[Posted 7:00 AM ET]
Wall Street
What a week. And where does one begin to attempt to make
sense of it all? The action was best summed up in the fact that
the financial sector had its worst day ever on Monday, and its
best on Wednesday. On Tuesday, the Dow Jones Industrial
Average closed below 11000 for the first time since July 2006,
but then staged a stirring comeback, reversing some 500 points to
finish the week at 11496. In between you had a ton of earnings
reports from the likes of IBM, JPMorgan, Citigroup and
Microsoft, with the usual mixture of those that beat expectations
and those that didn’t. Plus you finally had a reversal in oil and
the now seemingly unending saga of Fannie and Freddie.
But before we get to all this, let’s start off with the semi-annual
state of the economy testimony of Federal Reserve Chairman
Ben Bernanke, as given to Congress, because it will lead into my
own opinion on where we stand as far as the Big Picture.
Among other things, Bernanke said:
“The effects of the housing contraction and of the financial head
winds on spending and economic activity have been
compounded by rapid increases in the prices of energy and other
commodities, which have sapped household purchasing power
even as they have boosted inflation. Against this backdrop,
economic activity has advanced at a sluggish pace during the
first half of this year, while inflation has remained elevated….
“The possibility of higher energy prices, tighter credit conditions
and a still-deeper contraction in housing markets all represent
significant downside risks to the outlook for growth. At the
same time, upside risks to the inflation outlook have
intensified….”
Regarding this last point, Bernanke was certainly backed up by
the data, with the June reading on producer prices rising a
whopping 1.8%, 9.2% year over year, while consumer prices
for the same month rose 1.1%, or up 5.0% since June ’07. Forget
that the numbers, as usual, were far less when you exclude food
and energy since none of us have learned to exclude them in
real life. If and when we do, we’d have quite a scoop.
In terms of economic activity and the latest releases, lost in the
storm of news was a putrid reading on June retail sales, up 0.1%
when a gain of 1.3% was expected. So much for the stimulus
checks, which we’ve now learned went towards all things porn-
related, see below. And the data on housing, while at first blush
a plus in a better than expected reading on housing starts for
June, was in actuality a crock as it includes many multi-housing
projects that were accelerated for tax purposes. In fact I now
realize why there was a sudden rush of activity at that complex
down the block from my home I’ve been telling you about. The
one where it appeared all building had stopped with nary a unit
sold. Suddenly, I saw landscapers! [Still no sales I’m aware of,
but at least the outsides will get finished before the vagrants
move in.]
Anyway, Barron’s July 14 edition had a cover story on how
housing has bottomed. Here’s my rejoinder. There was nothing
in the piece about bottoming and then just sitting there, nor did
the author talk about a V-shaped bottom either. It’s pretty much
just left to the imagination. ‘We’ve bottomed.’ Yeah, well then
what, Einstein?
The deal is that numbers are being skewed these days because of
all the foreclosures. In some markets, such as in Southern
California, sales can look robust but it’s folks trying to pick off
foreclosed properties at fire sale prices. So be careful when you
read of an increase in sales in your neighborhood. Dig deep for
the facts. After all, sales of foreclosed homes drive down the
value of everything else in a neighborhood.
So let’s work our way into the financial sector. JPMorgan Chase
surprised to the upside in reporting its quarterly earnings this
week, which along with a solid report from Wells Fargo supplied
the catalyst for the rally in bank stocks. JPM CEO Jamie Dimon,
in discussing his firm’s outlook, said:
“Our expectation is for the economic environment to continue to
be weak – and to likely get weaker – and for the capital markets
to remain under stress. We remain conscious that since
substantial risks still remain on our balance sheet, these factors
will likely affect our business for the remainder of the year or
longer.”
Mr. Dimon, though, is known to talk down prospects in an effort
to make it easier to beat expectations next quarter, but there is
nonetheless little reason to doubt the above.
Deutsche Bank CEO Josef Ackermann was more optimistic,
saying the credit crunch was at “the beginning of the end” and
that many businesses were slowly returning to normal, citing the
banks’ efforts to rebuild their balance sheets by raising beellions
and beellions, as Carl Sagin would have put it.
But the banks are far from being out of the woods, to say the
least. Aside from the fact most banks’ balance sheets are nothing
but a black box, even a full year into the crisis, borrowers are
defaulting on all manner of commercial real estate loans, home
mortgages and consumer loans at an increasing rate as the likes
of JPMorgan and Citigroup pointed out in their reports.
Ah yes, Citi. Wall Street loved, in its own perverted way, that it
had to write down an additional $7.2 billion of mostly subprime
related debt (meaning it’s now written off a total of about $50
billion since last year), while credit costs because of bad
consumer loans increased $4.5 billion. In other words, it’s not
too soon to think of a Christmas season where finding a parking
spot at the mall won’t be an issue.
But before we get to Fannie and Freddie, let me interject my own
thoughts on the economy overall by referring to two statements
of mine from the past two months.
WIR…5/24/08
“I believe inflation will moderate for one simple fact. The global
economy is about to totally flip, just as we have done in the U.S.,
and demand not only for oil but wheat, rice and just about
everything you can imagine will fall. Not a crash, mind you…
just call it the Big Moderation.”
I’m more convinced of this than ever, and not for nothing but I
called the peak in corn prices to the day, 6/28/08, as I did earlier
in the year with the rice bubble.
WIR…7/5/08
“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…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.”
With oil having fallen below $130 since the above, I stand by
this last point as well.
OK, on to those two massive government-sponsored enterprises.
Last Sunday evening, as parents around the country were
beginning to put the young ones to sleep while worrying about
what Monday would bring in the markets at the same time,
Treasury Secretary Paulson strode before the assembled
microphones and talked of how the government wasn’t giving up
on Fannie and Freddie. They were both too important to fail,
seeing as they backstopped 50 percent of the mortgages in
America. Well, actually you and I as taxpayers backstop them,
but more on this later.
Paulson laid out a plan whereby (1) Treasury would seek the
“temporary authority” to ensure there was an adequate flow of
capital into the two in order to continue the flow of money into
home mortgages. (2) Fannie and Freddie would be granted
access to the Fed’s discount window as necessary, meaning they
could go up and exchange a Barry Bonds card for $2 billion, or
something like that, and, (3) the U.S. government would extend
the lines of credit already issued to the siblings. After some fits
and starts, Fannie and Freddie saw their shares recover a bit over
the course of the week but in the halls of Congress and the water
coolers on Wall Street and Main, there was much discussion
about systemic risk and moral hazard.
Following are a few scattered thoughts I clipped out…like
coupons for my local CVS Pharmacy.
Editorial / USA Today
“Since they were chartered as government-sponsored, publicly-
traded corporations four decades ago, [Fannie and Freddie] have
used their lobbyists and political allies to bail them out of minor
pinches. When critics suggested, say, that they should be
required to report to the Securities and Exchange Commission
like other corporations, or pay state and local taxes, or increase
their capital reserves, their influence-peddling machine went into
action.
“But their true ace in the hole has always been the ‘implicit
guarantee’ – now an explicit one – that Uncle Sam would have
no choice but to back them up if they ran into real trouble.
“Whatever the government does to right Fannie and Freddie
now, it has to understand – and taxpayers have to understand –
that these are fundamentally flawed institutions.”
Editorial / Washington Post….Tuesday, 7/15
“The hope is that the mere promise of a bailout will be enough to
restore confidence – so that this expensive promise [of aid] will
never have to be kept. Fannie and Freddie do back mostly high-
quality mortgages, and housing prices can’t keep going down
forever. But, just to be on the safe side, the government has to
attach some strings. At a minimum, Congress and the Bush
administration should be rewriting pending housing legislation to
require the GSEs to maintain greater capital reserves, as banks
do, once the crisis is over. Mr. Paulson, however, has said only
that ‘use of either the line of credit or the equity investment
would carry terms and conditions necessary to protect the
taxpayer.’”
Vincent Reinhart, former director at the Fed, in an op-ed for the
Washington Post
“(There) are two reasons to doubt that this movie ends so happily
and two reasons to wish it were never made.
“First, in the near term, continued double-digit declines in
housing prices will raise doubts about the repayment prospects of
more and more mortgages. Add to that the difficulties associated
with an economy teetering on the brink of recession. Anyone
holding mortgages or mortgage-related securities is in for a
bumpy ride. Fannie and Freddie, which are exposed to more
than half the market, are sure to face large losses and squalls of
investor uncertainty.
“Thus the second problem: The endgame is uncertain. The
government’s funding responsibility will end only when the two
firms have raised sufficient capital. It will be impossible for the
Fed or the Treasury to turn away a request for more credit. The
overall provision of credit could, therefore, be sizable and
extended.
“While policymakers have at least temporarily resolved this
crisis, we will live with the consequences for a long time.
Consider the downsides:
“First, the Federal Reserve is likely to be given additional
responsibilities related to overseeing housing finance. What
happens when that goal interferes with the ones Congress has
already given it – fostering maximum employment and stable
prices? An overextended Fed might be tempted to keep the
liquidity tap open too long to support housing finance, even at
the cost of a pickup in inflation.
“Second, the government had to act because, in today’s
interconnected markets, Fannie and Freddie are too big to fail.
Policymakers missed an opportunity for significant reform.”
Editorial / Washington Post…Thursday, 7/17
“The parlous financial condition of Fannie Mae and Freddie Mac
threatens the global economy. Treasury Secretary Henry Paulson
Jr.’s request for standby authority to lend the mortgage giants
more money and, if necessary, inject capital seeks to reduce this
‘systemic risk.’ Democratic leaders in Congress plan to attach
the Fannie-Freddie rescue to housing legislation already passed
by the Senate and slated for House consideration. Strangely,
though, both the Senate and House versions of the bill potentially
increase the very risks Mr. Paulson’s plan is intended to mitigate.
“Both measures would encourage Fannie Mae and Freddie Mac
to buy bigger mortgages on the secondary market (which they
would then either hold or sell as guaranteed securities to
investors). Ordinarily, the government-sponsored enterprises
(GSEs) buy high-quality loans under $417,000 for a single-
family home. This ‘conforming’ loan limit not only limits
taxpayer risk, it also anchors the profit-hungry GSEs to their
statutory mission: supporting affordable housing. Earlier this
year, as clouds were already gathering over the GSEs, Congress
raised the limit – to almost $730,000 in certain high-cost areas –
on the theory that Fannie and Freddie could help unfreeze the
housing market. The measure was supposed to be temporary.
But the pending Senate and House bills impose permanent
increases. The Senate would go up almost 50 percent, to
$625,000. The House, led by Speaker Nancy Pelosi (D-Calif.),
who represents the pricey San Francisco Bay Area, is
considering a $730,000 cap. Either way, Congress would be
authorizing the GSEs to pile more risk onto their already
staggering balance sheets, and mostly for the benefit of buyers
and sellers of expensive houses.”
But here’s the bottom line as we move forward. Congress, as
you can see, has yet to actually approve any plan but the market
liked that the Fed was making it clear it would not let Fannie and
Freddie fail. In the end, however, the actual risk to the
government and us taxpayers, let alone the market, will be
determined by how much farther we have to go in the housing
cycle and how many more defaults we see.
As to who is responsible for the mess, blame both Congress and
the Fed. But this story has a long way to run.
And a few other bits to munch on. President Bush would like
you to believe that his lifting of an executive prohibition on
energy exploration in the outer continental shelf was the reason
why oil dropped from $145 to just below $130. But this would
be far from the truth and Congress still has to either overturn or
let its own prohibition expire before the states can then decide
what they want to do. Most say that if the outer shelf is opened
up you won’t see significant new oil into the system for 7 to 10
years, but off California, for example, there is some that could be
accessed quickly, though Californians are still against lifting the
ban (however this attitude is changing weekly in favor it seems).
The reason for the slide in crude was simple. Demand
destruction is taking hold and the inventory picture has
brightened considerably. But the facts alone didn’t necessarily
warrant such a big slide so why did it happen now? Speculators
cashing in. Not manipulators. Speculators.
Lastly, there was a lot of talk of leadership this week. One who
hasn’t been is President Bush. In lifting the executive order on
banning drilling, for the first time the president actually used the
word “conservation.” “We must implement good conservation
policies.” Then he blamed Congress.
The next day at his news conference, he was asked why he
hadn’t mentioned conservation before and he replied “It would
be a little presumptuous on my part to dictate how (the American
people) should lead their lives.” At this same performance, when
talking about high energy prices, Bush said “We understood
what was coming” and “I don’t want to be an ‘I told you so,’ but
I told you so.” Thanks, Mr. President. You’re so prescient.
Street Bytes
–The past two weeks I’ve hammered away at the bull/bear
sentiment readings because I thought it was important to bring
them to you. Traders in particular should take a look at my
“Wall Street History” link where I have more work on the topic.
I personally have not changed my 80% cash / 20% equities
allocation, despite saying I might in coming weeks, though it
would have been a nice ego trip if I could have raised the equity
allotment before this week’s big rally. Alas, I’m just proud I
brought the facts to you in the fashion I did and anyone
following the indicator and acting accordingly did quite well, at
least for one week. There is just so much going on these days,
however, that I need a little more time to process it all before I
make a big change (it won’t be half-ass if I do). In fact
most of you would agree that’s one of life’s frustrations. We
never have enough time to just think.
For now the rally in the market was led by the drop in oil,
renewed confidence that the worst may be over in terms of
financials, particularly in the case of Fannie and Freddie, and
some better than expected earnings.
The positive earnings came from the likes of Johnson & Johnson,
Intel, Wells Fargo, Abbott Labs, JPMorgan, United
Technologies, IBM, Citigroup (though this is kind of a joke), and
Schlumberger. The negative reports in terms of reaction
included those of eBay, Merrill Lynch, Microsoft, and Google.
Overall, the Dow Jones added 3.6%, the S&P 500 1.7%, and
Nasdaq 2.0%.
On the tech front, Goldman Sachs analysts say the global
spending environment is the worst since 2003, but, overall, tech
is holding up quite well. Better than I would have anticipated.
But one issue that Microsoft faces which is very troubling is the
ongoing piracy problem that is costing it $100s of millions, if not
$billions. In China, for example, the company says eight in ten
programs are illegal copies. Excuse my French, but this sucks
and is yet another reason why I believe half the people in the
world are bad.
Yet there was one other item of note that helped out stocks,
particularly financials, and that was the news that SEC Chairman
Christopher Cox was going to limit “naked short-selling,” a
practice in which traders sell shares short without actually
holding them. Cox specifically limited the practice to 17
financials plus Fannie and Freddie, for now, having seen enough
of the types of bear raids that took down Bear Stearns and
threatened Lehman Brothers the other day.
Before the order, any seller had an obligation to “locate” shares
to be borrowed, but no physical contract. The SEC is in effect
saying “try harder” and may codify the rule later. In the
meantime, aside from some cumbersome operational issues for
Wall Street’s titans until they get the hang of it (and figure out
how to circumvent the new rules because this is what they do),
don’t get hung up on discussion of this topic. If it lessens the
chances of manipulating the market, good. There are other
regulations to come that will warrant far more discussion than
this one.
–U.S. Treasury Yields
6-mo. 1.91% 2-yr. 2.65% 10-yr. 4.09% 30-yr. 4.66%
Rates on the long end rose on the inflation numbers as well as a
flight from bonds back into stocks. Plus Minneapolis Fed bank
president Gary Stern also said the Fed can’t wait until financial
and housing markets stabilize before raising interest rates to
combat inflation.
–The IMF raised its global outlook for 2008 and now sees the
U.S. growing at 1.3%. The Federal Reserve amended its own
as well and sees GDP in the 1.0 to 1.6 percent range, up from an
earlier forecast of 0.3 to 1.2.
–Among the 23 industrialized nations in the MSCI World Index,
only Canada averted a bear market decline of 20 percent,
according to a report by Bloomberg. And you know how I’ve
noted I have handwritten readings on various benchmarks going
back to March 1990? When I saw that the Tokyo Nikkei closed
Friday at 12803, off for a sixth straight week, I decided to go
back to July 20, 1990. Guess where the Nikkei was then? Try
32421. [Conversely, the Dow Jones finished that particular week
at 2961 as we were about two weeks from Saddam’s invasion of
Kuwait and a quick bear market that would take the Dow down
about 20% from the highs set a week earlier.]
–Spain’s largest developer went bust in the nation’s biggest
bankruptcy ever, while consumer sentiment in Japan is at the
worst level since they began tracking such data.
–Wall Street banks are still holding $50 billion of old LBO debt
and carrying it at about 85 to 88 cents.
–Analysts had expected Merrill Lynch to report a loss of $1.90 a
share and instead Merrill came in with a loss of $4.95 as it wrote
down an additional $9.7 billion. Merrill also announced it had
sold its 20 percent stake in Bloomberg for $4.4 billion and was
selling its controlling stake in fund administrator Financial Data
Services. But for now they’re keeping their 49 percent stake in
BlackRock. What a sad, sad story.
–Keep an eye on labor talks with the likes of Con Ed in New
York City as well as Verizon workers on the East Coast. The
key is going to be who pays for medical benefits, as opposed to
substantial wage increases that simply aren’t in the cards. Expect
strikes.
–Last week I noted that New York Sen. Charles Schumer was
blamed by federal regulators for the collapse of IndyMac
Bancorp. Schumer had written a June 26 letter that questioned
whether IndyMac could survive and it’s no wonder this caused a
run on the bank after he made it public. Schumer said in
response to the allegation, “The regulator here was asleep at the
switch. The administration is doing what they always do,
blaming the fire on the person who called 9-1-1.” The Office of
Thrift Supervision says depositors withdrew $1.3 billion in the
11 days following Schumer’s disclosure.
Editorial / Wall Street Journal
“Very few banks, if any, would remain standing for long in the
current tense financial environment after a Senator, in effect, told
its depositors to run for the exits. In the 1930s, such tipsters
were derided as rumormongers and often faced indictment for
encouraging depositors to stampede banks.
“Only last week, the Securities and Exchange Commission
announced an investigation into the role of rumor-peddlers in the
run on Bear Stearns. We somehow doubt that Mr. Schumer will
receive similar SEC scrutiny for his very similar role in bringing
about a liquidity crisis at IndyMac. But he may be more
deserving.”
[Separately, the FBI is now investigating IndyMac for fraud,
including insider trading and accounting and loan irregularities,
among other things.]
–General Motors is cutting its white-collar payroll by 20 percent
and selling assets, it hopes, to the tune of $15 billion over the
next 18 months as part of its effort to avert a bankruptcy filing at
some point in 2009. Currently, GM is bleeding about $1 billion
a month in cash, though the shares have rebounded off a 54-year
low of $8.80 to close the week at $13.20.
–Star Oppenheimer analyst Meredith Whitney, who after her
performance the past year in gauging the banking sector deserves
to be in the Research Hall of Fame, not only nailed Merrill’s
loss, but said of Wachovia, “Expenses simply cannot come down
fast enough, seriously jeopardizing Wachovia’s ability to
generate earnings. We fear the company will have the greatest
reckoning with asset re-valuation and/or credit costs.” Fire!
–Real Estate Bits
Second-quarter sales volume in The Hamptons dropped 29
percent and the median price fell 11 percent. But there is far
more damage to come, I imagine. [Of course few Americans
give a damn about this part of the country. The median price,
after all, is still $735,000, with a median price of $891,000 in
Southampton itself.]
Donald Trump sold one of his Palm Beach mansions for $95
million to a Russian fertilizer tycoon, Dmitry Rybolovlev, who
no doubt will have many an armed guard wherever he goes,
because this is what these folks are all about. Trump, by the
way, is calling it a $100 million sale but the Palm Beach Post
notes the deed lists the price at 95. Regardless, The Donald
pulled off a good one, having paid $41.35 million for the
property in 2004. And get this, the paper reports Rybolovlev is
considering tearing down the mansion, which would make it the
most expensive teardown in the history of the universe.
Alas, all is not well in the San Diego County market, as Josh P.
notes. Housing prices dropped here 25 percent in June, year-
over-year. The condo market is even worse. A median of
$259,000 compared to $397,500 in June ’07.
Meanwhile in the San Francisco Bay Area, home prices have
plunged 27 percent to the lowest level since March 2004.
Two weeks ago I questioned why Merrill Lynch, with the latest
delays in the ground zero construction, let alone its financial
condition, would commit to moving its headquarters there. So
on Wednesday, it was announced Merrill had terminated talks on
the project in a huge setback for the Port Authority and developer
Larry Silverstein. Now, given the state of the economy and the
banking sector, the entire project, which was to consist of four
towers, is in doubt unless the owners get some big players to
commit. Merrill had been the first to express interest. [Its lease
at the World Financial Center, next door, expires in 2013 and
they could just extend that until 2018.]
Jeff S. apprised me of a piece in the Arizona Republic that
addresses a nightmare condo and townhouse owners can
appreciate. In Phoenix, The Landmark Towers, a 45-year-old
apartment complex, recently underwent an extensive renovation
as part of a project converting it to condos in 2005, the peak of
the bubble. So now property owners are seeing their association
fee rise from a monthly $230 to $700, plus residents have to pay
an additional $800 a month for eight months to pay for new air-
conditioning units. Yikes! Be careful when buying into older
projects, sports fans.
David P. passed along a research note from Credit Suisse that
concludes the Irish real estate market could fall another 30
percent. The chief reason? No surprise here…it’s still largely
about affordability.
–China’s consumer inflation rate fell to 7.1 percent in June, with
the economy growing at a 10.1 percent clip for the second
quarter, a decline from the previous quarter’s 10.6 percent but
still above the 8 percent rate that is generally considered
necessary to keep the masses happy and employed.
–In announcing its disappointing earnings, though to be fair net
income was still $1.25 billion, Google said click-throughs on ads
rose just 19 percent compared to 47 percent in the year earlier
period. Last April CEO Eric Schmidt said Google would outrun
any slowdown in the economy, but on Thursday he noted the
company faces “a more challenging economic environment.”
Ergo, Google is not immune, which anyone with common sense
knew all along. The shares fell a record $52 on Friday to $481.
–Do you have the ability to interact with strangers? Do you like
to entertain? Do you want to see the world? Then try IBM,
because in announcing its solid quarter it said it would spend an
additional $1.6 billion on sales and marketing in developing
countries through 2010. While U.S. revenue rose just 5 percent,
sales in the Asia-Pacific region climbed 16 percent and in the
Middle East, 20 percent.
–Midwest Airlines is reducing its work force by a whopping 40
percent, or 1,200, while Europe’s biggest budget carrier, Ryanair,
warned it will carry almost one million fewer passengers this
coming winter as it cuts flights by 14 percent, and Australia’s
Qantas is slashing at least 1,500 jobs.
–Intel Corp. turned 40 on Friday, and as alluded to above issued
a solid earnings report for the quarter as strong world-wide
demand for its chips overcame the soft U.S. economy. But
former chairman Andrew Grove has been working on other
projects these days and had the following thoughts on the topic
of energy in an op-ed for the Washington Post.
“Energy independence is the wrong goal. Oil, like all other
goods, flows toward the highest bidder. Consequently, talking
about ‘independence’ in a global economy ruled by market
forces is a contradiction.
“As national policy, we must protect the U.S. economy from
interruptions in the supply of such a critical commodity –
whether those interruptions are related to natural or political
causes. I believe that the appropriate aim is to strengthen our
energy resilience to adjust to such changes. We can do this by
increasing our reliance on electricity.
“Electricity can be transported only over land. Consequently, it
will stay in (or stick to) the continent where it is produced.
Equally important is that electricity can be produced using
multiple sources of energy. Petroleum, yes – but also coal,
which is abundant in the United States; wind; hydroelectric;
nuclear; and solar energy. If one source suffers a shortage, we
can produce electricity from another. Electricity will give us the
greatest degree of energy resilience.
“Most everything today runs on electricity. A big exception is
the transportation sector. Transportation uses more than half of
the petroleum consumed in this country. If we don’t convert a
large portion of the transportation sector to electricity, we cannot
make real progress toward energy resilience.
“This conversion will not be easy. It requires growth in
generation capacity as well as in the capacity and reach of the
transmission infrastructure. Most important, it requires vehicles
to run on electric power.”
[For his part, former vice president Al Gore called on Americans
to abandon electricity generated by fossil fuels within a decade.
Gore gave both Barack Obama and John McCain credit for being
ahead of most politicians in the fight against climate change. In
2007, electricity generated from non-fossil sources amounted to
almost 28 percent of the total, led by nuclear. Hydro-electric was
responsible for about 6 percent of the total and wind and solar
around 2 percent. Coal accounts for about half.]
–Speaking of wind, utilities in Texas gave approval to a $4.9
billion plan to build new transmission lines to carry wind-
generated electricity, such as in T. Boone Pickens’ proposed
wind farm on 200,000 acres in the Panhandle.
–InBev, in acquiring Anheuser-Busch, said it will not cut back
on advertising and promotional support for the sports industry.
AB is the No. 1 spender in this category, some $218 million in
2007 on sports ads. Citizens in St. Louis in particular are
concerned, though, that InBev will force Bud to cut back on
local charities. Separately, the AB-InBev combination,
combined with MillerCoors, will account for 80% of the U.S.
market.
–Last week I told you of problems in the Pakistani stock market
due to restrictions placed on trading by their Securities and
Exchange Commission that didn’t keep the market from
tumbling. This week protesters stormed the Karachi Stock
Exchange after the government relaxed some of the restrictions
and share prices plunged even further. The concern is the
demonstrations could spread and take down the new government.
–Earlier in the week, the London and Paris stock markets were
among those hitting their lowest levels since 2005. So much for
decoupling from the U.S.
–BlackRock, tied to Merrill Lynch but nonetheless far more
successful than the firm tethered to a bull, is moving its 1,200
employees from Plainsboro, N.J. to Philadelphia, in yet another
blow for my state. So much for Gov. Jon Corzine, former Wall
Street maven.
–The FDIC’s deposit-insurance fund is $53 billion and the
IndyMac collapse will cost it $4 billion to $8 billion. Ergo,
should more banks go under, we could have a budgeting
problem. It’s also at times like these we are reminded of the
$100,000 insurance limit, $250,000 for retirement accounts. 37
percent of the nation’s $7.07 trillion in deposits at the end of the
first quarter was uninsured.
–Strategist Ed Yardeni summed up the state of the financial
industry and the likes of Fannie and Freddie. “We are
increasingly nationalizing the financial system and leaving
upside out.”
–Inflation Alert: The newsstand price of the Wall Street Journal
is rising 33 percent to $2. So I have a choice. Continue to get
the hard copy and go from a large Dunkin’ Donuts coffee to a
medium, or read the paper online and get the large coffee. I think
coffee will win out.
–CNBC’s Erin Burnett is totally out of control and the network
needs to rein in her massively expanding ego. Ms. Burnett also
needs to understand that soaring jet fuel costs were indeed the
prime factor in the airline industry’s dire straits. This week she
tried to convince her viewers otherwise in a truly embarrassing
moment.
–From Barron’s: “Viewership of adult-entertainment Websites
has jumped since the start of the year, and particularly since
May, when the first of the government’s economic-stimulus
checks were mailed.” What a country, eh?
Foreign Affairs
Iraq: The White House has abandoned hopes for a long-term
agreement on status of forces before the Bush presidency ends,
looking for a ‘bridge’ instead, short term, but on Friday, in a
surprise announcement, President Bush and Iraqi Prime Minister
Maliki announced “a general time horizon” for withdrawing all
U.S. forces. This news hit late in the day and on major issues
such as this I like to wait 24 hours as much as possible. For now,
it’s been apparent the Iraqi government feels emboldened as top
officials claim their army will control the country by year end,
even after a series of attacks this week killed over 55. But
Admiral Mullen of the Joint Chiefs of Staff has been optimistic
the U.S. would be able to announce further troop withdrawals by
fall and Friday’s move is along these lines it would seem. Iraqi
politicians demanded a timetable so they could tell their
constituents before provincial elections that they’ve been tough
on the Americans.
As for the latest sentiment in the U.S., only 36 percent believe
the Iraq war was worth fighting, according to an ABC News/
Washington Post survey, but then 46 percent said significant
progress has been made. One of the tangible measures of the
progress has been a 70 percent drop in roadside bombs,
according to U.S. officials. Iran appears to have decreased its
activity here.
Israel: Where to begin? French President Nicolas Sarkozy
hosted member states of his new Mediterranean association,
including Syrian President Assad and Israeli Prime Minister
Olmert, and Assad, happy to be back in the spotlight, spoke of
peace, though he hastened to add not until after President Bush
leaves office. At the same time, Syria and Lebanon agreed to
exchange embassies as a first step in Syria’s formal recognition
of Lebanese independence. But of course the embassies could
easily be nothing more than spy nests. As to talks between
Syria and Israel, which thus far have been moderated by Turkey
on a fairly low level, Assad continues to demand a return of all
territory taken by Israel during the ’67 war, including the Golan
Heights. Amidst his ongoing corruption investigation, many in
Israel question whether Prime Minister Olmert is selling out.
And such calls were made in the country following the
wrenching trade of the bodies of two Israeli soldiers in exchange
for five Lebanese held by Israel, as well as the remains of 200
Lebanese killed by Israel since about 1980 in various conflicts.
It was in the summer of 2006 that Hizbullah captured the two
Israeli soldiers, Goldwasser and Regev, which led to the war and
all this time, until the actual moment when they were handed
over, the actual fate of them had been kept a secret, in case
anyone is wondering about Hizbullah’s growing strength, as well
as its command and control. There were some in Israel who
actually thought at least one of the two was still alive so
imagine the anguish when at the appointed time and place two
caskets were produced.
Among the five Israel released, however, was a man who had
killed five back in 1979. There were thus cries that Israel had
given up too much, even though the Israeli military has always
said it will never leave one of its own behind.
But here’s the bottom line. This whole transfer was a huge
victory for Hizbullah and Sheikh Nasrallah as the coming home
of the five prisoners, as well as the bodies, was celebrated by the
entire nation and all its disparate leaders in Beirut, including
President Sleiman and Prime Minister Siniora, which had to be a
bit troubling to Washington. The prisoners, incidentally,
immediately said they would continue the fight against Israel.
Nasrallah declared “The period of defeat is over and the time of
victory has arrived.” Prior to this week, a poll of Arab sentiment
across the Middle East found that Nasrallah was the most
admired leader with 26 percent. Syria’s Assad was second, 16
percent, and Iran’s President Ahmadinejad, 10 percent.
An emboldened Hizbullah is now talking of taking back Shebaa
Farms from Israel, with the Israelis saying they will not give it
up. Remember, as I first called for years ago, if Israel gave up
Shebaa, it would take away Hizbullah’s reason to exist and allow
the international community to put pressure on the Lebanese
government to force the militia to disarm. Until then, however,
there will be nothing but trouble and the odds of another war rose
two- or three-fold this past week.
Iran: Which brings us to the ongoing topic of Israel and Iran’s
suspected nuclear weapons program. The U.S. has been urging
the Olmert government to back away from launching an attack
on the nuclear facilities because Washington has been saying, in
public through officials such as Admiral Mullen, that the United
States is stretched too thin and is in no position to handle the
blowback. So what did we see this week? The White House
sending Undersecretary of State William Burns to be an
‘observer’ at talks between the EU and Iran; this after the Bush
administration said it wouldn’t negotiate with Tehran.
Personally, I have no problem with this but the European
proposal of a “freeze for freeze,” a six-week halt in Iran’s
uranium enrichment in exchange for a halt to strengthen
financial sanctions against the Ahmadinejad government won’t
work.
So for now we’re back to square one. Six years after we knew
Iran was gearing up to get into the nuke business, we’re left with
a country that for all we know is six months or so from having
enough material for a bomb; a situation that is simply untenable
from Israel’s standpoint, regardless of who is running their own
government, which is obviously not going to be Olmert by
September or October, it would appear. It’s about Israel’s very
survival. So I say, as I have since last December, that sometime
in 2008 Israel will have to make a move, regardless of what we
believe here in America is the prudent course of action. And at
this point the nuclear genie is basically out of the bottle in Iran.
Despite having problems with Ahmadinejad’s leadership, the
hardliners in Iran still are the prime movers of policy and at this
point they are not about to give up their opportunity to obtain
the bomb and then have the rest of the world begging at their
feet. And that, friends, makes for a most dangerous world with
today’s conflicts in Iraq and Afghanistan looking like child’s
play by comparison.
Russia: Not only did the Kremlin slap the U.S. and U.K. in the
face in vetoing new sanctions against Robert Mugabe and his
thugs in Zimbabwe (with China also vetoing the measure), but
Russia continues to make waves over the two breakaway
republics in Georgia, with Georgia threatening to shoot down
any Russian fighter jets that violate its airspace (as they have),
while the Kremlin has been drastically reducing the supply of oil
to the Czech Republic after the Czechs agreed to host part of the
U.S. missile defense system.
What has developed this week, though, is that President Dmitry
Medvedev has granted Prime Minister Putin powers to
implement foreign policy, which had previously been under the
purview of the presidency. Medvedev himself said on the overall
topic:
“Russia has become stronger and is capable of assuming greater
responsibility for solving problems on both a regional and global
scale. The world, which got rid of the Cold War, still cannot
achieve a new balance. Moreover, a trend towards the use of
force (in international relations) has become stronger.”
On the missile shield, Medvedev told a group of 200 Russian
ambassadors, “Deployment…only makes the situation worse.
We will need to react to this adequately.”
What appears to be happening is Putin will call the shots on
foreign policy, but for now continue to let Medvedev be the
public face. There is no doubt that for his part, Dmitry is already
flashing his hardline credentials.
China: The government warned foreign performers and
entertainers against doing or saying anything that would harm
China’s sovereignty or ethnic unity in a sign of increasing
nervousness ahead of the Beijing Games. Tens of thousands of
police are being deployed in an attempt to shield the world from
any demonstrations that could tarnish China’s image.
Then you have the environmental issues. Aside from the algae
problem, which appears to have been rectified, now officials are
concerned that a plague of locusts from Mongolia could descend
on Beijing during the Games. Seriously.
For my part, I maintain as I did last December in one of my ’08
predictions that the Games will be tense and take on a Cold War
tone. President Bush’s presence, however, could help relieve
some of the building pressures.
Nonetheless, in looking at the long-term relationship between the
United States and China, it’s important to keep the following in
mind, as reported by Defense News’ Wendell Minnick.
“China’s air power modernization efforts are largely focused on
overpowering Taiwan’s Air Force and destroying high-value
ground targets. However, the People’s Liberation Army Air
Force (PLAAF) is also preparing for the possible intervention of
U.S. forces on Taiwan’s behalf.
“The PLAAF trains for four types of air campaigns: air offensive
campaigns, air defense, air blockade and airborne. All four are
focused on a Taiwan campaign with possible U.S. involvement.
“ ‘When fighting enemy air forces, there is a strong preference
for attacking them on the ground, as opposed to fighting them in
the air, presumably because they recognize that their fighters and
pilots are still largely inferior to those of the United States and
Taiwan,’ said Roger Cliff, a China military specialist at the
RAND Corp.”
Meanwhile, because of warming ties between Beijing and Taipei,
the U.S. has frozen $11 billion in arms sales to Taiwan, including
delivery of dozens of F-16 fighter jets, until after President Bush
leaves office, at the earliest. Part of me understands this move.
The tourist exchange between Taiwan and China is going well,
for example. But from what I’ve read, the administration didn’t
tell Taiwan first that they planned on freezing the weapons sales.
North Korea: Six-party talks on nuclear disarmament resumed as
Pyongyang said the Yongbyon nuclear plant would be fully
disabled by October in return for massive fuel and food aid. But
the Commies said they wouldn’t resume talks with South Korea,
nor at last word have they allowed the South to investigate the
killing of the South Korean tourist at the North’s Diamond
Mountain resort.
Art Brown, former CIA operative in Asia, commented in an op-
ed for the New York Times.
“As it stands now, we have agreed to ship North Korea a million
new tons of fuel oil, released Mr. Kim (Jong-il) from the
handcuffs of our Trading With the Enemy Act, and – within the
legally mandated 45 days – will throw in other goodies that come
with removing North Korea from the State Department’s state-
sponsor-of-terrorism list. This comes on top of the American
decision last year to allow the North Koreans to transfer their
tainted money out of a bank in Macao.
“But the topper is that Kim Jong-il knows he still gets to keep his
stockpile of plutonium and even hang on to his existing rack of
nuclear weapons (minus the one he tested in October 2006 to set
the tone of the game).
“Nor are the North Koreans going to be required to fess up to the
uranium-enrichment program they picked up from Pakistan
earlier in the decade. Nor must they explain their role in the
suspected nuclear reactor in the Syrian desert that Israeli jets
were reported to have destroyed in 2007….
“Basically, all the North Koreas had to do for these latest
concessions was to blow up the cooling tower at the Yongbyon
nuclear plant, a publicity stunt for which they billed the United
States $2.5 million. Kim Jong-il’s plus-minus sheet looks
decidedly better than ours….
“No one should imply that North Korea is an easy nut to crack….
But things are not made any better by pretending that we are
making progress, as Washington seems to have decided to do, or
by ignoring the real concerns of our allies.”
[This coming week in Singapore it appears the North Koreans
will sign the Treaty of Amity and Cooperation in Southeast Asia,
a non-aggression pact, that to me is worthless but will garner
Kim more favorable press, as it already has in the region.]
India: This coming week the government faces a no-confidence
motion amidst a developing scandal where the opposition has
accused the ruling Congress Party of massive vote buying.
According to the London Times, “An MP said that the
government was offering to pay as much as $6 million for each
vote in parliament.”
And get this. “The government secured three votes yesterday by
naming an airport in Lucknow after the father of Ajit Singh, the
leader of a small regional party. It is even planning to free six
jailed MPs for the vote, five of whom are allies and four of
whom are convicted murderers.”
This all goes back to the nuclear technology deal with the U.S.
and if the government loses the no-confidence vote, that would
lead to a snap election as early as November.
South Korea / Japan: These two are squabbling over some
disputed islands and Seoul recalled its ambassador.
Turkey: 86 were charged in the supposed coup plot after two
retired senior generals were arrested. I don’t believe the
government on this one.
Ukraine: Tensions are once again rising as President Viktor
Yushchenko and Prime Yulia Timoshenko are at war with each
other yet another time. Ukraine’s inflation rate is a whopping 29
percent, the highest in Europe, while the economy is slowing.
And talk about poor approval ratings. Yushchenko’s is 6 percent
and Timoshenko’s 18 percent. As Bloomberg News quoted a
businesswoman, “Our government is a nut house.”
Sudan: As noted last week, the International Criminal Court did
indeed call for the arrest of President al-Bashir on charges of
genocide and war crimes. One of Bashir’s lackeys then said
“Darfur will be the graveyard for the enemies of Sudan.” The
U.N. withdrew much of its staff in anticipation of reprisals.
Zimbabwe: The news on renewed sanctions against Mugabe’s
regime hit as I was writing last week’s review. For the record, of
the 15 in the Security Council, aside from permanent members
Russia and China voting against, and thus killing the measure,
Libya, South Africa and Vietnam also said no, with Indonesia
abstaining. The nine voting ‘yes’ would have been enough were
it not for Russia and China. It’s the hope here that in the cases of
Libya, South Africa and Vietnam, the White House sends a
message that they have made a big mistake. But, alas, I’m sure
business will proceed as normal, especially in the case of our
new friend the Vietnamese.
Mexico: The head of Mexico’s intelligence service warned that
the government and all democratic institutions are truly under
threat from the drug cartels. Guillermo Valdes told the Financial
Times, “Drug traffickers have become the principal threat
because they are trying to take over the power of the state.”
“Congress is not exempt (from the moves the cartels are making
on the local front). We do not rule out the possibility that drug
money is involved in the campaigns (of some legislators).”
Venezuela / Colombia: What’s this? Good news? Presidents
Chavez and Uribe held a meeting and Chavez said a new era of
cooperation was dawning. Uribe said the two could solve their
differences. Clearly, the freeing of the 15 hostages the other
week has helped Uribe’s position as Chavez himself had been
backing off of his support for FARC weeks before the hostage
drama.
Random Musings
–There were a number of interesting polls this week. In a New
York Times/CBS News survey, Barack Obama leads John
McCain 45-39, while an ABC News/Washington Post poll has
Obama by a 50-42 margin. In this latter one, importantly,
Obama leads among independents 49-40.
But among the other findings in the Times/CBS survey was that
among voters who describe themselves as Democrats, 89% of
blacks favor Obama, 2% McCain, while 37% of whites choose
Obama versus 46% for McCain. Overall, only 30% of whites
have a favorable opinion of Obama. So it’s clearly going to be
one interesting vote come November, plus an awful lot can
happen these next 15 weeks, particularly on the geopolitical
front.
–The Times/CBS poll also has only 14% of Americans believing
the country is on the right track, with 81% feeling differently,
while the ABC/Post survey gives Obama a 19-point lead on the
economy as to who is better able to tackle this issue, 54-35.
–Both the Times and Post polls, as well as the latest Gallup
survey, all give President Bush the same 28% approval rating,
which is kind of remarkable. It’s also safe to say the figure isn’t
likely to improve much the rest of his term. But then Congress
in the Post survey gets an approval rating of just 23%, and only
14% in Gallup.
–But this week it’s all about Barack Obama and his world tour to
Afghanistan (where he surprisingly landed this morning) and
Iraq, as well as stops in Jordan, Israel, the U.K., Germany, and
France.
Charles Krauthammer / Washington Post
“Barack Obama wants to speak at the Brandenburg Gate. He
figures it would be a nice backdrop. The supporting cast – a
cheering audience and a few fainting frauleins – would be a
picturesque way to bolster his foreign policy credentials.
“What Obama does not seem to understand is that the
Brandenburg Gate is something you earn. President Ronald
Reagan earned the right to speak there because his relentless
pressure had brought the Soviet empire to its knees and he was
demanding its final ‘tear down this wall’ liquidation. When
President John F. Kennedy visited the Brandenburg Gate on the
day of his ‘Ich bin ein Berliner’ speech, he was representing a
country that was prepared to go to the brink of nuclear war to
defend West Berlin.
“Who is Obama representing? And what exactly has he done in
his lifetime to merit appropriating the Brandenburg Gate as a
campaign prop? What was his role in the fight against
communism, the liberation of Eastern Europe, the creation of
what George Bush the elder – who presided over the fall of the
Berlin Wall but modestly declined to go there for a victory lap –
called ‘a Europe whole and free’?
“Does Obama not see the incongruity? It’s as if a German pol
took a campaign trip to America and demanded the Statue of
Liberty as a venue for a campaign speech. [The Germans have
now gently nudged Obama into looking at other venues.]
“Americans are beginning to notice Obama’s elevated opinion of
himself. There’s nothing new about narcissism in politics. Every
senator looks in the mirror and sees a president. Nonetheless,
has there ever been a presidential nominee with a wider gap
between his estimation of himself and the sum total of his
lifetime achievements?”
–I was talking to a friend about McCain’s prospects after seeing
Republican Louisiana Gov. Bobby Jindal’s picture in Parade
Magazine and I just feel that at this point, McCain needs to
swing for the fences and select the 37-year-old Jindal as his
running mate. Thus far, 2008 is looking very much like 1996, as
McCain, like Robert Dole, has had a sense of entitlement about
the nomination.
–Obama raised $52 million in June, 2.5 times more than
McCain’s $22 million.
–The controversial New Yorker magazine cover was intended to
be satirical, but in light of the fact that, depending on the
question, 12 to 39 percent of Americans believe various
falsehoods concerning Obama’s faith and upbringing, according
to the latest Newsweek survey, the New Yorker cover only feeds
into the stereotypes.
–The Green Party chose former Democratic Congresswoman
Cynthia McKinney as its 2008 presidential candidate. Oh
brother. She is absolutely dreadful. Then again, when Ralph
Nader headed the ticket he won 2.8 million votes in 2000 (for
which some Republicans are forever grateful…see Florida
impact), but in 2004, when Mr. Greenjeans (or some facsimile
thereof) was at the top of the ticket, the Green Party received a
whopping 119,000 votes. In other words, it’s safe to say Ms.
McKinney has just received her 15 minutes of fame in this space.
–A Harvard School of Public Health study of the three major
diets found that those on the low-carb and Mediterranean plans
lost more weight and with greater cardio benefits than those on a
low-fat diet. Of course the low-carb diet was the brainchild of
the late Robert Atkins and allows one to consume large amounts
of meat and cheese (yes!), while eliminating bread and pasta (oh
noooo!).
But the Mediterranean diet has still been judged to be effective
and it includes a focus on carbs like pasta. So there’s only one
thing to do. Eat and drink everything to your heart’s desire.
–Pope Benedict XVI, speaking to a World Youth Day audience,
said “Our world has grown weary of greed, exploitation and
division, of the tedium of false idols and piecemeal responses,
and the pain of false promises.” He also blasted television and
the Internet for promoting sex and violence as entertainment.
But nothing specifically on reality television…which your editor
sees as the true sign of the apocalypse.
–So you know how I said all our positive work on clean air and
the environment can be undone by a slew of forest fires,
volcanoes, or China? Now comes word that researchers from the
University of Alberta, Canada have discovered that undersea
volcanic activity was the cause of a mass extinction in the oceans
93 million years ago. As reported by the BBC:
“In the so-called ‘anoxic event’ of the late Cretaceous Period, the
ocean depths became starved of oxygen, wiping out swathes of
marine organisms.”
Then again, this was a time when the average temperature was
nearly twice that of today with palm trees in what would become
Alaska. But then we were supposedly hit by this series of
underwater eruptions.
One other thing. Tiny ocean creatures called foraminifera, which
live on the sea floor, were wiped out and “littered the sea bed in
thick layers, and over geological time became transformed into
oil.” At which point a then teenage T. Boone Pickens began
exploring for it. And now you know……the rest of the story.
–Russian researchers are evacuating a station built on an Arctic
ice floe. Now this is scary (at least some of you may find it to
be). Back in September, the 21 scientists and two dogs landed
on a floe that was 1.2 by 2.5 miles and since it has shrunk to
1,000 by 2,000 feet in yet another confirmation of global
warming. Hope they remember to take the dogs, who otherwise
would be victims of increasingly desperate polar bears.
–Historian Victor Davis Hanson, in an op-ed for the New York
Post:
“Our 21st-century paralysis is surprising. The United States isn’t
materially exhausted. We sit atop trillions of dollars worth of
untapped oil, gas, coal, shale and tar sands.
“America could mine more uranium and reprocess fuels to build
hundreds of nuclear plants. U.S. agriculture is blessed with the
world’s best soils, most developed irrigation systems and most
productive and astute farmers.
“There’s as much sun and wind in the western United States as
anywhere in the world. We have plenty of natural resources and
the know-how to make all the wood, steel and cement products
we need.
“A new, hungrier generation of Americans will have to want to
reclaim our pre-eminence and change the national attitude. It
must be ready to pay off generations of debt rather than borrow,
build rather than sue and drill rather than whine.
“It’s time to honor rather than avoid and outsource physical
labor. Our children are healthy enough to cut our own lawns and
pick our fruit.
“But just as importantly, what Americans need now is leadership
to get moving again – rather than more platitudes about hope,
squabbling about race and gender and endless rhetoric about
who’s really a maverick or a true conservative or the most
liberal.
“What we need to know from our two presidential candidates are
specifics about how to jumpstart America.
“So, how many more barrels of oil, refineries and megawatts will
America produce – and when and how? How much debt will the
next administration retire – and when and how? How and when
will our schools return to knowledge-based rather than the
present (and failing) therapeutic curriculum?
“Americans, in short, should be tired of hearing that we are a
postindustrial, postmodern, post-anything society. Instead, we
want to be known again as a can-do producer nation that sweats
as much as it thinks. And the confident presidential candidates
who can best assure us of that will surely win this election.”
–Related to the above, the Los Angeles Times reports that 1 in 4
California students – 1 in 3 in Los Angeles – quit high school;
figures the state concedes are considerably higher than
previously acknowledged. The number of dropouts has grown
by an estimated 83% in just the past five years by one
measurement.
–Barack Obama told an NAACP convention audience:
“We’ve got to demand more responsibility from
Washington…and we got to demand more responsibility from
Wall Street, but you know what? We also have to demand more
from ourselves…
“Now, I know there’s some who’ve been saying I’ve been too
tough, talking about responsibility. At the NAACP, I’m here to
report I’m never going to stop talking about it….No matter how
much money we invest in our communities, or how many 10-
point plans we propose or how many government programs we
launch – none of it will make a difference, at least not enough of
a difference, if we don’t seize more responsibility in our own
lives.”
Good for you, Senator. Now tell a certain segment of the
population that it may behoove them to hike up their pants to
cover their underwear before they go into a job interview.
–Sign of the Apocalypse, part XIX. Parts of southern Taiwan
received as much as 44…44…inches of rain in 24 hours as a
result of Tropical Storm Kalmaegi on Friday. Forecasters had
said this storm would be a minor irritant.
–According to the National Center for Health Statistics, a record
number of babies were born in the U.S. in 2007…4.315 million.
That’s over 4 million that should be mowing their own lawns in
about 10 years. But then in 15-17 years, 1 in 4 of them will drop
out of school in California.
–You know who we should really feel sorry for these days?
Tomato farmers. Talk about getting jerked around. Today we’re
told tomatoes are safe to eat again, and in blaming hot peppers
now for the salmonella outbreak there is every reason to believe
tomatoes were never at fault, but in the meantime scores of
farmers lost fortunes.
–As the Washington Post reported, the Environmental Protection
Agency is more than a bit conflicted these days. First, the
agency decided not to regulate greenhouse gas emissions, like
from cars and power plants, until at least after President Bush
leaves office. But then in a new report the EPA said “it is very
likely” that more people will die during extremely hot periods in
future years – and that the elderly, the poor and those in inner
cities will be most at risk. It cites other possible dangers such as
shrinking water supplies in the West, and the increased spread of
disease through food and water.
–Speaking of water, I’ve always said that in the developing
world the first two concerns should be clean drinking water and
good roads, from which all else flows. Now the World Health
Organization has concluded 2.5 billion people have inadequate or
non-existent clean drinking water and proper sanitation. The
lack of the latter leads to the deaths of 5,000 children each day
from diarrhea-related illness. Get this. “Close to half the
population in Southern Asia still practices open defecation,”
according to a Unicef official. By 2015, though, 90 percent of
the world’s population will have clean water, so say the experts.
That would be a miracle.
–No telling what sanitation is like on Mars, but we are learning
with each passing day that it appears water was once all over the
place; vast lakes, flowing rivers, Six Flags. But researchers
appear to be setting their sights way too low. Like they talk of
the water supporting only microbes, though at the same time they
note Mars has clay minerals, so I’m thinking the first Martians
were really claymation figures.
—
Pray for the men and women of our armed forces.
God bless America.
—
Gold closed at $958
Oil, $128.56…lowest weekly close since 5/30
Returns for the week 7/14-7/18
Dow Jones +3.6% [11496]
S&P 500 +1.7% [1260]
S&P MidCap +1.6%
Russell 2000 +2.7%
Nasdaq +2.0% [2282]
Returns for the period 1/1/08-7/18/08
Dow Jones -13.3%
S&P 500 -14.1%
S&P MidCap -6.7%
Russell 2000 -9.5%
Nasdaq -13.9%
Bulls 27.8
Bears 48.9 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Note: Finally, in about ten days I’ll be rolling out the new and
improved version of StocksandNews, a “soft launch” as we say
while we iron out the inevitable kinks. We’ll do our best to
incorporate any suggestions you may have, but for now I will be
introducing a podcast for Week in Review by September and
perhaps a video or two by year end.
Brian Trumbore
