The year is half over, so as former New York City Mayor Ed Koch used to ask, “How am I doin’?” To borrow from Ronald Reagan’s farewell address, “Not bad…not bad at all.”
“Forgetting the usual caveats on geopolitical surprises, a major terror attack in the U.S., or a conflict over Iran, I do not see how you can make a claim, as so many are doing, that the economic recovery will begin in the second half, and, just as importantly, be sustainable, yet. What was once all about housing and the wealth effect has evolved into housing and jobs, the two then feeding into consumer and capital spending. The job picture is not going to be pretty for at least the first half of the year, while housing, which will bottom in April (though give me a month or two on this consistent forecast), then flatlines. There will be no ‘V-shaped’ recovery in housing. Not with inventory levels like we have today. At least lower mortgage rates, for those who qualify, could help keep the economy from tipping into depression through the ability to refinance, let alone buy a new home.
“This will remain a deep global recession, with pockets of rising unrest overseas helping to feed the doom and gloom as it doesn’t make for inspiring pictures on the nightly newscasts.
“The inauguration of Barack Obama, though, will supply some good feeling and both Wall and Main Streets will initially like the stimulus program that he signs shortly after taking office. Let’s face it, bulls are counting on stimulus packages around the world to get out of this crisis, and they have a point. I maintain China will be a leader in this vein.
“But, again, to then draw a line and say beginning in the second half it’s ‘Oh happy days!’ doesn’t strike me as being rational given the many facets of the crisis that make this all so historic. [The behavior of the stock market, though, is a far different story. More later.]
“This is an unprecedented financial calamity (thus far different from the Great Depression because we live in a totally different world) that has cut to the core of household wealth across the globe. And thanks to the fact a bunch of dirtballs on Wall Street played a large role in generating the mess, particularly the resultant credit crunch that has frozen lending, you now have a severe loss of confidence that the rules of the game are fair, and that the playing field is even. This isn’t repaired overnight, let alone one year, but it is an area where the likes of Barack Obama can have a most positive impact. It’s a time crying for leadership, and we pray a few emerge to write their own chapters, a la Winston Churchill or Abraham Lincoln, where schoolchildren a hundred years from now are taught, ‘Now this was a great man (or woman).’
“A few other points. Any stimulus programs are going to be running up against not only the problems discussed above, but the coming blowups in commercial real estate; the government’s inability to administer its own bailout program, as admitted this week; credit card debts that are yet another shoe to drop, especially for the likes of Citi, JPMorgan Chase, Bank of America, and American Express; the Treasury’s massive funding requirements as the federal and budget deficits soar; severe financial stress at the state and municipal level; and the possibility of trade wars, despite the talk from government heads that the world will act responsibly, even as the people cry out to protect their own interests.
“Couple this with the hot spots listed below and you have to wonder if Barack Obama truly understands what he’s getting into.”
There is very little in the above that I would change today. Many would now say the stimulus program leaves a lot to be desired; others, however, would continue to say just give it time.
On two other issues, I am not as concerned with the impact of commercial real estate as I had been, while thus far there has been little domestic unrest due to the financial crisis, which is rather remarkable, though I hasten to add I predicted in the same 1/3/09 column that China would not have widespread issues on this front and I was correct in saying it would be a leader when it came to administering stimulus programs.
I also can’t help but note that even President Obama himself has admitted he didn’t realize the extent of the problems he faced.
“For over two years I have maintained a model of 80% cash / 20% equities as the best way to beat the performance of the benchmark S&P 500 (or at least approach it and still be able to sleep at night) and I have obviously handily done so over that time. But then I missed badly on how far the market would fall last year….
“Anyway, I’ve been hinting the past few months I would turn more bullish, despite the economy, and I’m raising my split to 50% cash / 50% stocks, and I could raise it further still depending on what I see over the first quarter.
“In terms of returns, I’m even more bullish. The Dow and S&P will rise 20%, while Nasdaq and the Russell 2000 will advance 30%.
“Now you might be thinking I’m kind of talking out of both sides of my mouth but I’m not. The fact I haven’t moved my equity allocation to more than 50% is simply a reflection of the still dreadful economic news. The 20% to 30% return numbers are a guess on where we end up in December. I remain a doom and gloomer on the economy, but I’ve always said stocks trade more on sentiment than fundamentals. Most of the time….
“I’ve given these issues a lot of thought the past two weeks and I know I’ve been highly critical of those calling a bottom in the economy, as I reiterate above, when I see zero hard evidence to warrant this. But when I do see some positive signs, such as in better figures on industrial production or retail sales, anywhere in the world, I’ll turn quickly when it comes to the Big Picture.”
Again, that was six months ago and I wouldn’t change a thing. I pride myself on my consistency and if nothing else that’s what you get. I do just have to reiterate that in the case of my projected equity returns, this year hasn’t gone anywhere like I thought it would, but it’s the year end target that still matters…up 20% to 30%. I can easily see us treading water for months from current levels, but at some point in the not too distant future, we will get some actual good economic news, not just “less bad,” and if you thought the rally off the March 9 lows was powerful, you ain’t seen nuthin’ yet. Maybe we don’t see this until October, which would be appropriate since that month is known historically for major bottoms (though we won’t get anywhere near the 676 closing low on the S&P 500 from 3/9/09…the actual bottom is in, as I wrote shortly afterwards).
Oh, I know. The savings rate is soaring, consumer spending will remain punk, and job losses will get worse before they get better. But barring something unforeseen (and I view an Israeli attack on Iran as ‘foreseen’), while Santa Claus may not be leaving many packages under the tree this year, at least around January 10, when most investors receive their year end statements, they’ll notice Santa deposited something more precious to a lot of you. A positive surprise for ye olde portfolio.
On the labor front, I said about two months ago the unemployment rate will not hit 10.0%. Looks like I could miss this, perhaps badly, but I don’t change the prediction to then say “I told you so” after the fact. One should just admit mistakes and move on, but I’m holding out hope I could yet be right.
On housing, I went back as much as I could through my archives (goodness gracious, there’s a lot there!) and on 8/16/08 I wrote of real estate, “when we bottom, and that will happen over the next year (which is the first time I’ve actually gone this far), we’ll just sit there. No V-shaped recovery.”
11/29/08: “(Housing), nationwide, will bottom next April. Of course you won’t know this for a while as it’s happening, and the decline before then over the next five months could be severe, but that’s my story and I’m sticking to it. I also hasten to add that I’m sticking with my theory that once a bottom is reached, we just sit there awhile.”
Well, as you can see from the above I then tweaked the timing a bit, but have consistently said no V-shaped recovery. So whether I nail the bottom as April or May (April is out at this point), remember, I’m talking median home price, nationwide. It’s the only way to measure it, and I’ll frankly be very surprised if I’m off by more than 5%-7%. Regardless, as one who wrote the best statement on housing of anyone, period, back on 4/2/05, I’m not going to beat myself up if I’m off some at this point. To refresh your memory:
“Remember, the bubble isn’t just a U.S. story, it’s global; whether we’re talking Britain, Spain, Australia or China.”
This week, incidentally, there were growing signs that despite 11.5% unemployment and a state budget crisis of mammoth proportions the California housing market has bottomed, as the median price rose in May for a 3rd straight month; this as, nationally, the median price did fall to $173,000, the lowest mark since February ’05. One semi-bright spot on the foreclosure front…33% of existing home sales in May were sold as foreclosures or distressed properties, down from earlier 40%-50% levels.
Inflation: I have consistently said this is not an issue. I am also not going to play games and say, well, we all know the prices of energy and healthcare are going up, and your property taxes continue to rise, how can you say there is no inflation? Because that is picking and choosing your data points to suit your case. I have always just gone off the official government figures. Ergo, there is not only no inflation, with a punk labor market, putrid wages, and zero pricing power, you can’t convince me I should be sleeping with one eye open in order to ward off the inflation bogeyman. When I see wages start to rise, I’ll become concerned.
[If you want to discuss rising healthcare costs or property taxes in the context of the consumer and the economy, that’s a totally different matter.]
The Dollar: Ditto. This is not a concern. Oh, sure, you’ll continue to have statements from the likes of Russia and China, calling for an alternative, but get serious. While there will be some diversification out of the greenback, the amounts will be relatively small. In case you haven’t noticed, we’re in the midst of a global financial crisis, so it’s not as if the U.S. is in a deep recession and Europe is rockin’ and rollin’ so everyone is going to pile into the euro. And it’s also not as if the Saudis and the Chinese and the Russians are going to take their reserves and come up with a new currency called the Riruyuan. [I need to copyright this, however.] Or an IMF-based one, as China has been calling for. Again, will we see swings in the dollar? Of course. The dollar in freefall? No. At least not anytime the rest of 2009.
[The only possible way this scenario changes is if China, for whatever reason, decides to stick it to the United States even as it recognizes its own economy would thus feel pain. This is why you watch the trade front closely. There is more protectionism taking place than is hitting the headlines these days (especially from China), and that’s not good. But we also haven’t had a full-blown trade war. I do not, however, dismiss the possibility we could yet see one.]
So my bottom line is, the U.S. economy has bottomed, we have yet to see any real good news (though it’s coming), and stocks will finish the year strong. But the consumer, witness the news on Friday that the savings rate hit a 15-year-high of 6.9%, is holding back in a big way. Assuming one has a job, that means you’re repairing the balance sheet…good. Assuming you don’t have a job, you’re just trying to survive….troublesome.
A few notes on the other economic news of the past week. Durable goods orders for May came in at a solid +1.8%, when a decline of 0.8% was expected. Personal income for May rose a better-than-expected 1.4%, while consumption increased 0.3%, in line. Figures on May existing- and new-home sales were below expectations. And for the record, the final figure on first quarter GDP is -5.5%, which follows the -6.3% pace in Q4 ‘08.
Globally, Japan’s exports in May unexpectedly plunged 40.9%, not good, while consumer prices there fell 1.1% for the month, the sharpest decline since records started being kept in 1971. At the risk of insulting the intelligence of some of my readers, for those who forget what deflation really means, the remarks of an RBS economist in Tokyo simplify the topic.
“Profits fall, then wages come down, then consumers stop shopping. And because people aren’t shopping, companies lower prices. That’s the process that we’re starting to see. It isn’t easy to break out of.” [Bloomberg]
Elsewhere, South Korea’s government is still projecting growth of 4.0% in 2010, though getting there remains a chore.
And the World Bank said Russia’s GDP will plunge 7.9% in 2009, with 17% living in poverty. Russia’s banking system is also seizing up and the government is preparing a massive bailout.
Business confidence in Australia rose the most in May in 8 years as the stimulus program there, directed to consumers, kicks in. I believe our own stimulus initiative is the dregs, and it didn’t have to be that way. Stimulus programs in Australia, South Korea, and China, for instance, are indeed working because they are targeting the consumer, period.
Big Picture wise, Warren Buffett said that when it comes to the economy, “We have had no bounce” and, just like Stephen Roach and Nouriel Roubini the week before, Buffett has seen no green shoots. That “will happen,” he adds, “but hasn’t happened yet.” Buffett also said Fed policy is “sowing the seeds of substantial inflation down the road, but not the next two years.”
The World Bank lowered its global growth forecast to -2.9% for the year, while the 30-nation OECD (Organization for Economic Cooperation and Development) said GDP within the group will decline 4.1%. More specifically, Japan’s down 6.8%, the Eurozone down 4.8%, the U.S. down 2.8% (but up 0.9% in 2010), Brazil down 0.8% (though up 4.0% next year), China up 7.7%, and India up 5.9%.
Lastly, the Centers for Disease Control issued an update on H1N1 in the U.S. and it continues to spread, both here and around the world. Come fall, it thus remains a potential game changer.
–Stocks finished the week mixed, with the Dow Jones losing 1.2% to close at 8438 and the S&P giving up 0.3%, but Nasdaq tacked on 0.5% to 1838.
–U.S. Treasury Yields
The Federal Reserve opted to hold the line on interest rates at its Open Market Committee meeting and said in the accompanying statement that “substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.” The market was slightly disappointed the Fed didn’t enlarge some existing programs for buying Treasuries and mortgage-backed securities, but by week’s end was quite content as interest rates on the long end of the curve plummeted, and the Fed actually pulled back from programs that weren’t deemed necessary.
–Late Friday, the House passed sweeping (though, importantly), watered down emissions control legislation, 219-212, with 44 Democrats voting against. This is the bill that contains the controversial cap-and-trade system that some say is a giant tax on the American consumer and business. It now moves to the Senate, where it will get significantly watered down further. More next time, including both sides of the debate.
–Fed Chairman Bernanke was grilled by a House committee on the Bank of America / Merrill Lynch deal, saying emphatically that he did not threaten BofA management when it had second thoughts owing to Merrill’s disclosure of greater losses than expected. Bernanke contradicted statements given to New York Attorney General Andrew Cuomo by former Treasury Secretary Hank Paulson, Paulson having told Cuomo that Bernanke instructed him to threaten to fire CEO Ken Lewis if the bank backed out of the merger. The chairman said, “I didn’t tell him anything like that.”
–The World Bank warned of the adverse consequences of declining investment in the developing world. GDP for the emerging markets is expected to rise just 1.2% in ’09 vs. 8.1% in 2007. Tens of millions will be thrown back into poverty as a result.
–China’s Foreign Ministry accused Google of spreading vulgar content that violated the nation’s law. But the spokesman didn’t answer questions as to whether the government was responsible for disruptions in access to the search engine.
“According to complaints from many residents, Google’s English language search engine has spread large amounts of vulgar content that is lascivious and pornographic, seriously violating China’s relevant laws and regulations.”
–Car sales continue to show slight improvement in June, though imports now take 69% of the market, up 4 points over last year.
But in the latest J.D. Power & Associates quality ratings, Ford’s Mercury Sable grabbed first place among large cars, and GM’s Chevy Impala was third. GM’s Pontiac G6 and Chevy Malibu also ranked well in the mid-size category. But Chrysler’s vehicles did not rate well and the automaker desperately needs new partner Fiat to give it a shot in the arm.
–Disconcertingly, the level of insider selling is increasing.
–Josh P. passed along some good stuff on the Miami condo market, from an analyst Peter Zalewski. “Between 1961 and 2002, some 11,500 units were constructed in Greater downtown Miami. Since 2003, nearly 23,000 units have been built or are still under construction with the last units scheduled to be completed in early 2010. At the end of the first quarter, developers were still in possession of about 10,000 of the 23,000 new units.”
–Unless developments warrant it, I will not be commenting much on the healthcare debate. It certainly doesn’t appear anything will get done by the August recess. But for now I note that in a survey for the New York Times and CBS News, when asked the question, “Would you favor or oppose the government’s offering everyone a government administered health insurance plan like Medicare that would compete with private health insurance plans?” 72% say yes, 20% are opposed. 57% also say they are willing to pay higher taxes so that all Americans have health insurance. Of course the devil remains in the details still to be worked out.
–The global population of super-rich, defined as those having at least $30 million to invest, shrunk 25% in 2008, leaving 78,000 worldwide.
–Boeing announced a fifth delay for the 787 Dreamliner. What was once to have come onstream in 1957 (or so it seems), now looks unlikely to meet a new 2010 deadline. One consequence, pulled orders; such as Qantas’ canceling 15 set for delivery by 2015 (though in this particular case it’s more about reduced demand). Overall, lost orders are now up to 58 for the Dreamliner. But, seriously, at this point, who wants to be among the first passengers on this thing? Not me.
–Uh oh…Iceland’s parliament may reject a deal the government struck with the U.K. and the Netherlands to cover depositor claims in both places as a result of the nation’s financial system collapse. Some MPs say Iceland isn’t legally responsible to repay the debts. Said one, “The depositors are entitled to all the assets of the failed banks, but they are not entitled to the assets of private citizens in Iceland,” in referring to a $5.44 billion loan that Iceland would be taking on.
–Incredible how Facebook is seemingly leaving MySpace in the dust as MySpace lays off 300 of 450 employees outside the U.S. This is on top of 420 previously announced cuts in the States.
–Speaking of Facebook, it said its online-advertising system is taking off with triple the customers of last year. And of course the Iranian crisis is helping. All you hear about is the role of Facebook and Twitter.
–I was reading in Investment News a story about financial advisors and the use of Twitter…as in to my friends in the business, be careful! [Like stay away.]
–The story on Steve Jobs’ liver transplant hit as I was going to post last week and there wasn’t enough time to check it out further (as I like to do). Jobs did indeed have one and also returned to work, but the company continues to get well-deserved heat for its secrecy. Even Warren Buffett blasted Apple for its lack of transparency.
“The only billionaire I’ve ever had drinks with, Roger McNamee, and his Elevation Partners fellow investor Bono have hiked their contribution in Palm to 39 percent. Roger’s hanging with this one, even though Palm reported a loss of $506 million in its most recent quarter. [Roger’s been too successful in his career for him to fail. I may have to stick Palm on my idea board for 2009, which is rather empty right now.]”
Palm’s shares closed at $3.21 on 12/26/08 and, of course, I told you subsequently that I stupidly didn’t take my own advice and buy a few. This Friday, Palm shares hit $16 as it reported better-than-expected results for its fiscal fourth quarter, even though its new Palm Pre smartphone minimally impacted the numbers as it just hit the market.
–For the first time since 1996, Morgan Stanley is the No. 1-ranked mergers and acquisitions adviser thus far in 2009. Goldman Sachs, first since 2005, is now No. 2.
–Money manager Mario Gabelli paid himself $46 million last year. Over the past ten years, Crain’s New York Business calculates it’s more like $900 million in cash and dividends. The controversy is over how much Super Mario earns compared to the size of his firm, Gamco, which only has $18.5 billion under management. BlackRock, for example, with $1.3 trillion (before the Barclays acquisition), paid CEO Laurence Fink $21 million last year.
Now Mario gets all in a tizzy when folks make comparisons like this, saying that 98% of shareholder votes were cast in approval of his compensation package when last voted on two years ago, yet at the same time he fails to mention that he controls 95% of the company’s voting stock.
–Phil W. passed along a piece on the fund-raising game. According to the Palm Beach Post (Fla.), “Only two of a dozen well-known charities that hold annual fund-raising galas in Palm Beach reached their goal.” The American Red Cross Ball, for example, raised $800,000 vs. $1.1 million in ’08. [Of course this is Madoff territory.]
–Speaking of Madoff, he’s being sentenced on Monday, while wife Ruth apparently reached a settlement with the feds whereby she is giving up $80 million in assets, and retaining just $2.5 million in cash.
–Elsewhere in Dirtball Nation, R. Allen Stanford is in jail this weekend while his bail is being reviewed, Mr. Stanford being appropriately deemed a flight risk.
–Kimberly-Clark is cutting 1,600 jobs, or 3% of its global work force, but doesn’t plan on closing any plants.
–Last summer, seven of Broadway’s 39 theaters were dark during the summer. By the end of July, the figure will be 19, even after a record season of $943 million worth of tickets. But fret not, because the fall and winter look better, and for the remaining shows this summer, there is always the spillover effect.
–The Late Show With David Letterman beat the Tonight Show for the first time in more than three years last week.
–Talk about a stupid move, the Oscars is expanding from five to 10 nominees for Best Picture in an attempt to juice ratings and open up the process to more popular movies, instead of the small independent flicks that have been garnering many of the nominations in recent years. It’s like all the youth sports leagues these days. Everyone gets a trophy.
Or as 35-year academy member Robert Solo, a producer, told the Los Angeles Times: “It just eviscerates the whole value of the award. They did this because they’re not getting the television ratings. Is this what the academy is about? They’re worried the program would be canceled, but that’s not why the academy was created. This is merchandising. This is not award giving.”
–Ryanair CEO Michael O’Leary continues to look for ways to keep fares down, and/or raise revenues through unconventional means. The latest proposal is for passengers to carry their bags all the way to the tarmac beside the aircraft, thus eliminating baggage handlers; savings for which would supposedly be passed on. Under the plan, the passengers could then take unlimited carry-on baggage for free. Other details, such as what to do with skis, have yet to be worked out.
Iran: As the week ended, positions hardened; in both Iran and the international community. President Ahmadinejad, feeling emboldened and having the support of the Supreme Leader, Ayatollah Khamenei, scolded President Obama. Responding to Obama’s harsher tone, that he was “appalled and outraged” by the crackdown on protesters, Ahmadinejad said:
“Mr. Obama made a mistake to say those things…our question is why he fell into this trap and said things that previously (former President George W.) Bush used to say….
“I hope you avoid interfering in Iran’s affairs and express your regret in a way that the Iranian nation is informed of it,” said Mahmoud. [Reuters]
Later, a senior cleric said some protest leaders should face execution.
For his part, Obama called on the Iranian government “to stop all violent and unjust actions against its own people,” and emphasized the rights of the people there.
“Their bravery in the face of brutality is a testament to their enduring pursuit of justice. The violence perpetrated against them is outrageous.”
Earlier, Obama had said, “No iron fist is strong enough to shut off the world from bearing witness to peaceful protests of justice. Those who stand up for justice are always on the right side of history.”
Obama has been careful not to recognize Ahmadinejad’s government as the rightful victor, but at the same time this will inevitably be the case. However, the White House is recognizing any plans for engagement are not in the immediate future.
Obama: “The most important thing for the Iranian government to consider is legitimacy in the eyes of its own people, not in the eyes of the United States.” As the Washington Post editorialized, “As urgent as it is to address the threat of Tehran’s nuclear program, the United States and its allies must support Iran’s popular movement as long as it has life.”
So what of the movement? One of the three opposition candidates took himself out of the protests, but the other two, Karrubi and Mousavi, are at last word holding strong, though late Friday it appeared Mousavi was weakening his stance. To a large extent, the crackdown is working.
Karrubi, in an open letter, said, “You know well that those who support Ahmadinejad are those who promote a backward, Taliban version of Islam, something that is against the views of Imam Khomeini.”
Mousavi, while admitting he is being increasingly isolated, such as in 70 academics who met with him were immediately arrested after, told his followers, “The revolution is your legacy. To protest against lies and fraud is your right.”
Meanwhile, Rafsanjani continues to try to muster support to dislodge Ayatollah Khamenei, Rafsanjani having bankrolled Mousavi’s effort. At first he was told by Khamenei he, Rafsanjani, wouldn’t face prosecution, but then five relatives of his were detained. Hundreds of Mousavi supporters have been arrested. Somewhere around 20 have been killed.
The Guardian Council ruled out a new vote, saying there were no major irregularities, even though one survey showed there was well in excess of 100% turnout of eligible voters in some provinces. At the same time, 105 of 290 members of parliament blew off Ahmadinejad’s victory party.
Robert Kaplan / Washington Post
“Iran is so central to the fate of the Middle East that even a partial shift in regime behavior – an added degree of nuance in its approach to Iraq, Lebanon, Israel or the United States – could dramatically affect the region. Just as a radical Iranian leader can energize the ‘Arab street,’ an Iranian reformer can energize the emerging but curiously opaque Arab bourgeoisie. This is why the depiction of presidential candidate Mir Hossein Mousavi as but another radical, albeit with a kinder, gentler exterior than President Ahmadinejad, completely misses the point.
“As in the former Soviet Union, change in Iran can come only from the inside; only an insider, be it a Mousavi or a Mikhail Gorbachev, has the necessary bona fides to allow daylight into the system, exposing its flaws. Only a staunch supporter of the Islamic Republic such as Mousavi would have been trusted to campaign at all, even as he is now leading a democratic movement that has already undermined the Brezhnevite clerical regime. It is unfinished business of the Cold War that we have been witnessing the past few days. The Iranian struggle for democracy is now as central to our foreign policy as that for democracy in Eastern Europe in the 1980s.”
Lastly, I’ve been writing about the impact of women on Iran, and the Middle East in general.
Anne Applebaum / Washington Post
“(There) is a connection between the violence in Iran over the past week and the women’s rights movement that has slowly gained strength in Iran over the past several years.
“In the United States, the most America-centric commentators have somberly attributed the strength of recent demonstrations to the election of Barack Obama. Others want to give credit to the democracy rhetoric of the Bush administration…But the truth is that the high turnout has been the result of many years of organizational work, carried out by small groups of civil rights activists and above all women’s groups, working largely unnoticed and without much outside help….
“(At) the heart of the ideology of the Islamic Republic is its claim to divine inspiration: Its leadership is legitimate, as is its harsh repression of women, because God has decreed that it is so. The outright rejection of this creed by tens of thousands of women, not just over the past weekend but over the past decade, has to weaken the Islamic Republic’s claim to invincibility, in Iran and across the Middle East. The regime’s political elite knows this well: It is no accident that the two main challengers to President Ahmadinejad….promised to repeal some of the laws that discriminate against women, and it is no accident that the leading challenger, Mir Hossein Mousavi, used his wife, a political scientist and former university chancellor, in his campaign appearances and posters….
“The regime may succeed. Violence usually succeeds, at least in the short term….But regimes that repress the civil and human rights of half their population are inherently unstable. Sooner or later, there has to be a backlash. In Iran, we’re watching one unfold.”
Reader Kirk N. shared the text comments of an Iranian woman in Tehran, who is a cousin of a friend of Kirk’s.
“I am sure it takes time but soon this regime will be gone forever.” Light a candle.
Israel: Watching Israeli Prime Minister Benjamin Netanyahu the other day on “Meet the Press,” I was reminded of a description of him that he is “scarily smart.” No doubt, Mr. Netanyahu is brilliant, pure and simple. Whether he is right or wrong, though, is always subject to debate.
Israel has two major concerns these days, leaving out the threats posed by Hamas and Hizbullah, those being Iran’s nuclear weapons program and its relationship with the Obama administration. Regarding the former, it just seems inevitable to your editor that Israel will do what it has to do to set Iran’s program back at least three years by targeting known facilities within the next six months, while at the same time Netanyahu deals with Washington on the settlements issue.
The White House is adamant that Israel cease all settlement activity, including in Jerusalem, while Netanyahu says “natural growth” must be permitted, plus Jerusalem is off the table in this regard. It’s gotten so testy that the prime minister canceled a meeting in Paris with U.S. envoy George Mitchell. French President Nicolas Sarkozy echoed Obama’s demand that further settlement construction must end.
[Separately, the White House announced its ambassador to Syria would return, after being pulled four years ago, as part of the growing outreach in this sphere.]
James Kirchick, an editor at The New Republic, had some of the following thoughts in a New York Post op-ed.
“[Jews rewarded Obama with nearly 80% of their votes, but] Just six months into the new administration, however, it is becoming increasingly clear that those who harbored suspicions about Obama’s approach to the Middle East had good reason to be worried. A confluence of factors – including his administration’s undue pressure on Israel, a conciliatory approach to authoritarian Muslim regimes, and the baseless linkage of the failed ‘peace process’ to the curtailment of the Iranian nuclear program – point to what could become ‘the greatest disagreement between the two countries in the history of their relationship,’ as Middle East expert Robert Satloff recently told Newsweek….
“Obama’s strategic worldview assumes that once the Israeli-Palestinian conflict is resolved, other problems in the Middle East will be easier to fix, if not solve themselves….
“By establishing this connection, the fate of the entire region thus hinges upon the resolution of a problem that hasn’t had a solution for over six decades. This is an awfully convenient view for those who enjoy the status quo, which is why so many Arab despots cling to it, and it’s discouraging to see the Obama administration joining them….
“Unfortunately, the President seems to be paying no domestic political price for turning on Israel. Given the historic support that the American public has shown for the Jewish State, this is in and of itself a disturbing sign. But when an American administration’s rhetoric and diplomacy render Israel the obstinate actor and portray its supposed recalcitrance as the main obstacle to peace, public opinion will follow.
“The percentage of American voters who call themselves supporters of Israel has plummeted from 69% last September to 49% this month, according to the Israel Project. Meanwhile, only 6% of Jewish Israelis consider Obama to be ‘pro-Israel,’ a Jerusalem Post poll found, pointing to a disturbing gulf between the two nations. There are even signs of rising anti-Semitism, as a survey by Columbia and Stanford professors found that 32% of Democrats blamed Jews for the financial crisis.
“Obama is turning America against Israel, for what exactly? The false hopes of improved relations with Arab nations and a nuclear-equipped Iran. That is not what he promised in his campaign, and neither a fair practice or a fair trade.”
Iraq: June 30 is the deadline for U.S. troops to vacate the major cities and violence has ratcheted up in a big way, with two separate attacks in the past week, one in Kirkuk, the other in Sadr City, claiming over 70 lives each.
North Korea: So what is Pyongyang going to do on the Fourth of July? Will it launch a ballistic missile towards Hawaii? If so, one hopes it boomerangs back and takes out Kim Jong-il, but this would be asking too much. This week, the North said that if the U.S. attacked, there would be a “fire shower of nuclear retaliation.” Hardly. But at the same time the U.S. and its prime allies in the region, Japan and South Korea, can’t allow this crisis to go on too much longer. The latest UN Security Council resolution, for example, allows for inspections of North Korean cargo ships suspected of carrying weapons, but it will be ineffective since the ship’s captain has to grant permission first. China, for example, while expressing “serious concerns,” also insists on negotiations before any hostile or aggressive activity on our part. Meanwhile, 26-year-old anointed successor Kim Jong Un has apparently been placed in charge of an expanded Security and Spy Agency that includes the 100,000-person border police force.
Pakistan: The military claims to have killed 3,500 militants in its offensive against the Taliban and al-Qaeda, though you can probably discount this by at least half, but then the government totally telegraphed that they were launching an offensive to take out Taliban leader Mehsud, the man said to be responsible for Benazir Bhutto’s assassination. You’d think they’d try to do this in secret, wouldn’t you? But noooo. Mehsud was given time to flee his hideout. However, days later, the largest U.S. drone attack to date narrowly missed him, though it killed up to 80, many of the victims being civilians.
Also, there are new fears that the Taliban is moving its operations into the south of the country, like in Punjab, while at the same time there is an encouraging development; that being the emergence of citizens’ militias that are increasingly taking action into their own hands in trying to regain control of their towns. [Similar to the Iraqi Awakening movement.]
Meanwhile, a leading al-Qaeda figure said his group would use Pakistan’ nuclear weapons against the West if it were able to gain control of them, not that we didn’t already know this, but added al-Qaeda would be willing to “accept a truce of about 10 years’ duration with the United States if Washington agreed to withdraw its troops from Muslim countries and stopped backing Israel and the pro-Western governments of Muslim nations.” [AP] Surprised they didn’t ask for LeBron James while they were at it.
Lebanon: Saad Hariri is slated to become the next prime minister, and, curiously, Hizbullah has not repeated its demand for a veto since right after the election.
Russia: In a mildly positive development, Russia’s Supreme Court overturned the acquittal of three men accused of killing journalist Anna Politkovskaya in 2006. The court ordered a retrial for all three. Supporters of Politkovskaya, a critic of the Kremlin, have long argued there was government involvement in her death. The problem is the actual killer has still not been caught and campaigners want those who ordered the murder to be held responsible as well.
And, the leader of Russia’s Ingushetia region was critically wounded in an assassination attempt that took three other lives, a blow to Kremlin efforts to stabilize the Caucasus. President Medvedev called it an “act of terror.”
Ingushetia is a predominantly Muslim region with cultural ties to Chechnya, so Chechen President Ramzan Kadyrov, one of the truly vile people on the planet, has vowed revenge for the attempt against his friend, Yunus-Bek Yevkurov. Kadyrov, speaking in the Ingushetia capital, said, “We will conduct our investigation in line with the law of the mountains and our revenge for Yunus-Bek Yevkurov will be ruthless.” You can count on that. [Moscow Times]
Kyrgyzstan: Four months after the government here ordered the closure of a U.S. air base, an agreement was reached to at least allow the airport to be used as a transit point for non-lethal military supplies. The deal is important because there were well-founded fears the U.S. would lose full use of a facility critical to the efforts in Pakistan and Afghanistan, Kyrgyzstan being a short flight from both. There were 6,370 flights from the base in the past year.
Italy: The revelations into Prime Minister Silvio Berlusconi’s private life are coming fast and furious, including one where he allegedly entertained “about 20 women, including two lesbian escort girls, until dawn during a private party at his house in Rome.” [Lucy Bannerman / London Times] Patrizia D’Addario, the prostitute who claims to have footage of her encounters with Silvio, said, “It felt like a harem. And there was only one sheikh. Him.” At least 19 women have been interviewed by prosecutors investigating a possible prostitution ring run by a businessman tied to Berlusconi.
For his part, the prime minister is now admitting that he may have made a few mistakes with some guests.
Meanwhile, some of the prostitutes have had their homes broken into or cars trashed since the investigation began.
But wait…there’s more! Berlusconi allegedly told Ms. D’Addario once, “I know of a girl who no longer believes in men. I will make her believe. I will take her in my private jet.”
France: In a speech to a joint session of parliament at the palace of Versailles, the first such occasion in more than 130 years, President Sarkozy focused primarily on the economy and proposals to shore up public finances. But he also backed a plan to ban the burka, or face-covering veil, which some politicians equate with female oppression. Sarkozy said the burka was “not welcome in France.”
“In our country, we cannot accept that women be prisoners behind a screen, cut off from all social life, deprived of all identity. The burka is not a religious sign, it’s a sign of subservience, a sign of debasement – I want to say it solemnly. It will not be welcome on the territory of the French Republic.” He received extended applause.
China: Aside from the issues the government has with Google, Beijing is insisting after all that computer manufacturers ship PCs with the controversial filtering software, after waffling on the subject at the time I posted my last review. Critics say the Green Dam-Youth Escort program, sold by a Henan outfit, will be used to tighten censorship. It’s interesting, though, how vocal some of the critics, internally, have become, including the artist who designed the “Bird’s Nest” stadium for the Olympics.
Zimbabwe: Prime Minister Morgan Tsvangirai, once badly beaten by President Robert Mugabe’s thugs as leader of the opposition, has been defending the president in various forums. Addressing 1,000 Zimbabwean exiles in London, Tsvangirai was booed off the stage. At least he admitted that land reforms where white farmers were forced from their land had been a “disaster.”
–When the story hit that South Carolina Republican Gov. Mark Sanford was hiking the Appalachian Trail, as an outsider I could see him wanting to take a little break, though I assumed that despite the stories to the contrary, someone had to be able to reach him in the event of an emergency. No one, I mused, could be that irresponsible. Boy was my thinking off base on about a hundred different fronts. This guy is truly a whacko dirtball. And as I go to post, he’s insisting he won’t step down. Plus, of course, like all these jerks, of which there are way too many these days, Sanford wants our forgiveness. As Dick Vitale says, “Are you kidding me?!” His wife is absolutely nuts if she takes him back.
I mean, where to begin with this classic charlatan? I’d throw him in jail for using taxpayer funds last year for a trade mission to Argentina and Brazil where he was shacking up with 43-year-old divorcee, Maria Belen Chapur. Of course now he’s promised to repay part of the $9,000 cost.
“While the purpose of this trip was an entirely professional and appropriate business development one, I made a mistake while I was there in meeting with the woman who I was unfaithful to my wife with.”
This is the same guy who made a big deal out of refusing to take stimulus money.
Andrea Peyser / New York Post
“Looking as if he had just stepped out of a skin-cancer ad, and sounding like a pitchman for cut-rate Cialis, South Carolina’s ultra-tanned, oversexed and decidedly unrepentant chief executive, Mark Sanford, yesterday stood up before the nation – and refused to get to the point.
“After disappearing for five days on an ‘adventure trip,’ or so he told his staff, Sanford issued a crazy, long-winded and dazzlingly unapologetic apology to everyone on the face of the Earth – with the possible exception of palmetto bugs and atheists.”
And after apologizing to “people of faith across South Carolina and, for that matter, across the nation,” Andrea Peyser wondered…
“So what had he done? Shot an endangered polar bear? He completely buried his lead.
“Sanford gathered us together to say that he took that proverbial roll in the hay not once. Not twice. No. With his four kids at home and his wife managing his campaigns, Sanford developed a relationship with a ‘dear, dear friend from Argentina.’ A married lady he’d known for eight years.
“But when all was said and done, the governor of South Carolina gave himself a pass. Or, rather, he claimed that God gave him one!
“Sanford said, with complete assuredness, that’ God’s law is designed ‘to protect people from themselves….It’s not a morally rigid list of do’s and don’ts just for the heck of do’s and don’ts.’
“We have McGreevey and the fine rest stops of the Garden State. Spitzer and ladies of the evening. Paterson and anyone he can talk into the Holiday Inn.
“But Sanford earns a special spot in the Horny Governors sweepstakes.”
[Ed. or Horny Senators…seeing as that list would include John Edwards, John Ensign, David Vitter and, from the other side, Larry Craig.]
Jane Ridley / New York Daily News
“Rising GOP or Democrat star? It doesn’t really matter. Sanford is just another sleazy pol who has dumped on his wife and supporters from a dizzying height.
“He should head out to the Appalachian trail and take a long walk off a short cliff.”
Throughout his news conference, Sanford never once mentioned that he left the state leaderless.
State Sen. John Land, leader of South Carolina’s Senate Democrats, commented:
“The position he’s taken the whole time he’s been in office is, ‘I’m smarter than the rest, I’m more religious than the rest, I’m more godly than the rest. I just don’t see how he can come back and be a sinner like the rest of us and function.”
But Sen. Land, Sanford does have that “sparking thing” going for him.
Lastly, the Wall Street Journal’s Gerald Seib sums it up best.
“In American politics, is having an affair a mortal sin? Probably not….American voters have grown a bit numb to politicians’ sexual indiscretions. They are prepared to forgive adultery and have done so numerous times.
“But there are two related failings they find much harder to forgive. The first is hypocrisy, and the second is abuse of office in pursuit of a sexual escapade. Ultimately, those now are the two mortal sins for which absolution is much harder to find – and that is turning out to be Mr. Sanford’s real problem.”
–I totally agree with the conclusions of the Washington Post editorial board that Nevada Republican Senator John Ensign can’t just say he had an affair and then act like it’s business as usual.
“(There) should be further investigation of the circumstances surrounding Mr. Ensign’s acknowledgement that he had an affair with his one-time campaign treasurer. Aside from the appropriateness of having a sexual relationship with a subordinate (a firing offense in much of the private sector), questions exist about whether Mr. Ensign violated the Senate’s rules of conduct and federal election law….
“Among the issues are whether the dismissals of the woman and her husband, once a top Ensign aide, were tied to the affair and, if so, could constitute sexual harassment; whether improper severance payments were paid to the woman or her husband; and what the circumstances were behind the hiring of the couple’s son by the National Republican Senatorial Committee chaired by Mr. Ensign.”
Plus Ensign has hinted he was blackmailed, but never publicly said so. Explain yourself, senator.
–In his Washington Post op-ed praising Barack Obama for his handling of the Iranian crisis, Richard Cohen nonetheless concluded with an interesting observation.
“The President of Cool seems emotionally disconnected from events in Tehran – not unconcerned but not particularly upset, either. This is a quality that will cost Obama plenty in coming years. He can acknowledge your pain, but he cannot feel it.”
–The situation with the New York State Senate continues to degenerate, or as a Daily News column started off, “Albany’s dysfunctional follies veered into the inane on Thursday: Gov. Paterson cut off some Senate pay, a lawmaker branded the governor a ‘coke snorting’ womanizer and the Senate – once again – accomplished nothing.”
“Hot-headed Sen. Kevin Parker” not only accused Paterson of snorting cocaine, he also labeled him a “staff-banging governor.” Unreal.
The Senate has been paralyzed since the June 8 defection of two Democrats to the Republican Party, with one, Hiram Monserrate, then switching back to the Dems, thus leaving the Senate deadlocked at 31-31.
Speaking of Monserrate, appearing on Al Sharpton’s radio show last weekend, Monserrate said, “You know, I’m never gonna compare myself to anyone in the biblical context,” and then…he did.
“I remember Jesus himself, when he saw that in the temple there were merchants setting up shop, [he] began to turn over a few tables along the way…to get the people’s business done right.” [New York Daily News]
Editorial / New York Post
“Obviously, responsibility for the current mess falls on many shoulders – including just about everyone in Albany who claims to be a ‘leader’….
“But let’s be clear on one point: The long-term damage to New York – its institutions, its economy and its future – is palpable and profound.
“The Empire State? In your dreams.”
–In a survey for the International Herald Tribune, by two to one, people in Spain, Italy, France, Britain and the United States believe their leaders should reduce or eliminate their vacation time this year in response to the economic crisis. Germans, however, were split on whether Chancellor Merkel is entitled to her normal time off. Half in Germany also believe the economy would have no impact on their own vacation plans, but in the other five, two-thirds said it would. [John C. Freed / New York Times]
–Funny story for you Sunday talk show junkies. The New York Post’s Page Six reported that “Meet the Press” host David Gregory was furious MSNBC’s Joe Scarborough had accepted a gig on ABC’s “This Week.” As one network insider asked, “What is David Gregory so afraid of?” Talk about no class. Tim Russert wouldn’t have handled it this way. Look at Pat Buchanan or Bill Bennett, for example. They work for MSNBC and CNN, respectively, but are all over the place, as they should be. [Scarborough pulled out.]
–My buddy Mark R. has been trying to convince me I should be focusing on sun spots as being the key determinant in the globe’s weather, so I note a piece by Anthony R. Wood from the Philadelphia Inquirer last week which read in part.
“Sunspots…have been all but missing the last two years. Typically, the more spots, the more energy the sun gives off.
“What effect this might have on world climate is unclear. Earth’s atmosphere and the sun have had a long and complex relationship, and scientists acknowledge they still are not sure precisely what goes on between them.
“But changes in the deceptively volatile star evidently do have some impact on the planet’s weather…
“A sunspot lull correlated with the Little Ice Age – from the 14th through 19th centuries – when ‘Greenland’ became a misnomer.
“Recently, the sun has been ever-so-subtly weaker than usual. Last year, 266 days were spot-free, said David Hathaway, a NASA expert in Huntsville, Ala., and not a single spot was detected in August. And while 2008 was one of the warmest years on record worldwide, it was the coolest since 2000.”
NASA says activity will pick up, but admits they are in uncharted territory.
“To put the last two years in perspective, Hathaway says that sunspots were absent in 31 of the 70 years from 1645 to 1715, in the cold heart of the Little Ice Age, with none sighted from 1661 to 1671.
“The infamous ‘year without a summer,’ 1816, coincided with another lull from 1798 to 1825. But that chilly summer followed the cataclysmic eruption of Tambora in Indonesia, which cast a sun-screening veil across the atmosphere.”
Anyway, is sunspot activity, or lack thereof, a factor in our weather? Perhaps. But the more important factor, and most easily verifiable, is the jet stream, and, quite frankly, I’m tired of it…it’s why my area has had so much rain, a shower shy of a June record at last check. And that’s a memo.
–Staying with the extraterrestrial theme, I’ve always wanted us to focus on a manned mission to Mars as a way of uniting the world (or at least giving us something different to talk about around the water cooler and in our neighborhood taverns). My idea was to start by sending snowboarders, seeing as they appear to have the right attitude.
And so I noted with interest the thoughts of astronaut Buzz Aldrin in an interview in the Sunday Times Magazine.
“We’ve been concentrating on the shuttle [since we last walked on the moon], the space station and laying the groundwork for returning to the moon. The disturbing part is that, all this time, Russia has been concentrating on Phobos, a moon of Mars, and a number of us have recently realized just how significant that would be as a stepping stone to Mars.”
“Yes, much more. It’s much more terrestrial. It has a thin atmosphere and a day/night cycle that is very similar to ours. It has seasons. Russia perhaps is still entertaining the possibility that the moons of Mars might have access to ice or water.”
–Finally, this past week I noted the 40th anniversary of the death of entertainer Judy Garland in my Bar Chat column, which proved to be rather timely given the sudden passing of Michael Jackson, yet another troubled star. [For you younger folks, Garland was also a giant of the stage who had major drug issues.] I’ll discuss Jackson in some detail in that other space, but just a few thoughts for now.
It was a shame Farrah Fawcett got knocked off the front page. As for Michael, I loved his work with the Jackson 5, as well as his initial solo efforts, and last year while tossing a bunch of old LPs, I knew enough to save my copy of “Thriller.”
But one thing that struck me in my travels around the world the past ten years was how big a figure he was overseas. In more than a few pubs, his name would work itself into the conversation; granted, not always for the best reasons, but in the end the other guy fell back on Jackson\’s music.
From an editorial in the New York Post:
“Whether, ultimately, he was as pioneering a musician as such rock legends as Elvis Presley and John Lennon will be for rock historians to debate.
“But there is no doubting that, once upon a time, no star shone as brightly as Michael Jackson.”
Jackson does indeed stand with the giants of his industry, that\’s not up to debate, and, yes, he was a bridge between black and white. At his best, he was a genius. At his worst, however, he was a freak. It’s unfortunate his legions of fans didn\’t get to see one last show in London.
Returns for the week 6/22-6/26
Dow Jones -1.2% [8438]
S&P 500 -0.3% [918]
S&P MidCap -0.2%
Russell 2000 +0.1%
Nasdaq +0.6% [1838]
Returns for the period 1/1/09-6/26/09
Bears 28.7 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
