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05/13/2006
For the week 5/8-5/12
[Posted 7:00 AM ET Savannah, Tenn.]
Wall Street .the Fed frets
The Federal Reserve raised its key short-term funds rate a 16th
time, another percent or 25 basis points, to 5% on Wednesday.
But as I noted last week we all were waiting to see if they’d
provide a bit more clarity about future rate decisions and the
Street was disappointed.
While many were hoping the Fed would finally ‘pause’ when it
next gets together June 28-29, instead it averred that “further
policy firming may yet be needed to address inflation risks,”
depending on future data.
Well, this caused quite an uproar among the Wall Street
cognoscenti. ‘Whaddya mean further policy firming may be
needed?! You’ve got to be kidding me!’
Message to all you incredibly overpaid Street strategists. Try
doing your own homework for a change. You want the Fed to do
it all for you?
Heck, far be it for me to be a Fed defender, but no one knows
where we’re going from here. True, I’ve given you my outlook
and it isn’t pretty. And you shouldn’t be surprised I’m sticking
with it.
But the Fed can’t do anything but analyze a slew of coming data
on prices and economic growth over the next six weeks; it’s only
right they do so.
Now it’s the strategist’s job to stick their neck out and give their
clients some real analysis. If they have no conviction, they
should be fired; especially those working for broker/dealers
where management wants commission-generating ideas.
[Just wanted to get a rise out of my former wholesalers out there.
They heard this from me every week.]
Anyway, the Fed concluded for now that while “inflation
expectations remain contained,” pricing pressures could emerge
with the surge in commodity prices. So the real bottom line is:
will the consumer buckle under, finally, to higher energy prices
and/or a stagnating, verging on crumbling, housing market?
I’ve argued it would be housing, pointing specifically to the
second half. As for energy, it’s mostly about Iran for the
foreseeable future; that and weather in the Gulf of Mexico. It’s
almost time for our first tropical wave, after all.
The markets thus took none too kindly to the prospect of further
rate increases and runaway commodity prices and it was a two-
day bloodbath on Thursday and Friday.
China remains the top story in terms of the global economy with
a government think tank forecasting GDP growth of 9.8% in the
second quarter and 10% in the third. China also helped fuel the
metals surge – copper, zinc, nickel, and platinum among the
items hitting record highs, with gold at a 26-year best – in
announcing it was going to start building its strategic reserves in
uranium, iron, copper and other key materials, plus it was
accelerating construction of strategic reserves for oil and coal.
But back to the Fed and Wall Street’s loss of faith in Chairman
Bernanke and Co., one major concern, and the one with most
currency, is the fact the Bank of Japan and the European Central
Bank will both be hiking interest rates this summer (as will
China) while the Fed could be pausing; ergo, will the Fed then be
behind the curve? I don’t think they’ll put themselves in that
position.
We’re going higher on rates, in other words, and if we haven’t
already reached the tipping point, a move to 5.25% end of June
would do it.
Street Bytes
--So a funny thing happened on the way to Dow 11722. We got
close, but after a 260-point drop on Thursday and Friday, and
1.7% for the week, the Dow resides at 11380 instead. The
damage elsewhere was far worse with the S&P 500 losing 2.6%
to 1291, Nasdaq 4.2% to 2243 (100 points on the week) and our
stellar performer for ’06, the Russell 2000 index of little guys
yearning to breath, down a whopping 5%.
So is this the start of the first real correction in well over two
years? Since I said one must have conviction, I’ll say, yes,
though you have to give me one bounce-back week.
It certainly doesn’t look good that despite this roaring economy
of ours, consumer confidence by one key measurement is
plummeting. Yes, I guess it’s oil prices though I believe we’ve
peaked at the pump for a while, but the real issues are the ones
like healthcare that are killing the middle class. I just received a
note from an old friend in the business, Liz S., who is pretty
good with this kind of thing, figuring out the pulse and all, and
she gave me a number of examples of how premiums are
skyrocketing. And Mark R. told me of how property insurance is
soaring for everyone living along the coast, though in this case
for obvious reasons.
But while I could have put all the above in my opening
monologue, here’s something else. My new canary in the mine
is Chile. If we’re all so interconnected these days, as I think
you’d agree, and our economies are increasingly tied, consider
that the Central Bank of Chile announced this week that personal
debt there is up to 51.3% of disposable income, an increase from
34% in 2000. I’ve mentioned Chile a lot recently because it is a
classic emerging market, with a booming economy thanks to the
fact it’s King Copper, yet look at what the people are doing
tacking on more and more debt so when the inevitable downturn
hits it could easily evolve into a Crash. I would submit China
and India will be in the same boat, though statistics such as those
out of the Central Bank in Chile are not as easily ascertained in
these two.
--U.S. Treasury Yields
6-mo. 4.99% 2-yr. 5.01% 10-yr. 5.19% 30-yr. 5.30%
The bond market was spooked not just by the lack of conviction
on the part of the Fed, but also a reading on import prices; part of
the March trade data which showed prices rising faster than the
Fed deems comfortable. Again, bond traders are complaining
Bernanke isn’t Alan Greenspan, but you’ll recall in his early
days, leading up to the 1987 Crash, Alan Greenspan was no Paul
Volcker. Uh oh bad analogy.
And I haven’t really mentioned the falling dollar, have I? It’s
been hitting new lows versus the euro and yen for weeks now.
Of course while this is good for exports and helps shrink the
trade deficit, it’s also inflationary. But to be fair, for the first
time strength in the euro is somewhat warranted as Europe’s
economy is recovering for the most part. EU retail sales are at
their highest level in years, for example.
Lastly, the Treasury Department issued its semi-annual report on
China and its currency. It didn’t label China a currency
“manipulator,” which is what some in Congress wanted and
which of course it is. But on this one I think the Treasury did the
right thing. We do not need a fight with China just yet more on
this below.
--Energy: Oil rebounded back above $73 before slipping Friday
on, frankly, conflicting thoughts on demand. Some think it’s
succumbing to high prices, around the world, but I’m not so sure
of that just yet. There is no doubt $70 oil and $3 a gallon
gasoline in the U.S. curbs demand somewhat but if you’re also
telling me the global economy is still operating on all cylinders,
then demand will remain strong and the International Energy
Agency basically concedes as much.
And not for nothing, but as the Journal’s Alan Murray wrote the
other day, the debate on the energy front deserves a big, fat “F”
for economic literacy. It’s about supply/demand, folks, first and
foremost.
Meanwhile, our friends to the South, Venezuela’s Hugo Chavez
and his sidekick Evo Morales of Bolivia, were once again feeling
their oats. Chavez is talking of a new “extraction tax” as well as
hiking royalty rates further for foreign producers on his soil,
while Little Evo said there is no need to compensate the oil
companies for his move to nationalize the energy sector because
companies like Total, Repsol and Petrobras have already been
amply rewarded for their investments. If everyone else in the
world felt this way, economic activity would grind to a halt and
we’d have nothing else to do but go to soccer games and beat
each other up.
--Among the reasons for Nasdaq’s drubbing this week were the
tepid forecasts from the likes of heavyweights Cisco and Dell.
Dell cited it was a victim of price-cutting, thereby proving that
technology is still one sector where you have visible signs of
deflation. And fear not, friends. I haven’t abandoned my overall
deflation outlook.
--Both the Senate and House passed an extension of the tax cuts
for another two years through 2010, so the 15% maximum rate
on capital gains and dividends remains in place while a patch for
the alternative minimum tax was approved for 2006. Since day
one, I have been vehemently opposed to the lower rate on
dividends because this is truly a sop to the rich and nothing more.
The little guy has few, if any, dividends, with those he does
already taxed at a lower rate.
--Warren Buffett warned anew that the dollar would continue to
weaken, though his route these days is to acquire overseas
companies to take advantage of this. [He also sees a speculative
bubble in the commodities markets.]
--But regarding the dollar, I have long argued that China could
easily use it as a political tool, specifically regarding Taiwan.
China launches a lightning attack to take out Taipei’s leadership,
the U.S. ponders a military response, and China then threatens
the U.S., saying “stand back or we sell the greenback.”
So this week the Wall Street Journal’s Frederick Kempe
addressed the topic.
“The notion that China or some other American rival could
someday use its vast holdings of U.S. debt as a geopolitical
weapon, despite the great harm that would also cause to the
attacker’s own economy, is gaining (forgive the term) currency
in some quarters.
“The reason: the dramatic growth of global foreign reserves, and
thus of U.S. debt, in the hands of developing countries –
frequently, undemocratic rivals – already resentful of America’s
excessive influence. Those gaming the odds typically speak of
the danger that a rising China, in defending its vital interests –
Taiwan’s status or threats to a key ally – might risk such a move
despite the economic backlash.”
[Ed. I have argued that backlash would be minimal.]
Kempe quotes Brad Setser, director of research at Roubini
Global Economics.
“The irony is that the three countries in the world adding to
reserves the fastest, and thus buying the most U.S. debt now, are
China, Saudi Arabia and Russia, none of them democracies,”
says Setser. Throw in Venezuela and Iran, and “We are
increasingly counting on a group of creditors who are not our
closest friends but have a bigger and bigger stake in America.”
Today, the U.S. dollar represents 66.5% of total global foreign
exchange reserves, with the Euro at 24.4%. And developing
nations have been reducing the share of their dollar holdings to
60.5% from a high of 71% in 1998, according to the IMF.
--Significantly, as the New York Times reported, bird flu has not
exploded as a result of the spring migration back to old stomping
grounds. So was this all just another Y2K? It’s far too early to
tell, but that would be a dangerous attitude for governments to
take. Any preparation for bird flu will at some point pay off and
in most cases has been money well spent.
--Wachovia acquired California-based Golden West Financial for
$25 billion, leaving many scratching their heads. With Golden
West’s huge exposure to the California real estate market, why
would Wachovia want to purchase a mortgage portfolio, an
aggressive one at that, in the midst of a slowdown?
Not that Golden West itself is bad – it has a great reputation –
but it has been a leader in the increasingly hard hit adjustable rate
field. One expert estimates, by the way, that a full 29% of those
taking out a mortgage or refinancing in 2005 have zero or
negative equity at a time when values are flat-lining in the hot
segments, if not outright declining.
Joshua P., my spy for the San Diego market, said home sales
there fell 15% from March’s pace and are off 33% year over
year. The median home price has also now declined, albeit
slightly, the past two months. Josh also reports those two homes
in his neighborhood that have been on the market since the
Spanish-American War, it would seem, have now been joined by
two others on the block.
--Fannie Mae said it had uncovered yet more accounting errors.
They haven’t filed a 10-Q, or quarterly report, since Nov. 2004.
So the question should be why are these shares still trading? No
way investors have accurate information. The whole operation is
rife with fraud. But it’s giant Fannie Mae so we look the other
way. Yes, years ago I asked, “Do you think these guys know
what they own?” Do you think today the situation is any better
and that the risk of a massive financial accident has been
lessened any? I think not.
--Just an awful situation in Spain, for pensioners in particular, as
the government raided the offices of the 3rd-largest collectibles
company in the world, behind Sotheby’s and Christie’s, Afinsa
Bienes Tangibles, and another outfit, Forum Filatelico, for
running a Ponzi scheme. Up to 350,000 investors have anywhere
from $4.8 to $6.4 billion at risk. From a police statement:
“Potential investors were offered high returns from the purchase
and management of a stamp fund which was apparently made up
of overvalued – or even fake – stamps and whose returns did not
apparently come (from the fund) but from money received from
new clients.” [London Times]
Afinsa guaranteed 6 to 10 percent over a fixed period, with a
money back guarantee when contracts expired. The stamp angle
was key because Spaniards are big collectors and believed in
their ever-rising value. Of course these accounts were not
government guaranteed in any way. Your heart goes out to these
folks .and the death penalty would be more than appropriate for
those carrying out this fraud. But then Europe doesn’t believe in
the death penalty so maybe the rack would be another option;
only up to a point, of course.
--Haves vs. Have-Nots
Following are some diverse opinions, not necessarily all shared
by yours truly, on this growing topic.
Commentator Ben Stein / New York Times
“Something flashed into my mind (the other day) – something
that my late father used to say that it is ‘unlovely’ to see the
extremes of wealth and nonwealth that are evident in
contemporary America.
“We may be able to live with it. Some of us may even be able to
prosper amid it. But it’s not pretty. The rich should simply not
be that much richer than everyone else – especially those whose
lives protect them from terrorism.
“As I thought that, I had a revelation about oil. We all know –
and I mean all, even Congress – that the oil companies are not
fixing prices. We all know that the oil companies are not
creating these wild prices out of thin air.
“The worldwide market is at work, and traders and speculators
are driving up the price, based on uncertainty of supplies and
inventories, and presumably becoming very rich in the process
(at least some of them). That’s the market at work. It’s not up to
the government to set the price or to fix the situation except by
opening more space for exploration, and even that may not help.
.
“The real problem is the difference between the rich – including
rich oil people, of whom there are not many, but there are
enough – and the poor. It is up to the government to redress the
extraordinary difference in incomes of the rich and the nonrich,
even at the margins.
“What Congress can do, and should do, is address the stunning
underpayment of military men and women and the staggering
budget deficits that will be a burden on our posterity for decades,
by raising the taxes on the rich. It’s fine that there are rich
people. It’s even fine that there are superrich people.
“But if they are superrich, they derive special benefits from life
in the United States that the nonrich don’t. For one thing, they
can make the money in a safe environment, which is not true for
the rich in many countries. It is just common decency that they
should pay much higher income taxes than they do .
“America is becoming a nation of many rich people. I recently
read that there were close to 10 million millionaire households. I
read that there were hundreds of thousands who made more than
$1 million a year. Good for them.
“But it’s unlovely for them to pay as little tax as they now pay.
The real problem in this country is only temporarily about oil.
That will right itself, or we’ll get used to it and adjust.
“The real problem is saving a nation that is beset by terrorism,
and we cannot do that unless we feel that we are all in the same
boat, pulling the oars together. That includes the rich.
“Whatever rationale there may have been in 2001 for lowering
taxes is long gone. It’s time for them – us, because it includes
me – to pay their (our) share.
“It’s not about oil. It’s about fairness.”
Economist Robert A. Levine / International Herald Tribune
“In the risk-taking society of the United States, entrepreneurship
has retained a relative advantage in areas such as information and
biological technology, entertainment, and high finance. The
rewards have been very high for successful entrepreneurs, and
for executives in a position to reward themselves.
“Employment has remained high because the new technologies
have created jobs, particularly in supporting business and
personal services, but many of these jobs are at wages much
lower than the manufacturing jobs, which are moving abroad.
The costs to the United States have been growing insecurity and
inequality, compounded by deteriorating public infrastructure,
physical and social.
“In much of Europe, the ‘security society’ has used regulations,
expensive programs and high taxes to maintain services, leisure
and equality as well as security. The costs have been sluggish
growth and high unemployment (but many of the unemployed
have remained comfortable).
“Neither American growth nor European comfort is sustainable
at current levels in the face of globalization. For Europe, this
should be obvious: slow growth, compounded annually, will
leave it further behind the United States and ultimately much of
Asia, until Western Europe becomes an immense quaint Venice,
supported by tourism.
“America is in equal danger, however. According to the Federal
Reserve chairman, Ben Bernanke, not a noted radical: ‘Our
society is based on opportunity, it’s based on flexibility in labor
markets and product markets, it’s based on open and fair trade.
And all of those things are at risk if a growing portion of the
population feels they are not sharing in the benefits from those
changes.’”
Economist Robert J. Samuelson / Washington Post
“It’s often said that only the rich are getting ahead; everyone else
is standing still or falling behind. Well, there are many
undeserving rich – overpaid chief executives, for instance. But
over any meaningful period, most people’s incomes are
increasing. From 1995 to 2004, inflation-adjusted median family
income – for families precisely in the middle – rose 14.3 percent,
to $43,200, the Federal Reserve says. People feel ‘squeezed’
because their rising incomes often don’t satisfy their rising wants
– for bigger homes, more health care, more education, faster
Internet connections.
“The other great frustration is that it has not eliminated
insecurity. People regard job stability as part of their standard of
living. As corporate layoffs increased, that part has eroded.
More workers fear they’ve become ‘the disposable American,’ as
Louis Uchitelle puts it in his book by the same name. (John
Kenneth) Galbraith expected the affluent society to be a placid
society. Giant corporations would control markets and provide
safe jobs; government would regulate business cycles.
Underestimated were the disruptive effects of new technologies,
globalization and activist shareholders.
“Ours is a post-affluent society. Because so much previous
suffering and social conflict stemmed from poverty, the advent
of widespread affluence suggested utopian possibilities. Up to a
point, affluence succeeds. There is much less physical misery
than before. People are better off. Unfortunately, affluence also
creates new complaints and contradictions.
“Advanced societies need economic growth to satisfy the
multiplying wants – public and private – of their citizens. The
social order depends on it. But the quest for growth unleashes
new anxieties and economic conflicts that disturb the social
order. Affluence liberates the individual, promising that
everyone can choose a ‘unique way to self-fulfillment,’ writes
historian Avner Offer. But the promise is so extravagant that it
preordains many disappointments and sometimes inspires
choices that have antisocial consequences, including family
breakdown and obesity. Statistical indicators of happiness, Offer
notes, have not risen with incomes.
“Should we be surprised? Not really. We’ve simply reaffirmed
an old truth: The pursuit of affluence does not always end with
bliss.”
--Corporate donations as a percentage of pre-tax profits actually
fell last year to 0.9% from 1.1%.
--Business Week reports that many smaller universities have far
too great an exposure to hedge funds in their endowments, some
at more than 40%, in what’s bound to be an ill-fated attempt to
emulate their bigger brethren.
--I know there are a lot of Jim Cramer fans out there, and he did
select my carbon fiber stock a mere nine months after David P.
and I first discovered it but it just so happens I saw his
appearances on the “Today” show, 3/17 and 5/11.
As I documented in WIR, 3/18/06, Cramer was a raging bull on
3/17 and the S&P 500 closed at 1307 that day. This Thursday
morning his timing couldn’t have been worse. “We could go to
15000 on the Dow before we get really expensive,” he
confidently told Katie Couric. Of course the Dow dropped 140
points on Thursday and another 120 Friday. To compare apples
to apples, though, the S&P 500 finished the week at the above-
mentioned 1291.
But to give Cramer his due, his followers have done well in the
materials sector, in particular, and it only takes one or two home
runs to more than make up for some pain.
--Paid newspaper circulation continues to decline, off another
2.6% for the six months ending in March, but newspaper-run
Web sites are up 8% in the first quarter alone. Back to paid,
USA Today remains #1, overall, with the Wall Street Journal #2.
Meanwhile the Los Angeles Times’ paid circulation declined a
whopping 5%+ over the reporting period.
--Tourism during China’s Golden Week was up 20% over last
year’s pace in yet another sign of the economic boom. A total of
146 million were on the road. Glad I wasn’t among them,
though I saw a bit of the crush the day I left South Korea.
--Whirlpool is laying off 4,500. AOL, 1,300; mostly at its call
centers.
--I don’t have a Wal-Mart too close to my home so when I’m in
small town America I like to hit one for my clothing needs. Just
went to the one here in Savannah (which labels itself the “Catfish
Capital of the World” by the way) and for $50 I bought two
shirts and two pair of jeans. Now let’s look at the labels. The
shirts were made in China and Bangladesh, and the jeans were
put together by slaves in Mexico and Nicaragua. Now that’s
globalization.
--New Jersey’s government debt is now over $33 billion, which
ranks our little place 3rd behind New York ($49.6 billion) and
California ($64.4 billion). Do we know how to spend or what?!
--Talk about a travel nightmare check this out.
As passengers boarded a Cathay Pacific flight from Hong Kong
to London, it felt very warm inside the cabin. The captain said it
would cool once the plane was airborne. It didn’t and many of
the passengers began to feel like they were suffocating. A few
laid down in the aisles.
But for some reason the pilot didn’t turn back until the flight was
two hours out so it ended up being four hours before the plane
returned to Hong Kong. Cathay is extremely lucky no one died,
and, yes, it was diagnosed as a broken hose.
--You know what I’m tired of? Actors doing drug commercials.
Like the one for Bayer Aspirin.
“Two years ago I had a heart attack.” No you didn’t. “And if it
wasn’t for Bayer blah blah blah ” as his fake family gathers
around.
If I was king for a day, we’d have none of this that’s for sure.
--Inflation in Zimbabwe hit an annualized rate of 1,046% in
April. You’re reading that right. For example, a loaf of bread
cost 7 cents a year ago (though government subsidized) while
today it costs between $0.79 and $1.08.
It’s not known if Zimbabwe’s Federal Reserve equivalent is
opting to pause or raise rates further.
--Lastly, I’ve had a fair amount of success with my carbon fiber
stock, as some of you have recognized. Seeing as it was once
15% of my overall portfolio and is now far more, I just thought
I’d tell you I continue to be a pig oink oink and haven’t sold
any. This week the company reported its first operating profit
since 1999 and the sales pipeline is strong.
Carbon fiber is interesting. My company makes the lion’s share
of its money by supplying the wind power industry, with other,
lesser, applications being in sectors such as oil drilling and the
auto industry. [BMW, for example, is looking at the possibility
of an all-carbon fiber body down the road.]
And as Charles K. keeps reminding me, any success Boeing has
with its new Dreamliner jet will largely be because of its new
reliance on C.F. It’s lighter (as well as stronger than traditional
materials), which makes the aircraft 15% more fuel efficient;
rather important for an airline’s bottom line these days.
Sponsored by the Carbon Fiber industry have you had your
fiber today?
Foreign Affairs
Iran: President Mahmoud Ahmadinejad wrote a letter to
President Bush, the first such direct correspondence between the
two countries in 27 years. Promising “new solutions,”
Ahmadinejad’s rambling missive showcased his naivety and, as
Ray Takeyh of the Council on Foreign Relations put it, his
“deep-seated religious devotion the hubris of a committed
Islamist.” The White House properly ignored it since there was
nothing about resolving Tehran’s nuclear ambitions.
Later, in Indonesia, Ahmadinejad labeled Israel a “tyrannical
regime” in one of his many speeches – don’t you wish he’d shut
up for at least a day? – while earlier he questioned the creation of
the State of Israel.
But when it comes to action in the UN Security Council, forget
it. The U.S., Britain and France want a resolution under Chapter
7 of the UN Charter that would make it binding for Iran to
cooperate or face possible military action. But Russia and China
can veto such a proposal and would. Instead, the EU-3 plus the
U.S. are reworking the same old economic incentives in return
for Iran’s dismantling of its uranium enrichment program. Time
ticks by and Iran gets ever closer to having enough enriched
uranium for a test.
Iraq: Shia discontent over U.S. Ambassador Khalilzad, an
Afghan-born Sunni, continues to grow. A banner in Karbala
summed it up, “The American ambassador is the gate through
which terrorism enters Iraq.” [London Times] Of course in this
war it goes both ways as the British were pelted by Shia
protesters in Basra following the downing of a helicopter that
killed five British soldiers.
Overall, the government said there were 1,091 deaths in April
directly tied to sectarian violence, while for its part officials
announced they would attempt to create a unified security force
in Baghdad as a way of dismantling the militias. But who’s to
say they’ll join, or if they do, truly cooperate?
Israel: A boat filled with high-tech explosives was thankfully
seized off Gaza. These were far more sophisticated than what
Israel is used to facing.
But an even bigger story is the growing split between Hamas and
Fatah thanks to the fiscal emergency the Palestinian government
faces; a fuel crisis being the latest result of the cut off of funds
from Israel, the European Union and the United States. By
week’s end, though, all agreed that some humanitarian support
must be forthcoming to avoid a disaster, particularly on the PR
front. Hospitals, for instance, were in dire need of medical
supplies.
Russia: While President Vladimir Putin focused primarily on
domestic issues and national defense in his state of the nation
address, he did throw in this zinger, without mentioning the
United States by name.
“Comrade Wolf knows who to eat. He eats and doesn’t listen to
anyone else, and he doesn’t plan to listen to anybody.”
Putin talked of modernizing Russia’s strategic nuclear forces, but
like past Soviet leaders he chose to highlight his nation’s rapidly
declining population in issuing a series of proposals. Pending
Duma approval (just had to throw that in it’s a rubber stamp as
you know), mothers will receive $55 a month for their first
child’s initial 18 months and then $110 a month for the second
child over the same time period, plus other health and child care
benefits. Sounds like a diet of gruel to me, not that kids that age
are eating much better in the U.S.
Meanwhile, Amnesty International said racist killings in Russia
are “out of control” and in response Putin proclaimed in a
Victory Day speech that neo-Nazis are “leading the world to a
dead end” and would not be tolerated in Russia. Of course he
has.
And this week Russia banned two makes of Georgian mineral
water for “health reasons.” Right. Just this past March, Russia
had banned the importation of Georgian wines, also for health
reasons, they said. Can you say “Bullsheetsky”?
China / Taiwan: Kind of funny that after I talked about the battle
between these two over the South Pacific islands, some of which
still recognize Taiwan over China, the Wall Street Journal had a
front page story on the same topic.
But then there was Taiwan’s wandering President Chen Shui-
bian. Denied a layover in the U.S., except Alaska for refueling,
on his way to Latin America, Chen stayed away from our shores.
However, while in Costa Rica (which along with Paraguay
recognizes Taiwan) for the inauguration of President Oscar
Arias, he made the most of an opportunity to see First Lady
Laura Bush, there to represent her husband. The following is
both comical and pitiful.
From the South China Morning Post:
“In a television broadcast shown live in Taiwan, Mr. Chen was
first seen looking across to where Mrs. Bush was standing. He
then walked towards her, introduced himself and shook hands.
The entire meeting took no more than a minute before Mr. Chen
walked back to his place to observe the ceremony.
“As if the first meeting with Mrs. Bush was too brief, Mr. Chen
approached her for a second time after the ceremony. He was
better prepared that time, with his interpreter taking out a small
digital camera and recording the encounter.”
Taiwanese television reports said the meeting was a planned
“diplomatic encounter.”
Sounds more like me approaching a girl at dance school when I
was in 5th grade. “Hi.” “Hi.”
Korea: South Korean President Roh said he would meet with his
counterpart, Kim Jong il, anytime, anywhere, “to talk about
anything.” Roh said he was committed to provide significant aid
without conditions. Of course this is just what Washington
doesn’t want to hear in light of the dispute over Kim’s nuclear
weapons program, but Roh argues the talks are going nowhere
and his plan is better. This is what I was commenting on
following my recent visit to the region. A majority of South
Koreans are convinced that through economic integration, North
Korea will come around and act responsibly. Maybe Roh is
right, but I choose to believe it’s incredibly na ve.
Separately, North Korea did say it would allow U.S. passport
holders to enter with visas from Aug. 10 to Oct. 10 for the
purposes of attending one of those terrific synchronized
gymnastics competitions as well as some awesome flash card
displays! But if you think you’ll then be allowed to wander all
over the country and interview starving mothers and children, it
ain’t gonna happen.
Sri Lanka: It’s a civil war, despite the ceasefire of 2002, and it
took a decided turn for the worse on Thursday as suicide
bombers in a speed boat rammed a Sri Lankan naval vessel,
killing 17, and then the military bombed the Tamil Tigers. Total
killed about 70.
Britain: Prime Minister Tony Blair acted like he was now willing
to turn over the job to Gordon Brown, but not for another year.
Brown must be close to suicidal.
Thailand: The supreme court ruled that the April election was
invalid.
Germany: The government allegedly paid $10 million for the
release of some hostages in Iraq.
Latvia: While the full parliament and the president can veto it, a
parliamentary committee has approved a plan whereby the
government will publish the names of 4,500 who worked for the
KGB. This wouldn’t be done until Nov. 1, after parliamentary
elections, but you can imagine how such a move would roil the
nation.
Random Musings
--USA Today reported that the National Security Agency has
been collecting Americans’ phone records, looking for patterns
that may aid in deterring terror attacks. Not listening in or
recording conversations, mind you, but this goes beyond the
earlier issue of warrantless wiretapping of calls originating
overseas. While more members of Congress appeared to have
been made aware of this than the wiretapping program, I still
find it a bit troubling. But I’m invoking my “24-hour” rule
before commenting further. Same with the case of the CIA’s #3
man, Dusty Foggo.
--It’s too early to know if any of the above will further impact
President Bush’s abysmal poll numbers, but for now there is
amazing uniformity in the surveys for USA Today / Gallup and
CBS News / New York Times.
Both have Bush with just a 31% overall job approval rating,
while USA Today has only 52% of ‘conservatives’ approving of
Bush and just 51% of them for the Times poll.
[In the CBS / Times survey, only 39% now believe going to war
in Iraq was the right choice.]
In the Times poll, just 23% approve of the job Congress is doing,
but if you think that means we could see a massive shift in the
fall, think again.
According to various political experts, only 25 to 35 races out of
435 House seats are “competitive.” This figure was more than
100 in 1992. It’s all about redistricting and the cost of running a
campaign. As U.S. News & World Report put it, what kind of
democracy do we have? “A Fake Democracy.”
--The only good news for Bush these days is that John Kerry’s
approval rating is 26% and Al Gore’s just 28%.
--We continue to wait for President Bush to issue a veto.
--Just a little tidbit on the structure of the military, courtesy of
The Atlantic Monthly.
“For each American soldier capable of going out on patrol or
fighting insurgents, there are five support troops supplying his
needs, according to an Army spokesman. In other words, of the
roughly 130,000 American troops in Iraq today, only about
25,000 are combat troops. Categories overlap, of course; a truck
driver in a convoy can find himself in a firefight or be hit by a
roadside bomb. Still, when the generals plan how many troops
they need, this is the combat-to-support – ‘tooth-to-tail’ – ratio
that shapes their calculations.”
--From the above mentioned CBS News / New York Times
survey, came this comment from Jane North, 43, a Republican
from Reisterstown, Md., who said she recently changed her
registration to Democrat.
“Bush could put in some kind of regulation to control the profits
of the oil companies. He comes from the oil business, so he
certainly knows how it works.”
I have to tell you, sports fans. I really don’t think Bush
understands the oil business seriously.
--Bush is giving a speech on immigration reform, Monday night.
The CBS / Times poll shows 60% approve some form of
amnesty program, while 35% favor deporting illegals. 66%
oppose a 700-mile fence. What about a 698-mile one, huh?
Actually, the story on Friday is that he’s going to call on our
already overstretched National Guard to help secure the border,
beyond the emergency duties it''s performing in some states.
--Newark, NJ, has a new mayor, Democratic wunderkind Cory
Booker who has long been touted for great things even though he
lost his first shot at the office.
The political scene in Newark is interesting, to say the least.
Booker ran against Ron Rice, a state senator and Pips look-alike.
Mr. Rice is a real piece of work and with a late start in the
campaign didn’t stand a chance against the well-funded
(including a contribution from Oprah) Booker.
But I just had to share a report by Damien Cave of the New York
Times on Election Day.
It seems that Rice conceded from a bingo hall. Earlier, Cave
notes:
“At one point, after stopping by a church to hand out fliers, Mr.
Rice stood alone on Orange Street, smoked a cigarette, drank a
cup of Dunkin’ Donuts coffee and shouted at voters, ‘Come to
my fight, I need you in my corner! Take care of my cuts!’
“At another point, Mr. Rice stopped by Newark’s main post
office, where he waited in line to mail several letters.”
Hey, a man’s gotta do what he’s gotta do!
--Thanks to Britain’s own Freedom of Information Act, we have
learned that six years ago the government conducted a secret
study on UFOs. The conclusion? There is no proof of alien life
forms. I suggest they try harder.
--Actually, start with Kevin Federline, Britney’s husband. I
mean this guy is about to be a father for a fourth time, for crying
out loud.
--Big news on the animal front this week, or so the experts would
have us believe. Scientists in Canada have said DNA evidence
points to a new grizzly-polar bear hybrid; an animal with
predominantly white fur along with brown patches. I’m thinking
it’s really not a new species as much as a fashion statement; kind
of like kids wearing baggy jeans.
Then you had the supposed discovery of a new species of
monkey in Tanzania, one that sports a Mohawk haircut. I don’t
know about this one either. Look for the barber.
--So you’re probably wondering why I’m here in Savannah. It
has to do with the Battle of Shiloh, April 6-7, 1862; one in which
more died on American soil (about 3,400) than had ever done so
to that point in our nation’s history. One of the key figures for
the Union was General Lew Wallace, though he’s best known for
day one, April 6 Lew Wallace’s bad day, to be specific. It
seems Gen. Wallace basically marched around in circles and
didn’t come to Gen. Ulysses S. Grant’s aid until evening, when it
was almost too late, but the Union prevailed in day two.
Wallace nonetheless became a real whipping boy, his career
tumbled for a while, and it bothered him all his remaining days.
But Lew Wallace also went on to write “Ben-Hur.” And so I
came to Shiloh just to get my bearings on a few things
concerning this angle. And I have to thank Ken. H. for giving
me a terrific personal tour on Thursday. But Ken, I can now
admit to you I was scared to death of snakes when we were
walking next to that swamp. It’s not like I had my Swiss Army
Knife with me.
Shiloh, like so many other battles of the Civil War, is filled with
as many mistakes as it is bouts of heroism. All kinds of lessons
to be learned by our future military leaders. I’ve bored you with
this before but to the new readers, you don’t need me to remind
you that during the First Gulf War, Colin Powell and Norman
Schwarzkopf were following the strategy of both Grant and
Stonewall Jackson. And wouldn’t you know it worked like a
dream. Obviously, though, Donald Rumsfeld didn’t apply
Grant’s principles with regards to the second invasion of Iraq.
But it’s too late now.
---
Pray for the men and women of our armed forces.
God bless America.
---
Gold closed at $716
Oil, $71.82
Returns for the week 5/8-5/12
Dow Jones -1.7% [11380]
S&P 500 -2.6% [1291]
S&P MidCap -3.3%
Russell 2000 -5.0%
Nasdaq -4.2% [2243]
Returns for the period 1/1/06-5/12/06
Dow Jones +6.2%
S&P 500 +3.4%
S&P MidCap +7.0%
Russell 2000 +10.3%
Nasdaq +1.7%
Bulls 44.3
Bears 26.8 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Shout out to LT!
Brian Trumbore
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