Educate Yourself

Week in Review
For the week 6/11/2007 - 6/15/2007
Brian Trumbore
President/Editor, StocksandNews.com

Black Diamond is a term used to describe ski trails. Unless you are an expert it's not recommended you take them, particularly "double black diamonds," where the uninitiated could pull a Sonny Bono. They're dangerous?as is the world these days. Today's group of 'hot spots' are as numerous and serious as any faced since the end of World War II, and with each passing month I would argue the plight of peace-loving peoples grows worse. It's grim?particularly across the 30th Parallel?.and this week presented further evidence of a coming conflagration.

But before I tackle the depressing news of the week, I just have to talk about two countries that have been on my mind a lot recently, Russia and China; the real reason why I thought of invoking the "black diamond" label two weeks ago.

One thing seems clear. These two are on the verge of a true axis, one fueled by recent economic gains that in turn engender a growing military threat. Russian President Vladimir Putin is a big admirer of China's success on the financial front, while Beijing maintains its authoritarian sheen, and Putin knows that both he and the Chinese Communists can create more than their share of mischief to keep the world's lone superpower, the United States, off balance. So look for an increasing dialogue between these two, but I'm about to tell you how it will all unravel, to the detriment of both the United States and world markets.

Putin's authoritarianism, and that of his successor, possibly Sergei Ivanov, along with any slide in oil prices (which will still happen from time to time, oil bulls), will lead to growing unrest. The democracy movement is not dead here, and the increasing disparity between the classes in Russia will fuel an attempt at an Orange Revolution, Russian-style.

At the same time, China is already facing mass protests. Each week brings new tales, such as the case of 10,000 in Chongqing who rioted after city inspectors beat up a pair of flower sellers, one of whom later died. "Chongqing authorities issued a gag order on local media after the riots last Sunday and the news was only leaked to the Internet yesterday." [South China Morning Post.]

It's about income inequality in China, just like it is in so many other places these days; only here the people have to deal not only with rampant corruption and having land taken away for a pittance, but also environmental degradation on a scale never seen in the history of mankind. China's leadership is scared to death of a mass movement that will eventually take shape, but it's been successful in tamping down the pressure thus far.

But I'll tell you my main concern; one expressed in separate bits over the years. It's about the "nationalism card." It's about both Russia and China, facing protests in the streets and a real threat to each government's survival, attempting to turn the people's disaffection against the United States.

You've seen loud hints of this strategy in Vladimir Putin's complaints about the missile defense shield, only you ain't seen nothing yet. Russia will also become an increasingly fascist nation, as many in southern Russia already know so well.

China will turn its unrest into a movement to take Taiwan, once and for all, and could also obviously wreak havoc with its stupendous holdings of U.S. Treasury securities.

But aside from the national security implications, the economic impact here in the U.S. will come from plummeting confidence on the part of corporate executives, and that's bad for capital spending and employment, most directly.

So this is what's really been on my mind recently, even as the Middle East burns. You've just gotten off the gondola, you're admiring the gorgeous view, but you have a choice of going down a trail that fits your skill level or throwing caution to the wind and taking one marked by a black diamond. As Wall Street resumed its uptrend this week, even as the global political situation worsened considerably, I can't help but add my voice to the debate. Don't get swept up in the euphoria. Understand it's not just about interest rates and a booming global economy. Protect your assets. Stay off the dangerous path.

"Wonder what Iraq would look like if we left tomorrow? Take a look at Gaza today. Then imagine a situation a thousand times worse.

"We need to stop making politically correct excuses. Arab civilization is in collapse. Extremes dominate, either through dictatorship or anarchy. Thanks to their dysfunctional values and antique social structures, Arab states can't govern themselves decently.

"We gave them a chance in Iraq. Israel 'gave back' the Gaza Strip to let the Palestinians build a model state. Arabs seized those opportunities to butcher each other?.

"Educated Palestinians flee, if they can. Civilians cower, wondering where the next rocket-propelled grenade will hit. And, amid the carnage, students risk death to take their final exams so they can qualify to study abroad - and get out. The indiscriminate violence is the Palestinian version of democracy: Every citizen gets a chance to be killed?.

"We're stuck in Iraq, and it sucks. But were we to leave in haste, far more blood than oil would flow in the Persian Gulf. The disaster in Gaza's just a rehearsal for the Arab-suicide drama awaiting its opening night in Iraq."

"The seizure of the Gaza Strip by Hamas opens a new period in the history of the Arab-Israeli conflict and the Middle East. A new Islamist state is being established and it doesn't bode well for the West or regional stability.

"And yet we can hope that something will be learned from this experience. Israel's left-leaning Ha-aretz expresses the lesson with what some would call British understatement: 'Anyone in Israel still contemplating the question of a Palestinian partner might also need to do some rethinking. In Gaza, at least, it seems there is nobody left for Israel to talk to?.

"The radical forces have gained a major new asset that will encourage the recruitment of new cadre. Iran, Syria and Hizbullah will grow more confident and aggressive.

"We are now in the middle of the third great battle with totalitarianism in living memory. As with the struggles against fascism and communism, this conflict can only be won by a mobilization of Western resources and resolve. What has happened in the Gaza Strip is a lost battle in that process. There is not room for too many more of these defeats."

As I write, there really is little else to say about the sudden turn of events this past week. It's gotten so bad that even a U.S.- sponsored plan to arm the Palestinian Authority backfired as Hamas seized tons of weapons that were being delivered to Fatah by Egypt and Jordan.

The immediate fear, though, aside from the impact on Israel's security, is that Hamas' victory, with prodding from the likes of Iran and Syria, encourages Palestinians in Jordan and Lebanon to rise up.

Speaking of Lebanon, I noted with sadness the latest car bombing that claimed ten lives in Beirut, including an anti- Syrian member of parliament, as it occurred in a neighborhood along the beautiful coast with which I am familiar.

I was also disheartened by some absolutely shoddy reporting by Jay Solomon of the Wall Street Journal who wrote the following.

"The Bush administration seized on the election of Lebanese Prime Minister Fouad Siniora (in 2005, following the assassination of Rafik Hariri) as a symbol of what it described as a democratization wave sweeping the Middle East. After last summer's war, the White House made stabilizing the Lebanese government a cornerstone of its Middle East strategy."

Earth to Mr. Solomon. After initially supporting the Cedar Revolution in those first months of '05, the administration totally ignored Lebanon at the most critical time. Plus, it's inaction during last summer's war was criminal.

And for those who saw the pictures of U.S. aircraft landing in Beirut the other week, shipping arms to the Lebanese Army after the battle started at the refugee camp near Tripoli, understand this, as reported in the June 11 edition of Defense News.

"Pledges made over the past few months by Western countries to give Lebanon weapons to replace aging tanks and artillery have been broken or frozen awaiting political decisions, leaving the Lebanese Armed Forces (LAF) virtually on its own in its first direct engagement in the global war on terrorism.

"The LAF wants to improve its arsenal, not just restock its ammunition, as it fights al-Qaeda-linked Islamic terrorists in Palestinian refugee camps, according to military officials and experts here.

" 'We are only asking for new weapons that would give us a qualitative superiority against an enemy armed with similar or even better weapons than what the LAF has,' said one senior Lebanese Army official.

"Late last year, the official said, Lebanon asked the United States to deliver $800 million in weapons over three years, including attack helicopters, M60 tanks, second-generation TOW missiles, M109 self-propelled artillery, coastal patrol gunboats, some 250 modern night-vision goggles and an air-defense system.

"The West's reluctance to send arms to Lebanon has encouraged Russia, which has offered a substantial donation of weapons if Lebanon agrees to buy some at a discount?.

" 'The U.S. should take into consideration that the LAF is now fighting terrorism and thus must forget about its old policies and start supplying it with effective weapons,' said Walid Jumblatt, the Lebanese Druze leader."

To date, the U.S. Air Force transport planes you've seen have been carrying little more than ammunition. Germany, on the other hand, at least supplied two patrol boats.

There is no doubt that the Lebanese government itself needs to do more as it remains divided between the pro-Western and pro- Syrian camps, but I don't want to hear President Bush tell us the United States is doing all it can to help the forces of democracy vs. the Islamo-fascists. It's a lie.

Defense Secretary Robert Gates added his voice to the chorus singing of Tehran's arms shipments to the Taliban in Afghanistan, let alone suspected deliveries to Iraq. Newsweek also reported of a train accident in Turkey, where it was discovered some of the goods on board were weapons from Iran bound for Syria, that would then be shipped to Hizbullah in Lebanon. [There are conflicting theories on just how much Hizbullah has rebuilt its arsenal in southern Lebanon. Israel says they have more rockets than they did before last summer's war, while the general in charge of the UN force that is keeping the peace says this is just not the case.]

On the nuclear weapons front, the head of the International Atomic Energy Agency, Mohammed ElBaradei, reiterated that Iran was close to reaching the capacity for enriching large-scale levels of uranium, but then repeated his estimate Iran was still 3- to-8 years away. Oh, were we so lucky. No one should be in the least bit surprised to wake one morning and find Iran has tested a device, at which point a full-scale attack on its suspected facilities would be a certainty. Last weekend, U.S. Senator Joseph Lieberman, in responding to the arming of insurgents in Iraq, could just as easily have been talking about the nuclear issue when he said, "We've got to be prepared to take aggressive military action against the Iranians to stop them from killing Americans."

Lastly, in Iraq, the only good news was that Turkey appeared to stand down from its threats of a full-scale invasion into Kurdistan to root out PKK terrorists. Meanwhile, despite some successes in Anbar province, where the United States is arming Sunni Arabs if they'll fight against al-Qaeda (risky, to say the least), two U.S. generals decried the lack of progress in raising Iraqi security forces, al-Qaeda has been destroying more bridges and infrastructure, and the Iraqi parliament has been totally ineffective on the law-making front.

This was the week when traders were on edge about the inflation numbers and if you exclude the things we use, food and energy, the figures were tame. So the Street celebrated and resumed the buying that has seen the Dow Jones tack on 1530 points, 13%, in just the past 15 weeks (since March 16). As my grandfather used to exclaim, "Gee willickers!" Of course my older brother and I had no idea where this came from, but we kind of put two and two together and figured it meant amazement. And that's pretty much how I feel these days in terms of the stock market. I mean, goodness gracious!

Now I know there is some decent news out there in stock land, such as the core inflation numbers that allow the Federal Reserve to hold the line on interest rates, as well as earnings coming in better than expected. And, first and foremost, 95% of us have jobs, which means we can still buy stuff?lots of it?even if we really can't afford to.

That said, what's so bad? For most Americans, not including the folks at Blackstone Group, Goldman Sachs, or others of that ilk, the number one asset is your home and, in just about every area of the country these days, at best you are treading water?at worst, the value is not only going down but your mortgage payments could also be rising; let alone your property taxes.

The home, once a source of cold cash that was then used on all manner of fun things and enhancements, is rapidly turning into a staph infection. Even the mighty investment banks and mortgage kings, from Goldman to Bear Stearns to Freddie Mac, have seen their fixed-income departments, and/or portfolios, bleed red for the first time in ages. And with gobs of mortgage paper out there, and with few buyers, in many instances it's increasingly hard to put a value on it, let alone those dabbling with all the derivatives attached like pins on an Olympic fan's sweater. Someone comes up and asks you about one.

"Hey, where did you get that?"
"Oh, that (derivative)? You know, I don't remember!"

This week, we learned that by various measures foreclosures are at or nearing record levels. And it bears repeating?the economy isn't even in recession.

But I want to finish this segment with some thoughts from my favorite economist, Robert Samuelson, who noted the following in his weekly op-ed for the Washington Post.

"The economic expansion, both in America and the rest of the world, has rested on a foundation of abundant credit. Low interest rates famously drove the housing boom. In the 1980s, mortgage interest rates averaged 10.9 percent; after inflation, the 'real' rate was a hefty 7.2 percent. During the decade home prices rose a meager 1 percent beyond overall inflation. Since then, mortgage rates have dropped sharply. From 2000 to 2006, they averaged 6.5 percent, and after inflation only 4.2 percent. Lower rates meant people could afford to pay more. The result: Existing-home prices rose 29 percent more than overall inflation from 2000 to 2006.

"It's not just real estate. Low interest rates have fueled the private equity bonanza. Private equity refers to investment funds that, borrowing massive amounts, buy all the stock of publicly traded companies?.Similarly, low rates enabled governments and companies in developing countries to borrow huge amounts. From 2005 to 2007, borrowing will total about $900 billion, reckons the Institute of International Finance?.

"But now rates are edging up. There are two ways that credit tightens - that is, the price of money rises - and we're seeing both. The first is that government central banks, such as the Federal Reserve in the United States, deliberately try to restrict the amount of new credit. The second is that private investors and lenders become more stingy and risk-averse. They demand higher rates on bank loans, bonds and mortgages?.

"As the price of money increases, borrowing and the economy might weaken. The deep slump in housing could worsen. We could also discover that the long period of cheap credit has left a nasty residue.

"In this view, bad loans were made as lenders flush with cash poured money into riskier bonds and loans for private equity firms, hedge funds and developing countries. So defaults and losses mount; in effect, the 'subprime' mortgage losses of earlier this year are repeated on other types of credit?.

"But this grim fate is hardly preordained?.Aside from subprime mortgages, delinquencies on other bonds and loans remain low. Interest rate 'spreads' - the gap between rates on safe and risky loans - also remain low.

"Government central banks are attempting to restrain economies enough to prevent higher inflation, though not so much as to cause a recession. It's a delicate maneuver?.The drama is technical and mostly invisible. But the outcome will shape the 2008 economy - and help determine the next president."

--The Dow Jones rose 1.6% to close at 13639, less than 40 points off its all-time closing high, while the S&P 500 added 1.7% to the 1532 mark, five points shy of its record. Nasdaq climbed 2.1% to a 6+ year high, 2626.

After opening the week with yet another bloodbath, as the 10- year Treasury rose to 5.32%, a five-year high, before rallying Thursday and Friday on the tame producer and consumer prices news, net, it was still another down week in the bond pits, with yields rising, albeit slightly. It would appear that we may have set an intermediate ceiling at 5.30% since buyers did aggressively move in at that level.

This is also assuming that after what is clearly an inventory- driven, restock the shelves, rebound in the second quarter, the economy doesn't churn out 3%+ growth numbers in the second half of the year. Even I, at that point, would have to be concerned with inflation because, for starters, it would mean the U.S. economy is using a ton of oil in a world where crude is increasingly hard to bring up from the ground. Which leads me to?.

--Ye olde search for petroleum. I haven't had a chance to read BP's annual review of the global energy picture but from the bullet points I've seen, it doesn't paint a pretty picture. Plus, Royal Dutch Shell announced it was cutting back on its Nigerian operations over the coming years to offset rising costs, as well as losses caused by unending production issues related to the insurgency in the Niger Delta. And, for its part, the International Energy Agency stated this week that world oil demand continues to rise at a rate exceeding the growth in supply for non-OPEC suppliers. In other words, a good week for Peak Oil adherents.

--For the record, the core PPI was up 0.2% for May, with the core CPI up 0.1%. The latter is up just 2.2% year over year.

--More on the real estate front. In the vital six-county Southern California area, May home sales hit a 12-year low, though prices were steady. However, if you took out homes valued above $800,000, the median price was down. And in Dade County, Fla., there is a 31-month supply of existing condos on the market. That's 3-1.

--To add a little more meat to the above-referenced plight of the fixed-income departments on Wall Street, Goldman Sachs' bond- related revenues were down 24% in their last reporting period while Bear Stearns' declined 21%. BSC also has a large hedge fund that is off 23% year to date thru April.

--Japan's first quarter GDP was revised upwards to a 3.3% annualized rate, though the Bank of Japan opted to hold the line on interest rates at least for another month.

--In a big move on the food front, Kellogg Co., the world's largest cereal maker, said it would raise the nutritional value of its product and stop marketing to kids. Kellogg was facing a lawsuit by parents and nutrition advocacy groups worried about child obesity.

--China's government announced a moratorium on the production of ethanol from corn and other food crops due to the fact it is driving up the costs of corn and grain, with food prices up 8%. Needless to say, I saw this headline and almost had a heart attack, with my own investment in the biofuel sector there, but I'm not impacted. Plus, those already manufacturing corn- based ethanol have been grandfathered. [My biodiesel plant uses mostly vegetable and plant oils.]

--Inflation Watch, part deux: The newsstand price of the Wall Street Journal is going from $1.00 to $1.50, due in no small part to the fact its advertising revenue is dropping precipitously. Thursday's edition, for example, was as thin as a two-ply sheet of toilet paper. The New York Times announced that its own ad sales have dropped 8%.

--According to a survey of 50 cities by MasterCard, Moscow is the worst place to do business in terms of its economic stability, legal and political environment. London was first, with New York and Tokyo next. Stockholm, Copenhagen and Singapore were also rated highly.

--Yahoo CEO Terry Semel received total cash and prizes of $71.7 million in 2006, the highest paid CEO among 386 companies of the S&P 500 covered in an AP analysis, yet for four years under his guidance the share price has gone nowhere.

So Semel faced a shareholder revolt at the annual meeting, but he and the board of directors garnered enough votes to stay in control. The 66% approval, however, is very low as these things go. In the period Yahoo has been flat, rival Google shares have risen six-fold since its IPO in August 2004.

--The same above AP survey revealed that CEOs made 179 times the pay of the average worker in 2006, double the 90 to 1 ratio of 1994. The median compensation rose 23.8% just last year.

And on a related topic, a Bloomberg / Los Angeles Times poll shows that six in 10 say CEOs are "not too ethical" or "not ethical at all," versus 33% who call them "mostly ethical."

So knowing all this, it shouldn't be surprising that the coming Blackstone Group IPO is raising a few eyebrows as CEO Stephen Schwarzman stands to take home $677 million, while retaining a 23% stake worth more than $7.5 billion. Last year, Schwarzman left the office with bags of cash totaling $449 million. I commented recently [3/24/07] that he is bound and determined to be the wealthiest man in the world and he's certainly on his way to accomplishing this.

But I loved this passage by Journal reporters Henny Sender and Monica Langley from a story on Schwarzman this past Wednesday.

"Mr. Schwarzman is exacting in his personal life too. Once, while sunning by the pool at his 11,000-square-foot home in Palm Beach, Fla., he complained to Jean-Pierre Zeugin, his executive chef and estate manager, that an employee wasn't wearing the proper black shoes with his uniform, according to Mr. Zeugin, who says he has great admiration for his boss. Mr. Schwarzman explains that he found the squeak of the rubber soles distracting.

"He expects lunches consisting of cold soup, a cold entr?e such as lobster salad or fresh grilled tuna on salad, followed by dessert, Mr. Zeugin says. He eats the three-course meal within 15 minutes, the chef says. Mr. Zeugin adds he often spends $3,000 for a weekend of food for Mr. Schwarzman and his wife, including stone crabs that cost $400, or $40 per claw."

[I do not expect a proposed bill in the U.S. Congress on levying higher taxes on private equity groups and their executives to torpedo the Blackstone offering. It won't pass.]

--Former Federal Reserve Chairman Alan Greenspan is garnering quite a bit of publicity for his views the past few months, but you've probably noticed I haven't mentioned him much in this space. That's because in all honesty I feel the man is totally irrelevant and if you believe he is truly moving the markets, then you probably think Stephen Schwarzman would share his crab claws with you. For the financial press, however, it's far too easy to report that Greenspan still has influence.

--I noted with interest Steve Wynn's announcement that he was delaying a planned expansion of his Macau casino, citing both new visa requirements from the mainland (Guangdong province, specifically, where many of the gamblers come from) and an unprecedented increase in capacity. I wrote in one of my reports on the place, from my trip there two months ago, that "Macau has the look and feel of one of America's mining boom towns of days gone by. It's going to continue for a while, but major competition looms in the form of Singapore, Japan (which is changing its restrictive gambling laws) and Vietnam, for starters." ["Wall Street History," 4/20/07.] I also wrote how unimpressed I was with the place in my second visit there in three years. Wynn is smart to hold off. Macau has another year or two?and then comes the fall.

--Casino revenues in Atlantic City are tumbling, down 5.5% in May. There are eleven resorts there?far too many for a market facing increasing competition from New York and Pennsylvania. I haven't been to A.C. in about eight years, but my friends tell me it's still a dump.

--Australians are buying hybrid cars in record numbers, according to the Sydney Morning Herald.

--PIMCO's Bill Gross made a ten-bagger, minimum, on his stamp collection, selling a large number of them for $9.1 million at auction. Gross then donated the proceeds to Doctors Without Borders, the charity's largest gift from the United States in its history. [Now as for the performance of his core bond fund?]

--More gossip on the recent dismissal of WellPoint's CFO, David Colby. What a creep?as I correctly suspected two weeks ago. He was having affairs with a number of women, which he managed to keep secret for quite a while, including two sisters who worked for him...with neither knowing about the other's relationship with Colby!

North Korea: The $25 million in disputed funds has finally been transferred from a Macau bank to Pyongyang, thus removing, one hopes, the roadblock for the North's dismantling of its nuclear weapons facility at Yongbyon. For over four months, the Commies have used the $25 million as an excuse. Don't be surprised if they come up with a new one, and new demands.

[Then again, I just saw a story that the money hasn't been transferred, despite reports to the contrary.]

But of more immediate concern should be the health of Kim Jong Il. It is said he underwent heart surgery and some reports say he is not mobile (others say he is).

So who is in charge?let alone of the nukes? That's always been my chief concern. We know zero, zippo, nada about the men standing behind Lil' Kim. Is there a reformer in the group? Or, are they nothing more than a bunch of narco-WMD traffickers far worse than Kim?

Russia: Defense Secretary Robert Gates said the United States will not change its plans to deploy parts of a missile defense system in Poland and the Czech Republic, though Gates didn't rule out having a radar site in Azerbaijan, as proposed by Russian President Vladimir Putin, as a complimentary facility.

First Deputy Prime Minister Sergei Ivanov stated in an interview this week that Russia will target any sites in Poland and the Czech Republic.

"Of course. A new element appears, breaching strategic stability, and any military, any general staff will plan action aimed at neutralizing this?.In the event of the appearance of an anti-missile system, which in our understanding is aimed against Russia and not against a mythical Iranian and North Korean threat which doesn't exist today, of course we must somehow react to this and take measures." [Bloomberg News]

But as I've been warning, there is a bigger immediate issue in terms of Russian/U.S./NATO relations, that being Kosovo. During his successful visit to Albania, President Bush said "At some point, sooner rather than later, you've got to say, 'Enough is enough - Kosovo is independent.'"

But Serbian Prime Minister Kostunica said he was "disgusted" with Bush's call for Kosovar independence. "The United States has a right to support certain states and nations in accordance with its interests, but definitely not by giving away as a gift something which does not belong to it."

So it's the U.S. and NATO supporting the ethnic-Albanian majority vs. Russia's Slav friend Serbia. Of course the air war on Serbia in 1999 was over just this issue, and since then Kosovo has been UN-run. Russia has vowed to veto a Security Council resolution paving the way for independence. Sergei Ivanov said "If we agree to the uniqueness of Kosovo, we are truly opening a Pandora's Box" throughout the rest of Europe; meaning Abkhazia, South Ossetia, and the Basque region, for example. This will all come to a head shortly.

China: A story in the International Herald Tribune by David Lague discussed China's strategy with regards to Taiwan and a potential defense of the island by the U.S.

"The (Pentagon's recent annual assessment) suggested that Chinese forces could be tied up for years fighting an insurgency on Taiwan while China faced a range of economic and political repercussions including a possible boycott of the 2008 Olympics."

This is absurd (the Pentagon's conclusion, that is, not Mr. Lague's). All Beijing has to do is launch a hundred or so of its missiles sitting across the strait from Taiwan, disable three key air bases, and sue for peace. Knowing the U.S. will not go to war with China in this instance, it would be over in a matter of days.

Egypt: Parliamentary elections here went very badly, as the opposition Muslim Brotherhood claims 75 of its members were arrested after government agents beat them up inside polling stations. In certain districts where the Brotherhood is strong, the government has both stuffed the ballot boxes and turned away supporters. Some independent international observers said they were denied access to sites in question. Of course President Hosni Mubarak would tell you that the elections were free and fair?but if they weren't, he'd add the Islamist Brotherhood represents a threat to stability anyway so he's doing what's right.

Saudi Arabia: Following the explosive allegations that Prince Bandar bin Sultan received bribes totaling $2 billion from British defense contractor BAE Systems for helping to broker the world's largest arms deal, both Bandar and BAE denied the claims. The shifty prince said the charges "are not only untrue but are grotesque in their absurdity." Bandar then said he would have no further comment. U.S. investigators have long known that former ambassador Bandar was receiving at least $3 million per quarter into his Riggs Bank account in Washington, D.C., from an account at Lloyd's of London, but it wasn't known who owned the Lloyd's account. [I think even Inspector Clouseau could crack this one, quite frankly.]

Australia: Finally, some rain?lots of it?as parts of the country received more from a single storm than they have in 30 years. But I was glancing at the weather radar there from time to time and I kept thinking, gee, it's really only hitting the eastern coast, and sure enough, there was little, if any, relief for the nation's prime farming regions. However, there is hope Australia could be in line for its first La Nina event since 1998, which normally spells significant rains over the coming months.

Chile/Argentina: I thought this was interesting. Douglas Tompkins, founder of North Face and Esprit, has been buying up huge swaths of land in southern Chile and western Argentina in his singular attempt to save the planet. He has acquired over the past few years a 35-mile-wide strip of Chile from a coastal bay to the Andean mountain border with Argentina, as well as a half million acres of an Argentine marshland teeming with wildlife. In total, he owns well over one million acres in the two countries; all, he says, to be dedicated to preserving the environment in these locales. Others, such as Sly Stallone and Ted Turner, have been buying up huge tracts in Patagonia. But now many in both countries are concerned that Tompkins and the rest represent a threat to their sovereignty.

Dow Jones +1.6% [13639]
S&P 500 +1.7% [1532]
S&P MidCap +1.4%
Russell 2000 +1.5%
Nasdaq +2.1% [2626]

Bulls 56.7 [up from 52.2]
Bears 21.1 [Source: Chartcraft / Investors Intelligence]

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