Wall Street…Happy Anniversary
I’m going to do a “Wall Street History” piece for 3/19 (probably posted 3/17) that gets into some of the specifics of the two big anniversaries, 3/10/00 and 3/09/09, as I recall the two dates fondly, from a professional standpoint at least, because in March 2000, I was pounding the table in this space about the coming crash in Nasdaq, and was quoted around that time in the Star-Ledger to that effect, and then last March, when it looked like the world was coming to an end (it still might…sleep with one eye open), I said you had to separate market sentiment from the fundamentals and thus stuck to my guns that stocks would finish 2009 up 20% for the S&P and 30% for Nasdaq, which they then proceeded to do. I’d say it was my finest hour, especially given some of the disbelieving notes I was receiving at the time.
But what now? Well the worm has turned when it comes to deficits, globally, and while I pooh-poohed the issue for years, in the past few weeks I’ve made it clear my official position from here on is that they do very much matter and will continually impact market sentiment well into the future. On occasion there will be a positive note on the topic, but the preponderance of the news will be dire. When it comes to the impact on growth prospects in the United States, I agree with PIMCO and their “new normal” thesis. Growth will be tepid at best over the coming years. When it comes to the stock market, however, I’ll just take it one year at a time and I maintain domestic equities will finish down in 2010. At some point, the hot spots I write so much about will dominate the airwaves, and that isn’t good for sentiment.
As for today, next week could be quite interesting, perhaps historic, with the prospects for action on financial regulation and health care, if President Obama has his way. I discuss the former below, but on health care it was last year we were told there would be action by July…of 2009…so it’s been quite a misadventure for the White House. This past week the president hit the road, sounding more like a carnival barker than anything else. His schtick of “So and so is in the house” has gotten more than a bit old. Same with “Are you fired up?” No, Mr. President. I’m not fired up. The economy sucks, we’re in debt up to our eyeballs as a nation, this health care plan of yours doesn’t address topics I most care about, let alone its cost will kill us, and my college alma mater’s basketball team has imploded. And you?
“Once again, Barack Obama is a happy pitch man. He’s on stage with a microphone, jacket off, sleeves rolled up, his voice rising and falling as he tries to whip the big crowds into revival-tent fervor.
“He’s still peddling Hope & Change, although now he calls it health-care reform. He swears his miracle elixir will save your life, your money and your country.
“It will do anything you could possibly want – unless you want the truth. Then you’re squat out of luck. See, truth is a pre-existing condition not covered by ObamaCare.
“We used to arrest people for selling snake oil. Now we elect them.
“ ‘No false claim left behind’ is the perfect summation of President Obama’s last-gasp push for a bill that hasn’t been written. No matter details or cost, it’ll cure whatever ails you and America.
“He’s for it, whatever it ends up saying. Just as he was for the House bill and the Senate bill, both before and after they were written, although they contradicted each other in key ways.
“And we have to do it now – now, for history, before it’s too late.
“For Obama, it’s already too late. The public took a leap of faith on him once, and his expensive potions are making the country sicker. The sell-by date on his promise machine has expired.”
So does he have the votes, anyway? Can Nancy Pelosi twist enough arms? Do individual members of Congress even know what they are voting on? Let the real drama begin.
Meanwhile, over in Euroland, French President Nicolas Sarkozy said the euro region was willing and able to help Greece in its time of need, just don’t ask for specifics. Later, German Finance Minister Wolfgang Schaeuble wrote in an op-ed for the Financial Times:
“Should a eurozone member ultimately find itself unable to consolidate its budgets or restore its competitiveness, this country should, as a last resort, exit the monetary union.”
Well that wouldn’t be too cool as Schaeuble and German Chancellor Angela Merkel call for a new European monetary fund to deal with problem children, outside the IMF.
“Strict conditions and a prohibitive price tag must be attached so that aid is only drawn in the case of emergencies that are a present threat to the financial stability of the whole euro area,” wrote Schaeuble.
Countries that repeatedly break the deficit limit of 3 percent of GDP should pay a heavy price, including no subsidies.
My word. If the United States were part of Schaeuble’s EU, we’d be in deep [trouble]. It’s an increasingly dog-eat-dog world out there, kids. I just hope all participants check their weapons at the door.
For his part, Greek Prime Minister George Papandreou called for trans-Atlantic cooperation to combat “unprincipled speculators.”
“Europe and America must say ‘enough is enough’ to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system,” he said in Washington, as he prepared to meet President Obama, who in turn probably acted like he cared but really didn’t. We’ve learned Obama is good at that.
But while I have excoriated the likes of Goldman Sachs for aiding and abetting Greece in the formative days of their crisis, there is a difference in the role of the bankers, who created unnecessary product that they could peddle – and then when the buyer turned, stabbed them in the back by shorting that very product – and the speculators, or hedge funds. Personally, in case you haven’t noticed, I’ve come to loathe the bankers, and for good reason. But when it comes to the hedge funds, there are legitimate ones, just trying to make a buck, and others that are nothing more than mobsters. You can’t paint the entire industry with a broad brush, and Papandreou knows, as he conceded later, that first and foremost Greece is responsible for the mess it finds itself in.
What Greece really needs, today, are lower interest rates to service its humongous debt load, much of which is coming soon to a theater near you. Think about this. For every 5 billion euros ($6.8 billion) that Greece borrows for five years, they’ll pay about $1 billion more in interest over the life of the paper than the Germans would on a comparable security. [Both being in the eurozone, in a perfect world the yields are similar instead of 300 basis points, 3%, apart.] That’s why Papandreou is running around the globe, trying to build not just support but confidence in the credit markets that Greece can be counted on to meet its obligations. I like the man. He’s doing the best he can, and despite the violent protests in the streets of Athens, it seems that he’s slowly gaining support for his austerity program among the Greek people. Were he to succeed, you can also imagine some hedge funds would have their clocks cleaned and for Papandreou, that would be sweet justice.
And just a word on the credit-default swaps that the bankers created, which weren’t needed but are now being exploited. The EU wants to ban “naked” bets on the securities, where you can bet on a bond’s direction without actually owning the bonds. The U.S. Treasury, read Tim Geithner, wants them regulated, not banned, saying what’s needed is transparency. This is a huge issue and the two sides seem locked into their positions. Without the United States’ cooperation, the EU is hamstrung in its own enforcement.
Bottom line, though, assuming the situation in Greece stabilizes, the preceding is nothing more than putting out a brush fire with fire season approaching. However, I do agree with a statement from PIMCO’s Mohamed El-Erian.
“The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood.” The potential damage from increased government borrowings is “at present being viewed primarily – and excessively – through the narrow prism of Greece.”
Staying in Europe, there were some items worth noting on the economic front aside from the Greece mess. Like in industrial production, which for the eurozone rose a solid 1.7% in January, better than expected, though the same indicator was down in the U.K. for the month, while in Germany, exports, always a critical factor here, fell a whopping 6.3% in January, rather unexpectedly.
In Australia, the jobless rate for February ticked up to 5.3%, far from a concern, while exports soared 42.5% in the Philippines for the month of January vs. year ago levels, and Taiwan’s exports for February rose 32%. The unemployment rate in Taiwan fell to 5.7%.
In Japan, fourth quarter GDP was revised down to 3.8% from 4.6%, a mild disappointment, as business spending here remains weak, but exports rocketed 67%. The flipside is continually falling prices are squeezing profit margins.
Which brings us to my favorite topic, China, for very selfish reasons. I like that my largest holding here was able to increase its line of credit substantially to fund operations at the new facility without having to dilute my equity. The government is also releasing some figures as Jan.-Feb. because of the two-week Lunar New Year’s holiday in February, and for the two months industrial production rose 20.7% and retail sales soared 18%. Fixed asset investment spiked another 26.6%. For February, specifically, exports rose 45.7% vs. a year earlier, but bank loans fell for the month as Beijing’s efforts to tamp down the property bubble, and excess industrial capacity, took effect (I guess). Property prices, both commercial and residential, rose 10.7% in February vs. last year, but housing sales are slowing.
Understand something, folks, when you hear talk of a massive real estate bubble in China. I do not doubt for a minute that especially in the major cities, prices are too high and it’s hitting the middle class in particular.
But at the same time, also understand that the government requires a 30% down payment for a first home and 40% down for a second. So, yes, will there be a correction? Undoubtedly. But a bursting of the bubble a la the U.S., Spain and Ireland? I have trouble seeing that. You recognize that in the other three, the mantra was ‘no money down.’
Finally, with regards to China, there is also much talk of inflation here. Heck, the CPI for February rose 2.7%. We’re hardly talking Zimbabwe, though food price increases are troubling since 40% of the poorer households’ budget goes towards food.
So what’s the bottom line in all the above? Forget the decent retail sales number in the U.S. for February, as reported on Friday, it’s still about housing and the labor market, and there is zero cause for optimism, or a sustained rebound, in either. As a Washington Post headline had it, “New round of foreclosures threatens housing market,” like 5 million to 7 million more, and this could play out over perhaps another three years, as in a slow-motion train wreck.
And guess what? Since you read my last review, the Congressional Budget Office issued a new projection for Barack Obama’s proposed budget. It would add not just $8.5 trillion to the national debt by 2020, but try $9.7 trillion! Damn, we’re good.
Street Bytes
–Stocks rose again, for a fourth week in five, with the Dow Jones up 0.5% to 10624, while the S&P 500 advanced 1.0% to 1149 and Nasdaq 1.8% to 2367. The S&P is now up 3% for the year and, at 1149, a 17-month high.
–U.S. Treasury Yields
6-mo. 0.22% 2-yr. 0.95% 10-yr. 3.70% 30-yr. 4.62%
The Obama administration is set to name Janet Yellen, current president of the San Francisco Federal Reserve Bank, as vice-chairman of the Federal Reserve to replace the retiring Donald Kohn. The dollar fell on the news because Ms. Yellen is seen as a dove on monetary policy.
–Senate Banking Committee Chairman Chris Dodd is set to unveil his proposal for financial regulatory reform, including a pool, funded by banks, of at least $50 billion that would be tapped to dismantle an institution important to the overall system should it find itself in trouble.
But after negotiating with Republican Sen. Bob Corker, Dodd and the Democrats have decided to go it alone. Corker blamed the timetable and other priorities, such as health care. So next week we’ll see what else Dodd has come up with, including the fate of a Consumer Financial Protection Agency and where it ends up residing, under the Fed’s control or as a standalone agency.
–Commodity Futures Trading Commission chief Gary Gensler continues to pound the table on reform of the derivatives market. The former Goldman Sachs partner’s reform efforts have won the approval of Brooksley Born, the former head of the commission who I have profiled extensively. Gensler wants the big banks to sell their derivatives through public exchanges and clear them through central clearinghouses to enhance transparency. Today, there basically is none. It’s all about price discovery. For their part, the banks are worried about losing billions in profits. Screw ‘em.
–The government still hasn’t produced a plan to revamp (wind down) Fannie Mae and Freddie Mac, this despite a tab that now exceeds $125 billion in the single costliest component of the federal bailout for the financial system. But the two are behind the vast majority of mortgages made since the start of the crisis so how do you reform them when the housing market is still under severe stress? It’s a total nightmare as Fannie and Freddie talk of needing far greater aid than the funds already committed.
–At least another ward of the state, AIG, has been receiving more than anticipated for its units as it restructures itself into a far smaller entity, the latest example being $15.5 billion for its second-biggest foreign life-insurance operation to MetLife.
–According to the Fed and the Commerce Department, as of the end of 2009, the average U.S. resident’s net worth – market value of property and investments minus mortgage, credit-card and other debts – stood at $175,600, up 5.7% from the end of 2008, but still below the Q2 2007 peak of $218,650. So it’s hardly a time to treat yourself to a premium. Stay with domestic. Maintain your discipline.
–The cost of Toyota’s recall is now expected to top $5 billion amidst all the litigation costs and marketing efforts as U.S. officials announced they have received more than 60 complaints from Toyota owners who were still experiencing unintended acceleration even after their cars were repaired. And this week you had a few high-profile cases that only heightened Toyota’s problems, including the prospect of criminal charges for failing to report its safety issues.
By the way, as USA TODAY reports, that fellow with the runaway Prius, Jim Sikes, filed for bankruptcy in 2008, though he told the paper he isn’t planning to sue Toyota or otherwise profit. Through the bankruptcy he had a Mercedes, a boat and a motor home repossessed. The Prius was his only remaining vehicle.
Toyota has issues with how Sikes handled the car, including why he didn’t put it into neutral and coast to a stop. The Internet is evidently having a field day with the guy.
–Meanwhile, despite all the auto recalls and safety issues, there were fewer highway deaths in the U.S. in 2009 than in any year since 1954, which given how few were on the roads by comparison in ’54 shows you just how crappy the cars were back then, let alone the fact no one wore safety belts. So at moments like this it’s appropriate to toast Ralph Nader for all his efforts on the safety front. Just don’t do it while driving.
–Some facts on California. The unemployment rate was 12.5% in January, while the preliminary one for Feb. is 13.2%. But California did add 32,500 jobs in January. Nonetheless, the official unemployment rate in 8 California counties is above 20%! [It’s 12.5% in L.A. County and 10.1% in Orange County.]
–China’s chief foreign-exchange regulator dampened enthusiasm for gold, saying it “is not a bad asset, but currently a few factors limit our ability to increase foreign-exchange investment in gold,” adding it doesn’t offer good long-term returns due to price swings. While China’s holdings of gold are the fifth-largest in the world, it represents just 1.6% of China’s FX reserves at current market prices. Yi Gang also said China continues to buy and sell U.S. Treasuries on a daily basis and that his country doesn’t want it to be politicized. China will remain a “responsible investor” in Treasuries.
–China’s passenger car sales soared 55% in February from a year earlier, despite the long national holiday falling that month.
–China issued guidelines on banker bonuses at Chinese financial companies to discourage excessive risk taking. 40% of the funds budgeted for bonus payments will be locked up for three years in the event of future risks, after which the retained funds can be paid out. If the banks suffer big losses, they can tap the previously paid bonuses. Senior managers are also limited to no more than three times their base salaries. [Wall Street Journal]
–And as I go to post, it appears Google and the Chinese government have reached an impasse in negotiations over Chinese censorship of Google’s operations there, with Google saying it’s almost certain to close down its operation. [But the situation is fluid.]
–A 2,200-page report into the bankruptcy of Lehman Brothers concludes that JPMorgan Chase and Citigroup contributed to the collapse by demanding more collateral and changing the terms of existing agreements, thus severely impacting Lehman’s liquidity.
Of course it was the actions of the likes of former CEO Richard Fuld and former CFO Erin Callan that led to the pressure exerted by the other banks, because Lehman was certifying misleading statements about the bank’s finances, which the likes of JPM and Citi were sniffing out. The bankruptcy examiner declared that Fuld was “at least grossly negligent,” aside from being an arrogant, primo dirtbag. [Actually, these last two comments are mine, not the examiner’s.] In a nutshell, Lehman executives just kept manipulating the books, using “accounting gimmicks” to move assets off the balance sheet without disclosing same to the government, rating-agencies, investors or the Lehman board. As those who have read the entire report further point out, it’s a roadmap for criminal prosecutions.
For the attractive, comely, sexy, yet incompetent, Callan, it was a good ride while it lasted.
–The International Energy Agency raised its forecast for global oil demand this year to 86.6 million barrels a day, or 1.6 mm above 2009 levels. China will account for a third of the increase, according to IEA estimates, helping to offset stagnant consumption in the U.S. and Europe.
OPEC, which accounts for more than a third of global supply, meets in Vienna next week to pop the champagne as oil remains in the $80 range despite ample global inventories. Tensions over Iran continue to prop oil up to a large extent.
–President Obama unveiled a plan to double U.S. exports over the next five years, this as exports fell to $1.5 trillion last year from a peak of more than $1.8 trillion in 2008. Obama also promised a new push on pending free-trade agreements with South Korea, Panama, Colombia and a group of Pacific countries, but, just as in the case of health care, we’ve heard this before. On free-trade in particular, it’s disgraceful Obama can’t ram these agreements through given the majorities he has in Congress. Of course the above mentioned agreements are never popular in the Democratic Party. Gotta keep those union votes, after all, whether it’s good for the country or not.
–Citigroup Vikram Pandit said the bank will earn as much as $20 billion from its core business by end of 2012. The government still owns a 27% stake, at $3.25 a share. Citi shares closed Friday at $3.97.
–I have written much of the troubles in Ireland. This week the Journal’s Neil Shah reported:
“Debt-laden Ireland is wining applause from financial markets for quickly taking the kind of harsh economic medicine that countries around the world are putting off. But in this newly austere country, people like 35-year-old Robert Peelo are finding little cause for cheer.”
Peelo, a police officer, was expecting a pay raise of 6% a year ago. “Instead, Ireland has cut his take-home pay by 18%.”
“Mr. Peelo says he’s paying his 30-year mortgage by cutting out vacations, skimping on paid child care for his two young children and working police shifts on Sundays. Adding to the challenge, an old Irish code prohibits him and other police from taking outside jobs.”
Just imagine the hatred for the bankers who got Ireland into this mess (recognizing the failure in personal responsibility, as well, just as in the United States). It’s amazing the bankers haven’t all been taken out…or thrown off the Cliffs of Moher.
Meanwhile, AIB, Ireland’s second-largest bank, said the value of rural land is down at least 50% (a big deal here as it’s generally passed down through the generations and helped feed the sense of false wealth during the bubble).
And get this, one study says 170,000 more houses were built on the Emerald Isle than warranted by demand, and this isn’t including the popular “holiday homes” that many have.
–A staggering 93% of Iceland’s voters said ‘no’ to a referendum on the repayment of over $5 billion to Britain and the Netherlands as part of the Icesave debacle. The government in theory is committed to repaying the funds, though the people say that doing so would cripple the economy for decades. But without an agreement, Iceland won’t receive needed funds from the IMF and any hopes of being fast-tracked into the European Union will also fall by the wayside.
Meanwhile, Britain said it was determined to recover all the money it paid to British depositors who lost money in Icesave, but a compromise has to be reached on the repayment terms.
–According to an annual survey by the Employee Benefit Research Institute, 27% of Americans say they have less than $1,000 in retirement savings, compared to 20% last year. 43% have less than $10,000 socked away.
–Venture capital firms are struggling to raise funds according to the Wall Street Journal. “Last year, 125 venture funds in the U.S. collected $13.6 billion, down from 203 funds that raised $28.7 billion in 2008 and down from 217 funds that raised $40.8 billion in 2007.”
–Cisco Systems announced what it calls a major upgrade to its networking hardware, a router that is at least three times faster than its existing core product; one that has the capability of handling simultaneous video calls for every person in China. That may seem like overkill but it’s a necessity as use of video online continues to explode.
–U.S. sales at McDonald’s were basically unchanged for the first two months of the year. But in February, European sales were up 5.4%, while Asia/Pacific, Middle East and Africa’s soared 10.5%.
–There are growing complaints that Monsanto is monopolizing the seed market and that this is leading to higher food prices. The Justice Department and Department of Agriculture have launched an investigation into whether antitrust practices are driving the price action. The inquiry could take a year. U.S. farmers spent about $17 billion on seeds in 2009, up 56% from 2006, the USDA said; this while the number of independent seed companies shrunk from 300 to fewer than 100, with four companies accounting for 50% of the world’s proprietary seeds for major crops. [P.J. Huffstutter / L.A. Times]
–In 16 years on Wall Street, I didn’t take one sick day, and of course wasn’t paid for time not used. I only bring this up because in New Jersey, among our many problems is the issue of state and municipal workers being rewarded huge cash payments for unused sick leave. Like the retiring New Brunswick police chief who the Star-Ledger noted “is walking away with $376,234 in unused time, on top of his annual $115,000 pension. [The chief] was hailed by the mayor as a ‘tireless worker,’ but taxpayers would have been better off if he had taken a few sick days during his 26-year career.”
The Ledger mentioned six others in New Brunswick who are receiving between $115,000 and $310,000.
“Remember when retirements were celebrated with sheet cakes and gag gifts?”
There’s a movement afoot to scrap such deals, permanently, while the state senate is looking just to apply caps to new workers. Garbage such as this is one reason why New Jersey, and others of its ilk, are not only broke but the divide between the private and public sector is widening at lightspeed. It’s the start of a new civil war.
–Meanwhile, New Jersey Transit announced a record 25% fare increase, with a typical monthly pass for a local commuter hitting $250. That’s real money and many will be forced to cut back elsewhere; think coffee shops, for starters…who then layoff a worker because business is down….
–Hotel room rates dropped 14% worldwide last year, according to hotels.com.
–Continental Airlines CEO Jeff Smisek said that when it comes to the government’s new rules for fining carriers for extended on-ground flight delays, he says his airline and others will be quick to just cancel flights whenever bad weather or air-traffic congestion becomes a threat, which in turn obviously hurts travelers.
“The government is inconveniencing more passengers by passing what is a very stupid rule.”
Beginning April 29, the Transportation Department will fine a carrier up to $27,500 per passenger for commercial flights stuck on taxiways for more than three hours. So for 150 passengers, that’s $4.125 million! Understand the revenue for such a flight would be about $52,500. This is absurd.
–Apple has begun taking orders for its iPad, slated to begin hitting store shelves on April 3 (the WiFi version). Shares in Apple have been surging ahead of the announcement, from $192 to $226 in just the past five weeks. Analysts expect sales of 500,000+ units in the third quarter, with the cost ranging from $499 to $829.
–Mexican telecom tycoon Carlos Slim Helu has taken over the No. 1 spot on the Forbes World’s Billionaires list with a fortune estimated at $53.5 billion, up $18.5 billion in 12 months. Bill Gates is second at $53 billion and Warren Buffett third at $47 billion.
There are 1,011 billionaires, up from 793 a year ago amidst the global recovery. U.S. billionaires account for 40% of the total, though Asia added 104 moguls and now has just 14 fewer than Europe.
–Following up on my comment on the bacteria Acinetobacter from last week’s review, a microbiologist in Hong Kong has called for an urgent overhaul of hospital hygiene to stop the spread of it.
“Dr. Ho Pak-leung…says cleaning methods are decades out of date. He says that the rapid increase in infections – from just one or two a week in 2006 to 3,000 a year – may be due to doctors prescribing too many antibiotics,” aside from unhealthy operating room conditions.
–Tim Hortons plans on opening 900 stores in North America over the next three years.
–Loser Lindsay Lohan sued E-Trade for $100 million, insisting that the “milkaholic” baby in the latest commercial, who is named Lindsay, was modeled after her. The $100 million is for pain and suffering since every time she sees the ad, Lohan feels compelled to down a fifth of liquor and bust up a lounge. A spokesman for the ad company said they “just used a popular baby name that happened to be the name of someone on the account team.”
–Uh oh…AccuWeather’s inestimable Joe Bastardi is warning we could have “an extreme” hurricane season. “There will be a lot more impact on the United States’ shore,” including two or three major ones. Bastardi cites a weakened El Nino, warmer ocean temperatures and higher humidity levels. So buy natural gas contracts, sports fans! [I’m very serious. I’m going to play the sector, severely beaten down, shortly.]
Foreign Affairs
Iraq: It’s been awhile since Iraq has been the lead, but I’ve cautioned that both Dick Cheney and Joe Biden were more than a bit premature in calling this place a success. No doubt the election that took place last weekend was a huge positive, but it’s also about waiting 24 hours, witness the “democratic” election in Gaza, for example. Somehow Condi Rice and Co. weren’t counting on a Hamas victory in that case. And so we can’t just count on the parties the White House favors running the show in Baghdad.
For example, some are saying the secularist coalition headed by Ayad Allawi, a former prime minister, is playing the role of sore loser by filing 30 complaints of fraud against current Prime Minister Nouri al-Maliki’s ruling group. Several violations, though, have been confirmed by outside observers. Separately, six clerks at the main election center were dismissed for offenses committed while inputting voter tallies. Allawi also claims that 250,000 soldiers were denied the chance to vote and that an election monitor found ballot papers with votes for Mr. Allawi dumped in the garden of a polling station in Kirkuk. The head of the city council there, a supporter of Allawi’s, showed the evidence, as reported by the London Times.
But at what level did the fraud occur? Certainly no one expected a totally clean vote, but you see the emerging problems. Some of the claims, as well, will prove to be false, on both sides.
And understand it is going to take months…months…to shape a new government. Plus you have the critical issue of the fate of oil deals negotiated before the election by the al-Maliki government, without parliamentary consent. Will a new government, even if Maliki heads it, rip these signed contracts up?
And what of Iranian agent Ahmad Chalabi? What will be his influence as an elected member of parliament? [I haven’t seen officially, but I’m assuming he won his seat.]
Iran: Defense Secretary Robert Gates said Saudi Arabia and the UAE were willing to press China to support new sanctions, while Gates said the two were open to lobbying Moscow as well.
But whatever sanctions the U.S., Britain, France and Germany come up with, they are likely to be incredibly weak, targeting some banking and shipping, with a focus on individuals in the Revolutionary Guard, but absolutely zero chance of hitting Iran where it would really hurt, their importation of gasoline. It’s ludicrous. Those who think any moves will drive a wedge between the opposition in Tehran and the leadership are nuts. And who the heck knows when even light-weight sanctions will work their way through the Security Council?
Because so much time has elapsed since last June’s sham election, and because President Obama has done zero, publicly, to aid the opposition, it is dying out. At least General David Petraeus called the regime what it is, a “thugocracy,” to which Iranian Speaker Ali Larijani responded, ‘The murderous government of the United States is a government of thugs that has occupied Iraq and Afghanistan and has killed and injured hundreds of thousands of civilians.’ [Tehran Times]
Israeli President Shimon Peres told visiting Vice President Biden that the U.S. needed to do more to support the opposition movement, at least what exists of it. Peres said these “moral sanctions” will “also help the people of Iran, the Persians, to continue their struggle to defend their culture. They are ashamed of [Ahmadinejad]. In my judgment, this should be done strongly, clearly, vocally.”
Right on, Mr. Peres. Biden meekly replied, “The people of Iran are making that argument clearly, engaging in their own form of morally sanctioning their government as we have and as the rest of the world is.” Hardly, Mr. Vice President. You must not be reading the papers or watching the news. The opposition was rolled up during the last demonstrations in February.
One more item on Ahmadinejad. This week he called 9/11 a “big lie” and a pretext for the “war on terror.” The guy with the Members Only jacket questioned the death toll, saying the U.S. never published the victims’ names, which means that little Mahmoud doesn’t read the papers or watch the news, either; seeing as how every anniversary all the names are read at Ground Zero, the Pentagon and Shanksville.
Israel: Meanwhile, President Obama has traveled to Cairo and Istanbul, but not Israel, so he sent the vice president instead and it proved to be a most embarrassing, and humiliating, trip as the Israeli government chose the time to announce the building of 1,600 more settler homes in disputed east Jerusalem, exactly what the United States has urged Israel not to do before restarting peace talks between the Israelis and the Palestinians. Prime Minister Benjamin Netanyahu supposedly told Biden that construction wouldn’t begin for years, but the damage was done and it appears that one of the prime minister’s hard line cabinet officers made the decision to make the announcement on his own, just to tweak the U.S. Netanyahu has to deal with some loose cannons in his governing coalition and a result was the Palestinians said they would not negotiate with Israel until the project was shelved.
“(The) timing of the announcement was an unnecessary slap in the face to the vice president of the United States. Israel has few enough friends; such an insult to its closest ally makes no sense.”
No American president has ever had the guts to say ‘No’ to Israel. It has long been high time to tell them, “Look. You receive $2.8 billion in aid from us, almost all of it on the military front. Cut the crap or we’re slicing this in half.” Of course the chances of this happening are zero. But just once I’d like to see a U.S. leader threaten such a move. Without the U.S. there is no Israel. They need to be reminded of this from time to time.
[On Friday, Sec. of State Hillary Clinton blasted Netanyahu in a phone call to the prime minister, but what does he care? We never follow up with real action.]
Lebanon: Hizbullah reiterated that its weapons would not be “a subject for discussion” during upcoming National Dialogue sessions on a defense strategy. The opposition says the Resistance’s weapons must be tackled as part of Lebanon’s strategy in the Arab-Israeli conflict. Hizbullah has refused to disarm since the end of the 1975-1990 Civil War as it continues to insist its weapons are necessary to defend Lebanon against Israeli aggression.
Afghanistan: Even Defense Secretary Gates had to laugh that both he and Iranian President Ahmadinejad were in Kabul on the same day this week. Gates reiterated that Iran was aiding the insurgents to make sure NATO failed in its mission. He also talked of dark days ahead as the U.S. and its allies press their efforts into Kandahar.
Pakistan: Violence surged anew as at least 43 died in a series of attacks in Lahore on Friday, while on Wednesday at least five Pakistani workers of U.S.-based Christian relief agency World Vision were killed when gunmen attacked one of its field offices. Hell is reserved for people who perpetrate vicious attacks such as this. And, frankly, you just can’t kill enough of them. World Vision immediately suspended their operations which were in support of the victims of the 2005 earthquake there.
Meanwhile, the Pakistani government appears to have made real progress against the Taliban, but who really knows? It’s virtually impossible to keep an accurate score. I’m just amazed that in the entire region, from Egypt east to Pakistan, there hasn’t been a major assassination. That day is coming, and it won’t be just one.
[On a side note, the March 15 issue of Newsweek had an unsettling report on what many intelligence experts view as the new al-Qaeda, Pakistani militant group Lashkar-e-Taiba, LeT, the group responsible for the Mumbai attacks that evidently has a new, global vision.]
India: On my “Hot Spots” link I have a piece on the growing tensions between India and China, which bear watching. Russian Prime Minister Putin is traveling here to conclude arms and energy contracts (including for a long-delayed aircraft carrier); India running back into Russia’s arms as it sees the close ties between the U.S. and arch-enemy Pakistan, while dealing with a growing border dispute with China. Both India and Pakistan, incidentally, have been aggressively testing new missile systems the past few weeks. The United States had reached a big agreement with New Delhi on the nuclear cooperation front, but implementation is being held up, while Russia looks to fill the vacuum with India’s need for new energy sources.
China: The National People’s Congress gathering placed on the docket the issue of the widening spread between rich and poor, urban and rural, with per capita disposable income for urban residents at 17,175 yuan last year, compared with 5,153 yuan for rural residents, or a ratio of 3.33:1, compared to 2.56:1 in 1978. And while some people in Beijing and Shanghai earn more than 100,000 yuan a year, some in remote western areas take in only 2,000 (at 6.82 yuan to the $1, less than $300 a year).
On the cyberwarfare front, as reported in the London Times, “Urgent warnings have been circulated throughout NATO and the European Union for secret intelligence material to be protected from a recent surge in attacks originating in China,” this after the West had no effective response to attacks on U.S. government and military institutions. Considering that the U.S. and Britain are thought to have sophisticated defenses, what’s worrisome is the EU states generally have noting of the kind.
Chinese Foreign Minister Yang Jiechi said relations between the United States and China had been “seriously disrupted” over issues such as Internet censorship, arms sales to Taiwan and trade disputes, though I’d say the tone the past few weeks has actually been OK. Just a lot of bluster.
Lastly, the Dalai Lama voiced his support for the ethnic Uygur minority in Xinjiang province, which only makes it worse for both Tibetans and the Uygurs. This guy fled Tibet 51 years ago and nothing has improved for his people. So now he drags the Uygurs into it, who have enough problems of their own. For those of you who only hear the Lama’s side, the Chinese government has held several rounds of talks with his envoys since 2002, and while little progress has been made, it’s not as if some kind of agreement can’t be reached. It’s why Western leaders should focus their efforts on pressing the Chinese government directly, in private talks, while not meeting with the Dalai Lama himself. Then again, I’m seemingly the only one in the world with this theory so what the heck do I know?
Thailand: Thai authorities deployed 50,000 troops on the streets of Bangkok ahead of anti-government rallies whose purpose is to bring down the government. The demonstrators are supporters of fugitive former prime minister Thaksin, who had $1.4 billion of his fortune confiscated by Thailand’s top court. Despite his wealth, Thaksin appealed to the rural poor who now seek to overthrow what they see as an unresponsive elitist and undemocratic government. As I go to post, the protests have been peaceful though this could change in a nanosecond.
Nigeria: Talk about a hellhole, anywhere from 200 to 500 Christians were slaughtered by Islamists, including women and children, in reprisal attacks for sectarian killings against Muslims in January. Some of the victims were shoved into sewer pits and communal wells. Most were hacked to death. The Christians are mostly in the south of the country, with the Muslims in the north, so, guess what? Might as well meet in the center and just wail on each other. A dear Jesuit priest friend of mine, Father Bill, spent many a year here, caring for the mentally disabled (talk about God’s work) and he used to paint such a pleasant picture…except when he talked of being chased by a tank.
Ukraine: President Yanukovich secured a coalition in parliament, much faster than expected and a good sign. A former finance minister was proposed as prime minister to replace the ousted Yulia Tymoshenko. Investors have been encouraged by some of Yanukovich’s economic appointments, including the former central bank chief, to cabinet positions.
Brazil: President Lula, aside from saying Iran should not be subject to increased sanctions because sanctions never work, cited other issues in the Middle East as proof that the world’s traditional powers are not able to solve problems on their own.
“Who decided that the United States, France, England, China and Russia represent the collective aspirations of our planet, the new geopolitics, the new world order – with nations that were poor yesterday but today are in the midst of extraordinary economic growth?” asked Silva, in campaigning for a permanent Brazilian seat on the UN Security Council. [Tehran Times]
Yes, Brazil should have a permanent seat, along with India, Japan and Germany. I would then take away the veto power of all, with 6-3 votes needed to pass a resolution.
Ergo, you’d have on one end in most issues…the United States, France, Britain and Germany. And on the other…Russia and China, with the two sides then fighting over Japan, India and Brazil. Japan would not automatically side with the West, especially if its energy interests were in play.
So let’s all go down to the corner pub and discuss it further. I’m buying.
Random Musings
“Why is it that only days before Iraq’s parliamentary elections, we’re getting no sense of what they mean for the United States? Barack Obama’s White House and the American public seem strangely detached from the event, the mental door having been closed on Iraq some time ago. This begs a larger question: What does the U.S. stand for in the Middle East?
“Judging from the Obama administration’s performance recently, it’s hard to tell. If we take a random selection of values or principles that might be guiding the U.S. in the region, we enter a policy fog, the frequent over-reliance on style at the expense of substance. One can say many things about George W. Bush’s years in office, positive and negative, but he never sinned through ambiguity. A year into Obama’s term, however, ambiguity and disorientation are presidential trademarks in the Middle East.
“Does the administration stand for democracy, for example, or more broadly has it made human rights principles a centerpiece of its policy? Not really. During his campaign Obama consciously played down that trope by accepting that he would talk to the region’s rogues without condition. He tried with the Iranian regime, which ignored his overtures, and when the Green Movement took to the streets last summer, the president for a time studiously avoided encouraging the demonstrators. In his Cairo speech, Obama only paid lip service to democracy and human rights, showing that they were really not what preoccupied him.
“Now Washington has sent an ambassador back to Damascus – without conditions. Syria’s responsibility for the assassination of Rafik Hariri has been quietly played down (though to be fair, no less so than it has been in Beirut), and the Assad regime’s abuse of its own population is of utter disinterest to the Americans. Syrian involvement in the myriad bomb attacks in Iraq, its support for Iraqi Baathists, and its permissiveness toward Al-Qaeda in Iraq have not made the administration reconsider its Syrian opening. Violence works, and Obama has not proven otherwise….
“Power was at the center of the neoconservative worldview, so when Obama entered office he tried to portray his administration in less stark a light. Yes, power was important, for example in Afghanistan, but America would also seek dialogue, consensus, peace between Arabs and Israelis, and would generally put on a kinder, friendlier face than the Bush administration.
“That kinder, friendlier face was shown two weeks ago, when Secretary of State Hillary Clinton publicly declared that the U.S. would not use force against Iran. An attack on Iran would doubtless be a terrible idea, but for Clinton to rule out such an action so bluntly was not the best use she could have made of American military superiority. Indeed, it clarified a situation that the Obama administration should not have clarified, and the statement may ensure that the hardest of the hardliners in Tehran will win all future domestic debates on the best way to deal with international efforts to prevent Iran from developing a nuclear weapon….
“The reality is that the Obama administration these days provokes little confidence in its allies and even less fear in its adversaries. The U.S. remains the dominant actor in the Middle East, but to what end? If Obama’s ultimate goal is to be different than George W. Bush, he hasn’t even managed that. As setback follows setback, he is increasingly finding himself constrained by the same dynamics that Bush faced. But at least Bush knew what he was supposed to be about. Obama just seems lost.”
“I recently asked several senior administration officials, separately, to name a foreign leader with whom Barack Obama has forged a strong personal relationship during his first year in office. A lot of hemming and hawing ensued.”
“The paradox here is that Obama remains hugely popular abroad – from Germany and France to countries where anti-Americanism has recently been a problem, such as Turkey and Indonesia. His following means that, in democratic countries at least, leaders have a strong incentive to befriend him. And yet this president appears, so far, to have no genuine foreign friends. In this he is the opposite of George W. Bush, who was reviled among the foreign masses but who forged close ties with a host of leaders – Aznar of Spain, Uribe of Colombia, Sharon and Olmert of Israel, Koizumi of Japan.
“Jealousy or political rivalry may play a part – Sarkozy is one of several Europeans who have wanted to assume the role of Obama’s closest ally and reacted poorly when he didn’t respond. But another big cause seems to be lack of interest on Obama’s part. Focused intently on his domestic agenda, the president is said to be reluctant to take time to build relationships with foreign leaders….
“(It’s) worth wondering: Would Sarkozy have fought French public opinion and sent more troops to Afghanistan (he has refused) if he had been cultivated more by Obama? Would Israel’s Netanyahu be willing to take more risks in the (moribund) Middle East peace process if he believed he could count on this U.S. president? Would Karzai cooperate more closely with U.S. commanders in the field if Obama had embraced him?
“The answers seem obvious. In foreign as well as domestic affairs, coolness has its cost.”
So in the above two editorials, one concludes “Obama seems lost,” while the other says, “coolness has its cost.” Not exactly ringing endorsements, and yet another reason why the president’s approval rating in the Gallup poll has fallen to 46%.
–Economist Robert Samuelson / Washington Post…on “Millennials” (those 29 or younger)
“Consider a study of the 50 million Millennials 18 and over by the Pew Research Center. The report found some surprising and some not-so-surprising developments. Surprising (to me): Almost two-fifths of Millennials have tattoos, up from a third among Gen Xers (now 30 to 45) and from a seventh (15 percent) among boomers (now 46-64). Not surprising: Millennials are the first truly digital generation. Three-quarters have created a profile on Facebook or some other social networking site. Only half of Gen Xers and 30 percent of boomers have done so. A fifth of Millennials have posted videos of themselves online, far more than Gen Xers (6 percent) or boomers (2 percent)….
“The deep slump has hit Millennials hard. According to Pew, almost two-fifths of 18- to 29-year-olds (37 percent) are unemployed or out of the labor force, ‘the highest share…in more than three decades.’ Only 41 percent have a full-time job, down from 50 percent in 2006….
“The adverse effects could linger. An oft-quoted study by Yale University economist Lisa Kahn found that college graduates entering a labor market with high unemployment receive lower pay and that the pay penalty can last two decades. Writing in the Atlantic, Don Peck argues that many Millennials, overindulged as children and harboring a sense of entitlement, are ill-prepared for a ‘harsh economic environment.’ They lack the persistence and imagination to cope well. That indictment may be unfair. My own experience is that Millennial co-workers are diligent, disciplined and determined in the face of frustration.
“Regardless, more bad news may lie ahead. As baby boomers retire, higher federal spending on Social Security, Medicare and Medicaid may boost Millennials’ taxes and squeeze other government programs. It will be harder to start and raise families.
“Millennials could become the chump generation. They could suffer for their elders’ economic sins, particularly the failure to confront the predictable costs of baby boomers’ retirement. This poses a question. In 2008, Millennials voted 2 to 1 for Barack Obama; in surveys, they say they’re more disposed than older Americans to big and activist government. Their ardor for Obama is already cooling. Will higher taxes dim their enthusiasm for government?”
–In the span of about 48 hours, New York State’s top cop resigned as a result of the scandal surrounding New York Governor David Paterson, and then the interim boss abruptly announced his retirement. So now the state police are under No. 3, Deputy Dawg, or whoever the guy is. Heaven help New York if there is an emergency outside the Big Apple.
But what’s this? A new Quinnipiac University poll said 50% of New York voters say Paterson should serve out his term rather than resign, a slight uptick. And now investigators have found little evidence that the governor tampered with a witness in the domestic abuse case against one of his top aides, according to one report. The woman at the center of the controversy, “My Sherr-una” Booker, told probers she didn’t feel Paterson had threatened her in a phone call.
However, the investigation is not over as Attorney General Andrew Cuomo, who seeks the governor’s office, appointed an independent counsel to take over his office’s inquiry. Cuomo, who will announce he’s running shortly, said “there are credible issues that need to be resolved.”
–And then there’s former New York Congressman Eric Massa. Appearing on Glenn Beck’s show, Massa suddenly blurted:
“Now they’re saying I groped a male staffer. Yeah, I did. [Stop Eric…you don’t need to go here.] Not only did I grope him [Eric, stop!], I tickled him until he couldn’t breathe and then four guys jumped on top of me. It was my 50th birthday.” [You’re on your own, guy.]
Of course Massa talked of a naked Rahm Emanuel, poking his finger in Massa’s chest, and, well, I just hope I never see the creep at Dunkin’ Donuts.
But what’s this? House Speaker Nancy Pelosi’s office was notified in October about Massa’s erratic behavior? As reported by the Washington Post’s Carol D. Leonnig:
“Joe Racalto, Massa’s chief of staff, was uneasy that Massa, 50, was living with several young, unmarried male staffers and using sexually explicit language with them…But what finally prompted him to call Pelosi’s director of member services, the source said, was a lunch date that Massa made with a congressional aide in his 20s who worked in the office of Rep. Barney Frank….
“Racalto was concerned that the lunch followed a pattern by Massa…of trying to spend time alone with young gay men with no ostensible work purpose.”
And that, boys and girls, is our U.S. Congress in action. The War on Terror, Iraq, Afghanistan, Iran, 10% unemployment, deficits all the way to Jupiter, and this.
Wait. I almost morphed into Patrick Kennedy! Sorry. Boy, there’s a guy that needs to check himself in again, somewhere. But can you imagine Massa and Kennedy in the same discussion group?
–A settlement has been reached to pay $657 million to workers sickened at Ground Zero, though it still must be approved by a judge and 95% of the workers themselves. Most if not all of the money would come from a $1 billion grant from the Federal Emergency Management Agency. Most call it a fair and equitable settlement. It’s just a shame this wasn’t accomplished years earlier. Payments will range from a few thousand to more than $1 million. Settlement also means the cancellation of a number of trials slated to begin this spring.
–Memo to the 14 Republicans who proposed substituting Ronald Reagan for Ulysses S. Grant on the $50 bill. Don’t be jerks. As Joan Waugh, an historian who authored a book on Grant, opined in the Los Angeles Times:
“Yes, Grant’s administration was marred by corruption and controversy. But Grant himself remained steadfast in his belief that the goals of the war – unity and freedom – should be preserved even as the country’s enthusiasm for biracial reconstruction of the South faded away.
“He proudly signed off on the 15th Amendment to the Constitution in 1870, describing the law enabling black suffrage as ‘a measure of grander importance than any other one act of the kind from the foundation of our free government to the present day.’”
I have a print of Grant accepting Lee’s surrender at Appomattox in my living room (with George Armstrong Custer in the background), the terms of which will forever be remembered in our history for being so magnanimous and a tremendously important act in unifying our shattered nation at that time.
So to the Republican 14, learn your freakin’ history, you bums.
–A lot ticked me off this week. Like the story I saw on NBC about the wacko who is protesting at funerals of our men and women serving in Iraq and Afghanistan and his “right” to do so is going to be heard by the Supreme Court. You can imagine the response of the families of the war dead… ‘We’ve suffered enough and then we have to deal with this?’ You are burying your son, with honors, and this disciple of Satan is doing his anti-war schtick in your face? I’m shocked no one has totally gone off on the guy. I would.
In a similar vein, the family of the trainer slain by the killer whale at SeaWorld is trying to prevent video of the attack from becoming public. It seems SeaWorld’s cameras caught it all and once the police investigation is concluded, the material would become public under Florida law. That’s sick. But evidently SeaWorld and the family are consulting the lawyer who represented race driver Dale Earnhardt’s widow in a successful court fight to keep his 2001 autopsy photos private. Let’s pray they prevail.
–Switching gears, mark your calendar. Saturday, May 8. Betty White, 88 years young, is hosting “Saturday Night Live.” White has been asked before but turned it down because she didn’t think she was ‘New York’ enough. But her agent convinced her the timing was just right. Jeff Witjas said he told White, “Do it now, or when you’re 95.”
–President Obama is slated to defend his proposals for reshaping NASA on April 15 as there is bipartisan opposition to his plans to dismantle the existing rocket program and replace it with private efforts. As in everything else this president does, he hasn’t given any specifics.
–Lastly, we note the passing of Edgar Wayburn, 103. I frankly would have missed this were it not for reader Ken P. Wayburn was a major force in the conservation movement, a man the Sierra Club called “the 20th-century John Muir.” President Clinton presented him the Medal of Freedom in 1999, saying Dr. Wayburn had “saved more of our wilderness than any other person alive.” He transformed the Sierra Club into a lobbying force, serving as president, and then honorary president, all while continuing to make house calls. I like this line from his autobiography.
“In destroying wilderness, we deny ourselves the full extent of what it means to be alive.”
Pray for the men and women of the armed forces, and all the fallen.
Gold closed at $1101
Oil, $81.24
Returns for the week 3/8-3/12
Dow Jones +0.5% [10624]
S&P 500 +1.0% [1149]
S&P MidCap +1.7%
Russell 2000 +1.6%
Nasdaq +1.8% [2367]
Returns for the period 1/1/10-3/12/10
Dow Jones +1.9%
S&P 500 +3.1%
S&P MidCap +7.9%
Russell 2000 +8.2%
Nasdaq +4.3%
Bulls 44.9
Bears 23.6 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
