Note: I apologize for the length but I’ve now cleared the table on healthcare reform for a while.
Health Care…Deficits…and Hot Spots
Back on 2/20/10 in this space I wrote that for over 11 years “I talked about the deficit situation in terms of laying out the facts, but also saying I wasn’t going to lose any sleep over them in terms of their impact on the equity markets and I was right.” I then noted from that day forward, the deficits did matter in terms of the market’s psyche and you saw a classic example of this the past week, both here and abroad, as political leaders, central bankers and market strategists attempt to come to grips with an issue that is going to be with us for decades. This doesn’t preclude positive stretches for equities, and positive yearly returns from time to time, but without a doubt it will impact the rate of economic growth around the world.
Just this week you had Federal Reserve Chairman Ben Bernanke tell lawmakers that the U.S. government budget outlook is “somewhat dark” and that Congress better get its act together, soon. In response to a question about the budget impact of healthcare reform, Bernanke, while not addressing the new law, said:
“Clearly everyone agrees that the overall fiscal outlook for the government is somewhat dark over the medium term, and it would be very useful if there could be a bipartisan, concerted effort to explain, demonstrate and decide how the government is going to achieve a more sustainable fiscal trajectory.”
At the same time, PIMCO’s Bill Gross, who it needs to be noted has become one of the more powerful men in the world, said the three-decade bond market rally is drawing to a close. It’s about excess government debt and how to sell record amounts of it. In terms of the developed world, Gross says the only safe plays are those nations with low deficits; Germany and Canada.
“Bonds have seen their best days,” Gross told Bloomberg Radio. This doesn’t necessarily mean that yields go screaming higher, mind you, but this past week you had a good example of the impact of shaky credit markets as the 10-year Treasury saw its yield go from last Friday’s close of 3.69% to 3.90%, the highest mark since last June, before finishing the week at 3.85%. Sure, still well into record low territory, but it’s about sentiment and perception, plus any significant move higher in the 10-year translates into higher mortgage rates at a time when the housing market is dead in the water, while any sane analysis of the economy has to include the caveat that there will be no sustainable recovery without an authentic rebound in the housing sector.
This week we learned that new home sales for February, 308,000, were at their lowest level since they started tracking such data in 1963. Mortgage rates, for the most qualified buyers, may be at a still highly attractive 5.10%, or thereabouts, but get them over 6%, when wage gains are non-existent and the tax burden set to rise further, and you suddenly price out a lot of prospective buyers. There’s a reason why the Federal Reserve is maintaining rates near zero…no one can tell you, yet, that the recovery we’re in the midst of is truly sustainable.
John Lipsky, an economist I’ve always respected who’s now first deputy managing director at the International Monetary Fund, said advanced economies face “acute” challenges when it comes to the exploding debt burdens. All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014. Some, such as economist Kenneth Rogoff, have said that when the United States hits 90% (we’re almost there by the most common measurement), it becomes exceedingly difficult to sustain a solid growth rate.
Lipsky, though, hits on the themes that are not about to go away.
“This surge in government debt is occurring at a time when pressure from rising health and pension spending is building up.” And it’s not just about rolling back stimulus measures; withdrawal too early of which can lead to different problems. It’s also about the risks of inflation as governments are forced to print more money, though I’m on record that when it comes to the U.S., at least, we have a ways to go before inflation keeps me up at night.
Lipsky nails it in highlighting pension and health spending. I’ve been arguing that it’s also about the public vs. the private sector, and that’s where you have the potential for a real civil war in America (figuratively speaking). Not a week goes by without a major front page piece on how some taxpayers are increasingly disgusted that they are footing the bill for someone else’s significant public pension through higher property taxes, while they themselves are seeing zero wage growth on top of cuts to their own pension and other benefits.
Mortimer B. Zuckerman, Editor-in-Chief / U.S. News & World Report
“(We) are lurching toward a financial crisis that is well understood by the public. In a recent poll, 93% of respondents said they are concerned by the growing deficits; 59% are ‘extremely’ concerned. The public has come to understand what excessive debt means on a personal level, given how many people have mortgages that exceed the value of their homes and credit card lines that are beyond their capacity to repay, particularly if their income goes down. People also have come to understand how enduring personal debt can be and what it means for their economic future.
“Meanwhile, the country’s debt has reached record highs for peacetime. This fiscal year, the federal deficit is expected to top $1.6 trillion, an astounding 10.7% of gross domestic product (this is double the 5% incurred during Franklin Roosevelt’s New Deal from 1933 to 1936). The deficits through 2015 alone are projected cumulatively to exceed $6 trillion. And, in contrast to the 1930s, today’s deficit is not going to be financed by Americans; about half of it is financed abroad, mostly by China and Japan.
“Just think, our tax revenues are adequate to cover just four budget items: military spending, health spending, Social Security, and interest on the national debt. Every other program has to be covered with borrowed funds. This includes unemployment compensation, homeland security, support for state and local governments, federal outlays for higher education, satellite and manned space missions, the National Science Foundation, low-cost housing, infrastructure expenditures, the cost of our judicial and penal systems – the list goes on and on.
“Let us also not forget that we still have to cope with large increases in entitlement spending as our population ages and healthcare costs mount. So the long-term fiscal crisis will be even more severe….Our cumulative national debt is estimated to climb as high as 140% of GDP by 2030, up from 50% just a few years ago. If we fail to act in response to these deficits, we face the dangers of a collapsed dollar; of foreigners who may stop buying treasury bills; of soaring interest rates that will constrain our economy and require 7% of our entire economic output to be paid as interest to debt holders; and of a decline in public services.”
But while we can rant and rave about all this, it was none other than Alan Greenspan who got it right recently when he said, “Spending is off the table.” To which I observed Americans don’t have the guts to sacrifice. Some of us may talk of a smaller government, but don’t take away my benefits!
Health Care
So with all the above, tack on ObamaCare. First off, the president deserves credit for perseverance, as does Speaker Nancy Pelosi. But c’mon…the vote was 219-212 (34 Democrats against)…a margin of 4, in essence. Four votes the other way and no healthcare reform. What we’ve learned is Obama and Pelosi were indeed 10 votes shy in the days leading up to the vote and then they pulled out all the stops. I join those in opposition who are sickened by the corrupt process that led to the passage of this humongous entitlement. As I’ll point out in a bit, I also hope we can bury forever Barack Obama’s claim to lead the most transparent administration in history. But I don’t care as much that the process was not transparent as I do about being blatantly lied to and treated as a chump. There were facets in the shaping of this 2,700-page behemoth that were worthy of a banana republic. We are supposed to be a greater nation than this.
I repeat what I first cited in this column on 7/11/09, the comments of former Treasury Secretary Paul O’Neill in a New York Times op-ed from that week.
“Health care reform seems to be on the way, whether we want it or not. So I have been asking questions about the various proposals. Here is a sampling.
“Which of the reform proposals will eliminate the millions of infections acquired at hospitals every year?
“Which of the proposals will eliminate the annual toll of 300 million medication errors?
“Which of the proposals will eliminate pneumonia caused by ventilators?
“Which of the proposals will eliminate falls that injure hospital patients?
“Which of the proposals will capture even a fraction of the roughly $1 trillion of annual ‘waste’ that is associated with the kinds of process failures that these questions imply?
“So far, the answer to each question is ‘none.’”
O’Neill also noted then that Obama likes audacious goals. “Here is one: ask medical providers to eliminate all hospital-acquired infections within two years. This is hardly pie in the sky: doctors and administrators already know how to do it. It requires scrupulous adherence to simple but profoundly important practices like hand-washing, proper preparation of surgical sites and assiduous care and maintenance of central lines and urinary catheters.”
Just through these steps we’d save countless lives and tens of billions of dollars every year.
No one…no one in their right mind denies that health care didn’t need reforming, and yet how much of the debate was focused on the simple questions asked by Secretary O’Neill, beginning with the fact 100,000 die in our hospitals due to infections?
“Truth delayed is truth denied. Or at least truth was denied until yesterday, when the fig leaf of ‘health-care reform’ was shredded. Finally exposed was the Holy Grail of the ruthless quest.
“It was so our Narcissist-in-Chief could claim another notch on history’s belt.
“Don’t think for a second the whole last year was about reducing the deficit or bending the cost curve. Nor was it ever really about helping Americans who need better medical care. A handful of those poor souls were there again yesterday, human props for the show.
“As he smugly read the roster of predecessors who tried and failed, from T.R. to Bill and Hillary, there was no pretense of modesty. This was about him.
“The imperial trappings of coronation – of all things, a rock-star introduction of the president at a signing ceremony! The giddy celebration of self and party, the hailing of bureaucrats and congressional hacks as heroes and more odes to the Kennedy clan were as welcome as fingernails on a blackboard.
“Yet it was also predictable. A presidency dedicated to the pursuit of glory is a presidency squandered on ceremony.
“ ‘You’re the reason we’re here,’ Vice President Joe Biden said obsequiously to his boss. Never has a phrase been more pregnant with double meaning.
“Yes, Obama is the reason the Democrats were celebrating – and the reason not a single Republican was with them. Not all Democrats were there, for at least opponents were bipartisan.
“Obama is also the reason more than half the country could feel uninvited to the party in the people’s house. They made clear every chance they had – from elections to polls to demonstrations – that they were voting no.
“For their trouble, they were ignored and demonized. Their government does not represent them.
“It represents itself and its advocate acolytes. The party-in-a-hot house is what the Dems have become under Obama.
“Their disconnect from the people who pay for their imperial courts is now complete. They acted like children at a birthday party, oblivious to the pain in a nation where perhaps 15 million are out of work.
“Obama’s the reason they are unbothered. He has reduced the jobless to a statistical annoyance.
“A president is elected to lead, and Obama is leading America into a dead end. He could have gone for honest reform by agreeing to important changes that enjoy broad public support.
“The chief aim should have been to arrest rising costs. The savings could have been used to expand coverage and ensure health care and the economy were on a stable course.
“Instead, he opted for a misguided takeover of 17% of the nation’s product on the backs of a rented slice of Congress. The new entitlement will create a gusher of red ink and there is a very good chance the world’s finest health system will be diminished by longer waits, shoddy care and higher costs.
“Glib lies repeated daily are means to the end in which the state assumes more power, more money, more control. When he says, ‘we,’ he means ‘we the party, we the government.’”
“The reality is that ObamaCare is the price of two GOP electoral defeats caused by the failure of the DeLay Congress and a dismal Bush second term. The 2003 Medicare prescription drug benefit compromised the GOP on spending and legislative bullying. Republicans had a chance to do better on health care in 2005 but put their chips on Social Security and failed. Mitt Romney also gave Democrats renewed political confidence when he signed a prototype of ObamaCare into law in Massachusetts, though he now claims that these fraternal policy twins aren’t related….
“Many Republicans are already calling for ‘repeal’ of ObamaCare, and that’s fine with us, though they should also be honest with voters about the prospects. The GOP can’t repeal anything as long as Mr. Obama is president [Ed. referring to his veto power], even if they take back Congress in November. That will take two large electoral victories in a row. What they can do now is take credit for fighting on principle, hold Democrats accountable for their votes and the consequences, and pledge if elected in November to stop cold Mr. Obama’s march to ever-larger government.”
“Today, America’s vigor is challenged on two fronts. First, the country is becoming geriatric. Other nations spend 10% or so of their GDP on health care. We spend 17% and are predicted to soon spend 20% and then 25%. This legislation was supposed to end that asphyxiating growth, which will crowd out investments in innovation, education and everything else. It will not.
“With the word security engraved on its heart, the Democratic Party is just not structured to cut spending that would enhance health and safety. The party nurtures; it does not say, ‘No more.’
“The second biggest threat to America’s vibrancy is the exploding federal debt. Again, Democrats can utter the words fiscal restraint, but they don’t feel the passion. This bill is full of gimmicks designed to get a good score from the Congressional Budget Office but not to really balance the budget. Democrats did enough to solve their political problem (not looking fiscally reckless) but not enough to solve the genuine problem.
“Nobody knows how this bill will work out. It is an undertaking exponentially more complex than the Iraq war, for example. But to me, it feels like the end of something, not the beginning of something. It feels like the noble completion of the great liberal project to build a comprehensive welfare system.
“The task ahead is to save this country from stagnation and fiscal ruin. We know what it will take. We will have to raise a consumption tax. We will have to preserve benefits for the poor and cut them for the middle and upper classes. We will have to invest more in innovation and human capital.
“The Democratic Party, as it revealed of itself over the past year, does not seem to be up to that coming challenge (neither is the Republican Party). This country is in the position of a free-spending family careening toward bankruptcy that at the last moment announced that it was giving a gigantic new gift to charity. You admire the act of generosity, but you wish they had sold a few of the Mercedes to pay for it.”
[On some of the specifics…written Sunday, the day of passage, thus the ‘future’ tense]
“Insurance coverage would be mandated for both employers and individuals. Government would determine what benefits insurance would have to include and force Americans to purchase health insurance that satisfied government mandates. This might require Americans who are satisfied with their insurance to switch to a plan that includes the benefits the government requires, even if that is more expensive or includes benefits they don’t want or are morally opposed to.
“Insurance companies themselves would become little more than public utilities, protected from real competition, but with every aspect of their operation regulated and controlled by the government.
“And once in the doctor’s office, government would micromanage medical decisions, deciding what treatments are most effective, or, frighteningly, most cost-effective.
“All this, while accomplishing one of the most massive redistributions of wealth in U.S. history. Millions more Americans will be added to the ‘dole,’ making them more dependent on government. America will have taken a huge step down the road to becoming a European-style social-welfare state.
“That is what is at stake here. If this bill passes, America may be less healthy, and it will likely be less prosperous. And, almost certainly, it will be less free.”
“Liberals are hailing the vote as historic, and indeed it was – a blunder of major proportions that accomplishes none of the original goals on which healthcare reform was sold. It doesn’t come close to providing universal insurance and bends the cost curve up, not down.
“It expands Medicaid, cuts Medicare and adds billions of dollars in new taxes and mandates just as these monies are needed to put Americans to work.
“The most remarkable immediate result of the vote is, well, nothing much at all. Next year is already slated to be a tough year for Americans, as the expiration of the Bush tax cuts promises to suck billions from the private sector. Now ObamaCare’s mandates will increase health spending by businesses and households – with more ‘health-reform’ tax hikes set to hit in the years ahead.
“That’s not to say there will be no short-term effects. The bill immediately redefines youth to age 26, mandating that group and individual health plans cover adult ‘children’ up to that age. This will certainly increase premiums, as will the new law’s ban on policies that have lifetime and annual limits on health-care services….
“But the most onerous of the bill’s taxes start to take effect in 2013. Families with incomes greater than $250,000 will pay a higher Medicare Payroll Tax up to 2.35%, plus a new 3.8% tax on interest and dividend income. With this stroke, Democrats have managed to punish both work and the savings of American families….
“By 2014, the new law will certainly put the health-insurance market in full crisis. That’s the year insurers will have to offer policies to all comers – charging healthy people the same premiums as those who waited until they were sick to buy a policy.
“That reform has devastated the private-insurance market in every state that has adopted it – pushing premiums so high that more than half of individual and small-group policyholders drop their insurance altogether. These people will have nowhere to go except the federally created and subsidized ‘insurance exchanges.’
“Meanwhile, fines of $2,000 per employee will fall on businesses with 50 or more workers if any employee gets a subsidy from the federal government.
“Starting in 2018, ‘Cadillac’ insurance plans will be taxed – individual policies over $10,200 a year and family plans over $27,500. The way the tax is ‘indexed,’ in time it’ll cover more and more Americans – just as the Alternative Minimum Income Tax, first targeted at the super-rich, now hits millions in the middle class.
“The individual mandate is laughably weak, with fines starting at one-half of 1 percent of income in 2014 and topping out at 2% in 2016. Many Americans will game the system, paying the fine until a major health expense hits, and then buying insurance at government-mandated rates as if they were healthy….
“There’s no doubt that under this plan, taxes for all Americans will go up, deficits will climb, care will be rationed and all of us will be on their way to living under a government-run system of ‘Medicaid for all.’”
14 states have gone to court to block the legislation, with the main point being:
“The Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying health care coverage.”
“As America’s teetering tower of unkeepable promises grows, so does the weight of government, in taxes and mandates that limit investments and discourage job creation. America’s dynamism, and hence upward social mobility, will slow, as the economy becomes what the party of government wants it to be – increasingly dependent on government-created demand….
“The public will think the health-care system is what Democrats want it to be. Dissatisfaction with it will intensify because increasingly complex systems are increasingly annoying. And because Democrats promised the implausible – prompt and noticeable improvements in the system. Forbidding insurance companies to deny coverage to persons because of preexisting conditions, thereby making the risk pool more risky, will increase the cost of premiums. Public complaints will be smothered by more subsidies. So dependency will grow.
“During the Democrats’ health-care monomania, the nation benefited from the benign neglect of the rest of their agenda. Now the nation may benefit from the exhaustion of their appetite for more political risk.”
“The Democratic administration of Barack Obama, who denounced his predecessor, George W. Bush, as the most secretive in history, is now denying more Freedom of Information Act requests than the Republican did.
“Transparency and openness were so important to the new president that on his first full day in office, he dispatched a much-publicized memo saying: ‘All agencies should adopt a presumption in favor of disclosure, in order to renew their commitment to the principles embodied in FOIA, and to usher in a new era of open government. The presumption of disclosure should be applied to all decisions involving FOIA.’
“One of the exemptions allowed to deny Freedom of Information requests has been used by the Obama administration 70,779 times in its first year; the same exemption was used 47,395 times in Bush’s final budget year.
“An Associated Press examination of 17 major agencies’ handling of FOIA requests found denials 466,872 times, an increase of nearly 50% from the 2008 fiscal year under Bush.”
Lastly, if something major happens in the foreign policy realm, or there is a major terror attack on U.S. soil, no one will care about healthcare reform, but then you already know that.
But the other week I noted a sleeper…that being May Day. Over the decades it has traditionally been a day for the labor movement, especially in Europe. I’m just guessing that this time it could be really explosive. Certainly overseas there are more than enough reasons for anarchists to have a field day. May Day being a Saturday, for traders it might be worth a few extra ‘puts’ around April 28.
Street Bytes
–Stocks rallied yet again, a fourth straight week, though the gains were minimal, as has been the character of this rally that has seen stocks go up six weeks in seven. The Dow Jones rose 1.0% to 10850, while the S&P 500 advanced 0.6% and Nasdaq 0.9%. Electronics retailer Best Buy helped move equities with a solid report, and while it wasn’t a market mover, software giant Oracle didn’t disappoint on the earnings front, though it had moved up substantially before so the numbers didn’t generate any new excitement. Meanwhile, as Palm appears destined for the trash heap, I finally took my Palm Pre out of its box and charged it up. Next week, I may actually use it. Then again, I could decide to go for a jog instead.
San Francisco Federal Bank president Janet Yellen, soon to be Fed vice chairman upon confirmation, said it was too soon for the Fed to tighten. Aside from my above discussion on the deficit, three Treasury auctions did not go well this week, hardly a good sign when the government is looking to unload $1.6 trillion in paper this year.
And just a word on inflation overseas, or lack thereof. Consumer prices in Japan fell a 12th consecutive month in February.
–Yet another major story this week was the ongoing Greek debt crisis. Initially, Germany didn’t want anything to do with helping Greece out of its self-made deficit issue, 12.7% of GDP (when the European Union mandates it be no more than 3%…though this target has been broken regularly). 61% of Germans are opposed to aiding Greece, so with a fragile coalition it’s no wonder Chancellor Angela Merkel had adopted a tough stand.
But by week’s end, a joint eurozone and IMF bailout program was put in place, though with strict conditions and no immediate money for Greece, which first must make every effort to access the capital markets, such as for $27 billion in debt maturing in the next few months. Greece believes it can find buyers for its paper, but it desperately needs a lower interest rate than the current 6.25% for its ten-year bond, or over 3% higher than Germany’s comparable paper.
Should Greece, or any other euro nation, such as Portugal, which suffered a downgrade this week, require assistance, then a combination of aid from both bodies could be tapped, assuming all 16 nations using the euro agree to lend it out. In the battle between Germany and France, though, Germany won because it wanted IMF involvement, whereas France felt the IMF’s inclusion would hurt the reputation and integrity of the euro itself. [France is right.] But Merkel could still lose because in a worst case scenario, Germans would be tapped for funding; just what the people vehemently oppose today.
–Google attempted to bypass Chinese government censors by directing search users in China to its uncensored search engine based in Hong Kong, thus further incurring the wrath of Beijing. The People’s Daily intoned:
“For Chinese people, Google is not god, and even if it puts on a full-on show about politics and values, it is still not god. In fact, Google is not a virgin when it comes to values. Its cooperation and collusion with the U.S. intelligence and security agencies is well-known.”
Personally, while I don’t see Google’s move having much influence on U.S.-Sino relations, which were shaky anyway, this should have been handled far better, and if the company ever thought it could just resume business as usual at some later date when tensions subside, Chinese companies, such as China Mobile, acted quickly to distance themselves from the search giant. Google, for example, was to be on China Mobile’s home Web page which millions use.
“When an enterprise of Google’s global dimensions and visibility reverses course in China, it sends a message to enterprises world-wide: You can do the same. Do not fear to assert your interests, and those of your present and potential Chinese customers. For the most part, foreign companies doing business in mainland China previously assumed that their risks lay on the side of not complying with Beijing’s orders, however burdensome or threatening to profits or property interest….
“Google’s decision should also tell the U.S. government something about how to advocate its interests with China. The Google controversy coincided with cyber attacks against over 200 American companies, believed by U.S. authorities to have been launched by the People’s Liberation Army. China’s unchallenged behavior shows why we should not be optimistic that romancing Beijing will produce crippling sanctions against Iran’s nuclear weapons program any time soon. Instead, the Obama administration should emulate Google’s approach in official dealings, and support U.S. businesses in situations similar to Google so they do not have to act alone.
“Announcing China’s 1949 founding, Mao Zedong said, ‘The Chinese people have stood up!’ Now, Google has stood up, and the game is on between Mao’s heirs and the Internet generation.”
[Google’s share price was basically unchanged on the week, closing at $562.]
–Along the lines of the above, analysts at security software supplier Symantec have identified Shaoxing, a city in Zhejiang, “as the top source of all cyber attacks monitored this month from more than 12 billion e-mail connections the company processed.” One-quarter of all attacks originate from China, as opposed to Symantec’s earlier estimate of 18%. [South China Morning Post]
–In another high-profile corporate case, four executives of British-Australian mining giant Rio Tinto pleaded guilty to accepting bribes from Chinese steel makers at the first day of a three-day trial in Shanghai. The case initially was supposed to be about seeking confidential information on China’s steel industry so that Rio could raise iron ore prices, which China is particularly sensitive to seeing as it needs to import the raw material. Chinese officials had claimed Rio execs had caused “enormous economic losses” through their espionage.
But now it seems it’s more about the Chinese steel makers paying bribes to the Rio foursome for their own inside information on negotiations.
The case has sent shockwaves across corporate boardrooms that deal in China. If it can happen to Rio, it can happen to us, they muse.
The employees could face jail terms of more than five years but the court hasn’t said just what will happen to them. For Rio, China is their biggest customer, so they obviously don’t want to jeopardize the relationship. It is expected, though, that the court will rule on sentencing before the May 1 opening of the World Expo in Shanghai – the city’s biggest international event ever.
–Meanwhile, China is facing a severe labor shortage along its coastal exporting belt. In the industrial base of Guangdong, for example, plants were almost 900,000 workers short by late February, according to government data. Many of the rural workers that once migrated east are now finding better work opportunities in the interior, plus improved social services.
–China has had to suspend work on power plants in India due to restrictions on the import of skills and China’s inability to import their own technicians, as some Indian security officials are concerned about the country becoming too reliant on Chinese-made infrastructure. But India doesn’t have the homegrown workers to finish badly needed projects.
–In another example of the growing inequality in America, the public vs. private sector, a Wall Street Journal editorial on Friday points out that “According to the U.S. Bureau of Labor Statistics, from 1998 to 2008 public employee compensation grew by 28.6%, compared with 19.3% for private workers. In the recession year of 2009, with almost no inflation and record budget deficits, more than half the states awarded pay raises to their employees.”
And whereas the last few weeks I’ve pointed out cases from my home state of New Jersey concerning outrageous pensions, such as for retired police chiefs, the Journal notes that California has 3,000 retired teachers and school administrators, who stopped working as early as age 55, collecting at least $100,000 a year in pensions for the rest of their lives.
–New York City is shelling out $14.1 billion for pensions, health insurance and fringe benefits this year, or 22% of its $63 billion budget. Says E.J. McMahon, director of the Empire Center for New York State Policy, “Taxpayers are contributing $6 billion a year more for pensions than a decade ago, and getting nothing more for it – except funding pensions.” [New York Post]
–I noted new home sales for Feb. above. Existing sales for the same month came in slightly better than expected, with the median sales price at $165,100. January was revised slightly upward from the previous estimate. As part of my ongoing scorecard…I said we would bottom in April 2009 and then just sit there.
Apr. 2009…$166,500
Jan. 2010…$164,900
Feb. 2010…$165,100
So much happened this week that I did not really look at the administration’s latest loan modification scheme, announced on Friday, but earlier, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report that the re-default rate of loans modified in the first quarter of 2009 was 51.5% by the end of the year.
–A provision in the healthcare plan turns over the $70 billion student loan business to the federal government, thus depriving private banks of substantial fees for acting as middlemen in loans to low- and middle-income students. The government argues this will increase the amount for Pell grants and make it easier for the students to pay the loans back.
–In January, U.S. hotels had a record-low 45.1% occupancy rate. Separately, 400,000 U.S. hotel employees have been laid off the past two years, according to the American Hotel & Lodging Association, or 20% of the total workforce in the sector. The total property value of U.S. hotels has fallen by up to 50% from its peak in 2007, according to Fitch, which impacts the ability of owners to sell hotels and improve their credit profiles, as noted in USA TODAY.
–In another report, visitors to Las Vegas spent an average of more than $50 less on gambling in 2009 than the year before ($481 vs. $532 in 2008, and nearly $652 in 2006). Hotel spending per night was down 25%, year over year, and spending on shows was down 23%.
–Ford Motor CEO Alan Mulally took home cash and prizes of $17.9 million in ‘09, and there wasn’t one bit of criticism (outside of the expected complaints from Ford’s workers…who fail to understand that without the boss, in this case, they’re probably unemployed) because Mulally has done everything right, including, most importantly, not suckling from the teats of the government. Ford turned a profit of $2.7 billion last year, its first gain in four years.
–The National Highway Traffic Safety Administration says more than 100 deaths can now be blamed on sudden acceleration of Toyota vehicles.
–According to a Pew report, China spent $34.6 billion on clean energy projects last year, while the United States spent $18.6 billion. Five years ago, China’s investment in the sector was just $2.5 billion.
–Dubai’s stock market surged 3.5% after the announcement that the emirate’s holding company, Dubai World, would be supported by the government to the tune of $9.5 billion in additional funding as it looks to restructure its debt. Creditors will have to wait up to eight years to get all their money back.
–The unemployment rate in Ireland hit 13.1%, with construction the worst hit sector, and on Friday the government reported the economy shrank 2.3% in the fourth quarter, owing in part to devastating floods, as well as the depression in home building.
In 2007, 87,000 houses were built in Ireland, compared to 150,000 units in England and Wales, which have 13 times the population of Ireland.
–The UK’s leading group of institutional shareholders warned that advisory fees were a “deadweight cost” on shareholders, which is indeed the case worldwide. For example, in Kraft’s takeover of Cadbury last month, Kraft paid out $390 million in fees, while Cadbury paid its advisers between $50 million and $56 million, as reported by the Financial Times.
–Bank analyst Dick Bove said many of the stocks in the sector will “quadruple” over the next two to three years. They key? Sliding levels of loan defaults. “The catalyst is the reduction in loan losses. That’s all that investors in banks care about.”
–Much was made of a New York Times headline this week:
“Social Security Payouts to Exceed Revenue This Year”
“This year, the system will pay out more in benefits than it receives in payroll taxes, an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office.”
But it’s important to note that you need to differentiate this from saying Social Security is going broke. The funds aren’t expected to be exhausted until 2037, though if we had below normal growth in the economy for the next decade or so, this projection would come down as well.
What I find interesting is that because of our current dire straits, people are applying for benefits sooner than they had planned. Not that this is a big surprise (taking benefits at 63, let’s say, rather than two or three years later), but it’s just a good confirmation of the economic predicament many of our elderly find themselves in. Low (zero) interest rates on savings certainly helped speed up the process.
–The Wall Street Journal reports that Manhattan’s high end condo market is showing signs of life. One was sold at auction for a cool $33.2 million, acquired by a Chinese businessman. With 20-foot ceilings and views of Central Park, the property was once purchased by Donald Trump for $5 million in 1997, but then the recent seller acquired it just months later from Trump for $10 million. So nice return for The Donald.
–There’s a big controversy in New York over a proposed soda tax; one that would raise $450 million in its first year, filling 5% of the state’s $9 billion budget deficit, as reported by Crain’s New York Business. I agree with an editorial in the publication.
“Reality: New Yorkers struggling to pay their bills can simply buy fewer sugary drinks. Minorities and the poor would benefit most. Non-diet soda is not a basic necessity.”
Crain’s: “Treating obesity-related problems diverts $8 billion a year from more productive sectors of the state economy.”
Meanwhile, PepsiCo Inc. said it would cut the sodium found in each serving of its key brands by one-fourth in five years, and sugar per serving by 25% over the next ten years.
–The New York Post reports that fresh details have emerged into the extent some SEC staffers are obsessed with porn. “No fewer than 16 investigations are currently underway into SEC employees who’ve spent up to 1 ½ hours a day viewing online smut and kiddie porn.” The FBI was called in when one senior staffer “was found to contain flash videos of what appeared to be child pornography.”
–My portfolio: I decided to begin to take the plunge into natural gas this week, in a very small way. I’m looking to make 50% by September as it’s merely a bet we won’t have such a sanguine hurricane season in the Gulf.
Foreign Affairs
Israel: I posted Prime Minister Benjamin Netanyahu’s defiant speech to the AIPAC conference on my “Hot Spots” link, AIPAC being a pro-Israel lobbying group in Washington. It’s worth a read because he summarizes the basic disagreement. Israel is not going to deviate from its long held policy of developing East Jerusalem.
This was at the center of talks between the White House and Netanyahu afterwards, with some in Netanyahu’s cabinet saying their leader had been “humiliated” by President Obama. The Sydney Morning Herald reported that Obama told Netanyahu, “I’m going to the residential wing to have dinner with Michelle and the girls,” adding that the prime minister should consult his aides about goodwill gestures Israel was prepared to make towards the Palestinians before renewed peace talks. “I’m still around,” he said. “Let me know if there is anything new.” After the prime minister requested a second meeting, Obama didn’t accept Netanyahu’s plan. An Israeli columnist wrote that “Bibi received…the treatment reserved for the president of Equatorial Guinea.”
For starters, it really was incredible that the White House didn’t even allow a photo of the two. Israel is a rather important ally, after all, but Obama was obviously sending the message he was far from happy at the announcement of 1,600 more units for East Jerusalem when the administration wanted all settlement construction to stop while the U.S. tries to jumpstart peace talks. At the same time, UN Secretary-General Ban Ki-moon said of Israel’s announcement that embarrassed the U.S. when Vice President Biden was in the country recently, “All settlement activity is illegal, but inserting settlers into Palestinian neighborhoods in Jerusalem is particularly troubling.” While Netanyahu was in Washington, Israel announced a separate project of 20 units in the middle of a Palestinian neighborhood had also been approved.
[The Jewish population of East Jerusalem, by the way, has grown from almost nothing before 1967 to 200,000 today. The Palestinian population, which was about 66,000 in 1967, is now 270,000.]
Netanyahu and Obama failed to resolve the fate of East Jerusalem and Israeli hardliners, which make up Netanyahu’s ruling coalition, viciously attacked the administration and Obama specifically.
70% of Israelis favor the current Jerusalem policy, while just 9% of Jewish Israelis believe Obama is more pro-Israel than pro-Palestinian, with 48% saying he favors the Palestinian side, according to the latest out of the Jerusalem Post. Last May, 31% labeled Obama pro-Israel, with 14% believing him to be pro-Palestinian, so attitudes have changed drastically.
Obama, according to reports, has demanded that Netanyahu make a commitment to starting “proximity talks” with the Palestinians, including a limitation on further building in East Jerusalem. Netanyahu supposedly asked why Obama wasn’t putting more pressure on the Palestinians; where was the “reciprocity”?
“The important relationship between the United States and Israel is evolving in unpredictable ways. Their recent tensions are important for what they reveal about a more sophisticated and integrated American view of its Middle East policies, one which balances a commitment to Israel’s security against the problems Washington suffers from its excessive pro-Israel tilt and the continued Zionist colonialism in occupied Arab lands.
“The most significant recent development is the qualitative rather than procedural nature of Washington’s criticism of Israel. This is reflected in two ways. First, top American officials repeatedly and publicly accused Israel of insulting the United States and hindering its foreign policy objectives in the Arab world and in South Asia. Israel has shifted from being merely an actor that carries out actions that are ‘unhelpful’ to peacemaking, to the actor whose policies are damaging American strategic interests. This is the diplomatic equivalent of playing hardball.
“Israeli policies have gone beyond a personal affront or embarrassment to American officials and are causing the U.S. real pain beyond the Arab-Israeli arena. This is something new, and therefore Washington is reacting with unusually strong, public and repeated criticisms of Israel’s settlement policies and its general peace-negotiating posture. At the same time the Obama administration repeats its ironclad commitment to Israel’s basic security within its 1967 borders, suggesting that its support for Israel does not extend beyond that to include Israel’s expansion of colonization.
“Second, the American military has openly criticized Israel, saying (as the commander of U.S. Central Command, General David Petraeus, told Congress last week) that Israeli policies and the regional perceptions of Washington’s pro-Israel bias make it difficult for the U.S. to achieve its foreign policy goals through military or diplomatic activity. The top military leadership speaking out in public with such clarity is about as serious as it gets in terms of credible criticisms in Washington….
“The other important domestic change was President Barack Obama’s victory in passing health care legislation a few days ago. He is now in a much stronger political position at home, and less vulnerable to the sort of electoral blackmail and intellectual intimidation that are the hallmarks of some pro-Israel groups in the U.S. How Obama uses his political assets remains to be seen, given that the mid-term elections next November may again constrain any serious discussion of Middle East policy.”
“The only alternative for Israel is the full-scale expulsion of Palestinians, which would thoroughly discredit Israel in the eyes of the world. In a way the Israelis are paying for that choice before it has ever been made. Nor will it be. Israel simply has no expulsion option. It can reduce the Arab population in Jerusalem, perhaps; it can momentarily seal off Palestinians in enclaves in the West Bank and Gaza; but without a political solution, those are merely odious stopgap measures costing the Israelis ever more valuable political capital to sustain.
“That’s why the narrative has shifted, and it’s why Israel today is facing, for the first time, criticism from allies on moral grounds. A state that sustained itself for decades as a moral creation, a refuge for the world’s suffering Jews, is essentially ensuring that the only long-term outlook for Israelis and Palestinians is violence. Israeli Prime Minister Benjamin Netanyahu’s declared backing for a two-state solution notwithstanding, Israel has no endgame other than the perpetuation of ruinous stalemate. And because it holds the land, the burden is on Israel to define that endgame.
“Israel’s ability to draw the negotiating process out indefinitely has been greatly facilitated by Palestinian incompetence. The Palestinian Authority under Mahmoud Abbas is struggling to regain the initiative among Palestinians, while Hamas, despite optimistic suggestions to the contrary, has no interest in entering peace talks with Israel. Yet Hamas’ disastrous provocation of the Gaza war over a year ago has considerably undermined the movement’s military strategy, with Palestinians now more willing to go along with Prime Minister Salam Fayyad’s state-building project in the West Bank, if it is allowed to eventually lead somewhere.
[Ed. On Friday, two Israeli soldiers were killed in Gaza with Hamas claiming responsibility.]
“The Palestinian Authority has faced much criticism, especially by purported supporters of the Palestinian cause. But Fayyad’s approach is the only realistic project that Palestinians can pursue today – a project of internal consolidation. More important, as the world watches Abbas and Fayyad focusing on domestic reform, they also see Israel in a different light. The Palestinians, for once, have managed to transform interpretation of their relationship with Israel to their own advantage….
“Ultimately, Israeli leaders will insist they have no obligations but to their own people. They will disregard intensifying frustration with their actions because Israel’s security is an Israeli matter. But how true is that? If Iran acquires nuclear weapons, Israeli security will be more closely tied in with that of the United States. Any American regional nuclear umbrella will also cover Israel, regardless of Israel’s nuclear arsenal. As for the Palestinians, their problem has never been more internationalized – its repercussions felt in countless foreign capitals.”
Fareed Zakaria / Newsweek
“Bibi Netanyahu makes bold speeches about protecting Israel but when it comes time to act, he has cobbled together a coalition of extreme parties, made concessions to them on crucial issues, given them free rein to undermine Israel’s broader security, and pandered to his public’s most populist instincts – all to ensure that he can sit in the prime minister’s chair. Little that Netanyahu has done suggests he has prioritized the Iranian threat – or these deeper, long-term threats – and made difficult decisions to address them. Forget Winston Churchill, Bibi Netanyahu looks more like a local ward boss, concerned only with keeping himself in power while the dangers to Israel mount from all sides.”
Zakaria adds that he doesn’t believe Netanyahu is taking the Iranian threat seriously enough.
“If tackling the rise of Iran were his paramount concern [as Netanyahu loves to allege in speeches], would he have allowed a collapse in relations with the United States, the country whose military, political, and economic help is indispensable in confronting this challenge?”
I noted weeks ago that the reason why the botched Mossad mission to assassinate the Hamas official in Dubai (botched in terms of the trail of evidence left behind) would have major ramifications for any preemptive strike on Iran was because Israel needs the support of its allies. This past week, a furious Britain expelled an Israeli diplomat over the forged British passports that were part of the hit job. Couple this with problems between Washington and Israel and it wouldn’t seem Netanyahu is in a most advantageous position should he decide to strike the Natanz uranium enrichment facility anytime soon.
Iran: While Washington throws out hints that Russia and China may both be on board a new sanctions regime, suffice it to say any new sanctions on Tehran will be so watered down as to be virtually useless, though I do believe at least Russia, at a certain level, is frustrated with Iranian intransigence, while at the same time continuing to ensure it gets its share of Iran’s weapons and nuclear energy business, witness Moscow’s help on the Bushehr nuke plant.
I totally concur with the following from Alan M. Dershowitz, as expressed in a Journal op-ed.
“The gravest threat faced by the world today is a nuclear-armed Iran. Of all the nations capable of producing nuclear weapons, Iran is the only one that might use them to attack an enemy.
“There are several ways in which Iran could use nuclear weapons. The first is by dropping an atomic bomb on Israel, as its leaders have repeatedly threatened to do. Hashemi Rafsanjani, a former president of Iran, boasted in 2004 that an Iranian attack would kill as many as five million Jews. Mr. Rafsanjani estimated that even if Israel retaliated with its own nuclear bombs, Iran would probably lose about 15 million people, which he said would be a small ‘sacrifice’ of the billion Muslims in the world.
“The second way in which Iran could use nuclear weapons would be to hand them off to its surrogates, Hizbullah or Hamas. A third way would be for a terrorist group, such as al-Qaeda, to get its hands on Iranian nuclear material. It could do so with the consent of Iran or by working with rogue elements within the Iranian regime.
“Finally, Iran could use its nuclear weapons without ever detonating a bomb. By constantly threatening Israel with nuclear annihilation, it could engender so much fear among Israelis as to incite mass immigration, a brain drain, or a significant decline in people moving to Israel….
“But there are other ways in which a nuclear-armed Iran would endanger the world. First, it would cause an arms race in which every nation in the Middle East would seek to obtain nuclear weapons.
“Second, it would almost certainly provoke Israel into engaging in either a pre-emptive or retaliatory attack, thus inflaming the entire region or inciting further attacks against Israel by Hizbullah and Hamas.
“Third, it would provide Iran with a nuclear umbrella under which it could accelerate its efforts at regional hegemony. Had Iraq operated under a nuclear umbrella when it invaded Kuwait in 1990, Saddam Hussein’s forces would still be in Kuwait.
“Fourth, it would embolden the most radical elements in the Middle East to continue their war of words and deeds against the United States and its allies.
“And finally, it would inevitably unleash the law of unintended consequences: Simply put, nobody knows the extent of the harm a nuclear-armed Iran could produce….
“Most people today are not aware that British Prime Minister Neville Chamberlain helped restore Great Britain’s financial stability during the Great Depression and also passed legislation to extend unemployment benefits, pay pensions to retired workers and otherwise help those hit hard by the slumping economy. But history does remember his failure to confront Hitler. That is Chamberlain’s enduring legacy.
“So too will Iran’s construction of nuclear weapons, if it manages to do so in the next few years, become President Barack Obama’s enduring legacy. Regardless of his passage of healthcare reform and regardless of whether he restores jobs and helps the economy recover, Mr. Obama will be remembered for allowing Iran to obtain nuclear weapons. History will not treat kindly any leader who allows so much power to be accumulated by the world’s first suicide nation – a nation whose leaders have not only expressed but, during the Iran-Iraq war, demonstrated a willingness to sacrifice millions of their own people to an apocalyptic mission of destruction.
“If Iran were to become a nuclear power, there would be plenty of blame to go around. A National Intelligence Report, issued on President George W. Bush’s watch, distorted the truth by suggesting that Iran had ended its quest for nuclear weapons. It also withheld the fact that U.S. intelligence had discovered a nuclear facility near Qum, Iran, that could be used only for the production of nuclear weapons. Chamberlain, too, was not entirely to blame for Hitler’s initial triumphs. He became prime minister after his predecessors allowed Germany to rearm. Nevertheless, it is Chamberlain who has come to symbolize the failure to prevent Hitler’s ascendancy. So too will Mr. Obama come to symbolize the failure of the West if Iran acquires nuclear weapons on his watch.”
For his part, Iran’s Supreme Leader Ayatollah Khamenei blasted President Obama in his New Year’s address to the nation.
“You cannot talk about peace and friendship and at the same time plot and plan sedition and think that you can hurt the regime of the Islamic republic of Iran.”
Iraq: The parliamentary elections were March 7 and on Friday, it was finally announced that former prime minister Iyad Allawi’s coalition had captured 91 of 325 seats in parliament to 89 for Prime Minister Nouri al-Maliki’s coalition. In third, and the potential kingmaker, is the Iraqi National Alliance, one of whose leaders is Moqtada al-Sadr. The INA apparently gained about 70 seats, with various Kurdish parties taking 40-45.
The bottom line is we will now have months of political wrangling, beginning with Maliki’s protest of the vote. For his part, Allawi is a favorite of the West who is not afraid to stand up to Iran.
But there is a growing fear that southern Shia-dominated Iraq could resort to violence and declare itself a semi-autonomous region and hoard the vast oil reserves there. And you also have the feud between the Kurds and the Sunni Arabs over the disposition of Kirkuk, home to further vast oil reserves. As former ambassador to Iraq, Ryan Crocker, once said, “The events for which the Iraq war will be remembered by us and by the world have not yet happened.” Well the election was the first of those events. It is indeed just the beginning, witness a bombing on Friday outside Baghdad that killed 40.
Afghanistan: There are growing concerns here over Iran’s influence over Afghan President Hamid Karzai, Karzai having recently hosted Iran’s Ahmadinejad. The Taliban is receiving training (including on the use of IEDs) and arms from Iran, even though the Taliban is mostly Sunni and Iran, Shia, in yet another alliance of convenience.
“It’s wretched enough that our ‘friend’ Ahmad Chalabi has become Iran’s point man in Iraq. Now ‘our man in Kabul,’ President Hamid Karzai, is quietly shifting his loyalty to Tehran….
“Iran’s been training Taliban forces to kill our troops more efficiently.
“Karzai hasn’t complained. Nor has he objected to Tehran’s expansion of its support for its clients in western Afghanistan. He wants that support for himself.
“Far from being a gleaming apostle of democracy, Karzai’s just another hustler from the lands that perfected the con. Like Chalabi, he knew the magic words to say to Americans, then did whatever he wanted for himself, his fantastically corrupt family and his cronies.
“Publicly, the Obama administration continues to support Karzai, since the White House doesn’t have a Plan B. But no end of U.S. officers fresh from the combat zone are disgusted with the latest emir in Kabul and his government’s shenanigans. For their part, our generals mutter among themselves and cross their fingers.
“Karzai’s people despise him; his allies distrust him; his enemies mock him. And our troops keep him in power. Does that sound like a formula for success?”
Russia: During the times of the Cold War, an agreement between the United States and the then Soviet Union to reduce nuclear weapons would be a big deal. Today, I’ve placed Russia down here in this week’s order of importance for a reason. I have no problem with a nuclear arms reduction treaty that is fully verifiable, yet one that still leaves us with a formidable nuclear deterrent (1,550 warheads each, 800 deployed and non-deployed launchers and heavy bombers, and 700 deployed intercontinental and submarine-launched ballistic missiles). I also want a treaty that allows us to modernize the remaining warheads, and I haven’t had a chance to read up on this aspect.
Meanwhile, there have been growing demonstrations against national leaders in Russia, including Prime Minister Putin. Too much shouldn’t be made of them, yet, but come May Day the scene could be different. Russians, like everywhere else, are upset over the slowness of the economic recovery and there is only one institution to blame…government, whether it’s the mayor of Moscow or Putin. Putin certainly understands this, which is why he has been increasingly at odds with business leaders, who in turn haven’t been as timid in their responses to the criticism.
But to digress, there was a kind of funny story out of Spain this week. Spanish police announced the arrest of 80 reputed mobsters and many media outlets said it was a crackdown, across Europe, on the Russian mob.
One problem…it was the Georgian mafia. The gang was affiliated with a Georgian crime boss who has been imprisoned in Spain since 2006. 25 Georgians, for instance, were arrested in Austria, responsible for 30% of a recent spate of burglaries in Vienna.
So the Russian media was quick to take note. “The Russian mafia turned out to be Georgian,” read a headline in a mass-circulation daily. The West was admonished not to stereotype the Mob in the future. [Moscow Times]
China: May is going to be key for a number of reasons. Secretary of State Clinton and Treasury Secretary Geithner are slated to head up the U.S. delegation in talks in Beijing on the global economy with top Chinese officials. This presents the two sides with an opportunity to cool the rhetoric.
Editorial / Global Times [a Chinese government mouthpiece]
“President Obama has stated: ‘Our nation is made up of immigrants from every part of the world. We have protected our unity and struggled to perfect our union by extending basic rights to all our people. Those rights include the freedom to speak your mind; to worship your God; to choose your leaders. These are not things that we seek to impose – this is who we are. It guides our openness to one another and to the world.’
“It is self-evident to Chinese that Americans do seek to impose ‘who we are’ on China. It is not self-evident yet to American policymakers and the American people that it does not protect America’s economic or military security for Americans’ assumptions, policy proposals and military strategies to unintentionally or intentionally seek to harm China or ignore China’s sovereignty and right of self-determination.
“Due to the economic and national security crises the American political system has produced, American can no longer prudently think about China with traditional American assumptions, policies and strategies. China has not been, cannot be, and will not be a copy of America anytime soon, if ever….America cannot sustain policies and strategies seeking to contain or engage China that harm or seek to force China to copy America.”
On a different topic, China’s severe drought across its southwest has left 18 million people and 11 million livestock without adequate water.
And lastly, China’s food safety watchdog is issuing warnings on cooking oil, some 10% of which is illegally made and could contain cancer-causing agents (aflatoxin, highly carcinogenic). It seems that one-tenth of cooking oil used in China is made from recycled kitchen or restaurant waste oil. Yikes. You see, while edible oil prices were rising, some have been illegally selling the waste oil after putting it through a refinery process.
North Korea: Kim Jong-il is reportedly suffering from kidney failure, which requires dialysis, and also has partial paralysis following his 2008 stroke, according to a South Korean official. Which begs the age old question, while Kim has anointed one of his sons as eventual successor, just who are the generals that stand behind him. On Friday, a South Korean naval vessel sank after an explosion near the disputed sea border with the North and at first there were fears Pyongyang had torpedoed it. This proved not to be the case, though further details remain sketchy, but earlier North Korea had threatened South Korea and the United States with “unprecedented nuclear strikes” over a report the two countries were preparing for instability in the North. Gen. Walter Sharp, the top U.S. commander in South Korea, reiterated, “The possibility of a sudden leadership change in the North could be destabilizing and unpredictable.”
Britain: Following a three-day walkout by British Airways staff that crippled the airliner, millions of passengers will now have to deal with the first national rail strike in 16 years when workers walk out for four days immediately after Easter. Both work stoppages are over job losses and changes in work schedules. This all comes as Prime Minister Gordon Brown prepares to call the long anticipated election for late May.
Turkey: The government is proposing to amend the constitution to take away power from the military, an explosive issue.
Colombia: A car bomb killed nine in the port city of Buenaventura in the worst attack of the year. FARC is suspected.
France: President Nicolas Sarkozy has not only had to beat back rumors of adultery concerning wife Carla Bruni, as well as a defeat in regional elections, but now he’s forced to deal with his father’s tell-all memoir wherein the 81-year-old describes a sexual encounter with a nanny at the age of 11, as well as an addiction to adultery in general. The president was abandoned by the father at age five when he left Sarkozy’s mother. Biographers believe the president has an obsessive hatred for the man who refused to support the family in any real way.
Random Musings
–In a Bloomberg National Poll, President Obama received a 50% approval rating, down from 54% in this particular survey. He still has an 85% approval rating among Democrats, compared with 46% among key independent voters and 11% among Republicans. 58% approve of Obama’s handling of foreign affairs, but the same number believes the nation is headed in the wrong direction. [62% of independents feel this way. The poll was conducted March 19-22]
But then there was a CNN survey, conducted March 19-21,that for the first time had more disapproving of President Obama’s job performance, 51%, vs. 46% approving it. This poll was before Sunday’s vote on the healthcare bill, but beforehand, 58% disapproved of Obama’s policy, and 62% gave him a negative rating on his handling of the deficit.
–Bloomberg attempted to survey Tea Party backers for the first time and 96% say spending is out of control, vs. 69% of other respondents; 86% of the Tea Partiers say taxes are too high, compared with 57% for everyone else. Government is on a path to socialism, they believe.
But, as I’ve been expressing since this movement began, while 65% label Social Security as being either definitely or sort of socialism, half want to keep it under government control or aren’t sure about privatization. My problem with the group is that nowhere will you find them advocating cuts to entitlements. No one is willing to sacrifice, which is what cracks me up.
–Peggy Noonan / Wall Street Journal…on Democrats’ claims they are being threatened, post-healthcare reform.
Over the years, Republicans have been subject to the same threats. “Just about everyone in public life on whatever level gets threats now.”
“Under the news story on (House majority leader Steny Hoyer’s announcement that 10 congressional Democrats have recently been menaced and threatened with violence) on the Yahoo! news site on Thursday, there was a lengthy comment thread, with more than 800 people offering their thoughts. ‘An American Hitler might be in the making who would purge the leftists,’ said one, who of course didn’t use his or her name. ‘Republicans are criminals and terrorists,’ said another. ‘Republicans…are thugs, scoundrels and rascals.’ And: ‘What did they expect when they…went against the American people and are FORCING this bill on us.’ ‘It’s what happens before the revolution…people are frustrated over not being heard…let the battle begin.’
“Here, edited for a family newspaper, are some of the recorded telephone messages left on the answering machine of Rep. Bart Stupak. These are messages left by individuals who appear to be pro-life activists – that is, people who have put themselves on the line to support generous and compassionate treatment of the unborn.
“ ‘I hope you bleed out your___, get cancer and die.’ ‘You will rue the day…I hope you’re haunted the rest of your living day…We think you’re a devil…The country loathes you.’ ‘You are one big piece of human______. There are people across the country who wish you ill….Go to hell, you piece of_____.’
“These are people whose professed mission it is to save children. Whatever else these particular individuals are, they are people whose nerves have been rubbed raw.
“Responsible leaders on all levels of American life ought to stop, breathe in, and see the level of anger and agitation that’s rippling through the country. Both sides should try to cool it, or something bad is going to happen….
“People are angry at their economic vulnerability. They are angry at the deterioration of our culture, angry at our nation’s deteriorating position in the world, at our debts and deficits, our spending and taxing, our threatened security in a world of weapons of mass destruction. Their anger is stoked by cynical politicians and radio ranters and people who come at night, have a few drinks, and spew out their rage on the comment thread. It’s a world full of people always cocking the gun and ready to say, if things turn bad, ‘But I didn’t tell anyone to shoot!’”
–Kathleen Parker / Washington Post…on Democratic Cong. Bart Stupak’s cave
“Poor Bart Stupak. The man tried to be a hero for the unborn, and then, when all the power of the moment was in his frail human hands, he dropped the baby….
“Ultimately, he was weak and overwhelmed by raw political power. History is no stranger to such moments, but this one needs to be understood for what it was. A deception.
“The executive order promising that no federal funds will be used for abortion is utterly useless, and everybody knows it. First, the president can revoke it as quickly as he signs it.
“Second, an order cannot confer jurisdiction in the courts or establish any grounds for suing anybody in court, according to a former White House counsel. The order is therefore judicially unenforceable.
“Finally, an executive order cannot trump or change a federal statute.
“One can reasonably surmise that Obama, a former constitutional law professor, is well aware of the uselessness of his promise….
“Stupak’s clumsy fall from grace is a lesson in human frailty. In a matter of hours, he went from representing the majority of Americans who don’t want public money spent on abortion to leading the army on the other side.
“After the Sunday vote, a group of Democrats, including Stupak, gathered in a pub to celebrate. In a biblical moment, New York Rep. Anthony Weiner was spotted planting a big kiss on Stupak’s cheek.
“To a Catholic man well versed in the Gospel, this is not a comforting gesture.”
–Speaking of Catholics, the child abuse scandal grows by the day. Last Sunday, Pope Benedict XVI released a letter to sufferers at the hands of the Roman Catholic Church in Ireland, where a government report last year detailed thousands of instances of physical and sexual abuse from 1930 to 1990. I read the pastoral letter and herewith are some key passages.
“Like yourselves, I have been deeply disturbed by the information which has come to light regarding the abuse of children and vulnerable young people by members of the Church in Ireland, particularly by priests and religious. I can only share in the dismay and the sense of betrayal that so many of you have experienced on learning of these sinful and criminal acts and the way Church authorities in Ireland dealt with them….
“For my part, considering the gravity of these offences, and the often inadequate response to them on the part of the ecclesiastical authorities in your country, I have decided to write this…to express my closeness to you and to propose a path of healing, renewal and reparation….
“I must also express my conviction that, in order to recover from this grievous wound, the Church in Ireland must first acknowledge before the Lord and before others the serious sins committed against defenseless children. Such an acknowledgement, accompanied by sincere sorrow for the damage caused to these victims and their families, must lead to a concerted effort to ensure the protection of children from similar crimes in the future….
“You betrayed the trust that was placed in you by innocent young people and their parents, and you must answer for it before Almighty God and before properly constituted tribunals. You have forfeited the esteem of the people of Ireland and brought shame and dishonor upon your confreres….Openly acknowledge your guilt, submit yourselves to the demands of justice, but do not despair of God’s mercy….
“It cannot be denied that some of you and your predecessors failed, at times grievously, to apply the long-established norms of canon law to the crime of child abuse…Besides fully implementing the norms of canon law in addressing the cases of child abuse, continue to cooperate with the civil authorities in their area of competence….
“Only decisive action carried out with complete honesty and transparency will restore the respect and good will of the Irish people towards the Church to which we have consecrated our lives…”
But the Pope’s letter said nothing about requiring the controversial Irish Cardinal, Sean Brady, to step down or be disciplined, as some victims had hoped. Nor did Benedict clarify Vatican rules for investigating abuse cases and church leaders’ responsibility to inform civil authorities about offenses, which is the issue in both the high-profile German and Wisconsin cases that are at the top of the news.
“I feel let down,” said Hugh Keogh, 62, a Dublin insurance salesman (as told to the New York Times’ John F. Burns and Eamon Quinn). “It is one scandal on top of another.”
Another in Dublin said, “The pope is only taking action now because of the furor.”
As a report in the Washington Post put it, “(Benedict) did not lay out new prescriptions, suggest punishment or touch on the wider scandal that has led European government officials to denounce church secrecy surrounding abuse cases.
“But scholars said the letter also underscored Benedict’s willingness, compared with his predecessor, to address sexual abuse inside the church more forcefully.”
One figure whose legacy will suffer is Pope John Paul II, who never acknowledged that the institutional church had any role in this problem.
In defense of the Church, Vincent Nichols, the Archbishop of Westminster, wrote in the London Times:
“In the past 40 years, less than half of 1 percent of Catholic priests in England and Wales (0.4 percent) have faced allegations of child abuse. Fewer have been found guilty. Do not misunderstand me. One is too many. One broken child is a tragedy and a disgrace. One case alone is enough to justify anger and outrage. The work of safeguarding, within any organization and within our society as a whole, is demanding but absolutely necessary. The Catholic Church here is committed to safeguarding children and all vulnerable people.”
As a Catholic myself, the bottom line is that from the Vatican on down, there was an institutionalized cover-up. It’s not enough to say child abuse occurs everywhere (though this week in the New York area, a rabbi was arrested on such charges).
Incredibly, as I go to post, Cardinal Brady in Ireland has yet to step down. Pope Benedict himself may yet be forced to do so, and for the insiders at the Vatican there just isn’t a way to do this gracefully and save face.
“It has taken 20 years, but Congress is poised to reverse one of the great injustices foisted on the country in the name of the War on Drugs.
“At the height of the panic over crack cocaine in the 1980s, Congress passed draconian laws to penalize the drug’s use and sale. Possession of a mere 5 grams of crack – the weight of two pennies – guaranteed an offender five years behind bars; a conviction involving 50 grams would bring a mandatory 10-year sentence. These measures were supported by many in the Congressional Black Caucus who were deeply concerned about the devastation wrought by crack in the black community. But soon, the unfairness in the system became apparent: Almost 85% of crack arrests involved African American men, most of them young and tens of thousands of whom have been hit with inordinately long sentences. White and Hispanic offenders – those most often arrested for powder cocaine violations – escaped harsh sentences for small amounts…”
So now a bill, the Fair Sentencing Act of 2010, calls for wiping out the differences in sentencing between crack and powder, though it still must be recognized there are huge differences between the two forms of the drug and its impact, while at the same time, if approved, the measures would hand “back to judges a greater degree of discretion to tailor the punishment for those caught with very small amounts of the drug.” As it should be.
–I’ve said this before, but with each new revelation about Blackwater, the private security company, it’s amazing how the story dovetails with the plot line for last year’s 24. The Justice Department is evidently close to indicting former Blackwater president Gary Jackson and two others at the firm for illegally stockpiling AK-47s…17 of them. Federal law prohibits private parties from buying fully automatic weapons registered after 1986, but does let law enforcement agencies have them, so it seems Blackwater obtained the official letterhead of a local sheriff to create a false request for obtaining the guns. [Devlin Barrett and Mike Baker / AP]
Speaking of 24, I see where Jack Bauer is really and truly hanging it up come the end of the current season. They say it’s very stressful continually having to save the world.
–Two weeks ago, a voice came over the loudspeaker at a Walmart in Washington Township, N.J., announcing: “Attention, Walmart customers: All black people, leave the store now.” Six days later, a 16-year-old boy was arrested and what really ticks me off is this idiot is being protected because he’s a “juvenile.”
This stupid juvenile, must be 18, rule may have been appropriate in the days of “Our Gang,” but it hardly is today with the current generation. Expose them! At least Gloucester County officials deserve credit for acting quickly, but what are the odds of this kid becoming a solid citizen? Zero. Plus we’ve now learned he had done something similar before.
–Congratulations to John Heilemann and Mark Halperin, authors of the best seller Game Change, for receiving a reported $5 million-plus for a 2012 election year book. Thus far they’ve sold 356,000 hardcover copies for their chronicle of the ’08 campaign.
–Christiane Amanpour is receiving a reported $2 million a year to take over ABC’s “This Week,” which amidst staff layoffs at the network that total 400 isn’t going over real well, as you can imagine.
–There’s a little island in the Bay of Bengal, which Bangladesh referred to as South Talpatti and India, New Moore Island, that became a flashpoint between the two in the 1980s. That is, there was an island. It’s gone. Global warming.
–But wait…there’s more! If Iceland’s Katla volcano blows (the volcano you’re seeing on the news these days is but a little cousin of Katla, with scientists concerned it is a harbinger of a far bigger eruption), then it could send much of the world, including the U.S., into an extended deep freeze.
Says Gary Hufford, a scientist with the National Weather Service, “When Katla went off in the 1700s, the USA suffered a very cold winter. To the point, the Mississippi River froze just north of New Orleans and the East Coast, especially New England, had an extremely cold winter.”
The problem is that history shows when the smaller volcano (Eyjafjallajokull…you really don’t know if I spelled that correctly, do you?) erupts, Katla “always follows – the only question is how soon.”
Hmmm…must be a few stock plays in there. Natural gas? I’d say winter clothing retailers, but they’ve already had a big run. So let’s go with the first choice.
–If you exclude Alaska, the size of Australia isn’t that much different from the United States, yet the population of the former just hit 22 million, while the latter is almost 309 million. Just had to bring this up in case you wanted a little more leg room (or didn’t like the way things were going here at home). Then again, you have all those poisonous animals and insects to deal with in the Land Down Under, let alone you could have a leg ripped off by a shark.
–Lastly, back to the coming Ice Age, at least five people in Saint Petersburg, Russia, have been killed by falling icicles and ice blocks this winter. 147 have been injured. Said one resident to AFP, “Every day, I go out in the street as if I was entering a war zone.” That’s the future when Katla blows, sports fans.
Pray for the men and women of our armed forces, and all the fallen.
Gold closed at $1109
Oil, $80.12
Returns for the week 3/22-3/26
Dow Jones +1.0% [10850]
S&P 500 +0.6% [1166]
S&P MidCap +0.2%
Russell 2000 +0.7%
Nasdaq +0.9% [2395]
Returns for the period 1/1/10-3/26/10
Dow Jones +4.0%
S&P 500 +4.6%
S&P MidCap +8.3%
Russell 2000 +8.6%
Nasdaq +5.6%
Bulls 48.9
Bears 20.5 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
