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Week in Review 
For the week 2/11/2008 - 2/15/2008
Brian Trumbore
President/Editor, StocksandNews.com

I read a piece in the March 2008 issue of The Atlantic by Christopher B. Leinberger titled "The Next Slum?....The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today's McMansions into tomorrow's tenements." Following is the opening to this depressing story.

"Strange days are upon the residents of many a suburban cul-de- sac. Once-tidy yards have become overgrown, as the houses they front have gone vacant. Signs of physical and social disorder are spreading.

"At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community's 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son's bedroom and into her own, Laurie Talbot, who'd moved to Windy Ridge from New York in 2005, told The Charlotte Observer, 'I thought I'd bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.'"

Last week I wrote of my trip to Las Vegas and the housing market there, warning that while there will appear to be some big bargains, especially at auction, you have to understand two things: "your surrounding area may be blighted and don't expect the value to suddenly shoot up." I can't help but repeat this warning again. Be careful in moving into any new neighborhood these days. Phil W. just forwarded a story from Friday's Charlotte Observer addressing this very issue a second time down there; serious trouble with new developments built by Beazer Homes, currently under federal investigation.

Do your homework and be wary of new construction. I think this last point will prove to be yet another well-publicized scandal. Generally speaking, the quality is abysmal compared to what most of us grew up in.

Now that I've probably just ticked off a few of you with this last remark, this past week represented another classic example of the need not to get swept up in the day-to-day movements in the equity markets but instead stay focused on the Big Picture. No sooner had some experts called the end to the bear market, which is essentially what we've been in, even if not officially, when a whole new round of credit issues, almost all of which have their genesis in the housing bubble, came to the fore and stocks ended up giving back most of what had been big gains.

It didn't help that on Thursday, Federal Reserve Chairman Ben Bernanke told Congress, "The outlook for the economy has worsened in recent months, and the downside risks to growth have increased. To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so."

You've gotta love this comment. "As you know." Well you didn't, Benny Boy, until 300 million other Americans did. Bernanke didn't know housing "has deteriorated significantly over the past two years or so" until about December.

Earlier in the week the equally clueless Treasury Secretary Hank Paulson told G-7 finance ministers that while "current financial turmoil is serious and persisting," he still expected the U.S. would avoid recession. Then at the same congressional appearance as Bernanke, Paulson added "The U.S. economy is fundamentally strong, diverse and resilient, yet after years of unsustainable home price appreciation, our economy is undergoing a significant and necessary housing correction."

No doubt, Mr. Secretary, the correction is significant and necessary, but it's rather disingenuous for the likes of you to speak of "years of unsustainable home price appreciation" when you, as former head of Goldman Sachs, were among those leading the charge, the better to pad those Christmas bonuses. But that's just the opinion of a cynic who spent 16 years on Wall Street himself.

Also, we keep hearing from the shills that our economy is "fundamentally strong." Am I missing something? Is an economy built on world record levels of debt, from the consumer to the national government, fundamentally strong? One would think it's the opposite, but then I didn't study economics at Princeton like one of our esteemed federal officials.

This week the credit crisis spread further as the troubled bond insurer sector faced ruin. New York insurance superintendent Eric Dinallo proposed a break-up of their business models in order to first and foremost shore up municipal bondholders and issuers. But this also means the other side of the bond insurers' business, insurance and derivatives contracts, could generate huge losses for the investment banks and others exposed to these products. The goal is to separate the healthy from the sick, like a Third World clinic dealing with Ebola. This will all shake out in the next few days, with one bond insurer, FGIC, already seeking remedy on Friday.

But then you have a new issue to contend with, the auction securities market; some $330 billion in short-term paper where government entities and providers of school loans raise debt. It has virtually shut down, pushing the cost of doing business sky high. Long-time Wall Street buddy Mark R. told me on Thursday of how this market segment is impacting leveraged closed-end bond funds and sure enough, page C1 of Friday's Journal addressed just that issue. Bottom line, many investors in these products are either going to see their dividends slashed and/or they may not be able to exit when they want to.

So is it any wonder that an esteemed mogul such as Mortimer Zuckerman, publisher of U.S. News & World Report, writes:

"Quite simply, this financial crisis is the worst since the panic that led to the Great Depression. As a result, the recession may well be deeper and/or longer than any since the end of WWII. No one knows where the bottom is. That is why the level of confidence in both consumers and producers has declined - and must be restored if the financial fiasco is not to turn into a crisis for the broader economy."

Back to housing, the six-county Southern California region registered a record low in home sales for January, with 1 in 4 properties that were sold having been foreclosed on, thus putting further pressure on prices. The median home price here is at its lowest since January 2005. Nationally, the median sales price was down 5.8% for the fourth quarter vs. the last three months of 2006, while Goldman Sachs economist Jan Hatzius reiterated home prices will drop 22% between 2006 and 2009, with 15 million households experiencing negative equity, thus making refinancing impossible, let alone taking out a home equity loan. Together, refinancing and home equity LOCs totaled $466 billion in 2006, according to Fannie Mae. Rocket fuel that is no longer available for our "fundamentally strong" economy.

And in keeping with my global real estate bubble theme, I do have to point out that while both the U.K. and Australia have record low unemployment, as reported in each just this week, housing affordability has never been lower. Last week I also told you of the exorbitant amounts of credit-card debt in Australia and this week we learned that in the U.K., credit-card debt for the month of December was 25% higher than the same month in '06. Staggering.

So continue to keep your eye on the prize, friends; capital preservation.

Street Bytes

--Shares early in the week were helped by a better than expected retail sales number for January, but by week's end reality had set in, particularly in the case of a horrible reading on consumer confidence, the lowest in 16 years for the Michigan sentiment survey. And notice how little press the economic stimulus package received despite being signed into law the other day.

For the week the Dow Jones and S&P 500 each rose 1.4%, while Nasdaq picked up 0.7%.

--U.S. Treasury Yields

6-mo. 2.07% 2-yr. 1.91% 10-yr. 3.77% 30-yr. 4.58%

The recent trend of a steepening yield curve, lower rates on the short end and higher ones further out, continued as the bond market is convinced the Fed has to once again lower the short- term funds rate, with Chairman Bernanke saying as much this week, but at the same time inflation pressures are impacting the long end controlled by the bond vigilantes.

Inflation is rising worldwide, of this there is little doubt, particularly in places like the aforementioned U.K. and Australia, which in turn is further exacerbating the housing situation in those countries, and on Friday our Labor Dept. reported that import prices soared 1.7% in January, up 3.6% the past 12 months if you strip out petroleum, the highest rate since Oct. 2005.

--The Jordanian government announced some fuel costs will rise 76% as it is forced to slash subsidies. To try and alleviate the pain, though, salaries for public-sector employees, civilians and the military are being increased retroactive to Jan. 1. This is a classic example of the problems faced in virtually all emerging nations these days where governments have been forced to heavily subsidize energy prices or the country simply would cease to function amidst total anarchy. But at a certain point, even government has to seek relief and take its chances with a restive citizenry.

--Venezuela threatened to suspend shipments of oil to Exxon Mobil in retaliation for Exxon's legal maneuvering to protect its assets in four western ventures there; yet the latest example of the issues faced by Big Oil in dealing with growing nationalism over the control of energy resources.

--The IPO market on Wall Street is the worst since after the crash in 1987. Last year investment banks took home $11 billion in fees. Remember this as you contemplate sticking your toe into this sector.

--Swiss banking giant UBS reported a staggering $11 billion loss for the quarter, including $13.7 billion in additional subprime- related writedowns, bringing its cumulative total in this regard to $18 billion. Remember when Ben Bernanke said the total subprime mess would only cost $50 billion?

--Inflation watch, part deux: Platinum hit a record price in excess of $2,000 an ounce, though it's as much about ongoing power shortages in South Africa, where much of it is mined, than actual physical demand. Corn is now over $5.00 a bushel. And as folks around the world are stealing building products such as copper wiring for their scrap value, even my home town of Summit, N.J., is being victimized as idiots have decided to steal aluminum risers from the bleachers at the football stadium. Are there no workhouses? Are there no prisons?

--Private-equity firm Cerberus Capital Management LP, which acquired a 51% stake in GMAC (the financing arm of General Motors) from GM in 2006 for $7.4 billion, now says it faces "substantial difficulty" in GMAC if credit markets don't improve. Ergo, since the same markets are unlikely to over the immediate term, Cerberus and GMAC have some issues to contend with. Last year GMAC lost $2.3 billion on the heels of bad home and auto loans.

--Speaking of GM, the other day CEO Rick Wagoner was on CNBC after the automaker announced its earnings of 8 cents a share, well above expectations for a loss of 54 cents. But hold on. what's this? A $1.6 billion tax credit no one knew about? Gee, CEO Rick, what was the impact of that on the bottom line? Wagoner said he didn't know what the figure was.

I just found this incredible. The CEO is going on the air, touting a huge turnaround that wasn't there, and he didn't know the per share impact of the tax credit. So the Street was left scrambling and as it turned out it was indeed as simple as dividing the number of shares outstanding into $1.6 billion. But talk about disingenuous. Nice going, Wagoner.

For the year, GM ended up losing $38.7 billion, the largest loss for an automaker since the outfit that made Fred Flintstone's car lost out to Henry Ford and the Model T.

GM also announced a new round of early retirement and buyout offers for all 74,000 members of the UAW at GM facilities in the U.S., in the hopes of replacing them with lower-paid workers, but there were doubts the company's targets would be met. The cash payments of $45,000 to $140,000 may look attractive to some, but you can run through that kind of money in a heartbeat.

And on a related matter, auto-parts supplier Delphi Corp. is having problems financing its $6.1 billion plan to pull itself out of bankruptcy because of the state of the credit market. As the Wall Street Journal reported, "Delphi's chief lenders, J.P. Morgan Chase & Co. and Citigroup Inc.'s Citigroup Global Markets are having difficulties syndicating the loan to other lenders."

Delphi initially was looking for $4.45 billion in loans at rates up to 9.5%. One distressed-debt investor who passed on the Delphi debt told the Journal, "(Those were attractive terms) last summer, but it's a nonstarter now. The deal is not going well, and GM's in a bad spot unless some of the equity sponsors step in."

I also saw where many of the automakers are now offering 84- month car loans. That is beyond absurd, especially when a car loses half its value after just 36 months in most cases. What's the incentive to continue to make the payments?

--AIG, the world's largest insurer by assets, suddenly found a "material weakness" in how it valued its credit-default swap portfolio.like by $4.9 billion in October and November, according to the auditors. All together now. "These guys don't know what they own."

--Yahoo's board rejected Microsoft's $44.6 billion offer, saying it undervalued the company. Google, once mulling a joint venture with Yahoo, lost interest, while News Corp.'s Fox Interactive Media could merge with Yahoo, though while such a move would create a display-ad giant, it would lack the search scale of a Microsoft-Yahoo combination.

--Dow Jones & Co. announced it was pushing Altria Group and Honeywell out the door and replacing them in the 30-name Dow Jones Industrial Average with Bank of America and Chevron, effective Feb. 19. Excluding thinly traded Berkshire Hathaway, the two new entries are the biggest U.S. companies by market capitalization that aren't already in the Dow. The move was partly forced by the fact Altria was about to split off its international operations. As for Honeywell, it is the smallest in the Dow 30 in terms of revenue and earnings, plus industrial companies in general are not as prominent in the overall economy as finance and energy these days.

--Inflation watch, part trois: The cost of a first-class stamp is rising a penny to 42 cents in May.

--New York Mayor Michael Bloomberg on the economic stimulus package.

"They want to send out a check to everybody to stimulate the economy. I suppose it won't hurt.but it's in many senses like giving a drink to an alcoholic. The government's been doing exactly that. It's been spending money it doesn't have..This country has a balance sheet that's starting to look more and more like a Third World country."

Bloomberg was later criticized for comparing alcoholics to cash- strapped Americans, but I agree with the mayor.

--You want an example of a real stimulus program? Try Continental Airlines, which this month is issuing profit-sharing checks to its employees in an average amount of $3,500. That's capitalism at its finest.

--Inflation watch, part quatre: The cost of my lunch on Thai Thursday has risen 7 percent. Separately, no Salmon Sundays these days as conservationsalmon.com is out of the fish until June/July (at least you know it's real.and not farmed in China) and I suspect the cost will go up then by at least 10 percent.

--New York developer Harry Macklowe purchased seven Manhattan skyscrapers from Equity Office Properties Trust just one year ago for $7 billion. Now he is in default.

--Driving around the area last week, I couldn't believe the number of homes for sale given the time of year. That is not a positive. Josh P., who hails from out San Diego way, just told me one of his neighbors has had his house on sale for exactly one year, even after cutting the price three times. $2.8 million down to $2.2 million. Everything's relative, friends..

--Such as this one. Rocker Ozzy Osbourne and wife Sharon cut the sales price on their Malibu home $3 million the past two years, to $11mm from $14mm, but have now taken it off the market. It's available for a long-term lease, however.$37,500 a month. $33,500 and I'd consider it, depending on the neighbors. [Wall Street Journal]

--During their joint congressional testimony, Treasury Sec. Paulson at one point said that despite all the problems in the mortgage market, "93% of Americans were making their payments on time." This is nothing to crow about, but when given the chance, Fed Chairman Bernanke snippily corrected Paulson and said the percentage delinquent "was closer to 2%."

So on Friday, the nation's largest mortgage lender, Countrywide, said its January delinquencies rose to 7.47% of unpaid principal balances from 7.20% in December. Now I'm no Alfred E. Einstein, as Archie Bunker might have said, but it seems to me Sec. Paulson was right and the ever-haughty Bernanke proved once again he was clueless.

--Inflation watch, part cinq: This is not a misprint. Inflation in Zimbabwe is now running at a 66,212% clip according to government figures. I believe the last I reported was around 26,000%.

--In yet another sign of a punk economy, all eleven casinos in Atlantic City reported a year-over-year decline in January income for the first time ever and it's not all due to competition from Pennsylvania's slots.

--My portfolio: I wasn't going to talk about my China biodiesel play again until there was real news, but I do have to admit I purchased a little more this week. I'll learn over the coming 12 months whether this investment was worth it, but for those of you playing along at home, just a reminder. Since Sept. 24 this company has had two, 2-day spurts in the share price.one from $1.15 to $2.25, the other from $2.10 to $2.80. I'm determined not to miss the next one, assuming it's from the $2.10 level rather than $1.15.

[Note: 7:30 am...normally I wouldn't add commentary after posting my column, but I'm obligated to tell you I just read a not too flattering piece on the biodiesel company's auditor, also used by other Chinese companies. I will comment on this next week but for now understand two things. I've been to the plant, this is a real operation, and they just received financing for a massive expansion.]

--Check out my "Wall Street History" column for a good recap on how some 'got it' and others didn't when it comes to the housing crisis.

Foreign Affairs

Hizbullah/Lebanon/Israel: One of the world's most wanted terrorists, Hizbullah's Imad Mughniyeh, was assassinated in Damascus, probably by Israel, in what is viewed by most as a severe blow to the terror organization. One analyst told the Jerusalem Post, "The fact that the killers managed to reach such an important figure should sound an alarm bell in Hizbullah. This means that Hizbullah's top brass has been infiltrated by the Israelis and Americans."

Of course we may never know what really happened but for now Israel and its interests abroad are for good reason on the highest state of alert as Hizbullah leader Sheikh Hassan Nasrallah said, "(Israel) has crossed the borders. With this murder, its timing, location and method - Zionists, if you want this kind of open war, let the whole world listen: Let this war be open."

Nasrallah himself had to deliver the eulogy by videotape as he is a longstanding target of assassination as well. "Mughniyeh's blood will lead to the elimination of Israel." What is not known is whether the death ends up being a recruiting call for thousands to join Hizbullah.

Last week I wrote of how uneasy I was over a demonstration planned for Thursday to mark the 3rd anniversary of the assassination of former Lebanese prime minister Rafik Hariri. Ironically, the funeral for Mughniyeh in Beirut was held the same day but the Army did a good job of keeping the two groups of supporters apart, plus those mourning Hariri stopped their anti-Syrian protest a half hour before the Mughniyeh funeral out of respect.

[If you aren't familiar with Mughniyeh's history, he was accused of carrying out the suicide bombings of the U.S. Marines barracks in Beirut, along with attacks against Israeli interests in Buenos Aires among others.]

Iraq: The parliament finally made some real progress on political reconciliation in approving a 2008 budget, granting limited amnesty to thousands of detainees and clearing the way for provincial elections. It's a start but deep divisions remain between the Kurds, Shia and Sunnis, best reflected by the fact the three pieces of legislation had to be bundled together or else they wouldn't have passed separately. Meanwhile Russia wrote off $12 billion in Iraqi debt in clearing the way for the Kremlin to gain more access to oil projects.

The Washington Post, in praising the work of Defense Secretary Robert Gates, editorialized:

"Thanks to Mr. Gates' readiness to adjust (on the level of troops, acceding to Gen. Petraeus' recommendation), it's more likely that President Bush's successor will inherit an Iraq that is moving slowly toward stability rather than spiraling into chaos. So it's worth asking why Democratic presidential candidates Barack Obama and Hillary Rodham Clinton remain so unwilling to alter their outdated and dogmatic views about the war. Both issued statements Monday denouncing Mr. Gates' statement and the proposed pause in withdrawals; both stubbornly refuse to acknowledge that the changed situation in Iraq requires a rethinking of their plans for the rapid withdrawal of all U.S. combat troops. As Mr. Gates has recognized, to mechanically yank U.S. forces from Iraq according to a timetable inspired by American domestic politics, just when the troops appear to be succeeding, would be foolhardy as well as dangerous."

As reported by the London Times, it also appears al-Qaeda in Iraq is in a state of panic, according to a letter seized last October, contents of which were just released. One al-Qaeda leader described how his force in Anbar shrank from 600 to fewer than 20 owing to the Awakening movement where more than 80,000 Sunnis have joined groups designed to help eject al- Qaeda from the west and northern Iraq.

Pakistan: Critical vote on Monday, to say the least, as we all wait to see to what extent the results are rigged, if President Musharraf can survive, and what level of violence there is.

Separately, there was an encouraging poll the other day, conducted by the U.S.-based Terror Free Tomorrow organization, that revealed only 24% of Pakistanis approved of Osama bin Laden last month, compared to a 46% approval rating last August. Backing for al-Qaeda, overall, fell to 18% from 33%. But the same survey showed 58% suspected Musharraf had a hand in the Bhutto assassination, while only 7% thought al- Qaeda or the Taliban were behind it.

Iran: For the better part of two years now I have been urging the Bush administration to end-run President Ahmadinejad and talk to his chief rival, former president Rafsanjani. This week Thomas Erdbrink of the Washington Post reported that with Iran's upcoming March 14 parliamentary vote, it is clear Ahmadinejad and his supporters are "sweeping aside" the old guard, represented by the likes of Supreme Leader Ayatollah Ali Khamenei and Rafsanjani.

Erdbrink:

"If the clerics have a chance at regaining the political prominence they enjoyed in the years following the 1979 revolution, analysts say, it will be under the leadership of former president Ali Akbar Hashemi Rafsanjani.

"During Rafsanjani's two terms in the 1990s, his faction controlled several important executive and economic institutions in Iran, among them the Oil Ministry. He helped bring cleric Mohammad Khatami to power as his successor in 1997.

"Khatami's supporters, known here as reformists, included many onetime revolutionaries, such as former students who came to regret their 1979 takeover of the U.S. Embassy in Tehran. Rafsanjani's political allies teamed with the reformists and together they began arguing that Islamic law is dynamic and adaptable. They also favored reestablishing relations with the United States through compromise and proposed minor democratic reforms."

Now the reformists are either being pressured not to run in the parliamentary elections or are being excluded from the candidate list outright. One newspaper editor told Erdbrink that there is little likelihood the cleric-politicians who gained power after the revolution will rebuild their standing. "They are not a part of the decision-making process anymore," said Iraj Jamshidi. "I don't see any chance of a comeback."

Should this prove to be the case, and with Iran ever closer to gaining the bomb, it will be one of the giant black marks on the legacy of George W. Bush. Ahmadinejad was vulnerable, but Bush's incredibly unimaginative foreign policy team, despite its recent success in Iraq, blew it. Meanwhile, Ahmadinejad is heading to Iraq on March 2, the first such visit by an Iranian leader since the 1979 revolution.

China: One thing is clear. The chief foreign policy goal for China this year is to have a successful Beijing Olympics and this week the government took a hit amidst a new chorus of boos concerning its alliance with Sudan. Director Steven Spielberg quit as artistic adviser for the Games, saying "My conscience will not allow me to continue with business as usual. At this point, my time and energy must be spent not on Olympic ceremonies, but on doing all I can to help bring an end to the unspeakable crimes against humanity that continue to be committed in Darfur." Nine Nobel laureates signed a letter also urging a change in China's policy.

But the Chinese are fighting back and the people are incredulous that Darfur has become such a big issue when it's their moment to shine on the world stage. They are also upset over charges some Chinese nationals are alleged to have been involved in stealing classified military secrets, as the U.S. government indicted a Pentagon employee who is accused of passing on material related to the space shuttle that was then forwarded to China.

On a different matter, the government is beginning to estimate the damage from the storms, an initial cost of $15 billion (tourism revenues over the Lunar New Year holiday off a projected 70%), with 90,000 square miles of farm products destroyed (look out food inflation) and 1/10th of the forests damaged (90% in the hardest hit regions).

Here's something I didn't know. Trees take up only 18% of the mainland, while the average worldwide is 31%. Yet another reason why China has such a disastrous pollution problem.

And then there is Taiwan. Wendell Minnick of Defense News had a story on the development of Taiwan's new land attack cruise missile. Vice Defense Minister Ko Chen-heng said:

"I won't deny there's a development plan.The range cannot be publicized, but they aren't intended to strike civilian targets such as in Shanghai or Hong Kong.

"Since China lacks capability to cruise across the Taiwan Strait for a landing operation, China intends to fire missiles in the political and economic nerve centers of Taiwan to cause social paralysis, thereby forcing the U.S. to surrender."

Ko notes, however, that the U.S. government has been pressuring Taiwan to halt development of the weapon and then he adds:

"China has boosted its capabilities to prevent intervention by the U.S. military in times of emergency. Taiwan must wait for the arrival of U.S. troops to fight together. Therefore, it is essential to secure capabilities to make counterattacks on China's missile and radar bases as well as runways for military aircraft in order to buy time to delay China's invasion of Taiwan."

One problem, Mr. Ko. The United States is not coming to the defense of your good people (the best in the world that I've ever met). That's the ultimate tragedy of it all.

Russia: Once again, state-run Gazprom threatened to shut off the natural gas supply to Ukraine, though it was averted at the last minute as Ukraine agreed to start paying $1.5 billion owed Gazprom, while the latter is reported to have agreed to freeze the price of gas exports to Ukraine at last year's level. Russia supplies nearly 75% of Ukraine's gas, but 80% of all Gazprom shipments to Europe travel over Ukrainian territory.

In his last news conference as president, Vladimir Putin said he would hold the office of prime minister as long as Dmitry Medvedev remains president (8 years then, for starters). Ergo, Vlad the Great will be puppet-master.

Putin touted his economic successes, which we all know are due solely to soaring energy prices and he also issued now standard warnings that NATO better watch its encroachment, as well as saying recognition of Kosovo's independence (expected any day now) would be "not moral and not legal." [To this end, Serbian Prime Minister Kostunica issued his own warning to the people, saying Serbia would not allow itself to be humiliated.] Putin, in scolding the U.S. and many EU countries that are set to recognize Kosovo's independence, said "Are you not ashamed in Europe of the double standards you are applying to settle problems?" in comparing the status of Kosovo to separatist conflicts in parts of the former Soviet Union such as Abkhazia, South Ossetia and Trans-Dniester.

Back to Ukraine, Putin warned that if it joined NATO, Russia would "face (the) need to take retaliatory action." And Vlad announced he would grace an upcoming NATO summit in Bucharest in April with his presence.

Lastly, at a NATO security summit the other day in Munich, Ralph Peters of the New York Post related a comment by South Carolina Sen. Lindsey Graham, in attendance, who when questioned about Russian Deputy Prime Minister Ivanov's complaints about NATO said, "If Russia feels surrounded by states that subscribe to democracy and the rule of law, it should feel lucky."

Turkey: Parliament voted to lift a decades-old ban on Islamic head scarves at Turkey's universities. The secular establishment was upset, but the vote was overwhelming in favor.

North Korea: The South has hard evidence Pyongyang is diverting rice aid to the military, not that this should come as a shock to anyone. It just puts more pressure on the government in Seoul for having no checks on the $billions it has been sending across the border.

Australia: Prime Minister Kevin Rudd issued an apology to the Aborigines for the tens of thousands that were forcibly removed from their families as children.

"We apologize for the laws and policies of successive parliaments and governments that have inflicted profound grief, suffering and loss on these our fellow Australians."

The Aborigines, however, are not satisfied and want compensation.

---

Pray for the men and women of our armed forces. We also pray for the victims of Northern Illinois University and their families.

God bless America.

---

Gold closed at $906
Oil, $95.49

Returns for the week 2/11-2/15

Dow Jones +1.4% [12348]
S&P 500 +1.4% [1349]
S&P MidCap +0.2%
Russell 2000 +0.4%
Nasdaq +0.7% [2321]

Returns for the period 1/1/08-2/15/08

Dow Jones -6.9%
S&P 500 -8.1%
S&P MidCap -7.3%
Russell 2000 -8.4%
Nasdaq -12.5%

Bulls 36.7
Bears 35.6 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

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