Week in Review 
For the week 4/10/2006 - 4/14/2006
Brian Trumbore
President/Editor, StocksandNews.com

Going for the Bomb

Iranian President Mahmoud Ahmadinejad announced "Iran has joined the nuclear countries of the world" as scientists had evidently successfully enriched uranium for the first time, in direct defiance of the UN Security Council which had set a date of April 28 for Iran to abandon the program. Ahmadinejad then said the next day that large-scale enrichment would proceed, using, first, 3,000 centrifuges and then expanding to a 54,000 centrifuge operation at a future date.

On Thursday the head of the International Atomic Energy Agency, Mohamed ElBaradei, met with zero success in his meetings in Tehran as he sought to get Iran to climb down. Instead, ElBaradei was mocked as Ahmadinejad declared his Islamic republic would not retreat "even one iota". "Our answer to those who are angry about Iran obtaining the full nuclear cycle is one phrase: Be angry and die of this anger." Ali Larijani, secretary of Iran's Supreme National Security Council and the top nuclear negotiator, said UN demands that it freeze its nuclear program were "not very important." [London Times]

Earlier, Ahmadinejad and former President Rafsanjani, the father of the nuclear program, played the West for fools. Ahmadinejad:

"Iran relies on the sublime beliefs that lie within the Iranian and Islamic culture. Our nation does not get its strength from nuclear arsenals" in explaining Iran wanted to operate its program under the supervision of the IAEA.

Rafsanjani told a Kuwait newspaper:

"If those who are facing Iran in the nuclear issue are honest and strive to build trust, then matters can be settled easily. We are ready to allay their fears and to provide confidence-building measures and to give assurances on the peaceful nature of our activities.

"But if they continue with their pretexts and try to put pressure on us through our nuclear activities, then matters will become difficult and thorny for everyone, not just Iran." [Tehran Times]

Two opinions on what could happen next.

Amir Taheri / New York Post:

"Some analysts suspect that President Ahmadinejad may actually want a military conflict with the United States as the opening shot in his promised 'Clash of Civilizations.' He seems convinced that America, plagued by bitter internal dissension, lacks the stomach for a serious fight with the Islamic Republic and its radical allies throughout the Middle East. Thus he may want a clash over the nuclear issue, which many Iranians (thanks to the regime's Goebbelsian presentation) see as a matter of national pride.

"But even then Russia could either prevent a clash or hasten it by vetoing or voting for a strong resolution in the UN Security Council. The Russian position there is crucial because China, which also has a veto, would not be prepared to isolate itself by siding with Iran if Russia sides with the United States. If Russia vetoes, so will China. If Russia doesn't veto, the most that China might do to please Iran is to abstain."

And then there's Russian President Vladimir Putin.

"The American calculation is that Putin, having won the presidency of the G-8 for Russia for the first time, is unlikely to start his tenure by splitting the group to please the Iranian mullahs.

"Yet Putin won't want to make an unambiguous choice between Tehran and Washington. Russia needs the Islamic Republic for a number of reasons - including as part of Moscow's strategy to counter U.S. influence in Central Asia, the Caspian basin and the Middle East. [Tehran and Moscow have been working closely in Afghanistan for more than a decade; they're now developing a joint strategy in anticipation of U.S. withdrawal once President Bush leaves office.]

"Moscow also needs Tehran to prevent the United States from imposing its proposed model for the exploitation of the Caspian Sea's immense oil and gas resources. And, having lost all of its Soviet-era Arab friends and clients, Moscow needs Tehran as a bridgehead to the Middle East, the Gulf and the Indian Ocean."

Mark Helprin / Washington Post:

"Even were one to believe that, despite its low and stagnant per capita gross national product and having the world's second- largest reserves of petroleum and natural gas, Iran would invest uneconomically in nuclear power generation, one would also have to disbelieve that it wanted nuclear weapons. But with an intermediate-range strategic nuclear capacity, it could deter American intervention, reign over the Persian Gulf, further separate Europe from American Middle East policy, correct a nuclear imbalance with Pakistan, lead and perhaps unify the Islamic world, and thus create the chance to end Western dominance of the Middle East and/or with a single shot destroy Israel.

"Iran's claim of innocuous nuclear ambitions comports both with the Islamic doctrine of tazziya (literal truth need not be conveyed to infidels) and the Western doctrine of state secrecy (the same thing), and it is part of a strategy of deception and false compromise deployed to buy time. After almost three years, the Bush administration has maneuvered the International Atomic Energy Agency to refer Iran to the UN Security Council, where it will fall under the protection of Russia and China, which will make any resolution meaningless or veto it outright. In the event of sanctions, Iran can sell oil to China in exchange for all the manufactures it might need, trade on the black market and eventually reenter the world economy after the inevitable unveiling of Iranian nuclear weapons stimulates the resignation of the West.

"Were Russia not playing a double game, it would not have agreed in December to upgrade the Iranian air force and sell Iran 29 SA-15 SAMs for the protection of key facilities. Russia and China can operate in contradiction of what many assume to be their self-interest because they have always had a different appreciation of and doctrine relating to nuclear weapons, because they are willing to live dangerously and because they are the least likely targets. In addition, the agitation that they support roils the smooth surface of the Pax Americana to their maximum opportunity and relief. For example, chaos in the Middle East makes Russia in comparison a stable supplier of energy and shifts European resources and dependency to Russia's advantage?.

"If, like his predecessors Saladin, the Mahdi of Sudan and Nasser, Iranian President Mahmoud Ahmadinejad goes for the long shot, he may have in mind to draw out and damage any American onslaught with his thousands of surface-to-air missiles and antiaircraft guns; by a concentrated air and naval attack to sink one or more major American warships; and to mobilize the Iraqi Shia in a general uprising, with aid from infiltrated Revolutionary Guard and conventional elements, that would threaten U.S. forces in Iraq and sever their lines of supply. This by itself would be a victory for those who see in the colors of martyrdom, but if he could knock us back and put enough of our blood in the water, the real prize might come into reach. That is: to make such a fury in the Islamic world that, as it has done before and not long ago, it would throw over caution in favor of jihad. As simply as it can be said, were Egypt to close the canal, and Egypt, Saudi Arabia and Turkey to lock up their airspace - which, with their combined modern air forces, they could - the U.S. military in Iraq and the Gulf, bereft of adequate supply, would be beleaguered and imperiled."

While much of the talk this week centered around Seymour Hersh and his New Yorker article about the U.S. employing tactical nuclear weapons, bunker-busting bombs, against suspected Iranian facilities, a notion which British Foreign Secretary Jack Straw called "completely nuts," the real issue is one which I have raised time and time again. How quickly can Iran come up with enough enriched uranium to produce a bomb?

After the Iranian announcement of its supposed success we continued to hear the same talk from "experts" that Iran was still 5 to 10 years away. But no one really has any clue, including, it would seem, the Israelis these days.

And may I remind you of two items I noted in this space, 2/4/06 and 2/11/06; the first that there had been increased activity at the Iranian embassy in Pyongyang and that one shouldn't forget North Korea's Kim Jong-il once sold 1.7 tons of uranium to Libya, and, the latter, that there were strong reports North Korea had smuggled ballistic missiles into Iran.

But after the Iraq experience, U.S. credibility is shot and our position in the Security Council greatly weakened. Plus a Bloomberg News / Los Angeles Times poll showed only 48% of Americans now support military action against Iran if the mullahs continue to defy the world, already down from 57% in January.

Former national security adviser Zbigniew Brzezinski is quoted in a David Ignatius op-ed for the Washington Post.

"Time is on our side. The mullahs aren't the future of Iran, they're the past."

Many said the same thing back in 1979 as Ayatollah Khomeini assumed power (when Brzezinski also sat at the right hand of Jimmy Carter). 26 years later, what has changed? The mullahs have been both the past and the future.

For today, though, there are three possibilities. Iran is indeed 5 to 10 years away and the West can pray for regime change in the interim; Iran, which lied for 18 years about its nuclear program before admitting it had one, is much farther along than the experts believe; and/or, three, North Korea has greatly aided Iran's quest and the mullahs have not only been brilliantly stalling for time, they are also masterful poker players who could at any moment reveal a powerful hand. Two of the three options aren't good. The third isn't much better in relying on others to do our job.

Iraq

It has been exactly four months since the December election to fill the Iraqi parliament and the government has met for a grand total of 30 minutes. There are rumblings they could get together a second time this week, though to what effect is still not known. Interim Prime Minister Jaafari is hanging on, despite calls from the Sunnis, Kurds and the U.S. for him to step aside, while the violence continues unabated. Shias targeted by Sunnis in one bombing after another. Sunnis targeted by Shia militia and death squads located in the Interior Ministry as well as the Iraqi police and military.

According to the latest USA Today / Gallup poll, 64% of Americans want some or all U.S. troops to come home now. And in the aforementioned Bloomberg News / Los Angeles Times survey, only 37% now believe President Bush and statements that progress is being made.

This week Egyptian President Hosni Mubarak suddenly interjected himself into the conflict and made matters potentially far worse. In stating that "(Civil war) has pretty much started," Mubarak blamed the Shiite-led government and then added the Shia, not just in Iraq but elsewhere, are more loyal to Iran than their own countries.

This was not viewed favorably in the Shia community and I need to remind you of the fact that Egypt, Saudi Arabia and Jordan are 84-93% Sunni. [See WIR 2/25/06]

The Iraqi government proceeded to boycott an Arab League summit initially designed to help Iraq form a "united front" to stabilize the country. Arab League Secretary-General Amr Moussa said "The meeting has taken place because of our unanimous belief that the situation in Iraq is so serious, that we have to sit and talk to each other about it, and it would have been much better to have an Iraqi representative here."

A spokesman for Mubarak tried to play down the president's remarks, saying Mubarak meant "that Iraqi Shiites were sympathetic to Iran because of the Shiite religious sites in Iraq and because of their relationship as neighbors." [Daily Star]

But Shia cleric Grand Ayatollah Ali Sistani voiced his displeasure, let alone firebrand Moqtada al-Sadr, as well as Hizbullah in Lebanon which called Mubarak's remarks "lies meant to stir up tension between the Arab world's Sunni and Shia communities." [Tehran Times]

A Cairo-based analyst told the Tehran Times, "(Mubarak) is giving an impression that there is a Sunni-Shia divide in the Arab world. This way he is condemning half the population. Mr. Mubarak used to be a man who calculated his words carefully, but I think age makes a difference."

Mubarak better hope his own security forces are loyal.

And a few last notes on Iraq.

Chairman of the Joint Chiefs of Staff Gen. Peter Pace, in defending his boss, Sec. of Defense Donald Rumsfeld, against the recent comments of retired generals that the planning for and conduct of the war has been pitiful, said "I was very comfortable with the pre-war planning. I am comfortable with the way it was executed. And I would go back, given the same facts and figures, and reach the same conclusion."

My respect for Gen. Pace has plummeted, and when asked if the United States had the resources to go after Iran, if necessary, Pace replied, "We have sufficient personnel, weapons, equipment, you name it, to handle any adversary that might come along." [AP]

Depends what kind of war you're talking about.

Separately, the London Times has this telling tidbit, as reported by Ali Rifat and Hamoudi Saffar.

"Iraqi pilots who flew in Saddam Hussein's air force are being targeted by armed militias in an apparent witch-hunt against veterans who fought in the war against Iran two decades ago.

"According to official military statistics, 182 former pilots and 416 senior military officers had been killed by the beginning of January 2006 as part of the campaign. At least 836 pilots and high-ranking military officials have fled to neighboring Arab states."

And lastly there is the story of the newly crowned Miss Iraq, Silva Shahakian, an Iraqi Christian who inherited the crown after the initial winner stepped down upon receiving death threats and two runners-up begged off. Silva's whereabouts are unknown as she, too, has now gone into hiding. Organizers of the pageant are hoping to send her to the Miss Universe contest in Los Angeles on July 23.

Avoid L.A. that day if she does end up surfacing there, and, by the way, Happy Third Anniversary of the Fall of Saddam!

Wall Street

For the second straight week equity averages were virtually unchanged but the seeming lack of action masked big moves elsewhere, particularly in commodities and interest rates.

Whether you're talking gold, silver, copper, zinc or oil, yes, even cubic zirconium, commodities are either at or approaching all- time highs. Gold, for example, may still be over $200 shy of its high-water mark, but at $600 it's a 25-year high. Copper has hit all-time levels 12 straight days, while oil had its highest weekly close ever, $69.50, which is just shy of its intraday high of $70.85.

The action in copper is indicative of the entire commodities arena. Global growth, tight supplies and big investment flows are driving the price, but at the same time the miners are skeptical high prices will last so they are holding off on investing in new sources. The situation is compounded by labor issues around the world where copper is king. In essence, it's the same as the oil industry where many executives still aren't convinced $50-$60 oil is here to stay and thus are reluctant to expand their exploration budgets for long-term projects that could bump up against falling prices at some point. But here external factors, namely Iran, Iraq, Nigeria, and Venezuela (with the ever-present terror threat in Saudi Arabia), add up to a substantial risk premium.

In the case of oil, the market is also still dealing with the fact 23% of Gulf of Mexico production remains shut down after Katrina and Rita, just as rig operators are beginning to check the Weather Channel again in preparation for a new storm season. And the International Energy Agency warns that Russian oil production is slated to decline over the next four years at a time when demand is still expected to be strong. Where it will be made up is difficult to see, especially since OPEC, as we all know by now, has little spare capacity.

Christophe de Margerie, head of exploration for France's Total, said in an interview with the London Times that forecasters such as the IEA "have failed to consider the speed at which new resources can be brought into production."

For instance, the IEA is projecting demand of 120 million barrels by 2030, up from the current 84-85 mmbd level.

"Numbers like 120 million will never be reached, never," said Margerie, who notes such an output rise is impossible given available resources and geopolitical constraints on gaining access to reserves such as those in OPEC countries.

"Take Qatar," he says. "How many projects can you have at the same time? You have more than 100,000 people working on sites. It's a big city of contractors. Now they have the problem of having to build a new power plant to supply a city of contractors."

"The oil reserves are there," he says "and that's the good news, but what we can bring on today to meet demand is limited by factors other than what scientists see in a lab or think-tanks."

On the topic of emerging markets and the spectacular performance witnessed here the past few years, former Federal Reserve chairman Alan Greenspan told an Asian economic forum that we could be headed for a substantial fall in global asset prices. Greenspan said the current positive environment wouldn't last forever.

The source of today's liquidity is the boom in asset values worldwide, but "A good part of this expansion is a direct function of the decline in real equity premiums?.I don't know when the liquidity is going to decline but I am reasonably certain that what we're looking at is an abnormal situation." [Financial Times]

The International Monetary Fund, though, said the current ability of emerging market economies to weather storms is "as good as it gets." The IMF's director of international capital markets, Gerd Hausler, noted concerns about higher global interest rates were greatly overblown, thanks in no small part to the fact changes in monetary policy by the Federal Reserve, the European Central Bank and the Bank of Japan were well communicated.

Hausler conceded risks remain, including a flu pandemic, but downplayed any short-term developments. "It would not be serious for us to cry wolf and pretend that the [U.S.] dollar (for example) was about to collapse in the next six months."

But on the topic of debts, the IMF report said the most pressing issue was an increase in corporate borrowing, while a second concern was rising commodity prices that are then passed through to the consumer. I've been attempting to point out, however, that it's rising consumer debt, as much as the corporate variety, that should be a chief concern when measuring emerging market risk.

The IMF also says little about the global real estate bubble. Josh P. sent me a note on his San Diego neighbors who've been attempting to sell their homes for over six months, with one finally lowering the list price. But a piece in the Los Angeles Times noted the median home price in L.A. County (not to be confused with Orange or Ventura), passed $500,000 for the first time. What you need to understand here is the median income is $47,000. You start doing the math. How do you make ends meet?

The Wall Street Journal had a piece this week titled "Hot Homes Go Cold." Michael Corkery writes, "real estate agents in some of these formerly red-hot markets have been surprised at how suddenly market conditions have deteriorated in the past few months."

Those in the soft-landing camp have always said something like, "Well, if prices were to correct in an orderly fashion, Americans will easily adjust, especially because the vast majority now have built up sizable equity."

But speed kills and if the real estate environment flips on a dime in the regions that have seen the hottest markets, there's no telling what kind of damage to the overall economy it will generate.

Lastly, I can't help but comment on former ExxonMobil chairman Lee Raymond's golden parachute. Raymond, who retired last year, is receiving cash and prizes of $398 million. That's sick. And the Journal had a story on CEO pay, overall, for 2005, up an average 16%.

An old friend of mine from the fund business, Ron G., based in the Midwest, wrote of what he sees in his travels. The rank and file are suffering and the difference between the upper and lower-middle class is widening exponentially. This isn't necessarily about class warfare or even one's political persuasion and government policies. I'm a capitalist as much as the next guy, but some of the trends are deeply troubling and headlines such as on Lee Raymond's compensation compound matters.

Street Bytes

--The Dow Jones finished up 0.2% to 11137 while the S&P 500 and Nasdaq registered fractional losses for the shortened trading week. Initial earnings reports, while slim, were generally solid with Alcoa taking advantage of soaring demand for industrial metals, while G.E. had revenue gains of 10% for the quarter. But G.E. didn't positively surprise and, in the tech sector, AMD disappointed with its outlook.

Any big gains in 2006 thus far continue to be made in the small- and mid-cap sectors. The cover of the April 17 issue of Business Week was about the underperformance of large cap stocks. Incredibly, for the five years ending March 31, earnings for the S&P 100 companies are up a cumulative 213%, but share prices for these bluest of the blue chips have risen just 0.9% on an annualized basis (2% with dividends). That pretty much tells the story. When will they play catch up? Seeing as I continue to forecast a big economic slowdown at some point in the not too distant future, don't look to me to ring the bell giving the all- clear.

--U.S. Treasury Yields

6-mo. 4.92% 2-yr. 4.95% 10-yr. 5.05% 30-yr. 5.11%

Yes, the 10-year Treasury, now at its highest level since June 2002, was another big story on the week. As I wrote last time, what level represents the tipping point in the case of both interest rates and oil? Or does the U.S. economy, helped by recoveries elsewhere, such as in Europe and Japan, muddle through?

On the economic front, the trade deficit for February registered a slight decline but before anyone gets too excited it was still the third-highest figure on record, $65.7 billion. Retail sales for March rose a respectable 0.6% and industrial production was up a like amount. In all, pretty good stuff, though some Fed governors are concerned that the capacity utilization rate, now 81%, is approaching a level that has historically led to upward pressure on inflation.

--China says its economy grew at an 8.5% clip in the first quarter and a government report noted it could slow to 7.5% by year end. 8% is generally viewed as the threshold needed to take care of those workers that are displaced in closing obsolete operations ?as well as to prevent unrest.

--Bird flu is making inroads in Burma and Egypt. But while perhaps it's not a market-moving factor in 2006, H5N1 continues to simmer and mutate and spread inexorably around the globe. It's also important to note that when you read about the current mumps outbreak in the Midwest, it represents a classic example of how quickly bird flu, if it ever truly mutated to person-to- person status, could spread like wildfire around the world; as in the mumps case it's been traced to two individuals who flew extensively the past month or so.

--According to the Wall Street Journal, Russia's long sought after goal of gaining World Trade Organization member status could be wrapped up by midyear; that is if Congress goes along.

While the U.S. has remained the only stumbling block for Russia, and even as President Bush has promised his support, Congress looks at the 2001 WTO deal with China and doesn't want to sign another one where the beneficiary games the system and pirates U.S. goods and intellectual property.

But for all the problems I have with Russia, I just think we have to allow them in the WTO. I was for admitting China, as well, but I see the issues that have arisen since as being as much the fault of the Bush White House as it has been Beijing's. Only now, as President Hu Jintao prepares for this week's trip to the U.S., has the administration begun playing hardball.

And while the U.S. has been working with the European Union (which has the same issues as the U.S. in terms of Chinese dumping and pirating of goods), the Bush team has been too soft. Believe it or not, WTO mechanisms for resolving disputes work. Not always to our satisfaction but the United States isn't exactly an angel in this sphere; see government sugar and lumber subsidies, for example.

My broader point being in the case of Russia that the Kremlin will continue to hold the White House and the U.S. responsible for their failure to be admitted to the WTO and it's a card President Putin will play to his advantage when it comes to other disputes where we need Russia's cooperation. Let Russia in and you take away that card.

[I appear to be in a distinct minority on the trade issue, however. According to a USA Today / Gallup poll, by a 50-39 margin Americans said the current environment mostly hurts U.S. companies.]

--I loved this story from George Parker of the Financial Times.

"Germany?accused Austria of 'aggressively' poaching jobs and investment by slashing its company tax rates, as a wave of lower taxes spreads westwards from Eastern Europe.

"Peer Steinbruck, Germany's finance minister, complained Vienna's decision to cut corporate tax rates from 34 percent to 25 percent had led to an increasing number of German companies investing across the border in Austria.

"His complaint was greeted with satisfaction by Karl-Heinz Grasser, Austria's finance minister, who said it showed his polices were working."

--In the week ended April 7, program trading accounted for a whopping 60% of all New York Stock Exchange activity. At a casino, the house always wins.

--In the Enron trial, former CEO Jeffrey Skilling testified he was unaware of CFO Andrew Fastow's partnerships that we all know were designed to hide losses and inflate earnings. Skilling also alleges he resigned because he was depressed over the company's tumbling share price and he was flat tired. "I am absolutely innocent," he said.

--Russian energy giant Gazprom's market cap now exceeds that of Royal Dutch Shell and British Petroleum. A full 20% of the Russian government's revenues, by the way, are from taxes paid by Gazprom. [Moscow Times]

--General Electric said by 2008 foreign revenues will equal those generated by U.S. operations.

--Delta's pilots union reached a tentative contract agreement with the airline, thus averting what would have been a crippling strike this coming week.

--New York City office rents are soaring and could rise another 20% by yearend, according to Crain's New York Business.

--As Edward Wong of the New York Times reported, one need only look at Iraq's stock exchange to gauge confidence levels in the country. Today there is little, as best told by a 66% plunge in share prices the past year. Unemployment by most estimates exceeds 50% (Wong pegged it at 60%).

--Bausch & Lomb has quite a crisis on its hand with word from the FDA that ReNu contact lens solution is under investigation for being the cause of a seeming epidemic of eye disorders, a fungus that if left untreated can lead to blindness. The theory originated in Singapore and elsewhere in the Far East. In all seriousness, I bet a contributing factor is people simply not taking care of their lens cases.

--Michael Jackson has been forced to sell off a large percentage of his song catalog to Sony, one that contains 250 Beatles hits as well as other titles, as part of a $300 million refinancing that should help him stave off bankruptcy. Among the non-Beatles titles are Bob Dylan's "Blowing In The Wind." Another, though, is Neil Diamond's "Sweet Caroline," which I think most of you would agree has not aged well. Basically, it's become a lounge lizard favorite, i.e., Bill Murray on the auto train.

--Inflation watch: Trader George reported a dozen bagels in Chatham, NJ now cost $7.20 vs. $5.40 just nine months ago.

--As part of his retirement package, the aforementioned Lee Raymond also gets his country club fees ($210,000) paid for along with home security and a car and driver. Which means he'll never have to pump his own gas?.so he'll never really come in contact with the product that made him so wealthy.

--There has been quite a bit of talk about "naked shorting" these days; this being the practice by some short sellers of trading shares they don't physically hold. Under SEC rules, this is supposed to be illegal. But I have to admit I never knew short sellers paid a fee to a brokerage or trading firm for the right to borrow shares, then sell them, until I was approached by my own broker the other day to see if I'd sign up for a program whereby the shorts could borrow my carbon fiber shares. In return, I receive 4% on an annualized basis. Sign me up! I said. [My holding's value is unchanged over the past few weeks, still up over 100% just this year, but the intraday volatility has picked up?in part because the shorts keep probing the defenses, I muse.]

--It's amazing how some Wall Street professionals still don't understand just how closely regulators monitor suspicious trading activity. So when a 63-year-old Croatian seamstress suddenly turned a $2 million profit in options on Reebok International after the company announced it was going to be acquired by Adidas-Salomon, alarm bells went off at the SEC. It turns out the woman's nephew, a 29-year-old former Goldman Sachs bond analyst, spearheaded an insider trading ring the likes of which haven't been seen in years on the Street.

Foreign Affairs

Israel: With Ehud Olmert now formally prime minister as Ariel Sharon was finally deemed permanently incapacitated, the government cut all ties to the Palestinian government.

But on Friday, Russia said it would provide "urgent financial aid" to the Palestinian Authority; while Iran's Ayatollah Ali Khamenei called on his Muslim brothers to help Hamas, adding the U.S. was openly threatening the Islamic world by "talking about launching a crusade against it," as reported by BBC News. President Ahmadinejad then offered that Israel would be "eliminated by one storm."

Italy: Prime Minister Silvio Berlusconi lost an exceedingly close vote to Romano Prodi, with just 25,000 votes out of 38 million separating the two parties and only a two seat difference out of 315 in the Senate. But Berlusconi, who in his last campaign rally warned Catholics that the opposition left included "priest eaters," refused to accept the tally in calling for a recount. The courts have been ruling against him. Regardless, Italy is looking at another dysfunctional government to go along with the other 50 or so since World War II.

Meanwhile, the man identified as the boss of bosses in the Italian mafia was captured after being on the run for over 40 years. So the United States isn't the only nation that has trouble nabbing those on the most wanted list.

France: In a humiliating climb down, President Jacques Chirac was forced to scrap the labor law that was to make it easier for employers to fire young people entering the workforce. 90% of the French believe that Chirac and his prot?g?, Prime Minister Dominique de Villepin, have been weakened, with de Villepin in particular suffering a big blow to his own presidential aspirations.

Pakistan: Three prominent Sunni clerics were killed in a bomb blast that claimed over 50 lives in Karachi. The bomber was sitting right behind them at a religious celebration when he blew himself up. Rioting followed. No one as yet has claimed responsibility.

President Pervez Musharraf did achieve a victory of sorts as parliament approved the purchase of 77 F-16s from the United States.

Sudan: Count Bob Geldof among the small group of enlightened rockers, a la Bono. Geldof, organizer of last year's Live 8 benefit, accused China of being responsible for the carnage in Darfur.

"I was in Darfur 20 years ago and people were killing each other then. It's an ancient battle between nomadic people and settled people, between Arab-Africans and black Africans, between Islam and Christians, (but) the reason why it has not been resolved is because of China.

"The Chinese protect the Khartoum government" and won't allow action in the UN Security Council because Sudan provides China with 6 percent of its oil needs, Geldof said.

[This week Chad broke off diplomatic relations with Sudan, blaming its neighbor for a failed attempt by rebels to overthrow the Chadian government. 350 were killed in the attack and many of those taken prisoner claimed they were Sudanese that had been conscripted into the rebel force. More than 200,000 refugees from the Darfur region in Sudan have fled to Chad and now its leader has vowed to expel them unless he receives UN and African Union aid in helping repel Sudan's efforts to destabilize Chad's government.]

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Pray for the men and women of our armed forces.

God bless America.

Happy Easter.

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Gold closed at $601
Oil, $69.50

Returns for the week 4/10-4/14

Dow Jones +0.2% [11137]
S&P 500 -0.5% [1289]
S&P MidCap -1.0%
Russell 2000 -0.7%
Nasdaq -0.6% [2326]

Returns for the period 1/1/06-4/14/06

Dow Jones +3.9%
S&P 500 +3.3%
S&P MidCap +6.3%
Russell 2000 +11.6%
Nasdaq +5.5%

Bulls 53.2
Bears 24.5 [Source: Chartcraft / Investors Intelligence?on Mar. 14 (reading is taken after the close on Tuesdays) the ratio was 42.3 / 33.0. For a few days it looked like a classic contrarian signal but the rally failed.]

Have a great week. I appreciate your support.

Brian Trumbore

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