Educate Yourself

Week in Review
For the week 6/5/2006 - 6/9/2006
Brian Trumbore
President/Editor, StocksandNews.com

"Al-Zarqawi brazenly appeared on video, unmasked, and I agree with the Bush administration this is an act of desperation. Desperate people, though, are still capable of incredible acts of cruelty. But while our inability to capture him is mind-boggling, Zarqawi may have just overplayed his hand."

As it turns out, an insider simply helped direct U.S. special forces to Zarqawi as he was terminated this week.

"The skies over Iraq have seen many false dawns in the past few years?.The hope engendered by each breakthrough has been mocked so cruelly and so completely in subsequent months that we have become steadily and increasingly desensitized to any good news.

"And yet there are some events so singular and so innately benign that they can still pierce the cocoon of cynicism from which all but the most optimistic observers view events in Iraq. The elimination of Abu Musab al-Zarqawi, the totemic figurehead of the bloody insurgency, is surely one such?.

"His death does not disarm the insurgency, of course. And who knows what effect it has on their morale and organization. They are, in the most obvious sense, a bottom-up as much as a top- down bunch and he was only in the loosest sense a leader?.

"So what is so important about this one man's removal from the battlefield? For a country and a world inured to the spectacle of failure and shame in Iraq, this simple triumph has a number of positive consequences.

"The most obvious immediate benefit is the improved morale and standing of the fledgling Iraqi Government. The serendipitous timing of this week's operation - on the very day that Nouri al-Maliki, the Iraqi Prime Minister, affixed the final pieces to his Cabinet puzzle with new Defense and Interior ministers - should bestow some much needed legitimacy.

"It should also inject a little ?lan into the spirit of the Iraqi armed forces, themselves undermined by allegations of corruption and brutality and constantly reminded of their continuing dependence on U.S. forces to attain the most basic level of effectiveness?.

"The second reason for muted celebration is the effect this should have on the American military. Battered in the past few weeks by allegations of murder and cruelty, U.S. servicemen needed not only to demonstrate to the world concrete progress in their thankless effort, but also to remind skeptics who is the real enemy in this war?.

"However, the biggest benefit, I suspect, will be in the effect of this small but significant victory on the attitude of the American people. Success in this war will in the end be determined not by the insurgency's ultimate lethality but by the limits of the patience of the public back home. The task that the U.S. has set itself in Iraq, made harder by the ineptitude of much of its execution so far, requires a popular political willingness to see it through. That U.S. troops, even in the hellish conditions of Iraq, can overcome the military constraints on them is not in the end in doubt. But if America's patience is wearing thin, a vicious circle takes hold?.

"(The killing of Zarqawi) probably isn't the turning point most of us would like it to be - just as those other successes were not turning points. It should not and presumably will not produce another of those brief waves of euphoria, soon to be replaced by renewed despair. It should evince, however, not our weary cynicism but a satisfied, uncomplacent realization that in this long war on its enemies, civilization just scored another consequential victory."

"The new Iraqi prime minister, Nouri al-Maliki, would be wise if he followed the suggestion that Zawahiri gave to his henchman Zarqawi last year. 'Fill the void,' the al-Qaeda leader urged. That's what the Iraqis and Americans need to do now in the moment of opportunity offered by Zarqawi's death. Destroy his networks around the country. Peel off his supporters among the ex-Baathists and former regime loyalists; break his hold in towns such as Ramadi and Baqubah; get the Iraqi government out of the Green Zone and into the streets, where it can embolden ordinary Iraqis to believe that the republic of fear has ended."

"With one airstrike, U.S. forces deprived Iraq's insurgency - diverse and fragmented though it is - of its sole widely recognized leader, probably its biggest fundraiser and recruiter?

"The successful operation follows some of the darkest days of the war, when the kidnapping and killing of civilians in Baghdad seems to have reached new heights?.

"The events of this week offer Iraq's government a fragile opening to assert its authority, win the confidence of Iraqis and begin to restore order?.With the most notorious Sunni terrorist slain, Mr. Maliki should seize the opportunity to crack down on the Shiite death squads waging war against Sunnis and launch a long-planned effort to pacify the capital. He should also begin the work of revising the constitution with the aim of achieving a national accord on such divisive outstanding questions as federalism and the sharing of oil revenue.

"To do all this, the Iraqi government desperately needs continued U.S. military and economic support. That's why it was a little unnerving, in the middle of yesterday's celebrations, to hear President Bush speak of plans to hold high-profile consultations early next week on 'how to best deploy America's resources in Iraq.' U.S. commanders have been eager to reduce American troops from the current level of about 135,000 to 100,000 by this fall; the Pentagon may seize on the good news to justify the reduction. Both Americans and Iraqis would love to see U.S. troops come home - and a redeployment might help Mr. Maliki politically, not to mention U.S. Republicans facing this fall's elections. Yet officials from both countries were unanimous in predicting yesterday that the challenge from the insurgency will continue to be severe. Perhaps U.S. troops can be drawn down without worsening that threat; but it would be tragic if, after so much suffering, Iraq's first democratic government were denied the means to succeed."

"Abu Musab al-Zarqawi was a murderer, not a martyr. The majority of his victims in Iraq were fellow Muslims. He openly sought to trigger a civil war between Sunni and Shia followers of his faith. In the case of Christians who fell into his clutches, he combined the barbarism of centuries past with the tools of contemporary technology. Via video and the Internet he boasted that 'cutting off the heads of the criminal infidels is implementing the orders of our Lord.'?.

"(Zarqawi) has operated in Iraq for the better part of three years and no successor will have the same vicious standing with his peers. He will be difficult to replace.

"Terrorist bodies are also, despite the claims they make of popular backing, top-down institutions. They invariably depend upon the charismatic and cunning leadership of a small number of individuals. As Israel showed when it decapitated the hierarchy of Hamas in 2004, the 'military' capacity of terrorists can be decimated by the loss of a few crucial people. Al- Zarqawi is in this category?.His group will endure a period of disarray.

"The new Iraqi government?has to exploit this opening relentlessly?.Terrorism took root in Iraq because zealots sensed a political vacuum after the toppling of Saddam Hussein and moved ruthlessly to fill it.

"There is today a new vacuum in the ranks of the extremists. The administration in Baghdad must now use maximum force to defeat its foes."

"Will (Zarqawi's death) make a strategic difference? More broadly, how does the killing of key individuals in insurgent and terrorist organizations affect the prospects for success in Iraq? Some difference, surely, but not as much as one would hope, because of the nature of insurgent warfare. In conventional warfare, the origins of a war often have little bearing on how one fights it. The personality of Hitler and the missteps of the democracies in confronting Nazi Germany had little bearing on the decision to invade Europe in 1944 rather than 1943. But in irregular warfare, root causes and operational decisions are intimately linked, and those basic causes of war can change over time?.

"Progress in Iraq will depend on many things: the creation of a coherent government, to be sure, but also the development of effective and honest institutions of governance; the provision of employment to the angry young men in an impoverished land; the securing of electrical power and clean water to those whose lives have not improved noticeably in those respects since the time of Saddam; the disciplined application of force by the Iraqi military and police forces, and the purging of militias?.nor should the administration use this as a justification for withdrawing troops because the war is going well. It's not. Until life for the average Iraqi, particularly in Baghdad, has become more secure and prosperous than it is now, until Iraqi security forces can manage the multiple threats that beset not only their state but their sense of common identity, we will have to keep large forces in Iraq, or admit that our mission has failed and disengage altogether.

"The insurgencies are mutating as we wage the war: that is their nature. The internal struggles will continue to attract the participation of outsiders like Zarqawi; more sinister, however, will be the role of those whose names are not so well known, because they are not charismatic leaders of transnational movements, but rather serve the interests of neighbors who have no desire to see a unified and successful Iraq. Iranians, Syrians, Saudis and Turks all have stakes, and will not shrink from fanning violence if it suits their purposes. Still, in the final analysis, it is Iraqi insurgents and not foreigners who are the crucial problem for the U.S. and the Iraqi government."

"As important as (Zarqawi's) death is, no one should be overconfident that this is the turning point for Iraq. It is, as President Bush remarked yesterday, 'an opportunity for Iraq's new government to turn the tide of this struggle.' But it is only that; an opportunity. And unless Iraqi Prime Minister Nouri al- Maliki and his Coalition partners seize this chance to revise and revamp what has been a failing security strategy, it's an opportunity that could pass quickly?.

"Particularly troublesome is life in Baghdad, where common criminality mixes with the political violence to create a feeling of increasing demoralization. The Green Zone that shelters U.S. and Iraqi government officials is more isolated than ever, and there have been numerous reports of gangs attempting to enforce Islamic law in various parts of the city - even the wealthy embassy district of al Mansour?.

"While some media outlets seized too readily on bad news in the past, Baghdad is now so dangerous for reporters that the bad news is probably undercovered. The latest Pentagon report to Congress estimates that there are more than 600 attacks a week in Iraq - more than in 2004?.

"Countries can live with unstable hinterlands if they have to; ask the Colombians. But security in a national capital is crucial for confidence in the government and to prevent the flight of the educated middle class, on whom the future so heavily depends. Baghdad is also a multiethnic city, so its stability would carry a symbolic message for the minority-dominated provinces.

"Any new military operation would entail a more aggressive role for U.S. troops - and probably more casualties - as the November elections approach. But history has shown time and time again that Americans are willing to tolerate casualties in service of what they believe is a winning cause. What Americans have slowly been turning against in Iraq is the appearance of helplessness in the face of the daily drip of car bombings and stories of students slaughtered for belonging to the wrong Muslim sect. Down this road lies more flagging public approval, until some unexpected setback triggers a political stampede for withdrawal?.

"Zarqawi's death is in particular a boost for Prime Minister Maliki that will give him more public support for the tough decisions that lie ahead. Now is the time to make them. If the Maliki government can use this week's momentum to go on the offensive in Baghdad and the Sunni Triangle, then Zarqawi's demise really will be a turning point in the war."

I flipped on Fox News Thursday night to see how Bill O'Reilly and Sean Hannity handled the story. It had been weeks since I put O'Reilly on and I think it was the first time all year I had on Hannity and his sidekick. There was Tommy Franks with Sean, the retired general who is in no small measure responsible for the mess we are facing in Iraq, telling viewers that "the Iraqi people see evidence every day of an economy that is coming along." Franks clearly believes we're all morons.

And I got a kick out of seeing Bernard Kerik speaking from Jordan where he is undoubtedly scamming someone on a security contract, though once again playing the part of Fox News analyst. Maybe you have to have lived in the New York area to know what a despicable person this guy is, but if you're from Missouri and don't understand where I'm coming from, trust me. As for O'Reilly, he played his old cards over and over again, just like in the first days of the war when he told us all "a few casualties is no big deal."

But no doubt, the likes of Hannity and O'Reilly did have some good points when it comes to countering their bomb-throwing equivalents on the Left. No, I don't listen to "Air America" to get their side of the story. I see enough of that kind of venom in most newspapers.

My point is at times like these I just want rational discourse and these days it's seldom found. Of course Thursday was a great day for America and the cause of freedom. Zarqawi goes down as the worst terrorist of our lifetime, worse than bin Laden, though there is a hot suite reserved in Hell for both of them.

But as cited by some in the above opinion pieces, we have to press any advantage gained ruthlessly and it's here that politics can get in the way as it has throughout this war. President Bush's "war cabinet" worries me, for example. What the Iraqi government needs is our military support, as much as we can muster, and with no timetable; though at the same time there is nothing wrong with the Bush administration standing behind Maliki's own stated goal of 18 months before Iraqi security forces are ready to stand on their own.

Reality, though, continues to hit you in the face when it comes to Iraq, and the reality is every government ministry, the army and the police forces are filled with infiltrators, including from Iran. It just takes a team of 2 or 3 to perpetrate an act that can kill confidence both in Iraq and here at home.

But as I noted a while ago, to me if you're going to look at one item to gauge any improvement in the governing of the country, look no further than the treatment of the oil revenues. Perhaps Maliki has received promises of more Sunni cooperation in the new government, and thus some influence in the streets (that is if they ever get outside the Green Zone), but if the oil revenues are not divvied up in some equitable fashion, then the U.S. and its allies might as well go home because the insurgency would go on at least for my lifetime.

And here is where I have to repeat myself. The oil is in the hands of the Shia and their Iranian supporters in the south, and the Kurds in the north. We've seen how the Kurds are already lining up their own development contracts, outside of the central government, so fat chance of them sharing the spoils. They're going to be independent anyway, in 5-10 years, or so that's their plan. And the Shia aren't about to spread the wealth to their hated enemies, either.

Finally, for this week, let me remind Tommy Franks, the man who loved to golf when he went to War College, of the real scene in Iraq?in Baghdad?none of which is likely to change soon just because Zarqawi is dead.

I read a piece in the London Times that talked of the rules for women in some districts, a la what the Wall Street Journal hinted at above in its editorial. Women are told by the Islamist thugs that they can't drive, they can't go out after midday, they can't walk with a man. Men in black enforce the rules and go around shaving women's heads. All the while police do nothing.

Until that dynamic is changed, until the last doctors in Iraq (I think there are three left?four more were beheaded last week) can operate in peace, until there is security so reconstruction can resume, there is zero reason to be optimistic.

But we still have to give Maliki and his new cabinet one last chance, and President Bush must be prepared to go before the American people and explain why more troops, not less, may be required over the coming months.

This is it. American special forces and their collaborators achieved one of their prime objectives this week. But Zarqawi unleashed the whirlwind when he bombed the Golden Mosque of Samarra last February and it's hard to just put it back in the bottle. History is being written daily and it can still go either way.

The mullahs will receive their package of party favors if only they'd just play along and stop enriching uranium. Included in the assortment of goodies are spare aircraft parts, so their planes will stop crashing, as well as cooperation in developing a true civilian nuclear capability. Plus their athletes would probably be given passage to play a 'friendly' in Washington against DC United and Freddy Adu.

But President Ahmadinejad, Ayatollah Khamenei and the rest seek the bomb and to this end the International Atomic Energy Agency is prepared to release a report this week that shows Iran is once again operating full speed ahead after what appears to have been a brief pause?or nap.

So we've entered the netherworld of negotiations; at least Iran would love it that way. A world where the parties meet a few times a month around a nice mahogany table, surrounded by bottled water, fruit juices and some fresh muffins, with everyone just kind of staring at each other, zombie like, while back at the skunkworks, Iranians slave away some 100 feet or more below ground in one of countless sites stirring their witches brew. Ideally, Iran would love this to go on for at least another year.

The White House, though, maintains Iran has just a few weeks to approve of the contents behind the curtain that Carol Merrill is standing in front of and if it doesn't, well, by gosh, the administration and the EU-3 will take the whole issue up with the UN Security Council and ram through some sanctions.

That is unless Russia and / or China veto the proposal, at which point Condi Rice will take her European counterparts out for a night on the town on the Upper East Side of New York to get hammered; simply out of depression.

Then again, the White House, looking at the political calendar here in the States, could decide that it's time to cut some kind of deal, a la North Korea and Bill Clinton; one that back then took us a few years to discover was being broken left and right.

Lastly, Defense Secretary Donald Rumsfeld did say something I agree with this week. Addressing a gathering in Singapore, Rumsfeld questioned why Russia and China had allowed Iran to participate in a new regional outfit, the Shanghai Cooperation Organization. As reported by Michael Gordon of the New York Times, the secretary said:

"It strikes me as passing strange that one would want to bring into an organization that says it is against terrorism one of the leading terrorist nations in the world: Iran."

Yes, quite. And there, sports fans, is your answer to the question, "Are Russia or China going to go along with sanctions against Iran?"

Business Week's Emily Thornton had a terrific piece titled "Inside Wall Street's Culture of Risk" in the June 12 edition. As investors have been stretching for return, Thornton cites some of the following potential problems.

"(The) biggest danger may be on Wall Street. As the banks trade in ever-more-obscure products with ever-more-opaque clients such as hedge funds, observers worry that they might not be able to settle their trades in the event of a market shock, intensifying the damage?.

"It might not take a major meltdown to send bank profits tumbling: Scandals might get them first. Suspicions are rising that bank traders are acting on nonpublic information gleaned from their clients."

While this isn't necessarily new, Thornton notes "with so many different kinds of financial products being traded today, and so many parties involved, the temptations are unprecedented. The Securities & Exchange Commission has 'very active examinations and investigations under way,' says Lori A. Richards, an agency director."

"The New York Stock Exchange is investigating a major investment bank to see if it's giving a hedge fund it runs preferential treatment. And the SEC is examining whether banks have sufficient controls to prevent information about customer positions from being passed on to traders. Fines aside, the hit to banks resulting from the loss of their reputations could be far bigger this time. It's one thing for them to burn individual investors in order to serve big clients; it's another for the banks to burn big clients to serve themselves."

As one institutional money manager told Thornton, he used to hold almost every investment bank stock but now he only holds one. Why? "Investment banks are trading like there's no risk in the world," he told her.

And after the past few weeks we certainly know that's not the case; zero risk, that is. It's everywhere. And if you still don't believe Wall Street is nothing more than a casino, crazy days like Thursday where the market fell 170+ points and then reversed about 200 are all you need to know because there certainly wasn't a lot of news driving the markets?the Zarqawi killing having been flushed out pre-opening in New York.

Overall, it was a rough week; the worst in over a year for the Dow Jones as it took a 3.2% hit to fall to the 10891 level, or suddenly 831 points below its all-time high. The S&P 500 lost 2.8% and Nasdaq tumbled 3.8% to 2135, it's worst weekly close since last fall and a mere 2913 from its peak of 5048. [Sorry.]

But the above doesn't even begin to describe the carnage in the emerging markets which by one leading measurement fell 8% and are now off 20-25% from the peaks set in markets such as India's less than five weeks ago. No doubt, these same destinations also soared up to 200% in the prior three years but you know how these things work?many individual investors don't hop on board until long after the train has left the station and often they're in a such a hurry they've left their itinerary at home and really don't know where they're going.

The real problem both this week and the past month has been the realization that interest rates are rising across the globe in an attempt by central banks of all stripes and political persuasions to beat down any attempts by Ivan Inflation to make scrap out of your take home pay, and eventually the economy.

It's painful, especially if you're not holding a lot of cash to begin with, but picture the first-time buyer of stocks in one of these emerging markets. Throw in a little debt and a family that was eating out once or twice a week for the first time is back munching on dirt. I've been writing how I wonder just how much debt the newly emerging consumer class has been taking on in, say, Asia and Latin America, and the stories should begin trickling out soon.

As for the good folks at the Federal Reserve, Chairman Ben Bernanke got the ball rolling early in the week when he said the Fed "will be vigilant" when it comes to inflation and that recent measurements on prices were "unwelcome." Some Fed governors then chimed in that they can't wait for a slowing economy to bring inflation down?they need to act now, by god! Ergo, the Fed is poised to hike rates once again when it meets on June 28-29; following on the heels of moves by the European Central Bank, India, South Korea and Turkey. For those with lots of short-term debt and adjustable rate mortgages it's scary.

Add it all up and you have the additional fear that the corporate earnings picture also isn't going to be quite as sanguine as we were led to believe.

For the second time this year the yield curve has inverted. [Long bonds with lower yields than shorter maturity paper.] I scoffed the first time, but I can't help but accept the warning signal the curve is sending this time. Per my forecast, the economy is on the verge of rolling over and you'll begin to see real signs of this as early as the third quarter. Wait 'til you see the next figures on housing, for example.

This week promises more volatility as critical data on producer (wholesale) and consumer prices is released Tuesday and Wednesday. It's going to be tension city. Of course the news could be good?and the markets rally a bit?but Bernanke has already told you he's going to defend his manhood. Rates are headed higher.

--From their recent market highs to Thursday's lows, the Russell 2000 fell 12.4% and Nasdaq was off 11.4%, the second time both broached the 'correction' threshold of 10%. The Dow was off 7.6% at its worst levels and the S&P 500 6.8%.

--Energy: A funny thing happened on the way to lower energy prices?they fell for all of a day and then went back up above $70 for a barrel of crude. And gasoline futures remain stubbornly above $2.10, despite huge inventories. Even natural gas, with its own storage facilities bursting at the seams, fell below $6 only to rally.

So what gives? It's the same old, same old. Iran, #1. And right below that still reduced production in Iraq, ongoing tensions in Nigeria, a little terror premium from Saudi Arabia, a dollar or two because Venezuela's Chavez is on the erratic side, and now another few dollars because it's summer and the Atlantic and Gulf waters are heatin' up.

--Porsche, previously best known for a really cool Corgi Toy, has vaulted to the top spot in the annual J.D. Power & Associates quality rankings. But in the more closely followed specific category ranks, Toyota and its Lexus luxury line garnered 11 of 19 top slots. Corolla was the leading compact, for example, with Camry the top mid-size auto.

--In a survey by TNS Sofres, 65% of the French people believe their government is right to intervene to stop foreign bids for native companies. For example, the government continues to block Mittal Steel's bid for Arcelor and President Jacques Chirac is attempting to scuttle the battle over stock exchange Euronext. As Peggy Hollinger writes in the Financial Times, "(It) seems that (Chirac's) efforts are appreciated by the public, raising the risk that the government could intensify its interventionist efforts in the months ahead of the election next spring."

This isn't just a French issue. If world equity markets continue to unwind over the coming months, look for protectionist pressures to intensify?plunging stocks being a probable precursor to recession and increasing unemployment lines.

--A House panel investigating Fannie Mae's accounting debacle appears to be going after former chief executive officer and chairman Franklin Raines. Rep. Richard Baker, R-La., said "There seems to be clear evidence? that Mr. Raines perjured himself" in 2004 testimony to Congress. Meanwhile, current CEO Daniel Mudd, who was vice chairman when all the accounting chicanery was taking place, offered to give up some of his $26 million in compensation from 2000 through 2003 if the board so rules. An internal investigation has found no evidence Mudd himself was involved.

While all the talk recently has been of Enron and its guilty executives, as well as the cases of Tyco and WorldCom before that, when the history of this era is written it will be as much about Raines and Co. as the others. Frankly, I don't know what's holding Fannie Mae's share price up.

--IBM is tripling its investment in India to $6 billion over the next three years. Big Blue already has 42,000 employees here. But I was just perusing the June 19 edition of Business Week and Apple Computer has shelved plans to build a support center in Bangalore. One source told BW that the decision was cost- driven.

"India isn't as inexpensive as it used to be. The turnover is high, and the competition for good people is strong."

In other words, the work can get done elsewhere?a major warning flag for India and those expecting 8% growth here for the next 50 years.

--Yoshiaki Murakami, Japan's American-styled corporate raider and leading shareholder activist (a rarity in a nation where cross- shareholding has been the norm?a policy that stifles dissent), was arrested on insider trading charges as a result of the Livedoor investigation.

--So the other day I mentioned that China's former chief copper trader, Liu Qibing, hadn't been seen since he lost $300 million in 2005 by shorting copper as the price of the metal was taking off. Well it turns out the loss could approximate $700 million because the government never did cover its position and at some point it has to deliver the goods. [Jamil Anderlini / South China Morning Post]

--With the soaring price of copper, even after its recent correction, theft from construction sites has become a huge problem. It's particularly acute in Chile, the world's leading producer. Last month, 850 people were arrested for stealing or attempting to illegally sell the stuff. [Santiago Times]

--A study in Hong Kong estimates that air pollution is costing over 1,600 lives and at least $2 billion a year. The research concludes that if Hong Kong could just improve its air quality from "average" to "good" it would save 64,000 bed days in hospital and 6.8 million doctor visits. From my own experiences here, I have never come close to experiencing even "average."

[Additionally, the World Bank reports mainland China has 16 of the 20 most polluted cities in the world.]

--Uh oh?.alert on my carbon fiber play as it pertains to windmills and wind energy. Alan Levin reported in USA Today that the Defense Department and the Federal Aviation Administration have been holding up some major projects because there is a concern windmill blades could confuse radar. Drat!

The good news, however, for those of us owning shares in suppliers to this industry is that the FAA, which has to approve each application, received 4,343 of them last year, more than double the amount in 2004. This year it expects more than 10,000.

But what's this? The same June 19 Business Week also has a story about how Boeing is having problems with the carbon-fiber composite used in its Dreamliner 787 aircraft. Say it ain't so, Joe! [I'm not worried?.they'll fix it.]

--Google co-founder Sergey Brin acknowledged the search engine had compromised its values by acceding to Chinese censorship demands.

"We felt that perhaps we could compromise our principles but provide ultimately more information for the Chinese and be a more effective service and perhaps make more of a difference." [AP]

--And then there's heart-device maker Guidant. The New York Times' Barry Meier reports that Guidant was prepared to tell doctors about defects in certain models of defibrillators but failed to send a letter to them warning of the risks of implanting the devices into their patients?a letter that had already been prepared.

--Jim Hoagland of the Washington Post writes that the decision to select Henry Paulson as next Treasury Secretary was made without either Vice President Cheney or Karl Rove's knowledge.

--By August, Wendy's will become the first major fast food chain to switch to a healthier cooking oil that will reduce trans fats by up to 95 percent. They are to be congratulated.

To tell you the truth, until recently I had no clue just how bad trans fats were but I'm now checking every food package. Research shows eating just 5 grams of the gunk a day raises your risk of heart disease by 25 percent. A large order of Wendy's fries currently has 7 grams. McDonald's and the others have similar numbers.

--U.S. farmers will sell as much corn this year to ethanol plants as they do overseas. Keith Collins, chief economist for the Department of Agriculture, told the Associated Press "It's the most stunning development in agricultural markets today - I can't think of anything else quite like this." [It also makes you wonder how farmers can continue to defend the gigantic subsidies many of them receive?a big budget issue come next year; after the election, of course.]

Overall, the amount of corn used for ethanol amounts to 20% of the nation's entire crop.

--Frank Lanza, CEO of defense contractor L-3 Communications and a fixture on CNBC, died suddenly. L-3's shares soared in response on speculation the company would now be sold.

You know, when I pass on I hope my friends are toasting me with premium beer, but I'm not so sure I want everyone going "Woo-woo!" a la Homer Simpson.

--80% of Northwest Airlines' flight attendants rejected a contract offer calling for a 21% pay cut?to an annual salary of $857.

--Hotel fortunes are soaring. Revenue per available room rose 11% in April from a year earlier; up 20% in Chicago. Fewer rooms are being added compared to past years which adds to the pricing power.

--Broadway had a record year in all respects; 12 million in attendance for the 2005-06 season, total gross of $861.6 million and an all-time high percentage of seats filled, 81.6%. [Crain's New York Business]

--Sharper Image continues to struggle, reporting a loss of more than $12 million for its most recent quarter. I've always found their products to be way over-priced and of poor quality.

--Flat-panel televisions will account for 20% of the 190 million TV sets sold worldwide in 2006. By 2010 that percentage is expected to soar to 60%. I'm still waiting for my Dick Tracy TV watch.

--Stewart Richardson was sentenced to six years in prison for ripping off eBay customers to the tune of $300,000. Richardson ran a scam involving figurines, such as Hummels and Wee Forest Folk. However, it's possible the latter are simply in hiding.

Israel: I was all set to write something mildly positive about the region, until Friday's horrific attack on Palestinians at a Gaza beach. At least 7 were killed in an artillery attack of some sort that clearly was a tragic mistake. By initial appearances, it appeared a Palestinian family was simply enjoying a day at the beach. Three children were among the victims.

In response the armed wing of Hamas asserted its self-imposed truce with Israel was over and as I go to post Hamas has resumed firing rockets into Israel.

Earlier, prior to this incident, Palestinian Prime Minister Hiniya of Hamas said "There will be no civil war" as President Mahmoud Abbas proceeds with his referendum on a two-state solution for late July. Meanwhile, Jordan's King Abdullah II warned Israel not to reshape the West Bank without Palestinian agreement.

"A unilateral step by Israel would raise question marks and a sense of insecurity not only among the Palestinians, but among all the partners of peace in the region," he said, further warning any such move could greatly harm relations between Jordan and Israel.

Of course King Abdullah is deathly afraid of the Palestinians fleeing to Jordan, where he already has his hands full of refugees. Abdullah said "Jordan will never be a substitute homeland for anybody. The Palestinians' homeland and their state should be on Palestinian soil, and nowhere else." [Daily Star]

For his part, Israeli Prime Minister Ehud Olmert told Abdullah he would do everything in his power to restart peace talks with the Palestinians, including pursuit of the "road map," but would only do so if Palestinians, especially Hamas, renounced violence. But now this is all just talk, it would appear.

The shame is that Israel was having a good week. President Sezer of Turkey, the first Turkish head of state to visit the country since 1999, was a positive presence and, importantly, as far as Israeli-Turkish relations are concerned, Sezer declined to meet with Hamas while in the region; a move which garnered the praise of Israeli opposition leader Benjamin Netanyahu. Turkey would be the perfect mediator for this dispute if they chose to step up; the trust between Ankara and Jerusalem running deep despite a few bumps along the way.

India: It's curious to me that the United States and its European allies are so eager to negotiate with Iran over its nuclear program, including civilian nuclear power, yet when it comes to India and the recent deal between Washington and New Delhi it is in danger of failing to gain approval in Congress.

According to the Los Angeles Times, Senate Majority Leader Bill Frist is blocking the proposed legislation; another reason for me to loath this man.

The deal is critically important, particularly given the fragile political climate in India these days, but lawmakers here are concerned the accord would unravel existing international agreements on the spread of nuclear weapons.

As I've argued before, while we're all concerned about the children?ahem?and while the agreement could easily be negotiated to address some concerns on both sides?overall, the behavior of a majority in our Congress is both hypocritical and short-sighted.

"Lawmakers focused on a better U.S.-India relationship tend to favor the accord. But those concerned about nuclear proliferation think the U.S. is giving away too much. They fear the deal would encourage China, for example, to cooperate more closely with Pakistan and Russia to expand its aid to Iran's nuclear program."

"Granted, India isn't likely to sign up for an aggressive containment regime aimed at Beijing any time soon; but then, neither are we. Rather, India and the United States share an interest in encouraging China to become a stakeholder in an international system dominated by liberal democracies, while maneuvering to hedge against any challenges that Beijing might be tempted to mount?.

"India's location in the middle of a rough neighborhood also makes its population more likely to appreciate that the defense of freedom requires the taking up of arms. While Europeans have let their defense establishments go to seed, India is pressing ahead to develop a modern military capable of projecting power. Delhi already commands one of the best navies in Asia, not to mention the third largest air force and fourth largest army in the world?.

"The histrionic claims about Iran and other rogue states are considerably flimsier. Tehran has a nuclear weapons program because - surprise! - it wants nuclear weapons, and specifically the freedom of action they will grant the regime against its adversaries. The deal with India may give the Islamic Republic a talking point or two at the UN, but it will not sway the behavior of any country engaged in the real world struggle with Iran, or the regime itself. That dispute is being shaped by hard-nosed, and often crude, calculations of national interest and power, not what happens between the United States and India?.

"The resistance to the nuclear deal is made all the more ironic by the fact that the White House's Indian diplomacy cuts against many of the stereotypes about President Bush's foreign policy. It is a step toward a long-term alliance, grounded in shared interests and principles, not a temporary coalition of the willing. It is a deliberate courtship of a rising power, not a shotgun marriage with a client state. Most important, it is a rare instance of the White House successfully closing the gap between ambition and implementation that has dogged its initiatives, from democracy promotion to the war in Iraq. If a balance of power in favor of freedom is to come into being, it simply must include India."

North Korea: The commies accused South Korea of making repeated intrusions into North Korean waters and warned of retaliation. South Korea said it was doing nothing wrong. Actually, it's probably as much about the fishing grounds as anything else?.seeing as fish finding themselves in North Korean waters by accident are always frantically trying to swim to freedom before they are hauled in by unfriendlies.

China: Hong Kong-based Cardinal Joseph Zen Ze-kiun, the Vatican's highest official in China, blasted the Chinese government on the 17th anniversary of Tiananmen Square, calling on it to open up a full review of the massacre. Cardinal Zen defended the pro-democracy demonstrators from June 1989.

"All they asked for was a clean government - is that a sin? And what they wished for was a strong nation - is that a sin? All we're doing is pursuing their aspirations."

"Yes, the economy has improved and some people have earned lots of money, but corruption abounds, the gap in wealth is huge, mines keep swallowing workers and fake milk powder and fake medicines are flooding the market - is this considered an improvement? If they had listened to the kind of advice of the students and workers, would today's country be a better country?" [Keith Bradsher / New York Times]

This man has guts and will be a critical figure over the coming decade, a la Karol Wojtyla?Pope John Paul II.

Separately, China announced that its process of "cloud seeding" will be used, in reverse, to prevent downpours during the 2008 Olympics. The head meteorologist for Beijing, Nian Donglian, told the South China Morning Post:

"We sometimes turn a cloudy day into a dry and sunny one by shooting the clouds less intensively than when we make rain - this makes them dissolve. We can even make it snow - but that's still undergoing testing.

"It depends on the thickness and the position of clouds. Before we fire the ack-ack gun we have to call the airport to check there are no planes in that part of the sky - the last thing we want to do is shoot one down."

Now understand 20 of these guns are employed, blast shells packed with silver iodide. Let's just hope those responsible don't accidentally load plutonium, know what I'm saying?

Russia: I keep telling you President Vladimir Putin will still be in power come 2009, despite all his denials, and a recent survey here adds further credence to my thinking as 59% of Russians believe the constitution should be changed to allow him to stay in office beyond when his second term expires in 2008. Only 11%, incidentally, strongly disapprove of Putin.

Somalia: Islamists have apparently won the power struggle in Mogadishu, a big blow to the anti-terror effort. From an editorial in the Washington Post:

"Somalia demonstrates, once again, that rebuilding failed states - especially in the Muslim world - must be a central U.S. interest in a global war on terrorism. Nation-building is difficult, costly and painful?.But success is possible, as the international missions in the Balkans have demonstrated. Remarkably, the Bush administration still hasn't absorbed this lesson: Rather than try to build up a Somali government, it backed Mogadishu's warlords. Such cut-rate tactics sooner or later lead to a more troubling and dangerous situation - like the one the Bush administration now must face in Mogadishu."

--Pakistan: There was an interesting story in Defense News by Pierre Tran concerning arms sales to Pakistan. France is offering Pakistan three patrol submarines, but Pakistan wants to outfit them with Boeing's Harpoon anti-ship missile, not France's Exocet.

The U.S. Congress had earlier been notified by the White House that Boeing was going to sell Pakistan 130 of the missiles, but as in the above "street byte" on France and protectionism, France is raising hell over the selection of the U.S. weapon over a European based one. It's just a further example of the tough competition in this business.

Australia: The Aussies possess 40% of the world's known uranium reserves, though coal has been the primary source of energy. But now Prime Minister John Howard is saying his country should finally explore nuclear power. Go for it, mates.

On a different matter, looking at the success of U.S. and British special forces in Iraq, it's a reminder of the critical role Australia can play in the war on terror, as I've long maintained. So I was encouraged to read that the Aussies have doubled the number of their own special forces to 2,500 over the past five years. We need their help in Southeast Asia.

Malaysia: The head of the military here is warning that terrorists could use mines to destroy ships and disrupt trade in the vital Strait of Malacca, through which one-third of the world's trade (and about one-quarter of the oil) passes through. Admiral Mohamed Anwar Mohamed Nor said crude underwater mines could be easily rigged by simply packing explosives in an oil drum. [Agence France-Presse]

Peru: Alan Garcia was a truly pitiful president for Peru from 1985-90, but he's staged a spectacular comeback thanks to a run- off he was fortunate to sneak into as the anti-Hugo Chavez candidate.

Peruvians thus chose Garcia as the lesser of two evils as enough of them were disgusted by the fact Chavez openly backed Garcia's opponent. Many are thus hailing this as a further sign of a backlash against Chavez, coming on the heels of Alvaro Uribe's solid reelection effort in Colombia. I'd say it's way too early to draw that conclusion. As growth slows across the continent, Chavez's populist message will continue to resonate.

The United Nations: Seeing as the United States foots about 25% of the tab, you'd think UN officials would be careful in what they say, particularly on American soil. But the other day the UN's deputy secretary general (#2), told a New York audience the UN's failures were largely the fault of the U.S.

"The prevailing practice of seeking to use the UN almost by stealth as a diplomatic tool, while failing to stand up for it against its domestic critics, is simply not sustainable?.the UN's ability to respond is being weakened without U.S. leadership. There is a perception among many quite moderate countries that anything the U.S. supports must have a secret agenda, aimed at either subordinating multilateral process to Washington's ends or weakening the institutions."

To which U.S. ambassador John Bolton said, "This is a very, very grave mistake. To have the deputy secretary general criticize the United States in such a manner can only do grave harm to the UN."

The timing of Brown's remarks couldn't have been worse as the U.S. and Japan were already threatening to cut off funds without further UN reforms.

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