the week 1/28/2008 - 2/01/2008
Street.Thar She Blows!
that is. Here's a little ditty from BusinessWeek's Michael
10 years will go down as one of the greatest consumer- lending
sprees ever. Adjusted for inflation, consumer debt - including
mortgages - rose an average 7.5% per year since 1997, far
faster than the 4.2% rate of the previous 10 years. The last
time debt rose so fast was the 1960s, as the postwar generation
bought homes and autos..
debt also represents a formidable obstacle for banks and other
financial institutions that might want to lend more to consumers.
'Going forward, we're not going to see this credit- driven
growth,' says Alistair Milne, a professor and banking expert
at City University in London. 'Banks are saying, 'we have
to be more careful here.''"
a nice, succinct explanation, I think you'd agree. But you
deserve more.more evidence of our current predicament.
there was a week where it was important to sit back in your
easy chair with the drink of your choice and the lab at your
feet it was this one. You talk about a lot of noise. Try waiting
24 hours instead and focusing on the Big Picture.
does that picture reveal? Try the first reading on fourth
quarter GDP, up a meager, and less than expected, 0.6%, a
level putting it at recession's door. Or try the weekly reading
on jobless claims, up a stupendous 69,000 to 375,000. This
was totally out of left field. Or try Friday's figure on January
employment, minus 17,000. Coupled with revisions to November
and December's numbers, you have a three-month average of
less than 42,000 jobs created a month when by most measurements
you need at least 125,000 just to take care of an increasing
culprits remained construction and manufacturing, both of
which continue to bleed, and the numbers for construction
spending itself have been dismal recently. And the figures
for consumer spending in December were putrid, up only 0.2%.
data showed the housing sector to be on life support, as new
home sales dropped 41% in December over the prior year (down
26% for all of 2007), which came on top of last week's equally
poor data on existing home sales. Inventories remain near
multi-year highs, the median home price is declining, 7.7%
in the latest Case-Shiller reading of 20 major markets in
November, and RealtyTrac says foreclosures were up 79% in
2007 over 2006, and 97% higher for December alone.
were also headlines such as the following in the Journal:
Stall in Orange County"
Prospects Delay Shopping-Center Project"
bullish one was laughable to some of us.
Real Estate Is New Hit Bet"
bubble to follow, sports fans, as the article went on to talk
of Vietnamese flipping condo units before they were even built.
I think most of you are familiar with that one and you know
how it ends.
Robert Shiller of the aforementioned index told Bloomberg,
"We are in a historic housing bust right now, comparable to
that of the Great Depression. The unraveling of that has unpredictable
stocks continued to rally, including shares in Pulte Homes,
whose CEO said "The challenging market conditions that plagued
the homebuilding industry for the first nine months of 2007
worsened in the fourth quarter. Levels of new and existing
home inventory remain elevated, buyer demand for new homes
continues to be weak, and mortgage availability is still a
problem for many prospective homebuyers."
gives? Well, it certainly helped that the Federal Reserve
lowered rates further this week, another 50 basis points on
top of the 75 it slashed the funds rate on Jan. 22. The 1.25%
reduction from 4.25% to 3.00% signals the fastest easing of
monetary policy since 1990. Those worried about their adjustable
rates resetting not only won't have as high an interest rate
now, but if they qualify they can refinance into an attractive
fixed rate mortgage. And if the 10-year Treasury were to continue
to fall, another group of mortgage holders would be able to
refinance from their already low rates as well, like moi.
This is good. A major step in helping not only the housing
industry, but also the average American.
watching how aggressively the Fed moved, it simply adds further
proof to those such as yours truly who have criticized Chairman
Ben Bernanke. As in the handwriting was on the wall last spring
(at the latest) that we were heading towards a housing Depression
and Bernanke and crew were totally clueless. What's sickening
is that if they had acted sooner, there is no doubt hundreds
of thousands may have found a remedy before being forced into
foreclosure. And notice I haven't said anything about federal
bailouts or raising conforming loan limits.
tell you exactly what is going to happen in the housing market
the next five months. There are going to be all manner of
folks calling for the bottom by March. And then you'll see
a slight uptick in activity in April that will add further
weight to the argument.
however, we take a final leg down in the summer and when we
next bottom we just sit there, for a lengthy spell. To repeat
a theme of mine for the last 15 months in particular, if you
believe housing prices are just going to shoot back up, you
are absolutely nuts. And if you also believe you can have
a full- fledged recovery without significantly working off
existing inventories (unless homes that have been foreclosed
on are bulldozed as part of some jobs program), then you need
to join Britney Spears in the psych ward.
Grant / New York Times, on the overall environment.
the past decade, household indebtedness, expressed as a percentage
of the value of household assets, has shot up into record
territory. Watching house prices levitate, people did what
they could have been expected to do. They borrowed heavily
against the accretion in value they had already seen as well
as the gains they hopefully anticipated.
was a rub, however, and this, too, our seers and experts failed
to predict. The truth was that house prices were soaring beyond
the reach of the average home buyer. Bridging this widening
gap brought out the worst in just about everyone who had anything
to do with money from 2003 to 2007.
so mightily to make one and one add up to three or four or
five, Wall Street, Main Street and Washington collectively
brought us to the impasse of 2008, in which a debt crisis
is superimposed on a downturn in the economy, which is overlaid
on a bear market in real estate, which is conjoined with a
persistent and worrying weakness in the overseas value of
the dollar. As for the crackup in complex mortgage-backed
securities, now at the center of the debt predicament, the
global bank UBS has justly called it 'the biggest failure
of ratings and risk management ever.'"
the global economy the IMF lowered the projected rate of growth
in the U.S. for 2008 to 1.5% from 1.9%, while it pegs the
euro zone at 1.6% and Japan at 1.5%. Even when you include
still surging China, India and all the nations that produce
oil, you still just have an estimated 4.1% growth rate in
'08, down from 4.9% in 2007. Don't be fooled by this last
one. 2.5%-3.0% is recession by this measurement. [Think of
it like with China, where the government needs 8% growth just
to find jobs for all those flooding into the cities.]
of all those multi-nationals such as GE, Microsoft, IBM, or
Caterpillar that speak of softness in their U.S. numbers but
because they receive a majority of their orders from overseas,
are telling us talk of a global slowdown is bunk?
my take. GE will be among those missing expectations at some
point in 2008. The global economy, beset not just by the bursting
of my global real estate bubble, but also ever-rising food
prices, and stubbornly high energy costs, will continue to
slow. Armageddon? No. A worldwide recession? Yes. Admittedly,
though, there will be more than a few times when I'll look
foolish with this forecast but I'll be sitting back in my
easy chair, musing about the Big Picture while the stock and
bond markets play 'helter-skelter.'
I just have to comment on Ben Stein's New York Times piece,
where he says of those moving the markets on a daily basis,
such as hedge funds:
traders, not economists or securities analysts, can turn the
world upside down, make governments tremble, give central
bankers colitis and ruin the lives of ordinary men and women
saving for their children's college education or their own
retirement. In America today, it is the traders, not the politicians
or the generals or the corporate bosses, who have the power.
is what has become of the America of Thomas Jefferson. Lucky
for the traders. Sad for the rest of us.
thing's for sure: With the traders running things, it won't
be a good time for amateurs until the traders cry 'Switch!'
and the market starts to rise."
Stein wrote this last Sunday, so I'm not sure if he'd say
the trader community had called 'Switch!' as the markets rose
smartly this past week, but I have a question for him.
just getting this? Some of us have known all along Wall Street
was little more than a casino, especially over any short to
intermediate period. In fact I don't know why Mr. Stein had
to give a long dissertation when all you need to know is that
program trading overwhelms the retail variety every day. It's
done so for years, nay, decades! I do agree with him, though,
when he talks of it not being a time for amateurs, adult swim
time, as my buddy Trader George is fond of saying. Or since
it's Super Bowl weekend, at least make sure you've got that
inflatable football attached when you head into the pool.
Better yet, take a spear gun with you to combat the sharks
you'll come across.
to a strong rally on Thursday, Jan. 31, equities didn't suffer
their worst starting month ever, but the S&P 500's decline
of 6.1% was still its worst since 1990 and the sixth-worst
ever. So if you believe in the January barometer, the rest
of 2008 won't be great, but it also doesn't mean there is
necessarily a lot of downside from here, witness my own forecast
of 3% to 5% declines in the major averages for the full year.
though, the week was a good one, with Nasdaq finally breaking
its dreadful five-week losing streak and rallying back over
2400 (2413), up 3.8%, thanks to a general feeling that too
much damage had been done to the tech sector and that the
global economy was still in good shape. [They didn't ask me,
in other words.]
guess you want to hear about Microsoft's hostile offer for
Yahoo. There's really little to say except it makes perfect
sense for Microsoft if it is to ever be a player in search,
for starters, while Yahoo stock was simply dead in the water.
In fact while everyone was singing 'Zip-pi-ty-do-daaa,' I
just have to note that Microsoft's $31 offer is hardly anything
to write home about, seeing as Yahoo was $34 as recently as
last Oct. 29 and $40+ in January '06. But it's better than
$10, which is where Yahoo was headed. Just this week, CEO
Jerry Yang said the company was facing further "headwinds"
the more interesting story this week was Google's earnings
report. The company saw earnings rise 17%, $1.21 billion,
on $4.83 billion in revenues ($3.39bn retained after paying
fees to its partners), yet the shares tanked because both
decelerated more than analysts expected. But there was something
else. As Michael Liedtke wrote for the AP:
executives said a revision in the company's formula for showing
advertising links crimped the fourth-quarter results by reducing
the number of revenue-generating clicks. Without providing
details, the executives said Google made the change to decrease
the frequency of 'accidental' clicks on ads."
clicks on ads." Or click fraud. Long-time readers recognize
this as a theme of mine years ago. I was a victim myself of
click fraud, as I wrote. Are advertisers finally waking up
and demanding the truth? Looks like it.
Delaney had a blurb in the Journal the other day, prior to
Google's report, talking of the latest data from comScore
that "reported a 7% decline in the number of times U.S. consumers
clicked on ads appearing alongside Google's search results
in December compared to November."
quotes John Aiken, managing director at Majestic Research
Corp. in New York.
whole idea of the Internet not being as impacted and Google
not being as impacted was really holding up well until December.
Then we started to see a rate of deterioration that was faster
than what you'd normally expect."
bloom off the rose when it comes to advertising on the Net?
Or is any decline in use just because of the economy?
2.13% 2-yr. 2.05% 10-yr. 3.58% 30-yr. 4.30%
for 4.50% money market rates, fellow savers.]
record, in lowering the funds rate another ? percent the Fed
markets remain under considerable stress, and credit has tightened
further for some businesses and households. Moreover, recent
information indicates a deepening of the housing contraction
as well as some softening in labor markets."
the other week in depth on the bond insurers, companies such
as MBIA and Ambac, so I won't repeat my dissertation, but
there were all manner of rumors that private bailouts were
being worked out (not a big government one) and were this
to be true, it's a definite positive. But this is more a market
event than an economic one, outside of those companies that
would have had further writedowns. At the same time S&P said
subprime-related losses may now exceed $265 billion when the
ratings of all these securities are reduced to their essence..
in the 15-nation euro zone is now running at an average 3.2%
annualized rate, the fastest in over ten years, which means
the European Central Bank won't be cutting rates any time
soon to follow the Fed's lead, even as the euro economy slows.
Eventually, though, the ECB will be forced to follow suit,
op-ed for the New York Times, economist Robert Shiller had
some interesting points on the U.S. banking system and investors/savers.
United States, the very least we can do is to raise the F.D.I.C.'s
limits on insured deposits. The limit of $5,000 in 1934 was
12 years' worth of per capita personal income at the time.
The limit was last raised in 1980, to $100,000, which was
then 10 years' income. But because of inflation and economic
growth, that limit is less than three years' income today.
Deposit Insurance Reform Act of 2005 did not raise that ceiling,
though it will start indexing the limit to inflation in 2010.
We have allowed deposit insurance to go three-quarters of
the way to extinction.
limits of the Securities Investor Protection Corporation,
which protects customers when brokerage firms fail, were also
last raised in 1980 - to $100,000 in cash accounts and $500,000
in securities - and thus have suffered an equally drastic
erosion in real value. Such erosion could suddenly matter
if the crisis, or even just the psychology of the crisis,
were to worsen."
announced it will keep production at present levels out of
fears soft world economies will weaken demand. This will be
the official position at least until the next meeting, March
at Strategic Energy Research & Capital passed along further
evidence Mexico's giant Cantarell oil field will see production
decline by a further 200,000 barrels a day this year, for
those of you in the Peak Oil camp. Cantarell accounts for
43% of Mexico's production. It's up to Mexico and state-owned
Pemex to find new reserves and this takes time.
Mobil posted the largest profit in the history of mankind
(save Cleopatra Inc.'s inflation-adjusted 2nd quarter, 48
B.C., when she overthrew her husband, brother, and co-ruler
Ptolemy XIII with the aid of Julius Caesar), a cool $11.7
billion, besting its previous record of $10.7 billion in the
fourth quarter of 2005. Exxon also registered a record full-year
profit of $40.6 billion.
way, Exxon paid $29 billion in federal income taxes in '07.
[Total taxes paid, including for sales taxes, were $105 billion
on revenues of $404.5 billion.] Chevron also reported Friday
and earned $4.88 billion. Good for them. Those two employ
a lot of people, after all. Good, high-paying jobs, as our
president is fond of saying.
move that surprised no one, Gazprom, the natural gas monopoly
and one of the world's 10 largest companies by market cap,
announced that Russian Prime Minister Viktor Zubkov will replace
current Deputy Prime Minster Dmitry Medvedev after the latter
wins the presidential election in March. As a presidential
adviser to Vladimir Putin told Bloomberg, "It is important
for the state to oversee the country's largest company." Of
"The new home building sector is in danger of enduring a fifth
straight year of weakness in 2008 given continued upward pressure
on domestic interest rates," according to economist Harley
Dale of the Housing Industry Association. "Another year where
there is no catch up made in the yawning gap between housing
supply and demand will only serve to extend the existing problems
of very tight rental markets and deteriorating housing affordability."
Ah yes, that key word. affordability. [Sydney Morning Herald]
the U.K., the London Times' Grainne Gilmore:
lenders (in Britain) have also tightened their lending criteria,
becoming much less generous with the sums that they are prepared
to lend to prospective buyers. A couple of years ago there
were plenty of home loan deals that offered borrowers the
chance to access 100 percent of the asking price."
to throw this in because I know there have been skeptics when
I've written the U.S. wasn't the only one with 'no money down'
housing purchases. So, again, remember there are far larger
real estate bubbles than in America; Spain, Britain and Ireland
being among them.
the record, Countrywide Financial Corp. Chairman and CEO Angelo
Mozilo predicted last October that the company he founded
would return to profitability in the fourth quarter after
posting a loss of $1.2 billion in the third. Not quite. Countrywide
instead lost $422 million in the fourth. It thus makes sense
that Mr. Mozilo is giving up $37.5 million in severance pay,
especially after taking down $387 million in pay and stock
option gains from 2002 to 2006.
sign of an anemic economy, McDonald's announced its same-store
sales were flat for the first time in four years.
Lynch agreed to pay the city of Springfield, Mass., $13.9
million to settle a dispute that Merrill improperly sold Springfield
a collateralized debt obligation that plunged in value. Then
on Friday, Massachusetts' Secretary of State announced he
was bringing fraud charges against Merrill related to sales
of similar securities.
Wall Street Journal is reporting on Saturday that federal
criminal prosecutors "are investigating whether UBS misled
investors by booking inflated prices of mortgage bonds it
held despite knowledge that the valuations had dropped, according
to people familiar with the matter."
assumed the U.S. attorney is working closely with the SEC,
the latter having upgraded investigations of its own into
both UBS and Merrill Lynch involving similar material. But
such fraud cases are very difficult to prove.
in Amazon declined following its earnings report that showed
a drop in gross margins, even as sales rose 42% from the prior
year's fourth quarter.
announced it was closing a number of underperforming U.S.
stores as it finally recognized it was cannibalizing its own
operations when you have two on the same block. And I got
a kick out of the company's decision to pull its hot breakfast
sandwiches because customers complained that the smell was
overwhelming the aroma of coffee, which is why I go to Dunkin'
Donuts. Founder/CEO Howard Schultz added "There's a macroeconomic
headwind that we're all facing that strongly suggests that
the (U.S.) consumer is in a recession."
UN World Tourism Organization said that global tourism soared
to a record in 2007, with arrivals reaching 898 million, up
6.2% from 2006. The Middle East recorded the largest increase,
up 13%. [Turkey saw a 17.6% increase in '07.]
when it comes to the Middle East it wasn't a great week because
two communications cables crossing the Mediterranean were
cut, leading to severe Internet outages in much of the region.
At least some terrorists must have been hampered in their
been writing about the huge endowments some colleges have
and how little of it is trickling down to students to reduce
tuition, and then Geraldine Fabrikant had a piece in the New
York Times on some of the endowments held by elite prep schools.
Phillips Exeter Academy in Exeter, N.H., for example, has
an endowment of $1 billion. Goodness gracious. Tuition is
$36,500 here, though the school says it spends $63,500 annually
to house and educate its students. In fact Exeter is among
the richest 25 private schools, including universities and
week I blasted the editorial page of the Wall Street Journal
for not acknowledging the gigantic sums Big Oil is shelling
out in federal taxes when touting any success the Bush administration
has had in reducing the deficit (fleeting as this may have
week the Journal writes the following in discussing the difference
a 15% capital gains rate meant.
the year before the tax cut, the capital gains realizations
that filers report on their tax returns were $269 billion.
Realizations grew smartly in each succeeding year, and CBO
is now projecting that the total for 2007 will be $863 billion.
the stock market rose during that period along with the larger
economy. But the lower rate also gave investors more of an
incentive to 'unlock' their gains, taking profits and reinvesting
the net proceeds."
to Journal. Show a little intellectual honesty in discussions
such as this. Like try rewriting the above.
the market tumbled in 2002, as well as 2000 and 2001, and
thus there were few capital gains to be found, while the stock
market then rose from 2003-2007."
I would lower the cap gains rate to zero, but don't treat
your readers, WSJ, like a bunch of morons.
P. passed along a sign of the times, 'youwalkaway.com' ..as
in walk away from your home.
annual inflation rate in Zimbabwe accelerated sharply in November
to a new peak of 26,470 percent, from 7,892 percent in September.
The central bank raised interest rates to 1,200 percent from
975 percent. [Reuters] I'm thinking similar interest rates
in the U.S. probably wouldn't be good for those holding adjustable
scientists believe they have a solution to a major issue on
the global warming front, a way to neutralize the world's
1.5 billion belching cows. The key is adding a blend of nitrates
and an amino acid to suppress the methane that is thought
to account for 5% of all greenhouse gas emissions.
Lewis of the London Times: "Methane is about 22 times more
potent than carbon dioxide at capturing atmospheric heat.
Cows produce astonishing quantities of methane gas as the
bacteria in their stomachs breaks down plant fibers. Their
near- constant cud-chewing allows a small quantity of the
gas to escape with nearly every breath each animal takes."
I attended an investor lunch for my China biodiesel play this
week, though I was the only one there who had actually visited
the original plant. My CFO friend gave a terrific update,
so for those of you playing along here's what you need to
$15 million in financing that they recently obtained, the
production ramp-up at the new facility being built is on schedule
for October and by next January should be running at full
capacity. Without getting into a lot of specifics, my questions
on feedstocks have also been answered. As in I'm not concerned
about some of the negative press involving biodiesel in recent
months. They also have further expansion plans, having identified
another three locations in China, including one in the western
part of the country where they would use cotton waste.
investing in this outfit about one year ago and I'm essentially
flat. I did expect a higher share price by now but recognize
I may need up to another year before the market begins to
appreciate the growth story here. If they stick to their schedule
the revenue figures will explode in the first quarter of 2009
(with a little kick in Q4 '08).
underrated specialty chemical division is making noise because
it is the only one in China that is qualified for use in the
semiconductor industry there.
the company obtained a line of credit from a Chinese bank,
something a few of us have been waiting for. When questioned
about this, "I thought China's lenders were told by the government
to tighten up," CFO Gary immediately said, "Oh, that's for
real estate and infrastructure. Real estate (lending) is a
no-no. Infrastructure is a no-no. But when you say energy,
it's a yes-yes."
the biodiesel operation is breakeven at $35 oil. So the preceding
is the last update I'll be providing for a while. Suffice
it to say I'm hanging in there for 2008 and am not worried
about the dilution resulting from the recent financing of
I made a small purchase this week in a large cement company
you all would be familiar with. Not because I see a big recovery
in the economy, but rather this outfit can pick off those
operators going under, while perhaps participating in what
I see as a coming infrastructure boom, perhaps a result of
legislation currently being pushed by Senators Chris Dodd
and Chuck Hagel, as noted in a New York Times column by Bob
Herbert. And I also picked up a small amount in a certain
beer company that makes Dos Equis, which had the best commercial
of 2007: "Stay thirsty, my friends."
The head of disaster relief for the country said China is
experiencing its worst natural disaster since the founding
of the People's Republic in 1949 as a series of rare winter
storms totally crippled vast parts of the nation, and at the
worst possible time, the traditional Chinese New Year holiday.
the holiday runs from Feb. 6 to Feb. 12, with New Year's being
Feb. 7, but hundreds of millions of migrants use the time
to make an extended trip back home as it's the only real opportunity
they get to do so, so the actual travel period is from about
Jan. 19 to March 2. As I wrote a few weeks ago, the government
estimated the people would take 2.2 billion trips during these
from the fact up to 800,000 were stranded at one point at
the Guangzhou rail station, much of the winter crop (vegetables
and fruits) has been destroyed and due to transportation issues
some regions are already experiencing food shortages. Chenzhou,
a city of four million, is as of this writing out of both
food and fuel. Coal shipments have been severely hampered
and power outages are widespread. Just last Saturday morning,
before the full extent of the crisis was known, I wrote:
is also dealing with record snows, which has interrupted the
delivery of not just coal, but could also hamper the delivery
of food stocks in some regions. In other words, President
Hu may have to play the nationalism card earlier than I thought."
a fellow at a lunch in New York City this week who agreed
with my thesis on China going after Taiwan when it needs to
rally the people as a result of internal dissent, and he said
all his sources tell him the Beijing government is deathly
afraid of the next failed harvest, which in turn could send
the country spinning out of control. The severe weather only
compounds matters as the winter crop failure leads to further
inflation at a time when price pressures were already impacting
many other sectors.
On a separate
matter, Japanese food companies faced a crisis of their own
after many there fell sick from eating contaminated Chinese-made
food they were importing, including dumplings containing pesticides.
The Japanese government openly questioned China's commitment
to food safety only weeks after the country said it had improved
standards. Restaurants and schools took Chinese-made food
off their menus. I recently wrote in a separate column for
this site that it's no wonder at least 17 nations (including
the U.S.) are training in Japan and South Korea, ahead of
the Olympics, instead of having to deal with Chinese food
more than they'll have to, let alone pollution prior to the
of the Olympics, the government arrested a leading dissident,
one of 51 online journalists jailed the past few years. In
a strongly worded editorial from the Communist Party mouthpiece,
the People's Daily, China said it would not submit to taunting
or political pressure from groups or governments wishing to
use the Beijing Olympics as a forum.
activists) believe they can exert enough pressure on the Chinese
government to force China into a situation where it cannot
but do their bidding," the paper said. "These people have
made the wrong calculation."
added that governments would be mistaken to think Beijing
will pay attention to any pressure regarding Taiwan.
is no country in the world hosting an Olympics which would
compromise on their own core interests..
each subsequent Olympics people stand up and use politics
to maliciously attack the host nation, and use ideology to
draw up boycotts, where does that leave the Olympic spirit?"
Some good news, before the bad. One of Osama bin Laden's top
lieutenants in Afghanistan was killed in a suspected U.S.
airstrike (probably a drone) in Pakistan. Abu Laith al-Libi
was said to have directed a number of terrorist attacks in
have been a slew of reports in the past week that warn Afghanistan
is rapidly approaching "failed state" status thanks to a lackluster
reconstruction effort amidst worsening security. And now Canada
is threatening to pull its critical contribution unless NATO
steps up aggressively to add more forces.
that Taliban assault on Kabul's only luxury hotel? It has
had its intended devastating impact as Westerners are disappearing
from the capital at the very time when they are needed most.
Senator Richard Lugar, a senior member of the Foreign Relations
Committee, said "I'm not sure we have a plan for Afghanistan,"
in response to Democratic Senator Joe Biden's quip that "We
need a significant change in policy now." Rep. Sen. Chuck
Hagel added, "If we are making so much progress why are we
putting in 3,200 more marines?" The State Department says
they are seeking to leverage our added commitment into further
contributions from NATO but this is exceedingly unlikely.
Or as the Wall Street Journal opined:
fill up lots of air space at policy conferences talking about
Europe's readiness to play a prominent role in global affairs.
The Canadians are now usefully calling their bluff."
Germany rebuffed our request for their troops to move into
the violent south.]
Two horrific bombings in Baghdad on Friday, killing nearly
100, were yet another stark reminder we have a ways to go.
What was particularly sickening was the story the terrorists
supposedly strapped bombs on two mentally ill women, with
the devices then exploded by remote control (cellphones).
I also saw a piece by Matt Kelley in USA Today that should
tick off all Americans.
five years after the U.S.-led invasion of Iraq, allied countries
have paid 16% of what they pledged to help rebuild the war-torn
country.Foreign countries have spent about $2.5 billion of
the more than $15.8 billion they pledged during and after
an October 2003 conference in Madrid, according to a new report
by the Special Inspector General for Iraq Reconstruction."
shortfalls among 41 donor countries are from Iraq's oil-rich
neighbors. For example, Saudi Arabia and Kuwait each pledged
$500 million and have only spent $87 million and $135 million,
respectively. Spain, on the other hand, has spent $213 million
of $248 million pledged. The United States has spent $29 billion
to help rebuild Iraq.
Congressman Gary Ackerman, who heads the House Foreign Affairs
subcommittee on the Middle East, commented on the Saudis:
charging $100 per barrel of oil, making record fortunes, lecturing
everyone else, and then they stiff everybody, including their
cousins who they contend to be so very concerned about." Good
point. From 2003 to 2006, the Saudis exported $95 billion
in crude to the U.S.
The Gaza border crisis took a backseat to release of the Winograd
Report on the Second Lebanese War that surprisingly (to most)
stopped short of blaming Israeli Prime Minister Ehud Olmert
directly, saying Olmert launched the war out of concern for
the country's national interest, not political reasons. The
report was, however, highly critical of the IDF (the armed
forces) for its lack of preparation and decision-making. Hizbullah
used it to say it proved they had won.
last poll I saw still said 56% of Israelis want Olmert to
resign and Likud leader Benjamin Netanyahu is putting the
refuses to take responsibility, to demonstrate personal honesty
and leadership and to do what most of the public expect him
to do. The prime minister is emptying of content the concept
of responsibility. The people of Israel know today that they
are led by a prime minister who is not qualified or fit to
Michael Oren, who also fought in the war, wrote in an op-ed
for the Wall Street Journal:
lacks a constitution but is bound by an unwritten social contract.
Israelis defend their country with their lives and their leaders'
pledge not to send them to war heedlessly. Prime Ministers
Golda Meir and Menachem Begin resigned in the aftermath of
disappointing wars, though both were exonerated of incompetence.
By ignoring these precedents, Mr. Olmert, whose culpability
began before the war, when he appointed a defense minister
devoid of military experience, threatens to break the contract.
Israelis will think twice before following his orders - and
perhaps those of future prime ministers - into battle. The
cohesiveness that enabled Israel to survive 60 years of conflict
of Israelis are calling for Mr. Olmert's resignation. Rightists
convinced that the prime minister cannot safeguard the country's
security have joined with leftists who understand that leaders
who fail at war will never succeed at peacemaking. All are
united by a willingness to shoulder the burden of Israel's
defense. This was the commitment that united us that last
night in Lebanon, as we took up the stretchers bearing the
remains of somebody's son, somebody's husband, and brought
them home for burial."
In a very worrisome development, a demonstration over power
cuts in Beirut led to a riot where 8 were killed, all either
Hizbullah or opposition Shiite players. It was the worst mass
violence (non-car bombing) in Beirut since the 1975-90 civil
war, but as of this writing there has been no follow through.
President Mahmoud Ahmadinejad said his country would be producing
nuclear energy by 2009, while a senior official told reporters
the Bushehr plant was expected to be operational in October.
Russia, which is helping Iran to build the plant and has been
providing nuclear fuel, said the plant could be operational
by December. Separately, Ahmadinejad called Israel a "filthy
entity," adding "(Israel) has lost its reason to be and will
sooner or later fall." So who could blame Israel for acting
preemptively, as I'm convinced they will this year?
Korea: According to Kyodo News, Pyongyang has slowed the removal
of nuclear fuel rods from its Yongbyon nuclear facility to
less than half the rate needed to disable the site by a deadline
agreed to under the six-party denuclearization deal. North
Korea has removed only about one-eighth of the total supply.
The White House, particularly President Bush and Secretary
of State Condoleezza Rice, is looking more than a bit foolish.
The latest opinion poll ahead of the March 2 presidential
election shows Dmitry Medvedev at 71%, Communist leader Gennady
Zyuganov 13%, and Nationalist (pro-Kremlin) Vladimir Zhirinovsky
12%. The Election Commission formally disqualified ex-prime
minister Mikhail Kasyanov, who while he wouldn't have picked
up more than a percent or two of the vote was going to raise
hell. "The authorities are afraid of any discussion, any risk,"
he said after the Stalin-like move to take him off the ballot
for allegedly having too many fake signatures on his petitions.
Gorbachev sharply criticized the Kremlin for the pre-election
shenanigans. "Something is wrong with our elections, and our
electoral system needs a major adjustment." Remember, it's
not just the farcical maneuvering of Medvedev and Putin in
swapping offices these days, it's the fact Putin gets to handpick
all the governors. Gorbachev said this must be changed back
to direct elections for the position.
what I think will happen. Even Putin doesn't want Medvedev
attaining over 80% of the vote, though this is undoubtedly
what he will receive, so I'm thinking Dmitry wins close to
the above poll number, for appearance sake, with the other
two winning similar totals. Then Putin can attempt to claim
it was free and fair. I suspect each polling station already
has its marching orders on how the vote is to be divvied up.
Two opposition legislators were killed, while tourists fled
the Rift Valley, the staging point for many safaris, amidst
an "orgy of violence." Talk about a failed state. Former UN
Secretary General Kofi Annan put the two sides together and
there is talk of an agreement of some sort, but we have a
long, long way to go before peace returns. The genie is out
of the bottle.
Africa: And this nation threatens to confirm my prediction
for 2008 that it is a sleeper hot spot as South Africa now
grapples with severe power shortages that some say will last
at least five years. There will be a political crisis in the
not too distant future.
the men and women of our armed forces.
for the week 1/28-2/1
S&P 500 +4.9% 
S&P MidCap +6.7%...not too shabby
Russell 2000 +6.1%...ditto
Nasdaq +3.8% 
for the period 1/1/08-2/1/08
S&P 500 -5.0%
S&P MidCap -4.1%
Russell 2000 -4.6%
Bears 32.3 [Source: Chartcraft / Investors Intelligence]
I am off
to Vegas for the entire week and will have something next
time from there, but it will be abbreviated. Put a bunch of
guys together who are collectively celebrating their 50th
birthdays this year and, well, you know the drill.
great week. I appreciate your support.
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