Week in Review 
For the week 5/18/2009 - 5/22/2009
Brian Trumbore
President/Editor, StocksandNews.com

Wall Street
 
Somehow stocks eked out gains this week, despite seemingly more bad than good news on the economic front. By week’s end, all the talk was about the massive amounts of debt, around the world, that need servicing and the high costs of doing so; as well as the outlook for the United States in particular, following S&P’s downgrading of Britain’s credit outlook to ‘negative,’ one step from an actual downgrade of the UK’s AAA status. PIMCO’s Bill Gross said a downgrade for the U.S. was inevitable. It didn’t help when Treasury announced another pile of auctions for next week. But, again, stocks eked out gains.

So let’s review what was good, and bad, this week…the hard facts.

First, globally, Japan’s GDP fell a record 15.2% on an annualized basis in the first quarter (4% over the previous one). Singapore’s fell 10%, though this was better than first estimated. Mexico’s GDP declined a sickening 5.9% in the first over the fourth.

American Express announced a new round of layoffs, 4,000 on top of 7,000 announced in October, and Hewlett-Packard said it was cutting 6,000 on top of a previously announced 24,000 (much of which was a result of its integration with Electronic Data Systems). H-P’s CEO said the spending climate “looks the same,” with revenues to decline 4-5% over the full year, while Home Depot’s CEO said his company needs “to see a sustainable deceleration in foreclosures” before HD’s results show marked improvement on the top line (revenues).

Figures for April housing starts and building permits hit record lows, and were worse than expected, and stocks took it on the chin when the Federal Reserve’s minutes for its April meeting revealed a deteriorating outlook.

But as gloomy as the news was, again, stocks for the week eked out gains. Why?

One Fed governor said, “The improvement (in the economy) is becoming more broadly based.” The consumer is firming and industrial production has bottomed.

The big banks, forced to raise capital post-stress test, are indeed doing so. Bank of America was charged with raising $34 billion and has already taken in over $20 billion. Wells Fargo has raised $8.6 billion of a required $13.7 billion. Hedge fund king John Paulson, who made a fortune shorting mortgage-backed securities and financials, bought $1 billion of a BofA secondary.

Southern California’s median home price was at $247,000 in April, down slightly from the first quarter, but realtors are definitely seeing signs of a thaw. Sales of foreclosed properties are quickening. In battered Phoenix, more homes are selling than at any time since 2006. Prices are stabilizing. I maintain that, nationally, the bottom in home prices will be in the April-May time period. [Next week brings a slew of further data on the housing front.]

Overseas, German business confidence hit a 3-year high, and retail sales in the UK climbed in April for a second consecutive month. The UK’s 3rd-largest supermarket chain, J. Sainsbury, is accelerating its store expansion program, while a key purchasing managers’ index for the euro zone continues to improve. In Asia, Taiwan Semiconductor is beginning to hire back workers because “the worst is over.”

GE continues to see improvement in the capital markets and, despite the drubbing bonds took this week, credit spreads at the short end have narrowed significantly.

So where does this all leave us? Economist Paul Krugman said, “I share the optimism that the worst is maybe over,” but hastens to add the global de-leveraging we are experiencing will leave us in a funk for years to come.

I thought Martin Wolf summed it up well for the Financial Times.

“Is the current crisis a watershed, with market-led globalization, financial capitalism and western domination on the one side and protectionism, regulation and Asian predominance on the other? Or will historians judge it, instead, as an event caused by fools, signifying little? My own guess is that it will end up in between. It is neither a Great Depression, because the policy response has been so determined, nor capitalism’s 1989.

“Let us examine what we know and do not know of its impact on the economy, finance, capitalism, the state, globalization and geopolitics.

“On the economy, we already know five important things. First, when the U.S. catches pneumonia, everybody falls seriously ill. Second, this is the most severe economic crisis since the 1930s. Third, the crisis is global, with a particularly severe impact on countries that specialized in exports of manufactured goods or that relied on net imports of capital.

“Fourth, policymakers have thrown the most aggressive fiscal and monetary stimuli and financial rescues ever seen at this crisis. Finally, this effort has brought some success: confidence is returning and the inventory cycle should bring relief. As Jean-Claude Trichet, president of the European Central Bank, remarked, the global economy is ‘around the inflection point,’ by which he meant that the economy is declining at a declining rate….

“Unfortunately, there are at least three big things we cannot know. How far will exceptional levels of indebtedness and falling net worth generate a sustained increase in the desired household savings of erstwhile high-spending consumers? How long can current fiscal deficits continue before markets demand higher compensation for risk? Can central banks engineer a non-inflationary exit from unconventional policies?....

“What then is the bottom line? My guess is that this crisis accelerated some trends and has proved others – particularly those in credit and debt – unsustainable. It has damaged the reputation of economics. It will leave a bitter legacy for the world. But it may still mark no historic watershed. To paraphrase what people said on the death of kings: ‘Capitalism is dead; long live capitalism.’”

Personally, I haven’t changed my position on 2009 one bit. Stocks will end the year strongly higher, as sentiment wins out over fundamentals. The bottom in stocks is in; the bottom in the financial sector as well. The largest closure of a financial institution this year took place the other day, BankUnited in Florida with 85 branches, but the system held and markets yawned. We have answered the systemic risk question that kept us up at night last September and in the succeeding months. I am not as concerned about the commercial real estate crisis as I was with housing because housing has everything to do with a consumer that represents 70% of our economy. Commercial real estate is largely about the plight of small and medium banks.   There will be pain, but it won’t be of the systemic variety.

We’re far from happy days, but the fog has lifted to reveal a thick layer of haze. It will eventually burn off.

Lastly, I’m going to be watching the upcoming elections in Lebanon (June 7) and Iran (June 12) very closely. Geopolitics is returning to its traditional role of wild card after being largely ignored during the global crash.

Street Bytes

--All the major averages avoided a second consecutive down week as the Dow Jones eked out a 9-point gain to 8277, while the S&P 500 gained 0.5% and Nasdaq, 0.7%. Respected market strategist Laszlo Birinyi believes stocks can rally about 85% from current levels over the next 2-3 years. “We are confident we are in a bull market.”

--U.S. Treasury Yields

6-mo. 0.28% 2-yr. 0.89% 10-yr. 3.45% 30-yr. 4.39%

The long end of the yield curve collapsed as the 10-year Treasury hit its highest level in six months over the aforementioned supply and rating concerns. But whereas in the past mortgage rates were tied almost directly to the 10-year, the Federal Reserve is using its bag of tricks to keep rates at 5% or below (for qualified buyers). This becomes increasingly more difficult, though, if the 10-year continues to rise.

At the same time, however, keep things in perspective. We’re still at historically low levels across the curve. As Bart Simpson would say, “Don’t have a cow, man!” At least not yet.

--Oil prices climbed over $60, owing to the weak dollar but also a return to geopolitical concerns, such as in the case of renewed violence in oil-producing Nigeria. And we’re all feeling it at the pump as gasoline climbs to the $2.40 plus level in most parts of the country.

But fear not…gas prices are peaking. This is a traditional, seasonal pattern, brought on in no small part because refiners do extensive maintenance in the spring and reduce production.

And on a related basis, the International Energy Agency said that electricity demand is slated to fall 3.5%, worldwide, for the first time since 1945. A great barometer of economic activity, or lack thereof, which should also tell you that demand for all products oily and gaseous will remain punk as well.

--Goldman Sachs, JPMorgan Chase, and Morgan Stanley are among those looking to refund $45 billion+ of government funds handed out as part of the TARP program. But during congressional testimony, an interesting discussion took place as Treasury Secretary Timothy Geithner was being grilled on progress in all the government’s programs that were designed to stabilize the system. If, say, the banks return $50 billion, does that money go into the Treasury’s general fund to reduce the deficit, or does it just get added back to the TARP’s initial $700 billion, as in a revolver, for future use. The consensus in the Senate is clearly that when TARP was established, any money returned would reduce the size of the program, not just replenish it, which is Treasury’s current view. There hasn’t been a resolution on this rather important issue yet.

--Following is opinion on California’s vote to reject a package of budget-balancing measures that Gov. Schwarzenegger said were needed to keep a $15 billion deficit from widening further. [A separate proposal to limit lawmaker pay passed.]

Editorial / Los Angeles Times

“Some are only too happy to interpret the results of Tuesday’s election. From the right, small-government zealots lecture smugly that California has gotten its comeuppance for years of prodigal spending and unrighteous living. Liberals, they exult, have taxed and spent the state into fiscal collapse, and the only route now toward solvency is to eliminate cushy services and freebies that sap the entrepreneurial energy of the populace.

“What utter nonsense. These critics conveniently forget that spending has grown with the population and with healthcare costs that outpace the rate of inflation….

“As for those luxurious extras the state supposedly doles out, they largely consist of public education, which parents consistently demand, and safety-net services…which become more necessary in times of economic distress….

“From the left, activists insist that Tuesday’s balloting reveals public willingness to eliminate the two-thirds threshold for legislative budget and tax votes, and then to roll back 30 years’ worth of citizen initiatives, from Proposition 13 to Proposition 8, while raising taxes on the wealthy. But it’s a stretch to squeeze that message from this election. Besides, those who want a more progressive tax structure must acknowledge that they would be making revenues more volatile and the budget less stable when the economy tanks.

“The actual message from voters may be much less useful. Californians were happy in 2006, when cash abounded. Today’s irritation with politicians and their proposals probably stems more from high unemployment and scarce cash than any fundamental political shift.”

Editorial / Wall Street Journal

“California voters sent a blunt but welcome message Tuesday about runaway government. By rejecting by nearly two-to-one the political establishment’s $16 billion in higher taxes, spending gimmickry and more borrowing, the voters said it’s time government faced the same spending limits that the recession is imposing on everyone else….

“Governor Schwarzenegger had warned that if these initiatives were voted down, government services would have to be slashed, criminals released early and public employees furloughed. But voters decided that as painful as these cuts may be, the alternative of letting the state’s tax-and-spend machine continue was worse. How right they are….

“Despite the panic from Sacramento, Tuesday’s vote was the best fiscal news out of California in 30 years. It showed that the voters are paying attention to the games their elected leaders have been playing, and they have finally blown the whistle. We hope the sound was heard as far away as another out-of-control government, the one in Washington, D.C.”

Now, however, California faces layoffs of thousands of state employees, cuts to education of up to $5 billion, and more borrowing. Schwarzenegger is requesting a $6 billion loan from the federal government.

--The U.S. Postal Service has cut its staff by 25,000 this year. Employment is down to 635,000 from a peak of 800,000 in 1999.   The agency still faces a loss of $6.5 billion in ‘09. 

--For the fifth consecutive quarter, Target’s sales growth trailed Wal-Mart’s. In the first quarter, Target’s same-store sales fell 3.7%, while Wal-Mart’s rose 3.6%. Target did, however, exceed expectations on the earnings front.

--It’s projected that only 10 million cars will be sold in 2009, according to J.D. Power and Associates. As the outfit’s Gary Dilts said, “Recovery will not be a quick proposition.”

--Jack Welch, on the Obama administration’s handling of the Chrysler bankruptcy.

“I don’t particularly like where he’s taking us. To get the money he needs, he has to have a fake budget. He’s fooling people about how we’re going to have the top line support the programs in the middle without enormous taxes and some programs not going.”

Meanwhile, the 789 Chrysler dealers being shut down are attempting to cope with 44,000 cars and trucks that they need to liquidate. Deals galore.

--General Motors faces a June 1 deadline to either restructure to the satisfaction of the government or face bankruptcy. According to Reuters, the federal auto task force is looking to create a government-owned entity to give lenders a better deal than they received in the Chrysler restructuring (28 cents on the dollar). By having more of a government imprint on GM, the hope is consumers will be reassured that warranties, for one, would be protected. This would also be a way for the government to hasten restructuring. But we’ll see what happens in the final week of frenzied negotiations.  For starters, GM just received another $4 billion to make it through the deadline.

--Toyota has high expectations for its remodeled Prius hybrid, unveiled this week and with 80,000 advance orders in Japan already. The world’s largest automaker is looking to sell 400,000 units globally a year as it competes with Honda’s successful Insight.

--Speaking of hybrids and fuel efficiency, the Obama administration on Tuesday announced that it was moving up the deadline for automakers to achieve an average fuel economy of 35.5 miles per gallon to 2016 from the current guideline of 2020. All the major car companies appeared with the president at the White House in a show of support, though out of camera range were the snipers on the roof targeting any executives that attempted to bolt from the scene.

--While the fate of the Waxman-Markey bill on climate change, the “American Clean Energy and Security Act,” is far from certain, especially in the Senate, no doubt change is a comin’. President Obama praised the progress on “cap and trade” legislation. Meanwhile, China said rich nations should cut their greenhouse gas emissions by at least 40% by 2020 from 1990 levels as part of any global climate change pact. Beijing said any new deal must ensure wealthy nations “take on quantified targets to drastically reduce emissions.” The big conference on the matter will be held in Copenhagen in December.

Separately, according to the Energy Information Administration, U.S. emissions of carbon dioxide fell by 2.8% in 2008, the steepest drop since 1982. It’s all about the economy and reduced activity. As even the head of Clean Air Watch noted, “We don’t want a sick economy to be the solution to a sick planet.”

--President Obama signed legislation reforming the credit card industry that will curtail retroactive interest rate increases, require advance notice of same, and restrict some fees. But, in turn, you can expect the card companies to continue to restrict credit at an accelerating pace, which has an economic impact, and items such as reward programs could be curtailed.

--In its ongoing attempt to juice domestic demand, China’s State Council will spend $732 million on subsidies to consumers who trade in older vehicles for new ones. It will also spend another $290 billion for a successful appliance subsidy program, which pays rebates of 10% on the purchase price.

--AIG’s Edward Liddy said he’s ready to head back to retirement and will step down after 8 tumultuous months. This guy really got a raw deal due to the bonus issue that wasn’t of his making.   Perhaps years from now, he’s thought of in a different light.

--For the first time ever, the credit derivatives market shrank in the second half of 2008, off some 13.4% to a still rather hefty $592 trillion in contracts linked to bonds, currencies, commodities, and stocks.

--Those of us living in New Jersey are suffering because of our bloated state government and outrageous property, income and sales taxes. So I took note of a passage in a Journal op-ed by Arthur Laffer and Stephen Moore.

“(Consider) the fiasco of New Jersey. In the early 1960s, the state had no state income tax and no state sales tax. It was a rapidly growing state attracting people from everywhere and running budget surpluses. Today its income and sales taxes are among the highest in the nation yet it suffers from perpetual deficits and its schools rank among the worst in the nation – much worse than those in New Hampshire [ed. which still doesn’t have an income or sales tax and yet has high-quality schools and excellent services]. Most of the massive infusion of tax dollars over the past 40 years has simply enriched the public-employee unions in the Garden State. People are fleeing the state in droves.”

--In a classic sign of the times, subway ridership in New York City was down a third consecutive month in March…fewer jobs equals fewer commuters. [Though the city’s unemployment rate in April actually ticked down, another sign of a bottom.]

--Sales of homes in the ritzy Hamptons have declined the most since records have been kept for the Long Island beach towns, down 67% in the first quarter vs. a year earlier. The median price declined 28% over the same period. According to one expert, at current inventory levels it would take 34 months to sell it off at the recent pace.

--Speaking of Long Island, due to the recession, the number of corporate tents for the upcoming U.S. Open at Bethpage is just 54, compared to 78 when the Open was held there in 2002. 

--The pace of the advertising decline for monthly magazines continues, according to Media Industry Newsletter. Only 8 of 118 consumer monthlies monitored by MIN gained during the most recent six-month period. Only 4 of Conde Nast’s magazines are off by less than 30%. Flagship Vogue, for example, saw its ad pages decline 31%.

--Daniel Carasso died. He was 103. Carasso’s father, Isaac, created the Danone yogurt brand in Barcelona in 1919, naming it after his son, whose nickname in Catalan was Danon. Daniel then expanded the business in the United States (now Dannon) during World War II and the rest is history. His age is a good commercial for the product, no?

--A Senate Finance Committee proposal on how to pay for expanding health insurance coverage reveals that an added beer tax of $2 a case [$0.48 per six-pack] may pay for part of the program. Nooooooooo!!!!

Foreign Affairs

Israel: The cry in the Arab world is that the United States has not been an honest broker when it comes to the Middle East. Washington has been too pro-Israel, these folks say. Well, that claim can no longer be made. There is a reason why only 31% of Israelis believe the Obama administration is pro-Israel, compared to 88% who believed so during the presidency of George W. Bush. 

President Obama, and others such as Secretary of State Hillary Clinton, are making themselves very clear…Israel can not continue with its settlements policy. All activity must cease. Since day one of writing this column, I’ve been calling for such a move and it’s about time our leaders had the guts to say this. In the past, it was always, “Israel must follow the roadmap” but then there was no teeth to it. Now there is.

This week, President Obama and Israeli Prime Minister Benjamin Netanyahu met for the first time as leaders of their respective nations and the lines have been drawn. Netanyahu’s chief focus is Iran and stopping its nuclear weapons program. Any talk of a two-state solution to the Palestinian-Israeli issue is secondary. Obama wants the Palestinian issue resolved first.

Jeffrey Goldberg of The Atlantic had the following in an op-ed for the New York Times.

“Friends and advisers say Benjamin Netanyahu took three lessons from his brother’s death [ed. Yonatan died in the raid on Entebbe in 1976]: The first is that those who threaten Jews, and have the means to carry out their threats, should be neutralized pre-emptively. The second is that no one will defend the Jews except the Jews themselves. The third is that destiny has chosen the Netanyahus to expose and battle anti-Semitism – before it reaches the point of genocide.

“In his eulogy for Yonatan Netanyahu, Shimon Peres, then Israel’s defense minister, said: ‘There are times when the fate of an entire people rests on a handful of fighters and volunteers. They must secure the uprightness of our world in one short hour. In such moments, they have no one to ask, no one to turn to. The commanders on the spot determine the fate of the battle.’

“Benjamin Netanyahu faces the daunting task of maintaining Israel’s relationship with the United States, while at the same time forestalling Iran’s nuclear program. If Iran gains nuclear capacity, Israel will have judged him a failure as prime minister; if he does serious damage to his country’s standing in Washington, he will have failed as well.”

For his part, President Obama has said that he will wait until after the Iranian presidential election to see how things shake out before launching a diplomatic offensive. Obama did assure Netanyahu, however, that “we’re not going to talk forever,” and that sometime between October and year end, a decision is going to have to be made whether engagement with Iran will yield any substantive progress and if far tougher sanctions are warranted at that time.

The question then becomes, will it be too late? I’ve long argued the line has already been crossed in Iran. Even should one of the reform candidates upset President Ahmadinejad, whoever is in charge won’t give up the weapons program at this point. Iran’s ‘four corner’ stall strategy has worked brilliantly.

One other thing seems clear. Israel won’t launch a pre-emptive strike, say this summer, without the White House’s knowledge and the answer from 1600 Pennsylvania will be ‘don’t try it until negotiations play out.’

So in the interim it’s back to the settlements issue. Netanyahu believes they can grow “naturally,” that is, existing settlements can continue to expand. The Obama administration reiterates, ‘stop all further activity immediately.’

President Obama also says negotiations with the Palestinians must begin now, and on this Netanyahu doesn’t disagree as both would like to expand the process to include key states such as Egypt, Jordan, and the Saudis…for starters. But Netanyahu refuses to discuss a two-state solution. That’s where the stalemate exists; how to define the coming peace talks and what will Israel do on the settlement front. The difference between today and just one year ago is that the contrast in policies between Israel and the U.S. are stark …there is no fuzzy rhetoric this time.   

Iran: Just how far advanced is Iran when it comes to the nuclear program? I’ve frankly been surprised they haven’t already conducted a crude test. They certainly are close to having enough weapons-grade material, if they haven’t already reached this threshold. And the goal of weaponizing it hit another milestone this week with the test-firing of a long-range missile that could hit U.S. forces in the region, as well as targets in Europe, let alone Israel. A joint Russian-U.S. study, though, said Iran was still six years away from being able to put an actual nuclear warhead on a missile, but others argue they are much further along.

Regarding the election, moderate (using the term loosely) cleric Mahdi Karroubi blasted Ahmadinejad, saying he “offered the greatest service to Israel by raising the Holocaust issue because the whole world stood to support Israel.” Another candidate, Hossein Mousavi, has similarly slammed the president for waging a rhetorical war with the international community. Mousavi was quoted as saying, “Today, excluding a few friends we’ve had for a long time, we have no appropriate interaction with the international community and are subject to threats.”

Pakistan: The military offensive continues in the Swat Valley as Pakistan claims to have made substantial gains against the Taliban, but who really knows at this point where the truth lies? Pakistan also said it will go into Waziristan, lair of Bin Laden and Co. Will they actually do so? One thing we do know is that the number of refugees resulting from the Swat campaign is in excess of one million and Pakistan is calling for at least $600 million in emergency aid, of which the U.S. has sent $100 million at last word.

Separately, the New York Times reported that Pakistan is rapidly adding nuclear weapons to its arsenal, highly disturbing, while the Wall Street Journal did report a positive development; that being India and Pakistan are sharing intelligence on Islamic extremists at the urging of the U.S. The CIA is playing a key role in bridging the gap.

Speaking of India, the world’s largest democracy completed its month-long elections and the ruling Congress Party pulled off a definitive win, gaining 260 of 541 lower-house seats, including those of its allies, substantially more than 2004 and twice the leading opposition party (which is also hostile to Pakistan).   Prime Minister Singh will have no problem putting together a coalition with a large majority and the Indian people voted decisively for a free market and further reform. With all that has gone wrong recently, India provided a real shot in the arm for the forces of good.

Sri Lanka: Out of nowhere, the 26-year conflict between the Tamil Tiger rebels and the Sri Lankan government came to a resounding end as the army crushed the last Tamil stronghold. Ignoring western cries, including from the Obama administration, for restraint, the Tamil leadership was killed off, though at an estimated cost of 8,000 civilians the past two months, according to the U.N., in the final spasm of violence. It is estimated 70,000 died during the entire conflict, but now there is yet another humanitarian crisis as reports of horrifying conditions in the refugee camps circulate, with relief agencies reluctant to go into a still dangerous situation. For example, those fleeing the Tamil held outposts had to wade through mine-strewn swamps to escape. But, finally, the Tamil terrorists, who long ago assassinated former Indian prime minister Rajiv Gandhi, are history. Any diehards to the cause still remaining will have to write their own chapter. 

Burma / Myanmar: The junta put dissident Aung San Suu Kyi on trial for breaking the terms of her house arrest. Europe and the United States are livid and have called for a new round of harsh sanctions. But Asian leaders haven’t called for any punitive measures. China, in particular, doesn’t want to disrupt its extensive ties with Burma on the economic front (think natural resources and a new transport system through Burma on to China).

North Korea: There is increasing talk of a second nuclear test.

South Korea: Former President Roh committed suicide amidst a bribery probe.

China: Taiwan’s President Ma once again called on China to withdraw the 1,000 ballistic missiles targeting the island as a precondition for launching talks on political relations. Ma, with the recent gains on the economic front between the two, is under increasing pressure from within to take it slow, and to be wary.

“I have said many times in the past, before and after my inauguration, that if we are to negotiate a peace agreement with the mainland including military confidence-building measures, they should remove or dismantle the missiles targeting Taiwan.

“We don’t want to negotiate under the threat of massive attack,” Ma said during a press conference.

Russia: President Medvedev scolded officials for failing to reform the economy, as both he and Prime Minister Putin increasingly play the blame game. It’s really Putin’s responsibility, but Putin keeps trying to turn the tables. Medvedev said that efforts to foster innovation have failed.

“Practically no significant changes in the technological levels of our economy are taking place. This is especially obvious in the conditions of a global financial-economic crisis….

“Technological parks…Russia’s venture capital company…special economic zones – all this basically exists only on paper.” [Moscow Times]

On a related note, 64% of Russian employees feel incidents of corporate fraud will increase in the future, with only 14% believing their management is honest. This poll was conducted by Ernst & Young. Previously, Transparency International ranked Russia 143rd out of 163 countries when it comes to corruption.

Other items on the Russian front:

Egypt has quarantined over 80,000 tons of Russian wheat over the past few weeks, citing quality concerns. Evidently, much of the wheat is filled with dead insects.

And President Medvedev has created a special commission to look into recent attempts to rewrite Russian history, according to him. Medvedev and his supporters claim the commission is needed to combat anti-Russian propaganda in the former Soviet Union.

Well, of course Russia wants to go back to the old ways of lying about its history. As I’ve always said, these are the biggest liars in the world. I hope some of you caught the outstanding PBS series on Stalin and World War II. I know if I was a Pole, for example, I would be hesitant to ever talk to a Russian again.

Britain: For the first time since 1695, the Speaker of the House of Commons, Michael Martin, was forced to resign for the sake of “unity” over his handling of the expenses fiasco. Many are calling for the dismissal of the entire parliament. And so, just for the hell of it, the last time parliament was thrown out was April 20, 1653.

Oliver Cromwell:

It is high time for me to put an end to your sitting in this place, which you have dishonored by your contempt of all virtue, and defiled by your practice of every vice; ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches, and would like Esau sell your country for a mess of pottage, and like Judas betray your God for a few pieces of money. Is there a single virtue now remaining amongst you? Is there one vice you do not possess?

Ye have no more religion than my horse; gold is your God; which of you have not barter’d your conscience for bribes? Is there a man amongst you that has the least care for the good of the Commonwealth?

Ye sordid prostitutes have you not defiled this sacred place, and turn’d the Lord’s temple into a den of thieves, by your immoral principles and wicked practices?

Ye are grown intolerably odious to the whole nation; you were deputed here by the people to get grievances redress’d, and are yourselves gone!

So! Take away that shining bauble there, and lock up the doors. In the name of God, go!

Britain, part deux: The London Times had an unsettling story on how Pakistani terrorists are flooding Britain through “a network of sham colleges.”

“The gateway…has allowed hundreds of men from a region of Pakistan that is the militant heartland of al-Qaeda and the Pakistani Taliban.

“Eight of the terror suspects arrested last month in Manchester and Liverpool were on the books of one college. It had three small classrooms and three teachers for the 1,797 students on its books. Another college claimed to have 150 students but secretly enrolled 1,178 and offered places to a further 1,575 overseas applicants, 906 of them in Pakistan….

“Each of the men entered the country on a student visa.”

Those behind the scam are also making $millions in fees.

Ireland: A nine-year study looking into sexual abuse of thousands of children who passed through Catholic-run institutions concluded that the Irish government colluded in a conspiracy of silence. The report is brutal in all aspects.

Kuwait: Four women were elected to parliament, the first to achieve this milestone.

Venezuela: In his ongoing war of economic terror, President Hugo Chavez seized a pasta factory owned by U.S. food giant Cargill. Officials accused Cargill of not producing enough of a type of pasta sold at government-set prices and intended for the poor, as reported by the Financial Times. Other Cargill food plants were expropriated in March. All this on top of the state-owned oil company, PDVSA, and its seizure of the assets of some 60 oil service companies. In these instances, Venezuela then offers a take it or leave it price for the operations.

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Pray for the men and women of the armed forces, and the fallen. On Memorial Day, think not only of their passing…remember the glory of their spirit.

God bless America.

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Gold closes at $958
Oil, $61.67

Returns for the week 5/18-5/22

Dow Jones +0.1% [8277]
S&P 500 +0.5% [887]
S&P MidCap +1.0%
Russell 2000 +0.4%
Nasdaq +0.7%

Returns for the period 1/1/09-5/22/09

Dow Jones -5.7%
S&P 500 -1.8%
S&P MidCap +2.4%
Russell 2000 -4.4%
Nasdaq +7.3%

Bulls 40.7
Bears 29.1 [Source: Chartcraft / Investors Intelligence]

Have a good holiday. As always, thanks for your support.

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