Educate Yourself

Week in Review
For the week 5/22/2006 - 5/26/2006
Brian Trumbore
President/Editor, StocksandNews.com

Last Sunday I was driving around my community here in the New Jersey suburbs and couldn't help but notice a staggering number of 'Open Houses.' So the next day I talked to two realtor friends of mine and they said, yes, it was a record level of activity and they could have held a lot more.

I see two things happening. One, I don't know where everyone is going but in the hot markets such as mine, people are throwing their house up for sale, sensing a top. [Nationwide, inventory levels hit a record in April.]

But at the same time many folks are just as quickly pulling it off the market as soon as they see they won't get the price they thought they would. Most of these people have the attitude "the market will turn around in a year and I'm really not in a hurry."

When I say homeowners aren't receiving anything close to the asking price, we aren't talking $20,000 or $40,000. I'm hearing tales of prices in hot counties such as Westchester, New York, dropping $70,000 to $100,000 in a heartbeat.

Couple this with rapidly rising foreclosure rates and you can see how the worm has turned. But will it be a "soft landing?" Don't count on it.

Just last week I wrote, "You are going to begin to see an unending litany of tales of woe out of the national media and that is only going to help fuel the slide." Wouldn't you know that on Wednesday, NBC News had a segment "Housing: On the Bubble."

You don't need big declines in housing values, though, to impact consumer confidence but that is what you will increasingly see. And as I've been bringing up for years, this real estate bubble is global. Ask anyone who's been to Europe in the past few years, chatting up a few blokes in a pub, and you'll find everyone is buying a second home in Spain, to cite but one prominent example; thanks in no small part to the prevalence of low-cost airlines that make it far easier to jet away for the weekend. But these same communities are going to slide like the rest.

In China, both commercial and residential vacancy rates are soaring because of the other big issue when it comes to real estate, whether in Beijing or Boston?.affordability.

But this week we had an issue of a different sort come to a head; carnage in the emerging markets. In one two-week period, representing ten straight declines, the Morgan Stanley Capital International Emerging Markets Index fell 15%. Russia was off 25% over that time. India's market was forced to close one day after an initial decline of 10%. [It finished down 4% after re- opening.]

Volatility in the commodities markets remained at record levels, with copper rising 12% in one day (after nearly a 20% decline), the biggest single advance ever.

So on one hand investors were fleeing the riskiest of investments, while another group was embracing them on the dip. All in all, it was quite exciting, actually, especially if you had a majority of your assets in cash and could sit back with a cold frosty and observe the bloodletting from afar.

The Financial Times' Martin Wolf asked the question, "Why have markets reached their exposed position? The answer is that success breeds excess." Mr. Wolf cited William White, advisor to the Bank for International Settlements, who offered this explanation.

"Buoyed by justified optimism about some particular development, credit is extended which drives up related asset prices. This both encourages fixed investment?and increases collateral values, which supports still more credit expansion. With time, and underpinned by an associated increase in output growth, this process leads to increasing willingness to take risks ('irrational exuberance'), which gives further impetus to the credit cycle?.Subsequently, as exaggerated expectations concerning both risk and return are eventually disappointed, the whole process goes into reverse."

And in this reversal are the seeds for a global economic slowdown, the speed of which could surprise just as the decline in real estate seems assured of doing so.

By week's end, though, markets around the world were rallying because it is assumed any slowdown will be manageable; that inflation fires will be suppressed and central banks thus won't have to apply the brakes as hard as they otherwise would had inflation kept rising. It's a nice story, very comforting. But I'm betting it's not that easy.

--I'm declaring victory. I said after the first week of the slide it would evolve into a correction and by two readings it was. From its highs to its intraday lows on Wednesday, the Russell 2000 fell 10.8% and Nasdaq 9.9%; 10% being the decline required for the correction label. [At its worst point the S&P 500 was off 6%.]

For its part, after snapping back the Dow Jones finished the week up 1.2% to 11278, while the S&P gained 1% to 1280. But Nasdaq lagged once again (the 8th straight week it has underperformed the Dow), adding just 0.8% to 2210, though enough to get it back into the black for the year (+0.2%).

General Motors was the big winner among the Dow issues, rallying 14% on the strength of some analyst upgrades.

Despite some wild intraday swings, by week's end yields were virtually unchanged. There was a certain flight to quality element early on as equity markets swooned, plus the number on durable goods was far weaker than anticipated, but the housing starts data wasn't quite as bad as feared (I chose to focus on the record inventory figure instead), while a key inflation indicator, the PCE deflator, showed core inflation to be running at a 2.1% pace, not as worrisome to some but still above the Fed's comfort level.

--Reporter Kurt Eichenwald of the New York Times, who covered the Greed Era extensively, on the guilty verdicts for Enron's Jeffrey Skilling and Kenneth Lay.

"The Enron case will forever stand as the ultimate reflection of an era of near madness in finance, a time in the late 1990s when self-certitude and spin became a substitute for financial analysis and coherent business models. Controls broke down and management deteriorated as arrogance overrode careful judgment, allowing senior executives to blithely push aside their critics?.

"It was not simply that the ethics of the corporate world changed overnight; the ever-rising bubble of market prices created a sense of invincibility among corporate executives, who read market delusions as proof of their own genius. Arrogance gave way to recklessness, which in turn opened the door to criminality."

And I loved this piece from the Seattle Post-Intelligencer (and the AP), passed on to me by Charles K., concerning Ken Lay's charitable works.

"Seven years after donating $1.1 million in Enron stock to his alma mater and with little to show for the gift, company founder Kenneth Lay asked the University of Missouri to steer the unspent money to Hurricane Katrina relief.

"The school rejected the request, according to records obtained Monday?By February, a Lay attorney was asking the school to return the money so Lay could pay legal bills stemming from the fraud and conspiracy case against him. The school again turned him down?.

"Lay donated a total of 16,500 shares of Enron stock in two installments, according to university records. The first batch of 10,000 shares were valued at $57.56 each in November 1998, with the remaining 6,500 shares worth approximately $80.46 each when donated in July 1999.

"The university quickly cashed in those shares, avoiding the huge losses that plagued other Enron stockholders once the company collapsed."

--Government regulators fined Fannie Mae $400 million for its egregious behavior in manipulating earnings to benefit top executives directly. It's amazing former chairman and CEO Franklin Raines isn't joining Skilling and Lay in the slammer, though this is still a small possibility as a criminal investigation continues.

From 1998-2003, Raines received $52 million out of $90 million in compensation based on hitting incentives that were only achieved because Fannie played with the books. Other officers and directors benefited as well.

And Fannie employed lobbyists (like former Reagan advisor Ken Duberstein) to block the investigation into its accounting practices.

Dan Denning is publisher of a newsletter I subscribe to called "Strategic Investment" and aside from being jealous of Mr. Denning's ability to live in Melbourne, Australia (I loved my brief visit here a few years ago), I liked his take on a topic he has been all over.

"It is hard to be surprised anymore about the depth of the incompetence and negligence at Fannie Mae. For one, we still don't know exactly what's going on with the accounting. The company is so complex and has been so poorly managed that nobody seems to know how to keep track of the figures. We do know that it's cost Fannie some $800 million just to investigate itself. That is an accomplishment in waste, even by government standards.

"Fannie's outside contractor on the job, Deloitte & Touche, gets about $7.7 million per week for its help in sorting out the mess. This once again proves how integral the mortgage lending business has been to growth in America during the bubble years. It's also an outrageous testament to how much misallocated capital costs an economy, and how little you have to show for it."

Denning wrote this before release of the regulators' report, but as he warned beforehand, "Should Fannie shareholders and Fannie bondholders be worried about the sound of a latex glove snapping in place behind them?"

--Trade rules prohibit U.S. companies from exploring for oil and gas in Cuba's Gulf of Mexico waters, so this week companies from India and Norway signed on with Spain's Repsol to begin drilling in this area where a U.S. Geological Survey estimates there are substantial reserves of both. U.S. environmental law prohibits exploration on the U.S. side of a dividing line negotiated back in 1977.

--With the wicked volatility in the commodities markets, Merrill Lynch strategist Richard Bernstein had some valuable input, as reported by Barron's Michael Santoli.

"(Bernstein) estimated that there was a 50% speculative premium in commodities through the end of April. He did so by comparing the spot prices of commodities that have exchange- listed futures versus the spot prices of commodities that do not have futures.

" 'Our theory was that speculators were more likely to be active in the futures markets than in the actual physical commodity markets,' he writes. By looking at the spread between the two, he could estimate how much speculation versus actual demand existed for that commodity. At the end of March, the speculative premium was about 30%, the biggest premium in the history of his data. By the end of April the premium had inflated to 50% - so prices were about 50% higher than they would be if they were based on fundamentals."

--While there was a surge in discussion on bird flu due to the cluster in Indonesia, I am no longer as alarmed as I had been; though we'll see what happens in the fall when the birds start migrating again.

"Our point is that protectionism and reactions to perceived threats of it are potentially destabilizing events that threaten the current status quo. Yes, the world needs a cheaper dollar to help rectify the U.S. current account deficit and the excesses of American consumption. Yes, a cheaper dollar will allow for a decrease in Asian imports and a rebalancing of our current 'disequilibrium.' But prior currency protectionism followed by too swift of a policy reversal by public policymakers or the inevitable invisible hand of the market, risks asset volatility that is potentially destabilizing. The outcome depends importantly on decisions made by the Chinese themselves with regard to their (renminbi) revaluation. In plainer English, watch the pace of dollar depreciation or periodic re-appreciation if that be the case. Currency volatility can ruin the global economy's day, week, or year(s) for that matter." [pimco.com]

"Though the Bush tax cuts mean that the best-off Americans face lower effective tax rates than under President Clinton, they do pay a bigger share of all federal taxes. Data from the (Congressional Budget Office) and projections by the Tax Policy Center?show that the top 10% of income earners (with incomes above $251,400) will pay 56.2% of all federal taxes this year, up from 52.2% in 2000. That includes income and payroll taxes, Social Security and the like. The growing tax take from the rich reflects their growing share of the nation's income. In 2006, the top 10% is projected to receive 44.7% of all household cash income, up from 40.6% in 2000."

--A survey by USA Today estimates that the cost of future government entitlements such as for Social Security and Medicare - at the federal, state and local levels - is the equivalent of $510,000 per household.

--Former Federal Reserve chairman Alan Greenspan told an audience that Medicare is a "highly unstable situation" and a "very dangerous" one, with costs that will eventually put the U.S. in a "very serious state." Other than that, everything's fine.

--Yahoo and eBay announced a joint agreement to share more in terms of online advertising and communications; an alliance that was well-received by the Street?.even though it really has no clue what it all means.

--Senator John McCain is turning up the heat on the Pentagon and its procurement process. Good. This could be a big positive for him in his presidential bid. Remember, it was President Dwight D. Eisenhower in his highly underrated farewell address who first warned of the excesses of the military-industrial complex.

--Automakers warned that consumers shouldn't use E85 ethanol blend gasoline in their conventional vehicles. Anything more than a 10% blend can corrode the parts on a vehicle not intended to use ethanol. [Of course future models will correct this issue.]

--Remember Liu Qibing, the Chinese government copper trader who lost $300 million late last year by betting the wrong way? He hasn't been seen since, though it's assumed the communists are 'just' holding him under house arrest.

--Las Vegas Sands won the competition for Singapore's first casino, which is bound to be a winner (even at $5 billion) because gamblers will want to stay inside in order to avoid the oppressive humidity outside.

--Treasury Secretary John Snow will be departing soon. Good guy?as in he'd be a good neighbor?but not the greatest spokesman for the administration. But I seem to be the only one who doesn't like Snow's probable replacement, former Commerce Secretary Donald Evans. He just strikes me as too slick.

--In a survey of hedge fund compensation for Institutional Investor magazine, it was revealed that James Simons took home $1.5 billion last year. No. 2 on the list was T. Boone Pickens Jr., the 78-year-old oilman, at $1.4 billion.

Again, these are hedge fund operators, not corporate chieftains, so if the performance is there more power to 'em. Pickens's flagship funds, for example, returned 650 and 89 percent. [Boone likes leverage.]

Most hedge funds have a "2 and 20" compensation scheme; 2% management fee and 20% of the profits, though in the case of Simons it's 5 and 44.

But you have to question someone like Bruce Kovner taking home $400 million when his key fund has posted single-digit returns for three years running. Then again, investors can almost always pull their money out if they're unhappy with the arrangement.

--The New York Stock Exchange is attempting to acquire Euronext, which runs the Paris, Brussels, Amsterdam and Lisbon exchanges, as consolidation in the stock trading biz continues; Nasdaq having recently acquired a 25% interest in the London Stock Exchange.

--It's interesting to note that in the uproar over Home Depot CEO Bob Nardelli's compensation, over $200 million aggregate for the past five years despite a falling share price, one of the members of HD's compensation committee is Countrywide Financial's Angelo Mozilo, who took home $70 million himself last year. But we're assured there's no conflict of interest at play.

--This week the Senate Banking Committee held a hearing on economic literacy. The same day Katie Couric asked the president of Shell, "Is there any way to give customers a rebate?"

Well I don't want to get into a long discussion of how the market works and supply and demand (I did that last week), but the Federal Trade Commission's ruling on the oil industry this week gives me an excuse to give my own little lesson on literacy.

The FTC concluded Big Oil did not manipulate prices post- Katrina, much to the dismay of congressmen who need a red- meat issue for back home.

But anyone can tell if their local gas station is perhaps overcharging by simply following the gasoline futures contract, which should be on the nightly news alongside the closing prices of the Dow Jones and Nasdaq.

It's pretty simple. First, the futures contract is currently around $2.10 and has generally been in the $1.90 to $2.10 range over the past month or so. To figure out what the average price at the pump should be, tack on 70 to 80 cents, which covers items such as taxes, refining, blend requirements, transportation costs and a small profit. Of course the price is going to vary state to state based on availability and closeness to refineries.

There's a lag in the futures price vs. when that particular gas makes it into the pumps, but it's nonetheless a good gauge. All things being equal, for example, if the futures price stayed around $2.00 for the next month, then we should be averaging about $2.80 (max) for regular. If you see $3.40 instead, then that's probably gouging?at the local level?not by Exxon or Shell.

So start following the gasoline futures and hope for zero hurricanes this summer because you now know what damage to the pipelines and refineries can do to prices.

--While I have been a defender of Big Oil, should a federal investigation find that workers may have "improperly repaired two giant storage tanks used by the (Trans-Alaska) pipeline, potentially putting the structures at risk," [Wall Street Journal] I would fine the consortium headed up by BP, ExxonMobil and ConocoPhillips, $billions. Each tank holds 500,000 barrels of oil and a breach could dump the oil into Prince William Sound.

--What a dreadful reception for Internet telephony player Vonage and its initial public offering. Priced at $17 a share, after two days it was down to $13. MasterCard's giant IPO, on the other hand, the largest U.S. one in two years, fared much better; up 14% the first day.

--Back to real estate, Josh P. in San Diego tells me notices of default there - the first step toward mortgage foreclosure - jumped 60% in the first three months of this year, according to DataQuick Information Systems.

--XM Satellite Radio lowered its subscriber forecast, not exactly a great sign for the medium. Personally, I love their 60s music channel.

--The aforementioned Charles K. weighed in on the Lucent lawn debacle. Goodness gracious, he offered, "It won't green unless it gits its nitrogen." Yes, he's right. It's as much about fertilizer as anything else.

--My portfolio: The carbon fiber play calmed down a bit by week's end. I'm kicking myself over one factor here; failing to recognize there would be some substantial insider selling, though in this instance I can't blame the officers and directors one bit as it's the first time in ages they've been able to take a profit on their positions. I just should have been on top of this more.

Anyway, I'm going to stop talking about the position unless I make a move?for those of you playing along at home.

Iraq: Prime Minister al-Maliki put together a cabinet with the following makeup.

17 Shia, 7 Kurds, 7 Sunnis, 5 secularists (Alawi's faction) and three yet to be determined; the important defense, interior, and national security posts.

President Bush labeled it a "turning point," but the question is can the relative security of the Green Zone be replicated throughout the land and can al-Maliki deliver on his promise that Iraqi security forces will control the entire country within 18 months, thus enabling the United States et al to withdraw?

But one item could determine ultimate success or failure long before then; control of the oil revenues. The new oil minister said the central government should handle all contracts related to production, but the Kurds have already been working independently in lining up development deals for oil within their zone of influence.

Separately, commentator William Shawcross had these observations after spending time with British forces.

"(Al-Maliki) must set a clear mandate and he must implement it. People must see long overdue improvements in water, electricity and sewage systems, as well as security. He must also improve all levels of governance. An early test will be if he can get rid of the governor of Basra?who is regarded as useless.

"All this will be terribly hard, not just because of terrorist disruption but because the politicians concerned are unused to government. After 30 years of terror, Iraqis are understandably scared of making decisions.

"However, if the government is seen as broadly representative of the Shi'ite, Sunni and Kurdish populations and is seen to be effective, it will be much harder for the insurgents." [London Times]

Well, that's a pretty optimistic take. For another one, strategists Steven Simon and Ray Takeyh wrote of Iran's influence in Iraq in an op-ed for the Washington Post.

"Since the collapse of Saddam Hussein's regime, Iran has methodically built and strengthened its military, political and religious influence in Iraq. Iran's Revolutionary Guard has extensively infiltrated Iraq's Ministry of the Interior and police force, both mainstays of Shiite power. The hundreds of Iranian mullahs and businessmen who have slipped across the border have a commanding presence in southern Iraq's commercial and religious sectors?.

"Iran's paramilitary and intelligence buildup in Iraq would put some members of the 'coalition of the willing' to shame. Over the past three years, Tehran has deployed to Iraq a large number of the Revolutionary Guard's Qods Force - a highly professional force specializing in assassinations and bombings - as well as officers from the Ministry of Intelligence and National Security and representatives of Lebanese Hizbullah.

"The Qods Force has a longstanding relationship with Hizbullah, which it trains and supplies in coordination with Syria through an Islamic Revolutionary Guards Corps unit in central Lebanon. In the words of Iranian Maj. Gen. Yahya Rahim Safavi, the IRGC commander, 'The range of (the IRGC's) duty is not limited to our land and we have extra-border missions.'

"Iranian personnel have established safe houses throughout southern Iraq. They monitor the movement of coalition forces, tend weapons caches, facilitate cross-border travel of clerics, smuggle munitions into Iraq and recruit individuals as intelligence sources. Presumably, Tehran has recruited networks within U.S. military bases and civilian compounds that could be activated on short notice. Iran is also believed by regional intelligence agencies to have armed and trained as many as 40,000 Iraqis to prevent an unlikely rollback of Shiite control."

Iran: Aside from the above, Iran wants to be loved, as incongruous as that might sound. It seeks respect, and so it desires talks with the United States which would simply tack on another year or two to its bomb-making operation as it dragged any diplomatic effort out until they are ready to shock the world.

And Iran has its Gulf neighbors running scared. In a conference at Sharm El-Sheikh, Egypt, Arab League chief Amr Mousa said American claims regarding Iran's nuclear program have no credibility in the Arab world, and demanded any allegations be supported by proof from the International Atomic Energy Agency.

But then Mousa brought up an issue that is the Arab States' hole card. Yes, the region should be nuclear weapons free but that includes Israel's arsenal. One must understand that this stance resonates throughout the region, regardless of what your own feeling is, and while the Bush administration can call it a non- starter in any negotiations with Tehran, Iran and its neighbors can just keep hammering away at it.

At the same conference, Egypt's President Hosni Mubarak blasted the U.S., in a case of biting the hand that feeds him, accusing Washington of a double standard on nuclear policy when it comes to Israel while at the same time challenging the Bush White House to steer clear of unilateral actions such as the invasion of Iraq. Mubarak added that democratic reforms in the Middle East should "emanate from within the region," a slap at administration attempts to promote Western-style democracy. [AP]

Again, most Americans would like to throw up their arms when they read such talk, knowing we ply Egypt with $2 billion in aid annually, but it's a further example of U.S. failure to win over hearts and minds.

Israel: Prime Minister Ehud Olmert came to Washington for his first meeting with President Bush and Bush essentially agreed with Israel's unilateral steps to redraw the borders between itself and the Palestinian territories as it sees fit, as long as Israel exhausts all diplomatic efforts first.

And certainly for much of the past few weeks that's been the case as Palestinian President Mahmoud Abbas's Fatah movement battles it out with Hamas in a kind of low-grade civil war.

But give Abbas credit. He's proven to have more guts than I thought he had. Long ago he could have sought a cushy asylum in Egypt, or the West, but he's hung in there and now appears on the verge of winning the power struggle with Hamas. He's certainly put them on their heels.

So Abbas's plan is to call for a national referendum on the outline of a Palestinian state if no agreement with Hamas is reached in the next week on a joint platform. The referendum would then ask Palestinians to accept or reject a plan for the creation of a Palestinian state in the West Bank, Gaza and East Jerusalem. And whose plan is it? One worked up by leading Hamas and Fatah prisoners.

Hamas accepts the referendum in principle (at last word), though it would then have to negotiate with Israel and of course its own platform is still based on Israel's destruction.

So is there any reason for optimism? Probably little, but as long as Abbas is the central figure on the Palestinian front, there is some hope the level of violence between Israel and its neighbor won't escalate to full-scale war.

Then again, you always have Hizbullah and this week Sheikh Nasrallah reiterated his forces have "thousands" of rockets capable of hitting Israel at any time, while the Lebanese government remains powerless to disarm them.

But I have to end this segment with a discussion of a story that broke right before I posted last week's review. This is what I wrote.

"Note: I'm waiting 24 hours on a story that Iran's parliament has passed a piece of legislation mandating that minorities wear badges to identify themselves. The major press has yet to confirm it as I go to post."

Unfortunately, not every one employs my "24-hour" rule. It all started Friday, when Canada's National Post ran a piece from columnist Amir Taheri that the Iranian legislature had approved a law requiring all non-Muslims to wear clothes with colored badges to identify oneself as a Christian or Jew, for example. The story went that yellow was chosen for Jews, same as during Nazi Germany.

I watched CNBC's Larry Kudlow, Friday afternoon, as he irresponsibly railed about the legislation and to NBC terrorism expert Steve Emerson's credit he told Kudlow that he hadn't been able to confirm the story.

I then received a mass e-mail Friday night, passing the item off as gospel. Well, this is a hazard of my job?late-breaking news where I have to make a decision on whether or not to include it without all the facts.

As you all know by now, the story was false and the National Post was forced to apologize for running it. As for Taheri, I'll ignore his work in the future.

This of course is in no way a defense of Iran, but the reaction in some quarters to this fake story further points out the dangers of today's journalism. Some in the community have incredible power and we've seen countless examples in the past few years how actual lives have been lost as a result. Some, like yours truly, run up against constant deadlines and the pressure that entails. For my part I will continue to seek the truth as best I can and if it sometimes means holding off on the commentary until I learn more, in the long run that's all for the good.

Afghanistan: And in line with the above, it turns out another late-breaking story last week, the capture of a key Taliban commander by Afghan and Canadian forces, also proved not to be true, and on this one I guessed wrong. Days later we learned it wasn't the same guy.

The bigger story here, though, is the resurgence of the Taliban and I was having flashbacks to my youth when I'd listen to the weekly death tolls from Vietnam on the radio Sunday evenings and wonder why we weren't winning. We're killing 10 of them for every one of us, I'd think. Where do the Vietcong find all these people?

And so it these days with the Taliban, and for that matter the Iraqi insurgency. We're killing a lot, it appears, but they just keep coming.

China: The latest Pentagon threat analysis is more of the same, though it places a bit more emphasis on China's angling for confrontation with Japan down the road. To those who insist that the United States maintains its naval superiority in the region, however, I would remind them that China is rapidly improving its capability to take out our ships and, again, should China attack Taiwan and then knock out one of our destroyers or aircraft carriers, would the American people have the appetite for all-out confrontation? These days? No way.

Russia: Following is an AP report on a press conference President Vladimir Putin held after a meeting with the European Union. Putin was asked about Vice President Cheney's recent criticism of Kremlin policy.

"We see how the United States defends its interests, we see what methods and means they use for this. When we fight for our interests, we also look for the most acceptable methods to accomplish our national tasks, and I find it strange that this seems inexplicable to someone."

And while Putin said the United States remained "one of our major partners," he suggested no one had the right to interfere in Russia's relations with other nations.

" 'As far as the view of our relations with other countries, we will discuss our relations with them directly,' Putin said icily."

Yup, the G-8 in St. Petersburg is going to be a real tension convention, sports fans.

Germany: The World Cup starts in less than two weeks and government fears the competition will be used by far-right groups to draw attention to their movement appear to be warranted. Recently a German politician of Turkish origin was brutally beaten by neo-Nazis.

Turkey / Greece: These two rivals skillfully handled a 'dogfight' over the Aegean Sea that claimed the life of a Greek pilot. These 'fake' episodes occur all the time, though in this instance the Turkish and Greek jets collided with the Turk pilot evacuating safely. This could have precipitated a nasty imbroglio but cooler heads prevailed.

South Korea: Opposition leader Park Geun-hye (daughter of the late dictator Park Chung-hee and the leading female politician in the country), was slashed across her face by two allegedly drunk assailants at a rally in Seoul, though many are wondering if this was some kind of conspiracy. Political violence used to be the norm here but hasn't been for decades, basically since her father was assassinated in 1979.

But you'll recall when I was in South Korea just a few weeks ago I thought the young people were rather na?ve concerning their relations with their cousins to the North so I got a kick out of a New York Times piece by Norimitsu Onishi that talked of the popularity of North Korean theme restaurants in the South. To wit:

"The North Korean waitresses wore traditional dresses in the bright colors that were fashionable in the South some years back. The singer's interpretation of 'Whistle,' a North Korean standard of the 1980s, was shaky and off-key. Service was bad and included at least one mild threat. Drinks were spilled, beer bottles left unopened and unpoured.

"But the South Korean customers could not get enough of the Pyongyang Moran Bar."

This is disturbing. Need they be reminded hundreds of thousands, if not millions, have starved to death in North Korea in just the past decade?

Saudi Arabia: Three years after 9/11, Saudi officials claimed the religious curriculum needed to be reformed after a royal study group found it "encourages violence toward others, and misguides the pupils into believing that in order to safeguard their own religion, they must violently repress and even physically eliminate the 'other.'"

But as the Washington Post found, recent Saudi claims, including an ad campaign in the U.S., that it had reformed its textbooks is a bunch of garbage.

The Post had two independent, fluent Arabic speakers examine the latest offerings. For example:

Fifth Grade - "Whoever obeys the Prophet and accepts the oneness of God cannot maintain a loyal friendship with those who oppose God and His Prophet, even if they are his closest relatives."

"A Muslim, even if he lives far away, is your brother in religion. Someone who opposes God, even if he is your brother by family tie, is your enemy in religion."

Ninth Grade - "The clash between this [Muslim] community (umma) and the Jews and Christians has endured, and it will continue as long as God wills." "Muslims will triumph because they are right. He who is right is always victorious, even if most people are against him."

Twelfth Grade - "Jihad in the path of God - which consists of battling against unbelief, oppression, injustice, and those who perpetrate it - is the summit of Islam. This religion arose through jihad and through jihad was its banner raised high. It is one of the noblest acts, which brings one closer to God, and one of the most magnificent acts of obedience to God."

[Source: Nina Shea, director of the Center for Religious Freedom at Freedom House / Washington Post]

Colombia: Voters go to the polls this weekend as President Alvaro Uribe, one of America's good friends, stands for re- election. Last week, however, Uribe had to deal with a tragic friendly fire incident where troops accidentally shot and killed 10 undercover police officers working an anti-drug operation.

Montenegro: The required 55% of the voters here (55.4%) opted for statehood and a break from Serbia so Europe has its newest nation. StocksandNews was there to capture the scene on the streets.

Ukraine: Since my visit here and the March election, I've been trying to figure out just what the heck is going on. As it turns out, nothing. Parliament convened on Thursday for the first time and promptly adjourned until June 7. President Viktor Yushchenko has thus far refused to give the prime minister slot to the former holder of the office, Yulia Tymoshenko, despite her strong showing in the polls.

Pray for the men and women of our armed forces. And this Memorial Day weekend we remember all who gave their lives in service to our country.

Dow Jones +1.2% [11278]
S&P 500 +1.0% [1280]
S&P MidCap +0.4%
Russell 2000 +1.0%
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