For the week 6/15-6/19

Iran: I did write on 6/6/09 in this space that “(President Ahmadinejad) will receive more than 50% and avoid a run-off,” I just didn’t know that the vote would be such a farce; that Ahmadinejad would win in all 30 provinces, and in every social and age category. Plus, within hours of the election, we would not only learn the president had captured 65% of the paper ballots (later revised to 63%), but that “1.04%” were deemed invalid. Gee, it’s amazing how quickly these were counted by hand, many of us mused. Chief opponent Mir Hossein Mousavi said the election was “a dangerous spectacle” as his supporters then hit the street. At least 10 (revised downward) were killed in violent demonstrations. 

Then on Friday, Ayatollah Ali Khamenei, the Supreme Power Broker, warned that the protests must end, saying political leaders, read Mousavi and the other ‘reformists,’ would be blamed for any future violence. Khamenei also voiced support for Ahmadinejad, saying the president’s foreign policy (read nuclear weapons program) and stance on social issues were close to his. 

Khamenei also claimed it was impossible to rig the election. “There is 11 million votes difference. How can one rig 11 million votes?” Then he said the other three candidates had to appeal through the legal process…as if there is one. 

Interestingly, Khamenei also said the election was a “political earthquake” for Iran’s enemies – singling out Britain as “the most evil of them.” “Some of our enemies in different parts of the world intended to depict this absolute victory, this definitive victory, as a doubtful victory.” 

Amnesty International said it was greatly disturbed by Khamenei’s speech as it foretold “violent crackdowns if people continue to protest.” 

For his part, President Ahmadinejad traveled to Moscow for an economic summit just a day after the sham vote. He proceeded to blast the United States. 

“The international capitalist order is retreating,” he told Russian President Medvedev and China’s Hu Jintao. “It is absolutely obvious that the age of empires has ended and its revival will not take place.” 

“Iraq is still occupied. There is no order in Afghanistan. The Palestinian problem is unsolved.  America is overwhelmed by economic and political crises and there is no hope in their decisions. The allies of the United States are also not in a position to wrestle with these problems.” [Daily Star] 

For its part, the White House and President Obama continued to talk of starting a dialogue, while Republican Senator John McCain said, “(Obama) should speak out that this is a corrupt, fraud, sham of an election” and defend democracy. 

President Obama took a lot of flack for a stance that was deemed to be wishy-washy. French President Nicolas Sarkozy, on the other hand, immediately declared the Iranian election was “dreadful news.” 

I understand why at first Obama adopted a ‘wait 24 hours’ type approach, but by Tuesday, stronger words were required. Even Congress on Friday voted 405-1 to condemn the election. 

Following is some opinion…much of it harsh towards the White House…but to Obama’s critics, I would just ask that they not turn a blind eye, either, to the amazing screw-ups on the part of the Bush administration, going back to 2001/2002 when they didn’t support a budding Iranian student-led uprising (as I documented and pleaded for in this space), nor did President Bush act appropriately when Lebanon had its first crisis in 2005, also heavily documented here. President Obama deserves his share of grief on the Iranian situation, but I must have written at least 20 times of the Bush White House and its incredibly “unimaginative foreign policy” when it came to this region. I called for cutting dirty deals with the likes of Russia and France before the Iraq War, for example, as a way of carving up and pacifying both Iran and Iraq. In the past three years I called for endrunning Ahmadinejad by negotiating with Iranian leader Rafsanjani. But now it’s Obama’s problem.  

Ralph Peters / New York Post 

“Silence is complicity. Our president’s refusal to take a forthright moral stand on the side of the Iranian freedom marchers is read in Tehran as a blank check for the current regime. 

“The fundamentalist junta has begun arresting opposition figures, with regime mouthpieces raising the prospect of the death penalty. Inevitably, there are claims that dissidents have been ‘hoarding weapons and explosives.’ 

“Foreign media reps are under house arrest. Cellphone frequencies are jammed. Students are killed and the killings disavowed. 

“And our president is ‘troubled,’ but doesn’t believe we should ‘meddle’ in Iran’s internal affairs. [Meddling in Israel’s domestic affairs is just fine, though.] 

“Of all our foreign-policy failures in my lifetime, our current shunning of those demanding free elections and expanded civil rights in Iran reminds me most of Hungary in 1956. 

“For years, we encouraged the Hungarians to rise up against oppression. When they did, we watched from the sidelines as Russian tanks drove over them. 

“For decades, Washington policymakers from both parties have prodded Iranians to throw off their shackles. Last Friday, millions of Iranians stood up. And we’re standing down. That isn’t diplomacy. It’s treachery…. 

“Now our president’s attempt to vote ‘present’ yet again green-lights the Iranian regime’s determination to face down the demonstrators – and the mullahs understand it as such. 

“If we see greater violence in Tehran, the blood of those freedom marchers will be on our president’s hands.” 

Charles Krauthammer / Washington Post 

“Millions of Iranians take to the streets to defy a theocratic dictatorship that, among its other finer qualities, is a self-declared enemy of America and the tolerance and liberties it represents. The demonstrators are fighting on their own, but they await just a word that America is on their side. 

“And what do they hear from the president of the United States? Silence. Then, worse. Three days in, the president makes clear his policy: continued “dialogue” with their clerical masters. 

“Dialogue with a regime that is breaking heads, shooting demonstrators, expelling journalists, arresting activists. Engagement with – which inevitably confers legitimacy upon – leaders elected in a process that begins as a sham (only four handpicked candidates permitted out of 476) and ends in overt rigging.” 

“Then, after treating this popular revolution as an inconvenience to the real business of Obama-Khamenei negotiations, the president speaks favorably of ‘some initial reaction from the Supreme Leader that indicates he understands the Iranian people have deep concerns about the election.’ 

“Where to begin?   ‘Supreme Leader’? Note the abject solicitousness with which the American president confers this honorific on a clerical dictator who, even as his minions attack demonstrators, offers to examine some returns in some electoral districts – a farcical fix that will do nothing to alter the fraudulence of the election…. 

“Even from the narrow perspective of the nuclear issue, the administration’s geopolitical calculus is absurd. There is zero chance that any such talks will denuclearize Iran. On Monday, President Ahmadinejad declared yet again that the nuclear ‘file is shut, forever.’ The only hope for a resolution of the nuclear question is regime change, which (if the successor regime were as moderate as pre-Khomeini Iran) might either stop the program, or make it manageable and nonthreatening. 

“That’s our fundamental interest. And our fundamental values demand that America stand with demonstrators opposing a regime that is the antithesis of all we believe. 

“And where is our president? Afraid of ‘meddling.’ Afraid to take sides between the head-breaking, women-shackling exporters of terror – and the people in the street yearning to breathe free. This from a president who fancies himself the restorer of America’s moral standing in the world.” 

Robert Kagan / Washington Post 

“Obama’s policy now requires getting past the election controversies quickly so that he can soon begin negotiations with the reelected Ahmadinejad government.   This will be difficult as long as opposition protests continue and the government appears to be either unsettled or too brutal to do business with. What Obama needs is a rapid return to peace and quiet in Iran, not continued ferment. His goal must be to deflate the opposition, not to encourage it. And that, by and large, is what he has been doing. 

“If you find all this disturbing, you should. The worst thing is that this approach will probably not prevent the Iranians from getting a nuclear weapon. But this is what ‘realism’ is all about. It is what sent Brent Scowcroft to raise a champagne toast to China’s leaders in the wake of Tiananmen Square. It is what convinced Gerald Ford not to meet with Alexander Solzhenitsyn at the height of détente. Republicans have traditionally been better at it than Democrats – though they have rarely been rewarded by the American people at the ballot box, as Ford and George H.W. Bush can attest. We’ll see whether President Obama can be just as cold-blooded in pursuit of better relations with an ugly regime, without suffering the same political fate.” 

Editorial / Washington Post 

“We can understand the reluctance to sound a tougher note. The United States has few ways to help the opposition – and it may have to deal with whoever wins the current struggle. But, however the crisis ends, it may require rethinking of the administration’s Iran strategy. There is a connection between the regime’s internal character and its external conduct. To be sure, the Iranian opposition seems to be trying to change the course of the Islamic Republic rather than overthrow it; Mr. Ahmadinejad’s opponent, Mir Hossein Mousavi, is a veteran of the 1979 revolution who promised a restoration to its true principles. Neither man is a purely independent actor.   Mr. Ahmadinejad fronts for the country’s true powers, supreme leader Ayatollah Ali Khamenei and the Revolutionary Guards; Mr. Mousavi represents a rival faction centered on former president Ali Akhbar Hashemi Rafsanjani. 

“Still, many Iranians saw Mr. Mousavi, who has denounced Mr. Ahmadinejad’s rhetoric, as an alternative to the economic decay and international isolation wrought by the current regime. Mr. Mousavi is, potentially at least, a more reasonable negotiating partner for the United States. If Mr. Mousavi succeeds in getting a new election and ultimately wins the presidency, Mr. Khamenei’s power would be shaken and new opportunities for engagement with the West might open up. But if Mr. Khamenei imposes Mr. Ahmadinejad for another four years, it could portend an even more belligerent Iranian foreign policy. By crushing Mr. Mousavi and the movement he has inspired, the supreme leader would show that he is determined to hold on to power – and, probably, to terrorism and nuclear ambitions – no matter what anyone thinks, even his own people.” 

“The President yesterday denounced the ‘extent of the fraud’ and the ‘shocking’ and ‘brutal’ response of the Iranian regime to public demonstrations in Tehran these past four days. 

“ ‘These elections are an atrocity,’ he said. ‘If Ahmadinejad had made such progress since the last elections, if he won two-thirds of the vote, why such violence?’ The statement named the regime as the cause of the outrage in Iran and, without meddling or picking favorites, stood up for Iranian democracy. 

“The President who spoke those words was France’s Nicolas Sarkozy…. 

“Less than a fortnight ago, in Cairo, Mr. Obama touted his commitment to ‘governments that reflect the will of the people.’ Now the President who likes to say that ‘words matter’ refuses to utter a word of support to Iran’s people. By that measure, the U.S. should never have supported Soviet dissidents because it would have interfered with nuclear arms control. 

“The Iranian rebellion, though too soon to call a revolution, is turning out to be that 3 a.m. phone call for Mr. Obama. As a French President shows up the American on moral clarity, Hillary Clinton’s point about his inexperience and instincts in a crisis is turning out to be prescient.” 

“Almost as soon as George Bush named Iran as one of the three points along the ‘Axis of Evil,’ he proceeded to put it in a stronger position than it could ever have hoped to be. 

“Bush invaded Iran’s traditional enemy and strategic counter, Iraq. By enfeebling Iraq, Bush strengthened Iran. 

“At the same stroke, Bush gave Iran every incentive to proceed apace with its nuclear development program. 

“How? Because if Bush’s America was prepared to invade an unfriendly country unprovoked, then this was an excellent reason to develop a strong deterrent. And they don’t come any stronger than a nuclear bomb. 

“Bush’s invasion of Iraq, with British and Australian complicity, was a stunning strategic blunder. 

“Inadvertently, Bush had created the perfect conditions for a hardline, anti-Western, pro-nuclear regime in Iran to emerge stronger than ever, a sophisticated country of 70 million people with the world’s fourth-biggest oil reserves.” 

Meanwhile, International Atomic Energy Agency chief Mohamed ElBardei, an apologist for Iran in the past, conceded this week his “gut feeling” is that Iran hopes to gain the capability to build nuclear weapons if it chose to do so. “They want to send a message to their neighbors, to the rest of the world, ‘don’t mess with us.’” And in light of everything that has transpired the past week, one can’t help but think Israel, more than ever, will act unilaterally to set back the Iranian weapons program at least three years. Certainly the Israelis are not going to get a go ahead from the White House. 

Some things to watch over the coming days and weeks in Iran. There is definitely a growing division in Iran’s political elite and Revolutionary Guard. Ayatollah Khamenei and Ahmadinejad are looking to take out the old guard, including Mousavi, former President Khatami, and Rafsanjani. Ahmadinejad wants to replace most of the mullahs with Revolutionary Guard or Security Services personnel. The president has the backing of both the Supreme Leader and the military. 

Don’t underestimate Rafsanjani’s clout, though. While he isn’t popular among the people because of the perception he got his immense wealth through corruption and intimidation, he has many elites on his side. And it was interesting the other day that Parliament Speaker Ali Larijani criticized the Interior Ministry for the crackdown on students. 

Lastly, don’t underestimate the power of women in this instance. When President Obama gave his Cairo address to the Muslim world, I wrote (6/6/09) that his “thoughts on women’s rights could prove to be as transformational as anything else in his speech. Just give it time, but no one should be surprised if in certain nations, a year or two from now there are mass protests of women calling for more freedom.” 

I obviously didn’t realize it would be more like one to two weeks, rather than years. What made Mousavi such a popular figure was his wife, who campaigned alongside him. Watch another figure from the region…Queen Rania of Jordan. Her voice carries clout. 

President Obama may have 95% of the media groveling at his feet, but according to the latest Wall Street Journal/NBC News survey, only 56% approve of his overall performance, with a big slide in support among independents. Americans are increasingly concerned about the level of the budget deficits, with 58% telling the Journal that the President and Congress should focus on keeping deficits down – even if it means the economy takes longer to recover. Republicans have their opportunity to hammer away at Obama for spending too much, an issue that clearly resonates with an increasing number of voters, but the Republicans, after two terms of George W. Bush, don’t have much credibility themselves on the matter. 

On the issue of healthcare, a majority is in favor of Obama-Care, but details on covering the costs are still to come. For example, the plan put forward by Senator Ted Kennedy has a $1 trillion price tag over ten years, but it would cover only 16 million additional people. President Obama addressed the American Medical Association and said he could identify $950 billion worth of budget cuts and tax increases over the next ten years, enough to basically cover the full cost of healthcare reform, but the independent Congressional Budget Office says that a draft bill out of the Senate Finance Committee would cost $1.6 trillion. 

We have a long ways to go on the debate, and it seems unlikely the administration will get its way and have a plan for the president to sign by the August recess. But while a vast majority would agree that something has to be done about soaring healthcare costs, I’m in the camp that also says there are facets of our system that can be done far better, such as in the elimination of mistakes that claim 100,000 lives a year. And so I liked what Anatole Kaletsky wrote in the London Times the other day. 

“Whether or not voters have undergone a moral conversion, America has suddenly become aware that its present healthcare system is unaffordable. As Mr. Obama pointed out to the AMA…carrying on with the status quo is no longer an option. The mind-boggling cost of healthcare, not bank bailouts or property foreclosures, threatens the U.S. Government with bankruptcy and the whole economy with stagnation. 

“U.S. healthcare costs have long been out of line with costs in other countries. The U.S. spends $2.5 trillion or $8,100 per head on healthcare, 17.6% of its GDP. This is half as much again as the 11% of GDP spent in France and Germany and almost double the 9% in Britain and the OECD as a whole. The world’s next highest spender is Switzerland at 12%. Yet medical outcomes, such as cancer and cardiac survival rates, are generally no better than the OECD average and substantially worse than in France, Switzerland and Japan. 

“Until recently, however, these vast disparities made no impression on U.S. public opinion. Americans simply assumed that the rest of the world was out of step: their system might cost more, but it delivered more innovation and greater patient satisfaction than ‘socialized’ medicine. 

“In a mirror image of the false dichotomies distorting the healthcare debate in Britain, where U.S.-style privatization is presented as the only alternative to a state-run NHS, Americans have generally reacted to all reform proposals with horror, pointing to the inadequacies of the British system, while ignoring the experience of other countries. France, Germany, Switzerland, Canada, Australia and Japan, for instance, combine public and private provision in ways that deliver far better medical outcomes and greater customer satisfaction than the British system, at far lower cost than the U.S…. 

“Most importantly, individual Americans, whose borrowing power has vanished in the credit crunch, realize that extravagant medical costs are a luxury they can no longer afford. White House officials note that average wages have increased by only 3% since 2000, but health insurance premiums have rocketed by 58%.” 

Meanwhile, another topic garnered a lot of press this week but I will not spend much time on it for the simple reason that much of what was discussed won’t be debated in Congress until the fall, that being Obama’s proposal for overhauling the financial system, or new “rules of the road.” 

For now, while some on the right (though far from all) complained just because they felt like they had to (an attitude that has killed us elephants in recent elections), President Obama correctly reminded his opponents on this front, “Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected. All we’re doing is cleaning up after the mess that was made.” 

He’s right. But the issue is just how far do we need to go? Here’s my bottom line. I don’t care what Congress and the president come up with, as long as the rules are evenly applied. You have to be an idiot, regardless, to think little needs to be done. For example, you keep hearing the argument in some quarters (such as in the gun debate), that the rules on the books are sufficient, just apply them. That may be the case when it comes to gun control, but that’s hardly the case when it comes to an overhaul of our financial regulatory system. And the proof is in the pudding. When it comes to the president’s initial go at it, many congressional Republicans admit there are some good ideas in it.  Here are the main ones thus far. 

The Federal Reserve receives new, sweeping powers to oversee the largest and most interconnected players in the world. It would create a council of regulators, led by the Treasury Department, that would police the entire system for risky products.  

There would be a new consumer protection agency to guard against abuses of all kinds.  

Hedge funds would have to register with the SEC, while banks would have to hold more capital to protect against unexpected losses. 

Companies that repackage loans into securities would be forced to retain 5% of any offering. Good. There isn’t anyone that can disagree with this one. Think Countrywide, and if this had been in effect years ago. 

The biggest complaint seems to be in the new powers for the Fed, seeing as it was a major cause of the problems. Democratic Sen. Chris Dodd, who will be a key player in shaping final legislation, notes, “There’s not a lot of confidence in the Fed at this point, and I’m stating the obvious.” 

Turning to the week on Wall Street, there were some decent data points, including further tame inflation figures, a better than expected figure on housing starts, as well as a solid reading on leading economic indicators, all of the preceding for the month of May. 

But, in looking at the data of the past few months, while the environment is clearly ‘less bad,’ it’s far from rosy. Earnings out of FedEx and Best Buy told the tale. The former said the “operating environment…is expected to be extremely difficult” in the second half, though there are some signs business is leveling off, while Best Buy remained cautious on the second half as well. 

I’m going to keep the commentary short because I’ll attempt to tie everything together next week in my first half review. But what’s obvious is that while the bottom has been hit, worldwide, there are few, if any, signs of actual growth so most argue that the recovery, when it comes, will be shallow. The IMF, for example, says the U.S. will see a solid recovery…next year, though it added that globally, “The large part of the worst is not yet behind us.” 

Economist Nouriel Roubini chimed in that it’s not about “green shoots… (it’s more like) yellow weeds.” 

Morgan Stanley Asia chairman Stephen Roach said, ‘What green shoots?’ Roach has long argued, correctly thus far, that the consumer is toast and will be dormant for years to come. 

Many are saying any recovery will be far from a V-shaped one, but rather a W-shaped affair, particularly as the stimulus wears off, though I would hasten to add, what stimulus? A vast majority of us wish we could rework the entire $787 billion plan. 

In China, for example, their $585 billion plan is working, as the World Bank for the first time in ages raised the growth forecast here from 6.5% to 7.2% for 2009. But even with solid signs of recovery, the State Council warned “the foundation of the recovery is not firm.” There are numerous uncertainties, including overcapacity in industrial products. 

In the UK, there were further signs of recovery, but then retail sales for May unexpectedly declined, and Bank of England Gov. Mervyn King said the recovery would be sluggish. 

But back to China, this week Beijing introduced a “Buy China” edict; a rather worrisome development. The World Bank’s Ardo Hansson said, “China had earned an enormous amount of goodwill and was leading the charge globally to make sure protectionism did not take off (such as proposed \’Buy American\’ legislation). I think that position, that leadership reflected an understanding that China, relative to many other economies, has a lot more to lose from protectionism given the importance of the export sector.” Ironically, in issuing its earnings report, Best Buy said it had seen a surge in the popularity of local Chinese products over the past year at its stores in Shanghai. 

–Stocks took a breather, the first down week in the last five, as the Dow Jones fell 3.0% to 8539 and is back in negative territory for the year. The S&P 500 declined 2.6% and Nasdaq 1.7%. Nasdaq is still up 15.9% for ’09. Volume has been drying up recently as complacency sets in. In a story released after the market closed on Friday, General Electric’s Vice Chairman John Rice was quoted as telling the Atlanta Press Club, “I am not particularly of the green shoots group yet. I have not seen it in our order patterns. At the macro level, there may be statistics suggesting the economy is starting to turn. I (just) am not seeing it.” 

Well that’s not good. Rice continued, “We see a world where good companies and good consumers can’t get all the credit we would like. Companies with lots of cash on their balance sheet are worried about whether they will get what they need for working capital” and are cutting spending. “Until that changes I don’t think you will see a significant rebound. We are preparing for 12 or 18 months of tough sledding.” [Steve Matthews / Bloomberg] 

–U.S. Treasury Yields 

Rates were little changed thanks to the tame consumer and producer price data. Inflation is not an issue, period, and I am not going to give it a second thought until I begin to read stories of wage increases, not the freezes or wage cuts we are seeing, as noted below. 

–13 states now have unemployment rates over 10%, and eight states reached their highest level of joblessness in May since records began in 1976, as reported by the Labor Department. 

–Former U.S. Comptroller General David Walker said every man, woman and child in the country is responsible for some $250,000 each in public and private debt. This is based on projections of $55 trillion in federal debt, plus another $20 trillion in state, local, and household debt. 

–On the dollar front, Russian Finance Minister Kudrin said “don’t worry…there is no alternative to the dollar,” but then President Medvedev said once again that Russia can’t rely on one reserve currency. My bottom line? Don’t worry about a strong alternative to the greenback anytime soon. 

–Criminal charges were filed against Allen Stanford and four associates for running a $7 billion scam with the help of a top financial regulator in the Caribbean. Of the funds in question, more than $1.6 billion…with a ‘b’…was diverted in undisclosed personal loans to Sir Allen. 

–Lots of talk this week about a supply glut in natural gas owing to new onshore U.S. production from shale formation, as technology has improved. 

–The Irish government is going to be taking over many of the palatial homes owned by some of the nation’s biggest developers. The move is seen as “essential” in ensuring the public has confidence in a new agency supervising bank recovery efforts. “It would be simply unacceptable to leave these people living in luxury while the consequences of the business decisions they have made effectively lead to a doubling of the national debt.”  [Irish Independent]

–In another measure of the collapse in Ireland, sales of super-luxury autos (over $250,000) have fallen to five this year, vs. over 80 in 2007. 

–For the month of April, Spanish home values declined 47.6% from year ago levels. Banking experts predict further declines before a recovery in 2012. Your editor nailed this one back in April 2005. 

–Toyota Motor Corp. has received a staggering 180,000 orders for its new Prius hybrid in Japan in just a month, far surpassing its goal of 10,000 vehicles in monthly sales. The government is offering tax breaks and other incentives. The Prius was the No. 1 selling vehicle in Japan for May, clinching the top spot in the domestic market for the first time while overtaking Honda’s Insight. The new Prius is just starting to be delivered to America and only 700 were sold, though over 9,000 of the old Prius were sold here in May. 

–Cash-for-clunkers is nearing reality in the U.S., trading in a low mileage vehicle (18 mpg or less, built in 1984 or after) for a new car with 22 mpg and under $45,000 (or, say, a light-truck getting at least 18 mpg). In return you could receive a voucher of up to $4,500. 

In Germany, the program, instituted in January, has met with major success, though with unintended consequences. Instead of buying German manufactured vehicles from BMW, Volkswagen and Mercedes, consumers are buying small foreign vehicles, like from Czech Republic’s Skoda. Only 24% of the vehicles purchased are German made. 

–Interesting stretch for Continental Airlines. On Thursday, a pilot had an apparent heart attack on a flight from Brussels to Newark and died, but the jump pilot and first officer guided the aircraft to Newark  safely. Continental appropriately kept the incident quiet and passengers didn’t know until they landed. 

But last weekend, two girls were placed on wrong Continental flights while traveling unaccompanied in separate incidents. One flew out of Houston and ended up in Fayetteville, Ark., when she was supposed to go to Charlotte, N.C. The other kid was supposed to go from Boston to Cleveland to visit her grandparents but was mistakenly sent to Newark. In the latter case, imagine the poor grandparents, waiting to see their granddaughter, and the girl not getting off the plane. That’s outright cruelty…worse than waterboarding. 

–In a survey on airline service, Continental was ranked as serving some of the best meals, behind Singapore Airlines and British Airways. Singapore also has the most courteous flight attendants, followed by BA and Southwest. [American Airlines had the worst food and United the rudest flight attendants.] 

–Speaking of British Airways, it asked thousands of its staff to work for free up to four weeks, though the airline is not ordering staff to work without pay…they can still just stay home. 

–Amtrak ridership dropped for a seventh straight month in May.

–Deflation Watch, Part One: Chris K. reports that when he travels on business to New York, the hotel he stays at regularly has slashed his room rate from $400+ to $279 over the past year. 

–This was scary…the FDA warned that people should stop using Zicam nasal sprays and swabs because they can cause permanent loss of smell and taste. The FDA has received more than 130 reports (and manufacturer Matrixx Initiatives has another 800 it hadn’t made available to the agency). 

–Microsoft has filed its first lawsuit over click fraud, three individuals from Vancouver, British Columbia, and the corporate names they were using. Microsoft is seeking $750,000 in damages. 

–More on the Long Island Rail Road and overtime. The New York Post reported that 34 LIRR “grease monkeys” picked up an average $73,500 in overtime due to some archaic work rules. Basically, “the railroad is required to fill vacant slots on all work shifts – regardless of whether the manpower is needed – allowing senior repairmen to pick up enormous amounts of extra hours. 

“If a repairman is out sick or goes on vacation, for example, the rule requires the shift’s empty slot to be filled by another mechanic, even if he’s not needed or on OT.” 

Some mechanics work for 24 to 32 hours straight, racking up time-and-a-half, and are then paid to go home and sleep for eight hours. And then another worker picks up the eight hours for the man sent home. One fellow turned his $63,000 salary into $283,000 through overtime. Of course fares have been hiked 10 percent recently. 

–Deflation Watch, Part Deux: Hong Kong’s top ministers and political appointees are taking a 5.38% pay cut, while lower and middle civil servants see a pay freeze.   

–MySpace, seemingly in freefall in its battle vs. rival Facebook, is laying off 420 employees. 

–Six Flags, the theme park operator, filed for bankruptcy to get out from under $2.4 billion in debt, but will continue to operate normally. The company is seeking to have the debt wiped out, or at least drastically reduced. 

–Eddie Bauer also filed for Chapter 11, but it too hopes to keep all its operations going. It has $426 million in debt. 

–Deflation Watch, Part Trois: Josh P. relayed a note out of Stater Bros. of California (it being like a Costco), whereby they are lowering prices on more than 10,000 items. Certainly not good for margins, either. 

–Medtronic paid nearly $800,000 over the past three years to a former Army surgeon, Timothy R. Kuklo, for various consulting work. Kuklo then fabricated a study that touted positive results for one of Medtronic’s spine products. Dr. Kuklo also forged the signatures of the purported co-authors. [Wall Street Journal] 

–There was an uproar the other day when China announced new personal computers sold on the mainland beginning in July must have anti-pornography software. But researchers from the University of Cambridge, Oxford and the University of Toronto said the “substandard product” developed by companies in China was riddled with flaws that would allow outsiders to easily infiltrate a user’s PC, allowing others to steal private data and plant viruses. So, yes, it’s easy to then draw the line straight to the Chinese government. Alas, days later, Beijing backed away from the edict, though now it’s going after Google for allowing easy access to pornography through its search engine. 

–I’m a big Weather Channel fan, so I couldn’t help but take note of a New York Post article by Holly Sanders Ware that discusses how the channel’s audience has fallen from 460,000 between 6 a.m. and 10 a.m. five years ago to just 330,000, according to Nielsen. Then again, this shouldn’t be such a surprise because I’m like so many others that just turn to their superb Web site rather than click on the TV and wait 8 minutes for the local forecast. 

[The Weather Channel is launching a concerted effort to come up with more unique programming, like “Storm Stories,” having largely ceded this space to the likes of the Discovery Channel.] 

–Conan O’Brien’s ratings are crashing since he took over for Jay Leno. Part of this is a result of the gains David Letterman received with his Sarah Palin controversy, but of course many television executives are once again scratching their heads as to why Leno, No. 1 for so many years, was removed in the first place. But this is another case of ‘wait 24 hours’ before definitively drawing any conclusions. [Though personally I’m still psyched for Leno at 10:00 p.m. come this fall.] 

–Ever wonder what super talent agents earn? According to the New York Post’s Page Six, and a memo leaked from inside the William Morris agency, Ari Emanual, Jim Wiatt, and Patrick Whitesell took in $6 million to $7 million. Previously such numbers were never made public. So that means Ari Gold of “Entourage” fame is also doing quite well. However, the memo is creating a backlash as actors see some of their reps making far more than they do. 

–Megan McArdle wrote in The Atlantic on how even during the Great Depression, Americans spent on gadgets. 

“In fact, radio boasts the second-shortest interval between introduction and adoption by 75 percent of U.S. households, topped only by the black-and-white television, even though radio completed the last third of that journey during a major financial crisis. At the time, radios were not cheap. In 1929, the average set cost $133, when per capital GDP was only $850. Yet Americans continued to buy them even as the Depression deepened. They did so partly because a radio could substitute for so many other goods: phonograph records, concerts, lectures, newspapers, even movies. The percentage of Americans who attended a weekly movie reached an all-time high near 70 percent in 1930, and then dropped like a stone. By 1934 it had fallen to 40 percent, where it hovered for the rest of the decade. Americans, it seems, regard paying someone else to entertain them as a frivolous expense that can be cut – but buying equipment that does the same thing as an imperative.” 

–And John Houghtaling, the inventor of the Magic Fingers Vibrating Bed, has died at the age of 92.  I\’m assuming the product is also available Upstairs.

North Korea: Pyongyang threatened to weaponize its plutonium stocks, as well as conceding for the first time that it sought to enrich uranium for the same purpose, the latter being a much easier process to hide. And there were reports the North was prepared to launch a ballistic missile around Fourth of July, possibly targeting Hawaii, which is now receiving missile defense components in the event Kim Jong-il decides to go this route, which we all know would be the end of Kim and his regime, after which the U.S, South Korea and Japan would wait for any blowback, including an artillery barrage on Seoul that could include shells filled with chemical weapons. 

Israel: Prime Minister Netanyahu delivered his major address on foreign policy last Sunday, demanding that Palestinians recognize Israel as a Jewish state. 

In return for sovereignty, Palestinians would have to give up the right of return for refugees displaced by the 1948 Arab-Israeli war, and the Six-Day War of 1967. 

“I can call you, our Palestinian neighbors, and to the leadership of the Palestinian Authority; let us begin peace negotiations immediately, without preconditions,” said Netanyahu. 

“Israel is committed to international agreements and expects all the other parties to fulfill their obligations as well. When Palestinians are ready to recognize Israel as a Jewish state, we will be ready for a true final settlement.” 

But in attempting to walk a fine line between Western expectations and opponents in his own right-wing coalition, Netanyahu said, “Israel cannot agree to a Palestinian state unless it gets guarantees it is demilitarized.” 

The Israeli prime minister added that Jerusalem must remain the unified capital of Israel and would not be shared, plus Netanyahu refused to accede to Barack Obama’s request that settlement expansion be frozen; “natural growth” must be allowed within existing settlements. 

A spokesman for Palestinian Authority President Mahmoud Abbas said, “Netanyahu’s remarks have sabotaged all initiatives, paralyzed all efforts being made and challenges the Palestinian, Arab and American positions.” 

Palestinian negotiator Saeb Erekat added: ‘The peace process has been moving at the speed of a tortoise. Tonight, Netanyahu has flipped it over on its back.”  

Meanwhile, Netanyahu faced criticism from the Right, which disavowed his call for a Palestinian state, while those on the Israeli Left were like Meretz leader Haim Oron, who said: 

“Although the speech does bear evidence to an encouraging shift from a person who, throughout his entire public life, warned against the establishment of a Palestinian state, and has finally acknowledged history’s rules – Netanyahu’s speech is too little, too late.

Lastly, according to the Jerusalem Post, Hamas thwarted an assassination attempt on former president Jimmy Carter in Gaza on Tuesday. “Israeli security sources said they had learned of plans to target Carter and had passed on the information to his security detail in ‘real time.’” Supposedly it was an al-Qaeda operation and Hamas removed “three large black disks and some wire from a sand dune next to a road Carter had used.” 

Lebanon: Prime Minister Siniora said that in the wake of the election victory of the pro-West March 14 coalition, Hizbullah will no longer have the veto in parliament, to which the Hizbullah-led faction said they wouldn’t join a national unity government then. Prime Minister in waiting Saad Hariri, the 39-year-old billionaire son of Rafik, added, however, that the issue of Hizbullah’s arms is one for a national dialogue and that he wouldn’t try to disarm them. [He doesn’t have a chance, anyway.] Of course the Iranian vote has a major impact here when it comes to Hizbullah and its growing military power. 

Meanwhile, the U.S. Army is studying the Israel-Hizbullah conflict from 2006. Army historian Lt. Col. Scott Farquhar said, “(Hizbullah) had radio, couriers and fiber-optic cable – all very expensive stuff. They had things like remote TV cameras in hardened citadels observing the roads. You could watch where the Israelis were from multiple screens….There were some very sophisticated ambush sites that were supported by fires and direct fires. It was not guys trying to bury a bag of fertilizer on the side of the road. These things were full-blown, 400-pound shaped-charge anti-tank mines.” [Defense News] 

Iraq: Gen. Ray Odierno said American combat troops are on schedule to fulfill their obligations under a bilateral security agreement that went into effect the first of this year and close or hand over to the Iraqi government 142 installations in the cities by June 30, as U.S. forces relocate to bases outside urban areas. A few troops will remain in some high-population areas, but these are to focus on non-combat operations. Odierno is convinced Iraqi security is on track to meet the challenges. “The dark days of the previous years are behind us,” he said. 

Pakistan: The military has launched a new offensive on Waziristan, the Taliban and al-Qaeda’s prime hideout, including for bin Laden, but there is no way of knowing just how successful it will be. What we do know is the number of refugees, currently at 2.5 million, continues to grow. Separately, President Zardari and Indian Prime Minister Singh did get together at the economic summit in Russia, a good thing. 

Russia: While Washington prepares to protect Alaska and Hawaii from a potential North Korean attack, Russia is flat out spurning an offer to participate in the U.S. / European anti-missile system. Defense Secretary Gates said he was hopeful Moscow would consider hosting either radars or data exchange centers due to the growing threat from Iran. But the Russians are instead demanding Washington drop its intention to place interceptors in Poland and a radar station in the Czech Republic.  

Even British lawmakers criticized the U.S. missile defense plan because some in parliament are concerned about the plusses and minuses given Russian opposition. A report from the Foreign Affairs Committee, made up of legislators from the main parties, concluded: 

“We are not convinced that, as they are currently envisaged and under current circumstances, the United States’ planned ballistic missile defense deployments in the Czech Republic and Poland represent a net gain for Europe. 

“We conclude that if the deployments are carried out in the face of opposition from Russia, this could be highly detrimental to NATO’s overall security interests.” 

President Obama visits Moscow from July 6 to 8. 

Meanwhile, Russia used its UN Security Council veto to deny an extension of the UN observer mission in Georgia. The observer force had been in existence since 1993. So now it’s up to the European Union to continue its presence in Georgia as the Russians continue to reinforce the “independent” states of Abkhazia and South Ossetia, thus violating treaties signed at the end of the Russia-Georgia war of last summer. 

Somalia: This place exploded in violence this week; at least three separate attacks claiming over 13 victims each. A mortar hit a mosque, killing 13; 15 were killed in gunfire between government and Islamist forces in Mogadishu, where the loosely pro-West government actually only holds a small part of the city, and then a suicide bombing at a wedding reception claimed at least 50, including the Somali Security Minister. 

Separately, the EU extended its anti-piracy mission off the coast of Somalia by 12 months, warning of a “serious threat” to shipping. NATO has counted 114 pirate attacks thus far this year, more than in all of 2008. [Bloomberg News] 

Yemen: This country has a lot of unique tourist attractions, but it’s about the last place in the world I would want to visit these days as nine foreigners who were kidnapped by suspected al-Qaeda terrorists were killed, including three German children. The CIA has been tracking a growing number of al-Qaeda types from Pakistan that are heading to Somalia and Yemen as the U.S. and Pakistan act against the terrorists there. 

China: Interesting case here involving a Chinese waitress who killed a government official that assaulted her. The trial, which received a ton of publicity in China, resulted in the woman being set free. This was a good thing. 

Italy: Prime Minister Silvio Berlusconi’s days would appear to be numbered, as a new investigation has been launched amidst allegations that showgirls were paid to attend parties at his villa in Sardinia and his residence in Rome. Ergo, the women were being inducted into prostitution. One woman claims to have a video of her and Silvio in his bedroom. 

Northern Ireland: In a highly disturbing development, a fascist group, Combat 18, forced 100 Romanian immigrants, Roma, to flee their homes in Belfast as the group threatened to kill a baby. The Roma are being sheltered, at last word, but have no money to go back to Romania. 

Mexico: More than one ton of cocaine hidden inside frozen shark carcusses has been seized by the Mexican Navy. Mexican officials also discovered one of the largest meth labs in the country, enough chemicals to produce 40 tons of the drug, or about 309 million individual doses. [BBC News] 

–On the Guantanamo detainee front, protesters in Bermuda have called for the resignation of Prime Minister Ewart Brown, accusing him of acting like a dictator in accepting four Chinese Uighur prisoners from the detention center. Spain said it was ready to accept a few prisoners in order to help President Obama’s efforts to close the facility, and Italy said it will take 3 off Barack’s hands. Coupled with Palau’s recent acceptance of 13 detainees, there are still about 225 left at Guantanamo. 

–Nevada Republican Sen. John Ensign stepped down from his leadership post after acknowledging he had an 8-month extramarital affair with a staffer. Ensign had been looked at as a possible presidential candidate in 2012, and this is the last thing the party needed after already falling from 55 to 40 Republicans in the chamber in just three years. 

But while Ensign tried to head off further discussion, this case promises to garner all kinds of negative publicity.   Consider that the mistress, Cynthia Hampton, was treasurer for Ensign’s political committees, while at the same time, her husband, Douglas, was one of Ensign’s senior advisers, earning $162,000. [Both were let go, May 2008.] In the past, Ensign, a favorite of the Christian Right, castigated the likes of Rep. Sen. Larry Craig, as well as Bill Clinton, for their sexual misconduct. 

[On Friday, Ensign accused Douglas Hampton of extortion.]

–Former Czech Republic President Vaclav Haval had some harsh things to say about his country. 20 years ago, Havel was the leader of the “Velvet Revolution” that peacefully overthrew communism. But the optimism of that time has given way to a troubled present. 

As reported by Bloomberg’s Peter S. Green and Andrea Dudikova, Czechs are building “palaces of consumerism,” and politicians ‘can’t see farther than the next opinion poll and mobsters and money-changers have become the new economic elite,’ Havel said in an interview. 

“Not many of us thought the door would be opened so quickly to all the Mafiosi and back-street money-changers” who have now become “millionaires and billionaires,” he said. “We are living in the first truly atheistic society, and there’s no feeling that there is any kind of moral anchor.” 

Havel recalled one of the best known phrases from 1989, delivered to a crowd of several hundred thousand on a November day in the middle of the revolution. 

“Truth and love will triumph over lies and hatred,” he said then. After 20 years, the phrase “still nags some people.” 

“Even if they ridicule it in the newspapers, that’s better than if it’s completely erased from people’s minds.” 

–CIA Director Leon Panetta stirred it up when he told The New Yorker magazine that former vice president Dick Cheney would like to see another attack on the United States to prove he is right to criticize President Obama for abandoning the “harsh interrogation” of terrorism suspects. 

“I think he smells some blood in the water on the national security issue. It’s almost, a little bit, gallows politics. When you read behind it, it’s almost as if he’s wishing that this country would be attacked again, in order to make his point.” 

–There is no bigger mess these days than the state of New York politics, even more so than California. Two state senators, Hirman Monserrate and Pedro Espada Jr., switched from the Democrats to the Republicans in a coup designed to give the GOP a two-vote majority in a pure case of political opportunism from two very corrupt politicos. The New York State Senate has 62 members and it’s safe to say at least 50 are total idiots, with more than a few being outright criminals. 

Espada, who claims racism because he’s Hispanic every time he’s criticized, represents the Bronx but apparently lives in Westchester County. 

So the two, after successfully shutting down the government because no one knew who was really in charge, least of all the nudnick Gov. David Paterson, were seen sitting together at last Saturday’s Yankees-Mets game. Not that this is a crime, but when you are clearly not doing the public’s work, do you then sit in $650 seats? Espada said he paid $150 each for them, but those in the know say no way he paid that ‘little,’ if he paid at all. 

The New York Daily News’ Mike Lupica. 

“There they were in Legends Suite seats at the new Yankee Stadium, where the tickets have a face value of $650 apiece. Knowing what we know about Monserrate of Queens and Espada of the Bronx, of course, the amazing thing is that they didn’t try to scalp the tickets, then head up to Espada’s ‘second home’ in Mamaroneck to watch the game on television. 

“With political grifters like these, a day without getting something out of their jobs is just a day of wasted opportunity. You would say that Monserrate and Espada shouldn’t have been ticket holders on Saturday, they should have been ticket takers, but that would be insulting to people with real jobs.” 

Monserrate then decided to flip back to the Democrats the next day, meaning the Senate is locked in a 31-31 tie, at a time when the state has no attorney general who would normally break such deadlocks, and with a budget that is due. 

–Thankfully, New York is killing the geese, at least those threatening airliners. 

Editorial / New York Post 

“The country’s Canada goose population has increased fourfold since 1990 – not only posing a lethal threat to air travelers, but also presenting a major nuisance at parks and other public areas. 

“Frankly, it’s long past time to dispense with the legal niceties – and declare open season on geese everywhere…. 

–Note to Mark R. Argentina’s Perito Moreno glacier “is one of only a few ice fields worldwide that have withstood rising global temperatures,” as reported by Jeannette Neumann of the AP. [Mark being one who isn’t convinced global warming is real.] 

“Nourished by Andean snowmelt, the glacier constantly grows even as it spawns icebergs the size of apartment buildings into a frigid lake, maintaining a nearly perfect equilibrium since measurements began more than a century ago.” 

–But, as reported by Alex Morales of Bloomberg, “Polar ice caps are melting faster and oceans are rising more than the United Nations projected just two years ago, 10 universities said in a report suggesting that climate change has been underestimated. 

“Global sea levels will climb a meter (39 inches) by 2100, 69 percent more than the most dire forecast made in 2007.” Greenland’s ice sheet, for example, is losing 179 billion tons of ice a year. 

–And finally, I had my first colonoscopy this week, a year later than I should have. To my friends of similar age, get it done! There are no excuses. 

Pray for the men and women of our armed forces, and the fallen. 

Gold closed at $936
Oil, $69.60 

Returns for the week 6/15-6/19 

Dow Jones -3.0% [8539]
S&P 500 -2.6% [921]
S&P MidCap -3.2%
Russell 2000 -2.7%
Nasdaq -1.7% [1827] 

Returns for the period 1/1/09-6/19/09 

Have a great week. I appreciate your support.