Wall Street…crash and burn
But first, a reminder of some of the things I’ve written the past four months on how I, and others, saw the year playing out…for better or worse.
“I fall firmly in the camp that the deleveraging process for the consumer is far from over and that spending won’t return until the job picture improves, which I just don’t see happening in any big way. I also don’t see housing coming back significantly in terms of median home prices, owing to the still serious foreclosure issue, as well as a ton of option-ARM mortgages that will be resetting at much higher rates later in the year.
“It’s a year that’s…going to be dominated to a great extent by further issues on the state and local government front, as in revenues won’t nearly meet expenses, which will lead to even further layoffs. The big stories are California, New York and New Jersey….
“It’s about deficits and this is an issue worldwide. 2010 is about still stagnant, if not falling, wages. This year will also see an ever increasing anger with government and the health-care debate, and this will best be manifested in what is going to be an unruly mid-term election.
“2009 was about survival…2010 is going to be about shattered expectations and dreadful pictures on television that will depress the hell out of us….It’s going to be about terror attacks around the globe.”
“We are far from being out of the woods and the massive debts that governments in Europe, the United States and parts of Latin America have been accumulating are finally coming home to roost….I’ve been writing the past few months that the problem in the case of Greece, for example, is that the European Union doesn’t have a mechanism in place for bailing out a corrupt, profligate nation, yet that is exactly what the EU will have to do or they’re all going to hell and (economist Nouriel) Roubini’s forecast that the eurozone nations will abandon the euro in two or three years could be moved up some.
“PIMCO’s Mohamed El-Erian wrote in an op-ed for the Financial Times the following regarding Greece and the whole sovereign debt story.
“ ‘Most still think of Greece as an isolated case, just as they did Dubai a few months ago.
“ ‘With time, they will see Greece as part of a much larger investment theme that is a direct outcome of the global financial crisis: the 2008-09 ballooning of sovereign balance sheets in advanced economies is consequential and is becoming an important influence on valuations in many markets around the world.’”
“If you are optimistic these days, especially about the direction of the United States, the fate of the European Union currency experiment, or some kind of favorable resolution to the rapidly developing Iranian crisis, and all the offshoots from it, then you’re a better man than me. I see zero reason to be optimistic about much of anything these days. To wit:
“In Europe, specifically the 16 nations of the 27-nation European Union that use the euro currency, they are trying to come to grips with a debt crisis in Greece and a government in Athens that flat out lied until recently when confronted about its debt levels. ‘Debt? What debt problem?’ Greek officials would say when asked just where they stood.”
“(This time) it’s very different. And it’s not just confined to Washington, it’s about many of our individual states, let alone much of Europe. It’s about an era of profligacy that, in the case of the United States, flourished under both political parties, while in Europe, the gimme gimme gimme culture first really flourished as leaders ignored rather important long-term issues such as demographics and how exploding entitlements would be paid for.
“And while today’s problems cry out for leadership, what I see that is different is an unwillingness on the part of the people, whether here or overseas, to sacrifice. And it’s today, not 10 or 20 years from now, when the sacrifices have to be made. Any political leader bringing up the thought of reduced benefits, for example, would be voted out of office in a heartbeat (if not stoned). It’s why I have a real problem with the Tea Party folks. I’ve read their 17-point platform. Oh, sure, it talks about balancing the budget and reducing spending, but nothing on entitlements. It’s a bunch of feel-good malarkey.
“Since day one of writing this column, going back 11 years, and before that with PIMCO, I have 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. But you’ve undoubtedly noticed a shift in my tone the past few weeks and I’m here to formally say, now they matter in terms of market psyche. But what’s worrisome is I see no leadership on the issue….
“We The People don’t have the guts to deal with pain, but at the same time we do want to inflict pain on some deserving a ton of it, the bankers, specifically the likes of Goldman Sachs, or bank executives, such as in Ireland, who looted their institutions while encouraging irresponsible lending that did nothing but fill their pockets.”
Re Greece: “The people are furious and violence seems a certainty down the road.”
“I’m dead serious. If the global economy were to double-dip over the next two years, forget the whole euro concept of peace and harmony. You’ll have war. [And having just come from there, once again it could start in the Balkans, though this time Europe couldn’t rely on the U.S. to quell what would start out as a mere firefight. In fact it looks like I got out of Tirana, Albania in the nick of time. They had massive protests against the government on Friday….]
“Really…how can you possibly be optimistic? And I haven’t even begun to bring up the usual hot spots, terror threats, etc. Not one. No, this could be a terror of a different kind. Total anarchy in many parts of the world, all as a result of the economy, and the rise of truly ugly figures. We’ve seen it before. We never learn.”
Just about twelve hours after posting last week’s column, we learned just how close we came to fulfilling one of my predictions for the year, “2010 is going to be about shattered expectations and dreadful pictures on television that will depress the hell out of us….It’s going to be about terror attacks around the globe.” While the Times Square bomber failed to come up with a detonator that worked, one expert told the Daily News that the ingredients were indeed there to create a 30-foot fireball that would have sucked out the oxygen from anyone nearby. It could have killed “hundreds,” he said. New York City has now seen 11 legitimate plots since 9/11. Any one of these going off as planned would have drastically changed sentiment, which is why I spend so much time on the topic. It’s why my ‘hot spots’ matter.
And just as I wrote last Saturday of “terror of a different kind. Total anarchy in many parts of the world, as a result of the economy,” we had a small hint of anarchy in Greece, and in the stock market’s action on Thursday, financial terror of a kind never seen before, though not of the cyberterror variety that will one day hit us, but self-inflicted, at least 650 points of it.
As a guy who has maintained stocks would finish the year in negative territory (12% for the Dow and S&P, 6% for Nasdaq), I certainly wasn’t that surprised by this week’s action, save the 15 minutes from hell. It’s rightly been about Greece, and the growing realization that not only did the European Union act way too slowly in stemming the growing crisis, but that the joint IMF-EU package, $140 billion+ worth, may not be enough. The Greek parliament was forced to approve a severe austerity plan that will consign the nation to a severe recession as public sector pay was frozen until 2014, the tradition of public sector bonuses (equivalent to two months’ extra pay) was scrapped, state pensions cut or frozen, the retirement age hiked, VAT taxes increased, sin taxes up 10%, and one-off taxes on corporate profits levied. The people deserve it, but that doesn’t also mean it’s going to be good. The IMF believes the Greek economy will shrink 4% in 2010 and another 2.5% in 2011. Who the hell knows? With Greece’s tradition of a strong communist movement, anarchy down the road is indeed possible, and those bombs they like to explode, that normally don’t kill anyone (until this week), could turn increasingly deadly. This is the Balkans, after all. Anything can happen.
It was a week where Bundesbank President Axel Weber said, “There is a threat of grave contagion effects for other member states in the monetary union and increasing negative feedback loop effects on capital markets.” [Though Weber stopped short of calling for the European Central Bank to begin buying up government bonds, or quantitative easing, as a way of reassuring the market, a la the U.S. Federal Reserve. “Measures that damage the fundamental principles of the currency union and the trust of the people would be mistaken and more expensive for the economy in the longer term,” he said.] German Chancellor Angela Merkel, prior to parliament approving its part of the Greek bailout plan, said “We’re at a fork in the road. This is about nothing less than the future of Europe and with it the future of Germany in Europe.”
And the future of Portugal, and Spain, and maybe Italy, and Ireland….
In my musings over the years I feel like I’ve nailed quite a few of the Big Picture items. I also have that motto of “wait 24 hours” that has held me in good stead. I’m not a trader. I’m a long-term investor…and thinker.
In preparing the opening of this column I cited PIMCO’s Mohamed El-Erian and his thoughts from the week ending 1/30/10. For those of you who followed the markets closely this past week, what you should find striking is that he said the exact same thing the past few days. Of course he’s been spot on thus far, as he reemphasized in various interviews and op-ed pieces that 2010 was a “year of sovereign risk…now regional and on the verge of going global,” adding that as global demand falls, this is also deflationary.
So how does it all end? It’s going to play out slowly, at least for now. You may get a positive policy pronouncement or two from the ECB, for example, but you are going to see more Greek-like stress among the people. Should Greece be forced to restructure its debts, or, heaven forbid, default, some of the larger European banks in France and Germany, in particular, would be forced to take massive hits to their balance sheets, fueling a new round of bailouts at a time when Europe’s recovery is stagnating.
But let’s look at the U.S. economy. The economic data was great this week. March consumption was up 0.6% (regarding my opening comments I’ve been wrong on the consumer, though I maintain that won’t be the case the rest of the year), construction spending was better than expected, the April ISM figure on manufacturing was 60.4 (outstanding), and the April jobs report, released Friday, was solid…290,000 jobs created…and totally ignored amidst the Euro crisis. But while President Obama crowed about the improved picture, the way the numbers work out the unemployment rate rose from 9.7% to 9.9% as more people reentered the labor market.
Here I just have to get off track a little to bring up a thought you won’t yet find anywhere else.
Come the November mid-term elections, and the campaign beforehand, the unemployment rate is going to be a huge focus. You know that already. But what no one is talking about, even as they should be panicking in the corridors of the White House, is a simple fact. The last employment report we’ll have before the Nov. 2 vote is going to be October 1…data for September. The labor report is always released the first Friday of the month and that’s November 5th.
So you see where I’m headed. We just had April’s employment data. Thus there are only five more months to get the unemployment rate down substantially, say under what will become a big psychological barrier, 9%, and that doesn’t seem possible. Some, such as economist Mark Zandi, say we could be stuck back over 10% for some time to come.
It’s a little like the situation in the 1992 presidential election. The data later proved that the U.S. economy was in recovery, not recession, but it was too late for Bush 41. It’s going to be interesting for the Obama administration, and its attempts to limit the damage in terms of lost seats, whether or not an extra month or two, in hindsight, will have made a difference. Then again, if the crisis in Europe really takes hold, its impact on the U.S. economy will be such that the preceding will be irrelevant. The Democrats would get crushed.
And one thing that isn’t helping is that for all the crowing, as the Wall Street Journal pointed out, when it comes to the GDP data, this is one weak recovery.
1982 Q4…0.3%…1983 Q1…5.1%…Q2…9.3%…Q3…8.1%…Q4…8.5%
I also have to address the huge headwinds the United States faces when it comes to the finances of state and local government. You had a great example this week in New York, where Gov. David Paterson talked of 100,000 union employees being forced to take one unpaid day off a week (in lieu of layoffs), while New York City Mayor Michael Bloomberg, in releasing his budget, said that if police were off the table (and after the latest terror attempt they definitely are), then he’ll have to lay off 11,000 elsewhere, including 6,400 city teachers.
“New Providence council challenges school board to limit tax increase to 4%”
“Plunge in state revenue dashes hopes of an easy budget fix…
“Legislators were hoping revenue would continue to exceed projections, forestalling deeper cuts and further tax hikes. But April’s total was 30% below what was expected, leaving them with few options.”
Turning overseas, the fate of China’s economy becomes critically important to the rest of the world these days. While the likes of strategist Marc Faber and short-seller Jim Chanos continue to talk of a crash, others, including yours truly, believe China will weather its housing bubble (which is largely confined to the major metropolitan areas). The government continues to put new restrictions on both the banks, in raising reserve requirements a third time, as well as individual home buyers. China is also getting close to finally instituting a property tax, which would be a drag on prices but a far more predictable income stream for government.
So can the government engineer a soft landing from 11.9% GDP heights? The World Bank maintains China will grow 9.5% this year. A leading Chinese government economist says 9% is “no big problem.”
“China has a ‘relatively under-leveraged household sector,’ as the minimum deposit for buying first homes is at least 20%, while second-home purchases need 40% (Goldman economist Michael) Buchanan said. China’s household debt is only 22% of the nation’s GDP, while mortgage debt is 14%, he wrote. By contrast, Federal Reserve figures show $10.3 trillion of U.S. mortgage debt outstanding at the end of 2009, the equivalent of 70% of GDP.”
What we do know is that China’s stock market has already fallen 18% this year. It’s been a long time since there was a bubble in equities.
Street Bytes
–For the two or three readers left who have ignored my musings over 11 years that Wall Street is nothing more than a casino, you should have finally been converted on Thursday. As of this writing we still don’t know what happened in the 700 or so point downdraft in 15 minutes. Everyone on the Street has their theories, but regardless, this much is clear.
Wall Street needs mega-regulation. High-frequency trading, despite the pleadings of its adherents to the contrary, is destructive, not helpful. [I’m really tired of the “we supply liquidity when no one else will” b.s., as if they graduated from college and said, “I really want to do something honorable and beneficial to society. I’m getting into high-frequency trading.” “Oh, Bob. We’re so proud of you!”] As Options Monster’s Jon Najarian said on CNBC Thursday after the market closed, “It’s not a fair game.” Bang on, Jon. A leading commodities trader, Mark Fisher, told the network in a rare interview that he wanted to send a “warning to everyone.” Thursday’s action was “straight out of the Matrix.” Even Lloyd Blankfein, earlier in the week in an interview with Charlie Rose, said of Wall Street as a whole, “You could call it a casino, but if it is, it’s a very socially important casino.” Oh puh-leeze. The bottom line is that Thursday’s action crushed confidence further and the little guy has every reason to stay away.
As for the final figures this memorable week, the Dow Jones had its worst week since March of last year, down 5.7%, while the S&P 500 lost 6.4% and Nasdaq 7.9%; for the latter its worst performance since November 2008. All three indices are now down fractionally on the year.
So what you’ve seen the past two weeks, both negative, is a classic example of what I’ve been talking about for almost 600 columns now. You have to try and separate the fundamentals from market psychology, or sentiment. The economic and corporate data the past few weeks has been outstanding. The sentiment sucks.
Talk about a flight to safety, the U.S. Treasury market was a huge beneficiary of the European-generated chaos. And while many continue to talk about inflation, economist David Rosenberg lent his voice to the deflation camp in talking of excess capacity in manufacturing, labor and housing that will continue to push prices down. Personally, I still maintain inflation isn’t a problem, as measured by the official data, which if you’re going to play the forecasting game is the only way you can look at it.
In the Senate, Bernie Sanders dropped his proposal to audit the Federal Reserve’s monetary policy, opting for “a one-time audit of all loans and other financial assistance starting in December 2007.”
–One of the major causes for the market angst early in the week was the announcement by the Australian government that it was proposing a new “Resource Super Profits Tax” on the nation’s biggest commodities companies that have benefited from the boom in the sector, particularly surging demand from India and China for items such as iron and coal. The government of Prime Minister Kevin Rudd argues that the royalties paid by miners have not kept pace with profits. Some such as BHP said their effective tax rate would rise to 57% if the proposal went through, and as I go to post it’s not certain it will.
[Separately, Australia’s central bank raised interest rates for the sixth time since October, lifting the benchmark lending rate to 4.5%. The government feels this will be enough to slow growth and tame inflation.]
India’s purchasing managers’ index (PMI) came in at a strong 57.2 for April, the 13th consecutive month of expansion (50 being the dividing line between growth and contraction).
The UK’s PMI hit 58.0 in April as export growth was the fastest in 15 years owing to the weak pound.
Spain eked out a 0.1% gain in its GDP in the first three months of the year after seven straight quarterly declines, but now it has to deal with the contagion.
German factory orders rose 5% in March over February, far better than expected.
South Korea’s exports rose 31.5% in April over a year ago levels, 50.4% to China.
According to a report in the BBC, “One in five Irish homes is unoccupied.” A classic example of the building boom, and bust, is County Leitrim. Between 2006 and 2009, it’s estimated it needed to build 590 homes to meet demand. Instead it built 2,945….what are called Ireland’s “ghost estates.”
Romania, a la Greece et al, is cutting wages and pensions in the public sector to comply with an IMF-led rescue deal. Public sector wages will be slashed 25%! Jobless benefits and pensions will be reduced 15%. President Traian Basescu said, “The state sector is like a fat man of 200 kg sitting on the back of a 50 kg little man who is the real economy.”
So you’re depressed about the world picture and you’re thinking, ‘Maybe I’ll become a sheep rancher in New Zealand.’ Good choice. New Zealand’s unemployment rate dropped to just 6% in the first quarter, though it’s tough to get residency here.
–As part of the investigation into Goldman Sachs, the Senate investigative panel released documents showing how Wall Street packaged and repackaged the same garbage into securities that then found their way into portfolios and pension funds around the world. As noted in the Journal:
“In one case, a $38 million subprime-mortgage bond created in June 2006 ended up in more than 30 debt pools and ultimately caused roughly $280 million in losses to investors by the time the bond’s principal was wiped out in 2008.”
Meanwhile, Warren Buffett, holder of a $5 billion investment in Goldman, staunchly defended the firm and CEO Lloyd Blankfein at Berkshire’s annual shareholder meeting, saying Goldman hadn’t engaged in improper activity, though Goldman lawyers have met with the SEC in a sign it is prepared to settle the fraud charge filed against it, but only on its terms.
–But wait…there’s more! AIG, which was to retain Goldman to help it restructure its businesses, has replaced them with Citigroup and Bank of America. Is this just the tip of the iceberg in terms of clients leaving the tainted Goldman? Certainly European officials are rethinking their relationships after being screwed by Goldman in many cases.
–I look at the BP oil spill disaster and can’t help but wonder just what the long-term effects of all the chemical dispersant being used will be. Massive amounts are being sprayed on the surface, with success, but for the first time it has been dispersed directly onto the location of the leak, with no one really knowing if this will only contribute to the pollution threat, let alone the impact on fisheries and shellfish. Today, though, we should learn if the massive concrete dome designed to stem the major leak (out of three) can be put in place, but that’s just step one.
–While Wall Street’s collapse on Thursday should only aid the call for more regulation of our financial markets, earlier the Senate had approved a change to the overhaul legislation that would drop a $50 billion industry-supported fund to cover the cost of unwinding a failing firm, thus ensuring that shareholders and unsecured creditors will not bear losses when the government liquidates a business. Taxpayer funds also will not be used to rescue failing financial companies. Republicans appear content now that there are no loopholes that would allow future bailouts of Wall Street, though Republican support for the broader bill still isn’t a done deal as the debate will drag on through at least next week.
–The World Expo 2010 commenced in Shanghai and no way would I go, that’s for sure. While the early crowds have been less than expected, the lines are still way too long (like in some cases four hours!), there’s no shade, and if you’re using a tour company, they aren’t allowed to make reservations at many of the more popular pavilions. So let’s say you planned two days, staying in expensive hotels, with the hope of seeing the bigger exhibits and you only see half of the ones you wanted to. You’ve blown through your money and can’t extend your stay.
–China’s cabinet held a special meeting this week to address rising energy use and how to increase both energy efficiency and clean energy projects. Premier Wen Jiabao said, “We can never break our pledge, stagger our resolution or weaken our efforts, no matter how difficult it is.” Any failure on China’s part to reduce its efficiency targets will derail international efforts to limit greenhouse emissions.
“As we inch closer to a clearer understanding of the products and practices that unleashed the credit crisis of 2008, it’s becoming apparent that those seeking the whole truth are still outnumbered by those aiming to obscure it. This is the case not only on Wall Street but also in Washington.
“Truth seekers the nation over, therefore, are indebted to Senator Charles E. Grassley, Republican of Iowa, who in recent days uncovered what he called a government-enabled ‘TARP money shuffle.’ It relates to General Motors, which on April 21 paid the balance of its $6.7 billion loan under the Troubled Asset Relief Program.
“G.M. trumpeted its escape from the program as evidence that it had turned the corner in its operations. ‘G.M. is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse,’ boasted Edward E. Whitacre Jr., its chief executive.
“G.M. also crowed about its loan repayment in a national television ad and the United States Treasury marked the moment with a press release: ‘We are encouraged that G.M. has repaid its debt well ahead of schedule and confident that the company is on a strong path to viability,’ said Timothy F. Geithner, the Treasury Secretary.
“Taxpayers are naturally eager for news about bailout repayment. But what neither G.M. nor the Treasury disclosed was that the company simply used other funds held by the Treasury to pay off its original loan.
“Neil M. Barofsky, the inspector general overseeing the troubled asset program, revealed this detail when he spoke before the Senate Finance Committee on April 20.
“ ‘So it’s good news in that they’re reducing their debt,’ Mr. Barofsky said of G.M. But he went on to note that G.M. was using other taxpayer money to make the loan repayment, according to the transcript of his testimony.
“Armed with this information, Mr. Grassley fired off a letter to Mr. Geithner on April 22, asking for details of the transaction. ‘I am concerned…that this announcement is not what it seems,’ he wrote. ‘In fact, it appears to be nothing more than an elaborate TARP money shuffle.’”
Treasury’s excuses were pitiful. G.M. said it made no false misrepresentations. Grassley added:
“It emphasizes how misleading Treasury was and how misleading G.M. is as well. I hope Treasury learns its lesson, and that is: Tell it like it is, and if you tell it like it is you don’t get egg on your face.’”
–As for U.S. auto sales in April, with incentives coming off the table, sales began to slow from the pace earlier in the year. Ford’s rose 25% from 2009’s dismal numbers for the month, G.M.’s increased 6.4% (up 20% taking out brands the company is folding), Toyota’s up 24%, Chrysler’s 25%, Honda’s up 12.5%, Kia 17%, Hyundai’s 30%, and Subaru’s soared 48%.
–This is typical of Spain’s problems. The country became solar central, giving the industry massive subsidies as part of its efforts to green its economy, and in doing so attracted more investment in solar panels in 2008 than the rest of the world put together. So that same year, Prime Minister Zapatero cut solar rates, which hit the plants not built at the time, but now the government is weighing reductions on the thousands of installations already in place due to Spain’s excessive debt load. The problem was Spain never fixed limits to the number of plants that could claim subsidized prices and a gold rush ensued. But while it may be a prudent move, it is also sending a signal to investors that doing business with Spain’s government is too risky.
–United Airlines (UAL) and Continental finalized their merger agreement, thus creating the largest air carrier by passenger traffic. United’s name survives (though with Continental’s logo and colors), while Continental CEO Jeff Smisek becomes the CEO. The new United wrests the top spot from Delta Air Lines and will have the most Atlantic and Pacific routes, some 370 destinations in 59 countries. Of course when you take away competition, prices go up, plus jobs will be lost. But since they both are members of the same frequent flyer program, the Star Alliance, at least I keep my miles…and at the end of the day it’s about me.
–In its first full quarter of operations, Las Vegas’ $8.5 billion City Center hotel and casino development lost $255 million, including a $171 million write-down in the value of the project’s condos; sales of which have been a whopping 100 of 2,400 units. City Center is jointly owned by MGM Mirage and Dubai World. I imagine good deals can be had at the 4,000-room luxury hotel, Aria, which had an occupancy rate of just 63% over the period. [Wall Street Journal]
[Nationwide, the American Gaming Association reported that revenue from casino gambling fell 5.5% last year. Spending on lottery tickets, though, dropped just a smidge. Casino employment, by the way, fell from 357,000 in 2008 to 328,000.]
–Former Bear Stearns CEO Jimmy Cayne testified before the Financial Crisis Inquiry Commission and claimed his firm was torn apart by hedge fund wolves that, acting in concert with some banks, spread rumors on the health of Bear in the first quarter of 2008. Under extreme duress, Bear was forced into the arms of JPMorgan Chase, the first big casualty of the financial crisis. Bear, said Cayne, was a “big, fat goose walking down the lane, about to get eaten alive.” Earlier, former Lehman executive Dick Fuld, as well as former Citigroup CEO Chuck Prince, also blamed hedge funds with short positions for rumor-mongering. But in the case of all three execs, one was a pot-smoking wasto, one an arrogant a-hole, and the other utterly incompetent.
–Apple sold 1 million units of the iPad in the four weeks since it went on sale in the U.S., which was better than expected. But there were complaints about the video performance over AT&T’s network.
–Rupert Murdoch’s News Corp. posted a quarterly profit of $839 million, far better than the Street estimated, as its film division posted its highest profit ever owing to Avatar, which raked in more than $2.7 billion worldwide ($747 million domestically). A record 10 million copies of the Avatar DVD were sold in just 10 days, so it’s the picture that will keep on giving.
–Domino’s same-store sales soared 14.3% in the first quarter as its now four-month experiment with a new pizza recipe paid off handsomely; this at a time when the pizza delivery business overall is down 3%. Can’t say I’ve tried the new Domino’s, the old recipe being such a traumatic experience…like I have flashbacks.
–Iceland’s Ekrapula volcano is once again menacing Europe as the winds have changed. The ash cloud came back with a vengeance at week’s end, hugging Ireland’s western coast and shutting down a number of airports there with little hope the volcano will stop belching in the near future. Back in 1821, the last time Ekrapula erupted, it kept going for two years. Europe’s air carriers cannot afford another period like that of three weeks ago, especially during the summer tourist season.
–The Washington Post Co. put Newsweek on the block, this after Businessweek was sold to Bloomberg L.P. It’s just another sign of the times, with Newsweek projected to lose more this year than the $28 million it lost in 2009 as revenues continue to plummet. In early 2000, Newsweek’s circulation was 3.14 million. By the second half of 2009, it had dropped to 1.97 million. Time’s circulation went from 4.07 million to 3.33 million in the same period. But The Economist’s subscriber base in the U.S. is growing.
–My heart goes out to the people of Nashville and the surrounding area after the historic flooding. The pictures from the Gaylord Opryland Resort were unbelievable and it’s estimated that key convention facility alone had $75 million in damages and will be shut for 3 to 6 months. And Opryland itself, plus the Country Music Hall of Fame, were flooded, though I saw where the latter should reopen shortly. Overall damage to Nashville is in the $1 billion range.
–Lastly, Warren Buffett’s partner, Charlie Munger, said in an interview “envy is worse than greed,” a theme he has repeated over the years, and then he added it’s “about keeping up with the bastard down the street.”
Munger was referring to Wall Street and if you heard him say this, I hope like me you went “bingo.” It’s why I half-kiddingly talk about Wall Street’s spouses as I do.
Foreign Affairs
Britain: As a commentator on the BBC put it, it was an election of losers. David Cameron’s Conservative Party captured 306 seats in parliament (out of 650), a gain of 97 over the previous election, but given his huge advantages in the current political and economic climate, he should have picked up the 326 seats necessary to form a government outright. So Cameron was a loser.
Labour Prime Minister Gordon Brown was an obvious loser, losing 91 seats to 258, and the Liberal Democrats’ Nick Clegg, who was the third party darling going into the balloting, gained only 57 seats, a loss of 5, which as I noted a few weeks ago will have an impact on any third party candidacy in the U.S. It’s just further proof that, as much as I personally would like to see it, it’s not viable in the kind of two-party system both countries have.
In the popular vote, it was the Conservatives 36%, Labour 29%, and the Lib Democrats just 23%, with all sorts of weirdoes and alternative parties picking up the remainder.
I watched the Election Night coverage on the BBC and, geezuz, there were some truly strange looking people running for office over there.
But what now? By the time some of you read this, Britain may have come up with a solution for its first hung parliament since 1974 as Cameron is meeting with Nick Clegg today, after Clegg caucuses with the 56 other Liberal Democrats who won seats. Knowing what I do of the policy differences between the two, I don’t see how they come to an agreement, without Cameron caving on too many issues. Brown, though, is finished.
Regardless of how it all shakes out, however, experts in Britain seem to be in agreement when it comes to the relationship between the U.S. and the UK. It will be different…not nearly as chummy as the good old days. And then you have the rather important issue of money, as in Britain has none, so it’s a mystery why you’d want to be prime minister in the first place.
Iran: In attempting to set an example in terms of transparency, President Obama had the Pentagon release the actual number of active and inactive nuclear warheads in the arsenal, 5,113 versus 22,217 in late 1989. The goal is to get others to follow suit.
The release of the information was part of a nuclear nonproliferation conference at the United Nations where Secretary of State Hillary Clinton and Iranian President Mahmoud Ahmadinejad had a war of words.
Ahmadinejad fiercely attacked the United States and other nuclear states in his presentation, accusing them of manipulating the international arms control system, including the IAEA.
“Those who committed the first atomic bombardment are considered to be among the most hated individuals in human history. Regrettably, the government of the United States has not only used nuclear weapons, but it also continues to threaten to use such weapons against other countries, including Iran.”
Sec. of State Clinton, in following Ahmadinejad, said:
“Iran’s president offered the same tired, false and sometimes wild accusations against the United States and other parties…But that’s not surprising…Iran will do whatever it can to divert attention away from its own record and to attempt to evade accountability.”
But it was U.N. Secretary General Ban Ki-moon who really slapped down Iran’s president.
“I call on Iran to comply fully with Security Council resolutions and cooperate fully with the International Atomic Energy Agency. Let us be clear: The onus is on Iran to clarify the doubts and concerns about its program.”
“Iran’s Mahmoud Ahmadinejad won yesterday’s much-anticipated ‘duel’ with Secretary of State Hillary Clinton simply by showing up – and then she proceeded to hand him bonus points.
“It was a perfect symbol for the folly of President Obama’s choice of the United Nations as the center of the effort to stop Iran’s nuclear-weapons drive….
“The odious Iranian not only got to speak first; protocol obliged other speakers to address him as ‘His Excellency President Ahmadinejad.’….
“Turtle Bay is the perfect leveler: Bad guys and good get equal time, and their moral arguments get equal hearings. But it goes far beyond formalities.
“A majority of UN members envy Western power and/or resent Israel. Nothing is easier than to turn their attention from Iran’s violations of the Non-Proliferation Treaty to perceived evils by such countries….
“(The) easiest route to ‘unity’ at the UN is Israel-bashing. And the administration is playing along: Many of the assembled 188 NPT signatories were hoping that Clinton would give them more meat on Obama’s promise of a ‘nuclear free zone’ in the Middle East – and she duly told the crowd that the administration is contemplating ‘practical steps’ toward establishing that zone….
“This is absurd. Dating to the NPT’s first days in the 1970s, every U.S. president has declined to lean on Israel to join the treaty and open its facilities to inspection. Jerusalem has said it won’t be the first to ‘introduce’ nuclear weapons in the region – but as long as its neighbors threaten its annihilation, it won’t sign a treaty that it can’t afford to comply with….
“Ahmadinejad, who often talks of wiping Israel off the map, also called for the punishment of any country (America? Israel?) that threatens an ‘attack against peaceful nuclear facilities,’ as in Iran.
“And he railed against a ‘double standard’ between the treatment of Iran and ‘the Zionist regime, which has stockpiled hundreds of nuclear warheads.’
“Clinton dismissed all that – but then effectively endorsed it with the ‘nuclear free zone’ nonsense.
“Even now, the administration is publicly mulling a campaign to force Jerusalem to give up its ‘nuclear ambiguity’ stance. At the least, such talk further emboldens Ahmadinejad, feeding his effort to show the world that Iran is the ascending power while the West is ebbing.
“More important, none of these UN efforts will stop Tehran’s quest for a nuclear bomb.”
“Mahmoud Ahmadinejad should get out more. We mean that without irony. The Iranian President spoke yesterday in New York at the start of the UN conference reviewing the Nuclear Nonproliferation Treaty, and nothing could have done more to expose the folly of relying on arms control to maintain global security.
“The Iranian couldn’t have been clearer that his country intends to ignore any and all UN pressure to stop building its bomb. He averred that the world has ‘not a single credible proof’ that Iran intends to build a bomb, notwithstanding the world’s discovery of its secret uranium-enrichment facility at Natanz in 2002 and its secret underground facility near Qom last year….
“Delegates from the U.S., U.K. and France walked out during the speech, to their credit. White House spokesman Robert Gibbs chimed in that the remarks were ‘wild accusations, and Secretary of State Hillary Clinton took to the podium later…declaring it is ‘time for a strong international response.’
“This is all true enough, but it ignores Mr. Ahmadinejad’s real message, which is that Iran won’t be deterred by a stricter world antiproliferation treaty, or by one more U.N. Security Council resolution, or by the moral example, as President Obama likes to put it, of a new U.S.-Russian arms treaty. Iran wants the bomb in order to become a more potent Mideast power that can do as it pleases without having to worry about opposition from the world’s largest nations….
“The truly humiliating spectacle is the sight of the world’s leading powers devoting a month to updating a treaty designed to stop nonproliferation even as Mr. Ahmadinejad makes a mockery of that effort before their very eyes….
“If Mr. Obama and other world leaders were serious about Iran, they wouldn’t merely walk out on Iran’s president. They would rally the world to stop him, explaining the grave stakes to the public, and making clear to Iran that there is a deadline to diplomacy and that military force will be used if diplomacy fails. The only serious person at the U.N. on Monday was Mahmoud Ahmadinejad.”
But there is every indication that the United States is preparing for the day Iran does get the bomb, and thus how to contain it. Of course this would lead to Saudi Arabia, Egypt and Turkey aggressively pursuing their own nuclear weapons programs and the race would be on. Disconcertingly, Saudi Arabia, with its close relations to Pakistan, would have a leg up in the process. Separately, the Washington Post reported that U.S. and European intelligence officials are convinced Iran is on the verge of stepping up big time with new centrifuge technology that would allow it to greatly reduce the time required to enrich uranium to weapons-grade levels. I maintain Israel cannot let this happen, but that they should have struck Natanz last year.
Meanwhile, Iran’s proxy in Lebanon, Hizbullah, continues to receive long-range rockets from Syria, according to the Israeli head of Military Intelligence, and recent transfers are just “the tip of the iceberg.”
There are still serious questions, however, whether Scud missiles have been transferred. Israel maintains they have been. The West now believes differently. But just as importantly, there seems little doubt, as Israeli intelligence maintains, that Hizbullah has placed thousands of trained combatants south of the Litani River in violation of UN Security Council Resolution 1701, which was drafted after the 2006 summer war. I have to add, though, that Israel itself is continually violating 1701 in its flyovers. But bottom line, while Hizbullah says it has no interest in starting another war, one mistake, on either side, and this whole region could blow.
And just a word on Lebanese politics. Hizbullah and its allies are boycotting municipal elections in Beirut, saying it would only increase sectarian tensions in the capital. This whole situation is nonsense. Prime Minister Hariri continues to talk of parity between Christians and Muslims, but religion has to be taken out of the equation entirely. Of course it won’t….which is another reason why Lebanon is so dangerous.
Iraq: Prime Minister Nouri al-Maliki claims to have formed an alliance with the other leading Shia bloc, the State of Law coalition now headed by former Prime Minister Jafari that includes radical cleric Moqtada Sadr, though Sadr has long said he didn’t want Maliki leading a new government, while Maliki likes the perks of office.
The new coalition would constitute 159 of 325 seats in parliament, and they can easily find the other four necessary to govern. Former Prime Minister Iyad Allawi, who initially had captured the most seats, 91, is left out in the cold.
My friend Michael Young comments on the whole situation in the Daily Star…in part…
“Washington seems listless these days when it comes to the Middle East. The Obama administration is in power but doesn’t have very clear ideas about how to deal with the region’s multiplying difficulties. Those who served under George W. Bush have clearer ideas, but that’s luxury that comes from being out of power.
“The American capital maneuvers within the confines of what is politically achievable. Whether you’re for or against Barack Obama, you engage him through the agenda set by his administration. That’s why one idea remains a blip on Washington’s radar screen, precisely because it would represent a radical overhaul of American thinking in the Middle East. The idea is simple: The United States must build a strategic partnership with Iraq, the Arab world’s Germany.
“Why Germany? Because Iraq sits at the heart of the region, its borders touching three major states that, in one way or another, have caused the U.S. grief in recent years: Iran, Syria and Saudi Arabia (albeit for different reasons in Riyadh’s case). If you want to contain Iran and retain leverage over Syria, you need to control the Iraqi space. The Gulf states are too weak to stand up to Tehran, too vulnerable to its manipulation. It is pointless for the U.S. to place the burden of an alliance to constrain Iran on their shoulders. Iraq is what American influence in the Gulf is about, but few in Washington will agree. [Ed. I just have to note that Mr. Young just returned from Washington.]
“The Iranians certainly grasped that logic. They have spent years building up networks of relations in Iraq, under the very eyes of the Americans. But there are limits. Ultimately, Iraq’s Arab anchor will regain the upper hand, and the recent elections showed this. The Sunnis voted en masse, indicating that they sought to reintegrate into the Iraqi state, while Iran’s closest allies did relatively poorly. Tehran has reversed the situation thanks to Prime Minister Nouri al-Maliki’s desire to stay in office at all costs, pushing him to fall back on Shiite sectarian solidarity. But all that really tells us is that the U.S. missed an opportunity to press ahead with its own agenda in Iraq.
“When Obama looks at Iraq, he sees George W. Bush’s war, then calculates domestically. That narrow, parochial assessment is astonishingly petty. Had the president stuck to Bush’s 2011 deadline for an Iraqi pullout, he would not have lost much support at home, where Iraq is not an issue anymore. And by avoiding an interim departure this year, Obama would have earned the U.S. more flexibility to shape Iraq’s post-election environment in its favor.
“Instead, U.S. officials took great pride in saying that they had not interfered in the election process. What, precisely, was the thinking here? That America would be rewarded by some cosmic moral supreme court? That Iran and Syria would gasp at American uprightness and refrain from exploiting Iraq for their own purposes? Does the administration imagine that international politics unfolds like a Frank Capra film, so that like Mr. Smith in Washington the world would dissolve into tears of affection for Mr. Obama in Iraq?
“Once the Iraqi elections ended, it was plain what the U.S. should have done, or tried to do. A coalition government between Maliki and the front-runner Iyad Allawi was the right way to go. It would have helped return the Sunnis to Iraqi political life, while profiting from the Shiite split, to Iran’s disadvantage. The priority should have been to keep Maliki away from the Iranians, whom the prime minister was never very close to anyway. A shotgun wedding between Maliki and Allawi might have failed, their conflicting ambitions making this difficult. Yet both could have eventually seen an interest in following through, since they would have thus marginalized their communal rivals. Here was a moment when Barack Obama’s personal involvement was essential. But what did the U.S. do? Nothing….
“There are those in Washington who argue, laudably, that the U.S. doesn’t do empire – in the Middle East or elsewhere. Iraq was conquered and now the Iraqis must be set free. No one is suggesting the contrary. An American strategic partnership with Iraq would not represent hegemony by Washington. The aim would be to tie America’s regional interests to a country that is likely to become the Arab world’s future – with its pluralism, its vast oil potential that could serve Iraqi development well, and its desire to function as a normal state, not serve as a playing field for its neighbors.
“After having lost over 4,000 soldiers in Iraq; after having presided over an infernal period in the country’s history leading to the death of countless more Iraqis, mainly at the hands of groups hostile to Iraq’s stabilization; after all this, Washington should be more imaginative about defending its stakes in the region, and Iraq’s role in that endeavor. Yet all we see is a race to the exits. This makes you wonder whether the U.S. really seeks to retain its power in the Middle East.”
[And don’t forget to pick up Michael Young’s “The Ghosts of Martyrs Square: An Eyewitness Account of Lebanon’s Life Struggle.”]
Afghanistan: President Hamid Karzai is in Washington this coming week. U.S. commander on the ground, Gen. Stanley McChrystal, will be his chaperone. McChrystal says Karzai has “been a very reliable partner.” Few others believe this.
But when Karzai then returns to Afghanistan following his D.C. visit, he’ll host a so-called “Peace Jirga,” better known as a Circle Jerk, where all the warlords and drug kingpins gather round and swap smuggling stories.
North/South Korea: Lil’ Kim departed Beijing on Friday after a not so stealth five-day visit, including talks with President Hu Jintao. Kim said he was willing to resume nuclear disarmament talks, suspended since December 2008, but gave no timetable. No doubt he wants the other parties, aside from China, to first give him more aid. Instead, we should give him the finger.
On the sinking of the South Korean naval vessel in March, investigators have formally concluded the cause was a torpedo. Officials in Seoul have yet to officially accuse the North but have left little doubt as to where the responsibility lies. South Korean President Lee has said, however, that his nation would not return to any talks until it had finished dealing with the sinking of the Cheonan. There was also a report this week that North Korea had positioned 50,000 special forces along the border, which, if true, is highly disturbing. I’ve been there, and as heavily fortified as the border is, there are still legitimate concerns that the North has tunnels not discovered by the South. An unidentified senior government official told Yonhap news agency, “The threat that North Korea may infiltrate special forces for limited warfare has become real.”
Russia: In reading Defense News, I just have to note that an internal Russian audit found that just 10% of the Russian arsenal could be considered modern. Prime Minister Putin has mandated that number be brought up to 70% to 80% by 2020. The Russian Defense Minister, Anatoly Serdyukov, said it “will not buy Russian automobiles and armored vehicles the way they are.” So they’re buying a lot of German hardware, for one, which to an outsider should be worrisome. If you had a corrupt German chancellor, for instance, a la former Chancellor Gerhard Schroder (now working for the Russians), you have some real potential conflicts of interest.
Thailand: Embattled Prime Minister Abhisit said he would dissolve parliament in September, thus paving the way for new elections in November as a way to end the political standoff that has crippled the country. But the Red Shirts have balked at the offer and on Friday there was renewed violence.
Japan: Prime Minister Hatoyama’s approval rating is barely 20% as he faces growing public anger for breaking his promise to relocate the U.S. airbase on Okinawa. Hatoyama has had to concede that it is unfeasible to move all of the functions off the island entirely, citing the significance of maintaining the 50-year-old Japan-U.S. security alliance and U.S. deterrence in Asia.
Nigeria: Following the death of President Yar-Adua after a long illness, Acting President Goodluck Jonathan is in control until new elections are held in April 2011, the campaign for which promises to be bloody and destabilizing. But Jonathan, who is from the south, may not run because of a stupid, unwritten agreement in the ruling party that power rotates between north and south. Actually, I’m waiting for one of those Nigerian e-mails asking me if I’d like to be president. Heck, all I’d have to do is give them my social security number and credit card, the latter to pay for the cost of shipping and handling of the certificate designating me as such. Plus I’d get a stipend of U.S. $55 million.
Albania: As of Thursday, 21 opposition parliament members were on hunger strike, protesting last June’s general election that the Socialists claim was rigged.
Random Musings
–In a USA TODAY/Gallup Poll, 77% are concerned that stricter immigration laws would mean illegal immigrants and their families who have lived productively in the USA for years would be forced to leave. Yet 8 in 10 are concerned that illegal immigrants burden schools, hospitals and other government services, and 77% worry that they drive down wages. Yes, it’s a difficult problem.
68% say it is extremely important or very important to halt the flow of illegal immigrants into the country, and 67% say it is extremely or very important to develop a plan to deal with about 12 million illegals in this country. Yet 74% are somewhat or very concerned that tougher immigration laws would lead to harassment of Hispanics.
–Like presidents before him, President Obama dropped any effort on immigration reform. Liberal supporter Dana Milbank of the Washington Post commented:
“Obama’s retreat – after encouraging senators only weeks ago to take up immigration reform – clotheslined Senate Democrats. Since their proposal had already been leaked, they had no choice but to go ahead with the rollout of the plan Obama had just doomed….
“As the Arizona abomination makes clear, there is a desperate need for federal immigration action to stop the country from turning into a nation of vigilantes suspicious of anybody with dark skin. But leaders on both sides have instead run for the hills….
“Obama, meanwhile, afraid of breaking his campaign promise to take up immigration legislation during his first year, tried to juggle immigration reform and climate change legislation – and now he may wind up with neither….
“The whole episode is a reminder of what works and what doesn’t about Obama’s management style. When he engages forcefully, as he did in the final months of the health-care debate, the results are good. But when he hesitates and leaves matters to Congress, the results are poor.”
“Late-night comedians, recalling World War II movies in which Gestapo officers demand ‘show me your papers,’ find echoes of fascism in Arizona’s belief that there are occasions when police officers can reasonably ask for someone’s documentation. On Tuesday, Barack Obama, showing contempt for the professionalism and character of police officers, said: ‘Now suddenly if you don’t have your papers and you took your kid out to get ice cream, you’re going to be harassed.’
“Time was, presidents were held to higher standards than comedians. Today’s liberals favor indignation over information, but lawyer Obama must know that since 1952 federal law has said: ‘Every alien, eighteen years of age and over, shall at all times carry with him and have in his personal possession any certificate of alien registration or alien registration receipt card issued to him.’….
“Once Americans are satisfied that the borders are secure, the immigration policies they will favor will reflect their – and the law enforcement profession’s – healthy aversion to the measures that would be necessary to remove from the nation the nearly 11 million illegal immigrants, 60 percent of whom have been here for more than five years. It would take 200,000 buses in a bumper-to-bumper convoy 1,700 miles long to carry them back to the border. Americans are not going to seek and would not tolerate the police methods that would be needed to round up and deport the equivalent of the population of Ohio.
“Meanwhile, hysteria about domestic fascism is unhelpful, even though it is a liberal tradition. In his 1944 State of the Union address, FDR identified opponents of his domestic agenda as fascists. Declaring that his ‘one supreme objective’ was ‘security,’ including ‘economic security, social security, moral security,’ he issued a dire warning: Woodrow Wilson’s progressive policies had been frustrated by ‘rightist reaction,’ and ‘if history were to repeat itself and we were to return to the so-called ‘normalcy’ of the 1920s – then it is certain that even though we shall have conquered our enemies on the battlefields abroad, we shall have yielded to the spirit of Fascism here at home.’
“Today’s hysterics are unoriginal. But they learned their bad manners from a master.”
“The American president has the power to control America’s borders if he wants to, but George W. Bush and Barack Obama did not and do not want to, and for the same reason, and we all know what it is. The fastest-growing demographic in America is the Hispanic vote, and if either party cracks down on illegal immigration, it risks losing their vote for generations.
“But while the Democrats worry about the prospects of the Democrats and the Republicans about the well-being of the Republicans, who worries about America?
“No one. Which the American people have noticed, and which adds to the dangerous alienation – actually it’s at the heart of the alienation – of the age….
“(Yet) our national establishments deliberately allow the crisis to grow and fester, ignoring public unrest and amusing themselves by damning anyone’s attempt to deal with the problem they fear to address.
“Why does the federal government do this? Because so many within it are stupid and unimaginative and don’t trust the American people. Which of course the American people have noticed….
“The American people fear they are losing their place and authority in the daily, unwinding drama of American history. They feel increasingly alienated from their government. And alienation, again, is often followed by deep animosity, and animosity by the breaking up of things. If our leaders were farsighted not only for themselves but for the country, they would fix the border.”
“Dealing with (terrorist Faisal) Shahzad should be easy. An American citizen, he joined forces with a foreign enemy in an effort to kill Americans, and he’s admitted as much.
“That’s treason, pure and simple – and he needs to be propped up in front of a firing squad and sent to his reward.
“That almost certainly wouldn’t stop the next homicidal crackpot, but it would serve notice that the United States of America is growing weary of being a bull’s-eye for Islamist nihilists.
“The repeated plots on U.S. soil – against the subways, the Brooklyn Bridge, Fort Hood, the airplane over Detroit on Christmas Day, the Riverdale synagogue – are not ‘one-offs,’ as Homeland Security Secretary Janet Napolitano initially speculated about Times Square….
“There are no prescriptions here, no easy answers. It’s that sort of war. But it is a war. Next time, maybe the bomb explodes. Maybe not. All that’s certain is that there will be a next time. Let’s quit pretending otherwise.”
–As reported by Reuters, “After the failed bombing of a passenger jet on Christmas Day, U.S. intelligence officials told the White House what kept them awake at night was the risk that militants could launch waves of small-scale attacks on hard-to-protect targets on U.S. soil.
“The ‘nightmare’ of nuclear terrorism was the theme of President Barack Obama’s security summit last month, but many in the U.S. intelligence community believe the chances that al Qaeda will obtain atomic weapons are at the low end of the probability scale and they have more immediate fears….
“ ‘They do have the strategic goal of doing something catastrophic to this country,’ an official said on condition of anonymity. ‘But we think it’s more likely that we’ll see a series of smaller-scale attacks – the subway, the shopping mall – vulnerable targets that you can’t harden.’”
[I now live a two-minute drive from one of the prime soft targets, the high-profile Short Hills Shopping Mall. So many of us in this area are continually surprised nothing has happened there over the years.]
–New Jersey Gov. Chris Christie may be receiving a lot of attention nationally as he attempts to slash spending while fighting the unions, but the bottom line will be that if property taxes keep rising, he’s a one-termer. As columnist Paul Mulshine wrote in a Journal op-ed (Mr. Mulshine also being a super contributor to New Jersey’s Star-Ledger), the same people who put Christie in office are now bearing the brunt of the cuts to school aid, with the only solution for now being rising taxes. It’s a big experiment. It better work.
–A report on “The Miracle on the Hudson” and the heroic actions of pilot Captain Chesley “Sully” Sullenberger, withheld for a year until now, concludes he may have been able to return to LaGuardia Airport. As reported in the Wall Street Journal, “Pilots who used simulators to recreate the accident – including suddenly losing both engines after sucking in birds at 2,500 feet – repeatedly managed to safely land their virtual airliners at LaGuardia.”
No one is doubting that Sully and first officer Jeffrey Skiles made the right call in turning their plane into a glider as they had no assurance that the Airbus A320 would be able to clear Manhattan’s skyline had they opted to return, and they had to make a split-second decision based on their best instincts as to the problem at hand, while the simulations contain information that is conclusive. But, the report was completed a year ago and was held off because Airbus officials were afraid to second-guess the heroic actions of the pilots. One result of the findings, however, is the possible redesign of jet engines to better withstand bird strikes and to give pilots better guidance with dual-engine failures.
–To my friends in Ireland, I note the passing of your legendary radio broadcaster Gerry Ryan. I started going over there in 1989, back in the day when RTE was the only station you could pick up around the country and as my friends and I went from one golf course to the next, we caught Ryan’s show. He was a piece of work, and highly entertaining. For the rest of you, understand the nation is in true mourning over his death at 53.
–Pablo Picasso’s 1932 portrait of his mistress, “Nude, Green Leaves and Bust,” sold for a record $106.5 million, the most ever paid for a work of art at auction. Personally, she looks like a real head case.
–How many weather events and natural disasters do we need before it’s unanimous…something is off on Planet Earth. Nashville’s rain, 13.5 inches, was more than double the previous two-day record.
But there was an interesting side story to the flood there. As reported by Tom Weir of USA TODAY:
“Without a herculean effort by 400 Davidson County inmates on Monday, Nashville’s lone working water treatment plant most likely would have been overrun with muddy overflow from the Cumberland River.
“ ‘It was an incredible effort,’ Nashville Mayor Karl Dean said of the rush to bag 500 tons of sand on the grounds of a county jail and transport it to form a wall around the Omohundro Water Treatment Plant.
“ ‘We had staff and inmates that literally worked 36 straight hours,’ Davidson County Sheriff Daron Hall said. ‘We had inmates who volunteered and didn’t want to stop when we said they could go back….The attitude of all these guys was fantastic.’”
The Cumberland crested around 10 p.m. Monday night at nearly 52 feet, about 12 feet above flood stage.
–Aside from the obvious, what’s disturbing about the Univ. of Virginia lacrosse murder is the story of how the victim had been previously abused. In my years in school, at Wake Forest, I never heard one story like this. I’m just shocked how prevalent it appears to be in colleges these days.
–I watched Episode 8 of HBO’s “The Pacific” and it wrapped up the tale of war hero, and New Jersey resident, John Basilone. The story was so well done, as has the rest of the series. So, in a few weeks I’m headed back down to New Orleans to spend more time at the World War II Museum there. Hopefully there will also be some shellfish still available.
–I predicted weeks ago that there would be violence on May Day and I have to concede there was less of it than I expected, though there were major protests in Greece, Istanbul and Macau.
–Lastly, we learned this week that the genomes of 1% to 4% of people in Eurasia come from Neanderthals. From Paul Rincon of the BBC:
“The most widely-accepted theory of modern human origins – known as Out of Africa – holds that the ancestors of living humans (Homo sapiens) originated in Africa some 200,000 years ago.
“A relatively small group of people then left the continent to populate the rest of the world between 50,000 and 60,000 years ago.
“While the Neanderthal genetic contribution – found in people from Europe, Asia and Oceania – appears to be small, this figure is higher than previous genetic analyses have suggested.”
There’s no word on whether after this interbreeding, the two parties smoked cigarettes; there being no anti-smoking campaigns back then.
Pray for the men and women of our armed forces, and all the fallen.
Gold closed at $1210
Oil, $75.11…down $11
Returns for the week 5/3-5/7
Dow Jones -5.7% [10380]
S&P 500 -6.4% [1110]
S&P MidCap -8.1%
Russell 2000 -8.9%
Nasdaq -7.9% [2265]
Returns for the period 1/1/10-5/7/10
Dow Jones -0.5%
S&P 500 -0.4%
S&P MidCap +4.1%
Russell 2000 +4.4%
Nasdaq -0.2%
Bulls 56.0
Bears 18.7 [Source: Chartcraft / Investors Intelligence…ahem. I pick my spots carefully in deciding when to discuss this indicator. I gave you a pretty good clue on coming market action a few weeks ago, if I may say so myself.]
