[Posted 7:00 AM ET]
Wall Street
Yet another pretty amazing week, thanks in no small part to the
congressional hearings on the JPMorgan Chase acquisition of
Bear Stearns and the Treasury Department’s proposal for
overhauling regulation of our financial system, including that of
commercial banks, investment firms, and the insurance industry.
But for starters, the news on the economy remained gloomy. The
Labor Department announced that 80,000 jobs were lost in the
month of March, worse than expected, and that the
unemployment rate had climbed back over 5.0% to 5.1%.
Federal Reserve chairman Ben Bernanke told a joint House-
Senate committee that the U.S. economy was facing “recession”
and by week’s end only a handful were offering resistance to the
notion. Key readings on manufacturing came in at recessionary
levels, again, while weekly jobless claims rose above the critical
400,000 level and a slew of big companies issued significant
layoff notices. It’s not just Wall Street issuing pink slips these
days, it’s Main Street, and the labor picture is only going to get
worse in the coming months. Americans are also stretched to the
limit, facing record levels of debt, and that simply means one
can’t spend as much.
I was watching a perma-bull blowhard on CNBC Friday
morning, taking issue with the New York Times / CBS News
poll that showed 81 percent of respondents believe “things have
pretty seriously gotten off track,” up from 69 percent a year ago
and 35 percent in early 2002, but how can you not doubt this is
an accurate reflection of sentiment today? Look, I’m fine,
personally. Zero debt outside of a reasonable mortgage payment
and a small car loan, but I’m cutting back myself these days, and
I know enough about the Big Picture to understand things have
seriously gotten off track. We do face an Armageddon down the
road with entitlements, for example, and while we may not have
to pay the piper in this regard for years to come, this issue alone
should be cause for any learned American to answer a survey
question such as that above in the negative. And while I focus
on foreign affairs, and could think of a positive development or
two, you’d have to be an idiot to then take a leap and say Iran,
Iraq, the Middle East in general, Putin’s Russia, North Korea or a
surging China on the military front don’t give one serious pause
as to the future as well.
One thing is for sure, however, and that is the world has the
sniffles as the U.S. has caught a cold. Every major organization
such as the World Bank and the International Monetary Fund is
ratcheting down growth rates on all parts of the planet. The IMF,
for example, now says the world economy will grow by 3.7% in
2008. That might still sound like a decent figure, but understand
that when you are talking globally, 3.0% is recession, according
to these folks. How can that be, you might ask? You need some
growth just to meet the needs of an ever-growing population, for
starters. Think China, for example. It’s commonly accepted that
China needs 8% growth just to take care of the jobseekers that
have flooded the cities. So if you hear China is growing at 7% in
another year or two, that’s recession there. The point being that
the global economy is on a precipice. It can still go either way,
but if you believe my global housing boom scenario and just
extrapolate what’s happening in the U.S. onto virtually every
other nation on earth, certainly in the developed world, it’s not a
pretty picture.
Plus you have this inflation issue; food inflation, specifically. I
remain in the camp believing that as the world slows, so will the
pace of inflation. I have also warned for months now, however,
that first we have to get through this rough patch and prices of all
major food commodities, critically important in the developing
world, continue to hit new highs on an almost weekly basis; rice
being the latest story. Robert Zoellick, president of the World
Bank, said “33 countries around the world face potential social
unrest because of the acute hike in food and energy prices.”
That’s a pretty bleak outlook, I think you’d agree, though I need
to keep repeating another simple fact; for their part stocks don’t
necessarily have to go down as the economy is cratering and I’m
very comfortable with my forecast of minimal losses on this
front for the year.
On to Treasury Secretary Henry Paulson’s “sweeping overhaul”
of our financial regulatory system. Because the proposals will
take years to gain approval in Congress, if at all, I’m going to
largely ignore the topic going forward from here. But for now,
Paulson himself starts out with the opinion, “I do not believe it is
fair or accurate to blame our regulatory structure for the current
market turmoil. I am not suggesting that more regulation is the
answer or even that more effective regulation can prevent the
periods of financial market stress that seem to occur every five to
10 years.”
To attempt to summarize, Paulson and the administration’s gang
of rich people start off with the belief that the existing system
could use a more unified structure. The Federal Reserve would
gain power in that it would be able to go anywhere it’s needed,
but it would lose day-to-day control of the commercial banks in
terms of monitoring them, which would go over to the FDIC.
The Fed would, however, have control over investment banks
and impose stricter controls over capital in same, but it wouldn’t
regulate financial products, such as the sophisticated crapola that
fueled our current crisis. More on this in a second. Separately,
the insurance industry would only have one national regulator to
deal with, rather than each state, something it’s been screaming
for since Hartford Steam Boiler insured the first Easy Bake
Oven. Of course this also means power is passing from the states
to the Feds, in this and virtually all other areas of the financial
services industry, and guess who isn’t happy about this? Yup,
the television-whoring state attorney generals.
There are many other items, such as a proposal to combine the
SEC and CFTC, but again, knowing that this whole topic will be
up for discussion and debated in Congress for years to come, I’m
already bored to tears. I was just hoping that Paulson would
have proposed the American League dump the designated hitter,
but, alas, that didn’t fall under the presidential working group’s
purview.
Nonetheless I guess I better include some serious commentary,
such as this bit from an editorial in USA Today.
“An enhanced government role in overseeing these institutions
need not be overly regulatory. Washington should have little
interest in signing off on every new financial instrument issued.
But if it is going to rush in when large institutions get into
trouble [see Bear Stearns], it has an interest in keeping them out
of trouble in the first place. This entails requiring them to
maintain adequate reserves should their financial conditions
rapidly deteriorate. It also entails some way to promote greater
transparency and simplicity in credit markets.
“There’s no sense in allowing so much of the financial world to
play by its own rules when times are good and expect a bailout
when they are not. That lesson was learned in the 1930s, and
needs to be relearned now.”
This was also a week when the Senate approved a tentative deal
on a package designed to help distressed homeowners; one that
includes a new standard property tax deduction for those who do
not itemize, $10 billion in tax-exempt bonds for local housing
authorities to refinance subprime loans and provide new
mortgages for first-time home buyers, $4 billion in local grants
for communities to clean-up neighborhoods with rampant
foreclosures (by buying the properties outright and then
maintaining them….though bulldozing the structures is probably
a better idea in many cases, mused the editor), further funds for
counseling and, most importantly, at least from my vantage
point, a $7,000 tax credit to purchasers of foreclosed homes.
But then you have this provision, specially designed for
homebuilders, to allow them to claim current losses against taxes
paid in earlier, more profitable years. What a crock. Or as the
Washington Post editorialized:
“And who would be the biggest beneficiaries of this new tax
break? Well, a good guess is the folks who made money hand
over fist during the housing bubble but have been losing money
at the same rate since the subprime mortgage market collapsed
last year: the home construction industry and Wall Street firms
such as Merrill Lynch and Citigroup. In other words, this
provision is a large, unwarranted bailout for the very industries
that helped send the U.S. economy on its scary roller-coaster ride
in the first place. Business lobbies failed to get the carryback
provision written into the fiscal stimulus plan that sailed through
Congress in February. But it is dear to key players such as Senate
Majority Leader Harry M. Reid (D-Nev.) and Finance
Committee Chairman Max Baucus (D-Mont.), and so now it is
back, dressed up as relief for the beleaguered housing sector. It
deserves to die again.”
It’s particularly pitiful in Reid’s case; choosing the homebuilders
over the homeowners in his own incredibly distressed state. Gee,
was Reid thinking about the campaign donations he might
receive from the KB Homes of the world?
On the issue of the Fed and Bear Stearns, I still believe the Fed
did what it had to, knowing that time was of the essence and a
real systemic failure of our banking system loomed. From what
we know, to let Bear fail guaranteed a panic in the markets that
Monday morning.
But Andy Laperriere of ISI Group weighed in for a Journal op-ed
on the environment that allowed the likes of Bear and the
problems in the housing market in general to thrive in the first
place.
“(The) Fed’s policy of ignoring asset bubbles on the way up but
aggressively responding to cushion the blow when they
inevitably collapse (widely known in financial markets as the
‘Greenspan put’) caused investors to take on even greater risk.
The adverse consequences of this loose monetary policy extend
well beyond rising foreclosures and the other visible effects of
the housing bust. The Fed’s loose monetary policy has hurt the
average American. Here’s how:
–“Rolling asset bubbles have depressed wages by spurring
unproductive investment, first in the tech and telecom sectors
and more recently in housing…
–“The stock market and housing bubbles created windfall gains
for some (who sold at the right time) and windfall losses for
others (who bought at the peak)…..
–“The boom-busts have caused massive and unnecessary
employment dislocation….
–“The Fed’s loose monetary policy is causing inflation and
reducing the purchasing power of Americans’ paychecks.”
But, lastly, let’s go back to Paulson’s proposals. While
streamlining may be in order, why did we need a crisis to
concentrate the mind on the cause of all our problems? Aside
from the easy money and Laperriere’s points above, what about
the regulation of the garbage products that were foisted on the
investing public, from Los Angeles to New York to Rekyavik
and beyond? Why was it that no one, particularly at the SEC,
said, ‘Hold on, pardner. This stuff reeks, let alone the fact no one
can understand what the hell it is’? As reader Scott P. wrote, any
regulatory reform should be focused “on the products these [fill
in the blank] create in the name of greed.” Some of us, like Scott
and myself, have experience in peddling the Street’s wares. I
was fortunate that at least in my case, I could sleep at night over
what I was selling, my last ten years or so. Such is not the case
with thousands on today’s Wall Street. And having come across
a few of these folks in my career, I can tell you on full authority
they don’t give a damn about what they may have done to you or
your community’s pension fund.
Street Bytes
–The equity markets ignored everything above, and then some,
such as another $19 billion in writedowns from UBS, or
Deutsche Bank’s comment, in announcing its own $4 billion
writedown due to the credit crisis and housing, that “conditions
have become significantly more challenging during the last few
weeks,” let alone the recent economic news. For the week the
Dow Jones rallied 3.2% to 12609 and is now down just 4.9% for
the year, while the S&P 500 picked up 4.2% and Nasdaq 4.9%.
–U.S. Treasury Yields
6-mo. 1.52% 2-yr. 1.82% 10-yr. 3.48% 30-yr. 4.32%
Bonds were little changed as traders weighed the evidence that
the economy continues to slow vs. the simple fact some funds
are flowing back to stocks. PIMCO’s Bill Gross also noted on
Friday that “Treasuries are the most overvalued asset in the
world.”
–Auto sales for the month of March continued their miserable
trend. Chrysler’s and General Motors’ were both off 19%,
Ford’s 14%, and Toyota’s down 10%. For the year thus far,
sales industrywide are off 8%.
–As noted above, the layoffs are beginning to pile up, including
with some big names that had already announced substantial job
cuts and are now tacking on more. Such as Dell Inc., which is
closing an Austin, TX, plant and eliminating 900 jobs on top of
5,500 announced earlier, while struggling Motorola is issuing
pink slips to 2,600, bringing the total to 10,000 since early ’07,
let alone the fact Wall Street itself is bleeding profusely, even if
some firms don’t want to publicly talk about it.
–Congress approved legislation raising the ceiling on loans the
FHA can insure to as much as $729,750 in an attempt to spark
the housing sector, but as the Wall Street Journal reports, the
banks making the loans are adding fees and restrictions that
make them less affordable in yet another symptom of the credit
crunch.
–Josh P. passed along a piece out of Philadelphia on how
authorities are attempting to suspend foreclosure sales of homes
whose homeowners have fallen behind on adjustable-rate
subprime loan payments. Philadelphia is the first city to do this,
with others such as Baltimore and Cleveland probably to follow.
Whether you agree or disagree with the move, as Josh notes it’s
further evidence of the socialization of housing.
–According to casino analyst Bill Lerner of Deutsche Bank,
23,000 hotel or condo-hotel rooms planned for Las Vegas have
been canceled or suspended recently, including another massive
$5 billion project that was to be a combination of a 1,064-foot
tower and 5,000-room hotel / casino.
–Once high-flying Garmin Ltd.’s earnings warning was a classic
example of the slowdown in discretionary spending as the
world’s second-largest maker of car-navigation equipment said
first-quarter revenue will drop by up to 50 percent.
–Shares in Merck and Schering-Plough tumbled on news that
heart doctors at the American College of Cardiology meeting
said physicians should limit prescriptions for the companies’
jointly sold cholesterol drugs Vytorin and Zetia, with combined
sales of $5.2 billion.
A study shows the drugs work no better than a generic alternative
(Zocor) that is one-fifth the price. As cardiologist Harlan
Krumholz of Yale University put it, “this study provides no new
evidence to support the use of this drug, and it moves us to more
uncertainty about the benefits.” Krumholz, who was on the
panel at the Chicago meeting, said Zetia might be “just an
expensive placebo.”
In response, Schering-Plough said it is forced to cut 10% of its
work force and shut plants to save $1.5 billion annually, many of
the job cuts coming here in New Jersey.
–Separately, a trial of AstraZeneca’s heart drug Crestor was
stopped early because the drug proved so effective the study’s
monitors felt it would be unethical to withhold treatment from
half the volunteers currently receiving placebos.
–Sovereign-wealth funds grew 18% last year to $3.3 trillion and
are expected to hit $10 trillion in assets by 2015. Some say this
is a problem. I, though, agree with BlackRock’s Larry Fink, who
told Barron’s:
“(The size and their investments in the U.S. are) much ado about
nothing. The U.S. is dependent on foreign capital, and we must
have open markets for all investors. If we did not have foreign
capital, our interest rates would be much higher. Foreign capital
has supported our federal deficits. The debate today is about
sovereign-wealth funds investing in equities. To differentiate
bonds versus stocks is very difficult, and we have never seen
from sovereign-wealth funds any inappropriate investment
behavior.”
–John Reed, who masterminded the $166 billion merger that
created Citigroup with Sandy Weill, told the Financial Times it
was all a “mistake” and that the new conglomerate turned out
to be a “sad story.” “The stockholders have not benefited, the
employees certainly have not benefited and I don’t think the
customers have benefited because our franchises are weaker than
they have been.”
One man did benefit, Sandy Weill, and Reed himself did alright.
–Lehman Brothers got taken to the cleaners by a Japanese Ponzi
scheme orchestrated, allegedly, by trading company Marubeni.
Lehman, which has sued the outfit, said employees of Marubeni
helped arrange financing for a since-failed unit of a Japanese
health care company. The cost? $350 million that Lehman
provided, despite the fact documents were forged as the smartest
kids on the block didn’t realize they were being duped.
–U.S. Treasury Secretary Henry Paulson, in China, said “There’s
no doubt that what is happening in the U.S. markets (in terms of
the performance of financial companies and the credit crunch)
clearly has to give the Chinese pause” when it comes to further
opening of China’s markets to U.S. investment firms. How can
you blame them, sports fans?
–Bloomberg’s Thomas Black and Andres Martinez had a good
piece on Mexico’s state-controlled oil company Pemex and the
malaise infecting this critical component of the energy picture,
Pemex being the third-largest producer in the world. Production
has been steadily falling since 2005 thanks to lack of investment,
corruption, and bureaucratic inefficiencies. It’s all critical for
Mexico overall, as well, since Pemex funds about 40% of federal
spending. Were oil prices not rising, Mexico’s budget would be
a mess.
–The problems in the auction-rate securities market continue as
UBS lowered the price on its clients’ statements to reflect
perceived market value, while others such as Merrill Lynch kept
the values at par while admitting this wasn’t necessarily the case.
ARS are long-term bonds that were sold as short-term cash
alternatives because there was a consistent auction process every
few weeks. But when the credit crunch hit in full early this year,
the market froze up as the investment banks overseeing the
auctions pulled in their horns. The lawsuits are flying.
–“I’m off…on the road…to Morocco……..Where is it…it’s just
south of Spain…..” We honor Morocco for its first quarter
equity performance, up 24% in dollar terms and 16% in local
currency, slaughtering every other market in the world. The
worst was Turkey in dollar terms, down 37%! Gobble-gobble.
–Speaking of turkeys, try Legg Mason, which has now had to
provide $400 million to bail out a money-market fund. But, to
their credit, at least they are stepping up in the battle not to
‘break a buck’ in net asset value, which could cause a run on the
bank. [This issue is different from the auction-rate securities
mess.]
–We note the passing of ATA Airlines, which folded shop about
a week after Aloha Airlines filed for bankruptcy. My friend
Jimbo recently traveled on an ATA charter from Las Vegas to
Honolulu and it was one of the worst travel experiences of his
life. The plane was 23 degrees (OK, 58….) and if you asked for
a blanket, they sold you one with a logo for $10. Jim then took
the blanket and parachuted to safety.
–My portfolio: I still like 80% cash, 20% stocks, though this
week I sold my Mexican cement company (at a profit) due to
some short-term uncertainty (I could easily get back in before
long), while I bought a little in a Brazilian airline, one that I’ve
flown before and, as opposed to Jim’s ATA experience, loved
everything about it. [This was when I went to Paraguay.]
Otherwise, I’m riding my two big plays, the China biodiesel
offering (in which I bought a smidge more) and my California-
based solar operator, the latter continuing to rebound nicely. [I
also won’t keep briefing you on the portfolio unless I do
something that warrants disclosure.]
Foreign Affairs
Iraq: The recent military action in Basra greatly complicates
General David Petraeus’ upcoming appearance before Congress
because what is now clear is Prime Minister Maliki’s efforts to
beat back Moqtada al-Sadr’s Mahdi Army were an unmitigated
failure and that Maliki has lost any shred of credibility he still
had with the Iraqi people. President Bush had praised Maliki,
but the prime minister is as weak as he has ever been.
What happened is that aside from the fact the Iraqi Army was
unable to capture large swaths of Basra from the militia, up to
1,000 army soldiers either defected to Sadr’s side or gave them
their weapons and went home. The situation was so grave,
Maliki was forced to sue for peace. For his part, Senator John
McCain (another loser in this episode) said he was surprised
Maliki acted initially without U.S. approval.
NATO summit: President Bush achieved two of three objectives
at the confab in Bucharest. His efforts to put Ukraine and
Georgia on fast-track for membership were derailed by ‘Old
Europe,’ led by France and Germany, who worry about
provoking Russia at this point, though at the same time Croatia
and Albania were invited. With regards to Ukraine in particular,
I agree with Bush’s appraisal that Ukraine deserved a bid
because it “is the only non-NATO nation supporting every
NATO mission” in sending troops to Afghanistan, Kosovo and
Iraq. At the same time, though, Ukraine remains a divided
country with loyalties to the West and Russia split right down the
middle.
But Bush achieved important victories in the area of missile
defense, with NATO approving of his plan for sites in Poland
and Czech Republic, while France led the way in committing to
more troops for the war in Afghanistan, which in turn ensures
Canada’s continued support. And in his first, and last,
appearance at a NATO summit as president, Vladimir Putin
behaved himself. On Sunday, Bush and Putin are holding a
quick summit in the Black Sea resort of Sochi, their last one-on-
one before Putin shifts over to the prime minister’s slot.
Iran: CIA Director Michael Hayden, appearing on “Meet the
Press,” said that despite the recent release of the National
Intelligence Estimate, which painted a sanguine picture of Iran’s
nuclear weapons program efforts, it’s clear Iran is intent on the
idea. But in the Jerusalem Post there was an AP item that said
diplomats, speaking on condition of anonymity, believe that
while Iran supposedly has been linking strings of 300
centrifuges, the key to enriching at least small amounts of
uranium, the actual work is “preliminary,” with none running and
none installed in the main plant. Which just points out that no
one has a freakin’ clue even as I maintain Israel will be forced to
launch a preemptive strike by year end.
Israel/Palestine: Israeli Prime Minister Olmert caved to his
extremist coalition partners and is allowing 1,400 new homes to
be built on disputed lands, just hours after Secretary of State
Condoleezza Rice left Israel with her declaration that “settlement
activity should stop.”
The following viewpoint of Rami Khouri, from an op-ed in
Lebanon’s Daily Star, dovetails with my own beliefs as spelled
out over the years.
“It is hard to tell if U.S. Secretary of State Condoleezza Rice is
being deliberately innocent and juvenile, or, as the highest
American foreign policy official, she is genetically incapable of
being honest when it comes to Palestinian-Israeli issues. There is
now only one real test of progress, or criterion of political
seriousness, in the Arab-Israeli conflict in the short term: Can the
United States make Israel stop expanding its settlements in the
occupied Palestinian territories? If not, talk of peace is a cruel
hoax that will only raise and then dash expectations, leading to
unknown consequences when the backlash occurs.
“Continued Israeli settlement in occupied Palestinian land is the
single most destructive and dangerous reflection of the long-
running Palestinian-Israeli conflict. It captures in a single
dynamic the predatory nature of Zionist aims, the conquest and
settlement of Arab land by Israelis, and the continued dispersal
and ethnic cleansing of the Palestinians. If peace-making is to
have any chance of success, Israeli colonization of Arab lands
must be halted and then largely reversed under final-status
agreements.
“The Palestinians for their part have to reciprocate, of course,
with a move of equal magnitude. But the Palestinians, especially
President Mahmood Abbas and his Fatah movement who still
head the Palestinian Authority in the West Bank, cannot make
any meaningful move without Israeli permission. They cannot
expand, equip or train their police force; they cannot import or
export anything; they cannot drill water wells or build roads;
they cannot go shopping in Paris; they cannot even hold a
meeting of their full Parliament without explicit permission from
the Israelis.
“The Palestinian-Israeli ‘peace process’ in its current form has
lost all seriousness due to the severe imbalance in power between
the two sides. Into this difficult situation steps the American
government, vowing admirably, as it did at Annapolis four
months ago, to exert vigorous efforts to achieve peace by the end
of this year. Two things have been consistent since then,
however: senior American officials travel to Israel regularly to
push the peace process forward, and with every such visit the
Israeli government announces new settlement expansion plans….
“The continued expansion of Israeli settlements is a dagger
simultaneously pointed at the hearts of Palestinian negotiators
and American mediators. One reason why so many Palestinians
have lost hope in a negotiated peace, and have instead supported
Hamas and others who fight Israel militarily, is the continued
settlement activity by Israel and the apparent acquiescence by the
U.S. and the rest of the world.
“Fatah and Abbas have pleaded with the U.S. and Israel for
years, to no avail. They point out the illegality of the settlements
under the Geneva Convention rules and UN Security Council
resolutions, to no avail. No wonder they keep pleading, and Rice
believes things are moving in the right direction. They do not
want to pause for a moment, look up, see the reality of the world,
and catch sight of the refrigerators that are about to fall on them
and ruin their efforts.”
Back to Olmert, it was revealed that he declared for the first time
the attack in Syria last fall was intended to destroy a nuclear
facility being built by North Korea. [Olmert did this through a
meeting with Japanese officials in February.] While at the Arab
League Summit in Damascus, the Saudis blamed Syria for the
problems in Lebanon.
Pakistan: As suspected by the White House, the new government
here will press the U.S. to stop firing missiles in the tribal areas
without prior approval, which is unlikely to be granted. Former
Prime Minister Nawaz Sharif, one of the two main coalition
partners, is adamant there be no involvement of any foreign
forces in Pakistan.
But the issue of Predator attacks is so important to the U.S., it
will undoubtedly deal (in major amounts of cash) to allow the
border area attacks to continue, especially as Washington builds
its case that the Pakistani-Afghan border area has become a
permanent base for the Taliban, as well as al Qaeda.
China: German Chancellor Angela Merkel became the first
Western leader to announce she would boycott the entire
Olympic Games, not just the opening ceremony, while the IOC
warned China it was obligated to keep the Internet open during
the Games, this as China was forced to admit it is facing fairly
widespread unrest in its Muslim majority western provinces.
The situation both here and in Tibet is also fueling a backlash in
terms of rising Chinese nationalism, especially among the young,
who believe the government isn’t taking a tough enough stand on
Tibet’s protesters.
China is also one of the many Asian nations dealing with soaring
food prices and there has been panic buying at supermarkets as
such staples as imported eggs have risen 30% in two months.
On the China-Taiwan front, so far the rhetoric has been positive
following the election of Taiwan’s President-elect Ma. Both he
and Chinese Premier Wen Jiabao have stated they are willing to
negotiate on issues such as trade and tourism, but the sticking
point will remain the interpretation of “one China,” which was
purposefully left vague in a 1992 ‘consensus’ between the two.
As Ma is quick to add, Taiwan is also still being targeted by
1,000 missiles.
But back to the Olympics, the Western media is doing an awful
job of portraying both sides (and there are two) with regards to
the violence in Tibet. Christopher Caldwell addresses this in an
op-ed for the Financial Times.
“The Dalai Lama’s complaint that China is committing ‘cultural
genocide’ against Tibetans has not helped. The genocide in
question involves Beijing’s encouragement of immigration by
ethnic Chinese people, who reportedly make up a third of the
population of some Tibetan cities. Europeans who fear their
cultures are being eroded by immigration and Americanization
seldom receive support from human-rights activists. Tibetans
who fear Sinification are being held to a much lower standard.
China, while hardly blameless, has been assigned the role of
bogeyman. Like Israel during the second intifada, it gets blamed
for policing too harshly, and it gets blamed when thugs go out
and murder its citizens [ed. as was clearly the case in Lhasa, as
much as the West wants to ignore this fact.]
“It is unlikely that sporting boycotts can put pressure on China as
they put pressure on South Africa in the last decades of
apartheid….Many defenders of Tibet behave as if all the west
needs to do is to summon its eloquence and courage….
“But the West’s assessment of its moral prestige and influence is
inflated. James Mann, the veteran reporter, made the wise point
in his book, ‘The China Fantasy,’ that wishful-thinking
westerners often use the word ‘ill-advised’ to describe China’s
crackdowns, as if its leaders were just learning the ropes of
modern-day governance and yearning for guidance. ‘Rarely is it
acknowledged,’ he writes, ‘that the Chinese leadership did
precisely what it intended, anticipating the international criticism
in advance and deciding to ignore it.’
“China’s standing in the world, unlike that of South Africa, does
not rest on anyone’s approval but on military and (especially)
economic power….
“A boycott of the Olympic opening ceremonies might cause
China brief embarrassment and deprive it of a vanity-enhancing
spectacle. It would allow westerners to protest while continuing
to benefit from China’s cheap exports and big markets. But it
would not change the objective realities one whit.”
North Korea: Pyongyang launched a salvo against South Korean
President Lee, calling him by his name for the first time since he
won election in December. “The Lee Myung-bak regime will be
held totally responsible for ushering in a catastrophic incident by
freezing North-South relations.” The North later said it was
considering unspecified military “countermeasures” against the
South, this after President Lee said Pyongyang should “move
away from its previous ways and actions” so that the two
countries could “engage in sincere dialogue.” The North then
announced it was suspending all dialogue with South Korea and
closing the border to government officials.
One sidebar to the escalation in the war of words is the fact that
with reduced food aid, particularly from a now reluctant South,
the North Korean people are once again caught in the middle,
amidst what some call a famine.
Zimbabwe: Opposition leader Morgan Tsvangirai and his MDC
party supposedly topped the 50% mark in last weekend’s
election, but President Robert Mugabe, as of this writing, is not
conceding defeat and could call for a runoff in 21 days as his
goons hit the street.
Ireland: Prime Minister Bertie Ahern was forced to step down
after ten years in power due to an ongoing probe involving illegal
payments to politicians. Ahern oversaw the Irish economic
boom (which is turning into a bust at lightspeed, though the Irish
themselves are slow to recognize this) and he deserves credit for
his role in Northern Ireland’s peace talks. The replacement is
slated to be Brian Cowen.
Random Musings
–The interminable march to the Pennsylvania primary continues
with another 17 days to go. The latest Rasmussen survey had
Hillary Clinton ahead 47-42, despite the flap over Clinton’s
Bosnia sniper fire comments. I’ve tried to downplay some of the
talk from all sides during the campaign, but this incident
continues to amaze me; that she could lie so openly about it
when she had to know it would be scrutinized thoroughly.
Sincerely, this episode alone should disqualify her from holding
the highest office in the land. It’s not about the game of
‘politics,’ where we all put up with spin and a bunch of b.s.,
rather this is about a total lack of respect for the American people
and her treatment of us as a bunch of chumps.
–David P. said that a perfect running mate for Hillary would be
Knicks coach Isiah Thomas, the two being among the most
disingenuous charlatans in our nation’s history.
–Unreal that Hillary’s top adviser, Mark Penn, who is also CEO
of Burson-Marsteller, an international communications and
lobbying firm (PR, simply), has been helping Colombia map
strategy on its hoped for free-trade agreement, while at the same
time Clinton herself opposes it. This is yet another example of
what makes many of us sick over politics. And Hillary has the
equally detestable Howard Wolfson in her stable, too. At least I
can stomach most of Obama’s staff.
–New Jersey is going to have a fascinating primary for the
senate as 84-year-old Democratic incumbent Frank Lautenberg
announced he is running for reelection, got all the party honchos
to line up behind him, but then 50-year-old Dem. Congressman
Rob Andrews said he would run against the man who was born
the same year Rogers Hornsby hit .424, for crying out loud. I
love it. New Jersey has proven time and time again that we are
among the nation’s true idiots, but here’s hoping Lautenberg
goes down in flames.
–My home state also has severe budget issues these days, like
virtually everywhere else, but Gov. Corzine has proposed that a
slew of parks be shut down; this after the state spent $3 billion
the past few decades to protect open spaces from development,
one of the consistently more popular issues on the ballot. This is
absolutely nuts, especially the idea of shutting down historic
Monmouth Battlefield, site of the largest battle of the
Revolutionary War. Star-Ledger feature columnist Mark
DiIonno summed up the sentiments of many a New Jerseyan.
“Are we a state of pride, of the Founding Fight, of small-town
life and great natural beauty inviting others to come see? Are we
the state of that High Point monument on the postcard,
overlooking the mountains below?
“Or are we just broke? Broken in structure, broken in spirit?”
Fellow columnist Paul Mulshine adds of Corzine:
“Let me put it this way. I don’t think future legislatures will be
naming any forests after Jon Corzine.
“Naming rights to the Great Swamp are still up for grabs,
however.”
–Housing secretary Alphonso Jackson, yet another true
embarrassment in the Bush cabinet, was forced to resign amidst a
federal investigation into whether he had doled out lucrative
contracts to friends in the Virgin Islands and New Orleans.
Jackson was one in a long line of idiots (save just one or two in
my lifetime) to lead a department that should be shelved as one
of the next president’s budget cutting moves. HUD certainly
didn’t help its target audience understand the dangers during the
subprime boom.
–The Government Accountability Office estimates that 95 major
weapons systems have exceeded their original budgets by a
staggering $295 billion, as big a scandal as we have in America
today. It’s outrageous, and no wonder some of us support John
McCain because this has been one of his pet peeves for years.
–For the first time, Catholics are no longer the leading religion
as Muslims account for 19.2 percent to 17.4 percent for the Pope-
led crowd (of which I’m one). It’s mostly about Muslims having
big families and Catholics increasingly having small ones; more
so than other issues I’m not bringing up. Christians as a whole,
however, including Orthodox, Protestants and Anglicans, make
up 33 percent.
–I can’t believe Barack Obama bowled a ’37.’ I ran a bowling
outing for our Lions Club the other week and one of our blind
members did far better, for crying out loud. [OK, it was bumper-
aided, but Bill rolled something in the 80s.]
–We have an “Idiot of the Year” candidate in Republican
Congressman Darrell Issa, who in a previous life got rich selling
car alarms after getting busted for car theft as a teen (as noted by
the New York Daily News). Congressman Issa, who also played
the fool at the recent Roger Clemens / steroids hearing, insists
the 9/11 attacks were “simply” a plane crash, in wondering why
first responders need federal aid. Issa explained, “I have to
ask… why the firefighters who went there and everybody in the
city of New York needs to come to the federal government for
the dollars versus this being primarily a state consideration.”
–I find this incredible, too. Former Treasury Secretary Paul
O’Neill told the New York Times’ Deborah Solomon that when
both he and Vice President Cheney were pallbearers at President
Ford’s funeral, they didn’t speak to each other, Cheney having
fired O’Neill. Now we all know what a nice man O’Neill is,
regardless of whether or not you thought he did a good job, but if
you ever needed any more evidence what an awful person the
vice president is, look no further than this example.
–In a study commissioned by Colin Powell’s “America’s
Promise Alliance,” a ninth-grader living in one of the nation’s
biggest cities has only about a 50-50 chance of graduating. Here
are a few samples of graduation rates (2003-04).
Chicago 51.5%
Philadelphia 49.6%
Los Angeles 45.3%
New York 45.2%
Cleveland 34.1%
Detroit 24.9% [Nice job, Kwame!]
–Shannon Brownlee, author of “Overtreated: Why Too Much
Medicine Is Making Us Sicker and Poorer,” had the following
timely comments in a Washington Post op-ed.
“By constantly reminding us to be on the lookout for illness,
doctors and the media have made many Americans feel more
anxious. I’m not so sure their warnings have made us any
healthier, but they have decidedly eroded our sense of well-
being. We worry about every ache and pain; we fret that the least
little sign of sadness in a teenager is a symptom of clinical
depression. But in viewing so many aspects of ordinary human
experience as treatable diseases, we may have granted medicine
more power than it deserves – or is good for us….
“Striking fear also serves pharmaceutical companies, which want
you to worry about diseases, because people who worry are more
likely to go to their doctors and ask for drugs than people who
don’t. It turns out that much of what we – and our doctors –
think we know about many health problems has been shaped by
drugmakers and their marketers. Take ‘condition branding,’ one
of the most brilliant and widely used marketing techniques for
selling drugs. Condition branders use ‘information’ about
medical conditions to forge links between disease and treatment
in the minds of both patients and doctors. If they have a drug but
no condition, they will simply invent a disease….
“One of the best examples is ‘osteopenia,’ a diagnosis that
millions of women my age are given every year. Osteopenia is
supposedly the precursor to osteoporosis….Advanced
osteoporosis can make women vulnerable to hip fracture, a
serious event when you’re old and frail….Millions of women are
treated for osteoporosis with drugs that can slow bone loss, thus
reducing the risk of hip fracture. Or so the logic goes.”
The problem is the pharmaceutical industry creates diagnostic
criteria before the patient actually has a need for a drug, as is the
case with osteopenia, according to Ms. Brownlee.
“In our desperate desire for protection against the ambiguous and
unseen nature of disease, we have allowed our physicians and the
drug industry to medicalize everything from heartburn to
heartache. We want answers, even when there are none. We
look to medicine to bring relief from the terrible unknowns of
aging and its inevitable losses, even when the answers have been
manufactured to sell a drug.”
The other night I had dinner with a friend, Artie, who has been
constantly ill the last few years with fairly serious ailments. But
he looked good this time so I asked him how he felt and it turns
out he went to a doctor who diagnosed that his taking of an acid
reflux medication (I will not mention the name, so don’t write
me on this) was the cause of all his problems, so the doctor took
him off it and, presto! Artie is a new man.
Every time I stumble on the infomercial for “Natural Cures,” I
must say I find myself watching it for ten minutes or so. That
guy, Kevin Trudeau, is good…very good…at what he does. [I
also love watching televangelists. If you’re doing any public
speaking, you can learn a lot from the better ones.] Anyway, you
don’t have to agree with Mr. Trudeau’s remedies, and while I
bought the book I have yet to use any myself, but there is some
truth in what the man says. If you are still a doubter, though, I
hope Ms. Brownlee has at least pricked your curiosity.
–I vividly remember learning of Martin Luther King Jr.’s
assassination on April 4, 1968. I was reading a paper (probably
the box scores) in our living room, which was where the family
radio was, and the easy listening station (this was Mom and
Dad’s selection, you understand) interrupted what was probably
a Bert Kaempfert tune for the sickening news that Dr. King had
been shot. The riots that followed were equally disturbing for an
impressionable 10-year-old and then two months later you had
the assassination of Bobby Kennedy, followed by the chaos at
the Democratic Convention in Chicago, all while the Vietnam
War raged on. It was truly one of the worst years in our history,
saved only that Christmas by the wonder of Apollo 8 and the first
orbiting of the moon.
But on the issue of Martin Luther King, who with each passing
year I appreciate more and more, commentator Juan Williams
had the following thoughts in a Journal op-ed on Friday.
“While speaking to black people, King never condescended to
offer Rev. Wright-style diatribes or conspiracy theories. He did
not paint black people as victims. To the contrary, he spoke
about black people as American patriots who believed in the
democratic ideals of the country, in nonviolence and the Judeo-
Christian ethic, even as they overcame slavery, discrimination
and disadvantage. King challenged white America to do the
same, to live up to their ideals and create racial unity. He
challenged white Christians, asking them how they could treat
their fellow black Christians as anything but brothers in Christ.
“When King spoke about the racist past, he gloried in black
people beating the odds to win equal rights by arming ‘ourselves
with dignity and self-respect.’ He expressed regret that some
black leaders reveled in grievance, malice and self-indulgent
anger in place of a focus on strong families, education and love
of God. Even in the days before Congress passed civil rights
laws, King spoke to black Americans about the pride that comes
from ‘assuming primary responsibility’ for achieving ‘first-class
citizenship.’….
“(King) focused on traditions of black sacrifice, idealism and the
need for taking personal responsibility for building strong black
families and communities.”
But with the above in mind, Juan Williams notes that the
problem with Barack Obama’s campaign, recently, is that he is
no longer speaking “about the responsibility and the power of
black America to appeal to the conscience and highest ideals of
the nation. He no longer asks black people to let go of the
grievance culture to transcend racial arguments and transform the
world.”
“He has stopped all mention of government’s inability to create
strong black families, while the black community accepts a 70%-
out-of-wedlock birth rate. Half of black and Hispanic children
drop out of high school, but he no longer touches on the need for
parents to convey a love of learning to their children [ed. as
Obama initially had.]….
“Instead the senator, in a full political pander, is busy excusing
Rev. Wright’s racial attacks as the right of the Rev.-Wright
generation of black Americans to define the nation’s future by
their past. He stretches compassion to the breaking point by
equating his white grandmother’s private concerns about black
men on the street with Rev. Wright’s public stirring of racial
division.
“And he wasted time in his Philadelphia speech on race by
saying he can’t ‘disown’ Rev. Wright any more than he could
‘disown the black community.’….
“(When) Barack Obama, arguably the best of this generation of
black or white leaders, finds it easy to sit in Rev. Wright’s pews
and nod along with wacky and bitterly divisive racial rhetoric, it
does call his judgment into question. And it reveals a continuing
crisis in racial leadership.
“What would Jesus do? There is no question he would have left
that church.”
Back to Dr. King, in another story Juan Williams wonders
whether King would be able to connect in a meaningful way with
today’s youth.
“The big issue would be whether or not when he spoke out
against the excesses of the rappers, for example, or when he
spoke out on the high number of children born out-of-wedlock,
whether or not he would be lumped in with the Bill Cosbys of the
world.”
As for Mr. Cosby, I will have a fair amount on him next week in
this column as I’ve come across an excellent article on the man.
–Finally, I was in New Orleans last weekend, with the main
purpose being to visit the National World War II Museum, which
is spectacular. There was this quote from Gen. George C.
Marshall that perhaps provides a lesson for today.
“A democracy has a very hard time in a war. They can never get
ready in advance. The conditions are such that they are very
susceptible to surprise action, and the arbitrary government, like
the Hitler government, has every advantage in those respects.”
In 1939, military expenditures were as follows. [1998 dollars]
U.S. $12.6 billion
Japan $17.6 billion
Germany $262.7 billion
Japan had 4.6 million men in uniform, Germany 4.5 million, and
the United States just 635,000.
What followed was an amazing display of American pride, spirit,
ingenuity and productivity, allowing us to prevail, with the help
of our allies, after being so negligent and delusional that we
could remain neutral and out of harm’s way.
But walking through the museum, what constantly hits you are
the sacrifices America paid at all levels during the war. As the
generation above me can attest to directly, we were asked by our
president on down to salvage everything, as posters from that day
had messages such as “Share your cars and spare your tires.”
We saved tin cans and tinfoil, the latter from chewing gum
wrappers and cigarette packages. We saved cooking fat, which
was used to make explosives. Reading a paper from the day it
was announced the Battle of Iwo Jima was won, there was an
accompanying story on the front page with the headline:
“President Urges U.S. to Tighten Its Belt”
Americans must eat less, the story read, so others will not starve
(our servicemen and women). [Coincidentally, in keeping with
today’s food inflation, that same day there was a story on a major
shortage in eggs and a spreading black market.]
Well, you don’t have to be Einstein to know where I’m headed
with this. The whole time I’m walking through the museum, I
was thinking of how President Bush has asked nothing of the
American people other than to keep shopping. Nothing. And,
obviously, what’s particularly galling is only until recently has
Bush uttered a few words about conserving energy, and I’m
being kind in this regard. He had an opportunity to teach a
generation of children, in particular, about sacrifice and
supporting the troops and as in so many other areas during his
presidency, he blew it.
As for the current state of affairs in New Orleans, post-Katrina, I
found it very depressing. I was lucky to have two cab drivers out
of central casting for my trips to and from the airport, both of
whom were lifelong residents of the city, and both of whom had
lost their homes in the flooding. While I can’t know for sure,
they seemed to be the salt of the earth, with “Cookie” saying “I
didn’t have insurance on my home, that’s on me,” but at the
same time both he and Ambrose were livid at those around them
who cheated the system, and us taxpayers, out of untold $tens
and $hundreds of millions while they, trying to do the right thing,
played by the rules and continue to suffer.
I was also struck by the superb hospitality exhibited by the
workers at my hotel and the restaurants I went to, the best
attitudes I’ve experienced anywhere in the world the past few
years in all my travels. I kept thinking of them, ‘thank god you
have a job,’ seeing as 1 in 25 in New Orleans are homeless, a
staggering figure that’s about ten times that of the next worst,
Atlanta, if I recall correctly. Let’s just say you don’t stray more
than a block or two from the heavily policed French Quarter.
I don’t have any profound final observations other than I still
harbor doubts whether or not New Orleans is worth saving, given
the incredible costs and unfavorable geography. Cookie and
Ambrose insisted the Lower Ninth Ward, for instance, is 25-30
years away from revival, and it goes without saying there will
most likely be another huge storm over that time. But no
American should want his fellow countryman to suffer as these
mostly good people have, and so I’ll keep Cookie and Ambrose
in my thoughts and prayers.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $917
Oil, $106.39
Returns for the week 3/31-4/4
Dow Jones +3.2% [12609]
S&P 500 +4.2% [1370]
S&P MidCap +5.5%
Russell 2000 +4.5%
Nasdaq +4.9% [2370]
Returns for the period 1/1/08-4/4/08
Dow Jones -4.9%
S&P 500 -6.7%
S&P MidCap -5.0%
Russell 2000 -6.8%
Nasdaq -10.6%
Bulls 36.4
Bears 37.5 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
