[Posted 7:00 AM ET…Washington, D.C.]
Wall Street
Wednesday was the big day of the week as the initial advance
estimate on GDP for the first quarter came in positive, up 0.6%,
the same meager rate as Q4. Which means at least for now your
editor can not say his prediction from year end 2006 that we
would have a recession in ’08 has panned out, but I hasten to add
that the figure for growth was positive for one main reason: there
was a huge build-up in inventories (as well as some help from
exports) and if you strip that out, GDP was down 0.2%. The
simple fact is in the current quarter inventories will fall (or we
have a lot of incredibly stupid executives out there). Business
accumulated the inventory levels it did never thinking demand
would slow, as it did at quarter end in a big way. So much for
‘just in time inventory.’
I think you’d also agree that while back to back quarters of 0.6%
growth aren’t exactly recessionary, it’s darn close to it and the
numbers gods who officially weigh in down the road on whether
or not we are (were) in a recession take other factors into
consideration, such as employment.
On this front, with the release of Friday’s jobs report for April,
down 20,000, we have now had four consecutive months of job
contraction, thanks in no small part to a collapsing construction
industry and ongoing losses in manufacturing. So I hardly feel
like I’ve truly missed it with my forecast.
I did, however, say any recession would be ‘mild,’ but I’m not
prepared to say the more conventional ‘shallow and brief.’ I just
believe we are in for a long period of well-below par growth,
worldwide, and in most developed markets in particular it will
sure feel like recession.
But what of the Federal Reserve? It lowered the short-term
funds rate another ¼-point as expected to 2.00%, but then in its
accompanying statement didn’t talk of a ‘pause’ as the Street
wanted and instead left its options open, which is all well and
good, seeing as it has eight weeks of data to absorb before it
gathers again, but at the same time there are many who are
saying ‘enough is enough!’
Instead, the Fed offered the same pabulum that inflation will
moderate in coming quarters (I do not disagree with this), there is
a deepening housing contraction (I agree with this, too), and
there is a weak labor market (ditto).
So there’s little disagreement with the Fed from any quarter
concerning the evidence, and after having its head in the sand
last spring and summer we are grateful they are now dealing with
reality, but continuing to lower interest rates has done a number
on Americans at many different levels. To wit:
Editorial / Wall Street Journal…prior to the Fed’s move:
“So Federal Reserve officials are whispering to reporters that
they will consider a ‘pause’ after another interest-rate cut this
week. Perhaps we should be more respectful, but this sounds
like the alcoholic who tells his wife he’ll quit drinking next
weekend, after one more bender. What Chairman Ben Bernanke
needs isn’t a gradual withdrawal from easy money but
membership in Central Bankers Anonymous.
“Eight months into the Fed’s most recent rate-cutting spree, the
evidence is overwhelming that it has been a major policy
mistake. Aggressive rate cutting – taking the fed funds rate to
2.25% [now 2.00%] from 5.25% last September – has had little
effect on the banking crisis it was supposed to ease.
“The recent progress on that front has come principally from the
Fed’s discount window innovations, especially its lending to
investment banks in the wake of the Bear Stearns rescue. That is
the kind of targeted liquidity that helps the financial system
handle fears of bank failure and solvency without risking
inflationary side-effects. The shame is that the Fed didn’t do
more of this earlier, along with tougher regulatory oversight of
the likes of Citigroup. The way to save a troubled banking
system is to focus on specific problems via dividend cuts, new
management, losses in shareholder equity, rights offerings and
other new capital, and if need be public money through the
FDIC.”
Instead, the Fed’s actions encouraged a weak dollar.
“The practical impact (of this) has been to send energy and food
prices soaring. This is a direct tax on both the world’s poor and
America’s middle class. Just when the U.S. economy needs a
resilient consumer given the fall in housing prices, these price
increases have eviscerated consumer pocketbooks. In its attempt
to help Wall Street and the financial system, Fed policy is
punishing average Americans.”
And it’s killing those of us who like to save a little and hold cash
in a money market fund or CD, let alone those on fixed income.
Noted strategist Jeremy Grantham in an op-ed for the Financial
Times.
“Not believing in bubbles and/or being unwilling to risk
unpopularity by moving against them leaves the two Fed bosses
[Greenspan and Bernanke] with no alternative but to give free
rein to speculators on the upside and focus on the downside.
But, even on the downside, did they have to be so generous?
“It created an extreme form of moral hazard: it allowed risk
takers to win too big and too easily; it helped spawn a huge
hedge fund industry; and, worse still, it helped turn formerly
discreet bankers into speculators. If you even partially bail out
Bear Stearns – leveraged at 40 to 1 – next time someone will try
50 to 1.
“The Fed must show backbone. If you always take the friendly
way out, no bubbles will ever be pricked and we shall always be
reacting to crises in an increasingly speculative world. Paul
Volcker, the Fed chairman before Mr. Greenspan, had the
character to do tough, unpleasant things where necessary. His
two successors have not.
“Both men were in a position to be powerful naggers in
protecting financial standards; to question the quality of new
financial instruments, not praise their ingenuity as Mr.
Greenspan did; and to question and review mortgage quality and
off balance sheet financing. None of this nagging was done….
“Let me end with Mr. Greenspan’s full and contrite repentance:
‘I have no regrets on any of the Federal Reserve’s policies that
we initiated back then.’
“What can you say to that?”
Not much. All you can do is shake your head and order another
drink.
One other thing is for sure; Europe is slowing rapidly by almost
any measurement. Official forecasts of growth for both the 15-
nation eurozone and 27-nation EU show projected growth figures
of below 2% for both 2008 and 2009, a big comedown from
estimates of just a few months ago, as some major European
multinationals such as Michelin and Siemens warned on the
impact the U.S. slowdown is having on their operations, as well
as other signs the jig is up on the continent.
You want to know how dicey it’s getting across the pond?
Check out Spain’s retail sales figure for March, down a
whopping 8.7% on an annualized basis. That, my friends, is
what a bursting of a world class housing and credit bubble will
do to an economy and similar results can be expected in other
nations over the next two years. Speaking of housing, a Bank of
England analyst said UK home prices could fall 30% before it’s
Over, but then long-time readers already knew that.
Here in the U.S., the latest S&P/Case-Shiller housing index for
20 major metropolitan areas showed a 12.7% year over year
decline in February, while RealtyTrac reported foreclosures rose
112% in the first quarter. It’s so bad in Nevada that 1 in 54
homes received a foreclosure notice.
As for food and energy, oil was headed for a mini-correction to
the $110 level when it suddenly spurted higher Friday afternoon
and closed above $116, thanks primarily to misplaced confidence
that the global economy isn’t all bad and demand may rise again.
Gasoline futures, which last week hit $3.05, had dropped to
$2.80 but then they too came back and closed the week at $2.95.
Unfortunately, $3.60+ at the pump, as you’ve been hearing is the
nationwide average now, is the norm unless we get gas futures to
decline below $2.80 and stay there. Even so, you’d need about
$2.30 before you could kiss $3.00 gas goodbye across much of
the country. [Don’t worry, my California friends. I know your
prices are much higher at all levels.] Per the above commentary
from the Journal, oil producers are going to continue to demand
higher prices to make up for a weak dollar. And one note on the
greenback. You’ll have to forgive me if I refuse to get excited
with the euro going from 1.60 to 1.54. Wake me when we’re
below 1.40. Better yet, wake me when it’s back to 1.20.
Regarding food, this is another bubble, pure and simple. I know,
we’ve had some dreadful harvests and I know corn-based ethanol
is impacting prices, but it’s speculation, number one, that is
driving them. Heck, all you need to know is I told you the
explosion in the price of rice was a bubble, plain and simple, and
since then we had a 20% decline in the span of six days. Now
what happened on the supply/demand front in that period?
Nothing. Nothing has happened in the last three months, in fact,
except speculators running wild, hoarding, including at the
government level, and massive corruption. You know, you can
harvest rice three or four times a year so one bad harvest doesn’t
kill supply. There is no shortage of rice!
Having said this, I do not deny that short-term shortages in some
foodstuffs can be an increasing issue over time, but understand
that the way our markets work these days, speculators drive
prices parabolic. This same action can also lead to collapses in
the prices of many goods over time. Brush up on your Wall
Street history, if you doubt me. I just posted another piece on the
tulipmania of the 1630s. The similarities to today are striking.
Lastly, back to the employment report, average hourly earnings
for April were up a meager 0.1%. Today’s economic
environment is about a global housing bubble, the resultant credit
crunch, and stagnant real wages around the world, with the
middle class, be it in America, Britain, Russia or Australia,
taking it on the chin in a disproportionate fashion due to the real
cost of living. I can’t simplify the Big Picture any more than
that.
Street Bytes
–It was a third straight week of gains on the better than expected
GDP number and yet another one where all the gains came in
one day, in this case Thursday. The Dow Jones finished up 1.3%
to close at 13058, its high for the year, and is now down just
1.6% for ’08. The S&P 500 rallied 1.2% to 1413, a bit of a
technical breakout here, and Nasdaq finished up 2.2% to 2476, or
still more than 50% from its all-time close of 5048. [Sorry.]
Earnings were once again merely so-so, though much was made
yet again that Big Oil’s profits were sky high as ExxonMobil
earned $10.89 billion, Royal Dutch Shell $9.08 billion, BP $7.62
billion and Chevron $5.17 billion. But when you look at the
earnings on the basis of revenues, the percentage is minimal
compared to other industries. Just don’t ask any Democratic
politicians in particular to look at the facts. And as for Exxon,
one thing that is worrisome for its future is that some analysts
now believe its production will be flat for the next five
years…zero growth. That’s not good for anyone and is the result
of it not only being tougher to find oil these days, with virtually
all the big fields having been discovered decades ago, but also
the impact of state-owned operations whose demands often make
it unprofitable for an outside, independent partner. Saudi Arabia
is an obvious example, but look at the mess in Russia the past
few years as the Kremlin exhibits total control and there are few
foreign operators left in the country.
–U.S. Treasury Yields
6-mo. 1.69% 2-yr. 2.45% 10-yr. 3.86% 30-yr. 4.58%
You can not come as close to virtually unchanged as the bond
market was this week over last, with by my calculations a
combined total of five basis points difference across the four
securities listed above. The Federal Reserve did make another
move aside from lowering the funds rate, that being a further
expansion of its auction window for financial institutions, with
the Fed now accepting sports memorabilia in return for federal
loans, as long as it is accompanied by a certificate of
authenticity. [As alluded to above in the Journal editorial, these
auctions are indeed working.]
–U.S. auto sales from the Big Three were absolutely putrid in
April, with GM, Ford and Chrysler all down double digits while
Toyota, Nissan and Honda gained some…and thus more market
share. Car buyers are finally shifting from trucks and SUVs to
little clown cars in order to save money on fuel.
–Breaking news….Microsoft’s talks with Yahoo are heating up!
……………..yawn………..
–Aside from the international notes mentioned earlier, Japan
continues to ratchet down its growth forecast, Australian
business sentiment has fallen to its lowest level in seven years,
and in Ireland, the Celtic Tiger is turning into a tabby cat as
growth forecasts here are being lowered rapidly amidst a big
time consumer slowdown. Most experts (frankly, I’m as much
of one as anyone else when it comes to this country) believe
Ireland is now in recession off the past six months’ performance.
Separately, Dell Computer is laying off 250 at a plant outside
Dublin. Dell was one of the first to take advantage of Ireland’s
corporate incentives, and a smart workforce, to build extensive
facilities here and now you see the flipside. Ireland’s high labor
costs are starting to kill it.
–The International Energy Agency warned that the recent uproar
over biofuels is dangerous in that biofuel production has been
critical in meeting current, and future, fuel demand. The IEA
reports that biofuels make up about 50% of the extra fuel coming
to the market from sources outside OPEC and any retreat will
only lead to another surge in prices. It’s also important to note
the UN’s Food and Agriculture Organization says biofuels are
not a major cause of the current food crisis, and that they account
for 10% of the price spike, as reported by the Financial Times.
–On the whole energy issue in the United States, economist
Robert Samuelson had the following simple explanations in his
Washington Post column.
“Unsurprisingly, all three major presidential candidates tout
‘energy independence.’ This reflects either ignorance (unlikely)
or pandering (probable). The United States imports about 60%
of its oil, up from 42% in 1990. We’ll import lots more for the
foreseeable future….The basic cause of exploding prices is that
advancing demand has virtually exhausted the world’s surplus
production capacity….Combined with a stingy OPEC, the result
is predictable: Any unexpected rise in the demand or threat to
supply triggers higher prices.
“The best we can do is to try to exert long-term influence on
global balance of supply and demand. Increase our supply.
Restrain our demand. With luck, this might widen the
worldwide surplus of production capacity. Producers would
have less power to exact ever-higher prices, because there would
be more competition among them to sell. OPEC loses some
leverage; its members cheat. Congress took a small step last year
by increasing fuel economy standards for new cars and light
trucks from 25 to 35 miles per gallon by 2020. [And yes, we
need a gradually rising fuel tax to create a strong market for
more-efficient vehicles.]….
“But it’s hard for the United States to complain that other
countries limit access to their reserves when we’re doing the
same. [Ed. by not drilling in ANWR, for example.] If higher
U.S. production reduced world prices, other countries might
expand production. What they couldn’t get from prices they’d
try to get from greater sales….
“Perhaps oil prices will drop when some long-delayed projects
begin production or if demand slackens. But the basic problem
will remain. Though dependent on foreign oil, we might
conceivably curb the power of foreign producers. But this is not
a task of a month or a year. It is a task of decades; new
production projects take that long. If we don’t start now, our
future dependence and its dangers will grow. Count on it.”
But where has the presidential leadership been the past two
decades, from both parties? We need to do everything, drill and
promote alternative energy projects, and in some cases, tax
credits for both alt energy and Big Oil. And we may have to pay
higher taxes on gas at least in the short-term to finance some of
it. But Americans are fed such a bunch of baloney on this topic
that they can’t see the truth.
–Bank of America is refusing to guarantee $38 billion in
Countrywide Financial debt, after acquiring the near bankrupt
mortgage giant for a mere $4 billion. Countrywide’s operations
have continued to tank since the acquisition and now its
bondholders can no longer rest easy that B of A will necessarily
backstop them as the Street had felt all along. Late Friday, S&P
downgraded Countrywide debt to ‘junk’ status because of the
uncertainty.
–The New York Times had a piece concerning the great Robert
Rubin, vice chairman at Citigroup and former Treasury
Secretary, and it’s pretty amazing how, as he put it, “I don’t feel
responsible” for any of the problems Citi faced, in particular with
the mortgage market. Whatever, Bob.
[Citi had to raise another $4.5 billion in capital this week, this
time in stock, while CEO Vikram Pandit’s own hedge fund is
under severe distress…a huge embarrassment.]
–Wachovia Corp. has had a tough stretch lately. Aside from all
the losses it’s been reporting, necessitating the raising of gobs of
fresh capital of its own, it was forced to fork over $144 million in
a settlement with the U.S. government over a telemarketing
scheme that harmed hundreds of thousands of elderly, and then
we learn, via the Journal, that it’s the focus of a broad probe of
alleged money laundering involving Mexican and Colombian
drug gangs. [Other banks are implicated as well.]
–Las Vegas Sands and Wynn Resorts reported soft results in
their Vegas properties and in the case of LVS, disappointing
results from Macau (which I’ve told you is yet another bubble
waiting to happen…it’s just not that great a place, having been
there twice in the past few years). And when it comes to Vegas,
you’d have to be an idiot not to believe that the slowdown has hit
and will only accelerate.
–I get this publication, Links magazine, that is generally nothing
but ads for lavish golf resorts and communities and I’m thinking,
how many of these will really survive? Be very, very careful in
buying property on a golf course these days. You could take a
bath, especially in the start-up phase.
–Thailand, the rice king, is looking to form a rice cartel with
fellow producers Laos, Cambodia, Vietnam and Myanmar as a
way of maintaining high prices. Oh brother.
–Interesting tidbit in a column by the Journal’s Justin Lahart.
“In 1980, finance workers made about 10% more than
comparable workers in other fields, estimates New York
University economist Thomas Philippon. By 2005, that premium
was 50%.” And what did these finance folks create that was of
such great value? Not much.
–Vincent Reinhart, a former Fed official, said in a Journal op-ed
that the Bear Stearns bailout “eliminated forever the possibility
the Fed could serve as an honest broker” and should have
pursued other measures first instead of using its own money.
–New York City projects its revenues will fall 7% in fiscal 2009,
which starts in July, thanks to declining profits from Wall Street
and job losses.
–Sun Microsystems shocked the Street with a horrible earnings
report and will now lay off up to 2,500 more, on top of the earlier
extensive carnage at this company the past few years.
–Here in D.C., George Washington University has the most
expensive tuition in the country, $39,240. [That’s just tuition.]
Kind of surprising.
–The average circulation at the 10 largest newspapers fell 3.6%
for the six months ended 3/31. Of this group, only USA Today
and the Wall Street Journal reported flat sales.
–The New York Post had a story that regulators are warning
investors to study their brokerage statements because there has
apparently been a surge in ATM theft. A former NASD
regulator, Bill Singer, told the Post’s John Aidan Byrne that
“Brokers are electronically transferring customer funds,
ostensibly at their request, but in reality the money is going into
the brokers’ accounts,” all via forged client signatures.
One rep wired $2.65 million to his personal checking account
from the bank account of a limited liability partnership he
controlled. On a smaller scale, a broker was barred in January,
accused of forging a customer’s name to obtain an ATM
replacement card to withdraw $5,000.
–In a surprise move, Continental Airlines has opted to stay
independent, rather than merge with UAL, a big blow for the
latter. Continental CEO Larry Kellner said in a letter to
employees, “The risks of a merger at this time outweigh the
potential rewards.” This takes guts. Go Larry! [Your editor
only cares about his frequent flyer program, seeing as I just got a
notice I was upgraded to first class for my flight home today….
yippee!]
But Continental employees can’t rest easy and now there’s word
British Airways may make a run at it. As for UAL, they are
probably forced to merge with US Airways…which would be a
sloppy deal.
–Mars Inc., makers of Snickers and M&Ms, is buying Wm.
Wrigley Jr. Co., which makes Doublemint gum and Life Savers,
for about $23 billion in cash. Warren Buffett’s Berkshire
Hathaway is participating in the deal by purchasing a minority
stake as Wrigley would become a subsidiary of Mars. Mars
would then surpass Britain’s Cadbury Schweppes as the world’s
largest purveyor of sugar, massive consumptions of which will
kill you.
The key to the whole deal, though, is that Mars will remain
private and won’t have to worry about pleasing public
shareholders.
–Jay Gregg of the University of Maryland put out some research
on emissions of CO2 in China vs. the United States as China has
now surpassed us. Back in 2001, China was emitting 3.4 billion
tons vs. the U.S. 6.5 billion. Then in 2006, we were tied at 6.6
billion. It’s safe to say that today, 2008, China is well over 7.0
billion. What’s remarkable about this is that just four years ago,
the above-mentioned IEA said it would take ‘decades’ for China
to surpass the U.S.
Foreign Affairs
Iraq: Oil revenues are now projected to be double what was
initially forecast for 2008, $70 billion, so Congress has every
right to demand Iraq at least share in some of the reconstruction
costs. April also proved to be the deadliest month for U.S.
soldiers since last September with 50 dead.
Iran: Joint Chiefs of Staff Chairman Adm. Mike Mullen used
tough language in warning Iran that it shouldn’t take U.S.
involvement in Iraq to mean the U.S. can’t still respond to
actions Iran has been taking to arm and train insurgents there. It
was clear Mullen was talking about strikes inside Iran.
Separately, the U.S. is concerned that the sanctions regime
against Iran is falling apart under a potential wave of European
investment into Iran’s natural gas sector. Chinese and Malaysian
outfits are already in there and the existing sanctions pertain to
the nuclear program and banking, but not energy, which is where
Iran gets its money anyway.
Afghanistan: President Hamid Karzai was the subject of an
assassination attempt in Kabul. But while no doubt the U.S. and
NATO has actually made more progress here than it is being
given credit for, the comment that the assassination plot, just like
the recent attack on the main hotel for westerners in Kabul,
merely showed how desperate the Taliban are is beyond absurd.
They broke through heavy security in both cases, for crying out
loud.
Syria/North Korea/Israel: U.S. credibility, already low, is being
questioned with the release of the photos on the suspected
nuclear plant that the North was building in Syria and which
Israel took out in an airstrike last September. The story is likely
true, but this is where many look to Colin Powell’s discredited
presentation on Iraqi WMD at the UN.
Meanwhile, the London Times had a disturbing story on North
Korea’s military machine.
“North Korean military engineers are completing an underground
runway beneath a mountain that can protect fighter aircraft from
attack until they take off at high speed through the mouth of a
tunnel.”
[The project was identified by an air force defector and captured
on a satellite image, according to South Korean reports, as the
North, despite its food crisis, is ramping up military spending.]
Regarding the Syria/North Korea connection, the Times reports
that “nuclear experts were puzzled by the timing and quality of
the evidence released by the Bush administration…..However,
analysts in Seoul see the American disclosures as a sly way to
keep the negotiations alive.” The CIA, in essence, has done Kim
Jong-il’s work for him by orchestrating a “full declaration” that
allows Pyongyang to “make its declaration without losing face,”
commented the Korea Herald.
But, on a different matter, it’s always been clear that North
Korea has been providing Syria with missile technology, and that
Syria has a long-existing chemical weapons program.
So Syria has more than 100 Scud missiles, purchased from North
Korea, and in the 1990s added cluster warheads that experts say
are intended for chemical weapons. The concern now is that
Syria’s missiles are set up for a devastating first strike on Israel.
Regarding Israel, the Egyptians have convinced 12 Palestinian
groups to accept a ceasefire in Gaza, but the ball is now in
Israel’s court. Israel believes Hamas will just use the time to
improve its military capability. There was also a report this
week that a new intelligence assessment concludes Iran will have
nuclear weapons technology by year end. Something is going to
happen on this front by this fall.
But…on Friday, Israeli Prime Minister Ehud Olmert was
questioned in an ongoing, very serious corruption investigation.
Late word is that there is no way Olmert survives, which
obviously throws any Middle East peace initiatives into a ditch,
though the impact on planned operations against Iran is unclear.
Russia: Vladimir Putin steps aside to hand over the keys to the
presidency to Dmitry Medvedev this week, though don’t look
for any changes, as in Putin will very much be puppet master. All
you need to do is look to Georgia, where Putin is adding troops
to what was to have been a peacekeeping force only in the
breakaway republic of Abkhazia. No one should be surprised to
wake up one day to news of a clash here between Russian and
Georgian forces, or over the other restive republic, South
Ossetia. The West is warning Putin to behave, but will it act in
the event of a war?
Putin and his country, though, have a bigger problem; a long
range one. The UN now says the population could fall from 142
million to 100 million in 40 to 50 years. Staggering.
[Shorter-term, Putin faces 12-13% increases in food prices. The
public is satiated for now, but for how much longer? Pensioners
are getting killed.]
Zimbabwe: Robert Mugabe allowed for a recount in the March
29 voting and, presto, he now admits that opposition candidate
Morgan Tsvangirai did indeed pull in more votes, but not the
50% needed to avoid a runoff. Instead, the election commission
has said the vote was 48 to 43. Tsvangirai has yet to say whether
he’d participate in another round.
In the interim, Mugabe continues his renewed reign of terror,
with anywhere from 10 to 20 opposition leaders having been
killed according to various reports. [The higher figure is the
result of some just disappearing and presumed killed.]
Lebanon: This nation has been without a president now since last
October, and there’s no real reason to believe recent talk that the
various parties will reach a solution to the crisis in another week.
What is worrisome, though, are calls by al-Qaeda’s Ayman al-
Zawahri to attack the UN peacekeepers, who’ve largely been
useless, as in they haven’t prevented a massive rearming by
Hizbullah, but nonetheless it’s better they are there than not.
China: I’ve got to tell you, this time I agree with Jacques Rogge,
president of the International Olympic Committee, when he says
“You don’t obtain anything in China with a loud voice….It took
us 200 years to evolve from the French Revolution. China
started in 1949…It was only 40 years ago that we gave liberty to
the colonies. Let’s be a little more modest.”
Look, I’ve said before that China never should have been granted
the Games in the first place, but once they were, live with it. I
also firmly believe there are two sides to the recent unrest in
Tibet, and I believe the Dalai Lama is overrated….the mere
writing of which has undoubtedly just cost me a few readers.
I hope President Bush, who in this instance has done all the right
things thus far, shows up for the Opening Ceremonies and the
first day or two of competition. And while I don’t know if you
can compare the Chinese and South Korean experiences, Jacques
Rogge correctly notes that South Korea was a military
dictatorship when it was awarded the 1988 Games, which
“played a key role (in turning the South into a vibrant
democracy) by the presence of media people.”
This last point is key this coming August. China has promised
extensive press access. They better keep it.
Britain: An awful week for Prime Minister Gordon Brown as his
Labour party was routed in local elections, with the Tories
(Conservatives) taking 44%, the Liberal Democrats 25% and
Labour a mere 24%. Plus, in London, two-term leftist Mayor
Ken Livingstone was defeated by conservative Boris Johnson.
Austria: What a world we live in where a father can imprison
and assault his own daughter, father seven children with her, and
get away with it for 24 years. I’ve loved my trips to Vienna and
can’t wait to go back, but years ago I wrote of taking a train ride
to an outside village just to walk around and of how spooked I
was by the experience; a general sense of foreboding I haven’t
felt elsewhere.
Mexico: So here I write again last time of the ongoing violence
in this country that is discomfortingly close to home, and then on
Sunday 15 died in a battle in Tijuana among rival drug
traffickers. 15! One of the problems, though, is the ongoing
code of silence and days after, victims had not even been
identified in the press over fear of reprisals. Give me one reason
why Americans should risk going to any of the areas where
violence has been extensive in Mexico. Time’s up.
Random Musings
–Virtually all the polls of the past week, of which there were
many, show that approval of the Republican Party is at another
low [President Bush’s own numbers continue to plummet as
well, 27% approval in the NBC/Wall Street Journal survey] and
that Americans by a sizable margin want the Democrats to retain
Congress.
But, they also show a virtual dead heat when John McCain is
matched up against either Barack Obama or Hillary Clinton.
Let’s face it; this is going down to the wire.
Then there was the Newsweek survey that showed that 13% of
Americans still believe Barack Obama is Muslim. This is Third
World type stuff and beyond belief. But I think we can agree
race is going to play a big factor, as it already has, and Obama
has his work cut out for him….even before Rev. Jeremiah
Wright enters the conversation.
–And so it was on Monday, I arrived in Washington a few hours
after Wright’s appearance at the National Press Club (down the
block from my hotel), after which Obama did not want to disown
him, only to then change his mind the next day upon viewing the
videotapes and offering that he was “shocked” by Wright’s
“insensitivity and the outrageousness of the statements.”
Editorial / Washington Post
“With each defiant utterance Monday, the Rev. Wright dug a
deeper political hole for Mr. Obama.
“Did Mr. Obama climb out of that hole yesterday? It seems to us
that the whole sorry episode raises legitimate questions about his
judgment. Given the long and close relationship between Mr.
Obama and the Rev. Wright, voters will ask: How could Mr.
Obama have been surprised by the Rev. Wright’s views? How
could he not have seen this coming?….
“But Mr. Obama is right when he says that his entire career is
antithetical to the divisiveness of the Rev. Wright’s comments.
We’ve found things to cheer and things to criticize about Mr.
Obama during this long campaign, but we don’t see how anyone
could question his commitment to transcending old racial battles
and finding common ground. The Rev. Wright doesn’t speak for
the candidate, and we hope the pastor doesn’t become a
continuing excuse for political ads built on racial fears.”
Robert Novak / Washington Post
“The problem goes back to the reaction Obama and his strategist
David Axelrod crafted about two months ago, when videos of
Wright’s racist sermons first circulated. Insisting that Wright’s
incendiary remarks had been taken out of context, Obama took
the high road in delivering a widely praised speech on race
March 18 in Philadelphia….The Obama campaign thought the
pastor problem had been put to bed until Wright went on his little
road tour….
“The difference [this time] was that with every word Monday
heard over national cable television, Obama no longer could
slough off the preacher’s words as having been taken out of
context….
“Nobody knows whether Obama’s performance has damaged his
candidacy permanently, but his supporters hope the issue is out
of the news. The difficulty is that Jeremiah Wright, thrown
under the bus by his former parishioner, can reemerge any time
he wishes and renew discussion of the Democratic presidential
frontrunner’s real identity.”
George Will / Washington Post
“[Wright] is a demagogue with whom Obama has had a
voluntary 20-year relationship. It has involved, if not moral
approval, certainly no serious disapproval. Wright also is an
ongoing fountain of anti-American and, properly understood,
anti-black rubbish. His speech yesterday demonstrated that he
wants to be a central figure in this presidential campaign. He
should be.”
Charles Krauthammer / Washington Post
“At a news conference in North Carolina, Obama explained why
he finally decided to do the deed. Apparently, Wright’s latest
comments – Obama cited three in particular – were so
shockingly ‘divisive and destructive’ that he had to renounce the
man, not just the words.
“What were Obama’s three citations? Wright’s claim that AIDS
was invented by the U.S. government to commit genocide. His
praise of Louis Farrakhan as a great man. And his blaming Sept.
11 on American ‘terrorism.’
“But these comments are not new. These were precisely the
outrages that prompted the initial furor when the Wright tapes
emerged seven weeks ago. Obama decided to cut off Wright not
because Wright’s words or character or views had suddenly
changed. The only thing that changed was the venue in which
Wright chose to display them – live on national TV at the
National Press Club. That unfortunate choice destroyed
Obama’s Philadelphia pretense that this ‘endless loop’ of sermon
excerpts being shown on ‘television sets and YouTube’ had been
taken out of context.
“Obama’s [March 18] Philadelphia oration [on race] was an
exercise in contextualization. In one particularly egregious play
on white guilt, Obama had the audacity to suggest that whites
should be ashamed that they were ever surprised by Wright’s
remarks: ‘The fact that so many people are surprised to hear that
anger in some of Reverend Wright’s sermons simply reminds us
of the old truism that the most segregated hour of American life
occurs on Sunday morning.’
“That was then. On Tuesday, Obama declared that he himself
was surprised at Wright’s outrages. But hadn’t Obama told us
that surprise about Wright is a result of white ignorance of black
churches brought on by America’s history of segregated
services? How then to explain Obama’s own presumed
ignorance?….
“Obama’s turning surprise about Wright into something to be
counted against whites – one of the more clever devices in that
shameful, brilliantly executed, 5,000-word intellectual fraud in
Philadelphia – now stands discredited by Obama’s own
admission of surprise….
“Obama’s newest attempt to save himself after Wright’s latest
poisonous performance is now declared the new final word on
the subject….
“On what grounds? This 20-year association with Wright calls
into question everything about Obama: his truthfulness in his
serially adjusted stories of what he knew and when he knew it;
his judgment in choosing as his mentor, pastor and great friend a
man he just now realizes is a purveyor of racial hatred; and the
central premise of his campaign, that he is the bringer of a ‘new
politics,’ rising above the old Washington ways of expediency.”
–Peggy Noonan on President Bush in her Wall Street Journal
op-ed.
[Noonan having completed a series of lectures around the
country.]
“Here’s some comfort for all Democrats. In Lubbock, Texas –
Lubbock Comma Texas, the heart of Texas conservatism – they
dislike President Bush. He has lost them. I was there and saw it.
Confusion has been followed by frustration has turned into
resentment, and this is huge.
“Everyone knows the president’s poll numbers are at historic
lows, but if he is over in Lubbock, there is no place in this
country that likes him. I made a speech and moved around and I
was tough on him and no one – not one – defended or disagreed.
I did the same in North Carolina recently, and again no
defenders. I did the same in Fresno, Calif., and no defenders, not
one.”
–I was at the Spy Museum and saw this quote from then CIA
Director James Woolsey on the collapse of the Soviet Union.
“We have slain a large dragon filled with poisonous snakes. And
in many ways, the dragon was easier to keep track of.”
Rather prescient, I think you’d agree. Only now the dragon has
reawakened and could yet again breathe fire.
–The American Museum of Art and National Portrait Gallery,
which reopened in 2006 after a $300 million renovation, is one
of the best museums of any kind in the world. Absolutely
superb. Don’t miss it.
–I was disgusted with Andy Rooney’s commentary last Sunday,
slamming Pope Benedict XVI’s visit for zero reason. There are
times I actually like Rooney’s political musings, when he’s not
doing his insipid reports on his cluttered desk, but since Mr.
Rooney long should have had a name tag attached to his
windbreaker, I’m offering up a substitute commentary that he
should have delivered.
“During his visit, the pope singled out 57 handicapped children
when he was in New York. That was touching. [As a video of
the event is shown.] The handicapped deserve our thoughts and
prayers and, as much as possible, our time. Whether you agree
with Pope Benedict’s views, as represented by his church, or not,
isn’t as important as the example he set for the rest of us when it
comes to those less fortunate.”
–Finally, I went to Arlington National Cemetery on Thursday to
pay my respects as I always do when in town. I ended up more
or less following a group of ten Army Rangers around, who were
taking their own tour. There were tons of schoolchildren and it
was good to see them ogling our heroes. A few times I wanted to
chat one of the Rangers up and offer my thanks for their service,
but then the kids got in between, which was alright. A more
impressive group of Americans, representing all races, you never
did see.
So after catching the changing of the guard at the Tomb of the
Unknown, I split off from the crowd to seek out Section 60,
where they are burying the dead of both Iraq and Afghanistan.
Roughly 10 percent of the total who have died in the wars are
buried at Arlington and Section 60 is certainly not on any formal
tours as yet.
I mention this because of the thousands of tourists on the grounds
Thursday, at least at that moment I was the only one taking a
long walk away from the main area to find it. Along the way I
heard taps played twice for two services taking place elsewhere
on the grounds. There are often 8 to 10 burials a day at
Arlington after all. And then I got to Section 60.
I have to admit I wanted to see where Paul Smith is buried,
Sergeant First Class Smith being the first Medal of Honor
recipient of the Iraq War for his actions on April 4, 2003, when
he led a battle against over 100 of Saddam Hussein’s Republican
Guard near Baghdad International Airport. The three dozen men
Smith commanded were far outnumbered and surprised. As
noted during the award ceremony two years later, “From a
completely exposed position, (Smith) killed as many as 50
enemy soldiers as he protected his men. Sergeant Smith’s
leadership saved the men in the courtyard, and he prevented an
enemy attack on the aid station just up the road….His actions
saved the lives of more than 100 American soldiers.” Smith was
shot in the head in the same battle.
Alas, I was naïve to think Section 60 was like the other parts of
Arlington, with walkways and markers. Let’s pray some day
soon that it will be because that would signify a greatly reduced
rate of casualties and hopefully the end of the war.
What I did see, though, were two services, one about to start, the
other, far away, having wrapped up. Those in attendance were
standing around in a muddy area, it having begun to rain on a
day it wasn’t supposed to, and I can’t imagine what their
thoughts were. I saw a young woman in black walking away
with her cute little kid and instead of heading to a car, parked
along the road, or one of the buses that the Army had made
available, the two of them just walked over this muddy field and
it was as if they disappeared. Needless to say it was a
depressing moment.
I also felt like I was intruding by being there (though you can
imagine I was as respectful as possible and kept my distance) and
I didn’t have the opportunity to try and find Sergeant Smith’s
marker. Next time, because the likes of Paul Smith must never
be forgotten and they won’t as long as I’m alive.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $858
Oil, $116.30
Returns for the week 4/28-5/2
Dow Jones +1.3% [13058]
S&P 500 +1.2% [1413]
S&P MidCap +0.8%
Russell 2000 +0.5%
Nasdaq +2.2% [2476]
Returns for the period 1/1/08-5/2/08
Dow Jones -1.6%
S&P 500 -3.7%
S&P MidCap -0.9%
Russell 2000 -5.3%
Nasdaq -6.6%
Bulls 40.9
Bears 31.8 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
