Week in Review 
For the week 9/3/2007 - 9/7/2007
Brian Trumbore
President/Editor, StocksandNews.com

The Iraq Debate

Back on 12/30/06, in looking at the year ahead I said of the Bush administration's defining event:

"Iraq will show solid improvement by July, but it may not be enough to placate the American people as casualties continue to mount."

This ends up being close to the case, though I suspect Americans, through their representatives in Washington, are going to give the White House and the "surge" more time after listening to the long-awaited presentations of both General David Petraeus and U.S. Ambassador Ryan Crocker this coming week.

I am long on record as supporting the war from day one, but at the same time harshly criticized an AWOL President Bush during the critical period from mid-2003 to mid-2004 when the insurgency took hold. I recognized by late summer of '03 that we desperately needed more troops to secure the country and in succeeding years detailed how the president was ill-served by a Pentagon bureaucracy that produced some of the worst wartime leaders this nation has seen.

I supported Sen. John McCain in the early days of the '08 presidential campaign largely because I agreed with the surge in troops in Iraq at a time when McCain was its biggest supporter. I saw the surge as our last gasp, yet a shot worth taking.

But over the last 3-4 months some of you have commented to me that I've seemed pretty silent as the political debate heated up. I just didn't feel a need to comment every week when my motto after all is "wait 24 hours." It was reasonable to give Gen. Petraeus time to make it work, and it's appropriate that Petraeus now brief Congress and the people on whether it deserves our continuing patience. It does, by all indications.

But supporters of the war need to admit mistakes were made. Of course our president would like to ignore the past, and I've written I no longer would dwell myself on the conduct of the war, especially in the first two years, because we needed to look ahead.

And as the White House touts "bottom-up" progress (we were supposed to be seeing "top-down" by now) in some parts of Iraq, and as the Iraqi Army seems increasingly capable of holding gains, one also has to admit the casualties (about 80 U.S. servicemen each of July and August) are still far more than any American can be comfortable with, let alone the tremendous civilian loss of life and the millions of Iraqis already displaced.

Additionally, none of the above begins to address the unending failures of the Iraqi government; the failure after over four years to deliver essential services, the massive corruption, and the utter failure to get the Iraqi parliament to agree on a single item of real substance.

Many of us want to 'stay the course' a bit longer, but to what end? How much more time does the Iraqi government get? Gen. Petraeus himself expresses his dismay on this front in a letter to the troops on Friday.

Most of all, some of us are just crying for our president to be a true leader?not of the Republican Party, but of all the American people. It's still amazing, for example, that Bush has asked nothing of us, other than to shop and buy homes many couldn't afford. Someday I'll get into another topic that disturbs me?the increasing disconnect between the people and the military.

For now, Peggy Noonan, in her Wall Street Journal op-ed last weekend, nails it.

"What is needed is simply maturity, a vow to look to - to care about - America's interests in the long term, a commitment to look at the facts as they are and try to come to conclusions. This may require in some cases a certain throwing off of preconceptions, previous statements and former stands. It would certainly require the mature ability to come to agreement with those you otherwise hate, and the guts to summon the help of, and admit you need the help of, the other side.

"Without this, we remain divided, and our division does nothing to help Iraq, or ourselves.

"It would be good to see the president calming the waters. Instead he ups the ante. Tuesday [8/28], speaking to the American Legion, he heightened his language. Withdrawing U.S. forces will leave the Middle East overrun by 'forces of radicalism and extremism'; the region would be 'dramatically transformed' in a way that could 'imperil' both 'the civilized world' and American security.

"Forgive me, but Americans who oppose the war do not here understand the president to be saying: 'Precipitous withdrawal will create a vacuum that will be filled by killing that will tip the world to darkness.' That's not what they hear. I think they understand him to be saying, 'I got you into this, I reaped the early rewards, I rubbed your noses in it, and now you have to save the situation.'

"His foes feel a tight-jawed bitterness. They believe it was his job not to put America in a position in which its security is imperiled; they resent his invitation to share responsibility for outcomes of decisions they opposed. And they resent it especially because he grants them nothing - no previous wisdom, no good intent - beyond a few stray words here and there.

"And here's the problem. The president's warnings are realistic. He's right. At the end of the day we can't just up and leave Iraq. That would only make it worse. And it is not in the interests of America or the world that it be allowed to get worse.

"Would it help if the president were graceful, humble, and asked for help? Why, yes. Would it help if he credited those who opposed him with not only good motives but actual wisdom? Yes. And if he tried it, it would make news. It would really, as his press aides say, break through the clutter.

"I don't see how the president's supporters can summon grace from others when they so rarely show it themselves. And I don't see how anyone can think grace and generosity of spirit wouldn't help. They would. They always do in big debates. And they would provide the kind of backdrop Gen. Petraeus deserves, the kind in which his words can be heard."

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Wall Street?contagion

I can't help but repeat something I wrote last week, after all the talk on the airwaves as a result of Friday's awful employment report.

"(At) this point in time the Fed is largely irrelevant. The die was cast long ago. No one can dispute contagion is spreading and I reiterate, this is global. It's just unfolding at different rates of speed depending on where you are."

The current market turmoil that began in earnest about six weeks ago has always been about a global real estate bubble, first and foremost. Of course there are all kinds of ancillary causes, such as with derivatives for which no one has a clue what the value is, but even here many of the instruments were based off of?.you guessed it?housing. So, yes, it's about real estate and a simple fact that I've been pounding home for years?..around the world, far too many people have been stretching beyond their means. It's been about one word, "affordability." In my travels I've seen it, discussed it in pubs and bars with locals and ex-pats, and read about it in countless newspapers.

No doubt, the Federal Reserve, under the guidance of former chairman Alan Greenspan, played a huge role in creating the real estate bubble by keeping money artificially cheap, but he had help from his brethren bankers, from London to Tokyo. We replaced the busted bubble in technology stocks with one in bricks and mortar.

But what all did we learn that was new this week? Some analysts took heart in the August retail sales figures from the likes of Saks and Wal-Mart (rich man / poor man), but except for the high-end merchants, the reports across-the-board were largely nothing to write home about.

There was some decent news on the manufacturing and service sector, as in the leading indices of same didn't collapse below the 50 reading that connotes recession; but then you had an awful construction report, further carnage in real estate in the form of a pitiful pending sales figure, as well as record foreclosure filings and near record default rates in key regions of the country; all before the jobs report for August that showed the first decline in four years, and, with downward revisions for June and July, a three-month average of just 44,000. I mean to tell you, if our economy is as good as the White House wants you to believe it is, we should be creating about four times the current level, and would need to do almost as much just to keep up with population growth, for crying out loud.

And while some say August's number could be revised upwards in coming months, it could just as easily be lowered further. The financial services industry, for example, lost 35,700 jobs in August, the highest one-month total in 14 years, and the layoffs, thanks to the crises in mortgage and investment banking, are just beginning. Total mortgage sector job losses, by the way, are now over 102,000 this year, and counting, including late word Countrywide Financial is laying off a staggering 12,000, or 20% of its work force over the coming months.

One of the dumbest statements that all too many economists make these days is something like the following:

'I don't know what everyone is so concerned about. Housing is only 4-5% of the total economy. So we're in a little slump. The rest of the picture looks great.'

But housing, broadly defined, represented not 4%, but about 40% of the actual growth in the economy the last five years, and it was 40% of total job creation. Yet administration shills are trying to tell us housing's impact is just a drop in the bucket? Are they mainlining heroin from Afghanistan?

And switching gears, because it is truly going to be next week's main story, just what have Wall Street's investment banks been hiding? PIMCO's Paul McCulley, in talking about the issue of transparency, and lack thereof, says there are $1.3 trillion in "shadow assets" on the books of the banks, so the question is at what point do they finally put a value on the balance sheet and at what price? The Street has been jerking us around for years on this topic; for how much longer can they get away with it?

Not much, in answer to the last part, because for the first time the banks understand that that which they lend out runs the risk of never being paid back. This essentially is what is happening on the commercial paper front, and this week's buzzword, Libor; the rate at which banks lend to one another short term. Such interbank lending rates have been skyrocketing because no one knows where the bodies are buried and if enough of them turn up in one spot, one or more big banks could be, brace yourself, insolvent! To paraphrase Church Lady, "Well wouldn't that be special."

So this coming week we may, emphasize, may, begin to get a clearer picture on the other side of the risk trade, assuming we get a preannouncement or two. Of course I have to admit that when earnings for the brokerage firms are finally released, I'll be quite the cynic no matter what the accompanying statements say. It's a dirty place, Wall Street; filled with unsavory characters who would stab you in the back or drop you with a single shot to the head in the blink of an eye.

Street Bytes

--The Dow Jones fell for the 6th time in 8 weeks, off 1.8% to 13113. Friday's employment data led to a 250-point decline in the index as investors began to focus on the fact that if the economy begins to slide in earnest, what would happen to earnings? It didn't help that an economic bellwether such as Harley-Davidson warned on future results. And with Wall Street's big guns supposedly having returned from their vacations, there was nonetheless little news on all the leveraged buyouts where financing remains uncertain.

--U.S. Treasury Yields

6-mo. 4.19% 2-yr. 3.90% 10-yr. 4.38% 30-yr. 4.69%

I may feel the Federal Reserve is irrelevant at this point in terms of its ability to impact the economy, but the Fed still moves the markets and the next meeting is Sept. 18. They've certainly had more than ample excuses to lower interest rates sooner but chose not to, thereby cementing the opinion that even when they do act, it will be too late. True, stocks may rally for a few hours, or days, but that would be it.

Harvard economist Martin Feldstein spoke last weekend to the same group Chairman Bernanke addressed on Friday, Aug. 31, and Feldstein said the "economy faces a very serious downturn" thanks to the housing crisis. Fewer home-equity loans and refinancings, for starters, will have a deleterious impact on the consumer, he offered up.

But the Fed's latest survey of regional activity concluded that outside of real estate, the financial turmoil we are experiencing will have a limited impact on the overall economy. You can be sure there are a bunch of folks working overtime this weekend in a rush to rewrite this.

--Alan Greenspan said this week that "The human race has never found a way to confront bubbles." He's a funny guy, that Greenspan. It's book tour time!

--The Organization for Economic Cooperation and Development, a group consisting of the 30 richest countries, concluded in a report that "Downside risks have become more ominous." Bingo.

--Tax revenues of all sorts, both state and local, are drying up in those regions most heavily reliant on the housing bubble; such as in Florida.

--Energy: U.S. News & World Report's Mort Zuckerman had a good summary of the oil picture in the Sept. 10 issue. Following is an excerpt:

"We are in a new world order. The balance of power has shifted between the fuel-guzzling West and the oil-rich producing countries. They have increasing leverage over us, with political, economic, and military consequences. We are literally over a barrel.

"Here's how the chips fall. After World War II, the oil world was dominated by the 'Seven Sisters,' the name given to the oil companies controlling Middle East oil. These have shrunk to four: Chevron, British Petroleum, Exxon Mobil, and Royal Dutch Shell. They have been pushed aside by seven state-owned national companies, Seven Brothers, if you like: Saudi Arabia's Aramco, Russia's Gazprom, CNPC of China, NIOC of Iran, Venezuela's PDVSA, Brazil's Petrobras, and Petronas of Malaysia. The Seven Brothers control almost a third of the world's oil and gas production and more than a third of its total oil and gas reserves. By contrast, the survivors of the Seven Sisters control only about 10 percent of output and hold just 3 percent of the reserves. The Brothers are the rule makers; the international oil companies the rule takers. It is not going to change. In the next 40 years, 90 percent of new supplies, according to the International Energy Agency, will come from developing countries. Thirty years ago, 40 percent came from the industrialized nations."

And consider this, regarding the pace of new discovery keeping up with demand. In 1964, "we discovered 48 billion barrels and consumed approximately 12 billion?.in 2005, we found 5 billion to 6 billion barrels and consumed 30 billion barrels."

With rising demand from China and India, "The world has to discover a new Saudi Arabia-size oil supplier every five years to meet this demand."

Zuckerman concludes:

"We are facing a world of higher prices and increasingly tighter supplies, creating a growing gap between worldwide demand and worldwide production, at a time when non-OPEC energy production is peaking within a few years. Eventually, this will make us even more dependent on OPEC - with all of what that means. We also can't seem to develop an appropriate energy policy that by definition will take years to implement, so that delays are only postponing the higher costs to the next generation.

"It is we who are placing our own country over a barrel now."

--Staying with energy, state-owned Gaz de France is merging with Suez to create Europe's largest buyer and seller of natural gas; a deal that flies in the face of the European Union's goal of opening up competition in the energy sector. With the merger, the natural gas sector will now be dominated in Europe by just a handful of players including Russia's Gazprom, E.on of Germany, and Eni of Italy. Because of this there is less incentive for needed investments.

--Meanwhile, OPEC meets on Sept. 11 and is not expected to raise its production quota, currently 25.845 million barrels a day. OPEC's president, who is from the UAE, said markets are "adequately supplied." The outgoing director of the International Energy Agency opined "I fear that OPEC has set implicitly a new target price of about $70 a barrel."

--Even Toyota's auto sales dropped in August, down 2.8%, while Ford's fell 14% and Chrysler's 6%. But GM's rose 6% (thanks to excessive discounting), Nissan's were up 6% and Honda's nearly 5%.

--You may want to begin breaking the news to your children now rather than have them suffer a total meltdown in December, but with Mattel's latest recall of Chinese-made toys, its third, there will be virtually zero toys available this Christmas. Zippo. Nada. Which means it's back to home-made toys. Wash out some beer bottles, for example, and give the gift of glass bowling pins, which is what I might be giving my brother this year.

Of course on the PR front, this is yet another big blow for China, which can't be happy seeing some toy companies prominently advertise "Made in America," or anywhere but China. And on September 19 the House of Representatives will be holding a hearing on product safety, further highlighting the issue.

--Hell hath no fury like a techie scorned. Apple Computer's Steve Jobs learned this lesson when his company stupidly cut the price of the iPhone by $200 after charging $599 for it upon its introduction just two months ago.

Apple Nation, particularly those who waited for hours in line when the product was first brought to market, was in an uproar and within days, Jobs was forced to apologize and offer early iPhone buyers $100 in store credit.

"Our early customers trusted us, and we must live up to that trust with our actions in moments like these," Jobs wrote in a letter on the company's Web site. But as a blogger told the New York Times, "They hyped the iPhone for six months and built up our expectations, and then they grabbed our extra $200 and ran," though the same fellow was pleased to learn of the store credit.

--The SEC is focusing on investment fraud targeting the elderly, having brought more than 40 cases in recent years, including one where older Americans were sold fraudulent time shares in Cancun, Mexico. Life in prison without parole for any dirtballs convicted of such crimes, I say. That would put an immediate stop to it.

--Follow-up to last week's story that the World Health Organization is worried about new or existing global threats; the WHO confirmed five human bird flu cases in Vietnam, four of them fatal. Since 2003 there have been 100 infections in Vietnam with 46 fatalities. The H5N1 virus is still simmering and, globally, has killed 199.

Another virus, chikungunya, has been confirmed in 160 cases in northern Italy. This is a tropical mosquito borne disease that results in high fever and severe joint pain. One death was reported. The issue here is that it was a "world first" outside the tropics. While this is in no way as alarming as bird flu, there is no vaccine against chikungunya.

Lastly, on the honeybee front, which impacts pollination and agriculture, scientists believe they have found the cause of a devastating syndrome that has destroyed 50% to 90% of the hives in the U.S. According to the journal Science, it may be linked to Israeli acute paralysis virus. So now beekeepers can at least work on adopting genetically resistant stock.

--Taiwan has a serious problem regarding its economy. The number of visitors, both for commerce and tourism, is drying up as China continues to open up its borders to tourists and business travelers. This has become an important political issue as well as the vehemently anti-China current leadership goes up against the opposition pro-China party ahead of presidential elections next March. As an Asian think tank put it, "Failure to broaden economic ties with the mainland will relegate Taiwan to one of Asia's growth laggards."

--The debate in Congress over how to tax "carried interest," the profits hedge fund and private-equity types make on their investments, is absurd. Of course it should be at the 35 percent ordinary income rate, not the current 15 percent because it is treated as capital gains. It's performance-based compensation for management services, period, and should be taxed as such.

As the Washington Post offered in an editorial:

"If you're lobbying to keep a tax break, rich white guys making astronomical sums by investing other people's money aren't the most sympathetic clients - especially when they're paying taxes at a lower rate than firefighters and teachers. So the private- equity and hedge fund industry has come up with a cynical new approach, arguing that raising their taxes would hurt women- and minority-owned firms and dampen investment in needy urban areas."

Bullspittle.

--In the latest survey of 401(k) participation rates, this one from the Vanguard Group, less than two-thirds of those eligible actually do, which dovetails with an earlier Fidelity study that showed 57% sign up. Both figures are essentially unchanged from 2000.

So I say again, the government airs public service announcements for items such as anti-smoking campaigns, but I have never seen one, a single one, on urging Americans to contribute to their IRA or 401(k). That's just a failure of leadership in both parties.

--I had a meeting in New York on Thursday with the CFO of the China biodiesel company I've been investing in. Nothing to add on that front, incidentally, as it's "quiet time." But we spent a lot of time talking about real estate and the difference between rich and poor in our respective countries.

So on Friday I see in the Journal that former Major League Baseball player Matt Williams and his wife decided to put their not-yet-completed custom home in the Phoenix area on the market for $12.7 million. It seems the couple decided the "15,495-square-foot house would be too big for them," Ms. Williams says. Seems to me they might have a point. Try 11 bathrooms and a seven-car garage, for starters. Pop goes the bubble.

Foreign Affairs

Iran: In a move that warranted far more attention than it received, which was virtually zero, long-time political figure Hashemi Rafsanjani, the man I was urging the United States have direct discussions with in an end-run of President Mahmoud Ahmadinejad, was elected as chairman of the critical Assembly of Experts, placing Rafsanjani in direct conflict with the man who defeated him in 2005.

Rafsanjani has a checkered past, no doubt, and he's been implicated in some acts of terror, but he has emerged as a moderate in comparison to the wacko head of state, and, again, he's someone the White House should have been long talking to.

Rafsanjani remains a supporter of Iran's nuclear program, but he's also smart enough (and he's one of the wealthiest men in the nation through his business dealings) to know that Iran is throwing away its prime economic asset?its energy resources. Therein, I've long argued, lies the seeds of a great compromise ?. massive Western support for a peaceful nuclear program if Iran dismantles its weapons facilities, thus preserving its chief asset, oil, from which to draw future revenues, and buying Iran time to diversify its economy, something Rafsanjani has long advocated.

Of course I was making this argument last year. Today it's probably too late. This week Supreme Leader Ayatollah Ali Khamenei pledged that Iran would never yield to Western pressure over its nuclear program, and that it would outsmart "drunken and arrogant" Western opponents in the standoff. For his part, President Ahmadinejad said Iran had achieved its goal of 3,000 centrifuges, a level at which all experts agree Iran could produce enough enriched uranium for a bomb within 12 months.

And speaking of Iran's weapons program, there is no more dangerous man in this regard than the head of the International Atomic Energy Agency, Mohamed ElBaradei. As the Washington Post editorialized on Wednesday, El Baradei "has made it clear he considers himself above his position as a UN civil servant."

"Rather than carry out the policy of the Security Council or the IAEA board, for which he nominally works, Mr. ElBaradei behaves as if he were independent of them, free to ignore their decisions and to use his agency to thwart their leading members - above all the United States?.

"Three times in little more than a year the Security Council has passed legally binding resolutions ordering Iran to end its enrichment program; two of them have had relatively weak sanctions attached. Never mind that, says Mr. ElBaradei: He's decided that the world should simply accept Iran's enrichment capacity and that sanctions are the wrong response. His frequent public statements to this effect have been harmful, but now he's gone further. Last month, the IAEA struck its own deal with the Iranian regime, aimed not at the enrichment but at a separate set of unresolved questions about Iran's nuclear activities. According to the agency, Tehran agreed to a timetable for clearing up these matters by the end of this year?.

"By the time the IAEA and Iran are done talking about past questions, Iran will almost certainly have enough working centrifuges to produce a bomb within a year."

North Korea: Pyongyang said it would finally reveal?really? the extent of its nuclear activities by year end. Of course Lil' Kim said the same thing back in February. Immediately, though, the North added the U.S. had agreed to lift all economic sanctions and take the nation off the list of countries that sponsor terrorism, to which the U.S. and its chief negotiator Christopher Hill said, 'we didn't agree to do that stuff yet.'

When it comes to the key players in the region and the ongoing six-party talks, though, Japan and North Korea wrapped up two days of discussions on normalizing diplomatic relations and once again hit a wall on the issue of abductions of Japanese citizens in the 1970s and 80s.

Also on Friday, President Bush and South Korean President Roh had what was described as "a testy exchange" with regards to the North.

Roh asked Bush, in front of the cameras, to be "clearer" about his position on an official end to the Korean War, and Bush responded: "I can't make it any more clear?.We look forward to the day when we can end the Korean War. That will happen when Kim Jong il verifiably gets rid of his weapons programs and his weapons."

Lastly, Kim agreed to allow inspectors from the U.S., Russia and China to view the Yongbyon facility this coming week. The statements out of Russia and China will be particularly interesting.

China: Where to begin? In the past ten days we've learned that China has been hacking into the German Chancellery, UK government offices, and the Pentagon?all denied by Beijing. The U.S. is particularly concerned because of its systems vulnerability on the defense end with the heavy reliance on satellites. The Pentagon admitted China caused some damage with a June cyber-attack.

[The National Security Council is also concerned over the extensive use of BlackBerries among White House staff, by the way.]

Separately, President Hu Jintao warned Taiwan not to make any attempt to break away from the mainland, saying China was "resolutely opposed" to Taipei's planned referendum on the issue next March. Alarmingly, the People's Liberation Army held surprise exercises this week featuring beach landings.

On the product quality front, at the APEC meeting in Sydney, Hu pledged to improve safety in his talks with President Bush, while signing a number of natural resource deals with Australia, including an enormous contract to buy liquefied natural gas. Hu also threw in two giant pandas for Adelaide's zoo.

In Beijing's ongoing crackdown on corruption, ahead of the key Communist Party gathering in October, a senior parliamentarian was executed after he blew up his mistress?literally. They say it was a pretty ugly scene, actually. Numerous officials have been imprisoned, or worse, for using their power and influence for sex.

Lastly, regarding the party congress, authorities are concerned about massive protests, including by Falun Gong and various separatists groups.

Germany: We had another reminder of what we are up against with the arrest of three terror suspects in Germany, two home grown, for plotting a series of catastrophic attacks on Frankfurt airport, the U.S. base at Ramstein, and various soft targets frequented by Americans and Westerners. The suspects already had in their possession 1,500 lbs. of chemicals and presented "an imminent threat" according to German authorities. Evidently the U.S. tipped their counterparts off after listening in on chatter between Pakistan and Germany.

Israel / Syria: Syrian officials said its defense forces opened fire on Israeli warplanes that had invaded its airspace, but Israel, as of this writing, has not commented. In June 2006, Israel flew over the summer residence of President Bashar Assad. Each time Israel flies such operations, including over Lebanon, it is violating international law.

As the Daily Star of Lebanon editorialized:

"The fondest wish of many Israelis is to be accepted by their neighbors, but that cannot happen unless and until their government starts behaving itself. In the absence of acceptable comportment by the Jewish state, the Syrian regime would be well advised to tread very carefully lest it provide a pretext for the latest in a long line of blows to regional stability."

Afghanistan: British Prime Minister Gordon Brown and Foreign Secretary David Miliband are warning the U.S. that because of Washington's fixation on Iraq, the real front line in the war on terror is being lost?Afghanistan. The British are most concerned that NATO is losing the battle for the hearts and minds, including "what Britain regards as Washington's indulgent attitude towards Hamid Karzai, the Afghan president, who is accused of tolerating, even conniving with, widespread corruption inside his government," as reported by Tom Baldwin and Richard Beeston of the London Times.

Russia: The UK's air force scrambled yet again to intercept eight Russian military planes flying in airspace controlled by NATO, this after Vladimir Putin reasserted Russia's Cold War- era policy of flying bombers on long-range patrols. Norway's air force also tailed the Russian aircraft for a spell.

Serbia / Kosovo: Serbia's state secretary for Kosovo said Serbia was prepared to take military action should Kosovo's Albanian- dominated government declare independence. The United Nations has a Dec. 10 deadline for talks on the issue, after which the U.S. could unilaterally recognize Kosovo. I've maintained this is a sleeper issue; not one that tanks the financial markets, but one that can impact European cooperation in theaters such as Afghanistan if resources are diverted back to the Balkans to keep the peace. Vladimir Putin, on the other hand, would seemingly welcome the instability. Whether the Kremlin acts to head off trouble and convince its ally, Serbia, to behave, will be quite telling in judging the Russian threat over the next decade.

Algeria: A suicide bomber killed 15 when he detonated his bomb belt in a crowd awaiting a visit by the Algerian president. What this reminds me of is the fact the world has somehow escaped a high-profile assassination that could plunge the region, from North Africa to Pakistan, into total chaos. This particular bomber was discovered by the crowd 15 minutes before President Bouteflika was to pass, whereupon he set off the explosives.

Switzerland: The nationalist Swiss People's Party, the country's largest, has proposed a deportation policy that some say evokes Nazi-era practices. Under the plan, entire families could be expelled if the children are convicted of a serious crime, including benefits fraud. The party is in the process of collecting enough signatures to force a referendum. The president of the People's Party told the AP, "We believe that parents are responsible for bringing up their children. If they can't do it properly, they will have to bear the consequences." The party claims foreigners - who now make up 20 percent of Switzerland's population - are four times more likely to commit crimes than Swiss nationals.

Austria: The above is part of a disturbing trend in Europe, including Russia, most obviously. In Austria four soldiers were charged with exchanging Hitler salutes on a video appearing on YouTube. Here this is not a minor deal. The men face up to 10 years in prison if found guilty.

Zimbabwe: In the old days, when your children refused to eat their veggies you'd say something like "There are kids starving in China." Today, remind them the entire nation of Zimbabwe is starving, which will in turn elicit the response, "Where the heck is Zimbabwe?" At which point you whip out the family map and show them.

Zimbabwe, we learned this week, is out of food. Finally, perhaps the people will storm the presidential palace and string up Robert Mugabe, as should have been done years ago.

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Pray for the men and women of our armed forces.

God bless America.

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Gold closed at $709?breakout!
Oil, $76.70

Returns for the week 9/3-9/7

Dow Jones -1.8% [13113]
S&P 500 -1.4% [1453]
S&P MidCap -1.1%
Russell 2000 -2.2%
Nasdaq -1.2% [2565]

Returns for the period 1/1/07-9/7/07

Dow Jones +5.2%
S&P 500 +2.5%
S&P MidCap +6.1%
Russell 2000 -1.5%
Nasdaq +6.2%

Bulls 42.9
Bears 37.4 [unchanged again?Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

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