Educate Yourself

Week in Review
For the week 2/6/2006 - 2/10/2006
Brian Trumbore
President/Editor, StocksandNews.com

Last fall, as Paris and its suburbs were burning amidst Islamic violence, I had the following thoughts.

"The far-right's recruiting efforts have been bolstered this week, while the Muslim community will increasingly turn to radical leaders of its own."

"In Europe?virtually every nation has a (far-right, anti- immigrant party) that regularly garner(s) 10%+ and their numbers threaten to increase exponentially?.

"This is bad news for Europe, as it will only heap fuel on the fire of the Islamic neighborhoods that are now listening to their own merchants of hate with renewed dedication."

While the focus today has been on the violence in Damascus, Tehran and Beirut, the even bigger picture is exceedingly bleak. Whether it's a tragic ending to a police chase, as was the case in Paris, or some idiotic, if insensitive cartoons, it only takes a spark these days to have disastrous consequences. Some thoughts.

"Last week, as protests escalated in the Middle East, European newspapers in Spain, France and Germany rushed to republish the cartoons, claiming they were defending freedom of speech. But there is no threat to freedom of speech in Europe - no newspaper was prevented from publishing the cartoons, and demands by Muslims that European governments impose such censorship were quickly dismissed. In reprinting the drawings the European papers demonstrated not their love of freedom but their insensitivity - or hostility - to the growing diversity of their own societies. It is just such attitudes, more than any insult to Islam, that have inspired much of the Muslim resentment toward the West, and the growing anger of Muslims who live in Europe."

"There's plenty to criticize in the failed civilization of Middle Eastern Islam. But the European press avoids the serious issues. They could've run cartoons about al-Zarqawi's savagery, al- Jazeera's hypocrisy or the oppression of women. Instead, they attacked a religion's heart. Gratuitously.

"Those cartoons said more about Europe's own arrogance toward religious believers and intolerance of faith than they do about Islam. Today's Europeans consider religious belief as beneath their sophistication. They've come so far that they no longer grasp how intense faith can be - and how furiously the faithful can react.

"Through their clumsiness and vanity, the Europeans have made this an all-or-nothing issue. What began as a nasty little Danish problem has been globalized. If the Europeans appear to capitulate now, it will only encourage Muslim extremists around the world.

"Wasn't it those oh-so-clever Europeans who complained about a heavy U.S. hand in the Middle East? Who made excuses for 9/11, the Madrid bombings, street murders, terrorist kidnappings and beheadings, the London bombers, French suburbs aflame and no end of hate speech? Then treated Islam the way a dog treats a fire hydrant?...

"The Arab world, especially, is a pile of tinder waiting for random sparks. And the alacrity with which regional governments and Islamist groups have moved to blow up the cartoon issue into a conflagration is as tactically astute as it is despicable."

It all started last fall in Denmark. In hindsight, Prime Minister Anders Fogh Rasmussen merely had to meet with some Muslim representatives when the cartoons were first published in September. But he refused to do so, as such a move may have jeopardized his ruling coalition; one of whose members is the far-right Danish People's Party, which in turn describes Islam as a terrorist religion and has called the Middle East an inferior civilization. The DPP's leader wrote in a newsletter this week:

"The seeds of weeds have come to Denmark - Islamists and liars - who have fueled the lethal fire through their tour of the Middle East. We will deal with them." [London Times]

"Some people are speaking with two tongues. The Government watches the news circulated in Arabic countries very carefully so we can catch these false stories and correct them immediately."

And no doubt there is a ton of garbage being flung around by the other side, such as the television shows that have been spewing hate for an entire generation. U.S. Secretary of State Condoleezza Rice correctly pointed out that the violence has Syria's and Iran's fingerprints all over it. How else to explain the government in Damascus allowing the Danish and Norwegian embassies to be trashed (along with Chile's, accidentally)? How else to explain Tehran standing by while the Danish embassy there was attacked? And how else to explain the fact those arrested for the violence against the Danish embassy in Beirut were largely Syrian nationals?

But I have to bring up a front page story from the New York Times the other day that mentioned the December Organization of the Islamic Conference I discussed last week; the one where Saudi King Abdullah gave an important speech blasting terrorism.

The Times piece detailed how Islamic militants, snubbed by Prime Minister Rasmussen in September, took their grievance to this Muslim gathering and it was there that the anger coalesced into a communiqu? which read in part that the West was using "freedom of expression as a pretext to defame religions."

But the Times failed to say anything about the rest of that meeting, including Iranian President Ahmadinejad's diatribe against Israel and King Abdullah's scolding of the extremists.

Last week I pointed out how President Bush missed a crucial opportunity in his State of the Union address in not praising Abdullah; choosing instead to lump Saudi Arabia with the other "unstable" nations of the region.

"The U.S. appealed to Saudi Arabia Monday to exercise its influence in the Muslim world to ease rising tensions over the publication of cartoons?

"State Department spokesperson Sean McCormack said Saudi Arabia and other powerful actors in the region should 'take a leadership role in lowering tensions.'"

Sometimes I just want to scream, and if most Americans fully understood what was going on they would to.

And to those who think Lebanon is a democracy (see my comments on Thomas Friedman below), it's a loose one at best, in the mold of the new Palestinian government.

Having been to Beirut less than a year ago and having traveled to Hizbullah territory, I can picture the scene in Beirut this past week when Hizbullah leader Nasrallah told a crowd of at least 500,000:

"Defending the prophet should continue all over the world. Let Condoleezza Rice and Bush and all the tyrants shut up. We are an Islamic nation that cannot be silent when they insult our prophet or our sacred beliefs.

"Today, we are defending the dignity of our prophet with a word, a demonstration, but let Bush and the arrogant world know that if we have to, we will defend our prophet with our blood, not our voices." [Daily Star]

"You (militant Islam) frame the contrast between your world and our world more bluntly than we outsiders would ever dare to. In London the protesters held signs reading 'Freedom Go to Hell,' 'Exterminate Those Who Mock Islam,' 'Be Prepared for the Real Holocaust' and 'Europe You Will Pay, Your 9/11 Is on the Way.' In Copenhagen, an imam declared, 'In the West, freedom of speech is sacred; to us, the prophet is sacred' - as if the two were necessarily opposed.

"Our mindset is progressive and rational. Your mindset is pre- Enlightenment and mythological. In your worldview, history doesn't move forward through gradual understanding. In your worldview, history is resolved during the apocalyptic conflict between the supernaturally pure jihadist and the supernaturally evil Jew.

"You seize on any shred - even a months-old cartoon from an obscure Danish paper - to prove to yourself that the Jew and the crusader are on the offensive, that the apocalyptic confrontation is at hand. You invent primitive stories - like the one about Jews who kill children for their blood - to reinforce your image of Jewish evil. You deny the Holocaust because if the Jews were as powerful as you say, they would never have allowed it to happen.

"In my world, people search for truth in their own diverse ways. In your world, the faithful and the infidel battle for survival, and words and ideas and cartoons are nothing more than weapons in that war.

"So, of course, what started in Denmark ended up for you with Hitler, the Holocaust and the Jew. But in your conversation this past week, your defensiveness is showing. Democracy is coming to your region, and democracy brings the conversation. Mainstream leaders like Grand Ayatollah Ali al-Sistani are embracing democracy and denouncing your riots as 'misguided and oppressive.'

"You fundamentalists have turned yourselves into a superpower of dysfunction, demanding our attention week after week. But it is hard to intimidate people forever into silence, to bottle up the conversation, to lock the world into an epic war only you want. While I don't share your rage, I do understand your panic."

Of course everything above is related to Iran in one form or another. After I went to post last Saturday morning, the governing board of the International Atomic Energy Agency voted 27-3, with five abstentions, to refer Iran to the U.N. Security Council. [Cuba, Syria and Venezuela voted 'no.' Algeria, Belarus, Indonesia, Libya and South Africa abstained.]

"Consider whether to stop construction of a heavy water reactor that could be the source of plutonium for weapons.

"Formally ratify an agreement allowing the IAEA greater inspecting authority and continue honoring the agreement before it is ratified.

"Give the IAEA additional power in its investigation of Iran's nuclear program, including 'access to individuals' for interviews, as well as to documentation on its black-market nuclear purchases, equipment that could be used for nuclear and non- nuclear purposes and 'certain military-owned workshops' where nuclear activities might be going on.

"The draft also asks IAEA director general Mohamed ElBaradei to 'convey?to the Security Council' his report to the next board session in March along with any resolution that meeting might approve."

Iran's response was to resume "commercial-scale uranium enrichment," while the U.S. and Europe called for a "graduated" approach diplomatically. Little will transpire over the coming weeks until ElBaradei's March 6 review.

Once again, however, the Saudis spoke up, though I didn't see the Bush administration jump on it?as you'll soon see why.

Saudi Ambassador to the United States Prince Turki Faisal, in denouncing Iran's uranium enrichment program:

"It escalates the tensions, and brings about competition which is unneeded and unnecessary and uncalled for. Where is Iran going to use these weapons? If their intention is to bomb Israel, then they will kill Palestinians, Syrians, Jordanians and Saudis, as well.

"If they intend to bomb the United States, for example, they will kill other people, as well. Where is the value of having a weapon of destruction that people know you are not going to use?"

But then Turki added that most Iranians support the nuke program because they see a double standard in U.S. policy.

"They see the U.S. government negotiating with North Korea? and they see the U.S. signing a nuclear peace agreement with India?and they see the U.S. turning a blind eye completely to Israel, although Israel has the most nuclear weapons in our part of the world." [Daily Star]

And it's here where the debate always stops. Often, you can't argue with the logic if you just read words in a vacuum. But it's the reality of it all that slaps you in the face.

It was a light week on the economic front so there are just a few main themes to touch on.

Whether it was an earnings warning from luxury-home builder Toll Brothers or pronouncements from the National Association of Realtors that we will see a decline in new and existing home sales, the real estate bubble that many parts of the country have experienced has peaked. Now it's just a question of how fast it will collapse, or, will the real estate market just stagnate for a long spell. Either way, homeowners are going to be increasingly harboring doubts about their #1 investment and it will have an impact on consumer spending.

The NAR, though, says that while sales will slow the overall volume will still be near record levels and that the median price will rise between 5 and 6 percent. On the other hand, Toll Brothers notes that the days of flipping houses and speculative buying are over and, coupled with rising inventories and delivery times, at least by my way of thinking 5 to 6 percent is overly optimistic.

As for energy, just two months ago, Dec. 13, 2005, to be exact, the natural gas contract topped out at $15.37. This week it closed at $7.31?remarkable?and what a break we all caught as consumers. Meanwhile, crude oil fell to its lowest level in six weeks, finishing up at $61.84, though here there is way too much complacency with regards to the Iranian crisis.

But when I look at the Big Picture on the energy front, I am increasingly convinced that when it comes to the consumption of oil in this country, our "addiction," we have turned the corner. Not because President Bush focused on it in the State of the Union, but rather because of a coalescing of forces; geopolitical, domestic, private sector, environmental and economic that taken together demand action. Of course it's an easy statement to make since I have years to defend it, but the winds of change (hopefully powered by carbon fiber-based turbine blades) are upon us. [I have the first in a series of pieces on ethanol on my "Wall Street History" link, by the way, not that I'm convinced this is the direction to go as yet.]

Then there is the president's annual budget. Here, you can be sure I won't spend a lot of time on the topic until the real battles take place in Congress.

But what we need to know for now is that Bush submitted a $2.77 trillion record plan in which he is proposing to slash 141 programs for a total savings of $14.5 billion. Whoopty-damn-do. The administration is also proposing to slash $36 billion from Medicare over five years! But you know what? As small as that is, particularly since it's just a cut in the rate of growth, it at least is the first real attempt at cutting entitlements so on this we give the White House some credit.

Last Saturday I was perusing Barron's and the market lab section in the back and the Federal debt figure hit me?up to $8.2 trillion. Just 7 years ago it was $5.5 trillion. True, this is only about 60% of GDP and not anywhere near Japan's, for example. But that $8 trillion is costing you and me some $247 billion in net interest costs on the 2007 fiscal budget. This figure was $153 billion in 2003. I've raised this point before but it irks me to no end that more Americans aren't upset over this single fact.

Think about it. The president is lauding the fact he's slashing 141 programs with savings of $14.5 billion (which itself will be slashed during the congressional negotiations to follow), but we spend $250 billion on interest?a figure that will soon be $300 billion. Another way to look at it is if we eliminated the interest expense, the budget would practically be balanced. But we can't do that now, can we? Without defaulting, that is.

That about does it on this subject. Once a year I feel compelled to ramble and it's true that when it comes to the fiscal budget deficit, the fact it's only 3.2% of GDP is not so bad and that number hopefully will decline over the coming years. But it's that gross interest figure that's a crime. It took decades to get to where we are, though, and obviously both parties share in the blame; which is the single best reason to throw 'em all out.

--Stocks were mixed, with the Dow Jones finishing up 1.2% to 10919, the S&P 500 up just 0.2% to 1266, and Nasdaq off a meager one point to 2261. After a spectacular rally to start off the year (a continuation of 2005's performance), oil stocks have declined about 10% in less than two weeks, as represented by the XOI and OSX indexes. There were a few decent earnings reports, though, like with Cisco which is bullish on future revenue growth. And Disney beat estimates, but I will always have a hard time getting excited over the media category.

And I also have to make note of Prudential's chief strategist Ed Keon and his sudden change from 100% equities to 55%. It was mid-July of last year that I noted Keon's call was rather outrageous, and for all the risk you would have taken having followed his advice, you would have earned about 5%. Not my idea of what risk vs. reward is all about.

So now he's slashing his position in equities to a market weight, as these folks like to put it, citing, among other risk factors, the fact "Iran is dragging out longer than anticipated." You know, there are some clients of Keon's who probably pay big money for such insight.

There's a line in the movie "Shenandoah" where Jimmy Stewart is watching his boys choose sides in the coming Civil War and he goes "Ahhh, now it concerns us." You could say with regards to the inversion of the yield curve that we are finally at a point that is perhaps worthy of concern as well. The spread between the 2- and 10-year, 10 basis points, isn't yet Fort Sumter, but it's getting there. I've said the inversion would not be a concern until it was for real and it's now gaining my attention?though I'm holding back on outright fretting.

The government did auction off 30-year Treasury bonds for the first time in four years and the reception was strong because of the need for pension funds to match up long-term obligations with long-term fixed investments?at least a significant portion of their portfolios in order to better predict returns.

Next week, Fed Chairman Ben Bernanke takes the floor in Congress for the first time in his new role and every word will be parsed and picked apart in an attempt to glean some divine wisdom on the future direction of interest rates.

Lastly, the trade deficit came in at another world record, $726 billion for all of 2005, as our gap with China alone exploded to $201 billion.

--General Motors cut its dividend in half, slashed executive pay, and froze salaried workers' health benefits. But will the product sell?

--British Petroleum, ExxonMobil and Royal Dutch Shell are among the oil giants who reported lower production in the fourth quarter over the year earlier period. While it's true much of this has to do with the hurricanes' impact on Gulf output, it is also part of a disturbing trend. It's getting tougher and tougher to find new fields, let alone keep up production from existing ones. Case in point regarding the latter was a story in Friday's Wall Street Journal that Mexico's state-owned Pemex "may be facing a steep decline in output that would further tighten global oil supply and add to global woes over high oil prices." The big culprit is the deteriorating picture in Mexico's biggest oil field where water and gas are spreading, making extraction of oil more difficult.

--By late-April, Russia's Gazprom will become the single largest stock in the S&P emerging markets index, doubling Russia's overall weighting to 10.2 percent, according to S&P officials. Gazprom will displace South Korea's Samsung as the largest single issue, while Russia will trail only South Korea and Taiwan in the country weightings.

--While the focus is on Bush administration rhetoric and the amount of oil the U.S. imports from the Middle East, just 20%, Philip Bowring of the International Herald Tribune points out that Japan, South Korea and Taiwan not only import all their oil, but 75 percent of it comes from the Gulf. India imports 80% of its total crude and 80% of that is from the region. China imports 35% of its needs and 60% of this is from the Gulf. It's all part of the political calculations taking place not just in Washington, but in Tokyo, Seoul, Taipei, Delhi and Beijing.

--Real Estate, part deux: A local mortgage lending company in the New York City area forecast home prices would fall 2% in 2006. New York Mayor Michael Bloomberg's own people are calling for prices to decline 10% in the Big Apple.

--New York State residents, however, have been suffering for over a decade and have not participated in the growth experienced by the rest of the country when it comes to the overall economy. Since 1990, ? of the people between the ages of 20 and 34 have fled. The reasons? Among them are the highest per-capita tax burden, coupled with falling home values as manufacturing continues to exit the region.

--Last week I passed on the thoughts of Josh P. and the San Diego area real estate market. On Friday, the Journal confirmed Josh's observations. "Of the condo markets we surveyed (nationwide), San Diego showed the strongest signs of a slowdown." The city has seen a staggering 82% rise in inventory as the speculators abandon the market in droves. And as Josh first pointed out, the incentives for buyers now include everything from sofas to cars.

--The Journal reported that the FBI today considers Internet fraud the agency's third-highest priority after counterterrorism and counterintelligence. Criminal cases are being developed at a rapid clip and one key individual who is helping expose the dirtballs is Barry Minkow, the former felon who ran one of the classic Ponzi schemes of the 1980s.

--Former Federal Reserve Chairman Alan Greenspan isn't wasting any time in padding his bank account. According to the New York Post, Greenspan was paid a cool $250,000 in his first 'consulting' gig; a dinner for Lehman Brothers' top clients. Of course for Lehman this is chump change and its traders had a field day afterwards. But many take issue with the ethics of it all. Knowing his clout in the markets, it's troubling he couldn't wait until at least the first Fed meeting in March that Bernanke chairs before hitting the money trail.

--Bird flu continues to simmer and this week's news of its spread to Nigeria is potentially disastrous. Oh yeah, they have a proper infrastructure in place. Just remember, it's all about the global economy. Those who continue to bet heavily on the Asian markets, for example, without at least factoring in H5N1 are nuts.

--Crain's New York Business reminded its readers that Lucent's Patricia Russo has been paid $60 million in bonuses the past four years?and for what?

--A federal advisory panel voted 8 to 7 to suggest that drugs for attention deficit disorder such as Novartis' Ritalin and Shire's Adderall carry a "black box" warning on associated heart risks. F.D.A. officials described some 25 sudden deaths among people using the stimulants?mostly children.

--Nortel settled two class-action lawsuits resulting from its accounting scandal for a cool $2.46 billion, which will include a 14.5% equity stake in the company after Nortel offers a zillion new shares.

--AIG has agreed to a $1.64 billion settlement in its accounting fraud case. New York Attorney General Eliot Spitzer rightfully crowed.

"What we alleged a year ago has been proven. The fact that these material misstatements were orchestrated from the very top of the company is clearly demonstrated."

AIG is now forced to hire an outside consultant to monitor its internal controls for three years while $1.52 billion of the penalty (a joint NY / SEC / Dept. of Justice settlement) will go towards restitution, with the other $125 million in actual fines. Meanwhile, the fate of former CEO Hank Greenberg remains a big question.

--The Journal reported on a slew of price-fixing suits being launched against Chinese manufacturers. For example, China now supplies more than 85% of the vitamin C used in the U.S. and collusion is the name of the game. As reported by John R. Wilke and Kathy Chen, "As China becomes ever more dominant in manufacturing, its ability to dictate the prices of industrial and consumer products is steadily rising."

The story, though, fails to say anything about North Korea. Yup, just another reason why China's cooperation in talks over Pyongyang's nuclear weapons program will be limited. I know I keep repeating this theme, but no one else is. The last thing China needs is a new low-cost competitor in the region, which is what North Korea will inevitably become if a satisfactory agreement is ever reached.

--Reader Bill M. had to comment on my note last time about Nebraska friend Ken S. and his thoughts on the trucking industry. While a booming trucking sector is obviously a good sign for the economy, the drawback in major metropolitan areas is increased gridlock. Bill happens to be a big fan of resurrecting America's freight rail network, which in many parts of the country has been left to die. He's 100% right, but the political reality of it is another story. Right here in Summit, N.J., where my offices are, residents beat down an attempt to resurrect an old freight line. Like everything else, the 'not in my backyard' mentality prevails more often than not.

[As an aside, one conventional freight train can carry the volume of up to 500 truck trailers. Plus you save on fuel and reduce air pollution. Thanks, Bill.]

--Great news as for the first time in 70 years, the government is reporting there were fewer annual cancer deaths than the year before for the most recent reporting period; this despite a steadily rising population. It's due primarily to reduced smoking and earlier detection. Too bad the president didn't have this at his fingertips for the State of the Union, per my complaint of last week.

--I saw a story on how Google Desktop 3 is being integrated into Dell PCs and it was on the Dell I purchased in the past few weeks. But even before I saw the story on how it can track personal data far better than other operating software, I uninstalled it.

--Vonage, the leading Internet telephony company, has filed for an IPO. The reception on this one will be interesting as Vonage continues to bleed $10s of millions.

--Contained in the Pentagon's Quadrennial Review is a proposal that 35% of all combat aircraft be drones in 10 years, i.e., there are some potential investment opportunities here.

--Congratulations to my old friends at PIMCO / Allianz Funds. In an annual survey of fund families published by Barron's, it was #1, overall, for both stocks and bonds. Now get selling, guys.

--Ted Turner owns 40,000 bison, having started in 1976. [I was just reading my High Plains Journal, getting hungry over all the articles on beef and buffalo burgers.]

--The ratings for the Super Bowl were great, even if the game wasn't. ABC drew 91 million viewers, the best since 1996, and the network ended up charging $2.5 million for a 30-second spot.

--My portfolio: Late last year I said I was going to stick with a recommendation of 80% cash / 20% stocks for quite some time and the only thing that will change this is a big swing in the market, either way. Today, my own holdings are still largely made up of my carbon fiber play, which I was happy to see reported its first profit in eons. But I also have to admit I'm now dabbling, in the truest sense of the word, with 'puts' in international markets. This is well below 1% of my assets, though I'm thinking of increasing it substantially over the coming weeks and months?especially if we get a big rally. I just firmly believe the emerging markets, in particular, are due for a tumble. [Thus my eye on bird flu, perhaps more than others.]

--Royal Caribbean commissioned the world's largest cruise ship for $1.1 billion, slated for delivery in 2009. It will carry 5,400 passengers, or the average crowd at an Atlanta Hawks game. Currently, the Queen Mary 2 carries the most at 3,090, but this April the "Freedom of the Seas" is hitting the water with a capacity of 4,300.

I don't believe the new one has a name yet, so let me submit my pick for it? "Nightmare"

--Visa introduced a new slogan, replacing "It's everywhere you want to be" with "Life takes Visa."

Iraq: There is so little to say these days. The Dec. 15 election results were finally certified, which means a new government must be in place in two weeks?or at least parliament seated. And "60 Minutes" is evidently shining a light on the massive levels of corruption in the reconstruction effort, not that any of you should be surprised at what is revealed. It's been a disaster from minute one, whether it's the diversion of oil funds to the insurgency or repairing the power grid.

Israel: All eyes are on Russian President Vladimir Putin. Could he possibly be so stupid as to meet with Hamas's leadership before the terrorists renounce violence and / or recognize Israel's right to exist? Well, Putin wouldn't see it as being a poor move because he has never labeled Hamas a terrorist organization in the first place. An Israeli cabinet minister said Russia is "stabbing Israel in the back."

Hamas's council got together this week and the political leader, Khaled Meshaal, who has been exiled in Damascus (of course), said he would talk to Israel; but first it must return to the 1967 borders and, no, Hamas will not renounce violence. Oh yeah, that'll fly.

As for the Israelis, under pressure from the Quartet - the U.S., Europe, Russia and the U.N. - they turned over $54 million in monthly back tax revenues to the Palestinians but could easily cut off the spigot at any time.

Afghanistan: As the violence has escalated, the U.S. has achieved a victory of sorts. Both the leaders of Denmark and the Netherlands overcame opposition at home to win approval for continuing operations in Afghanistan and Iraq. Denmark's Prime Minister Rasmussen has been openly supportive of the Bush administration (not always reciprocated?as in the White House's delay in issuing a statement on the cartoon flap) and the Danish legislature actually voted to double its force in Afghanistan. The Netherlands then said it would send an additional 1,200 troops to the theater. NATO finally stepping up, to some extent.

Russia: Senator John McCain is calling for a boycott of the G-8 summit in St. Petersburg in June over Russia's human rights record and moves against press freedom. McCain had the guts to say this in front of Defense Minister Sergei Ivanov at a conference in Munich.

As for the so-called final deal reached between Gazprom and Ukraine, extending the temporary one that ended the New Year's natural gas crisis, don't fall for it. It's a sham.

The other day, Ukraine's deputy foreign minister told the Moscow Times "Everything is extremely unpredictable. This is leading to huge uncertainty. This is all very bad for Ukraine."

The problem is the shady middleman I wrote of last month, RosUkrEnergo. Part is owned by Gazprom, which is made up of Putin cronies to begin with, while the rest is nothing but organized crime figures.

China: Japan's controversial foreign minister said Taiwan's high educational standards were a result of Japan's occupation after 1895 (following the Sino-Japanese War). Not exactly what Beijing wants to hear.

But on a different topic, cooperation between China and the U.S. in space, according to Defense News, China recently hosted a group of U.S. lawmakers to its space launch facility in an attempt to show how transparent it could be. Supposedly, it was the first official foreign delegation to be shown the complex in Inner Mongolia.

Of course China draws no distinction between its civilian and military space programs and would use any sharing in technology to better its defense capabilities. I sure as heck hope our elected representatives understand this. But as we should all know by now, follow the money; as in I wish I had the time to keep track of future donations flowing into the campaign coffers of those in attendance.

Lastly, Reporters Without Borders says Yahoo supplied personal data on a user in China for a second time that led to a dissident's jailing in 2003. The group, based in Paris, said Li Zhi was sentenced to eight years for "inciting subversion" and alleging corruption by local government officials. Said a representative of the group, "It's one thing (for Yahoo) to turn a blind eye to the abuses of the Internet censors in China. It's another thing to be a part of them."

Thailand: There have been large demonstrations across the country calling for the resignation of Prime Minister Thaksin. One of Asia's richest men, he sold $billions in assets recently without paying taxes (though Thailand has no capital gains tax). So you'd think it wouldn't be much of a story except the Thailand Stock Exchange is investigating whether the sales were properly disclosed.

North Korea: While no dates have been set, it is being reported that Kim Jong-il has accepted an invitation from the Indonesian government to visit the country. Should he go, it would be the first time he has traveled anywhere besides Russia or China since he took over from his father in 1994. It would also be just the second time he has ever flown?the first being in 1965, also to Indonesia.

Of far more import, however, is a story from U.S. News & World Report that North Korea has smuggled an arsenal of ballistic missiles to Iran.

Dow Jones +1.2% [10919]
S&P 500 +0.2% [1266]
S&P MidCap -0.9%
Russell 2000 -1.0%
Nasdaq -0.0% [2261?off a point]

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