Week in Review 
For the week 10/1/2007 - 10/5/2007
Brian Trumbore
President/Editor, StocksandNews.com

Your World

Iraq: It's always dangerous to talk about good news when addressing the war as you never know what the following day will bring, but any unbiased observer has to agree the recent news has been better. You don't need to know that the death toll among Iraqi civilians, 1,975 in August, dropped to 922 in September, or that the U.S. toll, a still tragic 64 in Sept., was the lowest in over a year.

All you have to do is watch or listen to the national newscasts. On Monday morning I was listening to WCBS-AM national news and there was nothing on Iraq, but there was about the New York Mets' collapse in the baseball pennant race. This is good, friends; regardless of whether or not you agree the Mets warrant national exposure on such a program. In other words, it's a pretty easy barometer for gauging the impact of the surge.

Don't get me wrong, though. The above is merely stating a fact, as is the fact we appear to be no closer to any resolution of the ongoing crisis in the Iraqi government as measured by the lack of success on any real policy front. And the life of the average Iraqi, at least for those remaining in this hellhole, is still dreadful and whereas Sunnis used to live in the same neighborhood as Shia, this is obviously no longer possible.

But with the lowering of the level of violence, the American public's attitude is shifting. In the latest Washington Post-ABC News poll, 43% want a quick exit of U.S. forces vs. 60% in July.

Meanwhile, Sen. Joseph Biden continues to push his federal plan for Iraq, with 3/4s of the U.S. Senate agreeing to a non-binding resolution; one that would divide Iraq into three states along ethnic lines as the only long-term solution to the political crisis. I was ambivalent about this before, wanting to give the Iraqi government as much time as possible, but I can't argue with Biden these days. As he correctly points out, there is no central government, it simply doesn't function; let alone corruption is rampant. Then again, corruption is rampant around the world, to state the obvious, with few exceptions?.the United States not being one of them.

You also still have the looming issue in the north with the Kurds. Just one day after a security agreement was signed by Iraqi Prime Minister Maliki and Turkey's Prime Minister Erdogan, Kurdish rebels killed 12 Turks in an attack across the border. Turkey has shown amazing restraint thus far, but its military is itching for a fight.

Meanwhile, in the forgotten war in Afghanistan, the violence has never been worse. Despite what appear to be gains by NATO in taking out large groups of Taliban, the fact is there were three horrific car bombings in Kabul within the past week, including one today, that claimed over 45 lives. This just didn't happen before.

People compare Iraq to Vietnam, but I'm now of the belief that the better analogy is Vietnam and Afghanistan. At least it has the makings of such. I've written before of how on Sunday evenings in the 60s and early 70s, I'd listen to the news on the radio and hear the weekly casualty reports and think, 'How can we not be winning?' It's the same situation in Afghanistan these days. NATO casualties are low, Taliban deaths, as reported, are staggering, yet there is little to show for it in the way of progress.

It's also apparent that President Hamid Karzai is not the answer. The U.S. and its allies have made their share of mistakes, but the robed one, by increasing accounts, is weak and highly corrupt. Karzai started out as a large figure?now he's small.

Iran: Thanks to the UN Security Council's appeasement, Iran now has until November and the submission of answers to the International Atomic Energy Agency's questions on its nuclear program, which will then be forwarded to the Council on Nov. 22. Of course Iran was to have halted enriching uranium ages ago, but now we have Foreign Minister Mottaki brazenly saying "The U.S. is not in a position to impose another war in our region, against their taxpayers' (wishes)." More in a bit.

North Korea: What to make of this past week? By year end, Kim Jong Il has agreed to fully disable the Yongbyon nuclear facility, as well as provide a full accounting of other activities on the nuclear front, including the disposition of its existing weapons. Of course Lil 'Kim was to have done this last February.

Should Kim comply this time, though, the U.S. would then acquiesce to one of the North's biggest goals; that being its removal from Washington's 'state-sponsors of terrorism' list. Which is kind of curious since it was only yesterday, it seemed, we were talking about an alliance between Syria and North Korea; or are we to now believe the Israeli attack on the suspected Syrian nuclear facility was more on the lines of blowing up a pill factory in Sudan?

Confused? You should be. But imagine the discussion in South Korea these days. On one hand there are some who might be ecstatic at the thought of a formal end to the Korean War, as South Korean President Roh and Kim called for at their summit this week.

On the other, tens of millions of South Koreans are now wondering just where the talk of reunification is taking them? You thought the reunification of East and West Germany was costly? You ain't seen nothing yet when it comes to the potential for a North-South agreement. And this scares the hell out of South Koreans.

Which leads me to a thought I've had from time to time. North Korea, if Kim Jong Il truly desires it, would become the new low-cost provider in the world, much to the detriment of South Koreans and Chinese, in particular, as South Korean businessmen and their Chinese counterparts flood the North.

Remember when I wrote long ago of how Taiwan's businessmen did not have their country's best interests at heart? That's proven to be true. Now multiply that by three- or four-fold in the event Kim is serious. "Peace" will convulse the entire region, not that the alternative is better.

Lastly, on a different issue, Peggy Noonan had some sage advice in her Wall Street Journal op-ed on talking to one's enemies; a topic brought about by Iranian President Mahmoud Ahmadinejad's appearance at Columbia University in New York.

"If Jefferson had dined only with those who'd been a force for good in the world, Jefferson would often have dined alone. If we insist only good and moral leaders talk to us, we'll wind up surrounded by silence. In fact, if we insist we talk only to those whose good deeds have matched their high aspirations, we won't always be on speaking terms with ourselves.

"Domestically, the Democratic presidential candidates appear only before supportive groups. They don't speak to anti-tax groups and talk about their own assumptions regarding tax policy. They don't go to traditional values groups.

"It's all very controlled. And it's unworthy of a great nation. When people say the campaign feels artificial, that's what they mean. It's not John Edwards' hairspray or Hillary Clinton's makeup. It's that they give every sign of being afraid to speak and listen to those who haven't been patted down by thought- cops for unacceptable views.

"The Republicans are the same. An invitation to debate on Univision, the Spanish-language network? They have scheduling conflicts. What about the Log Cabin Republicans? No time right now.

"How unserious. If you, candidate A, have clear and serious reasons for desiring the wave of millions a year illegally over the border to stop, you should be able to talk to Hispanic groups and audiences about it. You go straight to them and appeal to their patriotism, fairness and common sense. Why? Because they're patriotic and fair and have common sense. It is a compliment to show you know this.

"Will some of them boo? Yes, of course. So what? Too bad. That's the price you pay for being truthful at a tough time. And in America it's always a tough time.

"The staffs, gurus and handlers of all the candidates are always afraid their guy will get booed. But do they realize how tired we are of hearing the tepid applause that follows the predictable pander?

"I know they're all always eager to laud Ronald Reagan. But Reagan began his fall 1980 campaign in the South Bronx, and argued his case with people on the street. After he was elected, he pleaded for peace in letters to Leonid Brezhnev. Too bad he wasn't tough enough. Oh wait.

"I think the problem is not coming from normal Americans but from our leadership, our academics and political leaders. The new fearfulness has resulted in new foreign policy: 'Let's not speak to Buffy.' Great. How's that working for ya?"

Brilliant, Ms. Noonan. And speaking of Reagan, I was doing a piece concerning former secretary of state James Baker's principles of foreign policy for my "Hot Spots" column and uncovered this from the career diplomat and troubleshooter.

"We must be prepared to talk to our enemies. It is in our interest to do so. This is why we maintained an embassy in Moscow throughout the Cold War. And this is why even so staunch an anti-communist as President Reagan was prepared to negotiate with the Soviets. His motto 'trust but verify' remains an irreplaceable injunction for any negotiations. Talking to a hostile government, whether it was Moscow during the Cold War or Damascus today, is not appeasement."

We'll see what happens in the case of Syria at the upcoming Middle East talks in Annapolis. President Assad himself is balking as of this date.

But what prompted me to write on this topic, aside from Peggy Noonan's column, was a call by an Iranian university for President Bush to come address them. Why he wouldn't do so, I'll never know. One of Ronald Reagan's most famous speeches was to students at Moscow University, May 31, 1988. Reagan didn't hold back as he talked about economic freedom and democracy, and we saw the results just a short time later.

As for that university in Tehran that invited Bush, they were also to have received President Ahmadinejad but he opted out at the last minute. Why? Because he heard the students wanted a question and answer session to air their grievances. It's one thing for Ahmadinejad to do a little tap dancing at Columbia. It's quite another for him to do so on his home turf.

What does all of this tell you? Iran is ripe for revolution, though I've also argued we may have missed our opportunity last year to end-run Ahmadinejad.

Dan Senor, a former foreign-policy adviser to the Bush administration and a total tool when he was serving in Baghdad under His Excellency, Paul Bremer, had an unimaginative op-ed in the Journal concerning dealing with the Iranian regime.

Unimaginative because he referred to a man I've discussed often, Rafsanjani. Senor brings up the terror attacks in Argentina of 1992 and 1994 in which the Iranian leader was implicated, concluding this is a reason not to talk to him. I don't doubt Rafsanjani had something to do with them and I've stated that previously.

But that's 13 years ago. Rafsanjani is a $billionaire businessman now who holds a grudge against Ahmadinejad because the little one with the cheap suits defeated him in the last election. Talk to the guy.

And to President Bush, you love to compare yourself to Ronald Reagan, as does every other Republican of your ilk, so follow his example.

Those students in Iran? Accept their invitation. Then watch Iran's government deny you access because they would be deathly afraid of the consequences, and see the students begin to march in protest.

---

Wall Street

Funny thing?that stock market. It's not that Friday's jobs report for September was stronger than expected; it in fact was spot on vs. expectations. But rather it was the huge revision upwards for August, turning what had been a worrisome loss of 4,000 jobs to a gain of 89,000. Of course these figures, witness the countless revisions, are nothing more than garbage, but we still make a market off these and other economic barometers, such as the consumer price index; the latter reflecting absolutely no correlation with reality but used, nonetheless, by the Fed when coming up with its interest rate policy.

It's also funny that the market hit new highs as Wall Street's investment banks and other financial institutions announced they were writing down over $20 billion in losses as a result of the credit crisis, largely due to marking-to-market their exposure to collateralized debt obligations (mostly related to subprime mortgages), leveraged-buyout loans on uncompleted deals, and plain old trading losses.

The carnage was tough to stomach. UBS?$3.4 billion. Citigroup?$5.9 billion. Deutsche Bank?$3.1 billion. Washington Mutual?$1.38 billion?Merrill Lynch?an estimated $5 billion, Merrill not having formally reported as yet.

But shares in all of the above rose. Why? Because the worst is over, that's why. At least this is what you are being told.

They've written off everything but the kitchen sink, as the old saw goes. Smooth sailing from here, sports fans.

Problems with transparency? Clarity? Not an issue?it's now been addressed. Everyone has come clean because this is, after all, the United States of America and when a Goldman Sachs or a Merrill Lynch tells you the worst is over, gosh darnit, it probably is. These are professionals, and are to be trusted at all times.

Oh, and by the way, Merrill's chief economist, David Rosenberg, who not only has zero to do with the above paragraph but has been bang on in his analysis of the real estate debacle, says the next four quarters will see weak economic growth and we are far from being out of the woods on the housing front.

PIMCO's Bill Gross, in his monthly outlook (pimco.com), commented on whether the likes of Federal Reserve Chairman Ben Bernanke, his fellow governors, and Treasury Secretary Hank Paulson truly understand the complexity of today's financial complex, one that "has morphed into something unrecognizable to many astute market veterans and academics."

"Remember those old economics textbooks that told you how a $1 deposit at your neighborhood bank could be multiplied by five or six times in a magical act of reserve banking? It still can, but financial innovation has done an end run around the banks. Derivatives and structures with three- and four-letter abbreviations - CDOs, CLOs, ABCP, CPDOs, SIVs (the world awaits investment banking's next creation; perhaps IOU?) - can now take a 'depositor's' dollar and multiply it ten or 20 times?.

"I'm sure that Bernanke, Paulson, and their cohorts understand this, but it isn't yet clear how much they appreciate it. Alan Greenspan admits in his newly published book that he didn't appreciate until recently the impact adjustable-rate mortgages and their subprime character, accompanied in some cases by outright fraud, would have on the housing market. If the Fed was so slow to grasp the role that subprime mortgages played in the housing boom and bust, do the Fed and the Treasury of today totally comprehend what happens when the nonbanking private system suddenly stops flooding the market with credit? Do they recognize that such a shutdown puts spending for housing and business investment at risk, and job growth as well? The Fed will have to adapt its monetary policy, and the Bush Treasury will have to adjust its fiscal policy to this brazen new world dominated more and more by private rather than public policies and proclivities. To overcome private-market caution, the Fed may need to put on a bold face marked by even more decisive cuts in short-term rates."

Gross also addressed, perhaps presciently as only time will tell, the employment report, five days before it rocked the market on Friday.

"(We could see) false hopes of a housing bottom, fears of a dollar crisis, or misinterpret one month's signs of employment gains and faux economic strength. The downward path of home prices, however, will dominate Fed policy over the next several years as will the lingering unwind of related financial structures and derivatives that have yet to be discovered by the public, and marked to market by their conduit holders."

We are in the midst of one of those stretches in the market where yours truly looks very foolish recommending 80% cash and 20% equities. And this can last a while, a la late 1999 / early 2000. But seeing as I didn't forecast anything awful for 2007, and instead have focused my attention on '08, I feel like I still have some time to be proven right.

One game that I play constantly, though, goes something like this. Will we hit 15000 before we see 12500-13000 again? Will we see 16000 and never again see 12000? 17000? A 20% bear market from 17000, after all, takes you back to just 13600. In the broad scheme of things, unless you were investing between 15000 and 17000, at that point a lot of folks would just say "Whoopty-damn-do." 13600 would certainly not mean the sky was falling, necessarily, even if the trip down for those who invested at the top made it feel like such.

For now, though, I'm sticking with my global real estate bubble theme and the eventual impact on consumer spending, first and foremost. Others can play with their inflation, currency and derivatives toys; I prefer to focus on what represents the #1 asset for 95% of homeowners throughout the world.

Lastly, not for nothing but growth is indeed slowing in much of the world despite what the hucksters on CNBC and other forums say. That doesn't mean it's not a good environment for stocks, I hasten to add, it's just the truth. And while the euro-zone economy is still pretty solid, for example, the risks are to the downside, as the European Central Bank's Jean-Claude Trichet offered this week in keeping the ECB's key lending rate unchanged at 4 percent. Trichet also mentioned a dirty word that is finding its way into the dialogue more and more these days?. protectionism.

Street Bytes

--The S&P 500 closed at a new record high on Friday, while the Dow Jones hit its record earlier in the week, part of a stretch that has seen the major averages race higher for four weeks in a row. The Dow finished up 1.2% to 14066, while the S&P rose 2% to 1557. For its part Nasdaq gained another 2.9% to 2780.

--U.S. Treasury Yields

6-mo. 4.19% 2-yr. 4.08% 10-yr. 4.64% 30-yr. 4.87%

Yields on the short end rose on the relatively strong employment data, particularly the upward revisions, with traders adopting the posture that another rate cut at the Fed's next meeting, Oct. 31, isn't a sure thing anymore. Next week brings data on producer prices and retail sales, both of which could help shape the Fed's decision.

--Ford's auto sales dropped for an 11th consecutive month in September, with light vehicles off more than 20%. Toyota's also fell, 4.4%, while GM's rose less than a point and Honda's were up 9%. Honda's U.S. sales have grown 13 straight years and despite the slip in September, Toyota's is now 11.

--Conor Dougherty had an interesting story last weekend in the Journal titled "Is Florida Over?"

"(For) Americans on the move, Florida has become a less- appealing destination. Moving company Atlas Van Lines brought 6,700 families into Florida last year and took 8,000 out, the first time it has moved more out than in. Even with falling home prices these days, it's still about key issues such as affordability. For retirees, the median home price for an existing single family home is still $231,000, or up 64% from five years ago, which has resulted in soaring property taxes for newcomers." [Florida has a two-tiered system that hits new or part-time residents harder than long-time homeowners.]

--Manhattan's commercial real estate market continues to slide as leasing activity fell 23% in the third quarter - the fourth consecutive period of decline according to a report by Cushman & Wakefield (and Crain's New York Business). But, Manhattan's residential market is still strong with the average apartment rising 6.3% to $1.4 million in the third quarter from a year-ago. But this is skewed by the cost of a three-bedroom home soaring 18% to $4.4 million. 4 or more bedrooms? Try $8.5 million. [I didn't see the more accurate median price for the quarter.]

--A follow-up to my discussion last week on global affordability and Ireland, specifically. I brought home some real estate listings from the Irish papers and just had a chance to glance at them. In case you wonder how anyone can talk of a bubble there, a very small one-bedroom apartment in a Dublin suburb, new construction, goes for over $400,000 in one ugly complex. In a similar setting, also outside Dublin proper, try $630,000 for a two-bedroom. Young people there simply can't afford this?but they stretch anyway and take out their 100% mortgages. This week one of Ireland's banks cut its growth forecast for the nation due to concerns over real estate.

--Back to Florida, Oren Dorell of USA Today had a story on "citrus greening," a disease that threatens the state's entire orange juice industry. First discovered in the Miami area in Sept. 2005, it has already spread to 27 of Florida's 32 counties.

"Citrus greening is an incurable disease that hits orange, lemon, grapefruit and other citrus trees. It is spread by an aphid-like insect, the Asian citrus psyllid."

The citrus industry saw sales of $1.4 billion in 2006. Shares of TANG soared on the news.

--This is not good news?According to Dr. Yoshihiro Kawaoka of the University of Wisconsin-Madison, the H5N1 bird flu virus has begun to mutate to infect people more easily, though there is a ways to go before it is transformed into a pandemic.

"We have identified a specific change that could make bird flu grow in the upper respiratory tract of humans," said Dr. Kawaoka. "The viruses that are circulating in Africa and Europe are the ones closest to becoming a human virus."

He is not trying to scare the public, just urging the scientific community to remain very vigilant. [South China Morning Post]

--I bring up items such as bird flu because of the potential to impact the economy, such as in the case of the travel industry. But even without a pandemic, Marriott International's third- quarter profit report, for instance, may have been alright, but the CFO warned that the current boom in the lodging cycle is looking a little long in the tooth as the company lowered its full- year profit forecast, while announcing revenue per available room could drop 5 to 7 percent in 2008.

--I noted with interest the revenue figures for September out of Macau and its casinos. While an increase of 55% may seem high, it was far below expectations of 75%, with new casinos such as Venetian Macau, owned by Las Vegas Sands, opening in the past few months.

I wrote last spring after my second trip here in just a few years that this was yet another bubble. I guarantee a year from now they will be talking about Macau and the potential for sizable losses for the likes of Las Vegas Sands and Wynn Resorts. While the number of day trippers from the mainland could continue to increase as China's middle class grows, Macau needs high rollers and, trust me, this place just isn't that great, plus soon Singapore and others in the region will offer far better experiences.

And I can't help but compare what I believe will transpire in Macau with the New York Mets. 'Huh?' you might be musing.

You see, the Mets' late-season, historic collapse has major ramifications for ownership going forward that few have been addressing. The team is moving into a new stadium in 2009 and undoubtedly will sell out every single seat that first year, as almost every franchise does when it opens up a new ballpark.

But Mets management can't be sleeping well when it comes to 2010 and beyond. Strictly from a baseball standpoint, I look at their division and see an awful lot of good, young talent in Philadelphia, Florida and Washington, and by 2010, Mets fans will not turn out in droves and spend $100 per person, all in, to watch a .500 team. In essence, like Macau, the Mets are in the process of overbuilding and in their case, the bubble may already have popped.

--In an AP-Ipsos survey, only 34% approve of President Bush's handling of the economy.

--According to regulatory filings, Countrywide Financial CEO Angelo Mozilo switched course in his stock options trading plan twice in late 2006 and early 2007, lending credence to the view his moves weren't exactly as pristine as he wants us to believe. Normally, when an executive adopts a plan it remains in place throughout, unchanged, to avoid any appearances of impropriety. This doesn't appear to be the case with Mozilo and inside information he was obviously privy to as he netted $138 million during the period in question.

--Thanks to the plunging value of the U.S. dollar, particularly vs. the Canadian dollar, or loonie, Toronto-Dominion Bank acquired mid-Atlantic regional Commerce Bancorp; the latter best known for extended branch hours and free services such as automatic coin-counting machines. [I still have about 8 coffee cans of coins in my home and remain too embarrassed to begin cashing them in?afraid someone I know will see me and start rumors that I'm homeless.]

It's incredible to think that about five years ago the Canadian dollar had plunged to 65 cents and today is at parity.

--New Jersey is estimating the cost to repair and upgrade 34% of its 6,434 bridges will be $6 billion-$8 billion over the next decade. Yikes. Better hold on to my coins?I'm going to need that source of funds it would appear.

--Last week it seemed every major publication had a story on how the ethanol industry's party could already be over, thanks to the fact there simply isn't a distribution network to meet demand. The glut in supply has caused prices to collapse as much as 30%.

What's absurd is that while U.S. ethanol capacity is expected to hit 12 billion gallons in 2008 thanks to the aggressive building of new plants, demand could be less than seven billion gallons.

But what was most disturbing was an article by Michael Smith and Carlos Caminada of Bloomberg News on Brazil and the health crisis tied to the ethanol industry there.

500,000 workers toil in the sugar cane fields (sugar cane being Brazil's corn equivalent for the fuel), but 312 died on the job from 2002 to 2005 and 83,000 suffered from accidents while working in the fields and ethanol plants, according to Brazil's Social Security Administration.

It's not only backbreaking work, with dehydration a major danger in the boiling sun and humidity, but they are also inhaling fibers, much like asbestos.

--Madison Square Garden, now known as the world's most 'infamous' arena, and Knicks coach Isiah Thomas were found guilty in a widely-followed sexual harassment suit that should resonate throughout the workplace. Former Garden employee Anucha Browne Sanders was awarded $11.6 million in punitive damages.

--GE is closing seven light-bulb plants around the world, including one in Brazil that employs 900, thanks to falling demand for traditional incandescent bulbs. Personally, I think I'm going to start stocking these like I do Chex Mix, water and beer. I'll find other ways to save the environment.

--Topps Meat Co., not to be confused with Topps Co., manufacturer of fine trading cards, closed after the second- largest beef recall in U.S. history following word of possible E. coli contamination in its product that sickened more than two dozen people in eight states. Meanwhile, the baseball card Topps is looking into whether or not it needs to recall all Barry Bonds cards in light of Marion Jones' admission of guilt in the BALCO case.

--Speaking of baseball, did you see Friday's game between Cleveland and New York? Do you think the insects that invaded the stadium from off the water, a Canadian amphibious landing, had everyone outside Cleveland wishing they lived there? Do you think the average lakefront property plummeted $100,000 overnight? At least when the Cuyahoga River caught fire back in 1969, the smoke and flames kept the bugs away from town.

--My portfolio: The China biodiesel play came back to earth this week, but actually did better than I expected. And one of my solar plays is way up since I purchased it in February, not a bad thing, so it's still premium beer in the fridge. [I also began to take profits on this last one, Friday.]

--According to researchers at Elon University (a fine school in North Carolina), "Extra time spent grooming has a positive and significant effect on both men's and women's earnings, but the effect is considerably larger for men," as noted in a paper by Jayoti Das and Stephen DeLoach. "For men, every extra 10 minutes of grooming increases their weekly wages by 6 percent. However, women would have to nearly quadruple their daily grooming time to receive that much in additional wages." [Matthew Lynn / Bloomberg News]

--Now I don't know squat about pumpkins, but if you haven't already gotten yours for Halloween, you better do so quickly. Due to weather conditions, many states are struggling this fall.

"Hot, dry weather causes pumpkins to produce too many male blossoms and too few female ones."

Huh, never knew this. Lots of males trying to show off in the pumpkin patch, I imagine.

Foreign Affairs, part II

Russia: As Gomer Pyle would have said, "Soo-prize, soo-prize." It's hard not to be cynical about President Vladimir Putin's decision to put his name forward as the leading candidate of the official Kremlin party, United Russia, in the upcoming parliamentary elections in December; thereby allowing him to be prime minister after he leaves office next March.

Putin said he would do so, however, only if United Russia gained an overwhelming victory, which of course it will, now, and if in March a president is elected with whom he, Putin, can work closely with. Seeing as how Putin handpicks the candidate to succeed him, this is most humorous.

Putin's approval rating, thanks to Russia's oil riches, is in excess of 75% these days, which could lead to United Russia gaining more than 66% of the Duma vote, a percentage necessary to ram through any legislation Putin desires, including that pertaining to the office of the presidency, such as amending term limits.

What it all means is that suddenly 66-year-old Viktor Zubkov, unknown until Putin just named him prime minister, could get Putin's nod to be president, thus making Zubkov a caretaker until Putin, just 54, can legally run for president again in 2012.

Lastly, Garry Kasparov announced he will run for president as head of 'Other Russia.' He doesn't stand a snowball's chance in hell, but he'll make it interesting.

Pakistan: I've given up trying to figure out what is going on here, except we know there is an election for president taking place today, though the country's Supreme Court could later rule the result null and void, because while it is allowing Musharraf to run for reelection while remaining head of the military, it said it could still decide later to say otherwise. Yup, confusing.

Meanwhile, Musharraf is to step down as military chief next month and has appointed the head of the ISI, Pakistan's intelligence arm, a Lt. Gen. Kiani, to fill the void. Kiani has been in charge of the investigations into the assassination attempts on Musharraf as well as Pakistan's anti-terrorism efforts. So you could ask yourself, just how good has he been?

As for former prime minister Benazir Bhutto, she is still slated to return to the country on Oct. 18 in time for the Nov. 15 parliamentary elections, and in the on-again / off-again negotiations with Musharraf, he has elected to remove all corruption charges against her as a first step in some sort of power-sharing arrangement. Then again, the story could be totally different by Sunday.

Burma: The generals appear to have successfully beaten back the democracy movement amidst rumors that those arrested, including the monks, are in a temporary concentration camp. Of course the world community really can't do anything about it, especially since China wants to keep its vassal state just the way it is.

But the Washington Post's Fred Hiatt throws out a topic that could gain some traction?boycott the Beijing Olympics. I do not agree with his take, but it's interesting.

"I understand the arguments against (boycotting the Games): China's rulers are gradually becoming more responsible in the world; to threaten their Games would only get their backs up. The Games themselves offer a chance to enhance international understanding; if we let world affairs interfere, there will always - every two years - be some cause. The athletes have trained for years; they deserve their chance.

"And yet: Hundreds of thousands of Burmese have risked everything - their homes, their families, their lives - to be free. They have done so with nothing on their side but courage, faith and the hope that the world might stand with them. And they still have a chance to succeed.

"Whether they do depends mostly on decisions made inside Burma. But people and countries outside can have some effect. Burma's neighbors in Southeast Asia could do more. The world's largest democracy, India, could do far more. China could do more most of all.

"China's Communist rulers have reasons not to help Burma's democrats. They enjoy privileged access to Burma's timber and other resources, for one. Even more fundamentally, dictators will shudder when they see another illegitimate regime threatened by people power.

"What could push them the other way? Their desire to be seen as responsible players, maybe. Their desire to have their one-party rule recognized as more sophisticated and legitimate than the paranoid generals of Burma, maybe. And, maybe, their deep desire to host a successful Olympics next summer.

"If a threat to those Games - delivered privately, if that would be most effective, with no loss of face - could help tip the balance, then let the Games not begin. Some things matter more."

[I have a selfish interest in seeing the Games come off. On Friday, the first day tickets became available, I snapped up a full pass to the U.S. Olympic Track and Field Trials next June in Eugene, Oregon. Guess I won't see Marion Jones, however.]

Ukraine: More election chaos here as former prime minister Yulia Tymoshenko would appear to be heading back to this post as part of a coalition with President Yushchenko, both being pro- West and EU. But the current prime minister, Yanukovich, who is pro-Moscow, is saying not so fast. As for Yushchenko, he offers on one hand that he wants a big tent with all parties welcome, but Tymoshenko said, 'No way, I won't serve in a government with Yanukovich.'

And as winter approaches, it's time for another potential standoff with Russian energy giant Gazprom. Gazprom says Ukraine owes it $1.3 billion. A Ukraine official then supposedly agreed to pay this off by Nov. 1, per Gazprom's request. But other government officials, including Yushchenko and Tymoshenko said, 'Not so fast!' Gazprom could of course at any time cut off the natural gas supply.

Turkey: The European Union is disappointed at the slow pace of reform in terms of Ankara's application for membership. The EU is slated to issue its annual progress report in November and it won't be good.

One major obstacle remains, divided Cyprus. The EU wants Turkey to open its ports and airports to traffic from EU-member Greek Cyprus, but Turkey refuses to do so before the EU lifts sanctions on the Turkish Cypriot state, recognized only by Ankara.

Lebanon: President Bush met with anti-Syrian majority leader Saad Hariri in Washington and warned Syria not to interfere in Lebanon's political process. "I am deeply concerned about foreign interference in your elections. We expect Syria to honor that demand."

Well this is truly laughable, seeing as Bush has been totally clueless about the missed opportunity here going back to the spring of 2005, as I've documented extensively in these pages. Kind of like the way Bush was clueless for over three years as to what was needed in post-Saddam Iraq.

Russia, part II: Back here for a little tidbit. President Putin traveled to Sochi, site of the 2014 Winter Olympics, and said, "We unfortunately have to admit that at this point, in a city of half a million people, there is no proper sewage system, electricity supply or infrastructure." Doesn't exactly make me want to visit the place beforehand, if you catch my drift.

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Pray for the men and women of our armed forces.

God bless America.

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Gold closed at $747
Oil, $81.22

Returns for the week 10/1-10/5

Dow Jones +1.2% [14066]
S&P 500 +2.0% [1557]
S&P MidCap +3.3%
Russell 2000 +4.9%
Nasdaq +2.9% [2780]

Returns for the period 1/1/07-10/5/07

Dow Jones +12.9%
S&P 500 +9.8%
S&P MidCap +13.6%
Russell 2000 +7.3%
Nasdaq +15.1%

Bulls 56.5
Bears 25.0 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

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