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09/15/2007
For the week 9/10-9/14
[Posted 7:00 AM ET]
Petraeus, Crocker and Bush
Following are a few questions and comments that arose from the
congressional hearings this week with Gen. David Petraeus and
U.S. Ambassador Ryan Crocker.
Rep. Sen. John Warner: “Is the surge making America safer?”
Gen. Petraeus: “Sir, I don’t know actually. I have not sat down
and sorted it out in my own mind.”
Rep. Sen. Chuck Hagel: “Buy time? For what?!”
Rep. Sen. Richard Lugar: “Do Iraqis want to be Iraqis?”
Dem. Sen. Barack Obama: “(Iraq) has been a disastrous foreign
policy mistake How do we clean up this mess?”
Amb. Crocker: “Our current course is hard. The alternatives are
far worse.” And, “There are no guarantees political
reconciliation will be achieved.”
Editorial / Washington Post following President Bush’s speech.
“Gen. Petraeus and Amb. Crocker have argued this week that the
maximal troop levels are necessary to prevent Iraq from
returning to the downward spiral into sectarian war it suffered
before the surge. They also have emphasized that political
accords will be slower in coming than Washington has expected,
if they are achievable at all. Yet Mr. Bush’s plan for the coming
year is based, once again, on the hope that Iraqis will take steps
that will make the added security provided by U.S. troops
sustainable – and prevent a worsening of the situation when
American brigades withdraw. Though this hope proved illusory
during the past eight months, there will be no change in the U.S.
mission.
“It’s impossible not to be skeptical that the necessary political
deals and improvements in Iraqi security forces will take
place .Still, there are no easy alternatives to the present policy.”
The Washington Post’s David Ignatius:
“(The) Iraq war is turned upside down. The Sunnis who were
our worst enemies are now our best friends. The Shiites for
whom we fought the war of liberation are increasingly obstacles
to reconciliation, and thus our foes. Today’s actual successes
undermine yesterday’s plans for success .our costly bets about
the future are little more than guesses.”
A slew of polls this week all revealed similar feelings. 60-65
percent want to see a withdrawal of U.S. troops, with most
calling for a deadline in 2008. 30-34 percent approve of Bush’s
handling of the war.
Here are some of my own takeaways after President Bush’s
speech.
--The president mentioned again that 1,500 insurgents and al
Qaeda types are being captured or killed since January. I can’t
help but repeat this is a far cry from a few “dead-enders.”
--“One year ago much of Baghdad was under siege.” That was
2006 three years after the start of the war; but then I said I
wouldn’t look back any more.
--The president talked of denying al Qaeda a safe haven, but of
course no mention of Afghanistan and Pakistan being keys to the
fight as well.
--The president said nothing about the massive corruption at the
government level.
--Bush talked of an enduring relationship with the same Iraqi
leadership, but here we are holding secret discussions with
Moqtada al-Sadr, a man many agree should have been killed
years ago. If the purpose of the talks is to prepare a role for him
in a future government, just what the heck does that say? Or are
we just going to give him $5 billion and set him up on the French
Riviera? [I’d check off a box on my taxes for that.]
--What 36 nations?
Well, I do agree with President Bush that a free Iraq would set a
positive example, and I agree neighbor Iran is a big threat and
that a stable Iraq would help check Tehran’s ambitions. And I
believe the alternatives are far worse.
So if I had a vote in Congress, I would continue to fund the
effort, which is the bottom line at this point. Some progress has
been made, but it’s an incredible leap of faith to expect true
political reconciliation.
It’s also clear that the longer we stay in Iraq, the easier it is for
the extremists to recruit. Picture what is being said during
Ramadan in the mosques across the entire region. Not one word
of praise for American resolve you can be sure, not that I’d
expect anything more of the clerics, 99% of whom refuse to
condemn the Islamo-fascists in their midst.
So, as President Bush told us, assuming Congress approves a
new round of funding, we have a new timetable, aside from the
permanent one he suggested. Next March another report from
Team Petraeus and Crocker. Time to turn over the hourglass.
But I need to switch gears. Last week I wrote, “Someday I’ll get
into another topic that disturbs me the increasing disconnect
between the people and the military.”
Ironically, in the past few days there have been a few op-eds
addressing this very issue.
I was also struck by the print ads for Ken Burns’ new film “The
War” about World War II.
“See How the Sacrifices of a Nation Made America the Land of
Opportunity.”
Read this and think of today. What has President Bush asked us
to do as a people? Nothing! He missed yet another opportunity
on Thursday. I’m not talking about supporting your
congressman if you want to keep funding the surge, as he was.
What are we, as a nation, doing to support our troops and, let’s
face it, the suffering people of Iraq? Why couldn’t Bush have at
least said something like the following:
“This war has been painful and not an hour goes by when I don’t
think of the brave men and women of our armed forces and the
tremendous sacrifices they are making. I think all the time, as I
know you do, of the sacrifices being made by their families back
home as well.
“But there are ways we can help, to show the soldiers and their
families how much we care and appreciate them. Many of you
are acting on an individual basis through various organizations,
sending care packages to the troops, writing letters. Churches
across America have their own programs to support the families.
“Regardless of how you feel about the war, one thing is clear.
The American people support those who protect our freedom. If
you want to help and are not currently involved with a specific
effort in your community, go to a Web site we’ve created .
You’ll find a few suggestions.
“And with the start of the new school year, I’d encourage
teachers to have their students write a letter to the troops. You’ll
see an address on the same site. The soldiers and their families
need our support.”
Just this little bit is so simple so why doesn’t he do it?
Roger Cohen / New York Times, 9/10/07
[Quoting Lt. Gen. Peter Chiarelli]
“ ‘The U.S. as a nation – and indeed most of the U.S.
government – has not gone to war since 9/11,’ he observes.
While the military is fighting, ‘the American people and most of
the other institutions of national power have largely gone about
their business.’
“Rarely, if ever, has daily death in combat been accompanied on
such a scale by the maxing out of the credit cards at the mall.
President Bush likes to call himself a ‘war president.’ More
accurately he has been the war-and-shop, conflict-and-home-
equity-credit president.
“Now those two worlds, eerily remote from each other, have
come together in simultaneous Iraq and credit crises .
“Chiarelli has long suffered the disconnect. He saw his soldiers
killed in flimsy Humvees because American industry was not
geared up in World War II fashion to produce replacements .
“ ‘Our current problems raise the legitimate question of whether
the U.S., or any democracy, can successfully prosecute an
extended war without a true national commitment,’ he writes.
“Unless you believe the United States can simply withdraw from
the world, a popular but na ve view, that essential strategic
question needs addressing beyond the Iraq tactics before
Congress this week. An answer is the minimum the now
overstretched shopping nation owes the long overstretched
fighting nation it seldom notices.”
Owen West, former Marine who served two tours in Iraq, in an
op-ed for the Wall Street Journal, 9/12/07
“Nearly six years into the war on terror and the stark irony of
America in modern war has emerged. Our professional warriors
who take the most risk believe the nation must commit to a long-
term fight that includes Iraq in some form. Overall support for
the endeavor wanes with distance.
“This divergence isn’t new. Those who have battled the enemy
up close have always been more heavily invested in a cause.
What’s different is that in past wars, the nation was tied to its
soldiers and had a familial barometer. Today most Americans
have never met a Gold Star family, let alone shaken the hand of a
fallen soldier. The military community is increasingly insulated
even as the burden of global war swells .
“(According) to an August CNN poll, 68% of Americans said
Gen. David Petraeus’s congressional testimony on Iraq this week
would not sway their personal view one way or the other.
Worse, 53% of Americans do not trust him to report what’s
really going on in Iraq, according to a USA Today/Gallup Poll
published Monday.
“This wrenching inconsistency indicates a deeper problem than a
fickle public or an inherent distrust in hierarchy. The poisonous
partisan climate in Washington has seeped beyond the Beltway
and is now harming the public’s trust in the institution that will
continue to sacrifice most in the coming years .
“(While) the country can thrive as a politically divided nation, its
ability to defend itself diminishes alongside faith in the fidelity
of the military. The unbalanced portrayal of the conduct of our
soldiers has done damage enough. To impugn our warriors’
motives as political is thoroughly corrosive and hurts all
Americans.”
But the disconnect in this nation was perhaps best exhibited in
one of the uglier incidents in memory. At the Rutgers-Navy
football game on Friday, Sept. 7, at Rutgers, a substantial
number of students in the Rutgers section serenaded Navy’s
players and uniformed Midshipmen with “F--- you, Navy. F---
you, Navy.”
Mark DiIonno of the Star-Ledger wrote of an Annapolis grad on
the sidelines, Bill Squires.
“ ‘At one point, I thought, we defend this country for people like
this?’ said Squires. ‘I wasn’t embarrassed as a New Jerseyan. I
was embarrassed as a human being.’”
I get into this disgraceful display in far more detail elsewhere on
this site. Suffice it to say, aside from the fact Rutgers’ president
and athletic director were scrambling to apologize to their
Annapolis counterparts, sadly, it’s a reflection of our times and
our clueless society. MoveOn.org’s well-publicized print ad was
yet another example.
We are growing apart as a people and if you’re not concerned,
you ought to be. World War II taught us some supreme lessons
and I can guarantee one thing; as you watch Ken Burns’ epic
(which starts a week from Sunday), you’ll be shedding more than
a tear or two. Not just for the past and the heroism displayed at
home and on the battlefront, but also for today’s America. We
have lost our way, and it’s disheartening. We have paid all too
steep a price the past few years with the mess in Washington,
where both political parties share the blame. It’s time to take
back our government, but for that you need both an educated and
engaged populous.
---
Wall Street
While my main focus for years now has been housing and its
potential impact on the consumer, I have to admit I was surprised
we didn’t see any preannouncements from the likes of
investment bankers Lehman, Bear Stearns, or Morgan Stanley,
all of whom report next week, along with Goldman Sachs.
[There was a cryptic warning from Merrill Lynch, but it revealed
no estimates of the damage, plus Merrill doesn’t report until
October.]
David Wighton and Jeremy Grant / Financial Times
“The leading commercial and investment banks have been in
private talks about how to account for losses in their leveraged
lending and securities businesses due to the credit squeeze.
“The discussions reflect concerns that the various banks could
make very different judgments about the impact of the market
turmoil.
“Banks have a high degree of discretion about how to value the
losses but top executives believe too much variation will
undermine market confidence.”
In other words, don’t expect anything close to the truth.
Treasury Secretary Hank Paulson was interviewed by the
Financial Times and made a rather curious statement.
“The reason (the duration of the current crisis) is going to take
longer today (than previous ones) is that we are more globalized.
Secondly, it is the level of complexity,” he said, adding that he
had met daily with bankers trying to value asset-backed
commercial paper and other products. “When they are confident
they understand the products, confidence will return.”
OK, sports fans. Am I the only one thinking, first, why is
Paulson discussing valuations with these scam artists, of which
he was once one, admittedly, and, second, “When they are
confident they understand the products, confidence will return”?!
This is absolutely pitiful, though it could also be the most
powerful statement of the year. It’s further proof of what I first
said eons ago, “These guys don’t know what they own.” Why
it’s enough to drive one into cash.
But let’s go back to housing and the economy. This week
Federal Reserve Bank of San Francisco President Janet Yellen
said in a speech:
“A big issue is whether developments in the relatively small
housing sector will spread to the large consumption sector,
perhaps through declines in house prices. Should the decline in
house prices occur in the context of rising unemployment, the
risks could be significant.”
While Ms. Yellen ends with the right conclusion, I’m continually
amazed at how Fed officials and other ‘Legends of the Fall’ say
that the housing sector is “small.” What planet are these people
living on?
It’s everyone’s number #1 asset! Start there. If you don’t feel
good about your #1 asset, and you have a lot of debt on top of it,
even if you do have a good job you’re probably concerned, as in
tossing and turning at night, snapping at the kids, and reining in
your spending. I’m not trying to be humorous here. There is a
lot of pain out there.
Thankfully, noted economist Martin Feldstein gets it. From his
important Wall Street Journal op-ed of 9/12/07.
“The time has come for the Federal Reserve to cut the federal
funds interest rate substantially, starting on a path from the
current 5.25% to 4.25% and possibly even less. Without such a
policy shift, the U.S. economy faces the risk of a significant
economic downturn.
“Three separate but related forces are now threatening economic
activity: a credit market crisis, a decline in house prices and
home building, and a reduction in consumer spending. These
developments compound the general weakening of the economy
earlier in the year, marked by slowing employment growth and
declining real spendable incomes .
“In addition to (the) general credit market problems [Ed. The
Bank of England’s rescue of a leading UK mortgage lender,
Northern Rock, on Friday being the latest example], the decline
of house prices and home building will be a growing drag on the
economy. Home building has collapsed House prices are
beginning to decline Since house prices adjusted for inflation
had surged an unprecedented 70% relative to rents and
construction costs between 2000 and 2006, house prices could
now fall substantially further.
“Falling house prices would not only cause further declines in
home building but would also shrink household wealth and thus
consumer spending. A 20% cumulative fall in house prices
would cut wealth by some $4 trillion, implying a decline in
annual consumer spending by about $200 billion or about 1.5%
of GDP – enough to push the economy into recession .
“If defaults become widespread, the process could snowball
driving prices down further .Problems of illiquidity of financial
institutions could become problems of insolvency.”
And don’t forget to have a nice day.
[I do have to add, though, that I don’t agree with Feldstein that
the Fed’s actions will make any kind of real difference.]
The consensus among 52 economists for the latest Wall Street
Journal survey has an average estimate for 4th quarter GDP
growth of 1.9%, with 2.1% growth in the 1st quarter 2008. The
risk of recession over the next 12 months has been pegged at
36% when taking an average of their projections.
The Anderson Forecast out of UCLA predicts GDP growth of
just 1% in both Q4 and Q1 ’08. These guys, fronted by Senior
Economist David Shulman, have been all over the real estate
debacle, particularly in California, and Shulman predicts home
price declines of 10-15 percent nationwide before recovery in
’09. Shulman writes in his report:
“The small recent minimal declines represent not the end, but
rather the beginning of what will be a very painful decline.”
In the critical six-county Southern California region, home sales
in August were at the worst levels in 15 years, but the median
price was still up due to the high-end market. That’s about to
change. [Josh P. passed on that in San Diego County the median
price finally fell $20,000 to $475,000. Inventories here,
reflective of the dreadful picture nationwide, stand at 13
months!]
Homebuilder Hovnanian garnered a ton of press for holding a
sale on new homes this weekend, offering $100,000 in add-ons
and price reductions, as well as attractive fixed rate mortgages
for those who qualify. In some areas the savings are 20% off list.
There are some rather hefty construction and land loans to pay
off, as you can imagine. I keep looking at this monstrous
townhouse development going up two blocks from me and I
know full well what game the developer is playing.
And remember, to repeat myself, this is global. Not just the
short-term liquidity squeeze faced by the aforementioned
Northern Rock, but in asset values. The Brits, for example, are
taking on record levels of mortgage and consumer debt at the
exact time their real estate bubble is about to pop. The London
market will outright crash, mark my words. China’s housing and
property sectors get little press, compared to industrial activity,
but prices there are insane. There are others such as Australia,
where a survey on consumer confidence is at record levels, but
here too, the same report touting this figure in the Sydney
Morning Herald also said “housing affordability” was an
increasing issue. It’s all unfolding at different rates of speed,
around the world, but few will escape the gathering storm.
For now, however, we await the Fed’s decision on interest rates,
Tuesday, and some clarity from the investment banks HA!
Street Bytes
--The Dow Jones registered its biggest gains since April, up
2.5% to 13442, largely on the belief the Fed will be
accommodative. The S&P 500 rose 2.1% and Nasdaq climbed
1.4% to 2602.
I didn’t mention oil in my opening segment for a reason, even
though the price of crude hit an all-time high of over $80 before
finishing the week at $79.10. It just hasn’t mattered, at least not
yet. Of far more import to me are the prices on gasoline and
natural gas futures and thus far, neither has spiked along with
crude. [Soon the focus will turn to heating oil as well.]
As for OPEC, it met this week and raised production 500,000
barrels, a mild surprise, thanks to pressure from the Saudis on its
fellow cartel members, but with daily demand running at 87-88
million barrels, and supply closer to 85, the oil price kept
climbing even after the increase. Regardless, headlines with $80
in them are great for alternative energy plays.
--U.S. Treasury Yields
6-mo. 4.21% 2-yr. 4.05% 10-yr. 4.46% 30-yr. 4.72%
Most await the Fed’s accompanying statement on Tuesday. In
the long run it’s irrelevant.
--In an interview to be aired on “60 Minutes,” former Federal
Reserve chairman Alan Greenspan says he knew about
questionable lending practices in the mortgage sector, including
borrowers with adjustable rate loans who didn’t know what was
about to hit them, thus creating a broad range of problems, but he
“had no notion of how significant they had become until very
late.” We should have pinned the name tag on his windbreaker
years before he excused himself from the table.
[And as always happens with book releases, the Journal got a
copy before Monday’s planned release date and details are
coming out as I go to post. Greenspan slams President Bush and
the Republican Congress for its failure to rein in spending.
Greenspan also calls Bush “incurious” when it came to economic
matters.]
--Oil production in Iraq before the war 2.58 million barrels per
day. Oil production today 1.15-1.5 million, depending on
whether the power stays on long enough to pump it.
--Mexico’s state oil monopoly, Pemex, was the target of six
explosions that shut down pipelines carrying oil and natural gas.
President Felipe Calderon said “Those who attack the security of
the Mexican people under any pretext are attacking Mexico and
democracy.” Evidently a guerrilla group similar to the Zapatista
Army for National Liberation carried out the attacks, seeking the
release of some of its members now in prison, but it’s a
worrisome development, worldwide, if Mexico now becomes a
constant target such as Nigeria has been; both being major
suppliers of crude to the U.S. [Colombia’s pipelines have also
been a long-time target of rebels, but the impact on the global
energy picture here has been non-existent.]
--Shares in General Motors rose on optimism contract
negotiations between Detroit’s Big Three and the UAW will go
relatively smoothly, including the lead issue of long-term retiree
health care. [The UAW selected GM as the ‘strike target’ but
this doesn’t mean workers will actually walk off. Talks have
now progressed past the deadline a good sign.]
--Japan reported growth fell a larger than expected 1.2 percent in
its second quarter.
--Shares in Countrywide Financial rallied on Thursday after the
largest home lender on the planet said it had arranged another
$12 billion in borrowing capacity, enabling it to continue making
loans. This after the company announced its mortgage loan
fundings for August fell 17 percent. I don’t see how anyone can
have a clue whether the worst is over for them. I suspect not.
--You know who nailed the real estate debacle? Former Credit
Suisse analyst Ivy Zelman, who as the Journal pointed out has
started her own firm, Zelman & Associates, to assess the current
state of the housing industry. These days Ms. Zelman says “This
recession in housing is more severe than the 1990 and 1991
downturn. It could have a much broader impact on the economy
than people realize, and it will be longer in duration.”
--California and Arizona investors, in particular, have been
caught up in yet another real estate bubble, this one south of the
border in Baja. Folks have been snapping up condos in new
developments along the coast, shelling out an average of
$500,000, and now many either are reneging on their contracts or
can’t sell units they thought they could flip. The Los Angeles
Times estimates 40 percent of the units were purchased by
flippers. I can’t say I feel sorry for these folks.
--Washington Mutual increased its loan loss reserves to $2.2
billion for 2007 and is laying off 1,000 in the mortgage business,
on top of 10,000 cut at the bank since the end of 2005.
--Goldman Sachs, former home of New Jersey Governor Jon
“Look Ma no seatbelts!” Corzine and Treasury Secretary Hank
“Administration Shill” Paulson, saw its Global Alpha hedge fund
decline 22.5 percent in August on losses from currency and stock
trades. Further redemption notices are no doubt flooding in over
the weekend. [Another fund, Global Equity Opportunities, lost
28 percent in the first eight trading days of August, but rallied
back some.]
--Thank god for McDonald’s. All they do is continue to execute
their business plan, accurately gauging consumer tastes and
trends, beat expectations, and increase the dividend. I was an
idiot for not buying into the story a few years ago and sticking it
in the IRA.
--Back to Dirtball Nation, according to John Aidan Byrne of the
New York Post, “Federal agents are investigating a brazen group
of New York scam artists who raised about $30 million from
unsuspecting investors by posing as principals of a successful
hedge fund and then fleeing with the loot.”
Operating under the name A.R. Capital out of a downtown
Manhattan office, it appears these guys just cold-called
prospects, including a number of college professors, created false
performance records, got more money from the same investors
and then one day poof! They were gone.
--No surprise here two professors at the University of
Pennsylvania’s Wharton School did a study of the private-equity
business and found that “The bulk of the average firm’s earnings
come from profitably refashioning and reselling the businesses it
buys.” In other words, investors are simply being gouged, not
that they shouldn’t have already known this. It’s about the 2%
management fee and the 20% cut of any profit that the buyout
firms retain. And as the Journal’s Tennille Tracy noted, half of
the fees generated fall in the ‘carried interest’ category that has
become a hot topic on Capitol Hill from a taxation standpoint.
[Carried interest revenue is currently reclassified as capital gains
and taxed at 15% vs. ordinary income which is taxed at 35%.
It’s a total scam. But don’t say that to Stephen Schwarzman.
He’s liable to stab you with a $400 crab claw.]
--Dirtball Nation con-tin-uuuuuuuuuuuuessss
Massachusetts regulators charged Morgan Stanley and three
employees with illegally cold-calling prospects who had placed
resumes on CareerBuilder.com. These guys downloaded
“thousands” of them and of course paid no heed to do-not-call
lists, thus violating state and federal statutes.
--As reported by the Wall Street Journal, about 100 investors in a
private equity fund run by disgraced Democratic fund-raiser
Norman Hsu may have been fleeced to the tune of $40 million.
Hsu convinced investors they were going to earn 40 percent on
short-term loans to fashion designers in the U.S. buying garments
made in China.
--I’ve been writing the past few weeks of various health issues,
including a mystery virus that had killed more than 100 in the
Congo who attended a funeral for two tribal chiefs. But now the
World Health Organization has identified a separate outbreak in
the region, that of Ebola, that has also killed over 100 at last
count. Ebola kills more than 80% of those who contract it and
you can get it simply by touching an infected person.
I note these cases under “Street Bytes” because you never know
when something like Ebola or bird flu suddenly explodes to the
point where it cripples economies, though as I heard one expert
say on the BBC the other day, in the case of Ebola it doesn’t
travel well; as in you’re basically dead before you can make it to
a plane.
--Italians were urged to hold a one-day “pasta strike” on
Thursday to protest price increases of 20 percent as the cost of
wheat soars due to increased production of biofuels. As reported
in the London Times, a recent survey found that nearly half of
Italians would rather forgo sex than spaghetti. For me it’s veal
cutlet and sugar cookies, but I digress.
--Inflation in China has become a serious issue with consumer
prices rising 6.5 percent, the most in 11 years. Pork prices have
soared 86 percent due to outbreaks of disease. The central bank
has already raised interest rates five times, including Friday.
Meanwhile, China’s fixed asset investment rose another 26.7
percent over the past year, despite curbs meant to control
runaway spending, which in the field of real estate rose 29
percent, yet another example of the growing bubble in the sector.
And the bubble will burst following the Olympic Games, at least
that’s my bet. While opinion is split on whether the Olympics
will further propel China forward or mark the beginning of far
slower growth, I fall in the slowdown camp for the simple reason
that so much of the spending on infrastructure has been
unnecessary like in the building of unused superhighways.
--Alcatel-Lucent once again proved it has been the worst run
company of the decade as it warned yet again and cut its full-
year revenue forecast. Patricia Russo, the worst CEO in the
history of the free world, said ALU “remains confident that it has
the right combination of people and assets to position the
company as a leading player in the industry.” Ms. Russo will be
exiting stage left shortly, one can assume. As for my Lucent
lawn indicator (its headquarters being blocks from my home), the
last time I drove by hundreds of geese remained encamped,
doing what geese do; which is most symbolic I think you’d
agree.
--An NBC / Wall Street Journal survey showed that approval of
President Bush’s handling of the economy remains at just 38
percent, unchanged from July.
--In a big move, Mohamed El-Erian left Harvard University and
his job managing its endowment to return to PIMCO, where he
will ride sidesaddle with Bill Gross as Co-Chief Investment
Officer, as well as Co-CEO (a position he will share with Bill
Thompson). PIMCO will be aggressively expanding into the
alternative investment arena where El-Erian’s past experiences
should come in handy. This is a big-time positive for my old
buddies here.
--This item in the Journal caught my eye.
“Larry Nelson was named director of global citizenship for Sun
Microsystems Inc. The position is new.”
I want that job! Travel the world, try local beers, be a good
citizen .
Foreign Affairs
Russia: In a surprise move, President Vladimir Putin replaced
Prime Minister Mikhail Fradkov with little known Victor
Zubkov.
The parliamentary elections are in December and the presidential
vote is in March. By selecting Zubkov, a Putin butt-boy, over,
say, leading presidential candidate Sergei Ivanov (your editor’s
choice), Putin is ensuring he retains maximum control at least
through December before the presidential race takes center stage.
While few expect Zubkov to run for president himself against
Ivanov and the other main contender, Dmitri Medvedev, Zubkov
could indeed do so and simply serve as a placeholder for four
years until 2012 when Putin becomes eligible to return. Putin
could then exercise ultimate control, as opposed to seeing
Ivanov or Medvedev build their own powerful bases. Fradkov,
incidentally, was doing just that.
[On Friday, a political analyst who met with Putin said Vladimir
was indeed thinking of a 2012 return.]
Anyway, lots of fun over the coming months watching this all
play out. There is also a slim possibility that the Duma could
amend the Constitution to allow Putin to stay in office, with 66
percent being required to effect that.
Lastly, Russia’s defense ministry was proud to show off its new
super vacuum bomb which given the source should be renamed
the Giant Dirt Devil. Russia proclaimed this to be the “father of
all bombs” with the power of a nuclear blast at a third of the cost,
or something like that.
Iran: Last week I noted the elevation of Hashemi Rafsanjani to
the head of the Assembly of Experts, and how I was frustrated
the United States never talked to him in a serious fashion as a
way of end-running Ahmadinejad. So on Monday, I read with
interest an editorial in Lebanon’s Daily Star.
“(American) pundits often demonstrate a lack of understanding
or appreciation of the complexity and dynamism of Iran’s system
of governance, which has evolved considerably since the days of
the Islamic Revolution. Interestingly, Iran could be on the brink
of yet another transformation, given the recent election of
Rafsanjani, a conservative pragmatist, as head of the Assembly
of Experts, a powerful body that has the authority to appoint and
remove the supreme leader. Rafsanjani has hinted that under his
leadership, the assembly will play a more active oversight role,
and perhaps even introduce key reforms such as term limits on
the supreme leader.
“Iranians are unlikely to abandon their system of Islamic rule.
However, the Iranian public has over the past few years
demonstrated an unquenchable thirst for change. Both
Mohammad Khatami and Mahmoud Ahmadinejad were elected
to the presidency on campaign promises to deliver something
new, whether in the form of political or economic progress. The
parties of both leaders have been punished at the ballot box for
failing to deliver on their pledges. And there is every reason to
believe that the Iranian people will continue to hold their leaders
increasingly accountable.”
I think I’ve proved my point. I respectfully suggest Sec. of State
Condoleezza Rice doesn’t have a clue. Talk to Rafsanjani and
cut a dirty deal with him.
Pakistan: So much for former Prime Minister Nawaz Sharif. His
return from exile lasted all of four hours before President
Musharraf sent him on to Saudi Arabia. Sharif, you’ll recall, was
the one deposed by Musharraf in the 1999 coup. Pakistan’s
Supreme Court, though, which has been very visibly battling
with Musharraf, could rule that Sharif should be allowed to
return, thus setting up another showdown.
A second former prime minister, Benazir Bhutto, announced she
is returning Oct. 18 from self-imposed exile. Bhutto and
Musharraf have been in discussions on a possible power-sharing
arrangement, though neither is popular.
Japan: In yet another political surprise this week, Prime Minister
Shinzo Abe suddenly resigned and then admitted himself to the
hospital, suffering from a nervous breakdown. In Japan, when
the leader’s approval rating drops below 30 percent, as was the
case here, it’s sayonara baby and Abe couldn’t cope with the
scandals that wracked his administration, including the
resignation of five cabinet ministers and the suicide of another.
A successor, which will come from the ruling Liberal
Democratic Party, doesn’t have to call a general election until
2009, however. Of concern to the United States, though, are
changing attitudes over support for the wars in Afghanistan and
Iraq, with the opposition saying Abe had overstepped the stated
mission in helping ferry U.S. troops between Kuwait and
Baghdad, to cite one example. And as the Washington Post
pointed out in an editorial, opposition leader Ichiro Ozawa
absurdly claims the Afghan mission is illegitimate and that the
“the U.S. started this war unilaterally without waiting for a
consensus to be built in the international community.”
[By the way, so much for the talks between the United States,
Australia and Japan in Sydney. With the political upheaval in
Japan, as well as Australia, these now take a backseat, I imagine,
and there was word India was not about to be invited to future
security talks among the three. My alliance proposal will have to
wait another few years.]
North Korea: Investigators from the U.S., Russia and China
inspected the Yongbyon nuclear facility, at the invitation of Kim
Jong il, and all parties called it useful as thus far Pyongyang
seems sincere about seeking help disabling the plant. But of
course there has been little news on other facilities, let alone
Kim’s turning over nukes he already has.
And then you have this situation in Syria, where there are reports
North Korea has been aiding Syria in the development of some
sort of nuclear facility. It now seems this was the target of an
Israeli airstrike the other day. Or as the Jerusalem Post noted,
Israel may have been testing out Syria’s air defense system prior
to further action either there or in Iran.
Israel: As of this writing, Israeli Defense Forces have yet to
respond in any concerted way to a rocket attack on an Israeli
training base that wounded over 60 on Tuesday. Hamas was
responsible.
China / Taiwan: Taiwanese President Chen Shui-bian took the
bold step of warning the United States not to interfere in internal
politics on the island, referring to the upcoming referendum next
spring on applying for UN membership and a de facto
declaration of independence. “(The) U.S. should never take it for
granted that it is a natural thing for Taiwan to cooperate with it,”
said Chen.
For its part, Beijing slammed Chen anew, labeling his call for a
referendum a “provocation.”
“If Chen Shui-bian obstinately and recklessly takes dangerous
moves irrespective of warnings and denouncement of the
international community, he must shoulder all serious
consequences,” said a spokesman for the mainland’s Taiwan
Affairs bureau. “A scum of the nation who attempts to split the
country won’t escape the punishment of history.” ‘Scum’ is kind
of personalizing it a bit, don’t you think?
U.S. Deputy Sec. of State Thomas Christensen said, “While U.S.
opposition to Chinese coercion of Taiwan is beyond question, we
do not recognize Taiwan as an independent state and we do not
accept the argument that provocative assertions of Taiwan
independence are in any way conducive to maintenance of the
status quo or peace and stability across the Taiwan Strait.”
[South China Morning Post]
Turkey: A catastrophe was averted when Man’s Best Friend, a
sniffer dog, detected a giant cache of explosives in a van parked
in a multi-story parking garage in Ankara. One can assume the
vehicle was to be placed elsewhere before detonation, though the
location where it was parked would have killed scores. It isn’t
known whether it was the work of Kurdish rebels or al Qaeda
types.
Morocco: King Mohammed IV is the real source of power here
as he selects both the prime minister and cabinet, but nonetheless
they held free elections for parliament and only 37 percent turned
out last weekend just 27 percent in Casablanca. What this
points out is the tremendous level of discontent in a country with
a 40 percent poverty rate; ergo, perfect conditions for breeding
terrorists.
Australia: Prime Minister John Howard announced he would
retire midway through his next term if he wins reelection in
December. His own party wants him out, even if they are
hesitant to say so publicly. Howard anointed Peter Costello,
treasurer, to succeed him. However, the opposition remains
firmly in the lead in the latest polls. Get used to the name Kevin
Rudd.
Colombia: Success the top drug lord, Diego Montoya, was
captured. The FBI had a $5 million price on his head.
Random Musings
--I forget who I was watching, but an Iraq strategist brought up
the names of Uday and Qusay, Saddam’s sons. It’s easy to
forget them, these Sons of Satan, but every now and then people
need to be reminded that if Saddam was still in power, or, worse,
if these two were actually splitting it, eventually we would have
had to confront them.
--National polls three different surveys USA Today,
NBC/WSJ, AP-Ipsos.
Republicans
Rudy Giuliani ...34, 32, 24
Fred Thompson 22, 26, 19
John McCain 15, 16, 15
Mitt Romney 10, 11, 7
Democrats
Hillary Clinton 45, 44, 34
Barack Obama 24, 23, 20
John Edwards .16, 16, 10
But in Iowa, where the real momentum will be built
Romney 28; Giuliani...16; Thomspon 16
Hillary 28; Edwards 23; Obama 19
--Hillary is returning $850,000 raised by Norman Hsu. This
nightmare is just getting started.
--In all the polls released this week, President Bush’s overall job
approval remains mired in the 30-33 percent range.
--Nebraska Republican Senator Chuck Hagel announced he is
not running for reelection next year, and while he could still
emerge on some kind of third party presidential ticket, the odds
appear to be small.
--It would seem Louisiana Rep. Sen. David Vitter enjoyed New
Orleans far more than he initially let on.
--If you’re doing lines of cocaine while reading this column, you
undoubtedly are feeling it in the wallet as the price hit a record
$118.70 a gram in the spring, up 29% from last year! [I wonder
if the Fed knows this?] Back in April 2005, when the DEA
began calculating the price and purity, a pure gram of cocaine
sold for $93.63. Another stock market indicator? Actually,
what’s happening is Mexico’s efforts on the drug front are
having an impact on supply crossing the border. [Donna
Leiwand / USA Today]
--My brother and I were musing the other day about life in
America. As he observed, growing up it seemed like the world
would just get better and better, despite the Russians and
Vietnam (we’re talking 1960s/70s). Today it seems like it’s just
getting worse and worse.
We can’t find miners, bridges collapse, we can’t take down a
friggin’ building (the Deutsche Bank tower) after being able to
build the World Trade Center, we can’t find Steve Fossett,
everyone is cheating you get the picture.
So you know how I’ve ranted and raved about the lack of true
evacuation plans in our communities these days; as in my
comments following the New York City blackout of Aug. 15,
2003? As I noted this past Aug. 4, I made the following
observation the next day.
“Watching the crowd of up to 100,000 attempting to get
ferries to take them from Manhattan to New Jersey during the
blackout, I kept thinking, what will happen if a dirty bomb or
chemical attack takes place and there’s true panic?”
So guess what we learned this week? The Dept. of Homeland
Security admitted that just 7 percent of urban areas appear
capable of carrying out mass evacuations. Unbelievable. Six
freakin’ years after 9/11. I wouldn’t be surprised to see a coup in
my lifetime.
--But let’s end on a far cheerier note congratulations to USA
Today, McPaper, which turns 25 today. What an awesome
success story, and I for one want to thank Gannett for helping fill
many an hour while traveling with its outstanding coverage of
sports and our nation.
---
Pray for the men and women of our armed forces.
God bless America.
---
Gold closed at $717
Oil, $79.10
Returns for the week 9/10-9/14
Dow Jones +2.5% [13442]
S&P 500 +2.1% [1484]
S&P MidCap +1.1%
Russell 2000 +1.0%
Nasdaq +1.4% [2602]
Returns for the period 1/1/07-9/14/07
Dow Jones +7.9%
S&P 500 +4.6%
S&P MidCap +7.2%
Russell 2000 -0.5%
Nasdaq +7.7%
Bulls 48.3
Bears 31.0 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
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