Wall Street
Just as in last week where I couldn’t help but start out with something a little different, that being the incongruity of having Democratic Congressman Charlie Rangel featured among his party’s leadership at the Blair House healthcare summit, which then proved more than inappropriate as Rangel was forced to exit his powerful House Ways & Means Committee chairmanship, this week I can’t help but note something of critical importance that isn’t likely to be the lead elsewhere.
In just this past week, Secretary of State Hillary Clinton set back U.S. foreign policy about 20 years. Thanks to her incompetence, we ticked off Turkey, Brazil, and laid an egg in Argentina, and that’s just for starters.
First off, Turkey. Late Thursday, the House Foreign Affairs Committee adopted a measure on the massacre of Armenians in 1915 that labeled it “genocide.” This has happened before in this committee, three times previously since 2000, but it has then never gone to the full House for a vote, and while the White House assured Ankara there would be no full vote, the damage has been done. It’s no wonder that opinion polls show 92% of Turks hating the U.S.
This was Clinton’s fault, solely. President Obama, as much as I’m frustrated with the man these days, can’t be responsible for everything. Yes, Obama, as a candidate, said he would label the 1915 episode genocide, but then last year, as happens annually to appease the Armenian voting bloc, a U.S. president has to issue a statement on the anniversary discussing Turkey’s past. Obama at that time, though, opted not to use the word genocide. He had learned the lesson that all previous presidents had. We need Turkey as an ally. But this time, Clinton herself went to the House committee way too late to appeal to them not to vote for the measure and we will pay the price as a result. What is so idiotic is that Clinton, just about a year ago, had helped broker an agreement between Turkey and Armenia that would have opened their borders for the first time in ages and led to a discussion among academics about 1915. Now the entire agreement is in jeopardy because she had her thumb up her butt.
But if that wasn’t enough, earlier this week Sec. Clinton traveled to Argentina, under immense pressure from wacko President Fernandez (some use the name Kirchner), upon which Clinton said that there needed to be “friendly mediation” between Britain and Argentina over the latest dispute concerning the Falkland Islands.
Yoh, Hillary. Whose side are you on? Do you mean to say you are abandoning our British allies for a people who’ve allowed themselves to be run by a corrupt family, the Kirchners, husband and wife?! Are you nuts?
Ralph Peters / New York Post [Mr. Peters being a retired lieutenant-colonel]
“I am wrong. For years, I’ve argued that our government should pay more attention to South America. Now Hillary Clinton has – and, boy, is it ugly.
“With tragic back-to-back earthquakes dominating the headlines from south of the border, a desperate ploy by the hard-left Argentine government – backed by Venezuela’s Hugo Chavez – threatens to shake the continent’s political landscape.
“And Secretary of State Clinton, during her whirlwind tour down south, managed to outrage our British allies and assist despised President Cristina Fernandez de Kirchner in her family’s assault on Argentine democracy.
“Clinton’s diplomatic malfeasance in Buenos Aires wasn’t an accident. She spoke for President Obama, who loves Third World liberation rhetoric and seems to think Britain’s still colonizing his family home in Kenya.”
Peters goes on to talk about the Kirchner’s desire to maintain control of the country, with ex-Prez Nestor Kirchner taking over again for Cristina when her term runs out, but the only way the family can achieve that, with the country broke and the economy collapsed, is to create a stir and wave the flag over the Falklands. So here comes Hillary in support.
But if that wasn’t enough, when Hillary got to Brazil for talks with President Lula and discussions on Iran, Lula told her that if she thought Brazil would support sanctions against Tehran, she was crazy. “It is not prudent to push Iran against a wall,” he said. Lula went so far as to add he takes Iran at its word that its nuclear program is peaceful. Oh brother.
So it was just a very special week for U.S. diplomacy, wrote the editor with dripping sarcasm.
Turning to the global economy, HSBC chairman Stephen Green, in reporting earnings on Monday that fell short of expectations, noted, “Huge challenges and risks remain for all of us. While emerging markets are leading the global recovery and seem certain to drive the majority of the world’s growth in the generation ahead, recovery in developed markets has been slow to start, and unemployment remains high.”
Certainly when it comes to Europe, there is little to like. Exempting Greece for a moment, the developed markets such as Germany, Britain, France and Italy are going nowhere fast. For every decent indicator, there are two or three poor ones. The EU economy has stalled out, with consumer spending flat, cap-ex (business spending) down, and GDP forecast to grow a whopping 0.2% in the current quarter. Though for the inflation hawks, there is none, nada. Want a good example? Check out a public sector wage deal in Germany where employees received a 1.2% retro raise back to January, plus 0.6% and 0.5% hikes through Aug. 2011, or just 2.3% over 20 months if my RadioShack dual powered solar-battery calculator has it right (you can’t just add the percentages to be truly accurate, you understand). There are a lot of workers these days that would actually kill for this kind of pay raise, but if you’ve followed German wage history this is practically deflation.
But to go back to Stephen Green’s comment, yes, the emerging markets have been carrying the day. Case in point, China, which this week commenced its National People’s Congress with Premier Wen Jiabao kicking it off with his State of the Union equivalent. Wen talked of the risks of an “unbalanced, uncoordinated, unsustainable” growth path and “latent risks,” such as in real estate and with the banks. Wen averred that stimulus is still needed but that for all the issues, the growth target remains 8%. So China needs to crack down on the property bubble, namely in the big cities, and lending must be reduced, but the biggest issue facing China is how to transition from an economy that has been anchored to infrastructure spending and exports to one where consumption takes the lead. This has never been tried before here and it flies in the face of a thrifty people, unless you are among the elite whereupon you blow it all on real estate and baccarat (more on the latter, below).
I remain bullish on China myself, and actually began to build a position this week in a Chinese natural gas play. My main holding here also began to stir ahead of earnings, though for those of you playing along, I continue to believe the main story with this one will be revealed around mid-May.
As for those who are crying “Bubble, bubble!” even Morgan Stanley Asia chief Stephen Roach, who has been a bear, said that the risk posed by asset bubbles in Asia is overstated because surging prices don’t threaten regional economies.
Roach told Bloomberg television, “The difference between the asset bubbles in this region and asset bubbles around the world is that they have not affected the real side of the Asian economy.” [He also notes concerns about inflation in Asia are “overblown” as excess capacity in the global economy is likely to keep a “lid” on prices for the next few years.]
But Roach does add that in the case of China, the transition from exports and investments to consumer-led growth is a concern.
Liu Yonghao, one of China’s corporate titans, told the Financial Times that China’s risks are manageable. “While there may be some bubbles, the situation is different in different industries. [Bubbles] may exist but they are not especially serious.”
Mr. Liu also had this interesting thought for those crying about the property bubble, traders such as Jim Chanos who compare China to Dubai.
“That kind of talk is just plain wrong. Dubai doesn’t have any industry, manufacturing or agricultural industries. It only has real estate and tourism, and relies on massive [external] borrowing. China doesn’t borrow money from anyone else. It lends money to others, like the U.S.”
I’m not quite as sanguine as Mr. Liu in terms of urban real estate, I just think there will be a soft landing. At least that’s the bet I’ve placed with my own capital.
I do have one concern, a selfish one because it could impact my chief holding in Fujian, and that is the need for tax reform in China, but I want to see what the People’s Congress says about the topic before expounding on it later. For now, let’s just say Wen and President Hu, who are both due to step down in 2012, favor a property tax, a la what we have, but this would hit many of the legislators who are doing a lot of the speculating. As it is now, you are taxed on sale. Taxes are also levied on production and this is the one that potentially impacts me.
Anyway, let’s go back to Europe and the rock-throwing by public-sector workers in Greece who are seeing their bonuses cut 30%. You see, in Greece workers receive an extra salary at Christmas and then bonuses during the Easter holiday (I didn’t know Jesus died for this) and the month of August. As part of the government’s third austerity plan to reduce the deficit, the bonuses were slashed, in a move that would save $5.44 billion. Civil service pensions, which the government has left untouched so far, will be frozen this year, which seems more than reasonable, while the value-added tax was hiked from 19% to 21%. The first polling data on the plan, however, revealed the citizenry against it, 47% to 46%.
So the labor unions are furious, while Greek Prime Minister Papandreou said the fiscal situation is an issue of national survival. “We will take every decision we have to in order to avoid the worst; to save our economy and the autonomy of our country.”
And while Papandreou didn’t outwardly seek any kind of bailout from the EU, leaders such as German Chancellor Angela Merkel said Greece had done its work, praising the government’s “huge effort” in passing its austerity plan, but that there would be no funds forthcoming. Merkel then took off after the speculators and the use of derivatives, specifically credit-default swaps.
“The more likely Greek outcome is not default, devaluation or euro-supportive government restraint, but traditional growth-killing tax measures followed by subsidies, loan guarantees and bailouts by the International Monetary Fund and European Union. Since the support they provide is government-to-government, not market-based, it will probably be conditioned on tax-hike austerity imposed on Greece’s private sector. This doesn’t address the core problem of growth, jobs and government spending restraint. The higher value-added tax already under discussion is decidedly not the upheaval in government spending, tax and regulatory policies also needed in Washington and many U.S. states.”
As to the controversy, and investigation into the role played by investment banks such as Goldman Sachs, and then the hedge funds, in Greece’s financial problems, some comment.
“If you lie down with dogs, you’ll get up with fleas. Goldman Sachs and the Greek government lay down together, and now the European Union suffers from a plague of fleas.
“In 2001, Greece wanted to dress up its finances to qualify for admission to the European Union and to trade in its tarnished drachmas for shiny new euros. Politicians and bureaucrats could see the advantages of borrowing in a currency made strong by the strength of the big German and French economies. The EU also makes generous subsidies to uncompetitive industries in its member countries – especially the poor countries, and especially in agriculture.
“Greece was spending enthusiastically and taxing ineffectually. It could not qualify to become a member of the euro zone because its deficits were too high.
“Enter Goldman Sachs, a firm that lives to help its customers do what they want, even if it isn’t in the clients’ best interests. Some clever young bankers in Goldman’s London office turned Greek dross into something more attractive – not gold exactly, more like gilded dross. Their deal converted inconvenient billions of Greek debt into currency hedges that weren’t reported as national liabilities.
“All sides ignored the fact that the currency hedges were structured to lose money for Greece in proportion to the debt being hidden, plus something left over for Goldman – like about $300 million….
“In Europe now, as on Wall Street in the summer of 2008, everybody knows there are problems. Nobody knows how big they are, or how many countries – and banks – share them. And, as in the summer of 2008, Goldman Sachs has nimbly used its knowledge to place new bets. Last week it was reported that Goldman had turned on its former Greece clients, buying up big interests in credit-default swaps that would pay the firm if the Greeks can’t pay their debts.
“Although stage-managed in London, it’s a perfect Wall Street play. First Goldman helped create a problem, then it stands to profit from it. But the lesson goes beyond Goldman Sachs.
“After decades of developing ever-more efficient ways of front-running their customers, Wall Street casino sharks have ceased to care about their clients. The sharks have no concept of fiduciary duty, unless there is a controlling legal principle and cops to enforce it….
“The solution is flea powder – ethical practice and fiscal prudence – all around.”
At least Greece was able to float a $6.8 billion, 10-year bond issue to stem the crisis temporarily, but it has a total of $50 billion maturing by May. And just a note on the liabilities to the German banks. Greece owes them $43 billion, but Spain owes the same banks $240 billion and Italy $209 billion. This is a financial crisis that will grind on for years, and to the detriment of growth.
On the healthcare front, I thought Republican Senate leader Mitch McConnell (Ky.) summed it up perfectly as President Obama prepares to ram his legislation through Congress, assuming they can muster the votes.
“This is really not an argument between Democrats and Republicans. It’s an argument between Democrats and the American people.”
There isn’t a single, rational American who doesn’t believe we need some major reform, particularly when it comes to costs, while I’ve argued we are failing miserably in addressing the preventative side of the equation. But at this point, is there anyone in this country who truly understands what’s in this 2,700-page fiasco, including members of both sides of Congress? Maybe Republican Congressman Paul Ryan (Wis.), who is playing Paul Revere in warning of the costs which only he seems to fully understand (and I’d certainly believe this lay-up Veep candidate in 2012 more than any of the other 534 residents of Capitol Hill).
“At his press conference yesterday, Mr. Obama claimed that ‘my proposal would bring down the cost of health care for millions – families, businesses and the federal government.’ He said it is ‘fully paid for’ and ‘brings down our deficit by up to $1 trillion over the next two decades.’ Never before has a vast new entitlement been sold on the basis of fiscal responsibility, and one reason ObamaCare is so unpopular is that Americans understand the contradiction between untold new government subsidies and claims of spending restraint. They know a Big Con when they hear one.
“Mr. Obama’s fiscal assertions are possible only because of the fraudulent accounting and budget gimmicks that Democrats spent months calibrating….
“[As Congressman Ryan has calculated] The real cost over a decade is about $2.3 trillion on paper…and even that is a lowball estimate considering how many people will flood to ‘free’ health care and how many businesses will be induced to drop coverage. Mr. Obama claimed yesterday that the plan will cost ‘about $100 billion per year,’ but in fact the costs ramp up each year the program exists. The far more likely deficits are $460 billion over the first 10 years, and $1.4 trillion over the next 10….
“Yesterday Mr. Obama again invoked the ‘nonpartisan, independent’ authority of CBO, which misses the reality that if you feed the agency phony premises, you are going to get phony results at the other end.
“The president also claimed the reason his plan is in trouble, and the reason Democrats must abuse the Senate’s rules to ram this plan into law, is that ‘many Republicans in Congress just have a fundamental disagreement over whether we should have more or less oversight of insurance companies.’ So most of Mr. Obama’s first year in office has been paralyzed over nothing more than minor regulatory hair-splitting. This is so preposterous that the President can’t possibly believe it.
“Congress’ spring break begins on March 29, and Democratic leaders plan on jamming this monster through Congress before then. Americans have to hope that enough rank-and-file Democrats aren’t as deaf to fiscal honesty as this President.”
“It is now exactly a year since President Obama unveiled his health care push and his decision to devote his inaugural year to it – his branding year, his first, vivid year.
“At best it was a waste of history’s time, a struggle that will not in the end yield something big and helpful but will in fact make future progress more difficult. At worst it may prove to have fatally undermined a new presidency at a time when America desperately needs a successful one.
“In terms of policy, his essential mistake was to choose health-care expansion over health-care reform. This at the exact moment voters were growing more anxious about the cost and reach of government. The practical mistake was that he did not include or envelop congressional Republicans from the outset, but handed the bill’s creation over to a Democratic Congress that was becoming a runaway train. This at the exact moment Americans were coming to be concerned that Washington was broken, incapable of progress, frozen in partisanship….
“New presidents should never, ever, court any problem that isn’t already banging at the door. They should never summon trouble. Mr. Obama did, boldly, perhaps even madly. And this is perhaps the oddest thing about No Drama Obama: In his first year as president he created unneeded political drama, and wound up seen by many Americans not as the hero but the villain….
“In his speech Wednesday, demanding an ‘up or down’ vote, the president seemed convinced and committed – but nothing he said sounded true. His bill will ‘bring down the cost of health care for millions,’ it is ‘fully paid for,’ it will lower the long term deficit by a trillion dollars.
“Does anyone believe this? Does anyone who knows the ways of government, the compulsions of Congress, and how history has played out in the past, believe this? Even a little? Rep. Bart Stupak said Thursday that he and several of his fellow Democrats won’t vote for the Senate version of the bill because it says right there on page 2,069 that the federal government would directly subsidize abortions. The bill’s proponents say this isn’t so. It would be a relief to have a president who could weigh in believably and make clear what his own bill says. But he seems to devote more words to obscuring than clarifying.
“The only thing that might make his assertions sound believable now is if a group of congressional Republicans were standing next to him on the podium and putting forward a bill right along with him. Which, obviously, won’t happen, for three reasons. First, they enjoy his discomfort. Second, they believe the bill is not worth saving, that at this point no matter what it contains – and at this point most people can no longer retain in their heads what it contains – it has been fatally tainted by the past year of mistakes and inadequacies.
“And the third reason is that the past decade has taught them what a disaster looks like, and they’ve lost their taste for standing next to one.”
“Obama (has been) reduced to suggesting that his health-care reform was indeed popular because when you ask people about individual items (for example, eliminating exclusions for preexisting conditions or capping individual out-of-pocket payments), they are in favor.
“Yet mystifyingly they oppose the whole package. How can that be?
“Allow me to demystify. Imagine a bill granting every American a free federally delivered ice cream cone every Sunday morning. Provision 2: steak on Monday, also home delivered. Provision 3: a dozen red roses every Tuesday. You get the idea. Would each individual provision be popular in the polls? Of course.
“However (life is a vale of howevers) suppose these provisions were bundled into a bill that also spelled out how the goodies are to be paid for and managed – say, half a trillion dollars in new taxes, half a trillion in Medicare cuts (cuts not to keep Medicare solvent but to pay for the ice cream, steak and flowers), 118 new boards and commissions to administer the bounty-giving, and government regulation dictating, for example, how your steak is to be cooked. How do you think this would poll?”
Lastly, Niall Ferguson, a professor at Harvard University and Harvard Business School, wrote a controversial essay in the March/April issue of Foreign Affairs from which he excerpted his thoughts for an op-ed in the Los Angeles Times. Ferguson writes of the potential loss of empire.
“If empires are complex systems that sooner or later succumb to sudden and catastrophic malfunctions, what are the implications for the United States today? First, debating the stages of decline may be a waste of time – it is a precipitous and unexpected fall that should most concern policymakers and citizens. Second, most imperial falls are associated with fiscal crises. Alarm bells should therefore be ringing very loudly indeed as the United States contemplates a deficit for 2010 of more than $1.5 trillion – about 11% of GDP, the biggest since World War II.
“These numbers are bad, but in the realm of political entities, the role of perception is just as crucial. In imperial crises, it is not the material underpinnings of power that really matter but expectations about future power. The fiscal numbers cited above cannot erode U.S. strength on their own, but they can work to weaken a long-assumed faith in the United States’ ability to weather any crisis.
“One day, a seemingly random piece of bad news – perhaps a negative report by a rating agency – will make the headlines during an otherwise quiet news cycle. Suddenly, it will be not just a few policy wonks who worry about the sustainability of U.S. fiscal policy but the public at large, not to mention investors abroad. It is this shift that is crucial: A complex adaptive system is in big trouble when its component parts lose faith in its viability.
“Over the last three years, the complex system of the global economy flipped from boom to bust – all because a bunch of Americans started to default on their subprime mortgages, thereby blowing huge holes in the business models of thousands of highly leveraged financial institutions. The next phase of the current crisis may begin when the public begins to reassess the credibility of the radical monetary and fiscal steps that were taken in response.
“Neither interest rates at zero nor fiscal stimulus can achieve a sustainable recovery if people in the United States and abroad collectively decide, overnight, that such measures will ultimately lead to much higher inflation rates or outright default. Bond yields can shoot up if expectations change about future government insolvency, intensifying an already bad fiscal crisis by driving up the cost of interest payments on new debt. Just ask Greece.
“Ask Russia too. Fighting a losing battle in the mountains of the Hindu Kush has long been a harbinger of imperial fall. What happened 20 years ago is a reminder that empires do not in fact appear, rise, reign, decline and fall according to some recurrent and predictable life cycle. It is historians who retrospectively portray the process of imperial dissolution as slow-acting. Rather, empires behave like all complex adaptive systems. They function in apparent equilibrium for some unknowable period. And then, quite abruptly, they collapse.”
Street Bytes
–Stocks staged a solid gain with the Dow Jones advancing 2.3% to 10566, the S&P 500 adding 3.1% and Nasdaq 3.9%. The S&P is up 68% off its lows of a year ago. Friday’s labor report for February helped with job losses coming in less than expected at 36,000 and the unemployment rate remaining at 9.7%. For the week, further mergers and acquisitions news, such as AIG’s sale of its life insurance unit to Prudential for $35 billion and Merck’s acquisition of biotech equipment maker Millipore, helped as well. Globally, stocks rose, aided by news on the Greece front, even though it is hardly positive in the longer run. I liked a comment from trader Doug Kass on CNBC’s “Fast Money” on Friday that the market, week to week, seems to have “a limited memory.”
–The 382 nonfinancial firms in the S&P 500 are holding over $930 billion in cash and short-term investments, according to a Wall Street Journal analysis, up 31% from a year ago, which is helping fuel the surge in M&A activity. It’s all earning essentially zero so there is increasing pressure to spend it, give it back to shareholders, or buy back shares.
–U.S. Treasury Yields
6-mo. 0.19% 2-yr. 0.89% 10-yr. 3.68% 30-yr. 4.64%
The vice-chairman of the Federal Reserve, Donald Kohn, is retiring in June, meaning there are now three empty seats to fill on the Fed’s seven-member board at a time when the White House faces immense pressure on the jobs front. The Fed has two mandates, price stability with full employment, with the former historically winning out. Thus the reason why you are seeing the use of the term “dove” (on inflation) as candidates are proposed. Hiking interest rates this summer, for example, could stunt job growth and impact the mid-term vote in a big way…not that this is in the cards.
“(We) learned that (China’s) holdings of U.S. Treasuries fell by $34 billion in December to $755.4 billion. No need to panic. It’s not a wholesale dumping of Uncle Sam just yet. Plus China buys anonymously through banks in Europe and elsewhere so its position may actually be larger.”
Bingo. This week the Treasury Department revised its figures to reflect China actually holding $894.8 billion! [Japan was revised down to $765.7 billion from $769 billion.]
“The sharp revision came as the Treasury looked at Chinese holdings in third markets such as Britain and Hong Kong, which were not picked up by the earlier estimates.”
–India’s government is targeting 10% growth in 2010, while Australia hiked interest rates a 4th time because its economy is doing so well, owing to its business with China.
–Japan’s corporate profits are recovering and the unemployment rate dropped to 4.9%, but cap-ex was down an 11th straight month and household spending declined in January over December as government stimulus wears off. This is one country to watch closely for signs the global recovery is for real, or whether we’re all headed for a double-dip.
–Note to inflation hawks…understand that in Ireland, workers are going to see pay cuts to compensate for a new pension plan designed to shore up funding. All workers will have to pay 4% of their incomes into a pension scheme (as it’s called there), which will be boosted by a 2% contribution from employers and a further 2% from the State. Ergo, pay cuts.
–Ford led the way in February with its car sales up 43.4%, while Toyota’s were down 9%. GM was up 12%, Honda up 13%, Hyundai up 11%, Nissan up 29%, and Chrysler’s were flat.
Toyota’s performance was actually a little better than expected, February being the first full month to gauge the impact of its myriad of problems, but Honda noted sales of its Accord sedan, which competes directly with the tainted Camry, rose 41%, while another Camry competitor, Hyundai’s Sonata, had a sales increase of 58%.
But now all the automakers have offered huge incentives for March, while GM was hit by its own recall issue, a possible power steering failure on its Chevy Cobalt model.
Lastly, faulty Toyotas are now blamed for 52 deaths in the U.S. according to the latest analysis of the National Highway Traffic Safety Administration.
–The only thing holding oil up is fears of a supply disruption due to a coming crisis over Iran. At $81, should we stay at this level it will certainly impede a recovery.
–Iceland voters are expected to vote ‘no’ to a plan to repay the U.K. and the Netherlands for bailing out depositors in the failed Icelandic Internet bank, Icesave. Officials are scrambling to cut a deal with the Dutch and British to blunt the impact of the referendum today, which Iceland’s finance minister was hoping to call off with a new deal, but that won’t be the case.
Without a repayment plan for the $5.3 billion owed, currently set at 15 years at 5.55% interest, Iceland will be unable to access aid from the IMF that it needs to have any chance at repairing its shattered economy.
–In Argentina, President Cristina Fernandez said the courts could not stop her from using central bank reserves to repay debts, this as she faces a constitutional crisis over the firing of the central bank chief for refusing to give up the reserves to pay private creditors.
–Citigroup CEO Vikram Pandit testified before a congressional panel for the first time in over a year and blamed short sellers for Citi’s near collapse in 2008. Said financial expert Christopher Whalen, “His bank has got the highest [credit] loss rate of any of the big four. The shorts were just responding – the emperor had no clothes.”
Otherwise, Pandit was fawning all over Congress, seeing as the U.S. still owns 27% of the shares. “Citi owes a large debt of gratitude to American taxpayers,” he said. He then shined everyone’s shoes and washed the salt off Washingtonians cars for free.
The government acquired its Citi stake at $3.25, which is roughly where it is today so it’s highly unlikely they will unload the stock soon, seeing as this would have a major adverse impact on the share price, though on Friday it was rumored the government was gearing up to sell anyway.
–In a good sign on the China-Taiwan front (with more below), Taiwan gave the go-ahead for China Mobile to open a subsidiary on the island, which then may take a stake in one of Taiwan’s leading cellphone operators.
–Meanwhile, China’s overseas investments rose 6.5% in 2009 to $43.3 billion and could jump to $60 billion this year, according to state media. Estimates of Chinese direct investment in the U.S. in ’09 range from $3.9 billion to $6.4 billion.
–The Chilean earthquake was particularly important for the price of copper, Chile accounting for 36% of global exports, but operations were not severely impacted, at least from what we know thus far, and so after an initial price spike to $3.48 a pound, copper leveled off some.
–Bankruptcy filings surged 14% in February compared with a year earlier. For 2009, they were up 32% over 2008, according to the American Bankruptcy Institute.
–Goldman Sachs’ trading desk netted at least $100 million on 131 days last year, according to an SEC filing. Goldman’s previous record was 90 days in 2008. Out of 263 trading days in ’09, Goldman’s desk lost money only 19 times. 2/3s of the firm’s revenues came from trading and investing. Of course Goldman was helped by the loss of some of its competitors, namely Lehman and Bear Stearns, while near-zero interest rates enabled it to slash their cost of funding.
–The Conficker network, a hacker attack on 12.7 million Internet addresses in 190 countries, was shut down by police and private security experts. Otherwise known as the Mariposa botnet, it had siphoned off financial and other information from inside half of the largest 1,000 U.S. companies, according to the Financial Times. Three men were accused of running the network and stealing millions of dollars. The arrests were made in Spain.
–A drug for treating Alzheimer’s failed in its first late-stage clinical trial and shares of its maker, Medivation, plunged 70% on Wednesday. The drug, Dimebon, had shown no effect in treating cognitive decline when matched against a placebo.
–Reader Matthias B. alerted me to a New York Times story by Andrew Pollack on hospital infections, after all I’ve written on the topic. Specifically, there was the case of a St. Louis area man who went into a hospital there for a routine hip replacement and was dead two months later of a blood infection, Acinetobacter baumannii.
“The germ is one of a category of bacteria that by some estimates are already killing tens of thousands of hospital patients each year. While the organisms do not receive as much attention as the one known as MRSA – some infectious disease specialists say they could emerge as a bigger threat.”
It seems for economic reasons, as well as scientific challenges, “the pharmaceuticals industry is pursuing very few drugs for Acinetobacter and other organisms of its type…Meanwhile, the germs are evolving and becoming ever more immune to existing antibiotics.”
New York City hospitals “have (also) become the global breeding ground for another drug-resistant germ, Klebsiella pneumoniae.”
“Some patient advocacy groups say hospitals need to take better steps to prevent such infections, like making sure that health care workers frequently wash their hands and that surfaces and instruments are disinfected. And antibiotics should not be overused, they say, because that contributes to the evolution of resistance.”
Of course the preceding paragraph is nothing new, it’s just common sense as I’ve been pointing out, but someone tell me how the healthcare proposal on the table today addresses the topic in a public way. Maybe it does.
But instead, an Atlanta couple, Armando and Victoria Nahum, started the Safe Care Campaign after their 27-year-old son died from a hospital-infection in October 2006.
Well God bless them…but why do these two have to go through the trouble when this is something that should be focused on from the White House?! Where are the public service announcements pounding away on the topic like with drug abuse?
–How long does it take for Congress to understand that postal service should be cut back to five days, immediately? I think I just answered my own question.
–Las Vegas’ turnaround in terms of casino revenues, which recently snapped a 22-month losing streak and a decline to 2004 levels(!), was fueled solely by Chinese baccarat players, with revenue from same rising 26.5% last year and 100% in the fourth quarter. By contrast, slot machine and other casino games revenues fell 11% in the last quarter. With the surge in Macau, Vegas operators have been aggressive in courting Chinese high-rollers. MGM CEO Jim Murren said 2009 was its “best year ever” in terms of its business from the international crowd, particularly Asia. “We know we’ve been outperforming the strip here in the baccarat numbers.” So you can imagine how closely executives like Murren follow the state of the Chinese economy and each tightening measure there. [South China Morning Post]
–I love this story out of Moscow. A developer of residential real estate, Lider, is offering a kilogram of gold to clients that buy apartments in three of its “business-class” complexes if they pay for at least 70% of the apartment’s price up front.
What Lider does is open up a metals account with a nominal value of one kilo of gold at a bank, and the client can cash out the account at any time. At current prices, a kilogram of gold is worth about $39,000.
–Speaking of Russia, billionaire and prospective New Jersey Nets owner, Mikhail Prokhorov, lost a $53 million deposit he put down on the world’s most expensive home on the French Riviera. Prokhorov made the 10% deposit on the $530 million property but backed out in 2008 owing to the financial crisis. A French court ruled he cannot get the money back. Even for a billionaire, this probably makes for a bad day.
–Domino’s is meeting with great success for its reworked pizza and will be stepping up advertising. Can’t say I’ve tried it yet.
–According to Morningstar, Warren Buffett’s Berkshire Hathaway Class A shares have returned 22% a year since 1965 with only two mutual funds, Fidelity Magellan at 16.3% and Templeton Growth Fund at 13.4% even coming close. Actually, they aren’t close at all. $10,000 invested with Buffett on 10/1/64 – $60,000 in today’s dollars – would now be worth $80 million. The same amount in Magellan would have grown to $9.1 million, while Templeton Growth would have about $2.9 million. [Sam Mamudi / Wall Street Journal]
–Mr. Buffett had the following comments in his annual letter to shareholders concerning Wall Street executives.
“The CEOs and directors of the failed companies…have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance.” Having benefited from the carrots, “some meaningful sticks now need to be part of their employment picture as well.”
–Actor Charlie Sheen’s returning to rehab hits CBS, with the average cost of a 30-second spot in Two and a Half Men going for $226,355, according to Ad Age. So with production suspended for the top-rated comedy, network execs are not happy. Plus advertisers are already steering away from Sheen, a la Tiger.
–If you don’t already know this, kids, understand that according to a study of employers, 45% of them check social-networking sites before deciding whether to hire someone. And as reported by Kyle Smith in the New York Post, it gets worse. Of that 45% who bothered to check, “80% subsequently decided not to offer a job to someone based on info found on the sites. Facebook: the great job killer of the 21st century.” [Charlie Sheen is lucky Facebook wasn’t around when he got his first shot.]
So if you’re posting sex jokes, or talking about how much you drank last weekend, you better rethink the propriety of this…we’re in the age of too much information.
–Over the years I’ve poked fun at Wall Street spouses, so I can’t help but make note of an item in the New York Post’s Page Six.
“The desperate housewives of Lehman Brothers were so ostentatious in spending their husbands’ millions, and such phony back-stabbers to each other, a new book claims, that there’s little sympathy for them now that the firm is bankrupt.
“Niki Gregory, the wife of Lehman president Joe Gregory, ‘loved the clothes and the jewels that her husband lavished on her,’ Vicky Ward writes in ‘The Devil’s Casino: Friendship, Betrayal and the High Stakes Games Played Inside Lehman Brothers.’
“ ‘She was known to take trips to Los Angeles just to shop. She gave Lehman wives tours of her vast shoe closets in their Huntington home,’ reads an excerpt…
“Ward writes: ‘The Gregorys were viewed by colleagues as people who needed to show off their wealth. No one else flashed cash quite like Joe, and he couldn’t help but tell all the other senior executives that his personal annual spending budget was $15 million. Joe also had both a seaplane and a helicopter ready for his daily commute.’”
Ah, but now without hubby’s money, what do they do? No one cares.
Foreign Affairs
Iran: So who wants some stiff sanctions on Iran? Anyone? It would appear that whenever the U.N. Security Council gets around to voting on a package, it will be nothing more than some weak financial measures on key leaders and the Revolutionary Guard, even as the U.S. House and Senate work on legislation that would at least tighten sanctions on companies doing business in Iran, including the targeting of sales of refined petroleum products to the country, but with an exemption for the six seeking to negotiate with Iran on its nuclear program; the five permanent members of the Security Council – the United States, France, Russia, China and Britain, plus Germany. Confused? The White House is actually looking to carve out a special exemption for China as a country cooperating in the U.S.-led drive to prevent Iran from developing nukes, which has led the likes of South Korea and Japan to say, ‘Excuse me, but tell me what exactly have the Chinese done to deserve this?’ as one senior official from a friendly country told the Washington Post the other day.
This week Secretary of State Hillary Clinton said, “I would assume sometime in the next several months” the U.N. will come up with a new sanctions resolution. Months.
As for Russia, President Dmitry Medvedev said his nation was prepared to weigh additional economic penalties, admitting everything “we have tried to say to the Iranian leaders, all our appeals to them to work on a peaceful nuclear program under the control of the international community, haven’t provided any results.” China, on the other hand, just wants continued negotiations. The whole exercise is truly pitiful. It’s a good time to ‘short’ the world.
Meanwhile, Israel is lobbying for more U.S. muscle-flexing in the Gulf, arguing Tehran will only change its behavior if it sees there are potential consequences for its intransigence. Sami Al Faraj, a retired Kuwaiti military officer who is now a consultant on crisis management, told Defense News:
“If we don’t underscore our intent with some kind of serious measure, up to and including the physical cordoning of the coasts of Iran, we will have a war. There’s no way for a new layer of sanctions to be imposed effectively without some sort of blockade imposed in the Arabian Sea and the Gulf of Oman.”
Some, such as U.S. Joint Chiefs of Staff Adm. Mike Mullen argue a blockade is a declaration of war, but Al Faraj says:
“A blockade is not a declaration of war. It is considered a belligerent act that falls just short of war. And when you’re facing a nation that doesn’t abide by any rules, this is the only language Iran is going to understand.”
As for the Iranian opposition, it has been largely silent, which was highly predictable because the White House said nothing to encourage them as the United States, instead, chooses to attempt to negotiate with an illegitimate regime. Mir Hussein Moussavi, though, did post an interview on his Web site calling the country’s rulers “a cult that has hijacked the concept of Iranianism and nationalism. Our people cannot tolerate such behavior under the name of religion.”
Iraq: The historic parliamentary election is Sunday, though voting began earlier in some provinces, as well as with the military that will be guarding voters tomorrow, and violence ruled the day, as it might Sunday. Once the vote takes place, it’s a classic case of wait 24 hours to see how it all shakes out.
But it was humorous to see Ahmad Chalabi, the man most responsible for convincing President Bush and Vice President Cheney to go to war, have his say in a Wall Street Journal op-ed on Friday, writing, “Now, as President Obama has stated, it is up to the Iraqi people. All we ask is the opportunity to move forward on our own as we see fit.”
Of course it’s well documented by now that Chalabi is an agent of Iran and I haven’t been in the least bit reckless in saying he should have been taken out. I also don’t plan on going to Baghdad anytime soon, I hasten to add. The problem now is that Chalabi is about to become an elected member of parliament. So basically we blew our opportunity.
[To my detractors, no one is complaining about the drone attacks picking off Taliban and al-Qaeda leadership. There is little difference in what I was arguing for, but as of Sunday, the dynamic will have changed.]
Afghanistan: U.S. special representative to the region, Ambassador Richard Holbrooke, summed up the dilemma here in an interview with the Financial Times.
“You can’t occupy every piece of terrain, so the real key is building and transferring [control to the Afghan security forces]. “It’s much too early” to tell how well this is going to go because “it is a difficult challenge.” As in:
“We need to work with the Afghans to produce a force structure which is trained, equipped, literate…You can’t have a police 90% illiterate. Police have to be able to read ID cards…They need to be off drugs. The attrition rate is very high.
“This is an area of legitimate concern for those internationalists who are putting their soldiers at risk on the ground to help protect Afghanistan from the Taliban and al-Qaeda.”
On the issue of Pakistani cooperation, Holbrooke said he is not prepared to say we have turned a corner.
Pakistan: Speaking of which, one of this country’s leading generals insists the Pakistani Taliban’s “command and control centers and their caches have been dismantled or captured. The kind of hits the leadership has taken, the casualties they have taken, the TTP [Pakistani Taliban] is no longer significant. It has ended as a cohesive force. It doesn’t exist anymore as an umbrella organization that can influence militancy anywhere.” At least so spoke Major-General Tariq Khan. As Richard Holbrooke said, however, it’s way too early to say we’ve turned a corner.
India: While peace talks between India and Pakistan have resumed, there is suspicion that Pakistan’s intelligence service (ISI) was behind the Taliban attack in Kabul that killed at least six Indians. [An Afghan intelligence official blamed Pakistan-based Lashkar-e-Taiba for the Kabul attack, the same group responsible for the 2008 Mumbai assault.] Pakistan has been concerned with India’s aid efforts in Afghanistan, which India insists are not directed at Pakistan. Pakistan claims, though, that India’s consulates are fronts for spies who direct operations against Pakistan, which is absurd.
Turkey: First, the government of Prime Minister Erdogan had to deal with the fallout of the arrest of about 40 former and current military leaders in an alleged 2003 coup plot, this in a nation where the military is revered and the motives of the Islamist government under deep suspicion. This story will be playing out for at least the rest of the year.
But then the U.S. Congress, as noted in my opening, voted to label the slaughter in 1915 of Armenians, genocide, and now the Obama administration must prevent a full vote in the House or you can kiss goodbye access to northern Iraq and cooperation in the region, including potentially Afghanistan.
In recalling his ambassador from Washington, Erdogan said, “We are seriously concerned that this resolution approved by the committee despite all our warnings will harm Turkey-U.S. ties and efforts to normalize Turkey-Armenia relations.”
Lebanon: Israeli Defense Minister Ehud Barak warned the United States that Hizbullah could hit multiple targets south of the Blue Line [drawn up as part of the end to the 2006 war]. As quoted in the Israeli daily Haaretz, Barak said:
“It is a bizarre anomaly that [Lebanon] is a member of the United Nations but has a militia, with members of Parliament and ministers, and an arsenal of 45,000 missiles and rockets that can hit all of Israel. And [Hizbullah says] they are ready to deploy it like in the past. We cannot accept this, we do not intend to chase down every individual terrorist, but we will consider the government of Lebanon [and] the country’s infrastructure, as part of the equation with which we are confronted.”
As reported in the Daily Star [Lebanon], Barak’s warning came as Sheikh Nasrallah visited Damascus for talks with Syrian President Assad and Iranian President Ahmadinejad. If I had two minutes with Barak or any other Israeli leader, I’d tell them, one, stop the flyovers, and, two, give up Shebaa Farms. [In the near future, you’ll be sick of me talking about Shebaa, but there will be a reason for it.]
China: As part of the new budget, the government said it was toning down the rate of growth for the military, though spending at $78 billion is still 7.5% higher than last year’s supposed total. So seeing as how China understates its defense budget, you can take this with a grain of salt. Then again, since China has stolen all of our technology, development costs should be drastically reduced. ‘Put Part A into Part B…and…voila! A new cruise missile!’
Speaking of stealing secrets, it seems clear that the hackers behind the attacks on Google and other companies stole valuable computer source code, with the hackers targeting those workers who had the access. Security firm McAfee says the evil ones used source code management software from privately held Perforce Software Inc., whose customers include Google and other large corporations.
But China is increasingly concerned with India, which could at least help take its eyes off the U.S. An editorial in China’s Global Times (which is sympathetic to the government), noted:
“In the last few days, India has dispatched roughly 60,000 troops to its border with China, the scene of enduring territorial disputes between the two countries.
“J.J. Singh, the Indian governor of the controversial area, said the move was intended to ‘meet future security challenges’ from China. Meanwhile, Indian Prime Minister Manmohan Singh claimed, despite cooperative India-China relations, his government would make no concessions to China on territorial disputes.
“The tough posture Singh’s new government has taken may win some applause among India’s domestic nationalists. But it is dangerous if it is based on a false anticipation that China will cave in….
“India’s current course can only lead to a rivalry between the two countries. India needs to consider whether or not it can afford the consequences of a potential confrontation with China.”
Not that anything is about to happen, but the rivalry between these two economic juggernauts does need to be watched closely. It would certainly be a huge shock to financial markets were we to wake up one morning to a major conflict on the border between the two.
On a more positive note, despite China’s ire over U.S. arms sales to Taiwan, Beijing is directing it at Washington, not Taipei, and as noted above in the case of China Mobile, Chinese officials said this week that they are committed “to the goal of peaceful development of cross-strait relations.”
Ukraine: Prime Minister Tymoshenko’s governing majority collapsed, freeing up new President Yanukovich to replace her, though cobbling together a ruling coalition will take a little time. He also arrived in Moscow for talks with Medvedev and Putin on what should be vastly improved relations between the two countries, though when it comes to Russia and Ukraine, it’s all about natural gas. Ukraine wants lower prices…Russia says they are just fine at current levels.
France: A story that didn’t receive much press, at least in the States, was the wicked storm that hit France and parts of Spain, Portugal, Belgium and Germany, claiming at least 50 lives in France alone as its Atlantic coast was battered, with many drowning when centuries old seawalls collapsed. Torrential rain was driven by winds of up to 87 mph. Falling trees killed at least7 outside France.
The storm became a political issue because evacuation orders were not issued beforehand. Said French President Sarkozy, “We need to ask how, in France, in the 21st century, families can be surprised in their sleep, die drowned in their home.”
Chile: As I went to post last week, all I knew is that a large quake had hit this nation, which proved to be one of the biggest in recorded history, 8.8., or anywhere from 500 to 1,000 times more powerful than the one that hit Haiti. Now, a week later, while the death toll is unclear the devastation is, including from some tsunami waves that struck the Chilean coast (and some outer islands) in the immediate aftermath. The only saving grace is that the more modern structures were built to withstand such a blow and they largely held up. Older buildings, though, gave way.
The government was overwhelmed initially, as virtually any would be, and aid was slow in reaching the most devastated areas, though it was interesting how the army was cheered in a nation with bad memories of military rule. Having been to Santiago myself in 2004, I was disappointed by the scenes of looting, though such incidents have happened here as well.
But I do have to defend the scientists who caught some heat for the Pacific-wide tsunami warning that proved to be a bit of a bust to some. Such talk is idiocy. As an oceanographer with the Pacific Tsunami Warning Center in Hawaii said, “Failure to warn is not an option for us.”
The criticism came before the extent of the waves that hit Chile itself was known. I hope the folks blasting the scientists feel like the jerks they truly are.
[Three waves devastating one Chilean village were at least 18-feet high, and these poor folks were not warned by Chilean authorities ahead of time according to accounts. As described in the port town of Talcahuano, after the earthquake hit, one family “huddled in a circle on the floor of their seaside wooden home, listening to the radio by a lantern’s light. They heard firefighters urging citizens to stay calm and stay inside. They heard nothing about a tsunami – until it slammed into their house with an unearthly roar. Gatica’s house exploded with water.” I just can’t fathom the terror of both the quake and then the wave. Somehow the Gatica family survived.]
And then you have the Desarmes family, the story of which Mark R. passed along. According to the AP, they left their native Haiti two weeks after the earthquake there, joining their eldest son in Chile. A month later they survived the 8.8. Said a family member, “My God, I left my country and I didn’t die, but I’m going to die here!”
Venezuela: A Spanish National Court Judge alleged that the Venezuelan government collaborated with the Basque separatist group ETA and the Colombian guerrilla group FARC to assassinate Colombian President Alvaro Uribe, a plot going back to 2003. Colombian officials, including Uribe, are reacting cautiously.
Egypt: Interesting development here as former IAEA chief Mohamed ElBaradei continues to make waves amid talk of a presidential run in 2011. President Mubarak has been in power since 1981 (where has the time gone?!) and while Mubarak has not named a successor, it is assumed it will be son Gamal. ElBaradei wouldn’t necessarily be a great friend of the U.S., witness his actions at the UN nuclear agency, but if he was allowed to run (and there’s no guarantee he will be in this closed country), it would certainly shake things up.
South Africa: President Jacob Zuma has pledged his country will be safe when it hosts the World Cup, South Africa being a place where there are 50 murders each day (a murder rate 7 times that of the U.S.), which has led to a ton of white flight and a real brain drain. Back in ’08, I had an interesting conversation with a South African in a bar in Hong Kong. He loved his country but the risks to his family were becoming too great, he told me, and this was the very kind of smart businessman that the country can ill afford to lose.
Zuma has said police need to use “deadly force” and the number of police will be increased 10% over the next three years, but this can’t come soon enough.
Separately, there were violent protests in Sharpeville, best known for a notorious 1960 massacre during the apartheid era, as there is public anger over poor housing, health and education and one broken promise after another in this the 16th year after the end of white rule.
Singapore: About six years ago I took a ferry from Singapore to Indonesia to check out the Malacca Strait and the tanker traffic, a time I’ve chronicled in this space for a different reason as it was the day Abu Ghraib hit the headlines and I wasn’t about to go chanting “U-S-A, U-S-A…” The view of the massive ships on the open water there, though, is awe-inspiring. But I came away from the experience as believing Singapore, Malaysia, Indonesia, and the U.S. had things well under control when it came to the terror threat.
So it was interesting that Singapore’s Navy warned this week that a terrorist group is planning attacks on the oil tankers. About 18% of the world’s crude passes through these waters each day, but in no way can terrorists really stop the flow of oil. One attack and the navies will swarm the area.
Philippines: Manila is facing power shortages and blackouts due to a severe drought brought on by El Nino. In the southern region of Mindanao, much of its power is generated by hydroelectric plants.
Random Musings
“Politicians…pretend to deal with budget deficits when they aren’t. Just recently, the Democratic Congress passed a new version of the ‘pay-go’ budget rule. Under pay-as-you-go rules, if Congress cuts taxes or increases spending beyond present policies, it must find offsets by raising taxes or cutting spending elsewhere. This seems a prudent discipline, and Obama bragged about being ‘responsible.’ What he didn’t say is that this new pay-go contains huge exceptions. These include the renewal of most of the Bush tax cuts, revisions of the alternative minimum tax, higher Medicare reimbursements for doctors and overhaul of the estate tax. Over the next decade, these exceptions could be worth about $2.5 trillion, says Marc Goldwein of the Committee for a Responsible Federal Budget.
“Or take the 18-member presidential bipartisan budget commission (10 Democrats and eight Republicans) charged with reining in the long-term deficits. If 14 members agree on a deficit-reduction package, Democratic congressional leaders have said they’d put the plan to an up-or-down vote. The obstacles to agreement are considerable. But if they’re overcome – and if Congress accepts the package – you might reasonably conclude that, finally, we’d be suppressing chronic deficits. Not so.
“The commission’s official task is more modest: It’s to eliminate the deficit in 2015, disregarding interest payments. This makes a big difference. By the administration’s projections, the budget deficit in 2015 will total $752 billion. Of that, interest payments represent $571 billion. Even if the commission succeeds, the deficit would exceed half a trillion dollars. It would almost certainly grow in future years….
“The make-believe of campaigning increasingly shapes the process of governing….Proposals tend to be constructed more for their public relations effects than for their capacity to solve actual problems.
“The result is a paradox. This electioneering style of governing strives to bolster politicians’ popularity. But it does the opposite. Because partisan rhetoric creates exaggerated expectations of what government can do, people across the ideological spectrum are routinely disillusioned. Because actual problems fester – and people see that – public trust of political leaders erodes.”
–Hall of Fame pitcher and retiring Republican Senator Jim Bunning is going out with his best stuff…nasty breaking balls in the dirt that are confusing batter and catcher alike. The 78-year-old, who has appeared a little erratic at times, put a “hold” on a $10 billion bill to pay for extended unemployment benefits and other programs, and, similar to Robert Samuelson’s discussion above, Democrats argued that the measure was an “emergency” bill exempt from pay-go rules. Bunning then threw some chin music. Even the Washington Post editorialized that while Bunning’s move didn’t exactly shine a great light on Republicans because Bunning isn’t the man us elephants want as our chief spokesman:
“The point Mr. Bunning was trying to make was a reasonable one: At some point, Congress has to stop borrowing and spending, even for worthy purposes. He’s correct about this in the long run, though there’s a fair debate as to whether the deficit is a greater threat to the economy now than, say, unemployment. What is clear is that a ‘pay-for’ Mr. Bunning proposed – cutting a tax credit for makers of a wood byproduct called ‘black liquor’ – is absolutely meritorious and should be adopted whatever else Congress does.”
Now here’s where it gets real complicated and it’s enough to make your brain hurt, but the bottom line is the tax credit Bunning wanted slashed was to have been cut as part of the Obama healthcare plan since the administration’s proposal is $79 billion more than the Senate plan and Obama had to find funds for the difference. So, if Bunning had succeeded, the ‘black liquor’ credit wouldn’t have been available to use towards offsetting the increased healthcare proposal. And while Bunning finally backed down, I frankly don’t know…or care…what the status of the black liquor tax beak is.
Then again, Sen. Bunning wrote an opinion piece for USA TODAY, that read in part:
“For too long, both Republicans and Democrats have treated the taxpayers’ money as a slush fund that does not ever end. At some point, the madness has to stop.
“Over a month ago, Democrats passed and President Obama signed into law the ‘Pay-Go’ legislation. It calls on Congress to pay for bills by not adding to our debt….Unfortunately, Pay-Go is a paper tiger. It has no teeth. I did not vote for the Democrats’ Pay-Go legislation because I knew it was just a political dog-and-pony show to get some good press after some political setbacks. Since the Pay-Go rule was enacted, the national debt has gone up $244,992,297,448.11 (as of Wednesday, that is)….
“Many people asked me, ‘Why now?’ [fight the fight] My answer is, ‘Why not now?’ Why can’t a non-controversial measure in the Senate that would help those in need be paid for? If the Senate cannot find $10 billion to pay for a measure we all support, we will never pay for anything.
“America is under a mountain of debt. Federal Reserve Chairman Ben Bernanke said in a hearing last month that the United States’ debt is unsustainable. We are on the verge of a tipping point where America’s debt will bring down our economy, and more people will join the unemployment lines. That is why I used my right as a United States Senator and objected.”
[Bunning then discusses how he was screwed by the Senate rules and a deal he had cut with Majority Leader Reid, only to have the Democrats use a parliamentary maneuver to set aside his amendment “and not vote on the actual substance of it.”]
“I have 40 grandchildren, and I want them to grow up in a country where they have all of the same opportunities I had as a child. I fear that they will not have those opportunities if Washington continues on its course of spending without paying for it. We are at over $12 trillion in debt. I know many Americans sit around their kitchen table and make the tough decisions. It is time for the politicians in Washington to do the same.”
What ticks me off is Bunning’s joust, when coupled with the above piece by Samuelson, shows you just how our president is lying to us, constantly, when he goes before one of his daily audiences and tells them that Congress has adopted a new discipline, thanks to him of course, Pay-Go, but it is indeed a total sham.
So good for you, Senator and Hall of Famer Jim Bunning. You fought the good fight on this your last big issue, I imagine. Unfortunately, it’s as if you were hurling in the World Series, went nine strong innings but left with the score tied 1-1, only to have the bullpen blow it in the tenth. Real fans, at least, know you threw a terrific game.
–It’s funny how everyone loves Democratic Congressman Charlie Rangel. That is those who have crossed paths with the guy, meaning his fellow politicians, Washington pundits, and I’m sure many of his constituents. And he’s got the war hero label from Korea. But the guy is a freakin’ crook, sports fans! Oh, some say that in Rangel’s case you can’t use the term “crook,” because he is not under criminal investigation for anything. But, as the New York Daily News’ Thomas Defrank wrote, Defrank being a long-time Washington scribe who is one of those saying you can’t call Rangel a crook:
“In Rangel’s case, ethical amnesia, terminal corner-cutting, personal hubris and Republican payback brought him down – abetted by a national revulsion toward Washington insiders that threatens the Democrats’ hold on power in November.
“He never seemed to grasp that the rules have changed since June 1970, when the 39-year-old state assemblyman knocked off Rep. Adam Clayton Powell – a certifiably corrupt pol.
“These days, it’s harder to pull off taking freebie trips to the Caribbean or failing to disclose or pay taxes on rental income and pass the political smell test.
“Rangel wasn’t just irked over barbs from the media and the GOP; he seemed genuinely amazed anyone would make a fuss about various financial issues still being probed by the House ethics committee.
“Rangel made it more difficult for himself by joining the who-me caucus, blaming his wife, staff and Spanish-speaking landlords for alleged transgressions – everyone but himself.”
–But boy does New York have a bunch of creeps these days supposedly leading the state, including one state assemblyman who was expelled after being convicted of assaulting his girlfriend, and a congressman (Eric Massa) who just resigned over a sexual harassment case involving a male staffer. Then there’s Gov. David Paterson.
Paterson “personally directed two female staffers to reach out to a domestic violence victim who was pointing the finger at his right-hand man,” chief aide David Johnson, who a state worker, Sherr-una Booker, accused of “a brutal assault on Halloween night in the couple’s Bronx apartment.” [Daily News]
As the New York Times initially reported, Paterson got directly involved in a criminal case, improperly trying to influence Booker to drop the charges against Johnson. Booker then failed to show on the court date. For his part, Paterson, who late last week dropped out of his campaign for a full four-year term (he having taken over for Eliot Spitzer), swore he had done nothing wrong.
“He did it. He really did it. Gov. Paterson pulled a Spitzer.
“Like his disgraced patron, Paterson created a huge deficit of trust with the citizens of New York, then brazenly committed a firing offense. Now the accidental Democratic governor must follow his predecessor out the door and into the Hall of Shame. Thanks for nothing, gov. Goodbye and good riddance….
“The outrageous intervention in a domestic-violence case by the governor and his State Police security detail proves he is unfit for the high office entrusted to him….
“The state faces an economic unraveling of historic proportions and New Yorkers deserve trustworthy leadership in this moment of peril….
“Paterson’s preposterous claims that he knew nothing about the brutal nature of the reported assault or that police officers who guard him were talking to the victim, both defy belief. Let him tell his story under oath.”
When it comes to Albany and its politicians in general, Michael Goodwin writes:
“Federal prosecutors…have what the military calls a target-rich environment. In layman’s terms, the feds are shooting fish in a barrel.
“Meanwhile, it is likely the Empire State will not make promised education aid payments in coming weeks. There is talk of delayed refunds to taxpayers and the MTA is handing out pink slips. Now this. Damn you, David Paterson.”
There is so much more to say about Paterson. Heck, he’s in major hot water for “demonstrably false” statements involving an $850 check he claimed to have made to pay for Yankees World Series tickets (that he was not to have received for free, as was initially the case), where Paterson says he made the check out himself but:
“The handwriting did not appear to match a sample of Paterson’s handwriting that the commission happened to have on file,” ergo he lied about the check, under oath, in a separate investigation. He can get 3-5 years for that.
So when is he leaving? A group of New York’s black leaders met on Thursday night and said he should stay, for now, this as a third Paterson aide resigned.
–Meanwhile, Harold Ford Jr., the former Tennessee congressman who thought he could establish residence in New York and then win a senate seat a year later, dropped out to resume his $2 million a year job as a rainmaker, or something of the sort, at Merrill Lynch. Maybe he’s a male escort on call for top brokers looking to snag the accounts of female executives (single ones, of course).
–P.W. Singer of the Brookings Institution, an expert on robotics, wrote an essay in Newsweek on how our fascination with drones and their usefulness, which no one can dispute, could yet be turned against us. For example:
“The unmanned spy plane that Lebanon’s Hizbullah sent buzzing over Israeli towns in 2005 was loud and weaponless, and carried only a rudimentary camera. But the surprise flight by a regional terror group still worried U.S. analysts, who saw it as a sign that the unmanned vehicles were falling into the wrong hands.
“Today that concern appears to have been well founded. At least 40 other countries – from Belarus and Georgia to India, Pakistan and Russia – have begun to build, buy, and deploy unmanned aerial vehicles, or UAVs, showcasing their efforts at international weapons expos.”
In the last six months, Iran and China have debuted weapons-ready surveillance drones. “All told, two thirds of worldwide investment in unmanned planes in 2010 will be spent by countries other than the United States.”
Recently the Wall Street Journal reported on how Iraqi insurgents were tapping into the planes’ video feeds using $30 software purchased over the Internet, yet Jim Tuttle, the Department of Homeland Security official responsible for safeguarding America against nonnuclear weapons, downplays the idea of drones being used against us. “What terrorist is going to have a Predator?” As P.W. Singer writes:
“Such arrogance is setting us up for a fall. Just as we once failed to imagine terrorists using our own commercial aircraft against us, we are now underestimating the threat posed by this new wave of technology.”
Singer concludes that those responsible for our safety need to widen “the threat scenarios our agencies plan and train for. It also means new legal regimes to determine who should have access to such dangerous technologies – lest our greatest new weapon come back to bite us.”
–I read some disturbing stuff in Army Times concerning drugs in the military, specifically antidepressants and antipsychotics used to deal with PTSD. For instance, 17% of active duty soldiers are on antidepressants, while prescriptions for antipsychotics are up 200% since 2001.
There are a couple of issues here. First, the Army’s suicide rate is up 150% and some are beginning to wonder how much of a role the meds play, while you also have the issue of deployment. As one captain noted, “Any soldier can deploy on anything.” They aren’t supposed to be, but “oversight is suspect.”
–As of this writing, the New York air-traffic controller who let his two kids radio departing aircraft last month, has yet to emerge from his home. Needless to say, the fellow is a prime early candidate for “Idiot of the Year.”
–Chesley Sullenberger retired this week and it was kind of strange. He had just returned to work last October and while no one expected the 59-year-old to be back in the cockpit for long, it appears his quick departure was kind of unexpected. In a statement, the US Airways captain of the “Miracle on the Hudson” said that pilots always hoped to “leave their profession better off than they found it. In spite of the best efforts of thousands of my colleagues, that is not the case today.” I’m assuming he’ll now wait an appropriate spell and then really let loose on what’s bugging him. Whatever it is, we better listen.
But one thing I saw in an article that must be bugging him, and should be bugging all of us, is the fact that a pilot with the experience of Sullenberger earns about $130,000 to $150,000 a year. For those of you of a certain age, yes, that’s what they earned way back in 1989. Dammit, this is absurd! An airline captain at a major carrier should be making $300,000 in my estimation. We want some of America’s best in that position and they should be paid accordingly. God bless you, Sully!!!
–In 2008, the most recent year for which federal statistics are available, 11.1% of pedestrians and 17.4% of bicyclists killed in the USA died in Florida, which has 6% of the nation’s population, ergo, it’s the deadliest state.
–An iceberg the size of Luxembourg that broke off from the Antarctic continent could eventually have a major impact on weather systems around the globe. But don’t worry, the impact won’t be felt for decades.
However, as reported by Hannah Devlin of the London Times, “The iceberg could block the production of cold, salty water, known as ‘bottom water,’ which could lead eventually to cooler winters in the North Atlantic.”
–Uh oh…according to an international research team led by scientists from the University of Alaska-Fairbanks, methane is leaking into the atmosphere from an unstable permafrost in the Arctic Ocean faster than scientists had thought and could worsen global warming.
Frankly, I didn’t realize it could escape from permafrost underwater. ‘Sup wit dat?
“Scientists have long thought that the permafrost under the East Siberian Arctic Shelf acted as an impermeable barrier that sealed in methane, a powerful greenhouse gas 30 times more potent than carbon dioxide.” [AFP]
But the research showed the permafrost is perforated, and the scientists warn that the release of even a fraction of the methane stored in the shelf “could trigger abrupt climate warming,” as a result of a “positive-feedback loop,” which has been the chief concern among the climate change set. [As opposed to my New York Mets, that are in a perpetual negative-feedback loop.]
Said scientist Natalia Shakhova, methane concentrations in the Arctic are at their highest levels in 400,000 years. So look for a real estate bubble soon up there…my opinion, not Ms. Shakhova’s.
I’m also thinking we need to tow the above mentioned iceberg to the Arctic to keep the waters cool, not that this would necessarily help with the situation.
–A study of 130,054 adults by Kaiser Permanente “found that people who drank four cups or more of coffee daily had an 18 percent lower risk of being hospitalized for irregular heartbeats and other heart-rhythm conditions than non-coffee drinkers. The risk of hospitalization was 7 percent lower for people who drank one to three cups of coffee daily, the researchers said.” [David Olmos / Bloomberg]
The study was to be presented Friday at an American Heart Association conference. Of course it was previously thought that high levels of caffeine were associated with a perception the heart was “racing.”
–PIMCO’s Bill Gross, in his March investment newsletter, pimco.com, had some terrific observations on cocktail parties. Mr. Gross writes he hasn’t been to one in 10 years. He labels them “excruciating.” I have to admit I find them to be the same.
Gross came up with a chart showing how 90 seconds into a typical conversation, “no one gives a damn about you and your problems,” but, “During the unbearable minute-and-a-half, you’re likely to have covered some of the following topics”:
1. Where are you from? (If it’s not a place where I’ve been or have a distant second cousin – don’t care.)
2. How’s the family? (If Johnnie is in advanced placement courses and my kids aren’t – don’t care. Don’t care about your kids’ soccer games either or that upcoming wedding.)
3. Medical problems. (Unless you’re dying from cancer – don’t care. Your artificial hip and kidney stone stories are important only to let me tell you about mine.)
4. How’s work? (Forgot where you work, but it’s a good lead in. Don’t really care though unless you can direct some business my way.)
5. Can you believe Tiger? (Now there’s something I care about, but the wife is only five feet away.)
“Actually,” Bill concludes, “the ‘afterparty’ is the best party of all – driving home with your partner and dissing all of the guests. Still, give me a home where Seinfeld roams, I suppose. Boring is better – cocktail parties are so 1990s.”
–The Chilean earthquake shifted the planet’s axis enough to make it spin faster, thus shortening our days by 1.26 millionths of a second, according to preliminary data by NASA.
“This is an esoteric effect that physics says has to happen,” notes David Kerridge, the British Geological Survey’s head of natural hazards, who studies earthquakes. “It’s interesting, but it has no particular consequence on anything.”
–Lastly, an authoritative review by 41 scientists has concluded that the demise of the dinosaurs was the result of a huge asteroid hitting Earth and not volcanic activity. It’s time to move on, people. If you were in the volcano camp, let it go. Just let it go.
Pray for the men and women of our armed forces, and all the fallen.
God bless America.
Gold closed at $1135
Oil, $81.50
Returns for the week 3/1-3/5
Dow Jones +2.3% [10566]
S&P 500 +3.1% [1138]
S&P MidCap +4.4%
Russell 2000 +6.0%
Nasdaq +3.9% [2326]
Returns for the period 1/1/10-3/5/10
Dow Jones +1.3%
S&P 500 +2.1%
S&P MidCap +6.0%
Russell 2000 +6.5%
Nasdaq +2.5%
Bulls 42.1
Bears 22.7 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
