Nine leading earnings reports were issued this week and they sum up where we stand on the economy these days. The environment continues to improve, slowly, but it’s virtually impossible to forecast 2010. And you didn’t hear one peep all week about the ever-present geopolitical concern, Iran, in terms of its ability to influence the markets and investor psychology.
Here’s my snapshot of the nine companies that to yours truly were of the most import. JPMorganChase and Goldman Sachs knocked the cover off the ball, earning $3.6 billion and $3.2 billion, respectively, though particularly in the case of Goldman the Street was irrational in its expectations and the shares declined some on the news (though they are up almost $140 off the March lows).
Intel and IBM issued solid reports, better than expected for these two tech heavyweights, with Intel raising its earnings and revenue guidance for the fourth quarter, a significant move, while IBM raised its earnings guidance but offered only so-so news on the sales front.
Citigroup and Bank of America disappointed as they continue to get hammered by credit losses and further increases to loan-loss reserves, but in both cases it’s still a far cry from the days when survival for both was in serious question. Today, Citigroup shares trade for $4.60, up from $1 in March, while Bank of America is at $17, up from a low of $2.50. Both also expressed confidence that delinquencies on the credit front have leveled off with a decent outlook for further improvement.
Then you had three one-offs. Johnson & Johnson was disappointing on the revenue front, General Electric also missed, badly, on revenues and the shares responded accordingly, while Google blew away the Street with record earnings and strong revenues as CEO Eric Schmidt confidently said the “worst is behind us” with ad sales rebounding. Google shares soared back to $550.
So add them all up and it was kind of disappointing, though not unexpected. As IBM noted, businesses still aren’t spending. A survey of economists summed it up; the recession is over but improvement is very slow, whether you’re talking jobs (where there is no improvement), credit (hard to find anywhere) and housing (stabilizing, but far from rallying). There is one watchword for the times, caution. Business is cautious about spending, including new hiring, while the consumer is exceedingly cautious all around. At least for homebuyers, if you can put 20% down and have good credit, you should get a mortgage at or under 5% plus you have a good selection of homes to choose from (like mine!).
On the macro data front, September retail sales were down less than expected, -1.5%, though up 0.5% ex-autos, which helped propel the stock market to the 10000 level for the first time since Oct. 3, 2008. And various regional readings on manufacturing rose far more than expected, while the national reading on industrial production jumped for a third consecutive month.
Then you have the inflation outlook. I have said for years now that this is not an issue, and it hasn’t been, but as happens every quarter it seems, many market players get all hot and bothered. Understand when I talk about inflation I’m not talking about rising property taxes or health care premiums. Yes, I’m paying more for each just like you all are.
But inflation, as measured by the consumer and producer price indexes, is nonexistent and if you want to say they aren’t accurate readings, that means you can then pick and choose your data to suit your purposes, which, frankly, is intellectually dishonest.
Here’s White House economic adviser Lawrence Summers on the economy this week, speaking to a meeting of the National Association of Business Economics.
“Lack of demand will be the major constraint on output and employment in the American economy for the foreseeable future. The combination of low capacity utilization and substantial leveraging of household balance sheets raises questions about the sustainability of demand growth going forward.”
“The good news is that this deep and long recession appears to be over, and with improving credit markets, the U.S. economy can return to solid growth next year without worry about inflation.”
Further, USA TODAY did a study of Bureau of Labor Statistics data and found that “Average weekly wages have fallen 1.4% this year for private-sector workers through September, after adjusting for inflation.” The paper quotes economist Heidi Shierholz who notes, “Wages are usually the last thing to deteriorate in a recession. But it’s happening now, and wages are probably going to be held down for a long time.”
This week Colorado became the first state to lower its minimum wage since the federal law was passed in 1938. Around the nation, employees are working fewer hours than at any time since the government began tracking the data in 1964. Adjusting for inflation, hourly wages are falling.
But now oil is spiking again so the inflation hawks have resumed their screeching. They seem to forget, though, that if oil goes up much further, goodbye any thought of a strong recovery because the consumer won’t even be buying chestnuts for Christmas should this turn out to be the case, and no recovery translates into deflation, as you can see is already happening on the wage front.
There has been some better news on the global economy, particularly in Asia. China’s leading government think tank reiterated it sees growth of 9% in 2010, and among the monthly indicators, power output (a key barometer here) rose 10% in September. Foreign direct investment for the month also rose substantially, while the export picture continues to improve.
India’s industrial production soared 10% in August with auto sales rising 17% in September.
Singapore’s GDP rose 14.9% on an annualized basis in the third quarter, with the government saying a “clear recovery” is under way. But it added economic activity will remain below previous levels.
A few other items. The Senate Finance Committee approved a health care bill (the Baucus plan) with Republican Olympia Snowe of Maine voting for the proposal, but the bill taxes high end insurance plans as its cornerstone and the unions don’t like this because they’re the ones with the high end plans! The bottom line is any health care legislation still must be reconciled with other versions that have come out of various Senate committees, let alone House proposals, so we have a long ways to go.
Also, understand that it’s probably about three years before the benefits of any plan that gets through Congress are actually realized, but Medicare cuts and the tax increases would occur immediately. This creates a problem, as in you and I won’t see any real changes except in the weight of our wallet. Now how does that make you feel?
Separately, my fraternity brother, Dr. W. W., notes on my long-discussed issue of hospital-acquired infections that the real risk “occurs with your bedside nurse and respiratory therapist. These people are shift workers (a fraction are currently unionized, soon to be a much bigger number as wages and hiring are stagnant and their perceived ‘workload’ increases). I have met many who are bright and hard working but a substantial minority of ones I see (especially on the night shift) are not particularly smart and do only the bare minimum possible and pay only token attention to time consuming tasks like appropriate care of central lines and endotracheal tubes. It is very hard to get this group of people to do the job ‘right’ (unlike a manufacturing line where a defective product is often immediately identifiable when appropriately supervised). I fully expect more problems with preventable hospital injuries in the future rather than less as our population ages and reimbursement becomes more contentious (and the growth of unionized health care workers continues).”
–It’s been a long way back to Dow 10000 but after hitting the mark early in the week on the heels of the solid earnings news from Intel and JPMorgan, as well as the better than expected retail sales number, stocks slipped back below 10000 on Friday due largely to IBM’s disappointing sales forecast to close at 9995, still up 1.3% on the week. The S&P 500 picked up another 1.5% and Nasdaq gained 0.8%. At Thursday’s closing high the S&P had rallied 62% off the March 9 low.
Again, I am still preparing to pull the trigger due to Iran should conditions warrant…more below…though for now the S&P and Nasdaq have officially attained the targets I set for the year.
–U.S. Treasury Yields
The federal budget deficit officially came in at $1.42 trillion for fiscal 2009. Government revenues plunged 16.6% from 2008, a similar number to that seen by many states these days and the states will be slower to recover.
So it was another week where the dollar dominated conversation, but at least the Treasury had some good news regarding August flows. Foreigners purchased $28.6 billion more in assets than they sold in the month, which follows a net increase of $15.3 billion in July and $90.2 billion in June. True, China trimmed its holdings of Treasury securities but only by $3.4 billion to $797.1 billion as it remained the largest foreign holder of our paper. Japan, number two, boosted its Treasury holdings to $731 billion from $724.5 billion. Ergo, stop panicking!
–With the spectacular returns in bonds this year, money is flooding into taxable bond funds, a record $228 billion through Oct. 7, which is a huge warning sign. The Bill Gross managed PIMCO Total Return Fund has taken in $36 billion in new assets. I would add that Mr. Gross is as good as any in the business in terms of mitigating risk when rates inevitably start heading higher, and there are always opportunities in other bond markets to exploit, such as on the emerging market side. Investors just need to be prepared for far smaller returns. My other advice is to make sure you have your financial advisor explain the concept of ‘duration’ so you’ll better understand the risks inherent in your holdings.
–In looking at third quarter fund returns, for the archives I just wanted to get down some figures for Q3 and 10 years.
–Time doesn’t allow me to get into too many details concerning the latest scandal on Wall Street, the arrest of leading hedge fund operator Raj Rajaratnam, founder of Galleon Group, who was charged with conspiracy and securities fraud in connection with an extensive insider trading scam. Rajaratnam and five others (some of whom worked at Intel, McKinsey & Co., and IBM) were caught on wiretaps, a first for a securities investigation of this kind. Rajaratnam was said to be worth $1.3 billion, according to Forbes.
–The above is not good at all for Goldman Sachs and their bid to smooth over the coming bonus issue at year end, with estimates now at anywhere from an average of $700,000 to $800,000 per employee. When you see a story like Galleon and rich hedgies abusing the system, it doesn’t give Mr. and Mrs. Middle America, let alone Joe Jersey, a warm and fuzzy feeling about Wall Street and how they make their riches.
I’m also very tired of the Street\’s defenders, including some of the leading executives (Goldman’s Lloyd Blankfein for one needs to shut up), talking of how hard everyone works on Wall Street, as if they were laboring in a steel mill back in the early 1900s, six days a week. Give me a break. [And having spent 16 years myself on the Street, I can speak this way.] The rewards far outweigh the toil.
And note to my Wall Street brethren. Next time you complain about how hard you’re working, think about the men and women of our armed forces in Afghanistan, for one.
–On the housing front, foreclosures continue to rise, an estimated 3.5 million for all of 2009 vs. 2.3 million for 2008. In the critical six-county Southern California market, though, there is further evidence we’ve bottomed as the median price in September was unchanged over August (2002 levels…and 46% below the peak of 2007).
–Editorial / Washington Post
“As you watch the depressing spectacle of President Obama proposing to buy off senior citizens with a $250 handout and thereby boost the national debt by another $13 billion, here’s something to keep in mind: If seniors’ benefits were to be calculated fairly, they would actually go down this year.
“Why? For one: In January, Social Security recipients got their biggest cost-of-living increase in 25 years: 5.8 percent. That was, it turns out, the inaccurate result of a quirk in timing; the COLA was based on third-quarter 2008 inflation numbers that were, well, inflated by soaring energy prices. The subsequent drop in energy prices meant that seniors’ benefits were boosted to account for inflation that didn’t take place. So seniors ended up with a 5 percent hike in their purchasing power – an annual benefit increase of about $700 for a typical retiree….
“Thus, President Obama’s proposal of a $250 handout. Make that another $250 handout; seniors already got one such ‘economic recovery payment’ in the stimulus bill. ‘We must act on behalf of those hardest hit by this recession,’ Mr. Obama said. Fine, but what is the evidence that seniors have been ‘hardest hit?’ They are less affected than other Americans by rising unemployment. Their benefits are guaranteed. Yes, they have lost equity in their homes and money in their retirement accounts; so have other Americans, many of whom face higher costs and more uncertain income than seniors. One measure of seniors’ relative economic status: Children are twice as likely to be living in poverty.”
–U.S. government pay czar Kenneth Feinberg ruled that Bank of America CEO Ken Lewis will not receive a salary or bonus for 2009. Lewis had a base salary of $1.5 million for the past three years and must return wages already received in 2009. As one market strategist told Bloomberg, “The man has been under extreme duress the entire year and deserves at least his base salary.” Others hope this is just an extreme case.
Feinberg gets to rule on pay plans for top managers at firms that received U.S. bailouts, including Citigroup and AIG, so don’t you know executives at these two are having sleepless nights over the prospect of having to face their spouses. “No bonus! Are you kidding me?! Get out of the house!”
Personally, I just wish Feinberg could rule on some contracts a few players on my New York Mets have been receiving, like the $12 million pitcher Oliver Perez stole from the team this year.
–In a positive sign, the world’s largest buy-out firm, Blackstone, is heading back into the market to list up to eight companies and sell at least five others, a reversal of its pessimistic view of the economy and financial markets. CEO Steve Schwarzman told investors in a letter, “We see the world changing once again. At least for private equity, the worst is behind the industry.” [Financial Times]
Blackstone’s move is important because the firm had correctly reined in its activities before the global economy collapsed.
–Steel production rose last week for a 23rd time in 24, a good sign.
–Among advanced economies, no nation has fared worse than Iceland. The three banks that ran the country racked up $80 billion in debt (16 times Iceland’s GDP), the stock market lost 97% of its value (you’re reading that right) and the economy will shrink a further 8.5% this year with consumer prices rising 11.7%, both the worst among the 33 advanced nations monitored by the IMF. Unemployment, just 1% in December 2007, has risen to over 8.5%, though this last figure is far below Spain’s 18.2% rate, the highest in the developed world.
But…the positive is that due to the collapsing currency, a record 353,000 (including yours truly) visited the country in the first eight months of the year.
–Another sad sack country where tourism has fallen, not increased, is Ireland which is facing a GDP loss of 7.2% according to the latest estimates for 2009, with a further decline in 2010…not good. Ireland’s budget deficit is now four times the EU limit, some 12.9% of GDP…just like in the U.S.! So you see, there really is a little Irish in all of us.
–An apartment in Hong Kong sold for a world record $56.6 million in yet another sign of the incredible property bubble that has developed here in just the past year after it corrected along with the rest of the planet, all owing to China’s recovery. Development has also been severely limited in Hong Kong and, as anyone who has traveled there knows, there is a limited amount of space left to build on, so they can only build up.
[The noted apartment, by the way, is said to be 6,157 square feet, is two stories, overlooks Victoria Harbor, has five bedroom suites and a garden of 340 square feet, which is huge for properties there.]
–Deflation Watch: As part of Wal-Mart’s strategy to be the cheapest online retailer, the company is going to sell 10 hot new books for just $9 through its Web site, Walmart.com, as it goes after Amazon. Hours later, Amazon was forced to match the price.
For authors, this is one scary development as it could easily force publishers to drastically reduce advances paid to writers. But author Dean Koontz, whose soon-to-be-released “Breathless” is one of those being discounted from $28 to $10, told the Wall Street Journal, “Any time people are fighting over your work it’s a good thing….I don’t think this is going to be a long-term thing. Rather, it sounds like a promotional strategy designed to call attention to Wal-Mart’s decision to enter the digital marketplace more heartily than in the past.”
–Bloomberg has acquired BusinessWeek for a mere $5 million plus the assumption of liabilities. The 80-year-old publication is projected to lose $40 million on revenue of $130 million this year. Bloomberg is hoping the move will help it draw more subscribers to its computer terminals where the company owned by the New York mayor still earns the majority of its revenue.
–Lazard CEO Bruce Wasserstein died suddenly at the age of 61. A star investment banker since the 1970s, Wasserstein was responsible for brokering more than 1,000 transactions, including Time’s merger with Warner Brothers and the Dean Witter, Discover combination with Morgan Stanley.
–Elinor Ostrom of Indiana University became the first woman to receive the Nobel Prize in economics, sharing it with Oliver Williamson of Cal-Berkeley. She is a political scientist, not an economist, which shows the judges now think of economics as an interdisciplinary field. So…since I was a poli-sci major myself, there is still hope I may one day be rewarded for my various theories on domestic vs. premium in the beer game. Then again, maybe not.
–Speaking of beer, David P. passed along a piece on the state of the beverage in Asia, as in it’s booming in places like Singapore, thanks to rising incomes and younger populations. Though consumption is still only about 60% that of the global average in these parts, this means there is further room to grow, sports fans! China is responsible for 47% of actual global volume gains between 2003 and 2008. [Source: Irish Times]
–My portfolio: I’ve made a few small changes the past few weeks. Some of you may recall that I’ve owned shares in a Mexican beverage company and a Brazilian airliner for over two years and they tumbled with all the rest. But I jettisoned the Mexican outfit when rumors hit it was going to sell off its beer operation and I actually made money on the stock, while the moment Rio was selected to be the site of the 2016 Summer Games I bought more of the airliner (and it’s done well since).
But my biggest play, the China specialty chemical/biodiesel company, has done much better since the March lows as I await the completion, and start-up, of the new plant that I visited last November. A lot of this news is now in the stock and it may take a while for the next big leg up, like when actual production begins to flow, but if the China economy grows at 9% next year as projected, I’ll do just fine. Heck, I’m up over 500% on the last big slug of shares that I bought in March…but before that I was down about 90% as in this particular issue I simply lost the discipline that had held me in such good stead over the years.
My other big position is the Canadian geothermal play I’ve talked about the past two years. The shares have gone nowhere but now I’m making money on the currency! Who wudda thunk it. This outfit is part of a four company merger, just being completed, however, and I have no freakin’ clue how it will all pan out.
Iran:
Secretary of State Hillary Clinton traveled to Moscow to get Russia’s support for increased sanctions should Iran not comply with existing UN Security Council resolutions and shut down its uranium enrichment operations, but Foreign Minister Sergey Lavrov said sanctions were “counterproductive” and that even the threat of them is counterproductive, while Prime Minister Vladimir Putin said talk of new sanctions is premature. “There is no need to scare the Iranians.” Only President Dmitry Medvedev told Clinton he would support sanctions but only if Iran fails to meet its obligations, yet here you see how Medvedev is outvoted as the power struggle between he and Putin intensifies. For her part, Clinton said Russia recognizes the need to act if diplomacy failed, while some of us thought, ‘What is she smoking?’
Meanwhile, the other key player in this drama is China and this week Premier Wen Jiabao met with Iran’s first vice president and said China was seeking high-level exchanges with Iran on energy and trade, not exactly what the White House wants to hear.
In Tehran, the government sentenced three protesters to death, while launching a very high-profile investigation into leading opposition figure, and cleric, Karroubi over accusations he has made of rape and torture.
Shirin Ebadi, the 62-year-old Iranian lawyer who won the Nobel Peace Prize six years ago, told the Washington Post that paying more attention to Iran’s nuclear ambitions than to its trampling of democracy and freedom is a big mistake.
President Ahmadinejad “is at the lowest level of popularity one can imagine,” Ms. Ebadi said. “If the West focuses exclusively on the nuclear issue, Ahmadinejad can tell his people that the West is against Iran’s national interest and rally people to his cause. But if the West presses also on its human rights record, he will find himself in a position where his popular base is getting weaker and weaker by the day.”
“Mr. Obama has extended the hand of friendship to a man who has blood on his hands,” she concluded. “He can at least avoid shaking the hand of friendship with him.”
Charles Krauthammer / Washington Post
“What’s come from Obama holding his tongue while Iranian demonstrators were being shot and from his recognizing the legitimacy of a thug regime illegitimately returned to power in a fraudulent election? Iran cracks down even more mercilessly on the opposition and races ahead with its nuclear program.
“What’s come from Secretary of State Hillary Clinton taking human rights off the table on a visit to China and from Obama’s shameful refusal to see the Dalai Lama? China hasn’t moved an inch on North Korea, Iran or human rights. Indeed, it’s pushing with Russia to dethrone the dollar as the world’s reserve currency.
“What’s come from the new-respect-for-Muslims Cairo speech and the unprecedented pressure on Israel for a total settlement freeze? ‘The settlement push backfired,’ report The Post, and Arab-Israeli peace prospects have ‘arguably regressed.’
“And what’s come from Obama’s single most dramatic foreign policy stroke – the sudden abrogation of missile defense arrangements with Poland and the Czech Republic that Russia had virulently opposed? For the East Europeans it was a crushing blow, a gratuitous restoration of Russian influence over a region that thought it had regained independence under American protection….
“Henry Kissinger once said that the main job of Anatoly Dobrynin, the perennial Soviet ambassador to Washington, was to tell the Kremlin leadership that whenever they received a proposal from the United States that appeared disadvantageous to the United States, not to assume it was a trick.
“No need for a Dobrynin today. The Russian leadership, hardly believing its luck, needs no interpreter to understand that when the Obama team clownishly rushes in bearing gifts and ‘reset’ buttons, there is nothing ulterior, diabolical, clever or even serious behind it. It is amateurishness, wrapped in naivete, inside credulity. In short, the very stuff of Nobels.”
[I do not agree with everything Krauthammer says, especially on the topic of the Dalai Lama, who for 50 years has done his people no favors, which is why I contend he is grossly overrated.]
So where do we stand now? The next key date is Oct. 25 and the opening of the Qom facility to IAEA inspectors. I suspect Iran will reveal just enough to placate officials (and the White House) as its brilliant stall game continues, while Israel sits back and observes that it can’t wait forever. But I can’t act as yet on my prediction Israel will attack in November until I see what occurs over the next 2-3 weeks.
Afghanistan: Following the UN’s investigation of the fraudulent election here, a runoff must take place as President Karzai’s estimated vote has now fallen to 47%, or below the 50% threshold. This creates all manner of problems, first and foremost being there is little time to prepare for a second vote with winter fast approaching. And should a runoff be postponed until March, that would be a disaster as Karzai would continue to lead an illegitimate government.
On the issue of General Stanley McChrystal’s request for 40,000 additional troops, Democratic Sen. Dianne Feinstein said Obama must listen to the general and that Obama needs to act soon.
Obama, and those around him, want to separate the Taliban from al-Qaeda and on this, former Obama advisor and CIA operative Bruce Reidel said that the two are closely aligned and it’s a “fairy tale” to think the U.S. can split the Taliban off from the other.
Pakistan: At least seven major attacks have now taken place in just the past week as the nation faces a full-blown civil war. Over 160 have been killed in brazen Taliban operations against army headquarters (unreal) as well as a series of four coordinated strikes on Lahore against the Federal Investigation Agency and two police academies. Interior Minister Rehman Malik said: “The enemy has started a guerrilla war. The whole nation should be united against these handful of terrorists, and God willing we will defeat them.”
With the high-profile targets being selected, the Taliban is sending the message the government can’t protect the people, with a spokesman for the group saying the attacks are revenge for the August killing of their top commander, Mehsud, by a U.S. missile.
And as the Washington Post editorialized, “Al Qaeda, though still dangerous, has suffered serious reverses in the past several years, while the Taliban has gone from struggling for survival to aiming for control over both Afghanistan and Pakistan. Though it is not known to be planning attacks against the continental United States, success by the movement in toppling the government of either country would be a catastrophe for the interests of the United States and major allies such as India….
“Now that the (Pakistani) army at last appears prepared to strike at the heart of the movement in Waziristan, the Obama administration is wavering – and considering a strategy that would give up the U.S. attempt to defeat the Taliban in Afghanistan.
“Adopting such a strategy would condemn American soldiers to fighting and dying without the chance of winning. But it would also cripple Pakistan’s fight against the jihadists. With the pressure off in Afghanistan, Taliban forces would have a refuge from offensives by Pakistani forces. And those in the Pakistani army and intelligence services who favor striking deals or even alliances with the extremists could once again gain ascendancy. After all, if the United States gives up trying to defeat the Taliban, can it really expect that Pakistan will go on fighting?”
Israel: It was disturbing that Turkey pulled out of a joint military exercise between NATO, the U.S., Turkey, Italy and Israel as Turkey claimed fighter jets that would be taking part were also involved in Israel’s operation against Gaza.
Speaking of which, peace talks are off for the foreseeable future as Prime Minister Netanyahu has made it clear that Israel won’t pursue negotiations with the Palestinians at the same time that the Palestinians and Arab states are pursuing a campaign against Israel in the UN over alleged war crimes during the Gaza campaign. Israel maintains the operation was a defensive response to 8 years of Hamas rocket attacks.
Netanyahu also maintains that there will be no negotiations until the Palestinians recognize the Jewish state, while the Palestinians counter Israel must first cease building new settlements before it would contemplate recognition.
Lebanon: The country was elected to the UN Security Council for the first time since 1954. President Michel Sleiman said, “Lebanon, through its international relations and its presence at the heart of the highest body in the United Nations, represents a security net in the face of any Israeli [attempt at] destabilization.” Sleiman added, Lebanon would be “vigilant to ensure the failure of any attempt to annihilate its rights or those of the Palestinians and Arabs.”
[Four others were elected as non-permanent members of the Security Council for 2010-2011; Brazil, Nigeria, Gabon and Bosnia.]
British Ambassador John Sawers said of Lebanon and Bosnia in particular, “The experience of being on the council will help strengthen their national government systems.” Time will tell.
“There are plenty of minefields for Lebanon to navigate as it joins its 14 colleagues on the council. An obvious place to start is Iran’s nuclear issue: what will happen to Lebanon when the so-called P5-plus-One countries decide to vote on a resolution on Iran’s nuclear activities? Will Lebanon take a clear stand either way, or will it just opt for the ‘easy way out,’ i.e. abstaining?
“What will happen if the international community’s agenda vis-à-vis Syria is on the table in New York; what if the U.S. and its allies are arrayed on one side, and the Syrians on the other? Vote with Washington? Politically costly. Vote with Damascus? Same result….
“A fractious vote in the Security Council might be reflected here, in even more fractious politics, or worse. It’s a pessimistic outlook, but a realistic one. Our politicians, from across the entire spectrum, must recognize that they’re stuck together, in a single boat – they must formulate a process that prevents the country from splintering when there’s international disagreement.
“The challenge for us it to prevent our local players from threatening civil peace, based on a Security Council action. It’s a high stakes benchmark of our performance, and one that involves real risks.”
Iraq: The government has done a definitive study of Iraqi deaths for the period 2004-2008 and finds that 85,000 civilians, soldiers and police were killed, with 2006 being the deadliest year, 32,622. [The preceding does not include U.S. casualties.] But they still don’t have a good estimate for 2003, the first year of the war.
Before I add my own thoughts, for new readers I have been a steadfast supporter of the war, and was of the surge. But the above obviously begs the questions, “Was it worth it? How many would have died under Saddam had he been in charge during this period? Would Saddam have been able to manufacture weapons of mass destruction assuming strict sanctions had remained in place…aside from existing chemical and biological stockpiles? Where would the price of oil have been? What would Iraq’s relations have been with Iran? Improved…or a continuing check on each other? Would John McCain have been the Republican nominee? More importantly, would Hillary Clinton have defeated Barack Obama, Obama having campaigned against the war? Our financial system still would have collapsed, but would the responses have been the same? Would bin Laden and Zawahiri have been killed or captured with more resources trained on them? Would the Taliban have been marginalized? If the Taliban is marginalized, one would think Pakistan would have been more stable, and on and on and on….”
North Korea: After high-level talks between Chinese Premier Wen Jiabao and the North’s Kim Jong-il, Kim said he was anxious to restart talks on the country’s nuclear weapons program, but only if it can first talk to the U.S. Then North Korea fired off five short-range missiles into the sea just for the hell of it, leaving many bewildered by the move.
But I was reading a piece in Defense News on North Korea’s conventional forces and it’s an important reminder of what South Korea faces each day, as in 70% of the Korean People’s Army is near the DMZ, compared to 40% in 1981, and aside from a stockpile of chemical and biological weapons, some 800 ballistic missiles are targeting the South. Additionally, analyst Bruce Bechtol says the North has 180,000 special ops forces that could infiltrate South Korea.
The casualties in the first day of an attack are estimated at 200,000.
China: The mainland and Taiwan are working on a trade pact that some estimate could cost 80,000 Taiwanese their jobs, those concentrated in low-tech industries such as apparel, so this will cause some angst and protests on the island as President Ma pushes for the deal.
Meanwhile, with China’s insatiable demand for energy, Russian Prime Minister Putin traveled to Beijing to sign $3.5 billion in energy and trade deals, though a big natural gas pipeline project that has been on hold for three years remained so at last word.
Russia: But when it comes to natural gas and Russian giant Gazprom, it’s still mostly about Eastern and Western Europe and driving a potential wedge between the two as a new Russian-German pipeline offers clear benefits to Western Europe, but potential Russian domination of the former Soviet bloc nations.
Currently, Russian gas goes through nations such as Ukraine so if the flow is shut off, Western Europe suffers. But now Russia can serve the West while applying pressure on the East without the West protesting.
In Russia proper, though, last weekend’s municipal and regional elections for 75 of the 83 regions were blatantly rigged in favor of United Russia, the party headed by Vladimir Putin, according to rival parties and independent election monitors. For example, as reported in the Moscow Times, “Polling Station No. 3,209 in southeastern Moscow reported that 100% of registered voters had cast ballots by 4 pm, itself a huge departure from the city’s overall reported turnout of nearly 35%. Two hours later, the station reported that 97.78% of registered voters in its district had cast ballots.”
So State Duma deputies representing three factions walked out of parliament for the first time in a decade. Now the spotlight is on President Medvedev, who has previously called for more democracy.
Philippines: Incredibly, the nation could be hit in the coming days with its third major typhoon in three weeks, the previous two having combined to take at least 750 lives while leaving 300,000 homeless.
Thailand: There are growing fears of chaos following word the revered King Bhumibol is in bad shape after being in the hospital for three weeks with pneumonia, though an official said “His Majesty’s condition is improving.”
Investors have their doubts and on Thursday, the stock market was down 8% at one point.
Bhumibol is a symbol of the State, the most powerful man in the country, and the focus of a personality cult. Anyone criticizing the king is subject to a prison sentence of 15 years. Just last month, a female opposition figure was sentenced to 18 years for giving a speech that most said was peaceful but taken to be a slur upon the king.
South Africa: Since Jacob Zuma became president in May, some 50 people are being murdered in South Africa every day, this as the World Cup fast approaches. So Zuma has called for “extraordinary means” to deal with “an abnormal criminal problem.”
“My thinking is that once a criminal takes out the gun, the intention is clear. The police must then act to protect himself or herself and the citizens and have no choice but to use force.”
Meanwhile, the London Times reports that white supremacist leader Eugene Terre’Blanche (sic) appears to be attempting a comeback, Terre’Blanche having been a key figure in the 1980s.
“Our country is being run by criminals who murder and rob. This land was the best, and they ruined it all. We are being oppressed again. We will rise again.”
I’d watch the World Cup from the safety of your flat in London or New York, frankly.
Hungary: A far-right party here, Jobbik, won 15% of the vote in elections for EU delegates. Headed by Gabor Vona, his Hungarian Guard paramilitary organization is distinguished by its Nazi-like symbolism and marches through Roma, or Gypsy, areas. Vona is feeding on the fears of young and rural conservative Hungarians. Particularly in the rural areas, the police appear overwhelmed in dealing with crime so the Hungarian Guard claims to fill the void and protect their countrymen against the criminal Roma. The courts have banned the Guard but Vona and the party refuse to bow to their edicts.
France: 2/3s of the French people do not want Culture Minister Frederic Mitterand to resign for having written of paying young boys for sex in Thailand, an opinion poll from Monday showed. I have defended the French over the years, but in this instance they are truly idiots.
–A collective “Idiots of the Year” award goes to the American people for being snookered by “Balloon Boy” on Thursday. Thankfully, I wasn’t aware of the story until shortly before the little urchin was discovered to be safe and sound.
“ ‘I’ve had so many breaking news alerts on my blackberry, you would think something major had happened!’ Ariana Huffington complained to MSNBC’s Ed Schultz as the Balloon Boy drama came to a happy ending yesterday.
“The alerts illustrated just how silly the cable-made drama turned out to be.
“The cable news media responded to the story of Falcon Heene, a 6-year-old boy who was allegedly trapped in a homemade weather balloon as it raced across the Colorado sky, the way they respond to any potential tragedy that conveniently is accompanied by great footage:
“They covered the hell out of it, non-stop, for hours. They covered it when all they had was that image of the UFO-shaped balloon. They covered it when the balloon landed more softly than anyone could have hoped….
“They covered this thing for hours until finally, to everyone’s relief, Falcon turned out to be hiding in a box in a garage attic….
“There are few spectacles in our culture more predictable, and more depressing, than the nonstop cable news coverage of a ‘developing story’ with no new developments….
“Here’s an idea. It’s a crazy idea, I know, but hear me out: when you’re covering a news story and there are, for the moment, no new pieces of information to discuss, stop covering the story for a little while.”
–Following is further response to President Obama receiving the Nobel Peace Prize.
“The Nobel committee did President Obama no favors by prematurely awarding him its peace prize. As he himself acknowledged, he has not done anything yet on the scale that would normally merit such an award – and it dismays me that the most important prize in the world has been devalued in this way.
“It is not the president’s fault, though, that the Europeans are so relieved at his style of leadership, in contrast to that of his predecessor, that they want to do all they can to validate and encourage it. I thought the president showed great grace in accepting the prize not for himself but ‘as an affirmation of American leadership on behalf of aspirations held by people in all nations.’
“All that said, I hope Mr. Obama will take this instinct a step further when he travels to Oslo on Dec. 10 for the peace prize ceremony. Here is the speech I hope he will give:
“ ‘Let me begin by thanking the Nobel committee for awarding me this prize….As I said on the day it was announced, ‘I do not feel that I deserve to be in the company of so many of the transformative figures who’ve been honored by this prize.’ Therefore, upon reflection, I cannot accept this award on my behalf at all.
“ ‘But I will accept it on behalf of the most important peacekeepers in the world for the last century – the men and women of the U.S. Army, Navy, Air Force and Marine Corps.
“ ‘I will accept this award on behalf of the American soldiers who landed on Omaha Beach on June 6, 1944, to liberate Europe from the grip of Nazi fascism. I will accept this award on behalf of the American soldiers and sailors who fought on the high seas and forlorn islands in the Pacific to free East Asia from Japanese tyranny in the Second World War.
“ ‘I will accept this award on behalf of the American airmen who in June 1948 broke the Soviet blockade of Berlin with an airlift of food and fuel so that West Berliners could continue to live free. I will accept this award on behalf of the tens of thousands of American soldiers who protected Europe from Communist dictatorship throughout the 50 years of the Cold War….
“ ‘Members of the Nobel committee, I accept this award on behalf of all these American men and women soldiers, past and present, because I know – and I want you to know – that there is no peace without peacekeepers….
“ ‘If you want to see the true essence of America, visit any U.S. military outpost in Iraq or Afghanistan. You will meet young men and women of every race and religion who work together as one, far from their families, motivated chiefly by their mission to keep the peace and expand the borders of freedom.”
“As Thorbjorn Jagland, who chairs the Nobel Committee, told CNN: ‘He has done a lot already’ and this award will ‘enhance the ideals Barack Obama is promoting.’
“What ideals are those? Well, the Nobel citation declares that Mr. Obama’s ‘diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world’s population.’ Now, the world is a big place, much of it run by despots and crooks, each of whom gets the same vote in the U.N. General Assembly as America. The Europeans are applauding that at long last there is an American President willing to let himself and his country mingle as equals with this amorphous global ‘majority.’….
“Mr. Obama sees the U.S. differently, as weaker than it was and the rest of the planet as stronger, and so he calls for a humbler America, at best a first among equals, working primarily through the U.N. The world’s challenges, he emphasized yesterday, ‘can’t be met by any one leader or any one nation.’ What this suggests to us – and to the Norwegians – is the end of what has been called ‘American exceptionalism.’ This is the view that U.S. values have universal application and should be promoted without apology, and defended with military force when necessary.
“Put in this context, we wonder if most Americans will count this peace-of-the-future prize as a compliment….
“We all have at least three more years to learn if Mr. Obama will fulfill the audacity of hope that the Nobel Committee has put on him to bow to the values of the world’s ‘majority.’”
“This was Barack Obama’s chance. Here was an opportunity to cut himself free, in a stroke, from the baggage that’s weighed his presidency down – the implausible expectations, the utopian dreams, the messianic hoo-ha.
“Here was a place to draw a clean line between himself and all the overzealous Obamaphiles, at home and abroad, who poured their post-Christian, post-Marxist yearnings into the vessel of his 2008 campaign.
“Here was a chance to establish himself, definitively, as an American president – too self-confident to accept an unearned accolade, and too instinctively democratic to go along with European humbug.
“Would the world have been offended? Well, to start with, the prize isn’t given out by an imaginary ‘world community.’ It’s voted on and handed out by a committee of five obscure Norwegians. So turning it down would have been a slap in the face, yes, to Thorbjorn Jagland….But it wouldn’t have been a slap in the face to the Europeans or the Africans, to Moscow or Beijing, or to any other population or great power that an American president should fret about offending.
“In any case, it will be far more offensive when Obama takes the stage in Oslo this November instead of Morgan Tsvangirai, Zimbabwe’s heroic opposition leader; or Thich Quang Do, the Buddhist monk and critic of Vietnam’s authoritarian regime; or Rebiya Kadeer, exiled from China for her labors on behalf of the oppressed Uighur minority; or anyone who has courted death this year protesting for democracy in the Islamic Republic of Iran.
“True, Obama didn’t ask for this. It was obvious, from his halting delivery and slightly shamefaced air last Friday, that he wishes the Nobel committee hadn’t put him in this spot.
“At the same time, the prize leaves Obama more open to ridicule. It confirms, as a defining narrative of his presidency, the gap between his supporters’ cloud-cuckoo-land expectations and the inevitable disappointments of reality. It dovetails perfectly with the recent ‘Saturday Night Live’ sketch in which he was depicted boasting about a year’s worth of nonaccomplishments. And it revives and ratifies John McCain’s only successful campaign gambit – his portrayal of Obama as ‘the world’s biggest celebrity,’ famous more for being famous than for any concrete political accomplishment….
“But by accepting the prize, he’s made failure, if and when it comes, that much more embarrassing and difficult to bear. What’s more, he’s etched in stone the phrase with which critics will dismiss his presidency.
–Speaking of nonaccomplishments, President Obama still hasn’t honored one of his prime campaign pledges to end the policy that forbids openly gay men and women from serving in the military. Oh, sure, he keeps telling gay groups, “I will end ‘don’t ask, don’t tell,’ that’s my commitment to you,” as he did again last weekend, but he gives no timetable for acting because he still hasn’t captured the support of key military leaders. Republican Senator Lindsey Graham, a former Air Force lawyer, said, “I’m not going to make policy based on a campaign rally…(If) you don’t have buy-in by the military, that’s a disservice to the people in the military.”
–What a race for governor we have here in New Jersey. Last week I said I was going to vote for independent candidate Chris Daggett just because there was no way I could pull the lever for Republican Chris Christie, recognizing that I could be ensuring a Corzine win. I’m at the point where I just want some independent types to make some headway in our political process.
Then the next day, New Jersey’s leading paper, the Star-Ledger, out of nowhere endorsed Daggett in a bombshell.
“The newspaper’s decision is less a rejection of Gov. Jon Corzine and Republican Chris Christie than a repudiation of the parties they represent, both of which have forfeited any claim to the trust and confidence of the people of New Jersey. They share responsibility for the state’s current plight.
“Only by breaking the hold of the Democratic and Republican mandarins on the governor’s office and putting a rein on their power will the state have any hope for the kind of change needed to halt its downward economic, political and ethical spiral….
“Daggett’s election would send shock waves through New Jersey’s ossified political system and, we believe, provide a start in a new direction….
“Where the major parties have differed, their differences have been inconsequential. Where they’ve been the same, their similarities have been destructive.
“They have contributed equally to gross overspending in Trenton by consistently pandering to the pay, pension and retirement policies demanded by powerful public employee unions. Democrats have financed the spree with tax hikes, Republicans with borrowed money and both with pension-fund raids.”
Now the Ledger, as liberal a paper as there is in America, makes the mistake of saying of Corzine that he “is an eminently decent and likeable man” when he is far from it (he’s a fraud), and there are many cynics in my state who say the Ledger is just playing games to get a few Christie supporters to go for Daggett and give Corzine the margin of victory in what is now a too-close-to-call race, but I’ve had it, and as a show of my commitment to Daggett I gave him a token $200 this week. Some polls put his support at 15%, others say he’s still at less than 10%. I say he’s going to shock some people.
“So much for the major party candidates. I have yet to meet a voter who has offered any motivation for supporting one except for the prospect of keeping the other out of office.
“Well, there’s a way to keep them both from winning. And for the next three weeks, Chris Daggett is going to have a tremendous amount of fun pointing it out.”
Lastly, back to Corzine, the New York Post editorialized this week:
“More than a year ago, (Corzine) demanded that the state Legislature end the practice of ‘wheeling’ – in which political fat cats give money to campaign committees, which then ‘wheel’ the money to other campaigns.
“Since there are no limits on such contributions, wheeling lets donors bypass the $2,600-per-candidate cap on donations.
“ ‘Instead of government of, by and for the people, we have a government of, by and for political contributors, lobbyists and those who at every level pay to play,’ said Corzine.
“Well, he should know. Because an analysis last week by The Record of Hackensack shows that the single biggest ‘wheeler’ in the entire state of New Jersey is (drum roll, please): Jon Corzine.
“That’s right – the Wall Street multimillionaire is the single biggest contributor to Jersey Democrats’ three biggest political war chests, having given $1.4 million.
“He’s also the single biggest donor to 20 of the 21 Democratic county committees. Garden State hypocrisy, anyone?
“This, even after Corzine…dramatically told the Legislature last year: ‘Today, that era ends.’….
“With such bald-faced duplicity right at the top of government, is it any wonder New Jersey is home to so much political corruption?”
Amen. It’s also why some of us draw the conclusion that Jon Corzine is simply a very bad guy, worthy of contempt.
[One other tidbit about my state. You know how I’ve talked of how dangerous it is to walk in this area? Two pedestrians were killed the other week, one in Summit, the other in a neighboring town, just walking their dogs (the dogs both lived). Overall, pedestrian deaths across the state are up 34% this year to 122 through September.]
–George Will had a column in the Washington Post addressing the coming senate race in Delaware next year. Beau Biden certainly seems teed up to run for his father’s seat, but it appears he will face a Republican challenge from nine-term congressman Mike Castle, a man who in 12 state races (including for lieutenant governor and governor) has not only never lost, but in the past four elections has averaged 65% of the vote.
–OK, time to lose some readers…my quarterly purge…as I inevitably tick off some of you with the following.
I’m Catholic and it’s taken H1N1 for some church leaders to finally wise up and do away with the hand shake while exchanging the “sign of peace,” a dumb practice, especially when you hear someone next to you hacking away, blowing their nose, or some other disgusting thing right before they smear their germs all over you. Sipping wine from the chalice also makes zero sense to me (and I have never done so). Is there anyone alive who believes wiping it with the same cloth actually cleans the chalice off between slobbering parishioners?
Alas, some Catholic dioceses have been telling their parishes to wise up. It will be interesting to see if they resume their regular rituals when the flu scare passes.
–Michelle Obama is getting an action figure from the same company that created a Barack Obama doll, which today is rather comical given the president’s inaction. As the New York Daily News reported, one Manhattan mom told the paper, “I bought the Barack figure last year, but I think Michelle is the one with the real superpowers in the family.” I’m just wondering if it’s going to be anatomically correct, though I already know the answer to that one. It won’t be.
–So Arnold Schwarzenegger signed a law in 2008 that prohibits Californians from chatting on their cellphones while driving, and then First Lady Maria Shriver is exposed as having violated the law on at least two occasions. [Two photos were revealed, so undoubtedly Ms. Shriver has broken the law daily, including just last Sunday.] So Maria joins the list of frauds in America.
–The latest global math scores are out and the U.S. again ranks well behind Hong Kong, Singapore, Taiwan and Japan among both fourth- and eighth-graders. So get your kids outside and away from the freakin’ video games, get them playing sports, and get them interested in baseball because there is nothing better for the young mind on the math front than learning that 2-for-7 is .286, 3-for-11 is .273, 4-for-13 is .308, and 5-for-16 is .313. Academically I can brag about one thing in my otherwise checkered career. I was top 1% in math for both the SAT and GRE (the latter taken when I stupidly thought I could get into graduate school) and it was largely because of my love of baseball and statistics, plus later on in my high school years an interest in the stock market.
–I clipped out a few items on the climate front, this after I played golf with a bunch of guys in the Poconos on Tuesday and Wednesday in what was some of the coldest October weather in the history of mankind (or at least the coldest I’ve ever golfed in). Thankfully we weren’t playing on Thursday there when it snowed.
“NOAA announced that globally September was the second warmest month in 130 years of recordkeeping, just behind 2005. World temperatures last month averaged 60.1 degrees Fahrenheit, which is 1.1 degrees above normal.” [AP]
“(The) warmest year recorded globally was not in 2008 or 2007, but in 1998…For the last 11 years we have not observed any increase in global temperatures….
“Climate change skeptics, who passionately and consistently argue that man’s influence on our climate is overstated, say they saw it coming.
“They argue that there are natural cycles, over which we have no control, that dictate how warm the planet is. But what is the evidence for this?
“During the last few decades of the 20th Century, our planet did warm quickly. [But to those who chalked it up to solar activity] research conducted two years ago, and published by the Royal Society, seemed to rule out solar influences.
“The scientists’ main approach was simple: to look at solar output and cosmic ray intensity over the last 30-40 years, and compare those trends with the graph for global average surface temperature.
“And the results were clear. ‘Warming in the last 20 or 40 years can’t have been caused by solar activity,’ said Dr. Piers Forster from Leeds University, a leading contributor to this year’s Intergovernmental Panel on Climate Change (IPCC).
“But one solar scientist, Piers Corbyn from Weatheraction, a company specializing in long range weather forecasting, disagrees.
“He claims that solar charged particles impact us far more than is currently accepted, so much so he says that they are almost entirely responsible for what happens to global temperatures….
“To confuse the issue even further, last month Mojib Latif, a member of the IPCC, says that we may indeed be in a period of cooling worldwide temperatures that could last another 10-20 years….
“But (Latif) makes it clear that he has not become a sceptic; he believes that this cooling will be temporary, before the overwhelming force of man-made global warming reasserts itself.” [Paul Hudson / BBC News]
“The Arctic Ocean could be largely ice-free and open to shipping during the summer in as little as ten years’ time, a top polar specialist has said.
“ ‘It’s like man is taking the lid off the northern part of the planet,’ said Professor Peter Wadhams, from the University of Cambridge.”
A team led by explorer Pen Hadow found that ice-floes were on average just 5 feet thick, when “The survey route – to the north of Canada – had been expected to cross areas of older ‘multi-year’ ice which is thicker and more resilient.” [David Shukman / BBC News]
“Poland deployed troops and snow ploughs on Wednesday after snow and powerful winds cut off power supplies to as many as 700,000 people in storms which swept Central Europe….
“Austria’s Alps recorded the biggest October snowfalls in 25 years, with as much as 30 inches in the mountainous regions around Salzburg.” [Reuters]
“Thanks to El Nino, the 2009 Atlantic hurricane season has been the quietest in more than a decade, offering a reprieve for residents in the danger zone and a chance for insurance firms to refill depleted coffers.
“With the peak of the season now behind, the Atlantic-Caribbean basin has seen just two hurricanes and a total of eight tropical storms.
“El Nino, the Pacific warm-water phenomenon that can produce destructive weather in other parts of the world, played a big role in suppressing Atlantic cyclones this year, experts said.
“If the full season, which runs from June through November, ended today, it would be the lowest number of storms since 1997. The last time an Atlantic season produced only two hurricanes was 1982….
“Meteorologist Todd Crawford said, ‘If you have an increase in the speed of the winds aloft over the Atlantic it acts to basically chop the heads off any kinds of storms….
“Crawford also said sea temperatures in the tropical Atlantic are cooler, by about 2 degrees Fahrenheit on average, than the blistering seasons of 2004, when four hurricanes hit Florida, and 2005, which produced 28 storms, the highest single-season total in recorded history.”
–Finally, Dereck Joubert had a story in the Washington Post on the plight of the African lion, which, unlike its elephant brethren, has no protection under the international accord governing such matters.
So while tiger bones “are used extensively in the East for medicines and mythological (read nonsense) cures for ailments or limp libidos, and the demand is increasing,” you are seeing a switch from tiger to lion bones, “which can be easily sold off as tiger bones. It’s ironic that the most famous animal in Africa, perhaps in the world, can’t even be poached on its own value but only as a ‘mock tiger.’”
There are about 16,000 to 23,000 lions left in Africa. 50 years ago there were half a million. That’s depressing. Then again, there’s a lot in the world that’s depressing these days.
Pray for the men and women of our armed forces, and all the fallen.
Gold closed at $1051…another high
Oil, $78.53…highest since 10/08
Returns for the week 10/12-10/16
Dow Jones +1.3% [9995]
S&P 500 +1.5% [1087]
S&P MidCap +0.8%
Russell 2000 +0.2%
Nasdaq +0.8% [2156]
Returns for the period 1/1/09-10/16/09
Bears 26.4 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
*For a great look at Bell Labs and the recent Nobel Prize recipients for Physics, check out Dr. Bortrum’s column. It’s already stirring a little controversy, at least from some of the e-mails I’m receiving.