Week in Review 
For the week 12/24/2007 - 12/28/2007
Brian Trumbore
President/Editor, StocksandNews.com

2007?2008

Before I take a look back at some predictions, warts and all, and make some new ones, a few words on the crisis in Pakistan.

This was totally predictable as the reckless Benazir Bhutto, mother of three, clearly had a death wish; like one of those 'suicide by cop' stories you read of where the criminal just wants to get gunned down. And while many are saying Bhutto was Pakistan's last best hope for democracy, that isn't saying much about the country and its inability to produce real leaders.

Benazir Bhutto was not a great figure, as I've noted before. The following is from Ralph Peters / New York Post.

"We need have no sympathy with her Islamist assassin and the extremists behind him to recognize that Bhutto was corrupt, divisive, dishonest and utterly devoid of genuine concern for her country.

"She was a splendid con, persuading otherwise cynical Western politicians and 'hardheaded' journalists that she was not only a brave woman crusading in the Islamic wilderness, but also a thoroughbred democrat.

"In fact, Bhutto was a frivolously wealthy feudal landlord amid bleak poverty. The scion of a thieving political dynasty, she was always more concerned with power than with the wellbeing of the average Pakistani. Her program remained one of old-school patronage, not increased productivity or social decency.

"Educated in expensive Western schools, she permitted Pakistan's feeble education system to rot - opening the door to Islamists and their religious schools.

"During her years as prime minister, Pakistan went backward, not forward. Her husband looted shamelessly and ended up fleeing the country, pursued by the courts. The Islamist threat - which she artfully played both ways - spread like cancer."

I loved the stories the past 24-48 hours of how tragic it was that this woman, "who was leading a good life in Dhubai and London," still felt compelled to come home and save her country; with zero mention that she was living a life of luxury because she had looted Pakistan when she was in power; such as the stories of how she set up all the secret Swiss bank accounts.

And how much can you respect someone who carelessly placed her followers at risk, with over 170 of them dying in the two attacks since her October return?!

But what now? Never was there more of a reason to invoke my "wait 24 hours" rule than today. What I do know, as I wrote in my 12/8 column, is that the other opposition figure, former prime minister Nawaz Sharif, "is plotting a coup, post-Jan. 8."

Sharif is another very bad player, only unlike Bhutto he has allies in the Islamist movement. Also remember it was Pervez Musharraf who deposed Sharif in the 1999 coup. It is totally impossible for these two to form a coalition of any sort, so there will be a battle between them.

As for the proposed Jan. 8 election, I get a kick out of those who say Bhutto was set to win the vote. Both Bhutto and Sharif agreed it was going to be rigged by Musharraf's supporters, despite his claim, clearly for public consumption in the West, that he wouldn't mind seeing Bhutto get a third term as prime minister (which went against the constitution).

Obviously there is another victim of this week's events, that being the Bush administration for spending $10 billion on what has been a failed policy. But I would urge the White House at this time to back off. We will only inflame tensions further by trying to impose our will. Personally, I am not concerned as yet about control of Pakistan's nuclear weapons. For today our bigger threat remains the loose material in the former Soviet Union.

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Here is some of what I wrote 12/30/06, in looking ahead to 2007.

"It's about 2008, really. In China the lead up to the Olympics in Beijing and in Russia the lead up to a possible presidential election should Putin actually step down. I still maintain he will find a reason to hang on and the constitution will be amended by next fall?.

"Watch the Balkans as the issue of Kosovo gets center stage for a spell. Nothing too deadly, but between increasing concerns over Russia's intentions and the need for vigilance in the Balkans as well as what should be an increased presence in Afghanistan, NATO is going to have to confront the fact it is turning increasingly into a paper tiger and must, therefore, recommit itself to the security of Europe and beyond.

"France's presidential election in April could lead to some fireworks. It should be an exciting race between the comely Socialist Party leader Segolene Royal and Conservative Nicolas Sarkozy. Sarkozy will eke out a win.

"Watch Colombia. A growing political crisis could encourage Venezuela's Hugo Chavez to grab some territory. Otherwise, Chavez will be quiet but behind the scenes Iran will be spreading its agents around the continent to plan for an explosive 2008.

"The Dow Jones will have two dreadful days. One when Iran tests a crude nuclear device. The second when there is a major assassination in the Middle East.

"North Korea will test another nuclear bomb, but otherwise will remain the hermit kingdom as talks over its weapons program continue to go nowhere.

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

"Afghanistan will stabilize some after a bad 2006. The Taliban, however, will only be regrouping in Pakistan, along with al- Qaeda?.

"Castro will not die."

You know, taken in total, not too shabby, really. I missed badly in the case of Iran and North Korea didn't test another nuke as it did enter talks, though the result of them may not in the end really be to our liking.

The Taliban made its move in Afghanistan a little sooner than I thought but I had the right idea. Chavez and Colombia are still at loggerheads (see below), Sarkozy won, Kosovo remains very much a potential flashpoint, I wasn't really wrong on the Putin front, as he does indeed stay in power, and it's still all about 2008 when it comes to China.

As for Iraq, I claim I nailed this one. Within 30 days of my target we did indeed see improvement but a majority of the people would still prefer to see the troops come home, depending on how the question is phrased by the pollsters.

Lastly, I have to tell you I'm proud about the Castro prediction (hang in there another few days, Fidel!) because you'll recall that one year ago, we had all manner of CIA reports saying he was on his deathbed. Yes, our "intelligence" is more often than not a joke.

2008

So what will the next year bring on the foreign policy front?

Iraq: Wait to see if they finally hold a referendum on the status of oil-rich Kirkuk, which the Kurds want to control, and when looking at the dynamic between the Kurdish rebels and Turkey, follow the actions of the Kurdish terror enabler President Barzani. The Kurds will strike back and launch a series of deadly attacks in Istanbul and Ankara and the U.S. will be under immense pressure to remove him.

Iran: March 14 looms as a huge date?Iran's parliamentary elections and the battle between the hardline supporters of President Ahmadinejad and the 'moderates' led by Rafsanjani. Ahmadinejad's forces will lose, thus putting pressure on Mahmoud to resign as the people revolt over soaring inflation. [More below on this one.]

Palestinian leader Mahmoud Abbas will be taken out, while scandals will force Israeli Prime Minister Olmert from office as he also comes under increasing pressure from Israeli conservatives to step down over what they'll see as appeasement of the Palestinians (before my projected Abbas incident).

As for Israel, Iran and the latter's nuclear weapons program, Israel will launch a strike at some point in 2008.

Vladimir Putin and Dmitry Medvedev will face a growing crisis in Russia over labor issues and soaring inflation here as well. You will also begin to hear more and more of Kremlin infighting among the former KGB factions that have set up shop there. It could get dicey for the tsar.

Kosovo will remain a big issue and could yet explode depending on how far Russia wants to support its client Serbia.

Kim Jong-il will die, or be incapacitated to the point where his son will have to take over. The world will shudder as South Korea gears up for war until the generals who have been behind Kim all these years reveal their hand, which will be to support the new Great Leader while standing down the military.

China will face a major crisis on March 22, the date of Taiwan's presidential election and a proposed referendum on applying for UN membership under the name "Taiwan." Moderates will win the election and the referendum will be defeated (assuming it goes through as planned), China long claiming this would be an act of war.

But prior to the Olympics, an old issue will rear up; that being the U.S.-EU arms embargo that was imposed on China following the 1989 Tiananmen Square massacre. France takes over the presidency of the EU in July and Nicolas Sarkozy will seek to lift the ban for both personal and commercial reasons, the former related to a summit planned for China later in the year.

The debate will be fierce, on both sides of the pond, and will be a particularly thorny one before the Olympics as China is pummeled by Congress and whomever emerges as a presidential candidate over the issue of human rights.

China will fight back, but the stage will be set for a very tense Summer Games and some of the events will take on a tone similar to the height of the Cold War when there was no better drama than a U.S.-Soviet Union boxing match or duel on the track.

The sleeper issue of the year could be chaos in South Africa as the ANC's new leader, Jacob Zuma, seeks to take control earlier than scheduled from Thabo Mbeki. Just this Friday, Zuma was ordered to stand trial on new corruption charges but I'm assuming he will be acquitted. The country will be in an uproar throughout the process. Our concern should be over the safety of its nuclear facilities, as spelled out last week.

Lastly, look for Pope Benedict to continue his dialogue with Muslim leaders. Al-Qaeda will scream about it, but if you're looking for something positive, maybe there is a surprise or two on this front.

Wall Street

I wrote the following about 2007 on 12/30/06:

"Those who are trying to convince us housing has bottomed and that it's soon back off to the races are nuts. There is absolutely no way housing, at least as represented by prices, has a good 2007.

"Housing was in a bubble, period. Bubbles, witness Nasdaq in 1999/2000, don't just pop and then return to old prices. But I'll grant you the housing sector could just stagnate for all of 2007, though I believe instead we will see another leg down.

"Remember, it's still largely about affordability and not one of the optimist shills ever brings this up. Prices have only retreated slightly in the bigger bubble markets and, as represented by the huge percentage of first-time and new-home buyers who are taking out subprime mortgages the past 12-24 months, a large percentage of Americans are still stretching way beyond their means?.

"So in our three-legged stool; housing, the consumer, and capital spending, housing remains a problem.

"And it will increasingly wear on consumer spending. This hasn't happened as quickly as I thought it would, nor has the market stagnated long enough for psychology to begin to wear thin. But at some point in 2007 reality will begin to hit Americans in the face; their leading asset has stopped appreciating, best case. The reverse wealth effect will then come into play?.

"Bottom line, stocks will meander around the breakeven mark in '07, call it up or down 3% for the troika - the Dow, the S&P and Nasdaq - when the final bell rings next December. But then all hell breaks loose in 2008."

I then continued the following week, 1/7/07:

"What we will see?is rising default levels for individuals; a harbinger of things to come in 2008. A reason why I'm not calling for outright disaster just yet is because, yes, there is a tremendous amount of cash sloshing around?and spending at the top levels of our society will more than make up for shortfalls at the middle- and lower-income levels. For a while longer, that is."

I'm giving myself an 'A' for '07, at least when looking at the Big Picture. Oh, I got some things wrong, such as calling for just 1.5% growth when the average, after a presumed 1.0% reading for the 4th quarter, will be closer to 2.5%, and I said the dollar "will remain largely a non-issue in '07." Then again, except for Americans traveling overseas and a little rumbling on the trade front, the sliding dollar wasn't the cause of any panics, rather it was the credit crunch, which I didn't foresee in terms of the securities wrapped around housing.

2008? More of the same. In fact it's pretty simple. Ditto. Only this time we do indeed get the recession, as classically defined; two or more negative quarters in a row in terms of the nation's GDP, though for now I'll say it's fairly shallow.

After years of overspending, the consumer, weighed down by their number one asset, their home, will finally cut back in a big way. It's not going to help matters any, either, that the big slowdown will be global. In many parts of the world this is already the case. Housing has certainly peaked in Western Europe, and you are seeing strong signs that my long discussed theme of a global real estate boom/bust has indeed taken hold. The speed of the decline will of course vary depending on the size of the bubble. Spain, the UK, and Ireland, for instance, will take it on the chin far worse than the U.S.

There is a common comment that goes something like this. "Once we get the credit crisis out of the way?.." Wrong! The spillover from housing is just getting started. Around the world, consumers are overstretched and weighed down by personal debt loads of record proportions. What ameliorated the situation thus far has been the fact both stocks and home values had continued upward in much of the world, but now that is no longer the case.

And as the global economy sputters and then grinds to a halt (with a few exceptions such as China), you will hear all manner of talk about trade wars. It's going to take a maximum effort on the part of world leaders to keep it from spinning out of control.

You are also going to be inundated with more talk of just how dirty the Street is. The other day the Journal had a story titled "Pricing Probes on Wall Street Gather Steam: SEC-Led Investigations Focus on Public Notice, In-House Discrepancies."

As reported by Susan Pulliam and Kara Scannell:

"The credit crunch that has hurt some homeowners and led to the Wall Street writedowns has highlighted an unnerving reality in the financial world: Investors increasingly have no way of knowing with any certainty the value of many of the securities now traded?.

"In one investigation, the SEC is examining a situation this year in which a trader at a now-defunct hedge fund of UBS's Dillon Read unit was confronted and then ousted after he valued mortgage securities at prices below the value assigned the same securities elsewhere at UBS." [An incident previously disclosed by the Journal.]

In Japan, they labeled 2007 the year of "deception," or the big lie. That was certainly the case in the U.S. as well and it will continue in '08 and beyond until we get some leadership in Washington that the people can respect; that which understands that U.S. capital markets have indeed become a joke as I ranted much of the fourth quarter. Wall Street, broadly defined to include some of the big banks and mortgage lenders, has been no better than some Third World systems on the transparency front. This must change, and soon. But as the global economy swoons, led by the United States, it's going to be more about finger- pointing than actual solutions.

Street Bytes

--The reports on holiday retail sales have not been great and when it all shakes out over the coming weeks, sales will come in below the National Retail Federation's 4.8% annual rate of the past decade. But thus far, most of the surveys still have it pegged at 3%-4%. I said it would be closer to 2%, but any increase is a last spasm of activity before the fall. Target, for example, said its same-store December sales figures will be down 1% to up 1%, max, a huge disappointment and not auguring well for '08.

On the housing front, the S&P/Case-Shiller index revealed that for the month of October, the average home price declined in value a whopping 6.7% in ten major metropolitan areas from year earlier levels, while new-home sales for November collapsed to an adjusted annual rate of 647,000 when it was forecast to come in around 715,000; a gigantic miss for this data point. Year over year new-home sales are 34.4% lower than November 2006. The median price declined just 0.4% to $239,100, while the average price actually rose a bit to $293,300.

I bring this last one up because as I'm continually harping on the fact we are in the midst of a global real estate bubble, consider that this week it was announced the average home price in England and Wales was $348,000! No surprise then that prices there have been in decline for three straight months.

--For the holiday-shortened week the major averages all declined less than 1%. No Santa Claus rally this year. As for my own predictions for stocks in 2008, equities are not grossly overvalued, even if earnings expectations are too high. For this reason I am once again not calling for dire trouble but do say the Dow, S&P and Nasdaq will finish the year off 3% to 5%.

--U.S. Treasury Yields

6-mo. 3.43% 2-yr. 3.11% 10-yr. 4.08% 30-yr. 4.49%

Rates plunged Friday on the housing news and renewed hope for further Fed rate cuts.

Seeing as we have one more trading day for bonds in '07, I'll wrap this topic up next time and address '08 then.

--Oil surged anew to close the week at $96 on both tensions in Pakistan and the chances it could spill over into oil-producing nations in the region, as well as the fact that for a 6th straight week there were significant drawdowns in crude inventories here in the U.S. My closely watched gasoline futures figure surged to $2.46?not good for those looking for gasoline at the pump to back down below $3.00 any time soon. Instead we're talking a national average of $3.15 if we hold current levels.

--Professor Jeremy Siegel had an op-ed in Friday's Wall Street Journal on the "January Effect," the outperformance of small stocks in the first month of the year. Some of his observations:

"Over the past 80 years, all the outperformance of small stocks over large stocks has taken place in the first month?.In fact, if you held the S&P 500 index for the 11 months from February through December and then switched to a small stock fund for the month of January, your returns would soar to nearly 15% a year. This return is almost five percentage points above the market, beating almost all active money managers?.

"(The) January Effect (though) has been far weaker since it was widely publicized in the 1980s. From 1990 through January 2007, the average January return on the Russell 2000 index has been 1.36%, only slightly more than the 0.70% percent return on the S&P 500?.

"There has, however, been a bit of a revival of the January Effect in recent years. Since 2000 the average return on small stocks in January has risen to 1.68%, versus 0.21% for large stocks."

--For the archives, various outside opinion on the markets for '08.

Rich Bernstein / Merrill Lynch?1525 on the S&P, 12/08
Tobias Levkovich / Citigroup?1675
Abby Cohen / Goldman Sachs?1675
Laszlo Birinyi / Birinyi Associates?1700
Francois Trahan / ISI?1750

Ed Hyman / ISI?fed funds 3.50%, 12/08
David Rosenberg / Merrill Lynch?2.50%
Brian Wesbury / First Trust?5.25%

[Source: Barron's / Business Week]

--The projected $14.5 billion budget gap in California will require drastic cuts in state services and sweeping job cuts at a time when the state is already in recession by some measures due to the housing crisis. Governor Schwarzenegger has told agency heads to plan for 10% reductions across the board for the fiscal year beginning July 1.

But it's going to be great for up to 30,000 prisoners who could be released as one of the cost-cutting moves.

--Canadian Prime Minister Stephen Harper said his government won't bail out investors holding $33 billion in shaky commercial paper (30-90 days maturity); just another example of the spreading credit crisis. This is not an insignificant amount for our friends up there.

--ExxonMobil has been denied permission to start work on a gas pipeline to China from the key Sakhalin-1 project, as well as to invest in oil deposits discovered near Sakhalin-1's boundaries. Gazprom has told Exxon it needs the gas from Sakhalin-1 for domestic consumption. I just bring this up because it is a further example of the rough road "Big Oil" faces when it tries to compete with the growing "State Oil" behemoths around the globe. It's why you shouldn't be surprised to see how tough it is for the likes of Exxon to replace their reserves when you read the earnings reports.

--Economist Robert Samuelson / Washington Post

"In a booming world economy, (trade) tensions have so far remained muted. China's discriminatory trade practices, for example, have excited angry rhetoric, but not much else. The Chinese have generally deflected protests by, among other things, announcing large import orders at crucial moments. When European officials recently visited, there was a placating order for 160 Airbus planes worth an estimated $15 billion.

"But would a global slowdown change that if other countries blamed Chinese exports for destroying their domestic jobs? Would import quotas or tariffs follow? Already, China has turned from the world's largest steel importer to the largest exporter?.In the United States, the present pattern of global trade is viewed with increasing hostility: U.S. deficits are seen as eroding industrial jobs while providing surplus countries with the dollars to buy large pieces of American firms.

"The world economic order depends on a shared sense that most nations benefit. The more some countries pursue narrow advantage, the more others will follow suit. 'What's the glue that holds all this together?' asks (Harvard political scientist Jeffry) Frieden (sic). 'Is there a common agreement about cooperation that allows governments to give up something to maintain the international order?' It's an open question whether these conflicting forces - growing economic interdependence and rising nationalism - can coexist uneasily or are on a collision course."

--Commentator Ben Stein / New York Times

"Today, in the midst of the mortgage mess, we see people breaching their fiduciary duty and getting away with it. A few may lose their jobs and wander off to a wealthy retirement. But the ordinary stockholders of the banks and mortgage companies are staggered. Entities that sought a marginally better return on their money and were sold exposure to the C.M.O.'s [collateralized mortgage obligations] are pauperized because of the losses. And there are reports that Wall Street is expecting $38 billion in bonuses this year.

"I keep hearing well-meaning people say that America is not a nation if it doesn't have control over its borders. But are we a nation if there is no meaningful restraint on what people can do with an offering statement and a computer screen inside our borders? We surely cannot remain a republic under law if there is no law except the axiom from 'Richard II' that 'they well deserve to have, that know the strong'st and surest way to get.'"

--Goldman Sachs CEO Lloyd Blankfein is taking home a record $68 million in cash and prizes (stock) for 2007, while Morgan Stanley's John Mack and Bear Stearns' Jimmy Cayne were forced to give up any bonuses due to their firms' dreadful performance in the wake of the subprime mortgage crisis. So you just know Mrs. Mack and Mrs. Cayne have spent the holidays screaming at them.

--Merrill Lynch, as rumored, was forced to sell a $5 billion stake to Singapore's sovereign wealth fund, Temasek, while Davis Selected Advisers took down $1.2 billion. But what was pitiful about the Temasek stake is that Merrill offered it shares at $48 a share, well off the then price of $58 (before details came out), thus significantly diluting existing shareholders. A rights offering would have been the correct way to go but time was obviously of the essence and provides yet another clue just how desperate some of the investment banks are to raise capital before the regulators are forced to question whether their levels of capital meet federal standards.

--Warren Buffett acquired a 60% stake in the Pritzker family of Chicago's Marmon Holdings for $4.5 billion, with the other 40% to be acquired over the next five or six years. Marmon is comprised of the kinds of "fundamental businesses" that Buffett loves, in his own words; wire and cable, railroad tank cars and water treatment systems.

[Buffett also said it was not time to go bottom-fishing in the banks, and then he later announced he was creating his own mortgage insurance firm to pick up the pieces from Ambac and MBIA, who in turn saw their shares tumble on the news of a brand new competitor with the Buffett moniker.]

--Speaking of water treatment systems, Barron Hilton is donating nearly all his $2.3 billion fortune to his family's philanthropic foundation that supports projects for safe drinking water in developing countries and other like causes worldwide. Good for him. As I've noted in the past, those seeking to provide computers to kids in the African bush with an average life expectancy of 30 are wasting their time and money if the same kids don't have drinking water first.

--Tokyo's stock market, closed Monday, finished 2007 down 11.1% as measured by the Nikkei Stock Average, its first down year since 2002.

--We had further confirmation online sales growth this holiday season slowed to 18% to 19%, according to two leading surveys, down from the 25% to 30% growth rates of recent years. Of course no one could expect the previous pace to continue forever, but the slowdown is considerable and obviously mirrors what's happening in the overall retail sector.

Separately, Amazon.com said its biggest shopping day had been Dec. 10.

--Sallie Mae's problems continue. The student loan king revealed the Education Department is investigating its accounting practices, while due to a credit crisis Sallie was forced to issue $2.5 billion in common and preferred stock aimed at shoring up its books; this as the shares hit their lowest level since 2001, down 66% from the 52-week high.

But I do have to mention that last week I was indeed quoting CEO/Chairman Albert Lord as he wrapped up his conference call with an expletive. I received some notes afterwards and realize I should have made that clearer.

--Once-great portfolio manager Bill Miller continues to underperform the S&P 500 by a huge margin with his flagship Legg Mason Value Trust. The fund on a total return basis was 12% behind the S&P as of 12/27.

--Billionaire investor Joseph Lewis, a high-school dropout, continues to raise his stake in Bear Stearns, now 9.6%, even though most of what he has purchased to date is significantly underwater. Then again, who am I to question a man who at 15 was a waiter in his father's catering company, expanded the business into a chain of eateries and souvenir shops, and then made a gazillion in currency trading?!

--While for the month of October (the latest recording period) casino revenues outside Las Vegas were off 5% or more, such as at the two giant Indian casinos in Connecticut (Mohegan Sun and Foxwoods), on the Vegas Strip revenues were up 19.8% over a year ago despite the jittery economy. As reported by Gary Rivlin in the New York Times, much of Vegas' success has to do with its ability to attract Asia's high-rollers who have a penchant for baccarat. At the Venetian and other like properties, for example, baccarat produced four times more revenue than a year earlier and now competes with blackjack as the top table game.

--Seeing as we have one more trading day in the year, I'll get into my final scorecard for 2007 next time in terms of returns vs. my recommended mix. I will admit to a lot of tax-selling in some minor positions of mine this past week, though not in my major holdings, including the biodiesel play many of you know of.

Foreign Affairs

Afghanistan: French President Nicolas Sarkozy said all the right things in a trip to Kabul, including recommitting his nation's 1,300 troops to the mission, but NATO needs to do far more and there is no indication Sarkozy will supply significantly more forces. New Australian Prime Minister Kevin Ruud also traveled to Afghanistan and recommitted his nation's force of 900, though he is sticking to his campaign promise to withdraw the 550 Aussies in Iraq. [South Korea's parliament voted to extend its minimal Iraqi presence.]

Iran: What have I been saying for well over a year now? Talk to former Iranian President Hashemi Rafsanjani, the real #2 in the country these days, with President Mahmoud Ahmadinejad being #3. So what happened last weekend? Rafsanjani blasted Ahmadinejad's economic policy, "accusing him of fighting inflation with slogans," according to a report by Agence France Presse and the Daily Star.

The pragmatic Rafsanjani said, "Take this issue [inflation] very seriously?.It should be dealt with using economic expertise and not with slogans and political games. Avoid slogans and incorrect statistics and bring out realities." Inflation is 19% as of the end of November.

Iraq: Turkey continued its air campaign against suspected Kurdish rebel (PKK) targets, saying at least 150 had been killed while the PKK says only a handful were. U.S. Maj. Gen. Rick Lynch, meanwhile, said continued success with the 'surge' is all about jobs, or the forces now aligned with the U.S. will go back to fighting. "It's tenuous. It could still go backward." There is also renewed talk of infighting between the two main Shia factions, as well as the reluctance of the Shia leadership to accept that some Sunnis have truly changed stripes.

Russia: There seems to be a major difference of opinion on whether the Kremlin is providing Iran with yet another sophisticated air defense system. Russia denies it is; this after an Iranian official said the contract had been signed.

In the presidential race, there are officially just five candidates. Dmitry Medvedev, communist Gennady Zyuganov, nationalist Vladimir Zhirinovsky, former prime minister Mikhail Kasyanov and Andrei Bogdanov. A sixth, reformist Boris Nemtsov, pulled out, saying "Goebbels-like propaganda, force and bureaucratic pressures are being used against the opposition." With no equal access to the media nor debates, the likes of Nemtsov and fellow reformer Garry Kasparov were just spinning their wheels.

North Korea: Pyongyang has thus far refused to dispose of unused nuclear fuel and destroy a cooling tower, per the six-party agreement, which means it would only take Lil' Kim and his Orcs three months to restart Yongbyon. The North is bitching that promised aid has not been forthcoming.

Thailand: After being deposed in a coup 15 months ago, former Prime Minister Thaksin is angling to return from exile following his People Power Party's victory in parliamentary elections, winning 233 of 480 seats in the lower house. Thaksin is wildly popular among the poor, even though he was an incredibly corrupt ruler who still hasn't faced charges. The ruling military has vowed he will be arrested should he return.

Israel: The government continues to build settlements, in total disregard of the 'roadmap,' and the White House just sits back, expecting there to be some magical peace agreement before President Bush leaves office. It's comical.

Lebanon: Yet another vote for president was canceled on Friday, the 11th such instance since it was to have originally taken place Sept. 25, owing to Syria and Hizbullah putting up one roadblock after another. While both sides agree the commander of the Lebanese Armed Forces, General Michel Suleiman, is the consensus choice, the parties remain at odds over how to amend the Constitution to allow a senior public servant to become president, who would lead a new government, and how many Cabinet seats each camp would get.

For its part, a leading Syrian legislator told an Arab newspaper that "if Syria feels threatened by Israel, it will be hard to stop our missile operators from responding to the Israeli aggression by attacking the Dimona nuclear reactor," emphasizing Dimona is "within range" of Syrian missiles. [Jerusalem Post] Not to be flip about a serious topic, but I would question the accuracy of Syria's weaponry.

Taiwan: Secretary of State Condoleezza Rice blasted President Chen Shui-bian for his proposed March referendum on United Nations membership, calling it "provocative" for raising tensions in the Taiwan Strait "unnecessarily."

China: I found this item interesting from a piece in the Financial Times.

"Former Nanjing university professor Guo Quan on Wednesday claimed his 'New Democratic party' enjoyed widespread backing for its goal of ending Communist 'one-party dictatorship' and introducing multi-party elections. 'We must join the global trend,' Mr. Guo said. 'China must move toward a democratic system.'"

Light a candle for this man's safety.

Serbia / Kosovo: There is an intense debate going on within the Serbian leadership over the issue of Kosovo. Prime Minister Kostunica condemned the United States. "America is openly striving for the destruction of the international order. America, which once seemed like a symbol of freedom, now advocates the policies of force." Serbia's president, though, Boris Tadic, said that while the country must strive to keep Kosovo, it should not give up "its European future" in the effort.

Venezuela / Colombia: President Hugo Chavez may have pulled off a public relations coup in securing the release of some prominent hostages held by Colombia's largest rebel group, FARC. One of them is a former congresswoman, though 44 other high-profile hostages, including three American defense contractors, remain in custody. Colombian President Alvaro Uribe had told Chavez to butt out of negotiations, but FARC clearly has an affinity for their fellow socialist.

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Pray for the men and women of our armed forces.

God bless America.

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Gold closed at $842
Oil, $96.11

Returns for the week 12/24-12/28

Dow Jones 0.6% [13365]
S&P 500 -0.4% [1478]
S&P MidCap -0.7%
Russell 2000 -1.8%
Nasdaq -0.7% [2674]

Returns for the period 1/1/07-12/28/07

Dow Jones +7.2%
S&P 500 +4.2%
S&P MidCap +7.3%
Russell 2000 -2.0%
Nasdaq +10.7%

Bulls 54.9
Bears 23.1 [Chartcraft / Investors Intelligence]

Happy New Year! And a Happy Birthday to our own Dr. Bortrum. It's a big one. Like five times Jamie Lynn Spears' age, if you catch my drift.

Brian Trumbore

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