[Posted 1:00 AM PT…Albany, Oregon]
Wall Street
Boy, that was a lousy first half of 2008, wasn’t it? The returns
are listed below but when looking at the Big Picture it’s not
exactly a surprise to your editor. I said end of 2006 that a
recession would hit in ‘08 and that’s what we have, even if the
official numbers don’t bear it out yet. I think economists Brian
Wesbury and CNBC’s Larry Kudlow are the only two remaining
in this country who can’t face facts. If it walks like a recession
and talks like a recession, it’s a recession, as borne out by six
straight months of job losses when we need to create well over
100,000 a month just to keep up with population growth. You
can ignore one or two data points from time to time as being
quirks, but not six in a row.
I also told you years ago that this all started with the global real
estate boom. Finally, you are seeing the ‘experts’ realize this is
the case as Europe’s housing industry collapses, particularly in
Spain, Ireland and the U.K. The credit crisis was a result of the
housing boom and now sky-high energy costs are only
exacerbating matters.
But, I have also said the recession would be shallow, in terms of
the official numbers, though lengthy. Whenever the bottom is,
whether for housing or the overall economy, we’ll just sit there,
which will continue to do a job on consumer confidence as
Americans’ number one asset is no longer a bank of last resort.
On the inflation front, however, I have talked recently of my
theory of the Big Moderation, and I am more convinced of this
than ever. Falling demand, both for oil in the U.S. as well as all
forms of consumer spending, both large (autos) and small (eating
out), will over time lead to a lessening of inflation pressures.
This will be true in virtually the entire developed world as well.
Which leads me to oil. I’ll lay out the facts below but I want to
be clear. I am definitely in the Peak Oil camp, but that doesn’t
mean I can’t also call for a big drop in the price of oil at some
point the next six months, to $100 or below. There is no way
you can validate $145 oil, no matter what anyone says on the
supply/demand front. I know all the arguments, and I have some
good friends who make their living in the energy sector and
would disagree, but there is no doubt speculation has played a
role in the high price just like speculators bid up the price of
some tech stocks during that bubble.
Yes, there could easily be a final spike to $175 or so should
Israel attack Iran, though watch what happens on this front
closely the next two weeks, as noted below, but it will be short-
lived.
Having said this, long-term, the worst thing that could happen
would be for oil to plummet below $100 because it may keep
Congress from passing needed alternative energy legislation. In
other words, it’s a classic Catch-22. Again, I’m a Peak Oil
adherent, meaning the days of $20 oil are long a thing of the past.
But $80 to $100 is probably more like the norm over the next ten
years simply because of the supply constraints out there, whether
it is withering oil fields in Mexico and Norway, OPEC’s
machinations, or state-run giants like Russia failing to do all it
can on the investment front in keeping the West and its superior
know-how out. But all this in turn could lead to a false sense of
security, until the next shock sends crude back to $150.
As for equities, in a roundabout manner of looking at the first
half, I said for all of 2008 that the major stock indices would
decline 3 to 5 percent. We’re obviously down more than that
thus far. So, do I amend my forecast? No way, which means I
see a decent rally somewhere down the line despite all the awful
news, with lots more to follow. Remember, stocks trade on
sentiment as much as fundamentals (if not more so) and
sentiment is reaching historic lows in many respects. In other
words, stocks could be close to being washed out. Sure, there
could be another 10 percent to the downside, or more if
something happened in the Persian Gulf or we had a summertime
terror attack, but I’m turning a little more bullish and in another
few weeks just may hike my allocation to stocks after sticking
with the 80% cash / 20% equities model since 2006.
So that’s what’s on my mind as I sit in a hotel room in Albany,
Oregon on the Fourth of July. [Don’t feel sorry for me. I’m
having fun later at the U.S. Olympic Track and Field Trials.] But
this column is a week in review so I need to dispense with some
important facts from the past seven days.
Regarding oil, the International Energy Agency reiterated
supplies will remain tight the next five years, while OPEC’s
president forecast $170 by year end and Russian energy giant
Gazprom spoke of $250 yet again.
I watched President Bush during a press conference Wednesday
say “I’ve been advocating (increased drilling, like offshore and
ANWR) since I’ve been in office!” What a leader. Not one
national address to the people on this critical topic. It would
have behooved him to have interrupted the reality show
programming for one hour in the past few years to do this, and
give the Democrats time to rebut, of course, but that’s not the
Decider’s style. Well I’ve decided I just can’t wait for him to go
back to Crawford.
On the housing front, the Wall Street Journal had a story on
Wednesday on how small banks are suffering with their massive
holdings of construction loans, something readers of this column
knew long ago, while Treasury Secretary Paulson, who last year
said housing was no problem, now warns prices will continue to
fall.
You also have the pitiful situation in Congress, where almost a
year after the crisis became apparent to the masses, finally the
House has passed a relief bill of sorts while the Senate delayed
action on it until after the holiday recess. To which President
Bush said, what we need is “less politics.” “I think we can get us
a bill. But it’s going to require less politics and more focus on
keeping your minds on who we need to help, and that’s the
homeowner.”
Simply stirring.
Meanwhile, you have this issue of the global economy and
interest rates. This week the European Central Bank, which likes
to say it has more of an inflation fighting mandate than perhaps
the Federal Reserve does, hiked its key lending rate ¼-point to
4.25%, thus incurring the wrath of countries like Spain, Italy and
Ireland that are on the verge of recession. This is the drawback
of the euro; one policy doesn’t always fit all, especially now.
Rate hikes spell doom for those economies already on the edge.
For his part, ECB chief Trichet said the hike should be all that’s
needed to damp down inflation over the coming months, but,
again, at the risk of what? Growth.
In the U.K. for example, housing prices have now fallen 6% by
one measurement and mortgage approvals hit their lowest level
since 1982 as one of the nation’s biggest homebuilders is on the
verge of collapse, while a leading retailer said its sales had
unexpectedly plummeted. Consumers are dying here and you’ll
recall how I wrote in years past that the British are far more
indebted than we are to begin with. [I just have to laugh. This
was all so predictable…and I did just that.]
And in another sign of the times, Europe’s largest engineering
firm, Siemens AG, announced it is laying off 17,200.
But it’s not just Europe having problems. In Australia, one study
has shown one in ten homeowners here are now suffering from
“distress” amidst rising mortgage rates and inflation. Thanks to
its still strong metals industry, though, the Aussie economy has
held up better than I would have thought, until now it would
seem.
Meanwhile, the Bank for International Settlements, the central
bank for central banks, said a severe global slowdown could
“lead to deflation” thanks to the global housing collapse in
developed countries, the commodity price boom which is
speeding the day of reckoning, and a financial sector in
shambles.
Finally, what’s worrisome about the above, including the ECB’s
rate move, is that there is zero coordination on the monetary
front at a time when there must be. Our own Federal Reserve is
thus in even more of a box as over the coming months the
inflation numbers are bound to worsen (until my Big Moderation
begins to kick in), while the economy continues to slow.
And lying in the weeds, with the world sputtering as it is, is the
issue of protectionism. Of concern to yours truly was a CNN
poll that showed for the first time, 51% view free trade as a
threat to the U.S. economy. If this sentiment carries the day over
the coming year, I’ll be changing all my forecasts post-haste.
Street Bytes
–For the first half of 2008:
Dow Jones -14.4%
S&P 500 -12.8%
Nasdaq -13.5%
The Dow Jones dropped 10.2% in June, the worst such
performance since the Depression and the Dow’s 14% slide
represented the worst first half since 1970.
Among the losers in the 30-stock Dow Jones average, shares in
GM lost 40% the first six months, AIG’s lost 39%, and Bank of
America’s fell 37%. [GM shares hit another historic low, trading
below $10 for the first time in 54 years this week.]
–For the week, it was another losing one, though selling abated
somewhat for the blue chips as the Dow Jones fell 0.5% to 11288
and the S&P 500 dropped 1.2% to 1262. Nasdaq, though, fell
another 3.0%. Of all the economic data points of the week,
which on the factory side were mixed versus expectations, it was
disconcerting to see a key measurement of the service sector fall
below the 50-line denoting recession (the ISM came in at 48.2)
because it’s been services that have been keeping things above
water.
But next week earnings season starts. Don’t look for a lot of
good cheer and merriment on this front.
–U.S. Treasury Yields
6-mo. 2.08% 2-yr. 2.53% 10-yr. 3.98% 30-yr. 4.54%
The short end of the curve rallied some on the belief for at least
this week that the Fed won’t raise rates anytime soon due to the
sick economy, even if inflation remains a concern.
–USA Today had a table on total returns, including reinvested
dividends and gains through June 30. For 10 years:
Lehman U.S. Aggregate Bond index…+74%
Three-month T-bills…+39%
S&P 500…+33%
[Source: Lipper]
Professor Jeremy Siegel, author of “Stocks for the Long Run,”
has trouble defending the title these days.
–Merrill Lynch estimates the global inflation rate has risen to
5.5% from 3.5% last December.
–June auto sales could not have been worse. GM’s were down
18%, Ford’s 28%, Chrysler’s 36% and Toyota’s 21%. Chrysler
announced it was closing a minivan plant in St. Louis and
slashing production at a pick-up operation also in the area.
–As the airline industry collapses, AMR announced it would cut
7,000 jobs by year end, while one industry expert expects fares to
rise 40% over the next four years. [They’ll be far higher than
that, if there is an airline industry.] At least 100 communities are
forecast to lose regular air transport by year end, according to the
Air Transport Association.
–PIMCO’s Bill Gross, in an open letter to Barack Obama
[pimco.com], who Gross presumes to be the next president, said
Obama’s policies will lead to the first $1 trillion deficit by 2011;
but there is little Obama can do about it because we need to
spend massive amounts to stimulate the economy and begin to cure
the housing industry.
–Here in Oregon, Blue Cross/Blue Shield premiums for
individuals are going up a staggering 26%; 16% for group plans.
–I told you China’s real estate bubble would burst right along
with the rest. The South China Morning Post reported that
housing prices in Shenzen are down from 20% to 50% over last
year. Folks forget that speculators were perhaps a bigger factor
in China’s housing bubble than even in the U.S., let alone
families have been using up every piece of savings to buy their
first home and now they are getting killed, figuratively speaking.
–Sooprize sooprize…wouldn’t you know it but revenues are
down on the Las Vegas Strip each of the first four months of ’08.
Remember those idiots who said Vegas was recession proof?
Did you buy anything else from them? Like the JPMorgan
analyst who last week lowered his estimates for the major
players because of what he wrote was “an unprecedented lack of
spend-per-visitor visibility.” Joseph Greff added investors don’t
fully realize “the magnitude and duration” of the downturn.
Speak for yourself, Mr. Greff.
–The collapse in housing can claim another victim, newspapers,
as housing-related companies were a big support for advertising.
This week the L.A. Times was among those announcing another
wave of layoffs, eliminating 1/6th of its newsroom staff and
blaming the action in no small part on housing. [The same can
be said of companies like Google and Yahoo and their reliance
on the mortgage companies for ad placement.]
–Manhattan’s office vacancy rate is rising rapidly, up 2% in the
past year to 7%. It’s going much higher before it’s all over.
–Last week I wrote how I felt corn was close to peaking and on
Monday corn fell the limit (though rallied back some the rest of
the week) as the government reported farmers planted 9% fewer
acres of corn. Corn fell, though, because this was better than
expected and as I said the flood damage, in the grand scheme of
things, is not quite as severe as you are led to believe.
[That’s as of today…and today’s weather. Of course this can
change over the course of the summer.]
–Everyone and their brother has been touting emerging markets
and no doubt some serious money has been made, but not the
first half of ’08. China’s key Shanghai index fell 48% and
India’s 34%. Brazil bucked the trend, up 6.6%. Among the
developed markets, Germany’s fell 20% and France’s 21%.
–E-mails prove that UBS was trying to sell $11 billion in
auction-rate securities to individuals as a way of unloading their
in-house position in same, even as the market for the bonds was
collapsing last summer. Wrote one marketing honcho, “The
pressure is on to move the inventory.” This is a classic example
of the very worst of Wall Street.
–And as if UBS didn’t already have enough problems, in its
ongoing battle with the IRS, the U.S. is now demanding the
Swiss banking giant turn over the names of 20,000 customers;
10,000 of which the government suspects has been evading U.S.
taxes to the tune of some $300 million. Remember, guys, just
because you have an overseas account doesn’t mean you can
avoid reporting your income when filing U.S. tax returns.
Lastly, UBS will be reporting more writedowns with its next
earnings release, though a tax credit may lessen the pain.
–It appears certain that Merrill Lynch, seeking more capital, will
sell its stake in Bloomberg LP for an estimated $5 billion to
$10 billion. A Bloomberg blind trust will probably take it back.
–Starbucks is closing another 500 stores, bringing the total to
600, which will cost 12,000 jobs. There is a classic case study of
biting off more than it could chew
–I’ve gone to the main mall here in Albany three times, just to
look at the traffic, and buy a few CDs, and in walking through
Target and Sears each time, it is truly sad what has happened to
Sears. Now the store here isn’t a mammoth one but it
nonetheless has everything the others do and I’d venture to say
each time I walked through there were no more than two other
customers; as opposed to, say, Target, where maybe there were
50.
–There’s a story in the local paper today that the days of the
lonesome cowboy and cowgirl are a thing of the past thank to $4
gasoline. As in when it comes to going to rodeos, they are car
pooling and staying together in jam-packed mobile homes and
hotel rooms. Said one cowgirl, “This is how tight the times are:
Barrel racers are even buddying up with bull riders.” Yikes.
–On my daily drive to Eugene for the Trials, I pass a massive
RV dealership, the biggest I’ve ever seen. Hundreds and
hundreds of them lined up. Archaeologists will be digging up
some of the same vehicles in 300 years or so.
–90% say soaring gas prices are inflicting pain and half say it’s
serious.
–Japan’s Nikkei stock average has just gone through its worst
losing streak since 1954.
–The Federal Reserve announced on Thursday that the assets it
accepted as part of the Bear Stearns takeover by JPMorgan
Chase are already down $1.1 billion.
–Freddie Mac, the 2nd-largest U.S. mortgage-finance co., saw its
shares reach their lowest level since 1995.
–The rate of suspicious fires in foreclosed properties is
beginning to spike. This isn’t all about idiots trying to recoup
losses through their insurance policies, though this occurs. It’s
also simply about the homes being used by the homeless or drug
dealers, particularly in urban areas, a candle is tipped over and,
you know the rest.
–It appears the rebuilding of the World Trade Center, initially
slated to cost about $15 billion, may run another $3 billion over
that. It’s also now clear the memorial to 9/11 will not be
completed by the 10th anniversary on 9/11/11. If I’m a
prospective tenant, such as Merrill Lynch, why the heck would I
commit to space today, especially given the state of the economy
and the fact you may not even require what you first thought you
needed?
–In the second quarter, not a single company backed by venture
capitalists has gone public, the first time this has happened since
1978.
–Hedge fund swindler Sam Israel, who attempted to fake his
own suicide and fooled no one, finally turned himself in to police
in Massachusetts.
–The military paid $1.74 per gallon in June 2005 for jet fuel
used on its high-performance aircraft and today they are paying
$4.07. Yes, there isn’t a sole not impacted in some shape or
form.
–Former NYSE chief Richard Grasso has won his battle to keep
his $187 million in pay as an appeals court threw out the final
two of six claims New York State, and Eliot Spitzer, had filed
against him, under the guise that Grasso’s compensation was
egregious for a non-profit. Now the NYSE is a for-profit outfit
and thus the court ruled accordingly.
You know how I feel about Grasso. He’s had his day, and won,
and that’s our system. But to me he was still little more than a
carnival barker and did investors a tremendous disservice in the
days after 9/11.
–CD sales are off another 16% thus far in 2008. The 30%
increase in digital sales of music doesn’t come close to making
up for the former.
–Steve D. passed along a terrific article by Bryan Burrough in
the Aug. issue of Vanity Fair on the collapse of Bear Stearns.
Folks, it’s must reading. I thought I had read everything I
needed to know, particularly after the Wall Street Journal ran an
extensive series on Bear, but it’s clear the actual tale is just
beginning as Burrough begins to unravel the mystery of the
sudden fall. Almost certainly (it can’t be proved as yet) some
hedge funds were largely responsible for the speedy events of
early March, but what I focused on were the stories behind
CNBC’s role in the whole affair.
We all probably have the same view of CNBC. It’s intellectually
lazy to just knock the network because it’s still the premiere
source for instant business news that is accessible worldwide;
important for us travelers. Bloomberg, on the other hand,
certainly has a solid television broadcast but you won’t find it in
many hotels in Amman, for example. Nonetheless, you have to
put up with a lot of garbage on CNBC to get what you want.
There are good guests and there are dreadful ones; good anchors
and dolts.
What the Burrough’s story points out, however, is just how
incredibly reckless CNBC’s reporters were in covering the Bear
collapse and their role is as important as any of the hedge funds’
potentially were. It’s downright scandalous and what I learned
from the article is, as one Wall Street senior executive put it to
Burrough’s, ‘there is no adult supervision’ at the network.
That’s scary. It’s happened before that CNBC ruined reputations
and careers, but never on the scale of Bear Stearns and it’s
increasingly clear, at least in my mind, that CNBC played a
major role in the loss of thousands of jobs. There is far more to
come on this one.
–But on a lighter note, according to the Beer Institute (I should
have gotten a job there), the industry accounts for 1.7 million
jobs in America and $55 billion in wages. Over the Fourth of
July weekend, beer sales account for 5% of the yearly total.
The good taste of beer…it comes in a bottle. [Or can.]
Foreign Affairs
Israel: Prime Minister Olmert worked out a highly controversial
prisoner swap with Hizbullah, exchanging an infamous Lebanese
killer for the bodies of two Israeli soldiers, in keeping, Israeli
officials would say, with the edict that Israel does not abandon its
men and women in uniform. A majority of Israelis agree with
the move, but it is also a victory for Hizbullah because it
heightens their legitimacy, at least in the eyes of its own people.
It’s also further proof, if you needed it, that Israel negotiates with
everyone, and I personally don’t disagree with this in principle;
versus the Bush administration’s policy, in the case of Iran, in
not talking until all its preconditions are met. [At least thus far.]
Meanwhile, ABC News reported that a U.S. Defense Department
official told them that an attack by Israel on Iran’s nuclear
facilities is likely by year end, while Iran countered its ballistic
missiles are aimed at the Dimona nuclear site in Israel should the
Israelis make such a move on Iran.
Iran: Separately, both Iranian Foreign Minister Mottaki and a key
spokesman for Ayatollah Khamenei didn’t rule out talks with the
EU (and by extension the U.S.) over the latest package of
incentives offered it if it would abandon its uranium enrichment
program. And then on Friday, the Secretary of the National
Security Council said Tehran had given a “constructive”
response to the incentives package. For the better part of two
years now, Iran has said halting the enrichment process was a no
go, so how seriously should the West take Iran’s seeming
overture for talks? We should know far more in just the next
week or two if Iran is truly amenable to at least suspending its
program. If they are, oil would fall significantly.
For his part, Admiral Mike Mullen, Chairman of the Joint Chiefs
of Staff, said if Israel attacked Iran, “Opening up a third front…
would be highly stressful” on U.S. forces.
Afghanistan: Mullen was of course referring to the other two
fronts being Iraq and Afghanistan. In the latter, it’s been highly-
publicized that the death toll in June for U.S. and NATO forces
was the worst since the war began, with 46 troops killed, 28 of
which were American and 13 British. [The Brits have now lost
at least 110 here.] Separately, Pakistan launched an offensive
against the Taliban in the tribal capital of Peshawar, though the
pressure needs to be sustained for it to succeed and Pakistan has
shown no signs of the ability, or desire, to do more than beat
back the terrorists for short spells.
Iraq: For the second straight month the death toll in Afghanistan
exceeded that in Iraq, where 31 were killed. Of course this
points out that there continues to be ongoing progress in Iraq, at a
cost, but more resources are needed in Afghanistan, which is part
of what Adm. Mullen is referring to. At least in Baghdad, Iraqi
officials are claiming real progress is being made in terms of a
long-term security arrangement with the U.S. that all parties can
agree to, but there may be some sort of interim agreement before
a more formal one is signed in 2009. [The UN mandate is for all
foreign troops to be out by year end, thus the need to circumvent
this or obtain another UN extension.]
But then you have the oil issue, details of which have come to
light through various congressional investigations. Of particular
potential harm to President Bush and the McCain campaign is
the revelation that Bush buddy Ray Hunt and his Hunt Oil Co.
were allowed to complete a deal in Kurdistan, with State Dept.
support, even though there has yet to be a formal oil revenue-
sharing agreement amongst all parties and thus this separate deal
(and others like it) undercuts Iraq’s central government and runs
counter to U.S. policy. Barack Obama and the Democrats can
have a field day with this as it obviously gives them reason to
crow, ‘See, we always told you it was about oil and little more.’
Zimbabwe: Robert Mugabe was sworn in for a new five-year
term as president, thus extending his rule of 28 years. Mugabe,
after the sham election, invited opposition leader Morgan
Tsvangirai to the inauguration, which the latter turned down, this
after Mugabe’s thugs had decimated the opposition’s leadership
in killing 90 of Tsvangiari’s supporters.
Mugabe then flew away to Egypt and a summit of the African
Union, where he was hailed by the leader of Gabon. Kenya’s
president, on the other hand, called on the AU to suspend
Mugabe until free and fair elections were held, but in the end, the
only thing the AU could muster was a declaration that called on
Mugabe to open up a dialogue. Nothing verging on
condemnation in the official protocol. Unbelievable.
Colombia: Thankfully, there was some truly great news this
week, that being the spectacular mission to free 15 hostages from
the grips of FARC, including former presidential candidate
Ingrid Betancourt, three American contractors, and 11
Colombian soldiers. Betancourt had been held about six years
and was a key bargaining chip for FARC, but now, following
the deaths of three of FARC’s seven key leaders this year, the
rebel movement is reeling.
It’s a tremendous victory for President Alvaro Uribe, a staunch
ally of the United States, as well as the Colombian people. It’s
also a big defeat for the likes of Venezuela’s Hugo Chavez as
both he and Ecuador’s leader have used unrest in Colombia for
their own revolutionary benefit.
And the rescue mission is a victory for President Bush, who has
stood behind Uribe. Now the ball is in Congress’ court in terms
of approving the free-trade agreement that Colombia deserves.
It’s going to be interesting to see how the Democrats frame the
issue.
Russia: Authorities are trumping up new charges against former
Yukos chairman Mikhail Khodorkovsky that could add another
15 years to his original 8-year term in prison. It’s said that
President Medvedev, who has championed law and order, needs
to look tough in dealing with Khodorkovsky, regardless of the
facts, in order to prove his mettle. Earlier Prime Minister Putin
announced that for the first time in many years Ukraine is all
paid up in its gas bills, this as Russia prepares to hike rates big
time for the once heavily subsidized former Soviet republic.
Back to Medvedev, it was pitiful this week that U.S. Treasury
Secretary Paulson went to Moscow begging for investment.
[Just from an appearance standpoint…nothing wrong with the
principle of it.] So after Paulson departed, Medvedev said that
with America’s economy mired in “essentially a depression,”
Russia won’t take any crap from the U.S. in terms of Washington
telling it what to do on issues such as human rights and the rule
of law. What will truly be interesting is if John McCain wins,
since McCain has already said Russia should be barred from the
G8, a stance I agreed with at the time McCain first stated this,
but now how pragmatic would a McCain presidency want to be?
Medvedev hasn’t commented much when questioned about the
senator’s position, except to say that Russia deserved a seat at the
table because it is now a global economic power. [Take away oil
and it’s a basket case.]
Turkey: Interesting developing story here that is flying under the
radar. The High Court has already ruled that the ruling Islamist
AKP party’s leadership should be dismantled because it is acting
against the interests of the well-established secular state, such as
in controversies over the wearing of head scarves and scattered
attempts to begin to adopt Sharia law.
So this week 20 suspects, including two retired generals, were
arrested for plotting a coup. The government has been accused
of conducting a witch hunt in retaliation for the court’s rulings.
No one should be surprised to see a radical change here, either
way, over the coming year and at least initially it could be highly
destabilizing to global financial markets, I suspect.
North Korea: This drops down in the order for at least this week
as there was little new news, except that already the U.S. is
flooding the North with economic aid, this despite the fact North
Korea has yet to really divulge what they are supposed to on the
nuclear front. As former ambassador John Bolton said of the
Bush presidency, it’s “in total intellectual collapse.”
South Korea: Hundreds were injured in the ongoing protests
over the renewed importation of American beef, shut out of the
country since 2003 over mad cow fears. The beef protests,
though, are being used as camouflage for a greater issue, disgust
over President Lee’s first few months in office and failure to get
the economy moving again, as well as ongoing stories of
corruption.
China/Taiwan: Direct tourist flights between the two have
resumed for the first time since 1949. And President Bush
announced he will attend the Opening Ceremonies in Beijing, a
good move. But then he’s going to South Korea and Thailand,
not good. First off, this is not the time to go to South Korea and,
second, there is zero reason to go to Thailand.
Poland: The president here gave an interview in which he said he
wouldn’t sign the Lisbon treaty even though parliament had
already approved it, this as France assumed the six-month EU
presidency. The stench leftover from Ireland’s ‘No’ vote is
enveloping the continent.
France: The chief of the army was forced to resign following the
unbelievable shooting at a military show that injured 17 civilians
when a soldier accidentally fired live ammunition rather than
blanks. He simply made a mistake in loading his gun.
Thankfully, no one died from their wounds.
Britain: The government is increasingly concerned about how
Russia has flooded the country with spies. Relations are bad
enough as it is, including the ongoing poor treatment of BP over
a joint oil venture.
Random Musings
–Most polls are showing that a majority of the American people
now favor drilling offshore….advantage McCain. For his part,
Obama continues to tack to the center, like all candidates do, yet
you have this fulminating at the mouth by Barack’s liberal base,
even though we know they will of course still vote for the guy.
Obama is being criticized, though, especially hard for his flip-
flop in now supporting the wiretap bill.
–John McCain was fortuitously in Colombia the day before the
hostage rescue, as part of a trip that included Mexico, but many
of his supporters say he should be focusing on the issues at
home. Barack Obama, on the other hand, is about to embark on
a trip that will take him to Britain, Germany, France, Israel and
Jordan as a way of bolstering his foreign affairs credentials.
Later, Obama is headed to Iraq and Afghanistan as part of a
separate, congressionally funded fact-finding boondoggle.
Alas, Senator Obama put his foot in his mouth more than once
over his Iraq policy and his original 16-month timetable on
Thursday, yet another reason for his base to be ticked while
giving McCain further ammunition. Barack is showing signs of
not being ready for prime time, shall we say.
–USA Today has a cover story on how rural communities are
just getting killed by gasoline prices. For example, years ago the
farming community of Allen, Neb., now with a population of just
411, once had four grocery stores and four gas stations. Last
year, it’s last gas station closed so now the folks have to drive
either 11 miles to Wakefield to gas up, or 28 miles to South
Sioux City. The only shopping is in Sioux City or 21 miles away
in Wayne. That adds up quickly.
I’m driving at least 100 miles a day here in Oregon this week and
it’s adding up for me, that’s for sure.
–What a disaster the salmonella probe has turned out to be as
innocent farmers have seen their businesses taken down because
of the failure of the government to identify the true source. And
now the Centers for Disease Control and Prevention have asked
state and local health officials to focus on salsa using fresh
tomatoes. What a crime it will then be if fresh tomatoes prove
not to have been the problem all along. Then again we shouldn’t
be surprised our government can’t do much right, witness the
massive settlement with Steven Hatfill, the one-time “person of
interest” in the anthrax case who has now been exonerated. At
least he is being duly compensated for the smear on his
reputation. Or is it unpatriotic to knock the government on
anything these days?!
–Two weeks ago I mused about the Midwest floods and an
invasion of mosquitoes, which could bring about an epidemic of
West Nile. Well the mosquitoes have indeed taken hold. In
Iowa they have about 20 times the normal number, as reported
the other day. However, these are not the disease carrying kind,
we’re being told. Not yet. [But they are said to be awful
aggressive.]
–Goodness gracious. Rush Limbaugh just signed an 8-year
contract extension that will pay him $400 million, including a
reported $100 million signing bonus.
–The air quality in many parts of California, and now sections of
Oregon, is awful due to the forest fires, with 2 to 10 times the
federal standard for clean air. Again, the problem, as studies are
now proving, is that smaller particles can travel deep into the
lungs and the blood stream. It’s why I opened my review last
week with the musings that we can do all we want to clean up the
air, a necessity, but Mother Nature can still do a number on our
best intentions, whether it’s forest fires, a volcano, or the jet
stream bringing China’s chief export across the Pacific.
–Boy this is depressing. The Arctic sea ice, in escalating
meltdown, is 43% less than it was in 1979 and there are now
some respectable studies that show it could disappear in as little
as five years.
But there was some good news this past winter, at least in the
Sierras, Cascades and Rockies, as record snows have begun to
put a dent in the long-term drought in this entire region. Heck,
some roads into Glacier National Park were still closed as of this
week due to a monstrous June storm that deposited 3 to 4 more
feet.
–And this good news. For reasons not yet known, the number of
sockeye salmon swimming up the Columbia River is double pre-
season expectations and about six times the total for all of last
year. Most swim to north-central Washington, where the
fishermen catch ‘em and the bears eat the fishermen, which is the
way nature intended it, sports fans.
–Alas, it’s Fourth of July weekend and the theme of patriotism,
or lack thereof, is in the air. Like in the case of the jazz singer at
the Denver mayor’s state of the city address, who when asked to
sing the national anthem sang the “black” national anthem
instead. “I’m an artist,” she said. ‘You’re a primo jerk,’ I
mused. And once again Barack Obama was also under assault.
I continue to get a kick out of those questioning Obama’s
patriotism, like when he didn’t wear a flag pin. Here in Oregon,
I haven’t seen one person in the stands at the Olympic Trials
wearing one (nor do I), but a more patriotic bunch you never did
meet. Let alone these stirring athletes I’ve been privileged to
observe the first six days of competition, many of whom will
now don our colors in Beijing.
My idea about America is this. I’ve traveled all over, to about 30
countries in just the past nine years, let alone another ten or so
different ones earlier in my life, and it’s not even close as to
which is the best place in the world; for freedom, natural beauty
and diversity.
But what I’ve come to like about America more than ever is our
work ethic, believe it or not. Sure, we all go through stretches in
life where it seems we’re dealt a bad hand, as in a recession, for
instance, but more often than not you are rewarded for your
efforts, and believe me, that isn’t the case everywhere else on the
planet where you often have the flipside, the lazy are rewarded,
which to me is unconscionable.
Through work one has the opportunity to better mankind, let
alone their community and family. Maybe this is more
appropriate for a Labor Day sermon, but I view that holiday as
just a well-deserved day off.
This is a time, though, to thank the Founding Fathers for the gifts
of freedom they bestowed on us, one of which is the freedom to
pursue your dreams, to work, which is what I see in evidence on
the track and field at Hayward Field in Eugene.
It’s also a time, just like with Memorial Day and Veterans Day,
to honor and celebrate those men and women in uniform, over
the history of our country, who have fought and died for our
freedoms, our right to pursue the good life.
So in reading a survey put out by USA Today and Gallup, the
question was asked, “How much does each action indicate that a
person is patriotic?”
95% said voting. 59% said ‘wearing an American flag pin.’
But in defense of Barack Obama, in a speech this week he said
“dissent does not make one unpatriotic.” That’s oh so true.
Thankfully, the same USA Today/Gallup poll found that 66%
believe “Protesting U.S. policies you oppose” is also an action
indicating a person is patriotic.
We have huge issues today to deal with in this country.
Historically important ones. There’s a reason why a record level
of us believe “the country is headed in the wrong direction,”
85%, which means there are more than a few hypocrites out there
when blasting those who may not share the same opinions as
their own.
So it’s time for all of us to unite around a single issue. Hold
our politicians’ feet to the fire, from the president on down, and
tell them that if they wanted that office so badly, then start acting
like it’s the honor they always tell us it is. Send them a note and
say, “Dammit, get to work!”
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $935
Oil, $145.30
Returns for the week 6/30-7/4
Dow Jones -0.5% [11288]
S&P 500 -1.2% [1262]
S&P MidCap -4.4%
Russell 2000 -4.6%
Nasdaq -3.0% [2245]
Returns for the period 1/1/08-7/4/08
Dow Jones -14.9%
S&P 500 -14.0%
S&P MidCap -8.3%
Russell 2000 -13.1%
Nasdaq -15.3%
Bulls 31.9
Bears 44.7 [Source: Chartcraft / Investors Intelligence…once
again a reminder: this is a contrarian indicator and thus the latest
figures are seen by some to be highly bullish.]
Have a great week. I appreciate your support.
Brian Trumbore
