Educate Yourself

Week in Review
For the week 4/2/2007 - 4/6/2007
Brian Trumbore
President/Editor, StocksandNews.com

If you had to sum up the past week in one word I'd choose "disturbing." How else to describe the Iranian hostage situation and the actions of House Speaker Nancy Pelosi? I watched the press conference with the British Marines and sailors on Friday and have more questions than before. But I was careful the past two weeks to take my own advice and 'wait 24 hours' before jumping to any conclusions and I'm still not exactly sure what all the facts are. What I find unsettling is I think they are lying about much of what really happened.

In the case of Nancy Pelosi, however, it is clear she not only did the country harm, she is also incredibly na?ve (I'm being kind) and for a woman who is just a few steps removed from the presidency, you can't help but be troubled and disturbed by her performance.

But first, the hostage ordeal. British Prime Minister Tony Blair was adamant no deal had been cut for their release and we can only take him at his word. But it was the words chosen by Blair early on, as well as those of his foreign secretary, Margaret Beckett, that were questionable; such as Beckett's expression of "regret" over the incident that precipitated the crisis.

As for Iranian President Ahmadinejad, it was a public relations coup as in the end he offered the soldiers' release as a "gift to the British people done out of Islamic compassion."

Earlier, Ahmadinejad said his government was seeking a "confrontation" with the British when it intercepted their boat "but the deplorable conduct of the British government led to the prolonging of this incident."

Ahmadinejad also scolded Britain for deploying the lone female, Faye Turney. "How can you justify seeing a mother away from her home, her children? Why don't they respect family values in the West?" This from a man whose goons recently beat on hundreds of female protesters demanding human rights in Tehran.

If there was any good to come out of the whole episode, it was that the protest staged at the British Embassy last weekend was comical. For starters you had to love how the government supplied a wagon filled with rocks, which was more than a bit symbolic by my way of thinking; read Stone Age.

More importantly, though, few bothered to show up. As a strategist remarked to Robin Wright of the Washington Post, the Iranian people weren't exactly "frothing at the mouth" like back in 1979-81. Herein lies a clue to Iran's future if we would just learn to play our cards right.

"The greatest shock from the Middle East this year hasn't been terrorist ruthlessness or the latest Iranian tantrum. It's that members of Britain's Royal Marines wimped out in a matter of days and acquiesced in propaganda broadcasts for their captors.

"Jingoism aside, I can't imagine any squad of U.S. Marines behaving in such a shabby, cowardly fashion?.

"You could put a U.S. Marine in a dungeon and knock out his teeth, but you wouldn't knock out his pride in his country and the Corps. 'Semper Fi' means something. And our Aussie allies would be just as tough.

"What on earth happened to the Royal Marines? They're members of what passes for an elite unit. Has the Labor government's program to gut the U.K. military - grounding planes, taking ships out of service and deactivating army units - also ripped the courage from the breasts of those in uniform?

"The female sailor who broke down first and begged for her government to surrender was pathetic enough. But when Royal Marines started pleading for tea and sympathy?Ma, say it ain't so!

"Meanwhile, back at No. 10 'Downer' Street, British politicians are more upset that President Bush described their sailors and Marines as 'hostages' than they are with the Iranians?.

"I've always respected the Brits and quite liked those I worked with when in uniform?but I'm starting to wonder if I bought into a legend. While criticizing our military's approach to everything, the Brits made an utter balls of it in Basra and now they're bailing out, claiming 'Mission Accomplished!' [OK, they had a role model?] In Heaven, Winston Churchill's puking up premium scotch?.

"John Bull has been cowed. By a pack of unshaven thugs. And the Britannia that ruled the waves is waving goodbye."

"Time and again, the Victorians meted out retribution to those who had the temerity to deprive British subjects of their liberty, the more terrible in cases where the lives and (worse) the honor of Englishwomen were placed in jeopardy. Nemo me impune laccessit was the ancient motto of the Scottish crown: 'No one messes with me and gets away with it.' In effect, that became the motto of the entire Victorian empire.

"I suppose a remnant of that spirit survived into the 1980s. There was certainly something distinctly Victorian about the Falklands expedition: the scale of the venture, the distance covered and the relatively small number of Britons to be rescued.

"Yet today we live in a different world. Britain could not re- fight the Falklands War if Argentina invaded the islands tomorrow. Nor could a British strike force be sent to punish the Iranian government today. If military action is going to be taken against Iran this year, it will be initiated by the United States, not Britain. And, to judge by Faye Turney's conspicuous absence from the front pages of U.S. newspapers, a British hostage crisis won't be the casus belli.

"As he approaches the 10th anniversary of his election as prime minister, (Tony) Blair consciously invites comparisons to Margaret Thatcher, the only other prime minister since 1827 to endure so long. Yet this new crisis of captivity, like Blair's needless kowtowing over slavery, exposes the profound differences between the nice guy and the Iron Lady."

"Many will be tempted to interpret the release of the hostages as evidence of Iran's essential reasonableness, conveniently forgetting who started the crisis in the first place. The lesson of these two weeks is not to slip back into negotiations with Iran in the hope of exploiting some division that may or may not exist between 'moderates' and Mr. Ahmadinejad's allies.

"The lesson is for the world to increase the diplomatic and sanctions pressure in response to Iran's threatening behavior and continued nuclear program. That is what will produce more fissures in the regime - as more and more Iranians understand the price of isolation and conclude that the mullahs and their Revolutionary Guards are leading them down a dangerous, losing road."

"Britain asked the European Union to threaten to freeze exports, $18 billion a year of commerce. Iran would have lost its No. 1 trading partner. The European Union refused.

"Why was nothing done? The reason is simple. Europe functions quite well as a free-trade zone, but as a political entity it is a farce. It remains a collection of sovereign countries with divergent interests. A freeze of economic relations with Europe would have shaken the Iranian economy to the core. 'The Dutch,' reported the Times of London, 'said it was important not to risk a breakdown in dialogue.' So much for European solidarity."

But Krauthammer and other conservatives also talk of how the new multilateralism of the Bush administration's second term has gotten us nowhere, as if unilateralism worked before. This is a dangerous slope.

"The capture and release of the British hostages illustrate once again the fatuousness of the 'international community' and its great institutions. You want your people back? Go to the European Union and get stiffed. Go to the Security Council and get a statement that refuses even to 'deplore' this act of piracy. [You'll settle for a humiliating expression of 'grave concern.'] Then turn to the despised Americans. They'll deal some cards and bail you out."

It's far more complicated than this, however, and every situation on the foreign policy front is different. But what has emerged over the past five years in particular is you need competent leaders and you'd have a hard time convincing me these are in abundance around the globe today.

And speaking of competence, or rather the lack thereof, we have House Speaker Nancy Pelosi. By now many of you have read or heard of the Washington Post editorial on her trip to Damascus, but it's important I repeat much of it.

"House Speaker Nancy Pelosi offered an excellent demonstration yesterday of why members of Congress should not attempt to supplant the secretary of state when traveling abroad. After a meeting with Syrian dictator Bashar al-Assad in Damascus, Ms. Pelosi announced that she had delivered a message from Israeli Prime Minister Ehud Olmert that 'Israel was ready to engage in peace talks' with Syria. What's more, she added, Mr. Assad was ready to 'resume the peace process' as well. Having announced this seeming diplomatic breakthrough, Ms. Pelosi suggested that her Kissingerian shuttle diplomacy was just getting started. 'We expressed our interest in using our good offices in promoting peace between Israel and Syria,' she said.

"Only one problem: The Israeli prime minister entrusted Ms. Pelosi with no such message. 'What was communicated to the U.S. House Speaker does not contain any change in the policies of Israel,' said a statement quickly issued by the prime minister's office. In fact, Mr. Olmert told Ms. Pelosi that 'a number of Senate and House members who recently visited Damascus received the impression that despite the declarations of Bashar Assad, there is no change in the position of his country regarding a possible peace process with Israel.' In other words, Ms. Pelosi not only misrepresented Israel's position but was virtually alone in failing to discern that Mr. Assad's words were mere propaganda?.

"[When criticized by President Bush for freelancing], Ms. Pelosi responded by pointing out that Republican congressmen had visited Syria without drawing presidential censure. That's true enough - but those other congressmen didn't try to introduce a new U.S. diplomatic initiative in the Middle East. 'We came in friendship, hope, and determined that the road to Damascus is a road to peace,' Ms. Pelosi grandly declared.

"Never mind that that statement is ludicrous: As any diplomat with knowledge of the region could have told Ms. Pelosi, Mr. Assad is a corrupt thug whose overriding priority at the moment is not peace with Israel but heading off U.N. charges that he orchestrated the murder of former Lebanese prime minister Rafik Hariri. The really striking development here is the attempt by a Democratic congressional leader to substitute her own foreign policy for that of a sitting Republican president. Two weeks ago Ms. Pelosi rammed legislation through the House of Representatives that would strip Mr. Bush of his authority as commander in chief to manage troop movements in Iraq. Now she is attempting to introduce a new Middle East policy that directly conflicts with that of the president. We have found much to criticize in Mr. Bush's military strategy and regional diplomacy. But Ms. Pelosi's attempt to establish a shadow presidency is not only counterproductive, it is foolish."

"Even Newt Gingrich, for all his grand domestic ambitions in 1995, took a muted stand on foreign policy, realizing that in the American system the executive has the bulk of national security power. He also understood he would do the country no favors by sending a mixed message to our enemies - at the time, Slobodan Milosevic?.

"With her trip, Ms. Pelosi has now reassured the Syrian strongman that Mr. Bush lacks the domestic support to impose any further pressure on his country. She also made it less likely that Mr. Assad will cooperate with the Hariri probe, or assist the Iraqi government in defeating Baathist and al-Qaeda terrorists."

Robert F. Turner, former state department official in the Reagan administration, in an op-ed for The Wall Street Journal.

"House Speaker Nancy Pelosi may well have committed a felony in traveling to Damascus this week, against the wishes of the president?.

"The 'Logan Act' makes it a felony and provides for a prison sentence of up to three years for any American, 'without authority of the United States,' to communicate with a foreign government in an effort to influence that government's behavior on any 'disputes or controversies with the United States.'"

This goes back to the presidency of John Adams, though Turner himself admits that the last thing the White House is about to do is attempt to enforce it.

"We can thank the U.S. Speaker of the House, Nancy Pelosi, for having informed Syrian President Bashar Assad, from Beirut [an earlier stop], that 'the road to solving Lebanon's problems passes through Damascus.' Now, of course, all we need to do is remind Pelosi that the spirit and letter of successive United Nations Security Council resolutions, as well as Saudi and Egyptian efforts in recent weeks, have been destined to ensure precisely the opposite: that Syria end its meddling in Lebanese affairs.

"Pelosi embarked on a fool's errand to Damascus this week, and among the issues she said she would raise with Assad - when she wasn't on the Lady Hester Stanhope tour in the capital of imprisoned dissidents - is 'the role of Syria in supporting Hamas and Hizbullah.' What the speaker doesn't seem to have realized is that if Syria is made an obligatory passage in American efforts to address the Lebanese crisis, then Hizbullah will only gain. Once Assad is re-anointed gatekeeper in Lebanon, he will have no incentive to concede anything, least of all to dilettantes like Pelosi, on an organization that would be Syria's enforcer in Beirut if it could re-impose its hegemony over its smaller neighbor?.

"Unfortunately, foreign bigwigs come to town, their domestic calculations in hand; then they leave, and we're left picking up the pieces."

Meanwhile, in Iraq, Moqtada al-Sadr is back in the picture, once again blasting the U.S. presence, while his boss, Shia cleric Grand Ayatollah al-Sistani, who seldom speaks up on issues of state, said he won't allow Baathists to return to government service, even as Prime Minister Maliki and President Talabani approve of the plan.

As for the 'surge,' the Pentagon is still on schedule?20-30,000 by mid-June. It started in February.

Three thoughts. First, as Senator McCain said weeks ago, this is pitiful. Second, Congress needs to give the surge a final chance to succeed. Third, I said back in December that the American people will begin to lose patience with it by June, not the hoped for year end timetable of Bush and General Petraeus.

So you might be thinking, but if the troops won't be in place until then, how can you judge success or failure by June? Because I've said there is one overriding issue, one guidepost, that everyone should focus on here when considering whether the government is making progress; that being the enactment of a viable oil revenue-sharing law. I noted weeks ago it was hashed out by the various powers but still has not been signed off on by parliament. The other day in his press conference, President Bush missed another opportunity. He chose to call the oil deal an accomplishment instead of saying, "I call on the Iraqi leadership and parliament to get together in the next 72 hours and sign this damn thing!" I hate to repeat myself, but I frankly don't understand why every single American serving in theatre, let alone their families back home, isn't screaming with one voice:

"It's been four years?we're giving our lives and busting our butts for you?so sign this freakin' oil revenue legislation or we're out of here!"

I'm telling you, there will never, ever, be an Iraq that can "govern itself, sustain itself and defend itself" without first reaching an agreement on the source of 80% of the nation's income. We can worry about the inevitable massive corruption that will follow enactment later.

So let me attempt to sum up all the above in laying out three principals that I see as critical in discussing the Middle East today.

2. The U.N. Security Council must enact far stricter sanctions on Iran to attempt to not only halt its nuclear weapons program but also begin to bring down the government.

3. The U.N. Security Council must get a tribunal in place to address the assassination of Lebanon's Rafik Hariri and bring the guilty to justice no matter how high up the chain of Syrian command it goes.

These are all very doable, but then they should have been accomplished a year ago.

In keeping with the recent pattern of one up, one down, this was an up week for the major averages with the big three registering solid gains; the Dow up 1.7% to 12560, the S&P 500 tacking on 1.6% to 1443, and Nasdaq advancing 2.1% to 2471. For the year, they're all up essentially 1%-2%, which means if you were sitting in cash you'd have had similar success, he wrote mischievously.

The stock market was closed for Good Friday, but the bond guys went to work for a few hours to trade the March employment report, and a strong one it was?up 180,000 in non-farm payroll with the prior two months once again revised upward as they always seem to be. The official unemployment rate ticked down to 4.4%, back to the level of May 2001, while hourly wages are now up 4% from year ago levels.

The bond market didn't like the numbers, though, because it makes it harder for the Federal Reserve to lower interest rates anytime soon and on this I don't disagree. But I will maintain, until they pull the plug on my computers, the Fed can't possibly raise rates or this economy would roll over faster than a bunch of Brits.

But just how strong is the economy? I have to remind everyone that the rate of growth has been 2.6%, 2.0% and 2.5% the past three quarters and no one anticipates anything better for the first when it is announced. It also needs to be noted that the national ISM readings on both manufacturing and the service sector came in less than expected for the month of March, though both are also still slightly above the 50 level, below which can be a sign of recession down the road.

So I have to go back to the three-legged stool?housing, cap-ex, and the consumer.

Housing is obviously still in the dumper, business spending is punk at best (as corporations continue to opt to spend excess cash on stock buybacks rather than plant and equipment), while the consumer keeps skipping down the road singing "Zippity-do-da." And, again, until we see the unemployment rate actually rise, as well as the lagging impact of the wealth effect on everyone's chief asset, their home, there's no reason for the consumer to slow up. Even I have to admit this. It's the American way, after all. Have coin?go shopping.

And to be totally fair, the mergers and acquisition game is still very much in play, witness this week's deals involving First Data ($25.6 billion) and Tribune Co. ($8 billion). That's certainly a sign not only of confidence but of liquidity.

But as for housing, yuck. Inventory figures continue to rise across the country, up 12.8% in Los Angeles and 12.2% in San Francisco, for example, just in March over February. Miami, thanks to its dreadful condo market, has seen inventories rise 61% over the past year. There will be no recovery in housing until you substantially wipe out inventory and on this count we're still headed in the wrong direction.

New Century Financial Corp., the 2nd-largest subprime lender, finally declared Chapter 11 and instantly laid off 3,200, or more than half its work force. Nationwide, when you include all facets of real estate, 21,200 were laid off in the first quarter and the pace will only accelerate. But if you tell me the economy is generating jobs in other sectors to make up for the ballooning losses in housing, well then I'll have to shut up, won't I?

But here's the deal. Some economists I respect, like Mark Zandi, are now calling for the median home price to decline 5% in 2007, which would be the largest drop since the Depression, while tougher lending standards are wiping out a large slice of the first- time home buyer market. Or, as PIMCO's Bill Gross put it, "As past marginal buyers are forced to sell their home to prevent foreclosures, so too will future marginal buyers be restricted from buying them."

We're only in the 5th inning of the housing crisis, I imagine, but remember, this game is destined for extra innings?as in stagnation when we finally hit bottom.

--It's all about earnings the next three weeks and after 14 consecutive quarters of double-digit gains, if they come in better than expected (the estimate is for only 4%) stocks will nonetheless do well. If they just meet expectations or fall below, and company guidance for the rest of '07 is so-so, stocks will decline.

The long end of the curve tanked with Friday's strong jobs data, but with a lot of market participants, including the international crowd, out for Easter, the better test will be the market's reaction on Monday and Tuesday. And we're still not out of the 4.50%- 4.80% range on the 10-year so I remain bored by it all.

--A spokesman for China's Commerce Ministry, Wang Xinpei, unsurprisingly slammed the Bush administration's move to impose steep tariffs on Chinese exports of coated paper.

"This action of the U.S. side goes against the consensus reached by the leaders of both countries to resolve disputes through dialogue. China strongly requires the United States to reconsider the decision and make prompt changes?.The decision brings great harm to the interests and feelings of Chinese business people and is not acceptable." [David Lague / New York Times; Bloomberg News]

"The anti-subsidy measure will increase the cost of Chinese products sold in the U.S., but will not increase the competitiveness of U.S. manufacturers. They will continue to operate at a disadvantage in competition with low-cost Asian rivals.

"The higher cost of U.S. manufacturing, together with the country's block on exports of its high-tech products, with their high value-added prices, is a fundamental cause of the trade imbalance.

"The differential reflects the reality of the division of labor as the world economy develops, not the so-called unfair subsidy by the Chinese, or whatever, government."

"(By) Commerce's own admission it's difficult, if not impossible, to determine how much China's government meddling affects the price of coated paper exports. Commerce also decries tax incentives and debt forgiveness handed out to paper companies through China's five-year plans. But while such industrial policy is grossly inefficient, it isn't necessarily illegal under World Trade Organization rules. What's illegal is to give tax breaks to companies explicitly to promote exports, which distorts international trade flows.

"In any case, the proper place for Washington to take its trade complaints is to the WTO. In February, the U.S. Trade Representative filed a case against Chinese subsidy programs aimed at promoting exports. A few weeks later, China retracted one of those programs rather than head to the WTO arbitration board. The U.S. will not get China to play by global trade rules by acting unilaterally itself. Meantime, in the name of punishing China, the Bush Administration is punishing U.S. paper consumers who will now have to pay higher prices than their global competitors?.

"Rather than be appeased by these China tariffs, Congress, Big Labor and various business interests are far more likely to claim policy vindication and demand more. The Bush Administration is playing with matches, and we hope the economy doesn't get burned."

--On the other hand, the U.S. and South Korea signed a landmark free trade deal that could boost trade between the two by $20 billion. But it still has to be approved by Congress and Korea's National Assembly and a successful outcome is far from certain, even as both sides protected key constituencies such as beef and rice (South Korea) and small trucks (U.S.).

--The Wall Street Journal ran a front page headline on Thursday titled "Mexico Tries to Save A Big, Fading Oil Field" that concerned a topic addressed in this space before, the startling production decline at the Cantarell Field; fully one-fifth in just 13 months.

Cantarell produces one of every 50 barrels of oil on the world market and for some of us it further illustrates the peak oil argument, one that then gets twisted around by its opponents to make us adherents look a bit loony.

On one hand that may be true, but it's getting it out of the ground that isn't easy and for today, here's the bottom line.

The world consumes about 85 million barrels every 24 hours and despite conservation efforts and the advent of alternative sources of energy, this total is expected to continue to grow well into the future, unless you are talking a global depression.

At the same time, for various reasons, including both physical and geopolitical, it's not easy pumping 85mm barrels of the stuff, and while those doubting the peak oil theory talk about great new finds, such as the one in the Gulf of Mexico announced last year, the fact is only one giant field has been discovered since the 1980s (in Kazakhstan). [The one in the Gulf will take years to come on line and there are serious technological impediments before we get there.]

So barring an economic collapse (a scenario I don't rule out of course), oil is not dropping back below $40. Obviously, though, the relatively high prices of today have yet to impact growth.

--Meanwhile, 14 of the world's largest natural gas producers are meeting this coming week in Qatar to begin to lay the framework for a new cartel. The 14 control about 42% of global output, including Russia's nearly 22% share, but the only folks who should be concerned about the prospects for a cartel are Europeans, as between Russia's 22% and Algeria's 3% the continent receives a considerable share of its overall needs from the two.

--The Big Three automakers continue to lose market share to their Japanese rivals as GM posted a 4% sales decline for the month of March in light-vehicle sales, Ford dropped 9% and Chrysler Group's fell 5%. By contrast, Toyota's jumped another 12%, Honda's increased 11% and Nissan's rose 8%. GM did say it was gaining further momentum in China as sales there jumped 25% in the first quarter.

--89-year-old Kirk Kerkorian and his Tracinda investment vehicle launched an all-cash bid of $4.5 billion for Chrysler, though others such as Canadian auto parts maker Magna as well as private equity firms Blackstone and Centerbridge are said to be interested. Back in 1998, Chrysler agreed to be sold to Daimler-Benz for $35 billion when Kerkorian was the largest shareholder. At first agreeing with the move, he later turned on Daimler management.

--Ford CEO Alan Mulally was paid $28 million in his first four months on the job, including a $18.5 million hiring bonus; though $11 million of this was to make up for compensation he was forfeiting by leaving Boeing. But considering contract negotiations with the United Auto Workers union are upcoming, and the fact Ford lost $12 billion in '06, the compensation package is unseemly.

--The U.S. Supreme Court ruled 5-4 that the Bush administration is breaking the law by refusing to limit emissions of green house gases, thus running counter to the Clean Air Act.

But while the decision will inevitably lead to increased regulation of auto emissions, any new requirements are years away from being enacted. Frankly, the administration has been gutless for over six years on this topic and it's not as if their support of Detroit and U.S. auto makers has stopped the slide in sales.

--The World Bank warned that despite Asia's current strong rate of growth, governments must step up spending on infrastructure as well as face up to their staggering pollution problems; reiterating that China, for example, has 20 of the 30 dirtiest cities in the world. China's dominance of manufacturing is also creating "intense competitive pressures for other East Asian economies."

--A study of New York City found that it now requires an annual income of between $75,000 and $135,000 for a family of four to enjoy what it terms "a middle-class standard of living." [New York Daily News]

--Josh P. passed along an item from the San Diego Union- Tribune that one of the big issues these days on the subprime mortgage front is that "a majority (that were) closed during the housing boom years carried no escrows for property taxes and hazard insurance," in stark contrast to the prime mortgage market where such accounts are mandatory.

Many subprime mortgage holders have thus been failing to make their property tax or insurance payments, which only hastens the foreclosure process. Can't say I ever thought of this one.

--Microsoft's Bill Gates and others, particularly in the tech world, have been decrying the lack of qualified help and the need to increase the number of H1-B visas that are granted for professionals. So I noted with interest this item from Crain's New York Business.

"The U.S. Citizenship and Immigration Services began accepting applications for the H1-B visas on April 2. Normally, CIS keeps granting visas to applicants on a first-come, first-serve basis until the 65,000 stock has been exhausted, which typically takes several weeks. This year, however, CIS received 150,000 applications on the first day, due to a big backlog of unsuccessful applicants from last year."

It turns out that CIS is overwhelmed and the selection process will take weeks. Those then shut out have to wait until April 2008 in hopes of getting a work visa for 2009. What's clear is the cap must be raised.

--Sam Zell's acquisition of Tribune will eventually lead to the sale of the Chicago Cubs for an estimated $600 million.

--A judge ruled on Friday that Internet phone carrier Vonage can not sign up new customers as punishment for infringing on Verizon's patents. I would suggest that Vonage begin to think about what it wants for its last meal. I'd go for veal cutlet and spaetzle, washed down with Pilsner Urquell, myself.

--Financial aid administrators at the Universities of Texas and Southern California, as well as Columbia University, were suspended when it was learned they owned stock in "preferred" lenders that are recommended to student borrowers and their parents. This came about as a result of a wide-ranging investigation by New York Attorney General Andrew Cuomo's office into potential conflicts of interest in the student-loan industry.

--You know those "10b5-1" stock plans corporate executives claim take away any conflicts of interest when it comes to their sales of company stock? The SEC is investigating whether these are yet another sham, as it would appear they are filled with loopholes. Said Linda Chatman Thomsen, chief of the agency's enforcement division, "We want to make sure people are not doing here what they were doing with (the backdating of) stock options."

A study by Stanford University's Alan Jagolinzer claims that "insiders started sales plans just before big drops in the stock price. That could indicate they may have put the plans into place to ward off charges that they were simply selling ahead of bad news." [Dionne Searcey and Kara Scannell / Wall Street Journal]

--A study published in the journal Science warns the American Southwest faces a permanent drought by 2050 because of global warming. It's already essentially been in one since 2000.

--An industry report suggests that global demand for solar power equipment will rise from $20 billion in 2006 to $90 billion in 2010. The demand for high-purity silicon required for solar cells is projected to grow 10-fold by 2015. [Financial Times] See my portfolio comment below.

--The British government got in a bit of hot water with the Saudi royal family when months ago it announced it was investigating BAE Systems, Britain's largest defense contractor, for bribery in handling future contracts with the kingdom.

Now it's been revealed that BAE was paying tens of thousands of dollars to two British actresses who befriended the man in charge of approving Saudi arms transactions, Prince Turki bin Nasser. Anouska Bolton-Lee, a former lingerie model, and Karajan Mallinder, another actress, regularly partied at a hotel in London with the prince and his entourage, according to the London Times. Well whaddya know? Sounds like a pretty familiar story line if you ask me.

--The New York Stock Exchange resets its "trading curbs" each quarter based on the level of the Dow Jones Industrial Average, so just know that if the Dow declines 3,700 points, the market will close for the day, regardless of the time. Ergo, if you're a trader, working on the Street or at home, for example, and the Dow drops 3,700 points in the morning, you could conceivably get in 18 holes that afternoon!

--My portfolio: I now own two solar energy plays, the same carbon fiber holding, and a biodiesel stock so I have an increasing focus on alternative energy; plus I own two traditional oil and gas plays and a water stock as well. Overall, though, I'm roughly 70% cash, 30% equities; or above the 80/20 mix I've been betting would beat the market.

Israel: Prime Minister Olmert, he of the single digit approval rating, called for a regional conference to discuss the 2002 Saudi peace initiative [land-for-recognition], but then he set preconditions such as the refusal to allow the return of a single Palestinian refugee. No one expects Israel to, but as columnist Robert Novak noted when you set preconditions it's "a classic mechanism for escaping talks altogether."

Separately, Israel is warning that Hamas is building up its forces rapidly in Gaza.

North Korea: Like Iran, Pyongyang will miss its deadline for dismantling its nuclear weapons effort at the Yongbyon plant (in their case, April 14). At the same time China and South Korea are still trying to make headway in the dispute between the U.S. and the North over $25 million sitting in Macau's Banco Delta Asia. The U.S. has agreed to free up the funds, which were to be transferred to the Bank of China, but the bank is afraid to accept the money out of fear it will affect its credit rating and future business.

The six-party talks on North Korea's nuclear weapons program have now been going on since 2003.

"For every person caught and accused of passing U.S. military and trade secrets to China?scores of others go undetected. Taking advantage of an outmanned counterintelligence effort drained and distracted by the wars in Iraq and against al-Qaeda, current and former officials say, China has systematically managed to gain sensitive information on U.S. nuclear bombs and ship and missile designs."

Well, that's been my complaint, as expressed again last week. Joel Brenner, the top counterintelligence official in the office of Director of National Intelligence Michael McConnell, said that while 140 foreign intelligence services are attempting to penetrate U.S. agencies, China's is the most aggressive, which Brenner describes as "an intensifying and troublesome pattern."

Qin Gang, a spokesman for China's Foreign Ministry, said at a recent press briefing, "I wonder why people always feel threatened by others and treat others as thieves. It indicates these people have a chip on their shoulders and have fragile psychologies."

To which I'd reply, "I wonder why one country targets another with over 700 missiles, even though the target itself presents absolutely no threat whatsoever?"

Ukraine: Remember, this nation is still basically divided in two, literally east and west with Russian and Ukrainian-speaking bases; those favoring the West and integration into the European Union, as exemplified by President Viktor Yushchenko, and those seeking strong relations with Russia, symbolized by Prime Minister Viktor Yanukovich.

But since the Orange Revolution of 2004 that brought Yushchenko to power, Ukraine has been floundering politically (though the economy has held up) and now Yushchenko has dissolved parliament and called for new elections on May 27 to break the gridlock caused by a standoff between the two long- time rivals.

As the past week progressed, Yushchenko warned Yanukovich not to revert to force, while lawmakers vowed to withhold the money needed to conduct new elections.

But it's really up to the Supreme Court at this point, the same one that overturned Yanukovich's victory within a week back in '04. This time Yushchenko has the loyalty of the military and secret service, though as yet it's not clear where the Court stands on the election issue, even as the president has the power to call them.

Pakistan: Fighting continues in Waziristan between Uzbek terrorists and the various tribes in the region. It's still far from clear, however, what impact if any this is having on the sheltering of the likes of bin Laden and Zawahiri.

It was the Musharraf government, you'll recall, that signed peace deals with tribal elders last fall in which the tribes agreed to disarm or evict the foreigners who have been supporting al- Qaeda and the Taliban. Now there's a rumor the government may be spreading negative propaganda against the Uzbeks to stimulate the fighting.

Separately, former prime minister Benazir Bhutto could be returning from exile following the dropping of a corruption case against her. There are various angles being reported but I'll go with the London Times one that surmises Bhutto may be coming back to help shore up President Musharraf ahead of planned parliamentary elections by year end; with Musharraf having dropped the case in return for her support. The U.S. and Britain are supposedly in favor of such an alliance because it would weaken radical elements, but it still all goes back to whether you believe Musharraf has been a true ally the past few years. [Survey says? No?.]

Somalia: So much for preventing this hellhole from becoming a safe haven for terrorists as the worst fighting in 15 years erupted this past week. While it's impossible to know how many have died, it's undoubtedly in the hundreds and everyone is involved, from Ethiopian and Somali government forces to militias of all stripes, with African Union peacekeepers often caught in the middle.

Venezuela: People here have been largely indifferent to their wacko leader, President Hugo Chavez, recognizing there isn't a helluva lot they can do to change their lot in life even if they wanted to.

But this week there were chants of "Don't Mess With My Hooch!" as Chavez banned alcohol sales during much of Holy Week. One bar owner told the Herald Tribune, "Holy Week is the best week of the year because people don't work, they go out and spend."

Actually, I didn't realize Chavez is a teetotaler, joining two other rather important world leaders in this regard. Sometimes I wish the other two would start drinking again.

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