstanding in this category, as the tightening in credit
conditions forces lending institutions to pull back to preserve
their already reduced capital; though if you follow Oppenheimer
banking analyst Meredith Whitney, and her latest projections of
further massive writedowns by the likes of Citigroup, UBS and
Merrill Lynch, just where the investment banks are going to find
another round of capital infusions to repair their already tattered
balance sheets is anyone’s guess. The sovereign wealth funds,
after all, can’t conceivably be stupid enough to keep throwing
good money after bad. They have been killed thus far…let alone
private investor Joe Lewis and his Bear Stearns debacle.
Sorry to be so surly. I actually had a better week, myself, but
then I haven’t received my new property tax notice yet. Here in
Summit, the headquarters for StocksandNews, I see homeowners
are getting hit with an increase of 7.3% on a depreciating asset.
Now isn’t that special. No wonder the motorists here try and run
you down when you’re in a crosswalk. Next time I’m flattened, I
guess I’ll be more understanding.
Well, we’re basically at quarter end and I said I’d update you on
my own forecast, which hasn’t changed in 15 months. While the
final word on fourth quarter GDP for 2007 came in at an
unrevised up 0.6%, I do maintain we are currently in recession,
though like many of you I eagerly await the end of April and the
first official gauge of GDP for Q1. I’m looking at taking some
tap-dancing lessons just in case.
For now, however, I’m sticking with my forecast of a “fairly
shallow” downturn. And how do I define that? Minimally
negative GDP figures, but it will feel worse.
That said, the housing sector will not recover in earnest for years.
We have entered a long period of well below normal economic
activity, thanks to our number one asset losing its value and the
impact that is increasingly having on consumer spending. Plus,
the slowdown is global, thanks again to my worldwide housing
bubble, and we’re just going to walk around feeling blah. “60
Minutes” will be doing segments on how we’re tired of looking
at each other and many of you will get sick of reading this
column because you’ll use the excuse it drags you down further.
There now…how’s that for a forecast? But guess what? The
above doesn’t mean stocks are going to take a big drubbing from
here. In fact I’m sticking with my original 2008 forecast of 3 to
5 percent declines in the major averages, meaning from current
levels we could see a little more upside from the January lows.
Where many are going to get things wrong, though, is in thinking
the economy is close to a bottom, say in the second quarter, and
that stocks should be ready to start a new bull run to new highs.
Sorry, we’ll be faked out, time and time again, like in housing.
In a nutshell, I’m not changing my tune one iota. But I do have
to bring up three other items. A wildcard, the election, and
inflation.
My prime wildcard is Iran. I remain convinced some action will
be taken, most likely by Israel by year end because clearly Iran is
not going to be forced to cease with its uranium enrichment
operation. I do not see how Israel can wait until next year, let
alone 2010 when most “experts” seem to think Tehran would
have enough material for a bomb or two.
But I’m not so sure anyone can say just how the markets would
react should a preemptive strike on suspected nuclear facilities be
carried out. I’ve written a lot on my “hot spots” link of disaster
scenarios, including a wave of terrorism, and obviously you’d
expect oil to spike $50 overnight, thus deepening the economic
downturn around the globe, but I’m not so sure how long the dire
news would last. I’m not sure a strike on Iran automatically
means Hizbullah and Hamas launch massive assaults of their
own on Israel and U.S. and Western interests. It seems like too
easy of a theory.
What if, instead, the Iranian people, led by the moderates, rise
up, overthrow their government for putting them in such a
perilous situation, and immediately start cutting deals with the
West to ensure their survival, which would of course include
cutting off funding to the terrorists? While I’m involved in
studying such material on a daily basis, I need a little more time
to fully think this through, thus I reserve the right to amend the
above over the next few weeks.
As for the coming presidential election, this is depressing. All
three candidates are bumming me out, including John McCain
because I have zero confidence he will perform well in the
debates. I love the man, and as you see when you Google my
name (scary what’s up there, by the way, including the detail), a
vast majority of his supporters just wish he was 8 years younger.
I truly am amazed, for example, at how little grasp of economic
matters he really has. [Maybe Mitt Romney as Veep is the
answer to this conundrum after all.] In the end, I just feel
Americans, and investors, won’t like the prospects for the next
term when they go to the polls.
Lastly, on a milder topic, inflation, I know the numbers don’t
look good today. I grocery shop just like the rest of you and I’m
sick of shelling out $40+ to fill the gas tank. Merrill Lynch did a
study that shows 36% of disposable income is going towards
food, energy and healthcare these days, the highest since this
data began being tracked in 1960, and, adjusted for inflation,
median family income in America has declined 2.6% since 2000
thanks to rising healthcare costs, a fact Republicans are always
loath to admit.
But I just believe inflation will come down with the slowing
global economy, though as I note below, on the food front we
have to face some serious crises the next few quarters in the
developing world in particular before this occurs.
Street Bytes
–Stocks finished mixed, with the Dow Jones losing 1.2% to
12216 and the S&P 500 declining 1.1% to 1315. But Nasdaq
managed to eke out a three-point gain despite some less than
exciting earnings out of Oracle. What hurt on Friday was J.C.
Penny’s earnings warning that in turn dragged down all the
retailers.
–U.S. Treasury Yields
6-mo. 1.52% 2-yr. 1.66% 10-yr. 3.46% 30-yr. 4.34%
Action in the Treasury pits was mixed, a la equities. The news
on the economy certainly wasn’t good, as durable goods orders
(big ticket items) for February were down a whopping 1.7%, far
worse than expected, while personal consumption, up 0.1%,
continued to confirm the consumer was retrenching.
–I was kicking myself when I saw the front page headline in the
Wall Street Journal, “Stocks Tarnished by ‘Lost Decade’”. Dr.
Whit W., a fraternity brother from Wake Forest and a loyal
reader, alerted me to this fact a month ago and, Whit, last
weekend I was doing some work on the topic for this week’s
review. Alas, I was too late. So I’m ‘buying’ next time we see
each other, Doctor.
The Journal’s E. S. Browning pointed out that the S&P 500 was
trading at 1362 in April 1999, and here we sit today at lower
levels, plus when you factor in dividends and the impact of
inflation, the S&P has risen just 1.3% a year over the past ten
years.
Well here is some different data than what the Journal had.
12/31/99
Dow Jones…11497……..today, 12216
S&P 500…….1469……..today, 1315
Nasdaq………4069……..today, 2261
Oil, $25.60….today, $105.29
Gold, $289….today, $936
Actually, the average price of oil for all of 1998 was $13.34 and
$18 in ’99. No one was complaining about prices at the pump
then.
But Dr. Whit was noting how he thought our markets were
heading towards Japan redux and a decade-long slump (like that
country went through in the 90s). Well, I just so happen to have
market data going back to 1990, so, let’s look at some
international barometers.
12/31/99
Tokyo Nikkei…18934…..today, 12820…another lost decade
London FT-SE…6930…..today, 5692
Frankfurt DAX…6958….today, 6559
Toronto Comp. …8413*…today, 13233
*heavy on energy and metals
Unless you were invested in commodities, and some emerging
markets, it’s been a lost decade all around.
–Growth in the U.K. for the fourth quarter came in at exactly the
same figure as in the U.S., up 0.6%. We truly are related. But
remember, the real estate bubble across the pond is worse than it
was here, particularly when it comes to mortgage reset rates,
which are about to slam the Brits.
–Oracle Corp.’s earnings were far from awful, just below
expectations so the shares got slammed after running up ahead of
the news. Sales of new software, for example, rose 16%, but this
wasn’t good enough, and then the company said on its
conference call that some customers grew “cautious” at quarter
end, which for those of us who believe we’re in recession is the
key.
–It’s incredible to think that it was just about nine months ago
that all we were talking about was the exploding private-equity
business and, today, it’s about the inability of Clear Channel
Communications and its private-equity buyers to complete the
financing as banks like Citigroup, Credit Suisse and Deutsche
Bank renege on their agreements to provide the funds. In this
instance, Clear Channel and private-equity firms Thomas H. Lee
Partners and Bain Capital Partners have been forced to take the
banks to court to compel them to complete the leveraged buyout.
Coincidentally, 25 of the 42 companies that Standard & Poor’s
says have the lowest credit ratings, and thus the highest risk of
default, are owned or controlled by private-equity firms. This
was all so predictable.
–JPMorgan sweetened its bid for Bear Stearns to $10 from $2 in
another hasty move to not only save the deal, but wrap it up in
light speed by April 8. In turn JPM is assuming responsibility
for the first $1 billion associated with a $30 billion portfolio of
impossible-to-price assets, which will now be managed by
BlackRock; selected by the Federal Reserve in what is one
helluva coup for Larry Fink and Co. [Nice time to be on the
marketing team there… “The Fed did its due diligence and
selected us. What else do you need to know?”]
Meanwhile, SEC chairman Christopher Cox said in a letter to
Swiss regulators that the “fate of Bear Stearns was a lack of
confidence, not a lack of capital.” As for Bear chairman Jimmy
Cayne, who has been accompanied by an armed guard since the
collapse of the firm, he sold his entire remaining stake for $61
million. A year ago it was worth $1 billion; not that we are
crying for the man.
–In a page one story in the Journal titled “Woes in Condo
Market Build As New Supply Floods Cities,” there is a mention
of San Diego, which “will add 2,500 units” over the next year or
so. Reader Josh P. was all over this a long time ago, as I’ve then
relayed on to you. And it was in the fall of 2006 that I was
cruising around the Tucson, Arizona, area and told you of the
glut I saw, which also proved to be the case as Phoenix-Tucson
are as much ground zero as Florida and Las Vegas when it comes
to this sector. Condos, nationwide, have the same inventory
levels as single-family homes, 10 months.
And then you have the issue of construction loans. I keep
writing of this 75-unit or so development down the street from
me and I still haven’t seen a ‘sold’ sign on a single unit, but
imagine the loan this particular builder is on the hook for. You
all know the developers’ game….sell some units, get the cash
flow, and build some more. Pretty tough to keep playing if
there’s no cash coming in, let alone in many cases those who put
deposits down, especially in the prime bubble regions, are
continuing to just walk away.
–In order to survive, maybe, Thornburg Mortgage, the “jumbo”
mortgage specialist that liked to say “we have no subprime,”
while accepting Alt-A and no-doc loans in some cases, was
forced to sell up to $1.4 billion in senior notes with an initial
coupon of 18%. It remains to be seen if this stop-gap measure
will work.
–Jesse Eisinger had the following thoughts in Conde Nast
Portfolio (great magazine, by the way) on corporate
responsibility.
“When Bob Nardelli said in September 2006 that he took ‘full
responsibility’ for manhandling Home Depot, how was he to
know that he’d be kicked out four months later with an extra
$210 million in the bank? Or that he’d end up at the wheel of an
American icon, Chrysler? Merrill Lynch’s Stan O’Neal, who
also mouthed the responsibility platitude, received $160 million
when he was dumped after billions of dollars of bets went bad
and word leaked out that he had toyed with selling the company
without talking to his board.
“Other disgraced Wall Street executives are hot commodities in
the job market, valued for their perceived ability to walk through
fire and survive. Private equity firms are turning away from
deals signed mere months before. J.C. Flowers & Co. even
managed to leave Sallie Mae at the altar and not pay the
contractually negotiated breakup fee. Housing-industry shills
who championed a rising market are keeping their jobs. Banks
that made disastrous loans are cutting in line to borrow at below-
market rates from the Federal Reserve. ‘It’s amazing, the lack of
shame,’ says Lawrence Mitchell, a George Washington
University professor and author of ‘The Speculation Economy:
How Finance Triumphed Over Industry.’ ‘The guys on Wall
Street claim they believe in free markets and are entitled to
enormous compensation because of their risk taking. But when
they lose, do they say to themselves, ‘I’m going to take my
losses’? No, they go running to Uncle Ben’ – Ben Bernanke –
‘and he, in a grotesquely irresponsible move, bails them out.’”
–Interesting viewpoint from columnist Matthew Parris in the
London Times on the overall mood both in Britain and around
the world.
“There’s no great debate about the world’s or Britain’s economic
prospects because what is there to say except ‘fingers crossed’?
Over the Thames the metallic clutter of huge cranes above the
isle of Dogs stays rigidly in place, steel arms swinging slowly
across the sky, building new skyscrapers: offices and homes for
office workers; and they are extending all the platforms of the
Docklands Light Railway so the trains can take an extra car
because the growing pressure of commuter numbers threatens to
overwhelm the service….
“Who knows what’s happening? Perhaps nothing, after all.
Perhaps this will all blow over. But what unsettles me goes
deeper than a sense of mystery about the future. At most
junctures in history there arises the feeling of a lull before a
possible storm. Heck we were in a worse state in 1945, or 1979
[Ed. the crisis Britain faced at the dawning of the Thatcher Era].
Danger was more imminent in the Cuban missile crisis in 1962.
The fall of the Berlin Wall in 1989 posited bigger unknowns for
the future. But at these crossroads the air was full of ideas:
strong ideas, competing ideas, confident philosophies, angry
dissent. People had policies. Ideologies clashed. Politicians and
thinkers jostled to present their plans. Leaders led.
“But what distinguishes this hiatus in 2008 from those earlier
forks in the road is the impassivity of our politics, and the
idleness of political debate, as we wait. There is a sense of
vacuum.”
Like I’ve been saying for years, there are no Churchills to call on
these days, that’s for sure.
–And a Churchill is what we need now when it comes to
entitlement spending, as yet another government report warned
this week of the coming crisis, first and foremost in Medicare.
Just don’t ask today’s presidential candidates to talk about
painful solutions.
–Prosecutors in California arrested 19 people involved in a scam
where homeowners were told they could avoid foreclosure by
signing over their home’s title, in essence, to the fraud ring who
then took out a new mortgage to take out the equity.
Someone explain to me why any individual involved in such a
premeditated fraud should not receive life in prison without
parole? Time’s up.
–Google received more bad news in the form of February data
from research group comScore Inc. that shows for the second
consecutive month, Google’s paid-click data fell 3% from
January, though this doesn’t reflect what advertisers are actually
paying per click. I just believe the bottom line is Google isn’t
immune to a slowing economy and reduced spending on
advertising. [Plus I have my own ongoing issues with click
fraud.]
–I saw this story on the wire, one that has political overtones.
Pennsylvania’s largest grower of fresh-to-market tomatoes, Fred
W. Eckel & Sons Farms Inc., said it was no longer producing the
crop because the fourth-generation farmer/owner, Keith Eckel,
can’t find enough workers to harvest it.
“There are a number of workers hesitant to travel, legal or illegal,
because of the scrutiny they are now under. So there are less
workers crossing state lines.”
–I have been waiting impatiently for my
conservationsalmon.com food source to start offering salmon
again, but now I’m beginning to wonder if they and others will
be able to procure the ‘wild’ variety after the latest data on the
Pacific stock. In Oregon and Washington, for example, the
population has plummeted from 1.5 million in 2005 to an
estimated 35,000 today. Man is the culprit (such as in polluting
the waterways) but not because of global warming.
–I spent some time in New York on Tuesday and took a long
walk through Central Park for the first time in what was probably
decades. Funny how you forget some of life’s simple pleasures.
I remain floored each time I’m in the Big Apple at the number of
tourists, thanks to the sagging dollar. I stayed overnight at a
hotel on W. 50th and I was the only American there, or so it
seemed. The smallest room I’ve ever had and it was $500, but
with the currency being what it is, still a relative bargain for
foreigners.
–Did you see the new drink hitting the market? “Gatorade
Tiger.” Oh, to be Tiger Woods. But then no one in the world
works harder at their craft than he does. Thus, no one is more
deserving of the rewards.
–Why does the Wall Street Journal insist on spelling JPMorgan
Chase as J.P. Morgan, even though the company’s own Web site
clearly tells you it’s the former? I have to admit I’ve been
confused myself and written it out every which way imaginable
on these pages, so I apologize for that.
–My portfolio: Much better week thanks to a recovery in my
solar play. But I’m still reduced to drinking domestic over
premium owing to the damage done the prior two weeks.
–We note the passing of Egg McMuffin founder Herb Peterson,
89. Peterson came up with the idea in 1972, and once upon a
time wrote the fast-food king’s first national advertising slogan,
“Where Quality Starts Fresh Every Day.” [I might co-opt this
one.]
Peterson, it seems, was partial to eggs benedict (who isn’t) so he
came up with a sandwich that consisted of an egg with the yolk
broken, topped with a slice of cheese and grilled Canadian
bacon. At first it was served open-faced on a toasted English
muffin, but that was messy when you picked it up so they added
the top half.
–And the great ad man Hal Riney died, 75. Among his triumphs
was the slogan for Saturn being a “different kind of company,”
the campaign for Frank Bartles and Ed Jaymes and Gallo wine
coolers, as well as Ronald Reagan’s “It’s Morning in America,”
all three of which were named in Advertising Age’s top 100
campaigns of the 20th century.
I liked what Riney once said with regards to his ego. That
wasn’t his driver, but rather “the fear that I’m really no damned
good.” [Bruce Horovitz / USA Today]
How many of us are willing to admit this? I’ll raise my hand
first.
Foreign Affairs
China: Lots of issues, but let’s start with Taiwan and its
presidential election last weekend where the Kuomintang’s Ma
Ying-jeou defeated his DPP rival, Frank Hsieh, 58-42, with a
strong 76% turnout. The result was viewed positively by all
sides, including China, as Ma has long sought peaceful relations
with the mainland. As one analyst told the Financial Times,
“The KMT and the Chinese leadership have a common objective:
economic development on both sides of the Taiwan Strait and the
easing of tension.”
Ma wants to focus on the economic issues first and then
eventually on a peace accord. China’s leaders have long
maintained they will communicate with Taiwan’s leadership as
long as the latter isn’t pursuing independence, as current
president Chen Shui-bian basically has.
Taiwan’s economy, while exhibiting decent overall growth
because of a still thriving electronics-driven export sector, is
nonetheless stagnating as manufacturing jobs have moved to
China and Taiwan’s business leaders have watched it lose out to
the likes of Hong Kong, South Korea and Singapore.
But back to the politics of it all, there is no talk of unification
with the emergence of president-elect Ma. Today, only a small
minority of the people desire this.
[By the way, two referendums calling for Taiwan to apply for
membership in the United Nations fell short of passage, as a
majority didn’t vote on the referendum at all, thus making it
invalid, while the fact there were no mass protests following the
election was a clear sign of Taiwan’s maturing democracy.]
Moving across to the mainland, it was all about the Olympics
and the ongoing international uproar over the situation in Tibet.
The torch lighting ceremony in Greece on Monday proved to be
a supreme embarrassment for Beijing as somehow protesters
were able to elude security and unfurl a black banner with five
interlocked handcuffs in the pattern of the Olympic rings. A
Chinese foreign ministry spokesman called the act “disgraceful,”
and there are real concerns the torch relay could see some
violence, particularly since China insists on winding it through
Tibet and the restive western provinces.
Many European leaders, including the president of the European
Parliament, are calling for a boycott of the Olympics, at least of
the opening ceremonies. President Nicolas Sarkozy himself has
hinted he’ll take this route.
Personally, I am not in favor of a boycott because I think the last
thing we want to do with China today is poke them in the eye,
though I note the following opinions on the topic, beginning with
Anne Applebaum of the Washington Post.
“Some boycotts do help solve some things. The boycott of South
Africa by international competitions was probably the single
most effective weapon the international community ever
deployed against the apartheid state….The boycott of the 1980
Moscow Olympics helped undermine Soviet propaganda about
the invasion of Afghanistan and helped unify the Western world
against it. I don’t know for certain, but I’m guessing that from
the Soviet perspective, the Soviet boycott of the Los Angeles
Olympics four years later was successful, too. Presumably, it
was intended to solidify opposition among the Soviet elite
toward the United States in the Reagan years, and presumably it
helped….
“ ‘The Olympic Games are not the place for demonstrations.’
Aren’t they? Actually, the Olympics seem an ideal place for
demonstrations. Not only are the world’s media there with
cameras running, but the modern Olympics were set up with a
political purpose: to promote international peace by encouraging
healthy competition among nations….
“Everything associated with the 2008 Olympics, from the
massive Beijing building program, to the Olympic torch that is
due to be carried across Tibet, to the Chinese Olympic
committee’s Web site (which describes China’s commitment to
‘promoting mass sporting activities on an extensive scale,
improving the people’s physique, and spurring the socialist
modernization of China’) is blatantly designed to promote the
domestic and international image of the Chinese state, too.
“No wonder then, that everyone who hates or fears China,
whether in Burma, Darfur, Tibet or Beijing, is calling for a
boycott. And the Chinese government and the International
Olympic Committee are terrified that those appeals will succeed.
No one involved in the preparations for this year’s Olympics
really believes that this is ‘only about the athletes,’ or that the
Beijing Games will be an innocent display of sporting prowess,
or that they bear no relation to Chinese politics. I don’t see why
the rest of us should believe those things, either.”
Michael Portillo / London Times
“Adolf Hitler’s glee at exploiting the 1936 Berlin Olympics as a
showcase for Nazism turned to fury when the black American
athlete Jesse Owens won four gold medals. The Chinese
leadership must by now be wondering whether staging the
Games in Beijing will bring the regime more accolades than
brickbats. Be careful what you wish for, as Confucius probably
said.
“In defense of the Olympic movement, Berlin had been selected
before the Nazis came to power. No such excuse covers the
decision to award the coveted prize to Beijing. In 1989 the
Chinese government crushed the peaceful protests in Tiananmen
Square as the world looked on in horror. China still secured the
Olympics and a propaganda triumph and has looked forward to
showing off to the world….
“All the indicators suggested that China would be given a soft
ride….As Washington became embroiled in (its wars and
scandals such as Abu Ghraib)…Premier Wen Jiabao, the prime
minister, must have been confident that America would avoid
dialogue on human rights….
“China’s economic sway is such that is has undermined U.S.
foreign policy with impunity. America aims to use its muscle to
shape a world that embraces western values. In developing
countries it insists that governments respect the rule of law and
reduce corruption as a condition for trade and aid. China, on the
other hand, has extended the hand of friendship to gruesome
regimes (including Sudan’s)….
“So China had every reason to expect a trouble-free Olympics
that would show its best face to the world….
“China failed to understand that politicians in democracies
cannot predict what positions they will take….In a few weeks
they have moved from avoiding anything that might offend
Beijing to scrambling to be seen as pro-Tibetan. It scarcely
matters whether the riots in Lhasa were, at least in part, brutal
and racist, nor that such violence is in defiance of the Dalai
Lama’s strictures and undermines his authority. The Tibet
bandwagon is rolling and every democratic politician clamors for
a place on board….
“When China bid for the Olympics it judged correctly that
democratic politicians are pusillanimous. Given their hunger for
Chinese contracts they would not let massacre in Darfur or
torture in Tibet disrupt a good party. But Beijing failed to see
that western statesmen are even more craven towards their
celebrities and media. Beijing’s other mistake was being too
anxious for the Games to be a success. A man who wants
something too much makes himself vulnerable. Surely
Confucius said something of the sort.”
Robert Kagan / Washington Post
“China can go for great stretches these days looking like the
model of a postmodern, 21st-century power….
“But occasionally the mask slips, and the other side of China is
revealed. For China is also a 19th-century power, filled with
nationalist pride, ambitions and resentments; consumed with
questions of territorial sovereignty; hanging on repressively to
old conquered lands in its interior; and threatening war against a
small island country off its coast.
“It is also an authoritarian dictatorship, albeit of a modern
variety. The nature of its rule isn’t visible on the streets of
Shanghai, where people enjoy a degree of personal freedom as
long as they keep their noses out of politics. It is only when
someone challenges its authority that the brute power on which
the regime ultimately rests shows itself….
“These days, China watchers talk about it becoming a
‘responsible stakeholder’ in the international system. But
perhaps we should not expect too much. The interests of the
world’s autocracies are not the same as those of the democracies.
We want to make the world safe for democracy. They want to
make the world safe, if not for all autocracies at least for their
own. People talk about how pragmatic Chinese rulers are, but
like all autocrats what they are most pragmatic about is keeping
themselves in power. We may want to keep that in mind as we
try to bring them into our liberal international order.”
On the issue of Tibet, Patrick French, an authority on the topic,
had an op-ed in the New York Times.
“The Dalai Lama is a great and charismatic spiritual figure, but a
poor and poorly advised political strategist.”
After all, he’s been in exile since 1959 and what improvements
have there been for his people?
“It has been clear since the mid-1990s that the popular
internationalization of the Tibet issue has had no positive effect
on the Beijing government. The leadership is not amenable to
‘moral pressure,’ over the Olympics or anything else, particularly
by the nations that invaded Iraq….
“When Beijing attacks the ‘Dalai clique,’ it is referring to the
various groups that make Chinese leaders lose face each time
they visit a Western country. The International Campaign for
Tibet, based in Washington, is now a more powerful and
effective force on global opinion than the Dalai Lama’s outfit in
northern India….
“These groups hate criticism almost as much as the Chinese
government does. Some use questionable information. For
example, the Free Tibet Campaign in London (of which I am a
former director) and other groups have long claimed that 1.2
million Tibetans have been killed by the Chinese since they
invaded in 1950. However, after scouring the archives in
Dharamsala while researching my book on Tibet, I found that
there was no evidence to support that figure. The question that
Nancy Pelosi and celebrity advocates like Richard Gere ought to
answer is this: Have the actions of the Western pro-Tibet lobby
over the last 20 years brought a single benefit to the Tibetans
who live inside Tibet, and if not, why continue with a failed
strategy?….
“Tibet was effectively a sovereign nation at the time of the
Communist invasion and was in full control of its own affairs.
But the battle for Tibetan independence was lost 49 years ago
when the Dalai Lama escaped into exile. His goal, and that of
those who want to help the Tibetan people, should be to
negotiate realistically with the Chinese state. The present
protests, supported from overseas, will bring only more
suffering. China is not a democracy, and it will not budge.”
I have to note that last week I received a very thoughtful note
from Jim W., a native of China now living in Minneapolis. I
agree with Mr. French’s conclusion above, as I imagine does Mr.
W., who just asks everyone to keep an open mind.
North Korea: Pyongyang test-fired a few bottle rockets, probably
in response to a tit-for-tat with Seoul this week, as South Korea’s
conservative new President Lee blasted the North for its human
rights record. The North then expelled South Korean managers
from a joint economic zone in North Korea at Kaesong.
Meanwhile, Pyongyang is also playing the role of bully and jerk
as it continues to ignore its obligation to fully declare its nuclear
weapons program, which is now three months overdue, as the
U.S. correctly insists there will be no further aid unless the North
comes clean on just what it was doing in Syria, for starters.
Iraq: Shia militia leader Moqtada al-Sadr ordered a general
strike over the government crackdown on his Mahdi Army
militia as violence then spread in both Baghdad’s Sadr City and
in Basra, recently turned over to Iraqi security forces following
the withdrawal by the British who were responsible for the key
sector where much of Iraq’s oil infrastructure is.
The sudden outbreak of intense fighting that has claimed over
100 lives in Basra alone certainly hinders any troop withdrawal
plans the White House may have had as General David Petraeus
prepares to update Congress on the war effort, and it also
provides the first real test of the Iraqi Army. Thus far, what’s
clear is that the army would have failed had the U.S. and Britain
not continued to provide key support on both the ground and the
air.
There has also been a worrisome pick up in attacks on the Green
Zone, as Petraeus accused Iran’s Quds force of training militias
on mortar warfare.
Despite the widespread attacks, President Bush maintained in a
speech, “[As] I consider the way forward, I will always
remember that the progress in Iraq is real, it’s substantive, but it
is reversible. And so the principle behind my decision on our
troop levels will be ensuring that we succeed in Iraq.”
Then he reiterated his claim on Iraq’s importance when looking
at the big picture. “If America’s strategic interests are not in Iraq
– the convergence point for the twin threats of al Qaeda and
Iran…the country at the heart of the most volatile region on
Earth – then where are they?”
Yet when it comes to the Iraqi leaders, by Friday, Prime Minister
Nouri al-Maliki, personally overseeing the operation in Basra,
appeared to be waffling as he gave Sadr’s Mahdi Army more
time to put down its arms.
But this was a week that saw the death toll officially hit 4,000.
Retired Lt. Col. Ralph Peters commented in the New York Post.
“Soldiers die in war. They always will. They know that when
they sign up or re-enlist. Nonetheless, our nation’s leaders have
the responsibility to employ our troops as wisely as possible and
never to squander their lives for political ends.
“As we reached the 4,000th service-member killed in action, I
found myself disgusted with both the Bush administration and its
irresponsible, cynical opponents. The slogan, ‘Support Our
Troops, Bring Them Home,’ may be the most dishonest that ever
intruded on American politics – but the war’s original sponsors
haven’t rushed their own kids to the recruiting office, either.
“With all-too-rare exceptions, our politicians, right or left, really
don’t give a damn about our troops. Polls matter, grunts don’t.
“Oh, the pols spout all sorts of rhetoric about how much they
honor those in uniform, but they really only value our troops as
tools of partisan policies or for photo ops.
“Between the incumbent president and his would-be
replacements, only one has served in uniform or had a son or
daughter serve in uniform. If military service is so praiseworthy,
why don’t more pols encourage their own kids to sign up? I’ll
tell you why: They regard our troops as second-raters who
couldn’t get into Harvard Law or a master’s program at Yale….
“Most pols don’t even know any service members – except for a
few grotesquely ambitious retired generals and admirals.
“We’ve seen President Bush dressed up in a flight suit, grinning
like Alfred E. Neuman among troops who desperately want to
believe in their commander-in-chief. We’ve seen Sen. Hillary
Clinton do drive-bys in Iraq – just long enough to make political
statements, pose with the troops, then zip home.
“For his part, Sen. Obama at least has the integrity to not even
pretend he cares about the troops – he doesn’t go anyplace more
dangerous than a Chicago church pew. No recent aspirant for the
Oval Office has known or cared so little about our military.
“I’m just damned angry. The right won’t admit any mistakes in
Iraq, while the left seeks to undercut progress there.
“Honorable, valiant and tenacious, our troops deserve better
leaders. Never in our history have we seen so profound a
contrast between those who serve and those who decide how
they should be employed.
“We also face, for the first time, national-level leaders who
would rather lose a war than lose an election.
“What actions in Washington would truly honor those 4,000
dead service members?
“From President Bush, a straightforward, no-excuses apology for
his administration’s arrogance and earlier mistakes in this war.
“From Sen. Clinton, a public denunciation of her Hollywood pals
(who keep funding movies portraying our soldiers as atrocity-
addicted psychotics) and a commitment to listen to our leading
generals before making any decisions regarding troop
withdrawals.
“From. Sen. Obama, a two-week visit to dirty-boots Army and
Marine units in Iraq (not the Green Zone and no photo ops) and a
pledge to give a fair hearing to military advice before
surrendering to al Qaeda in Iraq.
“From both parties in Congress, a return to the policy that, in
wartime, politics stops at the water’s edge.”
Israel: Defense officials say Hizbullah has new rockets with a
range of 300 km, or four times the range of those used in the
2006 war, which also means that all of Israel’s population
centers, as well as the Dimona nuclear reactor, are in range.
Vice President Cheney visited Israel and reassured its leaders:
“America’s commitment to Israel’s security is enduring and
unshakeable, as is our commitment to Israel’s right to defend
itself – always – against terrorism, rocket attacks and other
threats from forces dedicated to Israel’s destruction. The United
States will never pressure Israel to take steps to threaten its
security.”
But then he said the U.S. wants to resolve the Palestinian
conflict, but you can’t begin to dream of this unless the U.S. is
perceived as an honest broker and as long as we say one thing
and do another with regards to the settlements, we’re wasting our
time.
Separately, Israel is preparing its military for a full-blown assault
on the Gaza Strip should diplomacy fail to halt the rocket attacks.
According to Defense News, Israel is training for high-intensity
warfare as Hamas deploys an active-duty force of some 20,000,
professionally organized into five brigades, each with its own
command-and-control network, crack sniper units, intel officers
and logistics support systems.
Arab Summit: Leaders from Saudi Arabia, Egypt and Lebanon
are boycotting the Damascus summit, Sat.-Sun., over Syria’s role
in keeping Lebanon from electing a president since November.
Pakistan: The White House is very concerned that the new
leadership here led by Ali Zarderi and Nawaz Sharif, will
willingly cede control over the tribal areas in return for peace in
the rest of the country, so as President Musharraf is increasingly
isolated, there are reports the U.S. is stepping up its Predator
aircraft attacks on suspected al Qaeda and Taliban targets ahead
of a formal change in policy.
Afghanistan: French President Nicolas Sarkozy has committed to
send an additional 1,000 troops, which in turn should ensure
Canada remains engaged; this being a condition for Canada’s
continued involvement.
Victoria Nuland, the U.S. Ambassador to NATO, had some
interesting thoughts on the issues facing the alliance in an
interview with the London Times.
“One of the problems is that European defense budgets are going
down. When you look at the alliance, you don’t see 30,000
troops sitting in a parking lot with nothing to do and waiting to
be sent somewhere. Everyone is stretched. There are some
countries that could do more but one of the reasons why alliance
members are not chipping in with troops and equipment for
Afghanistan is that they haven’t hardened their helicopters to be
able to fight in the desert and they haven’t had counter-
insurgency training in the desert….
“After the Cold War ended, everyone thought we would be able
to focus on soft security, but now we find we have to do hard
security. The UK has one of the best militaries in the world and
is good at recruiting but the entire alliance structure has shrunk.
NATO is stretched to find 60,000 troops to deploy. In
Afghanistan, we’re now in a hump period between fighting the
Taliban and training the Afghans. In three or four years’ time we
hope that we’ll be doing more on training and less on fighting.
But during this hump period it’s hard for the alliance that had
never fired a shot in anger before in a ground war. In Kosovo it
was an air war; now in Afghanistan it’s a full-scale counter-
insurgency war.”
Russia: Parliament voted 444-0 in a non-binding resolution in
support of independence for Georgia’s two disputed territories,
Abkhazia and South Ossetia, especially if Georgia and Ukraine
are fast-tracked for NATO membership.
Speaking of which, next week’s annual NATO summit promises
to be interesting. Secretary-general Jaap de Hoop Scheffer
warned Vladimir Putin to tone down the rhetoric as Putin attends
for the first time.
For his part, President Bush, who is pushing for Georgia’s and
Ukraine’s membership, suddenly decided to hold a summit with
Putin following the NATO confab in the hope of repairing
relations before Putin steps down May 7, particularly on the issue
of missile defense.
As for presidential candidate John McCain, he has consistently
maintained that Russia should be excluded from the Group of
Eight, reiterating this week that the G-8 should once again
become “a club of leading market democracies: It should
include Brazil and India but exclude Russia.” I totally agree with
the senator.
And in case you had any doubts about the Kremlin’s intentions
these days, look no further than the treatment of TNK-BP, the
joint energy venture including British Petroleum. All foreign
employees were suspended because of newly risen visa
problems, this after a Russian-U.S. employee was arrested by the
Federal Security Service (formerly, the KGB) on trumped up
charges of industrial espionage (my opinion). Kremlin infighting
is leading to a fight between those favoring state-run Rosneft and
Gazprom over TNK-BP’s assets.
Saudi Arabia: King Abdullah had some interesting thoughts on
religion. At a forum in Riyadh, Abdullah said:
“I want to call for conferences between the religions to protect
humanity from folly.” Referring to his meeting with Pope
Benedict last November, Abdullah said “I wanted to visit the
Vatican…and I thank him. He met me in a meeting I will not
forget, a meeting of one human being with another….
“If God wills it, we will then meet with our brothers from other
religions, including those of the Torah and the Gospel to come
up with ways to safeguard humanity” as the major faiths share a
desire to combat “the disintegration of the family and the rise of
atheism in the world.”
For his part, Pope Benedict caught a lot of heat in Muslim
quarters for the Easter baptism of an Egyptian-born Italian
Muslim, but the overall theme of reconciliation was one of my
predictions for the year.
France / Britain: President Sarkozy had a triumphant state visit to
Britain and told parliament relations between the two countries
had “never been so close.” It should also be interesting to
observers in the U.S. how France and Britain have agreed to
cooperate extensively in the area of nuclear energy. We are
idiots not to be pursuing this option ourselves.
Zimbabwe: Today is the presidential election and one can only
assume Robert Mugabe will rig the outcome. Mugabe warned
the losers not to protest the results. “We don’t play around while
you try to please your British allies.”
Rest of the World: It’s about food shortages, whether you are
talking much of Asia, Egypt or Argentina, as both surging prices
and supply issues (some politically crafted) wreak havoc on the
lower- and middle-class.
Random Musings
–In the latest Pew Research nationwide survey, Barack Obama
suddenly leads Hillary Clinton, 49-39, as Hillary had to be hurt
by the flap over her incessant lies concerning a 1996 trip to
Bosnia where she’s been running around the country claiming
she was under sniper fire, as all independent accounts later
proved otherwise. No wonder Hillary’s negatives have once
again soared and the latest NBC News/Wall Street Journal poll
had her with only a 37% positive rating.
The same NBC/WSJ survey, though, still showed either potential
match-up in November to be a dead heat at this point.
–One more take on Barack Obama’s speech on race, this one
from Peggy Noonan’s Wall Street Journal op-ed. Ms. Noonan
was complimentary, then added the following.
“Here’s what didn’t work. Near the end of the speech, Mr.
Obama painted an America that didn’t summon thoughts of
Faulkner but of William Blake. The bankruptcies, the dark
satanic mills, the job loss and corporate corruptions. There is of
course some truth in his portrait, but why do appeals to the
Democratic base have to be so unrelievedly, so unrealistically,
bleak?
“This connected in my mind to the persistent feeling one has –
the fear one has, actually – that the Obamas, he and she, may not
actually know all that much about America. They are bright,
accomplished, decent, they know all about the yuppie
experience, the buppie experience, Ivy League ways, networking.
But they bring along with all this – perhaps defensively, to keep
their ideological views from being refuted by the evidence of
their own lives, or so as not to be embarrassed about how nice
fame, success, and power are – habitual reversions to how tough
it is to be in America, and to be black in America, and how
everyone since the Reagan days has been dying of nothing to eat,
and of exploding untreated diseases. America is always coming
to them on crutches.
“But most people didn’t experience the past 25 years that way.
Because it wasn’t that way. Do the Obamas know it?
“This is a lot of baggage to bring into the Executive Mansion.
“Still, it was a good speech, and a serious one. I don’t know it if
will help him. We’re in uncharted territory. We’ve never had a
major-party presidential front-runner who is black, or rather
black and white, who has given such an address. We don’t know
if more voters will be alienated by Mr. Wright than will be
impressed by the speech about Mr. Wright. We don’t know if
voters will welcome a meditation on race. My sense: The
speech will be labeled by history as the speech that saved a
candidacy or the speech that helped do it in. I hope the former.”
–John McCain gave a powerful foreign policy speech which I
will highlight in an upcoming ‘Hot Spots’ segment. On Iraq he
stated:
“We have incurred a moral responsibility….It would be an
unconscionable act of betrayal, a stain on our character as a great
nation, if we were to walk away from the Iraqi people and
consign them to the horrendous violence, ethnic cleaning and
possibly genocide that would follow a reckless, irresponsible and
premature withdrawal.”
With regards to Iran, the United States must do “all in our
power” to keep the country from developing nuclear weapons,
but McCain didn’t speak of using military force as he has in the
past.
McCain favors creation of a new world organization that he calls
a “league of democracies” that would in today’s world exclude
Russia and China and would be more likely to put real pressure
on the likes of Iran because under the United Nations system,
Russia and China can block this.
–As Mike Lupica of the New York Daily News put it, Hillary
Clinton and new Governor David Paterson just need to learn how
to shut up. Paterson is proving to be as big a dirtball as his
predecessor, Eliot Spitzer, after the governor admitted having all
manner of affairs, some of which were paid for with campaign
funds. And then he decided to detail his past drug use, which
wasn’t necessary for us to know but just added to our questions
about the man.
Lupica:
“Because up to now the only thing David Paterson hasn’t told us
is that he had to dodge sniper fire on his way to his next
girlfriend, Paterson apparently expects New York Democrats to
start singing ‘Happy Days Are Here Again’ because he’s the
governor who didn’t have to pay for it, even as college kids start
to think hanging with him would be a lot more fun on spring
break than going to Florida.”
–Then again, when it comes to dirtballs, Detroit Mayor Kwame
Kilpatrick certainly takes the cake, Kilpatrick having now been
charged with perjury and other counts regarding the cover-up of
an affair with a top aide and a lawsuit filed by two police officers
who alleged they were fired for investigating claims that the
mayor used his security detail to cover up extramarital affairs.
The cops won the suit and the city had to pony up $8.4 million,
as the mayor (and his aide) lied on the stand over and over again.
There are literally thousands of text messages between Kilpatrick
and his former chief of staff, yet Kilpatrick said he expects to be
cleared and will not resign.
–I meant to thank Kevin G. Hall of McClatchy Newspapers last
time for sourcing me in a syndicated column on the Federal
Reserve’s recent actions. He didn’t have to, but here’s one who
appreciates the honesty and integrity.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $936
Oil, $105.29
Returns for the week 3/24-3/28
Dow Jones -1.2% [12216]
S&P 500 -1.1% [1315]
S&P MidCap +0.3%
Russell 2000 +0.3%
Nasdaq +0.1% [2261]
Returns for the period 1/1/08-3/28/08
Dow Jones -7.9%
S&P 500 -10.4%
S&P MidCap -10.0%
Russell 2000 -10.8%
Nasdaq -14.7%
Bulls 36.7
Bears 41.1 [Source: Chartcraft / Investors Intelligence]*
*Beginning with the coming week, as soon as I get these figures
I’ll post them on the home page for you equity junkies out there.
You can thank Mark R. for this suggestion.
Have a great week. I’m off to New Orleans to visit the World
War II Museum and may have a thing or two to say about this
next time.
And Play Ball! [Pssst….Tigers over my Mets in the Series]
Brian Trumbore
