Wall Street
As noted financier Roger McNamee told me when we were on the QE2 back in early 2003, “It’s a good time to take a cruise.” Today, after a summer of little but doom and gloom, and with markets decidedly mixed since Memorial Day (Dow up a whopping 0.7%, while Nasdaq is down 3.5%), you would have been better off shutting down for a while, which is what Wall Street has clearly done recently witness the excruciatingly light trading volume.
This past week was typical. The Dow Jones and S&P lost less than one percent and Nasdaq picked up 6 points. As that other noted financier, Derrick Coleman, would have said, “Whoopty-damn-do.”
Yet in actuality you really have to hand it to the stock market for hanging in there as well as it has. The news on the economy, after all, has been lousy. Oh, sure, corporate earnings have been solid for the most part, but even here the message has been mixed. And frankly, where the likes of Caterpillar are optimistic, I’d be willing to bet their CEO isn’t nearly as rosy six months from now. More accurately, you’ve had Cisco’s John Chambers expressing discontent, and this week, both Wal-Mart and Home Depot, two rather important retailers, were hardly dancing a jig when discussing prospects for the balance of the year, with Wal-Mart commenting, “The slow economic recovery will continue to affect our customers, and we expect they will remain cautious about spending.” For these two, as well as for that of much of Corporate America, it’s been about cost-cutting, not revenue growth, when discussing the bottom line, and rare is the company that is hiring in any big way.
It’s been about housing and jobs, when it comes to the consumer, and this week, while I don’t like to make too much of one week’s data, jobless claims rose back to the 500,000 level, the worst in nine months.
But our president keeps telling us the economy is getting better. ‘Sup wit dat? Is it any wonder then that President Obama’s poll ratings on the topic continue to drop like a stone, with only 41% approving of his handling of it, 61% believing the economy is worse, or has stayed the same under Obama’s watch, while another 81% believe it is either poor or very poor (AP-GfK). [The other 19% are those folks with perpetual smiles on their faces that you really need to stay away from.]
The American consumer, in case you haven’t figured it out, is spending at the slowest pace for any ‘recovery’ since 1945, while we continue to slash household debt, which is a necessary evil even as it means we also aren’t spending. [Banks aren’t making matters any easier as they are slashing limits on credit cards and lines of credit.] And personal bankruptcies and foreclosures are still rising. [One sliver of hope…auto loans have been increasing, but I’ll say one of the big negative surprises of the fall is that Detroit will have proven to be a bit too hasty with its happy talk.]
But wait…there’s more! Economist David Rosenberg, who has been as gloomy as any, and pretty accurate (though unlike yours truly he totally missed last year’s equity rally), is calling for negative GDP growth in the U.S. for the second half of the year…a double-dip…though he argues we’ll later learn that by some measurements the economy never got out of recession in the first place (I disagree with this…but he’s entitled to his opinion).
It doesn’t help when a key measure of the Philadelphia area economy suddenly contracted last month when growth was expected, while July housing starts were worse than expected. At least industrial production for the month, nationwide, was said to have picked up 1.0%.
Next week will reveal more news on housing and I’ll comment further then, but in a sign of things to come, post-federal tax credits, California home sales dropped 20% in July, with the median price basically unchanged over June, even as mortgage rates continue to hit all-time lows, now 4.42% for a 30-year fixed.
I think the whole environment these days was best summed up by shipping giant Maersk (Denmark) which raised its earnings guidance, talking of the recovery in the global economy driving better demand and freight rates, but then at the same time it cautioned the outlook was subject to considerable uncertainty, not least due to developments in the global economy, as reported by the Wall Street Journal.
Geezuz, Maersk execs. You sound a little conflicted, know what I’m sayin’? Like maybe you need some R&R. Throw yourself in one of your containers and just float around for a while.
And that inventory could include PCs. Acer of Taiwan, the No. 2 maker of personal computers in the world, said its shipments are down 38%. Plus Deere’s CEO, while talking of strong demand in the U.S., said “European markets are down sharply.”
Well they are, but Germany isn’t Europe. While the Bundesbank was raising its estimate for GDP growth in the country for this year from 1.9% to 3.0%, France was lowering its 2011 outlook.
And you know how last week I talked of the Slovakia parliament vote against aiding Greece, and how “I would submit that round two of the European debt crisis is not that far away”?
Well this week interest rates on Greek bonds soared amidst new concerns. The European Central Bank may be pleased with Greece’s austerity program, as the government cuts its budget deficit, but revenues are below projection, unemployment could soar (further) and just weeks after a resolution to the crisis here, whaddya know…there is more uncertainty again.
It’s all so predictable, yet I’m amazed how many are missing it. These austerity programs are incredibly painful, though necessary. We’re talking lost jobs, cuts in public sector wages (if you didn’t lose your job), and cuts in benefits. It’s going to be one very depressed continent once this all settles in. Europe has been in a perpetual state of denial and it’s time to pay the piper (as it increasingly is in the United States…where it’s virtually 50 states in denial).
You are nuts if you are bullish on Europe in the short-term. And the gloomier things get here the more the people will be lashing out against immigrants, whether it’s France and its current fight against the Roma (gypsies, tramps and thieves), or Turks in Germany, it’s going to get ugly. And depressing.
Lastly, two final points. I still believe we’ll technically avoid a double dip, though I’ve said for months it’s really irrelevant because as the above poll numbers reveal, the vast majority feel like we never really got out of the downdraft in the first place, yet we have not had the geopolitical shock I thought we’d get this year. I would suggest to you it could still be Pakistan, but forget recession, if it’s of the right magnitude we go directly to Depression…you won’t be able to stop at recession and collect $400.
Second, in terms of the mid-term election, where a number like this week’s jobless claims figure is particularly important is it further guarantees that the Democrats will not be able to talk of an improving labor picture (which we’ve known for a while now), and that they have no recovery story…period. Then again, the Republicans, outside of keeping the top tax rate the same, don’t have one either. They just happen to be in the opposition…and this year that’s a good thing.
Street Bytes
–Stocks were mixed, with the Dow Jones losing 0.9% to 10213 and the S&P 500 0.7%, but Nasdaq picked up 0.3% to 2179, just slightly off the all-time high of 5048. Two big mergers, a hostile bid by BHP for Potash, and Intel’s acquisition of McAfee, helped prevent bigger losses.
–U.S. Treasury Yields
6-mo. 0.18% 2-yr. 0.49% 10-yr. 2.61% 30-yr. 3.66%
The producer price index for July came in at 0.2%, ex-food and energy up 0.3%, though still up just 1.5% year over year with the latter. The RJ/CRB commodities index, incidentally, is now down 5.6% for the year, which despite the hoopla on commodities prices is telling you something very different.
But regarding Treasuries, the 2-year hit an all-time low yield during the week, while the 30-year’s yield has been collapsing amidst the slowing economy and demand for investments that deliver some kind of yield. Money is flooding into bonds and bond funds at record rates, which is highly worrisome from the standpoint that you just know some are doing so without any idea of what can happen should yields reverse course. But we’re OK for now.
Speaking of low yields, though, look at German bunds. The 10-year had never been below 3.00% and now is suddenly 2.26%. [Inflation, always a concern here, is now estimated to run at just a 0.9% rate for 2010. And Germany is now the safe haven play in Europe as a whole.]
–Japan’s GDP for the second quarter was a putrid 0.1%, befitting a place where growth has been hard to come by for 20 years. But Taiwan’s tech engine led to a stupendous GDP gain of 12.3% in the quarter, year over year, which was 2 percentage points higher than expectations, though in the current one we’ll see if Acer’s above news is a harbinger of a big slowdown.
–New research reveals that the government’s claim that all but 25% of the oil from the BP spill has been cleaned up or dissolved is bogus. For starters, a huge plume of oil floats deep in the gulf, with University of Georgia researchers believing 80% of the oil overall still remains, though at the same time some scientists don’t believe oxygen levels in much of the gulf are adversely impacted. Another report, however, questions the toxicity of even highly dispersed oil on microorganisms that are a vital food for fish and other marine life. So the true picture remains murky.
Meanwhile, in an AP-GfK poll, President Obama’s rating on his handling of the oil spill has nudged up to 50% approval, while BP’s favorables have risen from 15% to 33%, thanks singularly to the efforts of Fred Lemond, who has personally spotted, skimmed and/or burned off all the oil spewed from the well, because he “grew up on the Gulf Coast, and loves these waters.”
[On Friday, NBC News had a report from Orange Beach, Alabama, where I spent a week last month, and tourism there is down 70% in August…deadly. What a damn shame. Evidently the locals also don’t appreciate Fred Lemond telling them he’s going to make things right, because BP isn’t.]
–Despite the high-profile $39 billion bid by BHP for Potash Corp., and Intel’s nearly $8 billion for McAfee, global buyouts are running at a rate of $180 billion, which aside from 2009’s trough is the lowest since 2003. Regarding the McAfee acquisition, though, many are questioning why Intel paid such a huge premium for the security software company, 60% above McAfee’s closing price prior to the announcement.
–Fidelity Investments reported that they’ve seen a spike in workers making hardship withdrawals from their retirement accounts, a 10-year high. And 45% of participants who took a withdrawal a year ago, took another this one. At least the average 401(k) account balance at the end of the second quarter was $61,800; up 15% from the same time last year thanks to the rally in equities, and bonds.
–China officially passed Japan as the world’s second-largest economy in the second quarter, with GDP of $1.337 trillion vs. Japan’s $1.288 trillion.
–China intends to invest $15 billion in an effort to develop electric and hybrid vehicles as 16 state-owned companies look to form an alliance on research and development, and create standards. The goal is to bring out 500,000 energy-efficient vehicles each year and eventually account for at least 5% of the passenger car market, now the largest in the world.
–Some 27 provinces and regions in China have adjusted minimum wage levels this year, exceeding 20% in about 20 of them, though in actuality the minimum wage is still only about $120 a month in many places.
–Taiwan-based IT giant Foxconn, which was on the hot seat a few months ago for not hiking wages quickly enough, resulting in some suicides, with workers then striking at some of its plants, said it would hire up to 400,000 new employees in the mainland over the coming year. Foxconn is a major supplier to the likes of Apple, Dell and Nokia.
–Half of the homeowners who enrolled in the White House’s flagship mortgage-relief program have either thrown in the towel due to the exasperating paperwork, or were turned down by the banks.
Meanwhile, the administration convened a meeting of dozens of experts on housing finance, looking for answers on the future of mortgage finance companies Fannie Mae and Freddie Mac, which, combined, insure 9 in 10 new mortgages, but at the same time taxpayers have shelled out more than $150 billion to cover Fannie and Freddie’s losses, with far more to follow. Fannie, for example, expects to lose money on all the loans it acquired in every year from 2005 to 2008, which make up 47% of its total holdings, and the process of absorbing the losses will go on for years before it could be shut down.
The problem today is that the private money has fled the mortgage market, leaving these two losers to fill the gap.
–Google celebrated its sixth anniversary since going public, Thursday, and shares promptly tanked, finishing the week at $462…still up just a bit from the $85 IPO price. Incidentally, the all-time intraday high is $747 set on Nov. 7, 2007, so it hasn’t been a pretty ride back down the escalator.
–As the facts slowly emerge on the dismissal of former Hewlett-Packard CEO Mark Hurd, it’s increasingly clear this guy was vastly overrated. As many are now pointing out, including my friend Jimbo from the software industry, Hurd, who made $146 million in four years beginning in fiscal 2005, time after time chose short-term gains over investing in the future.
–Looking for a job? Assuming you meet Australia’s foreign worker provisions, it’s estimated that Western Australia will need an extra 500,000 workers over the next 10 years as a result of its ongoing mining boom.
–According to human rights groups, hundreds of executives who have defaulted on bank loans in Dubai are in prison there. Heck, you can get up to four years in the slammer for a bounced check! And even when the sentence is complete, you can remain in prison until the debt is paid off, which is unheard of in modern times in the West. [Bloomberg BusinessWeek]
–Denmark, which has the world’s richest unemployment benefits, is now going to limit payments to two years instead of four. Said the Danish finance minister, “Four years of unemployment is a luxury we can no longer allow ourselves.” Good lord! Four freakin’ years?! Plus their “domestic” is “premium.” [New York Times]
–New Jersey’s unemployment rate ticked up to 9.7% in July. New York City’s ticked down to 9.4%. Separately, the SEC found that New Jersey misrepresented its financial condition when selling 79 bond issues totaling more than $26 billion between 2001 and 2007, as in it didn’t divulge that two of its pension funds were drastically underfunded…a rather important omission. The SEC didn’t, however, levy a financial penalty on the Garden State.
–Such was not the case with Barclays PLC, though, as it is being forced to pay $298 million to settle charges that the U.K. bank “altered financial records for more than a decade to hide hundreds of millions of dollars in payments flowing into the U.S. from Cuba, Libya, Iran and other sanctioned countries.” [Wall Street Journal] So you could say Barclays was the Dirtball Bank of choice.
–The student loan repayment rate at private nonprofit schools is 56%, and 54% at public state colleges and universities. But at for-profit schools such as DeVry, Corinthian Colleges, and Strayer Education, the rate was only 36% last year. The Department of Education is considering cutting off federal aid to programs in which less than 45% of students are able to repay their loans, so shares in the publicly traded for-profit outfits sold off sharply this week.
–Hedge fund giant Stanley Druckenmiller threw in the towel, writing investors, “The stress of performing in a way that I consider to be disappointing – even if you do not share that view – persists in exacting a high emotional toll….It’s a 24-7 job, 365 days a year. And when your name’s on the door, you’re responsible.” Druckenmiller became famous for making George Soros $2 billion on currency bets in 1992 (including the famous $1 billion British pound play), but his $12 billion Duquesne Capital Management firm was down 5% the first half of 2010, which in actuality is far from awful considering he did fine the previous two years. He’s just burned out.
–Bloomberg BusinessWeek had its annual popularity issue, so a few items.
Vanilla ice cream is favored over chocolate, 29% to 14%.
Honey Nut Cheerios are the favorite cereal, followed by Cheerios, Post Honey Bunches of Oats, Kellogg Frosted Mini Wheats and Kellogg Frosted Flakes. I’m a Honey Nut Cheerios guy when I’m not eating my Dunkin’ Donuts chocolate frosted…but now I’m kind of hungry for Frosted Flakes.
[A lot of folks this morning are eating Cheerios, no doubt, over eggs thanks to the still-growing recall of the latter.]
Labrador retrievers are the most popular purebred, followed by German shepherds, Yorkshire terriers, golden retrievers, and beagles. Beagles, though, are the best paid as they’ve been raking it in here in the New York area due to our bed bug infestations; beagles being experts on sniffing them out. So like if you’re a beagle, why go to college?
Burial is favored over cremation, 63.2% to 36.8%. I’m thinkin’ cremation, personally, and you can just put my urn on ‘red’ at the roulette wheel in Vegas.
–“Idiot of the Week,” Blackstone Group chief Steve Schwarzman, who said at a board meeting of a nonprofit organization that when it comes to Barack Obama’s imposition of higher taxes on private equity firms, “It’s a war. It’s like when Hitler invaded Poland in 1939.”
Someone impose a special tax on this jerk. Schwarzman is bitching about plans to jack up the tax rate on “carried interest” from 15% to as high as 35%. Carried interest should be taxed at a higher rate, though perhaps somewhere in between, but make him pay 35 nonetheless.
–Unless you want to pick up a virus, don’t go searching for Cameron Diaz, according to McAfee. She has the title “Most Dangerous Celebrity.” That’s computer virus, not the other type. I’m sure Ms. Diaz is fine, otherwise, though seeing as she’s dating Alex Rodriguez, one has to question her intelligence.
–David Ellison, the 27-year-old son of Oracle founder and CEO Larry Ellison, raised $350 million to co-finance movies with partner Paramount Pictures. Larry provided an undisclosed portion of the equity. Seeing as I have never been a fan of the father, I’m guessing David is about the last person on earth I’d want to have a beer with.
–My portfolio…I forgot to mention last week that I had a pretty funny deal with my small Brazilian airline holding, which I can now say was TAM. After two years, and realizing I was even, I just decided to sell it to raise a little cash, thinking I’d get back in maybe next year. Well, the very next day TAM merged with LAN of Chile, forming the world’s biggest airline in terms of market capitalization (10th in passenger numbers), with each retaining its brand but operating under a merged parent company. I left a few bucks on the table.
Ah, but my China holding responded positively to what turned out to be stupendous earnings, though it’s nowhere near where I think it will be in another 1 ½ years, barring a total collapse in China’s economy. For those of you playing along with me, we just need one or two big investors to learn the story and then take us along for the ride. Patience, my friends.
Foreign Affairs
Pakistan: 20 million are impacted by the worst flooding in recorded history, with 6 million at risk of disease, at least 3.5 million being children. The first cases of cholera are hitting, and one need only look at the pictures, and the insects all over the refugees’ faces, to know that the standing water is a massive breeding ground for mosquitoes, and with them, malaria. Vast stretches of Pakistan’s crop land is destroyed, as are food storage facilities. It is sad, sickening, and horrifying, with the risk of political instability growing by the day as well. Thus far, only the United States and the U.K. are stepping up in any sizable way, though at least in the case of the U.S., our visible presence can win over some hearts and minds. At least 19 Marine Corps and Navy helicopters are flying in the relief mission.
But in terms of the geopolitical aspects, the Pakistani government said its troops that are dedicated to fighting the Taliban have not been redeployed for relief efforts.
Nonetheless, the chaos and turmoil in the nation due to the flooding obviously opens up the doors for the extremists, as I noted weeks ago when the flooding first hit the news.
“For their part, Islamist extremists will attempt to capitalize on the disaster by 1) providing local aid to the poor; 2) blaming the government for not helping sufficiently; 3) claiming that the deluge was a judgment from Allah for Pakistan’s cooperation with the West and for not supporting jihad, and 4) spreading rumors that the U.S. masterminded the flooding to take control of Pakistan and punish Muslims.
“Sound incredible? Look at some of the things educated Americans believe. Then try to imagine the worldview of an illiterate, impoverished Pakistani subsistence farmer with dying children.
“The truth is irrelevant. People believe what comforts them and what feeds their rage. And they believe their own kind, not us.
“Meanwhile, these devastating floods have spread from the northwest – Taliban country – into the populous ‘civilized’ provinces of Punjab and Sindh, as well as into restive Baluchistan. Poorly constructed dams in Pakistan’s ‘breadbasket’ are endangered. A grim situation could become much worse.
“In the best of times, Pakistan is an unstable nuclear power; now a fifth of it lies under water. When the soil drains, the real struggle will begin.”
But in a slightly encouraging development this week, Pakistan’s powerful intelligence agency, the ISI, is conceding that the nation’s prime threat is no longer India, but rather Islamist militants, the first time in 63 years it has reached this conclusion. Analyst Bruce Hoffman told the Wall Street Journal, “It’s earth shattering. That’s a remarkable change. It’s yet another ratcheting up of the Pakistanis’ recognition of not only their own internal problems but cooperation in the war on terrorism.”
It is hoped the ISI’s admission could reinvigorate stalled peace talks with India, though it’s also unclear if the assessment has the full endorsement of the government and the military.
Afghanistan: General David Petraeus wants to see the July 2011 deadline to start withdrawing U.S. troops extended for six months, but Defense Secretary Robert Gates says the deadline is set in stone.
Petraeus’ argument is that while the American people are rightfully impatient that little progress has been made in nearly 9 years in the theater, it’s only during the past 18 months that we’ve had the right strategy and level of resources, and now progress is being made.
Of course to convince the people this is the case, Petraeus is going to have to be one helluva salesman. For starters, the stories of corruption within Karzai’s government are only gaining traction rather than going away.
But the Washington Post editorializes that President Obama must do more himself.
“Having formed his policy and committed the U.S. troops to implement it, Mr. Obama needs to explain his rationale to the American people, especially to the many doubters within his own party. He needs to do so not once, not twice, but repeatedly. This isn’t Gen. Petraeus’ war, and it’s not even Mr. Obama’s war. It is America’s war – and ultimately, only the president can make that case.”
Meanwhile, in yet another look at the Taliban’s brutality, Amnesty International reported that the Taliban’s stoning to death of a couple for adultery was the first of its kind since the fall of Taliban rule in 2001. Coupled with the killing of the ten aid workers the other week, it’s tough for Petraeus, today, to build the case that we’re making progress.
[And as I go to post, details are still emerging about an apparent Taliban massacre of 20+ road crew workers and their guards at a major development project in the south. Also, two Aussie soldiers were killed this week, bringing their death toll to 20 in the war.]
Iran / Israel: According to the New York Times, the White House, “citing evidence of continued troubles inside Iran’s nuclear program, has persuaded Israel that it would take roughly a year – and perhaps longer – for Iran to complete what one senior official called a ‘dash’ for a nuclear weapon, according to American officials.”
The administration is convinced international inspectors would detect an Iranian move to breakout within weeks, and that then you’d have a year, or more than enough time to plan military action. Israel has always said it reserved the right to act should they detect Iran was racing for the bomb. Certainly, any move by Tehran to kick out inspectors would be seen as an aggressive action likely leading to a strike. Israel is also concerned that while they agree with some of Washington’s conclusions, Iran may still have a second, secret enrichment site.
For his part, Supreme Leader Ayatollah Ali Khamenei said he won’t negotiate under threats such as Admiral Mike Mullen’s utterance the other week that the “military option remains on the table.”
Last week I wrote of the musings of some experts, both in the U.S. and abroad, on the likelihood of an Israeli strike on Iran’s suspected nuclear facilities by July of 2011. This week, nuclear arms analyst Gary Milhollin responded to the Atlantic magazine piece this was based on.
“Israeli airstrikes would be likely to eliminate Iran’s Arak heavy-water reactor, Isfahan uranium conversion plant and the uranium enrichment centrifuges at the nation’s Natanz complex. In addition, Israel could destroy the Bushehr nuclear power plant – slated to receive its first nuclear fuel within days – if Jerusalem were willing to weather the possible diplomatic fallout of potential Russian deaths at the site, he said.
“However, an attack would be unlikely to eliminate Iran’s stocks of low-enriched uranium, centrifuges not yet installed at Natanz or material prepared for the machines, the expert warned. In addition, the Persian Gulf nation would retain any expertise it has obtained to date on nuclear-weapon design, he said. ‘All these essentials of nuclear-weapon breakout capability seem likely to remain,’ Milhollin wrote.
“An attack would enable Tehran to expel International Atomic Energy Agency officials from its nuclear sites by arguing the U.N. audits had provided its longtime foe with information for the assault, he said.
“In addition, a strike could prompt Iran’s populace and a number of governments to rally around the country’s leadership, Milhollin suggested.
“ ‘Israel can’t destroy enough of Iran’s nuclear capability through airstrikes, nor can Israel invade,’ the expert said. ‘Only the United States can do those things. Whether it might ever do either is the big question, and one to which absolutely no one has the answer.’” [Global Security Newswire]
But former U.S. ambassador to Israel, Martin Indyk, said that President Obama has been increasingly hinting at military options for preventing Iran from acquiring the bomb. And I can’t help but note that Defense News reports there have been 75 high-level meetings between Israel’s Ministry of Defense and the Pentagon in the past 17 months.
As for Russia’s beginning the fuel process at the Bushehr plant after years of delays, much to the chagrin of the Obama administration, Russian Foreign Minister Sergei Lavrov said:
“It is a most important anchor, which keeps Iran within the regime of nonproliferation. It is fully protected from any proliferation risks whatsoever. This idea is shared by all the leaders of Western countries.” [Agence France-Presse]
On a totally different matter, it is hoped that Israeli and Palestinian leaders will meet in Washington on September 2nd to begin direct peace talks, which would be two years after the last round of negotiations took place, though no one is expecting any progress whatsoever.
And a note on Lebanon. Parliament granted an estimated 400,000 Palestinian refugees living in Lebanon the same rights as foreigners, lifting restrictions on what jobs they can hold, though they would continue to be barred from working as engineers, lawyers and doctors, among other regulated professions reserved for Lebanese citizens. It does at least grant Palestinians social security benefits.
Iraq: The last combat troops have pulled out, 7 ½ years after the U.S.-led invasion, leaving 50,000 U.S. soldiers for training the Iraqi army and security forces, with the mission officially being changed from “Operation Iraqi Freedom” to “Operation New Dawn,” though exactly what Iraq’s new dawn is remains to be seen, seeing as how its political leaders still can’t form a new government, almost six months after the March 7 parliamentary vote. Both the U.S. and Iraqi political figures have appealed to moderate Grand Ayatollah Ali Sistani for help but he remains neutral; this as violence continues to rise, like the deaths of 60 at the hands of a suicide bomber at an Iraqi army recruitment center. The risks of a military coup here continue to rise as well, even after the presumed formation of a central government. Or as Max Boot concludes in a Journal op-ed:
“The worst combat is over, at least for the time being. But America must still fight for Iraq’s future if the sacrifices made by so many heroes, Iraqi and American alike, are not to be in vain.”
And it is ironic that the very Iraqis who were worried the Americans would stay forever, now are scared to death that we’re leaving. They should be.
China: The Taiwan legislature approved the Economic Co-operation Framework Agreement with China by a 68-0 vote, but opponents comprising the other 50 seats refused to take part, instead voicing protests. Said an opposition leader, “The situation right now is pretty much like a dog barking at a train, and we actually can do nothing about it. Once the agreement becomes effective, which is inevitable now, Taiwan will lose its sovereignty and become like Hong Kong and Macau.” [South China Morning Post]
But the trade pact is a good thing, even as Taiwan’s rulers remain realistic as China continues to build the missile force targeting it (as many as 1,600) while it waits for Taiwan’s presidential election in 2012.
China is also rapidly building up its military capability in other ways, and Taiwan is urging the United States to sell Taipei more sophisticated weapons, which the U.S. is obligated to do under the Taiwan Relations Act, though the U.S. is under no obligation to come to Taiwan’s direct aid should it be attacked. Of course any arms sales to Taiwan tick off Beijing.
And it’s not as if the U.S. doesn’t understand China’s intentions. The Defense Department has criticized China’s growing missile and naval capability as not being helpful to improving bilateral relations. To which a Chinese Defense Ministry spokesman said:
“Issuing this report (the Pentagon’s) is not beneficial…China firmly abides by a defensive national defense policy, does not take part in military confrontation and does not pose a military threat to any country. We ask the United States to stop remarks and behavior that are not beneficial for mutual trust between the two militaries and Sino-U.S. relations,” added Geng Yansheng. [Agence France-Presse]
The Pentagon countered, “China has the most active land-based ballistic and cruise missile program in the world,” including a “carrier killer” anti-ship missile. China is also pouring money into space-based weapons systems and cyberwarfare capabilities.
The United States and China desperately need to resume military ties, which China broke off after the most recent sale of arms to Taiwan.
Analyst Mark Helprin commented on the potential scenario in an op-ed for the Wall Street Journal. Helprin is particularly concerned that the United States is ceding leadership in the Far East to China, militarily, despite rhetoric to the contrary, such as the recent words from Secretary of State Hillary Clinton that the United States has an interest in any disputes in the South China Sea.
“As Chinese naval, air, and nuclear power rapidly grows and ours diminishes, Mrs. Clinton’s recent opening is an invitation to China to gamble on odds moving in its favor. Although the U.S. military has come up with an elegant, workable strategy to counter this dynamic – ‘The Air-Sea Battle’ – it cannot succeed if the shrinkage of aircraft and ship numbers, ballistic missile defenses, foreign basing, flying hours, anti-submarine warfare, and the defense-industrial sector continues apace.
“That our resolution is heartening as we strip ourselves of the means to support it is a cause of anxiety to China, which sees in the ‘wavering and chaos in U.S. policy’ the kind of confusion that can lead to unintended consequences. We must not retreat from making demands that are reasonable and just, but we must be properly equipped to see them through. Diplomats should know this, and that in the relations between rival states little is more dangerous than hollow talk, except perhaps hollow talk that in the uninformed imagination of the speaker appears rock solid.”
North Korea: Pyongyang admitted it seized a South Korean fishing vessel, though has yet to return the crew. Seoul for now is downplaying this latest incident with its ornery neighbor.
On the issue of a successor to Kim Jong Il, it was assumed his son, Kim Jong Eun, would be named at a government meeting in September, but now there is some conjecture that a career politician, Jang Song Taek, could be some sort of interim leader, seeing as Kim Jong Eun is just 25- to 28-years old. [It’s rather pitiful our intelligence doesn’t know the age for sure.] So will the 64-year-old Jang serve as a mentor or would he seize power himself?
Separately, a North Korean fighter plane ploughed into a house in northeast China, with the pilot dying amid reports he was trying to fly to Russia and defect. But the incident is proving to be an embarrassment to the Chinese military because it appears the air force failed to detect the intrusion and allowed it to fly very close to a major city, Shenyang; this as the U.S. and South Korea are planning further naval exercises in the nearby Yellow Sea. Pictures of the plane clearly indicate it wasn’t shot down. Only three known pilots have ever successfully defected from the North, all to South Korea.
Russia: Interesting item in Newsweek by Anna Nemtsova on the brain drain here, as a new generation of exiles flees. “Businesspeople, lawyers, accountants, and bankers say they’re leaving the country after being robbed and threatened with false arrest by crooked law-enforcement officials. Exact numbers on the exodus are difficult to pin down, but it’s safe to say that thousands of well-to-do Russian professionals now living abroad don’t dare return to their homeland for fear that the state’s representatives will throw them in jail for the crime of making an honest profit. Police are believed to be colluding with organized criminals to seize control of legitimate businesses.”
Transparency International estimates a full third of Russian businesses have been targeted. President Medvedev certainly recognizes the problem and has blasted the bureaucrats, warning them to “stop terrorizing businesses,” but the system is ignoring him. So the thieves continue to drive away Russia’s best and brightest, leaving nothing but a class of thugs and hoodlums.
Australia: Just two months ago, Julia Gillard ousted fellow Labor leader and Prime Minister Kevin Rudd in a party coup, installing herself as the new leader. Gillard then called a snap election to take advantage of what she saw as her popularity among the electorate. But today, Saturday, is election day and all the polls in the days leading up to it showed a dead heat. Gillard’s party supports a controversial 30% tax on the mining sector that giants BHP Billiton, Rio Tinto and Xstrata support, but the smaller companies don’t. The Green Party, which would be in Labor’s coalition, wants a higher tax. The opposition (represented by former Prime Minister John Howard’s Liberal party and candidate Tony Abbott) is more pro-business and pro-U.S. [This is a gross generalization.] More next time when we learn the results.
Romania: Just a note that when it comes to Afghanistan, who is supporting the United States in a big way? Romania. As others rush out the door, Romania is increasing its troop commitment from 962 to 1,500. The United States is anxious to work closely with Bucharest, partly to deter any aggressive moves by Russia. 15 Romanians have given their lives in Afghanistan.
So we toast our friends with an Ursus bier. Hell, you’ve gotta love these guys. They recently took control of a base north of Kandahar and renamed it Forward Operating Base Dracula.
Mexico: I wasn’t going to comment on the unending drug war here this week except I had to note that a drug gang blocked off at least 13 major roads in the city of Monterrey last Saturday. “Drivers were dragged out of their vehicles by armed men and their cars used to cut off the roads….The blockade happened after a shootout between the Mexican army and alleged members of a drug cartel, in which four people were killed.”
I mention this because from time to time over the years, Major League Baseball has sent two teams here, one usually being the Padres, to play a few games. I’m thinking this doesn’t happen again anytime soon, even as Monterrey is supposed to be Mexico’s richest city.
South Africa: The people here may have had a successful World Cup, but the aftermath is a mess, and none of you should be surprised. More than a million civil servants went on strike for higher wages and patients are reportedly dying due to staff shortages. Military doctors and nurses have had to step in. The unions are demanding an 8.6% pay raise and President Zuma’s government says it can’t afford it, so the unions are beginning to resort to violence against non-striking workers. Zuma countered he can fire the strikers. Boy, that would be a Reagan moment. As reported by the BBC:
“Access to hospitals has been blocked – and on several occasions those on strike have gone into wards and dragged nurses away from their patients, our correspondent says.”
Random Musings
–With just ten weeks to go before the critical mid-term elections, in an AP-GfK survey, the Democrats in Congress receive 37% approval vs. just 30% for Republicans…but…among those likely to vote, 49% would give the nod to Republicans and 45% Democrats.
Among key independents, in 2008, 52% backed Obama vs. John McCain, but now only 32% want Democrats to keep control of Congress.
[President Obama’s overall approval rating remains 49% in the AP survey, but is down to 44% in the latest Gallup poll, a new low.]
–Gerald Seib of the Journal interviewed prognosticator Charlie Cook, with Cook estimating Republicans will take 35 to 45 seats in the House (Republicans needing 39 to regain control), but Cook says he’s being conservative in forecasting Republican gains. In the Senate, they need to take 10 seats and it’s unlikely Republicans will accomplish this.
–Talk about a nation of idiots, 20% of Americans believe President Obama is a Muslim, and the result from a Pew Research Center poll is before his recent comments on a proposed mosque near Ground Zero. Mr. Obama is a Christian, of course, yet only 34% now identify him as such.
And this all comes on top of the president’s remarks concerning the Islamic center in New York last Friday night. In the same Pew survey, 61% are opposed to the building of the center, while in a Siena poll, 63% are opposed, and a CNN/Opinion Research poll had 68% opposed.
On Friday, Aug. 13, the president said that while he understands Ground Zero is “hallowed ground,” he told a group of Muslims that he believes they have “the same right to practice their religion as everyone else in the country.”
“And that includes the right to build a place of worship and a community center on private property in Lower Manhattan, in accordance with local laws and ordinances. This is America. And our commitment to religious freedom must be unshakable. The principle that people of all faiths are welcome in this country and that they will not be treated differently by their government is essential to who we are.”
But then the next day, after his aides got hold of him, having heard the uproar, including from fellow Democrats, Obama said this:
“In this country we treat everybody equally and in accordance with the law, regardless of race, regardless of religion.
“I was not commenting and I will not comment on the wisdom of making the decision to put a mosque there. I was commenting very specifically on the right people have that dates back to our founding. That’s what our country is about. And I think it’s very important as difficult as some of these issues are that we stay focused on who we are as a people and what our values are all about.”
Of course the president had, indeed, endorsed the Ground Zero location on Friday night, so he was more than a bit disingenuous the following day. He looks very small as a result.
This is one of those issues where I find it necessary to present both sides, with many conservatives taking positions you wouldn’t initially expect, and I’ll give my own opinion at the end.
“It’s hard to be an Obama sycophant these days. Your hero delivers a Ramadan speech roundly supporting the building of a mosque and Islamic center near Ground Zero in New York. Your heart swells and you’re moved to declare this President Obama’s finest hour, his act of greatest courage.
“Alas, the next day, at a remove of 800 miles, Obama explains that he was only talking about the legality of the thing and not the wisdom – upon which he does not make, and will not make, any judgment.
“You’re left looking like a fool because now Obama has said exactly nothing: No one disputes the right to build; the whole debate is about the propriety, the decency of doing so.
“It takes no courage whatsoever to bask in the applause of a Muslim audience as you promise to stand stoutly for their right to build a mosque, giving the unmistakable impression that you endorse the idea. What takes courage is to then respectfully ask that audience to reflect upon the wisdom of the project and to consider whether the imam’s alleged goal of interfaith understanding might not be better achieved by accepting the New York governor’s offer to help find another site.”
“The mosque should be built precisely because we don’t like the idea very much. We don’t need constitutional protections to be agreeable, after all.
“This point surpasses even all the obvious reasons for allowing the mosque, principally that there’s no law against it. Precluding any such law, we let people worship when and where they please. That it hurts some people’s feelings is, well, irrelevant in a nation of laws. And, really, don’t we want to keep it that way?…
“We would like to think that others would be as respectful of our own horrors. And yet, we should beware what we demand lest others demand the same of us. Count the number of times we’ve heard ‘sensitivity’ invoked the past several days. Muslims should be more sensitive to the families of those who perished, we’ve heard repeatedly. Even the Anti-Defamation League, defender of religious freedom, urged the mosque’s leaders to situate the building farther from Ground Zero – out of sensitivity….
“But the more compelling point is that mosque opponents may lose by winning. Radical Muslims have set cities afire because their feelings were hurt. When a Muslim murdered filmmaker Theo van Gogh in Amsterdam, it was because his feelings were hurt. Ditto the Muslims who rioted about cartoons depicting the image of Muhammad and sent frightened doodlers into hiding….
“It isn’t a stretch to say that the greatest threat to free speech is, in fact, ‘sensitivity.’
“This is why plans for the mosque near Ground Zero should be allowed to proceed, if that’s what these Muslims want. We teach tolerance by being tolerant. We can’t insist that our freedom of speech allows us to draw cartoons or produce plays that Muslims find offensive and then demand that they be more sensitive to our feelings….
“Nobody ever said freedom would be easy. We are challenged every day to reconcile what is allowable and what is acceptable. Compromise, though sometimes maddening, is part of the bargain. We let the Ku Klux Klan march, not because we agree with them but because they have a right to display their hideous ignorance.
“Ultimately, when sensitivity becomes a cudgel against lawful expressions of speech or religious belief – or disbelief – we all lose.”
“How precisely is our cause served by treating the construction of a non-radical mosque in Lower Manhattan as the functional equivalent of defiling a grave? It assumes a civilizational conflict instead of defusing it. Symbolism is indeed important in the war against terrorism. But a mosque that rejects radicalism is not a symbol of the enemy’s victory; it is a prerequisite for our own.
“The federal government has a response to American mosques taken over by advocates of violence. It investigates them, freezes their assets and charges their leaders. It does not urge zoning decisions that express a general discomfort with Islam itself.
“Here again, this debate illustrates a gap in perspective. A commentator can speak with obvious sincerity of preventing American hallowed ground from being overshadowed by a mosque. A president not only serves Muslim citizens, not only commands Muslims in the American military, but also leads a coalition that includes Iraqi and Afghan Muslims who risk death each day fighting Islamic radicalism at our side. How could he possibly tell them that their place of worship inherently symbolizes the triumph of terror?
“There are many reasons to criticize Obama’s late, vacillating response to the Manhattan mosque, and perhaps even to criticize this particular mosque. But those who want a president to assert that any mosque would defile a neighborhood near Ground Zero are asking him to undermine the war on terrorism. A war on Islam would make a war on terrorism impossible.”
“Actually, the ultimate victory for Osama and the 9/11 hijackers is the moral timidity that would ban a mosque from that neighborhood.
“Our enemies struck at our heart, but did they also warp our identity?
“The war against the terrorists is not a war against Islam. In fact, you can’t have an effective war against the terrorists if it is a war on Islam.
“George W. Bush understood this. And it is odd to see Barack Obama less clear about this matter than his predecessor. It’s time for W. to weigh in.
“This – along with immigration reform and AIDS in Africa – was one of his points of light. As the man who twice went to war in the Muslim world, he has something of an obligation to add his anti-Islamophobia to this mosque madness. W. needs to get his bullhorn back out….
“So look where we are. The progressive Democrat in the White House, the first president of the United States with Muslim roots, has been morally trumped by Mayor Michael Bloomberg and Gov. Chris Christie of New Jersey, two moderate Republicans who have spoken bravely and lucidly about not demonizing and defaming an entire religion in the name of fighting its radicals.
“Criticizing his fellow Republicans, Governor Christie said that while he understood the pain and sorrow of family members who lost loved ones on 9/11, ‘we cannot paint all of Islam with that brush.’
“He charged the president with trying to turn the issue into a political football. But that is not quite right. It already was a political football and the president fumbled it.”
“We’ll be frank here. From the outset, we considered the decision to build a mosque and Islamic cultural center so close to Ground Zero to be at the least obnoxious, and at most an incitement.
“But this has nothing whatsoever to do with the right of Muslims to build a mosque and worship there.
“But that doesn’t trump the right of others to question the means by which the mosque is to be built, and the motives of those who intend to build it….
“Thus New Yorkers have a right – if not the duty – to express concern about the mosque, given Imam Feisal Abdul Rauf’s continuing refusal to identify the sources of the $100 million he proposes to spend on the mosque.
“Especially since he has said he plans to raise the bulk of it in the Mideast.
“Equally disquieting is Rauf’s refusal to comment on – let alone renounce – the mosque’s endorsement by the co-founder of Hamas, which Rauf famously has declined to label a terrorist organization.
“To note that Rauf is not being a good neighbor would be an understatement.
“We believe him to be a provocateur, a conclusion we have reached only after waiting patiently for weeks for a sign – any sign – that the imam ever intends to explain himself. Clearly, he does not….
“We hope that Rauf eventually proves us to be mistaken. As things stand, however, count us among the opponents of what only can be termed a wrongheaded, inflammatory undertaking.
“It’s a land-use issue that turns on appropriateness, a routine point lost on developers and defenders. Would they also rise in high dudgeon to support an amusement park on the site, declaring we must not discriminate against Ferris wheels?
“Remember, this same dynamic duo [Ed. Bloomberg and Obama] also insisted that putting the mastermind of 9/11 on trial near Ground Zero would convince the world what fine folk we are. There, too, opponents initially were blasted as bigots before Bloomberg came to his senses and flip-flopped.
“I spy a trend: if you’re opposed to something the president and the mayor want, you are a bigot.
“So say yes or shut up. Welcome to the new democracy, where being in the majority automatically means you are wrong.”
“On the day it murdered (thousands)…al-Qaeda was looking to hijack more than jetliners. The killers’ ultimate goal was and is hijacking Islam itself. And to do that they need us to make them into more than what they are.
“Without us elevating them into enemy combatants in a war on terror, they would be just a couple of hundred murderous losers.
“Even now, after all our mistakes, after we let bin Laden slip away in Afghanistan and lost our focus going into Iraq, al-Qaeda is still more a gang than an army.
“It is still so small that its new operations chief, Adnan Shukrijumah, met personally with the knuckleheads who planned to bomb the subway last September.
“When the previous operations chief, Khalid Sheikh Mohammed, was captured, he was not surrounded by a host of terrorists. He had nary a bodyguard when he was rousted from bed in his underwear at the house where he was hiding out like what he was, a murderer on the run….
“We are only helping the bad guys if we declare that the religious freedom at the core of our democracy does not apply to a mosque too close to Ground Zero.”
“This is something that we ought to b able to work out with people of good faith. We have to understand that it is a real affront to people who’ve lost their lives, including Muslims.” Earlier, another high profile Democrat, Senate Majority Leader Harry Reid, through a spokesman, said, “The First Amendment protects freedom of religion…but (Senator Reid) thinks that the mosque should be built someplace else.”
“The real story of the Ground Zero mosque is that the project only became feasible because of the appalling and astonishing fecklessness of the officials who were charged with the reconstruction of the site and the neighborhood all the way back to 2001.
“We’re just three weeks shy of the moment, nine years ago, when the landing-gear assembly from the plane that hit the South Tower smashed through the roof and two floors of 45 Park Place, which housed a Burlington Coat Factory.
“Imagine that, in the weeks following, you had expressed the opinion that in nine years’ time, that building would sit abandoned only 560 feet from Ground Zero – and there would be no memorial, no museum, no nothing on the 16 acres on which the towers themselves sat.
“Forget the whole question of whether there would be a mosque (or Islamic cultural center) in its place. Just imagine that you’d delivered the view that New York would so completely fail to maintain a sense of purpose regarding the salvation of Ground Zero. Imagine the scorn to which you’d have been subjected at the suggestion.
“Yet here we are. Memories of the last nine years have turned Ground Zero from a site of horror, to a reminder of grief, to an occasion for ludicrous artistic posturing – and now to something very close to parody….
“It’s an unimaginable failure with many fathers, the Port Authority of New York and New Jersey and the politicians who control it; the Lower Manhattan Development Corp., and others. But at the top of the list of shame sits former Gov. George Pataki, who had primary statutory authority for the site and whose idea the design competition was.
“Pataki’s forgettable 12-year governorship deserves to be remembered only for what he was unable, unwilling or just incapable of doing when history called on him to do something great. Instead, he dithered and fought and pouted when Rudy Giuliani got too much credit, and fantasized about running for president and finally faded away.
“Pataki called President Obama ‘dead wrong’ for supporting construction of the mosque. But this wouldn’t be an issue at all if Pataki had done the job that posterity called upon him to do. His failure is our shame.”
“Radical Islam is not, by any means, a majority of Islam. But with its financiers, clerics, propagandists, trainers, leaders, operatives and sympathizers – according to a conservative estimate, it commands the allegiance of 7% of Muslims, i.e., more than 80 million souls – it is a very powerful strain within Islam. It has changed the course of nations and affected the lives of millions. It is the reason every airport in the West is an armed camp and every land is on constant alert.
“Ground Zero is the site of the most lethal attack of that worldwide movement, which consists entirely of Muslims, acts in the name of Islam and is deeply embedded within the Islamic world. These are regrettable facts, but facts they are. And that is why putting up a monument to Islam in this place is not just insensitive but provocative.
“Just as the people of Japan today would not think of planting their flag at Pearl Harbor, despite the fact that no Japanese under the age of 85 has any possible responsibility for that infamy, representatives of contemporary Islam – the overwhelming majority of whose adherents are equally innocent of the infamy committed on 9/11 in their name – should exercise comparable respect for what even Obama calls hallowed ground and take up the governor’s offer.”
My own opinion? It’s incredibly insensitive, and in no way do I trust Imam Rauf, even as our State Department apparently does. But it’s hoped cooler heads will prevail and a compromise location can be found.
However, as John Podhoretz notes, the real shame in all this is the truly embarrassing job done by those responsible for redeveloping Ground Zero and getting a suitable memorial up. That it will have taken ten years for the latter is pathetic. Our nation falls short on so many different levels these days. And the rest of the world isn’t any better.
–As expected, Defense Secretary Robert Gates said he would step down next year, though he may at least wait until the planned withdrawal of U.S. troops in Afghanistan is underway. I like the idea of Senator Jack Reed of Rhode Island to replace Gates; Reed being a former Army ranger who knows as much as anyone in Congress about the military.
But what of Gates’ efforts to cut waste from the Pentagon budget in favor of giving the troops more of what they need? He needs to stay on further, because otherwise, as an editorial in Defense News puts it, “those who oppose him…will simply drag their feet until, through sheer inertia, they win out.”
–The head of the UN climate and weather body, Ghassem Asrar, said scientists must urgently look into changes in atmospheric currents linked to catastrophic floods in Pakistan and China, as well as wildfires in Russia and the split of a giant iceberg in Greenland in recent weeks. The World Meteorological Organization called the four “an unprecedented sequence of events” that “compare with, or exceed in intensity, duration or geographical extent, the previous largest historical events.”
–In the trial of former Illinois Governor Rod Blagojevich, 11 jurors were ready to convict the jerk of what prosecutors called a “political corruption crime spree,” but one juror held out and only agreed that Blago lied to the FBI, the least serious of the 24 counts against him. So Blagojevich did what only he can do, taunt the prosecution. “This is a fight for the very freedoms that we as Americans enjoy,” he said. Spare me, you SOB.
–James J. Kilpatrick died. He was 89. Kilpatrick was best known to a certain generation for his “Point-Counterpoint” segment on “60 Minutes” where the conservative would debate liberal Shana Alexander; later skewered on “Saturday Night Live” by Dan Aykroyd and Jane Curtin. Aykroyd would proclaim, “Jane, you ignorant slut,” and Ms.Curtin would reply, “Dan, you pompous ass.”
–And I loved the stories on Los Angeles plastic surgeon to the stars, Frank Ryan, who died when his car flew down a coastal cliff. At first it was ‘How could this happen?’ It was 4:30 p.m., after all, when he veered off the Pacific Coast Highway. No one wanted to state the obvious. The idiot was Tweeting! Heidi Montag, who once went through ten procedures in a single day with Ryan, wrote on her Twitter page, “He is in a better place.”
No he isn’t! The guy was jerking around, not paying attention, and the 50-year-old Ryan died about 30 years before he probably should have. Thankfully, though, his dog survived, dogs being No. 1 on the All-Species List.
I’m headed to Ireland for a few days later in the week and I really don’t know what I’m doing with this space next time. You see, it’s all about golf and pubbing, pubbing and golf, and little work will get done. But assuming my hotel’s Internet connection works (and these things are spotty in the west of the country), I’ll have some sort of abbreviated review next Saturday.
Pray for the men and women of our armed forces, and all the fallen.
Gold closed at $1228
Oil, $73.82
Returns for the week 8/16-8/20
Dow Jones -0.9% [10213]
S&P 500 -0.7% [1071]
S&P MidCap +0.3%
Russell 2000 +0.2%
Nasdaq +0.3% [2179]
Returns for the period 1/1/10-8/20/10
Dow Jones -2.1%
S&P 500 -3.9%
S&P MidCap +1.4%
Russell 2000 -2.3%
Nasdaq -3.9%
Bulls 36.7
Bears 31.1 [Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
