Europe and Wall Street
Forgetting for the moment geopolitics and issues like North Korea, Iran, Lebanon and terrorism that could sap sentiment in a nanosecond and send the markets careening backwards, history may look back on this week and conclude that this was the time when the United States finally looked in the mirror and realized it was time to change, for the better. This story at the end, but first, reality check…
And once again we start in Europe with Ireland’s bailout. With 57% of the Irish people, according to an Irish Independent/Quantum Research poll, wanting the State to default on debts to bondholders in the country’s stricken banks, simply because the government cannot support the debt burden it has taken on, but with markets roiled by this prospect, to say the least there has been mass confusion on the direction of the European Central Bank, the euro currency, and the continent as a whole. The end result for now, however, was inevitable, and so the European Union and the International Monetary Fund officially bailed out Ireland on Sunday night.
The bailout package totals 85 billion euros, or about $113 billion, with 45 billion euros coming from European governments, 22.5 billion from the IMF, and 17.5 billion from Ireland itself through its cash reserves and national pension fund, or as one put it regarding this last item, Ireland is reaching into its sofa cushions.
Among the details, Ireland is being forced to pay an interest rate on its loans of 5.8%, which is higher than the 5.2% Greece is paying for its bailout of last spring. The ECB and IMF, however, don’t believe the Irish government’s growth forecasts that accompany its austerity plan (assuming parliament approves it on Dec. 7) and so Ireland was given an extra year, until 2015, to get its fiscal house in order and the budget deficit back below the preferred 3% of gross domestic product target. And Ireland does get to keep its cherished 12.5% corporate tax rate.
The immediate reaction on Monday and Tuesday was not good. So much for Ireland, investors said, whose next? Portugal? Spain? Italy? Belgium? And European finance ministers muddied the waters big time in talking about future haircuts for bondholders after July 2013 in order to spread the damage so that politicians wouldn’t have to ask an increasingly surly public for more funds to bailout their neighbors, i.e., Germans are not real happy campers these days. But it’s all conjecture thus far. Exactly which bonds would be impacted? How much of an effect will this really have and wouldn’t the EU still have to come up with a ton of fresh capital should, say, Italy fall under the gun? [Portugal and Spain having long been bailed out beforehand.]
In the end, for today, the EU speaks of having an agreement whereby post-2013, each nation’s debt problems will be handled on a “case by case” basis, meaning it will be all about the political environment at the time, and, for example, how well Germany and France are getting along.
Or, as the Wall Street Journal editorial board concluded:
“So here is what the EU has done: In the name of combating speculation against the debt of euro-zone members, the EU has now insured all those speculators against loss for three years at least. Meanwhile, in creating a permanent crisis-management mechanism, the EU has succeeded only in making permanent crisis more likely.”
At least by week’s end things had stabilized some owing to an aggressive intervention on the part of the ECB as it bought massive amounts of Portuguese and Irish bonds to sharply bring down the cost of borrowing for the two, and ECB President Jean-Claude Trichet strongly hinted we ain’t seen nothin’ yet, while at the same time stressing that eurozone governments need to be prepared to pony up more funds to increase the size of the EU’s rescue fund, which thus brings us back to square one and the point I made all last spring.
This is Europe, not the 50 United States. We’re all one nation, the 16 employing the euro are 16 different countries. We all pledge allegiance to the United States of America, they pledge allegiance to France, first, then, err, class starts. I certainly hope they aren’t pledging allegiance to the EU as well…as much as the bureaucrats in Brussels would love this to be the case. When push comes to shove, and as one country falls after another, the people are going to say “That’s it. Screw ‘em.” And it won’t matter if the president, prime minister, or chancellor at the time is an enlightened sort. If they don’t go along with the people’s wishes it will be off with their head!
But there is one hope…and one hope only…and that is growth. If Europe, not just Germany, were to grow at a 3% clip the next five years, after another bailout or two the continent could buy enough time to see itself through the crisis.
But that’s just not going to happen. I get a kick out of some of the headline writers for the likes of Bloomberg, who really need to read their own writers’ work, or use their brain. One headline after another touts a bullish figure, such as a decent manufacturing number for the eurozone in October, but the headline doesn’t include the fact that maybe that was the case in Germany and France (and non-euro Britain), but the others are all struggling.
And just as the ECB and IMF said Ireland’s growth projections for its four-year austerity plan were, to quote incoming U.S. House Speaker John Boehner, “chicken crap,” the European Commission is projecting growth of just 1.5% in 2011 and 1.8% in 2012 for the EU. Yes, Germany may grow at a 2.2% clip in 2011 (after 3.5%+ this year), but the rest of the continent will continue to sink. Why? Because their austerity programs will tamp down growth and they still have massive debts to service. This isn’t rocket science, kids.
And, again, regarding Germany, there is all this happy talk but the growth trend here, after a better than expected 2010, is down…not up. And as much as some of us admire what the U.K. is doing in terms of addressing its budget issues, the government there this week pared back its own growth forecasts. Europeans, as much as they deserve it (as do Americans), are being asked to make wrenching changes and the euro-area unemployment rate was just reported for October to be 10.1%, the highest since July 1998.
“Europe’s challenge is no longer just economic. It’s also social and political. Cherished values and ideals are under assault. The euro, intended to nurture unity, has bred discord, as countries assign blame and argue over sharing costs. The social contract is being rewritten, with government benefits and protections being cut….
“The rescue of Ireland, as with Greece before, represents a gamble that Europe can arrest growing doubts and win the patience of bondholders and voters: persuading the investors not to continue dumping bonds (those of Ireland and other countries) in panic, which raises interest rates and could precipitate a self-fulfilling financial collapse; and persuading ordinary citizens to tolerate austerity (higher unemployment, lower social benefits, heavier taxes) without resorting to paralyzing street protests or ineffectual parliamentary coalitions. Whether the gamble will succeed is unclear, as are the potentially chaotic consequences if it doesn’t.”
But let’s look at the United States, shall we? Before Friday, the economic news was good, as in continued improvement. October construction was up, when it was expected to be down. The November ISM figure on manufacturing was solid, 56.5 (50 being the dividing line between growth and contraction), following a very strong Chicago Purchasing Managers reading of 62.5 for the month. The ISM non-manufacturing (service) figure for November was a solid 55.0. The Federal Reserve’s beige book, the look at regional activity, spoke of an economy that was improving in 10 of 12 regions. Retailers posted blowout November same-store sales figures. The figures on shopping for the Thanksgiving weekend, “Black Friday”, and then “Cyber Monday” also came in strong for the most part (though these numbers are really crapola…but the various folks putting them out are employed and that’s good).
But then came Friday’s jobs report for November and it was downright hideous. Payrolls increased just 39,000 when the forecast was for gains in the 140,000 to 150,000 neighborhood. More importantly from a psychological standpoint, the unemployment rate rose to 9.8%, the worst since last April, and the number of hours worked and hourly earnings were unchanged. The number of unemployed in America now numbers 15.1 million and it’s the number of long-term unemployed that is most distressing, as Fed Chairman Bernanke has been highlighting in his speeches. One area of the economy that continues to get hit is state and local government. New York City, for one, will cut 10,000 jobs over the next 18 months.
No matter, though. Wall Street focused instead on the earlier good data, and stability in Europe (for a few days at least) and on Wednesday and Thursday the market staged its biggest two-day rally since July, and even with Friday’s depressing jobs picture, stocks managed slight gains again.
One of the reasons for the better tone after three desultory weeks was not just Europe but the feeling that Congress will extend the tax cuts and jobless benefits in the next few days, and late on Friday we learned that the Fed is contemplating even more quantitative easing, more free money! It’s Christmastime, after all….
Christmastime is here
Happiness and cheer
Fun for all that children call
Their favorite time of year
Free money for all
We’ll pay for it some fall
But for now enjoy it all
And buy yourself some beer
But I did start out by saying this could yet prove to be an historic week for a good reason and that is the fact President Obama’s debt commission, unlike most other presidential commissions throughout our history, took its job seriously, the composition of it was fair and bipartisan, lending gravitas, and 11 of 18 voted for a broad-based plan to cut $3.8 trillion in spending through a mix of tax increases and cuts in entitlements including Social Security and Medicare.
While 14 of 18 were needed to forward the plan to Congress for consideration, five of the six senators on the panel backed it (though five of the six House members voted no), and there is for once real momentum for actual change. Change we could believe in!!!
Special kudos to Democratic Senators Dick Durbin of Illinois and Kent Conrad of North Dakota, along with Republican Senators Mike Crapo of Idaho, Tom Coburn of Oklahoma and Judd Gregg of New Hampshire. Is the plan perfect? Of course not. But it is a real plan and my guess is President Obama will find the political courage to adopt much of it, for starters, when he gives his State of the Union address.
Just as the British people (forget the protesters you’ve seen) placed their faith in a new government to come up with a real deficit-reduction plan of their own, which led to the backing of the markets there, such would be the case in the U.S.
I choose to be optimistic, that this coming January and through the spring, the new Congress will face facts and reality. I believe all will pick up the mantra, as stated by commission co-chair Erskine Bowles, that “the era of deficit denial is over.”
This can have a huge positive impact on sentiment. Imagine, Congress’ approval ratings may actually rise! Even the president’s!
But lest your editor, and all of you, get too carried away, there are those hot spots out there, and for this reason I’ll continue to sleep with one eye open.
Street Bytes
–After a 3-week lull, the bull market resumed with the Dow Jones up 2.6% to 11382, the S&P 500 up 3.0% and Nasdaq up 2.2%.
–U.S. Treasury Yields
6-mo. 0.19% 2-yr. 0.47% 10-yr. 3.01% 30-yr. 4.31%
The bond market was all over the place this week. We need another few days to see how things are truly shaking out.
China’s purchasing managers’ index for November came in at a strong 55.2 (55.3 by the important HSBC index which is seen as more independent). This is good, people. And I would not be concerned with further tightening measures to come. If growth slows to the 8% range, even 7%, that’s OK. I also maintain that while we could see another month or two of scary inflation data here, food prices will stabilize quickly. [I read stuff most others don’t. Some food prices are already coming down, as I mentioned two weeks ago, and the market is missing this.]
Japan’s October industrial production was down 1.8% from September and unemployment ticked up to 5.1%. Fourth quarter GDP could be down after five straight quarters of (largely tepid) growth.
South Korea’s CPI was up 3.3% in November, though this was better than October’s annualized pace of 4.1%.
*But, far more importantly, on Friday it was announced the U.S. and South Korea had finally reached agreement on a free trade pact. This could be huge, and a big win for Obama, but he’s going to have to win over a new Congress. Yours truly wants the president to succeed on this one.
India’s third quarter GDP was up 8.9%. As Ronald Reagan would have said, “Not bad…not bad at all.” But inflation is still an issue here and, perhaps more important, the pace of foreign direct investment continues to fall.
When I was in Australia last month, I questioned just how well the economy was doing despite the happy talk. It turns out that third quarter GDP was only up 0.2% over Q2, and now there is talk Q4 could be down. Retail sales were down in October despite all the beer I drank there.
Unemployment in Germany was unchanged at 7.5%. But while its retail sales were up a strong 2.3% in October, per my comments above the rest of the eurozone’s were up only 0.5%.
Just a reminder for those who don’t now know the mantra…Spain’s economy is twice the size of Greece, Ireland and Portugal combined, i.e., the reason for all the worry about its fate.
The euro-area CPI for Nov. came in just up 1.9%. There are zero pricing pressures here.
Canada’s third quarter GDP was up 1% on an annualized basis, well off Q2’s 2.2% pace.
–A provision of the Dodd-Frank financial regulation bill was that the Federal Reserve be forced to be more transparent, and so it was that on Wednesday, we learned just who the financial institutions were that saw fit to run to the Fed during the height of the financial crisis. In a nutshell, everyone borrowed from the Fed, as in everyone needed to be bailed out.
“We learn, for example, that the cream of Wall Street received even more multibillion-dollar assistance than previously advertised by either the banks or the Fed. Goldman Sachs used the Primary Dealer Credit Facility 212 times to the tune of nearly $600 billion. Even in Washington, that’s still a lot of money. Morgan Stanley used the same overnight lending program 212 times from March 2008 to March 2009. This news makes it impossible to argue that either bank would have survived the storm without the Fed’s cash.” Even General Electric tapped the Fed for $15 billion, and, given the interconnectedness of the markets, many a foreign bank, such as UBS and Barclays, did as well.
The total amount of the lending was $3.3 trillion at its peak and the Fed brags they haven’t lost a penny. But as the Journal observed:
“While it’s interesting to see a fuller picture of how the Fed intervened in the panic, what the documents don’t tell us is why. Yes, we know, to stop ‘systemic risk.’ But that still doesn’t explain specific acts of intervention that may well have exacerbated the panic.
“For example, why did then New York Fed President Timothy Geithner and Fed Chairman Ben Bernanke believe in March 2008 that an also-ran investment bank, Bear Stearns, was a systemic risk?
“Why did Messrs. Geithner and Bernanke insist on bailing out AIG, despite apparent resistance within the Fed? The central bank still refuses to release a memo to Mr. Bernanke from the Fed staff, which Senator Jim Bunning has said made the case that an AIG bankruptcy was not a systemic risk. The Fed and other regulators have continued to stonewall document requests on these cases.”
As the Journal editorial board concludes, “If there is one overwhelming lesson of the Fed’s bailout files, it should be that we never want to do this again.”
–A new report released by the Congressional Budget Office found that the cost of the Troubled Asset Relief Program, TARP, is now expected to cost the federal government about $25 billion. And, while it’s still described as a $700 billion bailout, due to the fact the financial system stabilized as quickly as it did far less than $700 billion was used. Total TARP outlays are expected to be $433 billion, of which about half has been repaid thus far.
–President Obama did the right thing and froze pay for all federal workers (save the military) for two years.
–I sloughed off the Thanksgiving, Black Friday, Cyber Monday data above but for the archives the average Thanksgiving weekend shopper spent 6.4% more than last year, but then ShopperTrak said Fri.-Sun. sales were basically unchanged (not including online sales).
The National Retail Federation, the only folks I trust, estimate the Christmas shopping season will see a sales rise of 2.3% over last year. In ’09 sales were up 0.4% and they were down 3.9% in 2008. I actually think sales will be closer to up 3.0% (as I exclude the fact my own spending will be down 96.7%….OK, maybe 7.2%…it’s not real scientific).
Anyway, I saw three different figures for Cyber Monday…sales gains of 16% to 20%.
As for Amazon, comScore said its Web traffic was up 25% over the holiday, while Wal-Mart’s was down 1% and Target’s up 9% (in terms of the critical unique visitors ‘metric’…as much as I hate to use the word).
–Among the WikiLeaks disclosures was one pointing to the Chinese Politburo as being behind the hacking of Google’s site…not that we didn’t already know this.
–Forget the buoyant pending home sales data for October. The real estate market still blows.
–While WikiLeaks founder Julian Assange is tracked down by Interpol as a result of charges filed in Sweden for rape and sexual molestation, the site itself was taken offline by its U.S.-based domain name host, EveryDNS.net, which stated that wikileaks.org had become the target of multiple denial of service attacks and “These attacks have, and future attacks would, threaten the stability of the EveryDNS.net infrastructure, which enables access to almost 500,000 other websites.”
EveryDNS.net, it turns out, is owned by Amazon and was under pressure from Sen. Joseph Lieberman’s staff, which called the company asking about the relationship. Amazon said it suspended the link not because of government pressure, but because it decided WikiLeaks was violating the terms of service.
“When companies or people go about securing and storing large quantities of data that isn’t rightfully theirs, and publishing this data without ensuring it won’t injure others, it’s a violation of our terms of service, and folks need to go operate elsewhere.”
It seems WikiLeaks just moved to Amazon’s servers in recent weeks after denial of service attacks had sought to shut it down.
On its Twitter feed, Wiki said if Amazon executives “are so uncomfortable with the First Amendment, they should get out of the business of selling books.” [Charlie Savage / New York Times]
–U.S. car sales rose 17% in November over last year’s pace, raising the seasonally adjusted annualized sales pace to 12.26 million vehicles. During the boom, sales exceeded 16 million annually. For the month, Ford’s rose 24%, GM’s 12%, and Chrysler’s 17%.
But Toyota continued to struggle, down 3.3%, while Honda’s rose 21% and Nissan’s climbed 27%. Heck, Hyundai and Kia saw their sales rise 45% and 48%, respectively.
[GM said its sales in China rose 11% in November from a year ago.]
–Everyone is pointing to Bank of America as being the target of a future Wiki dump after founder Julian Assange made ominous statements in an interview with Forbes that very early in the new year, WikiLeaks would release “tens of thousands of its documents that reveal some sort of unethical behavior,” which could “take down a bank or two.” Assange said he is not releasing the docs until he can carve them up into more digestible pieces. The reason for the Bank of America certainty is that back in Oct. 2009, Assange told Computerworld he had “5GB of data” from BofA.
“One-in-three restaurants will close over the next six months if business conditions don’t change,” said Restaurants Association boss Adrian Cummins.
Cinema, however, appears to be hanging in there, while attendance at football (soccer) and rugby matches is suffering big time.
–Novartis AG announced it would cut 1,400 jobs at its U.S. general-medicines unit, while investment manager State Street is laying off an equal amount.
–The trustee liquidating Bernard Madoff’s firm, Irving Picard, sued J.P. Morgan Chase for $6.4 billion, claiming JPM aided and abetted Madoff’s fraud. In a statement, Picard’s counsel said:
“J.P. Morgan was willfully blind to the fraud, even after learning about numerous red flags surrounding Madoff. JPM was at the very center of the fraud, and thoroughly complicit in it.”
Oh baby…this is great. I’m tired of reading about a “superstar” CEO at JPM myself. You rock, Picard!
–It turns out the Qantas Airbus A380 superjumbo incident was far more serious than first thought. After the explosion in the engine, which Australia’s Transport Safety Bureau confirmed was caused by an oil leak, “The aircraft would not have arrived safely in Singapore without the focused and effective action of the flight crew,” a report said.
The five pilots on board (with a combined 72,000 hours of flight experience) had to struggle with more than a dozen system errors and warning lights flashing all over the place.
–China’s imports of gold have risen fivefold this year, China being the world’s largest producer and second-biggest user, this as gold will register its 10th annual gain. China’s investment demand may reach 150 tons this year, according to the World Gold Council, vs. 3-4 tons 10 years ago, which is a rather staggering comparison.
–But in Hong Kong, the territory has been wracked by a highly sophisticated gold scam that has hit the retail sector. Some estimate as much as 2,000 ounces, or $2.28 million worth of fake gold, has infiltrated the market. The counterfeiters appear to be using pure gold coating that then masks an alloy comprised of metals such as osmium, iron and nickel. But none of the fake stuff has made it into the key gold bar market.
–While another climate summit is underway down in Cancun, Europe is suffering through an historic early blast of winter that is doing a number on some economies. Many of the busiest airports were forced to close for long stretches. Britain had its earliest widespread snowfall since 1993 as Dec. 1 was the coldest in the U.K. on record. One newspaper in Germany said it was the coldest December 1 there in several hundred years.
But, the World Meteorological Organization said global temperatures will probably be the warmest on record in 2010. Good thing these folks aren’t standing on a chair in a pub in London making this proclamation and instead doing so from Cancun.
–The New York Post reported that the Port Authority “is working on a hush-hush project to terror-proof the four PATH subway tunnels running under the Hudson River to thwart a potential catastrophic bombing that could flood the system.” Defense contractors are installing reinforced metal plates and massive flood-prevention gates. You don’t want to know how quickly a blast today could kill all.
–In another sign that China’s technical expertise is gaining rapidly and that it is not just a low-cost producer of shoddy products, a test train of its yet-to-be opened high-speed rail link between Beijing and Shanghai hit a record speed of 486 km per hour (302 miles per hour). While French and Japanese trains have hit higher speeds, 357 and 361 mph, the China train is evidently the highest speed for an “unmodified conventional commercial train.” The line will open in 2012 and cut the time between Beijing and Shanghai in half to five hours. [South China Morning Post]
–Sands’ application to develop a multibillion-dollar casino resort on a massive plot of land in Macau was denied. Sands China has already spent $102 million in pre-construction work on the site, which it has been planning to develop for at least the past five years, but the financial crisis put everything on the back burner and now the government has made its surprise move. Rival Stanley Ho’s family enterprise is evidently trying to get the property. Ho had the first casino in Macau and when I went to his place about 8 years ago I was amazed by the women at the….Anyway, Sands does have other projects in Macau that it is proceeding with.
–Update: In typical city/local municipal fashion these days, Newark did layoff 167 police officers because the union refused to make any concessions. A similar story is unfolding in Jersey City. And then I saw where in Los Angeles, the police union, get this, doesn’t want the city to hire new officers because the existing ones want to keep their overtime!
–Only 44% of households have an individual life insurance policy and 30% have no individual or employer-provided life insurance, according to a new survey by an industry-sponsored group; this even as term life premiums are far lower than a decade ago.
–I’ve been trying to map out my travel for next year as early as possible and it is possible to get inexpensive airfares. For instance I’m heading back to Iowa for the state fair in August to see some of the early presidential contenders, as I did in 2007, and I obtained a round trip from Newark for just $286, which is darn good for a market that is far from heavily covered. So act fast!
–California Democratic Rep. Anna Eshoo said a piece of legislation she is pushing through Congress is the most popular in her 18 years in Congress. What is it? Regulating the volume on television, particularly when it comes to commercials where advertisers often raise it to distinguish their ‘noise’ from the competition.
–My portfolio: I blew out my natural gas ‘calls’ at a substantial loss, but the reason was I wanted to offset a far larger gain as a result of my uranium play. I told you earlier I sold the first third of the latter at a 60% profit, and this week sold the 2nd third for a 200% gain ($2.40 to $7.20, for those looking for clues as to which stock it is). I just have trouble being a pig, but I might hold the last third until well into next year now that the company has commenced actual production. This has been one of the two or three best surprises of my investment career. [It finished the week at $6.70.] Back to nat gas, I am holding my straight UNG play.
For those of you playing along with moi re my China/Fujian stock, I am not in the least bit surprised at the lack of activity since they reported earnings. And I feel as if I have to keep repeating that I might be holding this one well into 2012. As long as the overall China economy continues to grow at a respectable rate, this stock will do just fine and is now trading at an annualized p/e of less than 5. [Yes, I trust the numbers having broken bread with the CFO.] Finally, I’m thinking of heading back to China in March but that’s March Madness time! What to do? I found out this week that a contact I have on other investments is involved in the travel industry play I’ve referred to, one that I want to personally visit in Shenzhen before I invest more heavily in it, but I don’t want it to run away from me either.
–So I watched the “60 Minutes” story on “Spider-Man: Turn Off the Dark” and thought, what the hell, I’ll get some tickets. As soon as the story was over I was online and…it took me like 20 minutes to get through and complete the sale. I saw an NBC story later in the week that sales exploded after the piece. Oh, by the way, the ticket prices are indeed rather high.
— “Rudolph the Red-Nosed Reindeer” is on Monday night, 7:00 PM, ABC Family channel. Now why would I bring this up? Because this year, more than ever, it’s all about Burl Ives who sings of ever-rising commodities. All together now…
Silver and gold
Silver and gold
Ev’ryone wishes
For silver and gold
How do you measure
It’s worth?
Just by the pleasure it
Gives here on Earth
Congratulations to all those who have been playing the gold and silver multi-year rallies. But be careful. Try not to be a pig…oink oink. And, heck, out of respect, and wealth, you really should watch Rudolph. I’m going to…and I didn’t even invest in the stuff. [I’m a sucker for the plight of the island of misfit toys.]
Foreign Affairs
North Korea: China has refused to condemn North Korea’s attack on a southern island and wouldn’t favor any side, from its public statements that it wants to help resolve the dispute as a “responsible great power.” China prevented the UN Security Council from censuring Pyongyang’s actions.
“Our general goal is for all sides to exercise calm and restraint and to make every effort to avoid such incidents recurring,” China’s foreign minister said.
But on Friday, South Korea’s choice to be defense minister following the resignation of the last one, told a parliamentary confirmation hearing that any further North Korean aggression will be met with airstrikes. There is a reason for the tough talk. It’s because the response of the South Korean military to the North’s artillery barrage that killed two soldiers and two civilians was pathetic.
For example, the North fired 170 rounds but it took 13 minutes for South Korea to respond. One report I read said the military had only six K9 self-propelled howitzers on the island, while North Korea had an estimated 1,000 artillery pieces in the area. And, only three of the guns were able to fire back. Two malfunctioned owing to software failure and one jammed before firing, according to London’s Sunday Times. A radar system also failed. All this while South Korea spends about $20 billion a year on defense. The new defense chief talks tough, and said in his hearing it would be difficult for North Korea to conduct full-scale war because of its weak economy, but who’s to say North Korea wouldn’t totally kick the South’s butt? Seoul could be annihilated in the first 15 minutes. In fact, as I write this, I can’t help but bring up the unthinkable. That North Korea will do so much early damage in a war that the only way to stop it will be for the U.S. to launch a nuclear attack…and then you bring up the debate I first noted about 7 or 8 years ago. It’s easy to talk about nuking the North, but where does the fallout go? Aside from the physical and human toll on Seoul’s population, for example, how much more of South Korea would be rendered uninhabitable for decades? As I said when I first brought this topic up, I sure hope the U.S. has war-gamed it and studied the wind patterns, etc. Split second decisions are going to have to be made. And, of course, you have to predict what China’s response would be.
Lastly, and equally distressing, we have zero intelligence when it comes to Pyongyang and it’s impossible to know just who the generals are behind Kim Jong-eun (or –un) and what they will do when the father dies. We have absolutely no idea. Do the generals accept the son’s leadership, or, as seems more likely to me, do they just plug him in the back of the head? But if they do accept his leadership, of course he has to show the generals how tough he is. It’s an incredibly scary situation and the South has zero options.
Israel/Iran: The WikiLeaks cables at least buttressed Israel’s case for action against Iran as leaders in Saudi Arabia, the UAE and Egypt referred to Iran as “evil,” an “existential threat” and a power that “is going to take us to war.” In various cables, Saudi King Abdullah repeatedly called for Washington to attack Iran and destroy its nuclear program, and in 2008, one of the king’s envoys told U.S. Gen. David Petraeus to “cut off the head of the snake.”
The feelings of Saudi and Egyptian leaders have long been well known, but the leaks become a public expression of what heretofore were closed door pronouncements.
Separately, Iranian President Ahmadinejad admitted the country’s uranium enrichment program was hit by a software virus.
“They were able to disable on a limited basis some of our centrifuges by software installed in electronic equipment,” he said. “Our specialists stopped that and they will not be able to do it again.” New talks on the nuclear program are slated for this coming week in Geneva. No doubt the topic of the Bushehr power plant will be part of the discussion as Iran said it would become operational in the next two months.
And then you have the case of the two Iranian nuclear scientists, one killed and another wounded while in their cars on the streets of Tehran on Monday. Assailants on motorcycles attached magnetized bombs to the cars of the two as they drove to work with the devices detonating seconds later. At least two other nuclear scientists have been killed in recent years. President Ahmadinejad blamed Israel and the West, and then on Thursday, Iranian intelligence officials said they had some suspects that had cooperated with the CIA, Mossad and MI6, upon which Church Lady said: “How conveeeenient.”
Separately, the WikiLeaks documents reveal just how tight the Chinese-Iranian relationship is in terms of sharing both nuclear and missile technology. Give me a reason to be optimistic about the world and I’ll gladly take it.
But back to Israel, the nation is in a state of mourning over a horrific tragedy on Thursday. A bus carrying dozens of prison guards participating in a rescue mission was not able to escape the flames of Israel’s biggest forest fire in history. 41 died. The guards were being sent to help evacuate three prisons in the flames’ path. Israel is receiving help in fighting the fire from the likes of Russia, Greece, Spain, Cyprus and even Turkey.
Lebanon: Israel’s Chief of General Staff Lt. –Gen. Ashkenazi said there is a small chance Hizbullah will act against Israel upon publication of the Special Tribunal for Lebanon’s (STL) findings on the 2005 assassination of former prime minister Rafik Hariri. For its part France said it would continue to support the STL as French President Sarkozy met with Lebanese Prime Minister Saad Hariri. Recently, a leading Hizbullah leader told the French ambassador to Lebanon that his party could not guarantee the safety of United Nations forces in Lebanon (UNIFIL) if the STL indictment implicates Hizbullah members. My contact in Beirut, however, maintains an indictment may not be as imminent as some think, as least one that meets the requirements of the judge who would then have to approve a move onto trial.
Afghanistan: “60 Minutes” had a piece last Sunday on the problems faced by the United States and others in training the Afghan police force and then a day later, an Afghan being trained for border police duty killed six of his American trainers before being killed himself. The Taliban claimed responsibility. It was at least the fifth incident of its kind.
On the WikiLeaks front nothing is new, it’s just the preponderance of documents laying out the massive scale of corruption throughout the Afghan government, as well as the U.S. having problems with Britain’s military effort, including one by a U.S. general who said British forces had “made a mess” of counter-narcotics efforts by employing the “wrong” tactics.
And in a poll by USA TODAY and Gallup, only one in five Americans agree with President Obama’s new 2014 timetable for completing the withdrawal of combat forces. Four in ten say the troops should be withdrawn sooner. 39% now see sending troops to Afghanistan as a mistake. In November 2001 the figure was 9%.
With the corruption allegations and the latest embarrassment over peace talks, where the U.S. and Britain were snookered by a fake Taliban leader, it’s no wonder that respected politicians such as Pennsylvania’s Democratic Gov. Ed Rendell say, “I question the value of us being there at all….I’m not sure 10 years from now and with all that money invested, things are going to be measurably better.”
[As for Obama’s trip there Friday, what the hell was that all about with all the pressing issues back home? I want to give him the benefit of the doubt, but my initial reaction was that he didn’t do it closer to Christmas because he didn’t want to screw up his own vacation plans. Otherwise, I need to adopt my ‘wait 24 hours’ discipline.]
Pakistan: As described by Alex Rodriguez of the Los Angeles Times, among the WikiLeaks documents is “a chilling Feb. 24 State Department cable…a Russian Foreign Ministry official laid out concerns about the safety and fate of Pakistani nuclear facility workers ambushed by Islamic militants in the last few years.
“ ‘Some were killed, and a number were abducted, and there has been no trace seen of them,’ the cable reported Russian official Yurij Korolev as saying during a December 2009 meeting of U.S. and Russian diplomats and security officials in Washington.
“The cable also expressed concerns that some Pakistani nuclear workers may share extremist religious beliefs similar to those held by Islamic militant groups and could be susceptible to recruitment.
“According to the cable, Korolev acknowledged that the U.S. and Pakistan together have established reliable layers of physical protection and security at the country’s nuclear and missile sites. But, he added, ‘there are 120,000 to 130,000 people directly involved in Pakistan’s nuclear and missile programs, working in these facilities and protecting them…Regardless of the clearance process for these people, there is no way to guarantee that all are 100% loyal and reliable.’”
Russia: The WikiLeaks disclosures may have severely damaged U.S.-Russian relations as Russia was described in the cables as a virtual “mafia state” (true) and a nation rife with corruption, bribery and protection rackets (also very true). Prime Minister Vladimir Putin told CNN’s Larry King the leaks were “no catastrophe” but you know behind the scenes the Kremlin is saying something much different.
One cable, for example, details the claims of Spanish prosecutor Jose “Pepe” Grinda Gonzales who says when it comes to Russia, Belarus and Chechnya, “one cannot differentiate between the activities of the Government and OC (organized crime) groups.” Judge Grinda had led a long investigation into Russian organized crime in Spain that led to more than 60 arrests.
A U.S. cable from the embassy in Madrid talks about the “unanswered question” of the extent to which Putin is tied to the mafia and that Putin had to have known about the operation to murder former Russian security agent Alexander Litvinenko in London in 2006 (also true).
The U.S. ambassador to Russia submitted a damning report on corruption in Moscow.
“Criminal elements enjoy a (protection racket) that runs through the police, the federal security service, ministry of internal affairs and the prosecutor’s office, as well as throughout the Moscow city government bureaucracy,” wrote John Beyrle. Again, all of this is true.
U.S. Defense Secretary Robert Gates said in another cable that “Russian democracy has disappeared.” True. Putin said Gates was “deeply misled.” Not true. [BBC News]
Meanwhile, as the debate over the New START nuclear missile treaty continues, U.S. officials believe Russia has moved some of its short-range tactical nuclear warheads to facilities close to NATO allies, which would run counter to pledges made in 1991 to pull these same weapons back from and reduce their numbers. It’s believed Russia has many times the number of such tactical nukes as the U.S. does. The White House has told congressional leaders that the 1991 pledges weren’t legally binding and were difficult to verify. Some see New START as a stepping-stone to a deal to reduce tactical nukes.
But in the same interview with Larry King, Putin said Russia would have to expand and update its nuclear arsenal if Russia can’t reach an agreement with NATO on a new missile defense system, as well as New START.
And then you have the World Cup. On Thursday, Russia won the right to hold the event in 2018, while Qatar was selected for 2022. This was an unmitigated disaster all around.
“International soccer’s governing body, FIFA, makes the United Nations seem like a model – well, almost – of transparency and good governance. Even the International Olympic Committee, no stranger to corruption and foul play, benefits by comparison.
“The world got another close look at FIFA yesterday when the 2018 and 2022 World Cup bids were awarded in a conclave of the soccer boyars in Zurich. Their secret vote came amid allegations of kickbacks, bribes and collusion.”
During the week, the London Times and BBC had various reports on FIFA committee members and their willingness to sell votes. Two of the committee members were then barred from voting. The BBC said three board members took bribes in the 1990s from a sports marketing firm. Needless to say, London’s 2018 bid suffered with the disclosures. The Brits were furious because they easily had the best technical presentation, but FIFA President Sepp Blatter, when speaking of both Russia and Qatar, said, “We go to new lands.”
In the first round of voting, England received just two votes out of 22. Andy Anson, chief executive of England’s bid team, said: “Clearly politics played a part. People who promised us our vote obviously went the other way.” Anson added that when it came to both winners, “The two bids with the worst technical reports won.” London Mayor Boris Johnson said: “FIFA can’t last in its current form.”
Former football star Marc Wilmots, representing the 2018 Belgium-Netherlands bid, said: “Russia is a political choice and Qatar is an economic choice. You can say that to some extent the sport has been the loser with the decision for these two World Cups.”
As for Vladimir Putin, he did not travel to Zurich for the vote and days before was blasting the process and accusing England of trying to undermine it, an apparent reference to the news stories by the London Times and BBC…representatives of a free press, it just has to be stated.
But upon winning the right to hold the Cup in 2018, Putin said, “This decision shows that Russia is trusted.” Not true.
Turkey: Aside from the WikiLeaks disclosures damaging Washington-Moscow relations, they have also done a number on U.S. relations with Turkey as some of the cables accused Turkish Prime Minister Recep Erdogan of corruption, including the allegation Erdogan had various secret Swiss bank accounts.
“The United States is responsible for those diplomats’ false claims and their smears,” he said.
Some in Turkey believe the cables were an American fabrication, a dirty tricks campaign against Erdogan for his criticism of U.S. policy. The prime minister does now have a problem with his party base, as it had staked its reputation on being free of corruption.
Egypt: President Mubarak’s ruling party cleaned up in parliamentary elections, with run-offs in a second round Dec. 5. The opposition Muslim Brotherhood and rights groups said the vote was incredibly fraudulent, with the White House citing “worrying” problems with restrictions on poll monitors, the press and freedom of speech.
Reuters interviewed one voter, Hassan Said, a chemist, who said he tried to vote for the Brotherhood candidate, “but a state security officer watched him fill out the ballot and said he must choose the (ruling party) NDP candidate. ‘We resisted, but then he said: ‘If you don’t vote like I tell you, you will not leave this polling station,’’ said Said.”
Brazil: With the World Cup being held in Rio de Janeiro in 2014, followed by the 2016 Olympics, the government is under immense pressure to clean out the drug gangs or negative publicity will keep tens of thousands of tourists away. So it shouldn’t be a surprise that officials claimed victory in an intense campaign to take over a key gang stronghold. More importantly will be what kinds of headlines we see coming out of Rio in, say, early 2013 when people start seriously contemplating attending the World Cup. [Don’t look here, sports fans.]
South Africa: Robyn Dixon of the Los Angeles Times had a depressing article on the water situation in Johannesburg. To wit:
“The spring, just over 20 miles northwest of Johannesburg, flows blood red. It is toxic, highly acidic and full of heavy metals, so nasty that newly weaned impala and other animals in the Krugersdorp Game Reserve downstream can’t drink the water – and some of them die of thirst.
“The water, a poisonous legacy of the gold mining industry, is dead. Not one living organism survives in it.
“Millions of gallons of the same kind of toxic water lie underneath Johannesburg, a city of nearly 4 million people, and it’s rising 50 feet a month.
“The technical term is acid mine drainage. If nothing is done, subterranean parking garages will fill with the toxic red water in about two years’ time. Tunnels for electrical cables and underground railway stations will flood. And unnatural crimson streams will spring from the ground across the suburbs to the east of Johannesburg as the rising water escapes.”
Dixon writes that while the South African government has resolved to act, it could be too late.
Random Musings
“While this whistle blowing has nothing to do with the right to know, with access to information, in our lingo, it still brought to light the most candid, albeit shocking, revelations about the inner thinking of the U.S. on its relations with the countries of the world.
“A first question that comes to mind after this debacle is how a highly sophisticated, high-tech nation like the U.S. can allow itself to be put in the embarrassing situation of having to explain and defend itself against allies and enemies alike.
“How can the most powerful country on Earth fall into a trap that requires it to engage in damage control over something that should not have happened in the first place?”
“This disclosure is not just an attack on America’s foreign policy interests, it is an attack on the international community: the alliances and partnerships, the conversations and negotiations that safeguard global security and advance economic prosperity.”
“The international clamor and juicy gossip surrounding the WikiLeaks fiasco are obscuring critical facts. Sweep away the smoke to see the Big Picture.
“First, the Obama administration did nothing to stop this disaster when it had a chance. The almost-certain leaker, Army Pfc. Bradley Manning, was hostile to the military as far back as January. That month, he wrote on his Facebook page, ‘Bradley Manning didn’t want this fight. Too much to lose, too fast,’ according to London’s Daily Telegraph.
“It reports that in May, serving at a base near Baghdad, he changed his status to ‘Bradley Manning is now left with the sinking feeling that he doesn’t have anything left.’
“Five days later, Manning, openly gay and half-British, wrote that he was ‘livid’ after being ‘lectured by ex-boyfriend.’ He was arrested that month for leaking a video of a helicopter attack, and is still being held. By then, he already had downloaded 250,000 documents and given them to WikiLeaks….
“Manning is not a whistleblower. He is a traitor and should be charged with treason. He betrayed his nation in a time of war.
“Second, Secretary of State Hillary Rodham Clinton was derelict in not trying to stop the release. It was not until Saturday, when it was well-known the documents were about to be published, that a State Department lawyer wrote to WikiLeaks founder Julian Assange and told him to stop. That’s pathetically little and late.
“Clinton now calls the release ‘illegal’ and says publication ‘puts people’s lives in danger, threatens our national security and undermines our efforts to work with other countries.’
“Granted – so why didn’t she move hell and high water to block it? Her failure to act is a major black mark against her.”
“It is understandable for the administration to underplay the significance of the WikiLeaks State Department cables. But while it is wise not to go into a public panic, it is delusional to think that this is merely embarrassing gossip and indiscretion. The leaks have done major damage.
“First, quite specific damage to our war-fighting capacity. Take just one revelation among hundreds: The Yemeni president and deputy prime minister are quoted as saying that they’re letting the United States bomb al-Qaeda in their country, while claiming that the bombing is the government’s doing. Well, that cover is pretty well blown. And given the unpopularity of the Sanaa government’s tenuous cooperation with us in the war against al-Qaeda, this will undoubtedly limit our freedom of action against its Yemeni branch, identified by the CIA as the most urgent terrorist threat to U.S. security.
“Second, we’ve suffered a major blow to our ability to collect information. Talking candidly to a U.S. diplomat can now earn you headlines around the world, reprisals at home, or worse. Success in the war on terror depends on being trusted with other countries’ secrets. Who’s going to trust us now?….
“(But) what is notable, indeed shocking, is the administration’s torpid and passive response to the leaks. What’s appalling is the helplessness of a superpower that not only cannot protect its own secrets but shows the world that if you violate its secrets – massively, wantonly and maliciously – there are no consequences….
“At a Monday news conference, Attorney General Eric Holder assured the nation that his people are diligently looking into possible legal action against WikiLeaks. Where has Holder been? The WikiLeaks exposure of Afghan war documents occurred five months ago. Holder is looking now at possible indictments? This is a country where a good prosecutor can indict a ham sandwich. Months after the first leak, Justice’s thousands of lawyers have yet to prepare charges against Julian Assange and his confederates?….
“And where are the intelligence agencies on which we lavish $80 billion a year? Assange has gone missing. Well, he’s no cave-dwelling jihadi ascetic. Find him. Start with every five-star hotel in England and work your way down.
“Want to prevent this from happening again? Let the world see a man who can’t sleep in the same bed on consecutive nights, who fears the long arm of American justice. I’m not advocating that we bring out of retirement the KGB proxy who, on a London street, killed a Bulgarian dissident with a poisoned umbrella tip. But it would be nice if people like Assange were made to worry every time they go out in the rain.”
Robert Baer, former CIA case officer / Financial Times
“(The) truth is that the damage to American credibility and diplomacy is incalculable….
“You have to wonder now whether Saddam wasn’t right, for it is a failing of America’s bureaucracy that has seen its diplomatic secrets betrayed through WikiLeaks. We may have already surmised that the Gulf sheikhdoms see Iran as a bigger threat than Israel. But for this view to be made public is another matter.
“We cannot of course put the toothpaste back in the tube; the credibility of the state department as a reliable interlocutor has evaporated, and no doubt for a long time. While it figures out how to contain future damage – by limiting distribution of its cable traffic, and physically locking hard drives to prevent documents being downloaded on to CDs and thumb drives – somehow we have to reassure our friends that we can keep a secret, especially those that are vital to their survival.”
You know who is really scared about WikiLeaks? China. Think about it. Imagine its people learning of the inner workings and dirtiest secrets of its government, including the treatment of dissidents. So I read with amusement an editorial from a government mouthpiece, Global Times, that read in part:
“(It) is worth noting that most of the materials that were exposed are sensational in nature, yet minor pieces of information, and the negative effects of their release can pretty much be mitigated by some remedial work….
“WikiLeaks claims that it has a large number of volunteers working all over the world with access to confidential information for free. The powerful and ubiquitous CIA has not been able to identify the source of the sudden leakage of diplomatic secrets. It sounds more or less unconvincing, Julian Assange, founder of WikiLeaks, is still on the run, despite his high public profile.
“Is there some tacit understanding between the website and the U.S. government? It may be worth asking. And what does it mean to other countries that are on the radar screen of WikiLeaks?
“If granted real authority, once WikiLeaks sets its sights on other countries, the fallout could be drastic. Leaked information could severely damage the social stability of nations that are not able to handle the release of so much sensitive information.
“An information tsunami is flooding every country, but different countries have different abilities to control and absorb it.
“Developed countries, especially the U.S., dominate the global flow of information at the moment.
“Countries like China, despite their rising status in the information world, must have a line of defense against a hurtful information campaign.”
Pretty funny, don’t you think? Oh yeah, China is scared to death. “Leaked information could severely damage the social stability of nations….” Ergo, you can be sure China is either currently behind some of the denial of service attacks, or will not hesitate to take WikiLeaks down in the future.
Lastly, there has never been a clearer modern case of treason than Bradley Manning’s. Upon conviction, please put him to death. [Instead he’ll receive life.]
“Charlie Rangel stood briefly before the House of Representatives late yesterday, recalling his service on a Korean battlefield 60 years ago and attempting to put some perspective to his contemporary difficulties.
“ ‘Bugles blared and screams were heard and I had no thoughts that I would be able to survive. But God gave me the strength not only to survive…[but to] lead 40 men to safety.
“ ‘I tell you that story not for sympathy but to let you know that at that time in every sense I made up my mind that I could never complain to God for any event that occurred in my life and that I would dedicate my life…to [improving] the quality of life for all Americans.’
“History will judge whether that ambition was achieved.
“But it remains that presently the chamber voted 333-79 to censure the 40-year House veteran for a series of ethical violations – and that speaks for itself.”
No doubt there were some positives in Charlie Rangel’s life and House career, but I watched the proceedings Thursday on C-Span and was appalled by some of what was said by his apologists. No one ‘gets it,’ I mused. What Rangel was found guilty of by the Ethics Committee and then the full House was simple abuse of power, including failure to pay incomes taxes for 17 years. I marvel at his defense where he states “at no time did I seek to enrich myself.” What am I missing? After the censure, Rangel was his old arrogant, obnoxious self as he said the vote “reflects the political tide.”
–Connecticut Democratic Sen. Christopher Dodd said farewell after 30 years in office, stating in part:
“Intense partisan polarization has raised the stakes in every debate and on every vote, making it difficult to lose with grace and nearly impossible to compromise without cost. Americans’ distrust of politicians provides compelling incentives for senators to distrust each other, to disparage this very institution and disengage from the policy making process.”
I think I’m down myself to about 3 senators that I trust. Lugar, err, Lugar, and, err, Lugar.
–Steven Hayes, the man sentenced to die by lethal injection for the brutal 2007 Connecticut home invasion that captured this area’s attention, is slated to be executed on May 27, 2011. Alas, I doubt the state will carry through the sentence. Believe me, I understand the issues with the death penalty. Merck’s new CEO once got a man off death row who had been wrongly convicted. But there are other cases where it’s clear the guilty should die. There is a right way to do this. God willing, I swear someday I will base a political campaign on this single issue and win. [I’ll also be excommunicated from my church.]
–“Hamsters subjected to simulated jet lag showed diminished neuron production compared with healthy specimens, according to a new study. They also failed a simple learning test. For nearly a month after their schedules stabilized, the hamsters were unable to learn and recall which of two spaces contained a running wheel [a test that healthy animals ace.]” [Wall Street Journal]
I can tell you from recent personal experience that I would have failed this test as well.
–Huge debate on how much vitamin D we should be taking as a report from the Institute of Medicine, which is part of the National Academy of Sciences, tripled the recommended amount to 600 international units from 200 IUs as set back in 1997.
However, that is nothing compared to a ton of new research that shows people routinely need to consume 2,000 to 3,000 IUs daily, so the Institute of Medicine’s recommendation was highly disappointing.
–Finally, baseball great Ron Santo died. Boy, I have written a ton about this man. I may be a Mets fan but I respected this Cubbie big time. Way back in May 2002, I wrote in another column I do:
“Sports Illustrated’s Rick Reilly has a touching piece on a ballplayer who I have long argued should be in the Hall of Fame….Third baseman Santo, who played 14 of his 15 seasons with the Cubs, certainly has the career #s to warrant induction.”
I then noted an 8-year stretch, 1963-70, when Santo had at least 25 homers and 94 RBI each season at a time when 20-90 was big.
“Of course, there is far more to the Ron Santo story, which is why he should have been selected for the Hall of Fame long ago. You see, Santo found out at age 18 he had diabetes and for most of his career he kept it a secret, with only a few teammates knowing. Santo used to give himself insulin shots in the bathroom and he had to constantly monitor his body, particularly during games.
“The last year or so has been rough on Ron, who continues to do color on Cubs broadcasts. Recently, he had his right leg amputated as a result of complications from his disease, but it hasn’t slowed him any.
“ ‘I just appreciate being alive,’ he told Reilly. ‘Every day is a gift.’”
That was 2002. Santo would lose his other leg, yet keep working. I have an autographed Ron Santo jersey that by chance I was admiring just about a week ago. Got it from a former major leaguer, Jay Johnstone, who some of you may be familiar with (a good guy in his own right).
I’m not trying to win a Pulitzer and so I can’t express this any other way, but, boy, it really sucks that the great Ron Santo didn’t get the Hall of Fame nod he deserved while he was alive. No one loved the sport more than he did. This, friends, was a great man. RIP.
Pray for the men and women of our armed forces, and all the fallen.
Gold closed at $1406…highest weekly close this year
Oil, $89.19…ditto…and this is not good for the overall economy
Returns for the week 11/29-12/3
Dow Jones +2.6% [11382]
S&P 500 +3.0% [1224]
S&P MidCap +3.2%
Russell 2000 +3.2%
Nasdaq +2.2% [2591]
Returns for the period 1/1/10-12/3/10
Dow Jones +9.1%
S&P 500 +9.8%
S&P MidCap +22.0%
Russell 2000 +20.9%
Nasdaq +14.2%
Bulls 55.4
Bears 21.8 [Source: Chartcraft / Investors Intelligence]
And Happy Birthday, Mom!!!
Brian Trumbore
