This week the dollar was front and center so let’s start with that. As in a report from the UK’s Independent newspaper that the Gulf states were in secret talks to replace the greenback as the main currency for their oil trades. According to the paper, Saudi Arabia and the United Arab Emirates were in a corner somewhere speaking to Russia, China, Japan and France. The Saudis said the story was “absolutely inaccurate,” and Kuwait, part of the Gulf Co-operation Council, said “We have never discussed or proposed” replacing the dollar with a basket of currencies including the yen, China’s yuan, the euro and the Gulf Council’s new unified currency that is in the works.
That was one issue for the dollar. Some of the others were perhaps best summed up in the following, which I’ll discuss on the other side.
“In a storm [such as in last fall’s financial panic], the dollar was thought to be less risky than other investments. But as this overall global risk aversion has ebbed, the risk calculus has turned and the dollar itself has become more dangerous to hold than nondollar investments.
“The world’s investors can also see the arc of overall U.S. economic policy, which is becoming less inviting to global capital. Higher taxes on capital gains and income; new entitlements that will require trillions of dollars in new U.S. borrowing; a wave of new anti-trust enforcement, more telecom regulation (‘net neutrality’) and trade protection, new restrictions on energy production, easier rules for union organizing, and so much more. All of these are signals that U.S. growth is likely to be slower than it otherwise would be, and that the returns on investing in America will be lower than they should be. This too is a reason to sell greenbacks.
“For many in the Washington establishment, alas, the falling dollar is considered a virtue. They believe it will help U.S. exports and therefore reduce the trade deficit and bring back manufacturing jobs. But as (economist) David Malpass argues, capital flows dwarf trade flows as a source of wealth creation. The only way to build wealth and create more high-paying jobs over time is through the productivity gains that come from greater investment and innovation. As the dollar falls and capital flees the U.S. for other countries, those global competitors reap its benefits and become more productive and relatively more prosperous.
“The more immediate danger – in the coming months – would be if the fall of the dollar becomes a rout. This could cause a spike in commodity prices, such as oil, that are traded in dollars and jeopardize the nascent economic recovery. But even if there is no dollar panic, the volatility of currency markets is distorting investment decisions and creating more economic uncertainty. It could also lead to a round of competitive devaluations, as other nations try to placate their own domestic export constituencies.
“Washington may not care to notice, but the sell-off in the dollar is a daily global vote on U.S. economic policy. It is not a vote of confidence.”
So here are my thoughts. First off, the actual movements in the dollar, in the currencies that really matter such as the euro, have been minimal, far less percentagewise than you’d think given the hue and cry. The fall in the greenback has been orderly thus far. And, yes, it is helping the multinationals so it’s no mystery some shares have also gotten a boost, but I hasten to add the falling dollar certainly isn’t the main reason for the spectacular rally off the March lows in the equity markets.
But we’ve had debates like the one above for as long as I’ve been involved on Wall Street and I continue to maintain it’s mostly hot air.
This time, however, the cries from the dollar bears have credence in terms of our soaring deficits and administration fiscal policy, such as the coming new health care entitlement. These are indeed big concerns. The Journal is right…the current slide in the dollar is to an extent a vote of no confidence. And on this score the future does not look good.
I just don’t believe the dollar will go into freefall because central banks can not allow that to happen. Can it decline a bit more? Of course. But to those who pin their entire investment philosophy on the ups and downs of the currency, understand that China holds more $s today than one year ago. The world is not dumping dollars. It is, though, reallocating to a certain degree and with far more alternatives these days than we had, say, ten or twenty years ago, including in stocks, bonds and commodities, that’s bound to occur. But assuming the U.S. economy recovers, especially against some of the other developed nations, the dollar will stabilize, if not move higher. That’s my bottom line for the next 3 months, which is as far as I’m prepared to go. Should Israel attack Iran’s nuclear facilities, for example, the dollar will rally. When it comes to looking out beyond the next 3 months, I’m working on my forecast now, including on what, if any, deficit surprises we’ll see in 2010 and beyond, not that the administration will have had anything to do with a positive figure or two. Accidents do happen, you understand.
In the here and now, I have a new barometer. The Summit, N.J. downtown parking lot indicator. And it’s not good.
Employees who work here mostly use a multi-tiered lot, five levels. Just one year ago, if I went out in the morning and came back around 10:30, it would be impossible to find a spot. Six months ago if I tried to get a spot then, there might be a handful open as the recession was really biting. Today, when I seek a spot after taking a break for a jog, there is an entire level that is empty. And the rate of change has been startling. Seeing as downtown Summit now has 21 empty storefronts, with second and third stories once peopled by mysterious financial firms (read hedge funds), it’s a good microcosm from which to judge.
Not that the above is earth-shattering. Heck, it’s Stockbroker 101 (to use a term from the old days) that on your way to and from work you were taught to hone in on the parking lots of the businesses you passed to try to glean trends (especially with the publicly traded ones). It’s also Econ 101, and I can guarantee you all have the same stories in your own community. If on the other hand you do find a business where the lot appears to be filling up these days, you might want to do some quick research, and then pass the story on to me.
I’ll tell you a positive one. The other day upon my return from Ireland, my car service (this is not as good as it sounds) picked me up at Newark and we headed to the 4th level of the parking garage where he had parked the car. He’s always on the 3rd level. “Business seems to be picking up these days,” he told me. “I never have to park way up here.”
So that was an encouraging tidbit. I’ve also noticed that the Summit post office, which I look down on when I park my car in the garage at 4:50 a.m., has been opening up earlier again after cutting back hours drastically just six months ago. [The customer service windows, though, remain on their reduced schedule.] Nonetheless, a decent small sign not only of ‘less bad,’ but potential growth.
It was also encouraging that the ISM reading on the service sector hit 50.9 in September, better than expected and above the 50 dividing line, while weekly jobless claims fell for the 4th time in five weeks.
But as for the plight of the consumer, just as an emptying parking lot equates to job losses and reduced spending, it’s hard to see how the coming Christmas shopping season will be anything but lousy, or flat at best vs. last year’s dismal performance that in turn was the worst since the 1960s. The National Retail Federation estimates sales will be down 1%, even as September chain store sales, as reported this week, were up 1% by one barometer (including a nice 5.5% bump at Kohl’s over Sept. 2008).
I like what David Novak, CEO of YUM Brands (Pizza Hut, Taco Bell, KFC) said in a comment passed along by Josh P.
“First of all, I think we have to deal with the macro situation that everybody is competing in right now. I don’t think I’ve ever seen a softer U.S. consumer than what we are seeing today in my career. You’ve got unemployment almost 10%, all-in it’s about 17%, and surveys say 35% of consumers think they could lose their job in the next 12 months. Consumer confidence is weak. You know, people are saying that they are going to be cooking more at home. It’s the first time where I’ve actually seen research show that people are cooking more at home than what they say they intend to do.”
Business overall certainly isn’t helped by the ongoing shrinkage in consumer credit, seven straight months, whether it’s the consumer himself that is pulling back and/or his bank and credit card companies doing it for him. And this part is global.
So for reasons such as the above, Federal Reserve Chairman Ben Bernanke once again reiterated the Fed will keep rates low for “an extended period.” For now it’s all about getting employment back on track…inflation is a concern for down the road.
Overseas, I comment on interest rates below but a combined index on Euro manufacturing and service sectors hit 51.1 in September, solidly in growth mode (albeit slow), while German manufacturing rose 1.4% in August, though here, such as in the U.S., there are concerns that credit is still way too tight to allow a true recovery to blossom.
Back in the States some final thoughts. Public support for health care reform is back to 50/50, a slight improvement, as the Senate Finance Committee produced a bill that the Congressional Budget Office said would reduce the deficit over ten years, though most of us know this is a crock because it’s a new entitlement and aside from the costs that will invariably be higher than projected today, Republicans still ask, how is it really paid for? We know…higher taxes, but just say so. A key vote on the Senate proposal will take place this coming week, but we still have a long ways to go before President Obama, Nobel Peace Prize winner, is affixing his signature to actual legislation. At least if you’re the president, there is hope he’ll get something, while the rest of us just throw up our arms and say, “Whatever,” which was also found in a survey to be the most grating word or phrase. To me it’s “The president is about to make another appearance.”
[I strongly urge you to read my 10/9 “Wall Street History” piece on health care reform. I guarantee it will open your eyes.]
On the economy, the White House recognizes it needs to do more, including extending the home tax credit, which seems a certainty, more transportation spending (maybe…or just rework the existing $787 billion stimulus program to target more of same), and possible tax cuts (don’t get too excited).
Big picture wise, and thinking globally, it is all about rebalancing as Chairman Bernanke, Treasury Secretary Geithner and many of their foreign counterparts have been saying. Leaders in Japan, China and Germany, for example, know they need to increase consumer spending at home, which would open up markets for the likes of the U.S., which in turn needs to save more. America can no longer be the consumer of last resort (at least in theory).
Lastly, H1N1. Notice how I’ve scaled back my musings on this one. I think caution was appropriate months back, at least in terms of waiting to see if it was a potential game-changer. All I can tell you is that in my recent travels, I no longer see it that way. It’s just the flu, a mild variety, despite all the talk of a pandemic. If you normally take a flu shot, I’m assuming you’ll take one for this. Clearly children, we are learning, could be at risk. Otherwise, the government is taking the proper precautions, especially in keeping us informed.
–So much for the correction. Stocks soared on little news other than the fact the ISM service sector reading was better than expected and Alcoa reported solid earnings for the quarter. Not to belittle the aluminum king’s impact, but the only real positive take away was that its business in China is strong. On the week, the Dow Jones rose 4% to 9864, a new high for the year, while the S&P and Nasdaq both added 4.5%.
What have I been saying all year? Sentiment will trump fundamentals. There are many out there who still don’t get it. It’s why once again I am bang on with my forecast that the S&P 500 and Nasdaq would finish up 20% and 30%, respectively, with current year to date returns of 19% and 36%.
But the year isn’t over, is it? Don’t worry, I’m still as focused as ever on Iran, I just haven’t pulled the trigger yet. You can’t, until we see what happens with the new Oct. 25 deadline to open up the second facility to inspectors, details below.
And with earnings season beginning in earnest next week, we’ll see if there is more than bottom line improvement. We need some top line stories with actual revenue growth, or optimistic forecasts of same.
As for you gold bugs, the yellow metal having hit a few all-time highs, good for you. In fact, everything is up this year, big time. Stocks, bonds (particularly the junk variety), emerging markets, gold, silver, cubic zirconium, the price of beer…so everyone has something to brag about, a rare occurrence. [I wish I had been playing beer futures.]
It’s 2010 that would appear to be the real test and I’m not revealing my cards just yet.
–U.S. Treasury Yields
The European Central Bank and Bank of England left rates unchanged as ECB President Jean-Claude Trichet said “We are out of freefall, (though) we have to be cautious and we have to be prudent (about lifting rates too soon).” Australia’s central bank, however, created a bit of a stir in becoming the first G20 nation to raise rates over concerns that the Aussie economy, and housing market, were on the verge of picking up too much steam as a result of the country’s booming commodities sector as well as coming infrastructure spending, Australia being another example, like China, of a country that understood how to stimulate an economy in the first place.
–The estimated federal budget deficit for fiscal 2009 (ending 9/30) is now projected to come in at $1.4 trillion. Americans do things big. Take a bow.
–This was encouraging. The Conference Board reported that confidence among U.S. chief executives rose in the third quarter to the highest level in five years on expectations the recovery is indeed taking hold.
–And Canada’s unemployment rate fell for the first time in a year to 8.4 percent from 8.7 percent in August.
–California’s Association of Realtors projects median home prices in the state will rise 3% next year, which would be a further sign of stability, but also an example of my theory that once we bottomed (which might have been my predicted April-May time frame) we just scrape along the bottom for an extended period.
–As for commercial real estate and the talk of pending disaster, I have consistently said this is in no way remotely as important as the housing industry for one prime reason, the wealth effect. What the commercial real estate mess does impact, though, is access to credit for consumers and small businesses as banks (primarily of the small and regional variety) finally confront the issue and take their lumps. So this can impact the pace of any recovery, and gives fodder to the double-dip camp. I’ll have more on this in coming weeks as I gear up for 2010.
–The International Energy Agency raised its forecast for crude demand to 86.1 million barrels a day in 2010, up 1.7 percent from last month’s forecast, owing to “buoyant economic activity in more oil intensive emerging countries.” At the same time the IEA offered that “the outlook for 2010 is still fraught with uncertainty.”
–Exxon Mobil has agreed to pay $4 billion for a minority stake in an oil field off the coast of Ghana, though as analyst Fadel Gheit said, in acquiring a 23.5 percent stake in the project it’s further proof that “Exxon has to run harder just to stay in place” due to falling access to dwindling reserves, let alone issues of state control.
–Along the lines of the above, a UK Energy Research Council study says that not only is the era of cheap oil at an end, but the 10 largest oil producing fields in the world are all in decline, thus buttressing the arguments of the peak oil adherents, of which I’m one.
True, the oil companies have touted massive new finds this year, but it’s not as if the costs are minimal to then bring it up. Just as in the markets’ saying “the easy money has been made,” when it comes to oil, “the easy crude has been extracted.”
–According to the Energy Information Administration, the outlook for heating oil consumption in the Northeast is for demand to drop 2 percent (as well as 2 percent for the average household cost) due to a relatively mild winter; this as inventories already stand at a 27-year high. On the natural gas front, the savings are estimated to come in at 12 percent over last winter.
–Time to pat myself on the back for not wasting your time over the years with every little kidnapping or murder of a Nigerian oil worker. It seems at least for this week the rebels have laid down their arms. This was one of the most overblown stories of the past decade in terms of its impact.
–General Motors said vehicle sales in the first nine months of the year in China were up 55.6 percent from a year earlier, boosted by Beijing’s stimulus policies.
[GM also appears to have finalized the sale of its Hummer division to a Chinese company.]
–Deflation Alert: British Airways is introducing a two-year pay freeze for cabin crew, a freeze being a cut assuming overall prices rise just a smidge. Also, look for a crazy holiday travel season, particularly overseas, as strikes could be the order of the day.
–California was hoping to raise $4.5 billion from the sale of general obligation bonds to finance infrastructure projects but demand was such that the deal was cut to $4.14 billion, not a great sign. After the spectacular performance of the credit markets all of 2009, investors have finally started demanding higher yields in many instruments. Of course California’s weak credit rating didn’t help.
[In a March offering, investors received 5.85% on the 20-year bond and this week’s preliminary yield was down to 4.63%, before the state was forced to hike it to 5.00%.]
–The New York Times’ Julie Creswell had a scathing article on private equity firms, the scourge in many eyes of the financial crisis as they acquired what were perceived to be undervalued companies, mostly with massive amounts of leverage.
For example, Creswell writes of Simmons Bedding Company, the victim of seven acquisitions in 20 years, which will soon file for bankruptcy protection with bondholders standing to lose $575 million, while 1,000 employees are laid off.
“But Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it….
“Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years.”
Simmons itself is staggering under $1.3 billion in debt, compared with just $164 million in 1991, before “it began to become a Wall Street version of ‘Flip This House.’”
I hate writing about stories like this, truthfully, because I have friends on all sides of the Street, many of whom have profited mightily themselves in such deals. It’s just wrong, though. As Creswell adds, “From 2003 to 2007, 188 companies controlled by private equity firms issued more than $75 billion in debt that was used to pay dividends to the buyout firms.”
–According to a study by Britain’s National Health Service, five times more inpatients have died from blood clots than from MRSA and Clostridium difficile (an intestinal bacterium) combined. The deep-vein thromboses cases are easy to prevent, too.
–The head of the Federal Communications Commission warned that there is not enough room in the airwaves for the wireless “explosion” in wireless data traffic. “The biggest threat to the future of mobile in America is the looming spectrum crisis,” said Julius Genachowski, the head of the five-member FCC who took over in late June. “The problem is, many anticipate a 30-fold increase in wireless traffic.”
As an example, AT&T is overwhelmed with a 5,000 percent increase in wireless data consumption in just three years owing to those who own Apple’s iPhone.
I’ll tell you what the above really means. We are totally unprepared for a true national emergency. Let’s say there is a dirty bomb attack in Manhattan. You can forget trying to contact loved ones, let alone emergency services, should this occur.
–On a lighter note…Zagat’s says 157 restaurants have opened in New York this year, while 102 have closed. A bit surprising. Gramercy Tavern and Union Square Café, by the way, remain the most popular restaurants, while Le Bernardin, Daniel, Jean Georges and Per Se held the top four slots for food rating.
“Chinese-language financial websites carried the surprising news yesterday that shares in Wing Lei – the Cantonese name for Wynn – had soared as much as 90 percent.
“The headlines suggested a scorching debut for casino operator Wynn Macau’s HK$12.6 billion listing on the Hong Kong stock market.
“There was just one catch: shares in Wynn Macau only begin trading today.
“Instead, the company with the surging stock was Wing Lee Holdings, a manufacturer of electronic components for use in computers and telecom equipment whose shares closed at a 12-month high of 70 cents yesterday.”
Wing Lee had to issue a statement saying “the board is not aware of any reasons for such increases” in share price.
Wynn Macau did then come public and finished up a solid 6 percent. I didn’t see if Wing Lei was hammered when investors realized their mistake.
–The NFL’s television ratings are at their highest in 20 years, up 14 percent from 2008 after the first four weeks. Monday night’s Packers-Vikings matchup on ESPN was the most-watched show in cable TV history with 21.8 million viewers.
–Jay Leno’s ratings, however, have been plummeting. Since the official start of the television season, which began Sept. 21, he has finished in last place every night, after his strong start without the competition of new dramas. The network argues that since Leno will air originals 46 weeks a year, the real test is when repeats are being shown on other networks. If a surge doesn’t result then, well, Leno (and Jeff Zucker) are in trouble. I know I haven’t been watching like I did the first week, but that’s partly because it’s now baseball playoff time. [Speaking of which…Hey, Matt Holliday. Nice catch!]
–“Federal regulators issued final rules requiring airlines to test and disinfect the tap water served to passengers and used in plane lavatories…” If you even contemplate drinking airline tap water, you are lacking in intelligence, sorry to say.
–Looking for a new business opportunity? Try snail farming. According to a Reuters story, Bulgaria has become a leader in escargot production as demand, particularly from France, outstrips supply. After France, Bulgaria is also the second-leading producer of foie gras. But this year, 800 to 900 tons of snails – six times more than in 2008 – will be exported from Bulgaria.
And how many snails does a single breeder produce? 150. Personally, I had escargot just the other night, before reading of this, so I’ll toast the Bulgarians next time I partake.
–Meanwhile, in the United States, soybean farmers have received an additional $2.5 billion over the last four years due to the biodiesel industry’s demand for soybean oil. [High Plains Journal]
Afghanistan: Last Saturday was a stark reminder of the increasing toll for this bleak, and now 8-year-old, war as eight Americans were killed in a massive attack; this as the Obama administration continues to dither on General Stanley McChrystal’s request for more troops, up to 40,000 (there are reports he actually called for 60,000).
Most say the president has three choices: ‘Go all in,’ ‘Redefine the mission,’ and ‘A middle ground.’ Redefining the mission to focus solely on fighting terrorists does not seem likely from the statements the White House has been making in terms of ‘not abandoning the mission.’ Going all in also doesn’t seem likely, given opposition from many Democrats. So the guess here is Obama chooses a middle ground that will promise more troops, though not set an exact number, after the already ordered 68,000 are firmly established and results can be assessed. In other words, kick the can down the road a bit more to see what happens after the UN rules on the election, as well as to gauge the effects of the Pakistan government’s own vow to intensify the war against the Taliban in safe havens there such as South Waziristan. After Friday’s bomb attack in Peshawar that killed 49, the government’s job may have been made easier.
“Commanders in Chief can change their minds. George W. Bush waited too long to embrace the ‘surge.’ He had private doubts when the casualties also surged in 2007, but he gave the new approach a chance to succeed. Mr. Obama is blinking even before all the additional troops he ordered to Afghanistan have had time to deploy to the theater.
“Gen. McChrystal’s liberal critics also have very short memories. In 2003, Army Chief of Staff General Eric Shinseki clashed with his superiors by saying many more troops were needed to pacify Iraq. He became a Democratic hero and is now Mr. Obama’s Veterans Secretary. In this case, Gen. McChrystal has become a political target merely for taking at face value Mr. Obama’s order to fight the war properly.
“In an interview with Newsweek, Gen. McChrystal said he wouldn’t resign if the President rejects his request for more troops. If he were really trying to dictate policy, he’d have given a different answer. But we don’t think Gen. McChrystal should stay to implement a Biden war plan either. No commander in uniform should ask his soldiers to die for a strategy he doesn’t think is winnable – or for a President who lets his advisers and party blame a general for their own lack of political nerve.”
But the real issue could be the UN’s release of their final tally of the votes from the recent fraudulent election that threatens to keep President Hamid Karzai in office without a runoff. Peter Galbraith, who until recently was a special representative to UN Secretary General Ban Ki-moon for Afghanistan on the elections, wrote an explosive piece in the Washington Post. Basically, it’s sickening what transpired, especially given the costs the United States is bearing in both blood and treasure.
“Afghanistan’s presidential election, held Aug. 20, should have been a milestone in the country’s transition from 30 years of war to stability and democracy. Instead, it was just the opposite. As many as 30 percent of Karzai’s votes were fraudulent, and lesser fraud was committed on behalf of other candidates. In several provinces, including Kandahar, four to 10 times as many votes were recorded as voters actually cast. The fraud has handed the Taliban its greatest strategic victory in eight years of fighting the United States and its Afghan partners….
“(At) critical stages in the election process, I was (ordered) not to pursue the issue of fraud. The UN mission set up a 24-hour election center during the voting and in the early stages of the counting. My staff collected evidence on hundreds of cases of fraud around the country and, more important, gathered information on turnout in key southern provinces where few voters showed up but large numbers of votes were being reported. (Norwegian diplomat Kai) Eide ordered us not to share this data with anyone, including the Electoral Complaints Commission, a UN-backed Afghan institution legally mandated to investigate fraud. Naturally, my colleagues wondered why they had taken the risks to collect this evidence if it was not to be used….
“President Obama needs a legitimate Afghan partner to make any new strategy for the country work. However, the extensive fraud that took place on Aug. 20 virtually guarantees that a government emerging from the tainted vote will not be credible with many Afghans.”
So is it any wonder that opponent Abdulah Abdullah has called for an inquiry into the UN’s role in the vote? Abdullah specifically mentions Kai Eide and whether he is neutral, while praising Galbraith for his bravery in “standing up for transparency.” A result is expected to be announced any day now.
Lastly, the Washington Post’s David Ignatius commented on the emerging “Obama Doctrine.”
“In Obama’s formulation, America has regained its authority because it has returned to the global framework that the Bush administration disdained. Obama said this plainly in his Sept. 23 speech to the United Nations General Assembly. He talked about how the United States has ‘re-engaged’ the world by dealing with issues that ‘fed an almost reflexive anti-Americanism.’ Obama listed his deliverables – banning torture, ordering the closure of Guantanamo, withdrawing from Iraq, embracing negotiations on climate change and even paying America’s bills at the United Nations.
“Now it’s your turn, was Obama’s corollary message. For nations that defy international norms (read: Iran, North Korea), Obama warned of isolation: ‘America intends to keep our end of the bargain,’ he said. ‘Those nations that refuse to live up to their obligations [as signatories of the Non-Proliferation Treaty] must face consequences.’
“You can find similar language in almost every major address Obama has given….When he disclosed Iran’s secret enrichment facility on Sept. 25, he blasted Tehran for ‘refusing to live up to [its] international responsibilities.’
“The vision of a global rule of law exemplifies what we are coming to understand as Obama’s way of thinking – optimistic, rational, practical. But like the mantra of ‘change’ that got him elected, it is an empty vessel waiting to be filled with the details of real life. It’s not a strategy. It’s a formula for how to solve problems – which is not the same as global leadership.
“Obama hasn’t applied this doctrine directly to Afghanistan, but let me briefly try: The international community has made a commitment, through the United Nations and NATO, to help rebuild Afghanistan. That mission is limited, but it does carry continuing responsibilities. Training the Afghan army and promoting security is one; supporting economic development and better governance is another; encouraging Afghan political reconciliation is a third.
“The notion that the United States can break with that mission – and opt for a more selfish counterterrorism strategy that drops the rebuilding part and seeks to assassinate America’s enemies with Predator drones from 10,000 feet – would not fit well with any reading of the Obama doctrine. That approach, to be blunt, would be lawless.”
Iran: We’ve already entered familiar territory. President Obama, in announcing that the West knew of a second secret uranium enrichment facility at Qom, said Iran had two weeks to open it up to International Atomic Energy Agency inspectors. But the IAEA’s Mohamed ElBaradei traveled to Tehran and said inspectors will be allowed in Oct. 25, three weeks, and in this game an extra week can be crucial when it comes to hiding stuff. At the same time, the White House, as well as its partners Britain, France and Germany, are still on record as giving Iran until year end to comply with existing UN Security Council resolutions or face increased sanctions.
So, as some have been arguing recently, including even Sen. John McCain, it appears we are heading to an era of “containment” because actually stopping Iran from obtaining the bomb seems illusory at this point.
This comes as various stories were leaked that Iran had acquired the know-how to produce the bomb, and that Israeli Prime Minister Benjamin Netanyahu had traveled to Moscow in his recent not so secret mission to expose a list of Russian scientists that Israel felt were aiding Iran’s weapons program. “The point (was) not to embarrass Moscow,” a source told the London Times, “rather to spur it into action.”
But this isn’t a surprise. Russian scientists have been involved in Iran’s nuclear program for years [just look at Bushehr]. I still maintain that Netanyahu told Vladimir Putin and Dmitry Medvedev that Israel was going to be forced to act and that if Russia would just delay delivery on the S-300 sophisticated anti-missile system it has promised Tehran, Israel wouldn’t stand in the way of any future Russian arms deals once Israel had done its work. [Just a thought, my own, not anyone else’s.]
It’s also apparent the Obama administration is prepared to act, in concert with its allies, without the help of Russia and China when it comes to new sanctions. But, again, it’s a question of timing, let alone the fact that some allies, such as Japan and South Korea, need oil from Iran and are concerned about Tehran’s reaction should they join a new sanctions regime.
Another potential issue has arisen, the disappearance of Iranian scientist Shahram Amiri, who was on a pilgrimage to Saudi Arabia four months ago when he vanished. He was said to be a researcher connected to Iran’s Revolutionary Guard Corps, according to the Washington Post, and Iran’s foreign ministry office issued a statement saying, “We hold Saudi Arabia responsible for Shahram Amiri’s situation and consider the U.S. to be involved in his arrest.”
Some say Amiri defected to the United States with information on the Qom facility and that it was unusual for Iran to call attention to someone like this unless they were truly concerned over his possible move to the other side given the information he might have.
It’s also interesting that CIA Director Leon Panetta told Time magazine that the CIA was aware of Iran’s ‘secret’ nuclear plant in Qom going back to 2006 and that the United States has conducted “covert operations into that area.”
And one can’t help but note a story that McDonnell Douglas has received a contract to build four “gargantuan bunker-busting bombs” that seem perfect for dismantling the nuclear facility at Natanz. The bit I read made it sound like this didn’t preclude the possibility the U.S. itself will act to take out the facilities. I’d say it’s just as likely we pass them off to Israel.
Finally, on the issue of deterrence and Iran getting a bomb, I have always held a position similar to that stated by Jon Meacham in the current issue of Newsweek.
“My colleague Fareeed Zakaria argues that deterrence has worked since 1945, and he is right. But I have a more tragic view of things. The success of deterrence is dependent on rationality, and the more people with access to nuclear weapons increases the risk that irrationality will enter the equation. Which is a polite way of saying that human forces – pride, ambition, fanaticism – will always confound the most elegant of geopolitical calculations.”
Israel: Yes, it’s all about Iran. Nothing else matters, especially prospects for renewed peace talks with the Palestinians. U.S. Special Envoy George Mitchell really should chill out until spring and save the taxpayers a few coins in the process because Israeli Foreign Minister Lieberman could not have been more clear. “(Mitchell) is spreading illusions and in the end brings disappointment” when he talks of relaunching talks.
North Korea / China: Chinese Premier Wen Jiabao traveled to Pyongyang for extensive talks with the North’s Kim Jong-il (who was once again looking feisty and hardly on the verge of death). Afterwards, Kim said he was prepared to restart six-party talks on ending its nuclear program, but he wants bilateral talks with the U.S. at the same time. For his part, Wen brought promises of further aid and an expansion of economic ties as China’s main concern is that the situation on its border remain stable, first and foremost.
Separately, China had to be pleased that President Obama canceled a planned meeting with the Dalai Lama until after Obama meets with China’s leadership in Beijing in November. Good move. Relations with China are far more important, on all manner of levels, than a sit down with the incredibly overrated Lama. Also understand that with al-Qaeda’s declaration of a Holy War on China over its perceived oppression of the Uighurs, China would say it’s in no mood to give in to what it would call terrorists, including those seeking to destabilize Tibet.
Russia: NATO Secretary-General Anders Fogh Rasmussen said that climate change and the thinning polar ice cap had “potentially huge security implications” for NATO as a new Northwest Passage trade route is opened up with access to a ton of oil, assuming you can access the crude easily. Of course it’s all about Russia and how it behaves over the next few years in this regard.
On a different matter, the issue of Chechen strongman Ramzan Kadyrov, who I claim is one of the truly despicable figures on the planet, he won a libel suit against the director of a human rights group who had linked him to the killing of one of its workers. Granted, the verdict was passed down in a Moscow court and the message has been received, no doubt. Criticism of public officials is strictly limited…and thus yours truly probably isn’t going to tempt fate and travel to Grozny himself.
The case was about the July kidnapping and killing of Natalya Estemirova, who was investigating Kadyrov’s security forces. “Several others who have spoken out the loudest against Mr. Kadyrov have turned up dead, some in places as far-flung as Moscow, Vienna and Dubai.” [New York Times]
Italy: Prime Minister Silvio Berlusconi’s future is in serious doubt as Italy’s top court stripped him of his immunity from prosecution, paving the way for corruption trials that threaten to take down his government. His attorneys had used what came to be called the “Animal Farm” defense after the motto in Orwell’s novel, “All animals are equal, but some are more equal than others.” For his part, Berlusconi vowed to stay on and govern with “even more grit,” calling the charges against him “laughable.”
France: What an embarrassment, the new Culture Minister, Frederic Mitterand, the nephew of the late President Mitterand, who has had to defend himself over past admissions that when in Bangkok, the openly gay Frederic paid “boys” for sex. What the hell is this guy still doing in office?
It seems that back in 2005, Mitterand had penned a bestselling memoir, at a time he was a popular television figure, wherein he wrote:
“I got into the habit of paying for boys…The profusion of young, very attractive and immediately available boys put me in a state of desire that I no longer needed to restrain or hide.”
Mitterand might have escaped the uproar had he not run to the defense of Roman Polanski when the director was arrested for having sex with an underage girl. Thus far, French President Sarkozy has defended Mitterand. Why? It seems wife Carla Bruni was the one who had first floated the idea of selecting the pervert for what in France is a highly visible position.
Ireland: The results of this nation’s second vote on the Lisbon Treaty came in right after I posted last Saturday and the margin, 67% for, 33% against, was in contrast to the rejection the treaty suffered in 2008, 53-47. It’s now up to the Czechs to finalize matters (with Britain still having the right to trash it at a time of its choosing…some say after next May’s election when it’s expected Prime Minister Gordon Brown will go down in flames). Voters who switched in Ireland said they were influenced by the financial collapse and the ensuing near-depression. Ireland was also assured that it would retain its sovereignty and that it wouldn’t be forced to contribute troops to any European Union military effort, the Irish liking their neutrality, as well as maintaining its own tax policies.
The Lisbon Treaty creates a full-time EU president (probably Tony Blair, assuming Angela Merkel approves) and foreign minister with the goal of having a bigger say in foreign affairs. Economically, it’s about streamlining a system originally designed for 15 nations that has now expanded to include 27, and with it the ability to compete better with China, India, Asia and the U.S.
Back to Ireland, I was over there the other week as debate on the treaty was wrapping up and it was pretty funny. For starters, Ireland owes everything to the EU. Try $90 billion in subsidies since 1973!
As for the Irish economy, in my 17 trips here since 1989 I’ve seen it all, literally. Bust to boom to bust. At least amidst today’s bust I didn’t see any gypsies with their caravans off to the side of the road like I did in my first few trips.
The bust was zero surprise to your editor, having warned of it countless times following my trips here. The young got incredibly cocky, leveraged to the hilt, lost their sense of Irishness and the accompanying warmth, and were doomed to fail.
Consider the construction boom in Ireland. At the peak, they were building half the homes Britain was though the latter had 14 times the population. The banks lent $hundreds of millions to each other until the crisis hit, at which time they refused to even talk to each other.
In the town of Lahinch, where I’ve spent time in every trip except one, I have the advantage of knowing many of the business owners so I was able to get information from a wide assortment. “How’s Allen doing?” I’d ask of a competitor. “Oh, we just wonder how he survives because the banks are all over him,” Mr. D. would reply. Then I’d go to Michael, “Is business picking up at all? Everyone seems to be struggling. How are you doing?” “Oh, bejeezuz, Brian. We’re all up s—’s creek!”
The Irish economy is slated to plunge 8% this year, with unemployment at 12.4% as home prices continue to fall. I have to tell you. Just looking at the displays in the realtors’ windows, they still don’t get it. Properties remain outrageously overpriced.
As for inflation, check this out. One economist predicts wages will fall 7% over the next two years. So throw that into your global equation, inflation hawks.
And some of you have probably heard that for the first time since 1995, the nation is seeing net migration, though this is a bit deceiving because many of those leaving are Eastern Europeans who had come here to work.
Finally, there is a positive development. While my experience this time was limited to three days in Lahinch, much of it taken up by golf, I can say unequivocally that the old Irish attitude I so loved when I first started coming here has returned. They’ve been humbled in a big way and from what I heard there is a true national dialogue about getting back to basics. A return of the traditional Irish hospitality is first on the list. Competition for the tourist dollar is fiercer than ever these days. There are a lot of great places to journey to, as I can most readily attest.
But back to Lisbon, Czech President Vaclav Klaus has suddenly demanded a new footnote to the treaty granting his state the right to opt out of the pact’s charter of rights and freedoms, similar to that obtained earlier by Britain and Poland, before he’ll sign it. Klaus says he needs it to prevent the heirs of the millions of Sudeten Germans expelled after World War II from filing land claims to regain their confiscated property, as reported by the Financial Times. If the Czechs don’t approve, the whole ratification process could be reopened, which would kill it.
Turkey: This is positive. Today is the day an agreement is to be signed reopening the border with Armenia, one that has been closed since 1993 but in essence has been shut going back to 1915 and the massacre of Armenians, which Turkey claims were collateral deaths related to a civil war during World War I, while everyone else has labeled it genocide.
Philippines: Tragically, this nation faces another disaster as the remains of Typhoon Parma incredibly hung around for a full week, devastating the northern part of the country and killing up to 500, including 160 in landslides.
–I was listening to CBS-AM national news early Friday morning and the announcer was talking about Zimbabwe’s Morgan Tsvangirai possibly winning the Nobel Peace Prize when a minute later he said, “And this just in…President Barack Obama has won the Nobel Peace Prize.”
Yes, I was shocked along with hundreds of millions of other folks across our land, let alone billions elsewhere. Even Today’s Matt Lauer was incredulous, continually prefacing his remarks with “not to be rude…” and “with all due respect….” when querying Meet the Press host David Gregory as to what the White House reaction must be, let alone the logic of the choice.
But for the archives since this column is a running history, first and foremost we all were thinking the same thing. The guy hasn’t done anything yet! I mean to win a Nobel Prize for a change in tone?! C’mon. The selection of Obama, this year…not 2010 when we should all hope he deserved it…cheapens the award to the Publishers Clearinghouse Prize Patrol level. [Obama should check to make sure the $1.4 million he is designating to charity isn’t paid out in installments over 20 years.]
Beyond the above, though, so be it. I never respected this particular award to begin with. Recall, Yassir Arafat once picked up a medallion. And Ronald Reagan never got one.
I do have to add the comment of the Financial Times’ Gideon Rachman:
“The peace prize committee says that he is being rewarded for his ‘extraordinary efforts to strengthen international diplomacy.’ But while it is OK to give school children prizes for ‘effort’ – my kids get them all the time – I think international statesmen should probably be held to a higher standard.”
–Barack Obama ran a campaign focused on his domestic agenda, but by next month he will have traveled to at least 20 countries in his first year in office, smashing the record of 15 held by George H.W. Bush and Gerald Ford in their first years. Nothing particularly wrong with this, mind you, since a fair number of trips were related to the economic crisis, but as noted by Steven Thomma of McClatchy-Tribune News Service, Air Force One cost $100,219 an hour to operate, plus you have all the other planes with items such as his limo that are part of the entourage.
–The House Ethics Committee intensified its investigation into New York Congressman Charlie Rangel (as the Congressional Black Caucus continued to express its support for the incredibly corrupt Democrat…which speaks volumes of the CBC), but as Newsweek points out, while Nancy Pelosi talks of draining the swamp when it comes to corruption, 12 of the 16 House members that have had at least a complaint filed against them are donkeys.
–The more we learn, the more we are realizing terror suspect Najibullah Zazi was the real deal in terms of the threat he posed, as Attorney General Eric Holder conceded the other day.
–According to a Pew Forum study, there are about 1.57 billion Muslims in the world, or 23% of the total global population of 6.8 billion. 2.25 billion are Christians. But the focus of the study is really that there are more Muslims outside the Middle East, such as in India which has more than any country except for Indonesia and Pakistan. China has more than Syria. Germany has more than Lebanon. 2/3s are in Asia, if you view it as Turkey to Indonesia.
Now how many Muslims from the Middle East have won the Nobel Prize in the most important categories; Physics, Chemistry and Medicine? Witness the latest winners for these three categories. For Physics, two former Bell Labs researchers, George E. Smith and Willard S. Boyle, shared the prize with Charles Kao of Britain (born in Shanghai and with dual citizenship in the U.S.).
Smith and Boyle did their work literally about three blocks up the hill from where I live and our own Dr. Bortrum knew them well. In fact while he will spell out some details in his next column, Bortrum (who bears a striking resemblance to my father) once asked Smith and Boyle, “When are you going to win the Nobel Prize?” [Bell Labs, which remains in a greatly reduced state the research arm of Lucent Technologies, has produced 13 Nobel laureates and more than 31,000 patents since 1925; much of the great work performed a stone’s throw away. It could also be said that in one single complex, there are probably about 300 times more patents than ever produced in the entire Muslim world.]
Meanwhile, the Nobel Prizes for Chemistry went to two Americans and an Israeli, Ada Yonath being the only one of the nine science winners who is not an American citizen, either native or naturalized.
The other three Americans won the Nobel Prize in medicine, two of whom are women. I imagine there isn’t a single Muslim woman who won a Nobel Prize in medicine or any of the science categories.
I really don’t think I have to spell out my point much further. Some societies promote education and excellence, others don’t. Those that don’t tend to be losers and, coincidentally, also treat their women like garbage.
From a quick glance of the past winners of these three categories, in the Middle East, there is one winner from Algeria, one from Egypt, and one from Pakistan. [Democratic India, on the other hand, has five winners in the three categories.] No Saudis, not that this should be any surprise, they having no other talent whatsoever than extracting oil others had to find for them, plus another skill which should be obvious to most of you.
But the Washington Post ran a story on Friday of Saudi Arabia’s new high-tech university which admits women, much to the consternation of conservative clerics, a positive development. Let\’s hope this is truly the start of a trend.
–Incredibly, the New Jersey gubernatorial race is now even, Republican Chris Christie having blown a double-digit lead as by his own admission he refuses to spell out specifics on rather important issues such as tax policy. I was at a meeting of my local service organization on Wed. and I asked the guys assembled who they were planning on voting for.
Now this is a most conservative group and, no surprise, Gov. Jon Corzine didn’t pick up any votes in my small sampling, but more of us, including yours truly, say we’ll vote for the third party candidate, Chris Daggett, who I’m thinking could get as much as 20% on election day, than Christie. Granted, this would wrap it up for Corzine, but a lot of just don’t care anymore…we feel compelled to make a point that the Republicans once again did an awful job in my state.
–This is distressing. The Star-Ledger (N.J.) surveyed junior and senior girls at two high schools in my county and 20% said they had been abused in a relationship. In high school! I never heard one story like this when I was growing up. More than 50% of the girls said that they knew someone who is a victim of dating abuse.
–On a potentially related matter, at least reported rapes, nationwide, have fallen to the lowest level in 20 years as DNA evidence helps send more rapists to prison and victims more willing to work with authorities, according to USA TODAY.
–In New York City and Long Island, about 100 teenagers have died in texting-while-driving accidents in the last five years, according to a study from the Department of Transportation. New York Sen. Charles Schumer has proposed to require all states to ban texting while driving, with a ban going into effect in New York, Nov. 1. The Obama administration is seeking a ban for interstate bus drivers and truckers. Good. I think of it all the time these days…who’s texting as they approach me.
–If Michelle Obama wins the Nobel Peace Prize next year, I’m committing hari-kari. I mean to tell you, I watch the first 20 minutes of Today, before switching back to CNBC, just to get a little international news and/or an interview with a newsmaker like John McCain. Sure, if there is a high-profile murder case, or a situation like with David Letterman, it finds its way into this prime block, but generally the first segments are newsworthy.
So on Thursday, there in the first 20 minutes was a piece on Michelle Obama and her family tree as if this was news. Hey, as I told Mike the Barber about four hours later (Mike having seen it as well), that’s OK for the 7:30 or 8:00 slot, not right up front.
I have little problem with the Obamas. It’s great they are super role models for their children, and America in many respects. But I don’t need a story on the First Lady every freakin’ day. Especially on news programs. Of course later on Thursday, there was Brian Williams running the same piece on Nightly News at a time when there are a ton of geopolitical stories that warrant coverage.
–Boy, am I glad I wasn’t like in California, or Hawaii, and got up extra early to watch us bomb the moon. That was really exciting, wasn’t it? Here’s what we’ve learned. When the Moon Men (they’re there, you know…just wait) begin launching an attack on Planet Earth, we’re going to need far better weaponry than slamming spacecraft into them because it was like the Japanese firing a machine gun at Godzilla. Doink!
Far more impressive in outer space land was the discovery of a new ring around Saturn that “is big enough to fit a billion Earths.”
–Lastly, I spent some time at West Point this week. What an impressive group of future leaders we are developing, men like Gen. McChrystal, for example, he being a graduate. Duty, honor, country. God love ‘em.
Pray for the men and women of our armed forces, and all the fallen.
Gold closed at $1050
Oil, $72.27
Returns for the week 10/5-10/9
Dow Jones +4.0% [9864]
S&P 500 +4.5% [1071]
S&P MidCap +5.8%
Russell 2000 +6.0%
Nasdaq +4.5% [2139]
Returns for the period 1/1/09-10/9/09
Bears 24.4 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
