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11/03/2007
For the week 10/29-11/2
[Posted 7:00 A.M. ET]
On Tuesday, after touring inspiring Independence Hall in
Philadelphia, I was walking through a nearby park when I came
across a statue of Robert Morris, 1734-1806. Morris was a
signer of both the Declaration of Independence and the
Constitution, and was instrumental in raising funds to finance the
war. In time he became one of the wealthiest men in America,
but then I read on his marker:
“Morris speculated heavily in land. Overextended, he fell into
bankruptcy and spent three years in debtors’ prison.”
You see, friends, it really is all about real estate, as we learned
once again this week.
The latest examples of the global property bubble, for instance,
are in Singapore, which announced it was curbing speculation
with home prices up 23% just this year, while with regards to
Britain, Bloomberg News ran the headline, “U.K. Housing
Market Teeters on Edge of Northern Rock.” As reported by
Simon Clark:
“Britain’s expansion has been spurred by a borrowing spree,
thanks to interest rates at 40-year lows from 2001 to 2006. By
the end of 2006, the British owed 1.37 trillion pounds, or 1.61
times their income – the highest rate in the Group of Seven
nations, according to the London-based National Institute of
Economic and Social Research. By June 30, the ratio had grown
to 1.66. The U.S. rate remained at 1.42 during that period.
“Britons poured the borrowed money into housing – and then
used their new homes as collateral to take on even more debt.
Residential property prices soared 189 percent in the past 10
years, almost twice the increase for single-family homes in the
U.S., according to HBOS Plc, the U.K.’s biggest mortgage
lender, and U.S. government figures.
“Consumers have spent some of these gains and loans on goods
such as new kitchens and cars they otherwise couldn’t afford,
said Alan Clarke, a London-based economist for BNP Paribas
SA, France’s biggest bank.
“ ‘The only thing that has been supporting consumer spending
growth is wealth gains from house price inflation,’ Clarke says.
‘This is about to disappear.’”
Where some of us were wrong was in the timing, I’ll be the first
to admit. But the global real estate bubble is beginning to
unravel with a vengeance and of course the first big
repercussions are being felt here in the United States. It sure was
fun while it lasted, though. As a mortgage salesman told Scott
Reckard of the Los Angeles Times in a story on some of the
dicey option ARMs, “Newport Beach, where everyone is driving
a Mercedes and the homes start at $1 million, is like an old
western movie set,” he said, describing the finances of many
wealthy homeowners as precarious. “It’s all just a front, with
stilts holding it up.”
The picture isn’t getting any better as the latest S&P/Case Shiller
index revealed home prices fell an 8th straight month in October,
while economist Robert Shiller maintained there are “no signs of
a turnaround.” Shiller earlier commented that “psychology is
possibly changing worldwide” with regards to real estate, as in
he’s now coming around to my global theory. And in case you
didn’t hear, foreclosures across America doubled in the past year.
As for the banking industry, including those who like to call
themselves ‘investment’ banks, it continued to slowly reveal that
its books are toxic. This week UBS wrote down $4.4 billion in
mortgage-related paper, and, in a bit of honesty missing from
most reports these days in the sector, said not only is there more
pain to come but UBS basically can’t value the garbage it has; as
opposed to some of their brethren who fake it.
But I suppose you want to hear about the Federal Reserve, even
as it remains largely irrelevant at this stage. I said it in August
and I maintain today that while in the short-term its actions can
make a difference, longer-term it’s too late.
This week your central bank lowered the key funds rate 25 basis
points to 4.50% but the Fed scared the market by acting as if this
is it no more cuts. In its accompanying statement the Fed said
“the pace of economic expansion will likely slow in the near
term, partly reflecting the intensification of the housing
correction,” while “upside risks to inflation roughly balance the
downside risks to growth.” So forget that 3.9% rate of growth
for the U.S. economy in the third quarter, we’ll see nothing like
that going forward, though that doesn’t mean we are in turn
lowering rates further because inflation remains an issue.
Inflation indeed is a growing issue; such as in the EU-zone where
it is now at 2.6% and within striking distance of the European
Central Bank’s 3% limit. In other words, the ECB, long a better
inflation fighter than its U.S. counterpart, could be hiking interest
rates at a time when our Federal Reserve is still lowering them.
Can you spell further trouble for the U.S. dollar?
But wait fret not for I bring you tidings of great joy. For unto
us this past week strode Treasury Secretary and Street Shill Hank
Paulson, yet again, who proclaimed from his lofty perch, “I am
strongly committed to a strong dollar.” From the early reviews
of Jerry Seinfeld’s “Bee Movie” that I read; Paulson’s joke
garnered more laughs than anything in Jerry’s film effort.
Staying on the inflation topic, the price of crude finished the
week at yet another high, $95.93, but remember what I’m
focused on gasoline futures, which now sit at $2.43, or well
above my personal Maginot Line of $2.30. While I recognize
$3.00 at the pump has been an issue throughout this year in many
states, here in New Jersey we’ve been residing around the far
more benign $2.65 level. Not anymore. So fill ‘er up
immediately because gasoline is about to rise 35 cents in a
nanosecond.
But why does oil continue to soar and confound the skeptics?
Yes, you have the terror premium, but the inventory picture
amidst still sky high demand is not good, while on the
exploration front, as Schlumberger’s chief said, 70% of all the oil
fields being tapped today are more than 30 years old. You don’t
have to be a Boone Pickens to take it from there.
Street Bytes
--Volatility reigned supreme again as stocks soared at first on the
interest rate cut on Wednesday, then swooned on renewed
concerns over mortgage-related losses and a research report on
Citigroup questioning whether it would be able to maintain its
dividend. [CEO Chuck Prince has reportedly resigned.] Even
news that GDP came in at 3.9% for the third quarter, as well as a
solid reading on October employment, with 166,000 non-farm
jobs being created, couldn’t help as the Dow Jones fell 1.5% and
the S&P 500 lost 1.7%, though Nasdaq bucked the trend to add
0.2%.
The GDP report is ancient history, anyway. The economy is
slowing and the impact from housing is only now being felt,
albeit slightly, as the consumer begins to understand their #1
asset is dead in the water. Two leading indicators of
manufacturing, the Chicago Purchasing Managers Index and the
national ISM, came in worse than expected and added to the
belief we are entering a rough patch.
--U.S. Treasury Yields
6-mo. 3.80% 2-yr. 3.67% 10-yr. 4.32% 30-yr. 4.62%
Bonds rallied anew despite the strong GDP number, the solid
employment report, and a Fed that hinted it was done on the rate
front. Normally, given this threesome, bonds would have tanked
but the credit crisis and the unknown trump everything else these
days.
--Due to my large holding in a China-based biodiesel company, I
have been following the shortage of diesel gasoline on the
mainland closely as to its potential impact on my own
investment, which has held onto recent gains.
The issue is government price controls and the spread between
soaring oil and a far lower retail price, as mandated by Beijing.
Of course if you are a refiner, such as Sinopec or PetroChina,
you lose money under that arrangement and so the refiners
slashed production, or shuttered it outright, leading to gas
stations running dry. Pump prices haven’t been raised in 17
months, until the other day, that is, when the government
relented and allowed them to rise 10%.
Well, this goes to the issue of government-subsidized prices of
key staples, worldwide, and consumers, not just in China, but
India, Malaysia, and other nations are starting to feel the pain.
Low-income citizens, where a market-based gallon or liter of
petrol could equal their daily wage in some cases, will revolt, as
they always have throughout history when governments are
forced to throw in the towel on a subsidy. The UN this week
also warned of the coming crisis, particularly when it comes to
food inflation.
Of course, perversely, when it comes to oil the current
pricing environment can help in hastening the day of viable
alternative energy sources. As for my biodiesel play, I’ll learn
the impact of the mini-crisis in China when it reports earnings
next week.
--Staying on the energy topic, I noted on 10/13/07 in this space
that Big Oil’s earnings have peaked for a variety of reasons,
despite the soaring price of crude, and this has indeed been the
case. Exxon Mobil’s came in 10% lower in the third quarter,
though some would argue $9.4 billion is still pretty good.
Importantly, however, Exxon’s production was off 2%.
Chevron, in its earnings report, spoke of facing a similar
shortfall. Peak oil get used to it.
--New York City Mayor Michael Bloomberg, no dummy, it’s
safe to say, ordered all city agencies to institute a hiring freeze,
while cutting their budgets; this in light of the fact New York is
about to suffer a double whammy lower tax revenues related to
a softer housing market as well as from potentially much lower
receipts from Wall Street.
--Chrysler’s car sales fell 12.4% in Oct., while Ford’s fell 13%,
its 12th consecutive monthly decline. GM’s overall sales slid
0.4% while Toyota’s rose 0.5%. Meanwhile, Chrysler
announced it was eliminating 11,000 jobs, including 1,000 white
collar positions; this on top of 13,000 previously announced in
February. The automaker is also ditching four slow-selling
models.
--New York attorney general Andrew Cuomo accused
Washington Mutual (indirectly, not named, due to restrictions on
a state’s ability to bring cases against federally chartered banks)
of pressuring an appraisal company to inflate home values.
Higher values allow a lender to make bigger loans and earn
greater returns when pooling the securities. Emails show that
Washington Mutual pressured the appraiser in question,
eAppraseIT, as the latter’s president said “we have agreed to roll
over and just do it.” [New York Times]
--Bond insurers such as MBIA and Ambac continue to see their
shares slammed amid concerns over the subprime instruments
they are insuring. Moody’s Investor Services as recently as Oct.
23 rated 97% of Ambac’s $71.5 billion CDO portfolio AA or
better, but since then there have been a plethora of downgrades
of the mortgage pools.
--Cisco Systems announced a $16 billion expansion in China,
including investments in manufacturing and education. Part of
the plan is an agreement with Alibaba Group, China’s biggest
online commerce company, to aid in future business services for
small- and medium-sized operations. CEO John Chambers said
Cisco and China’s Education Ministry will open 300 centers to
train students in networking technologies, with Cisco donating
equipment. “Our commitment is to try to train 100,000 students
over the next three years,” Chambers added. American job
seekers may want to head to China now and marry a mainland
woman.
--It will take a long time for Merrill Lynch to regain its
credibility after the Stan O’Neal debacle and the $8.4 billion
writedown (with more to come). On a personal note, in my days
in the fund industry I dealt extensively with Merrill and found it
to be the most professional of the big firms. First class all the
way, and their sales force delivered for us. [While on the
investment side, at least where I was concerned, no one got hurt!]
But as for the departing O’Neal, he takes with him parting gifts
of $161 million, owing in no small part to Merrill allowing him
to ‘retire’ rather than fire him, which means he got to keep his
retirement funds and stock. [Otherwise, he could have lost stock
that had not vested, for starters.] Merrill says, hey, at least he
didn’t receive a bonus or severance pay. Of course the payoff is
still egregious, but, sadly, this is the system as the rest of us
schleps have learned all too well.
--Inflation watch, part deux: Aussie wheat production continues
to plummet due to the drought there; Australia’s output being
critical to the global food picture. Kangaroos are rioting.
--Shares in Google crossed the $700 level, just weeks after
hitting $600 (10/8), as investors now focus on its efforts to
become the platform for accessing the Internet on cellphones by
introducing a system that is compatible with wireless carriers
such as Sprint Nextel and T-Mobile, while at the same time
looking to bid on licenses for new airwaves to build out its own
network. Google then would offer a proprietary phone, for free,
paid for by ads.
But as one analyst told the Washington Post, when Google gets
into wireless in a serious way, expectations will change. “Do
you ever go to Google for technical support?”
Separately, Google is teaming with social-networking site
MySpace to take on rival Facebook, which just sold a stake to
Microsoft.
--Alcatel-Lucent, in announcing yet another miserable quarter, is
tossing 4,000 more on the street, on top of 12,500 eliminated in
February, blaming housing in part for fewer fixed lines as
revenues plummeted 11%. Incredibly, though, the CFO was
fired but CEO Patricia Russo remains. And it’s not like I’ve seen
her rake the leaves at headquarters to at least begin to earn her
staggering salary.
--Warm weather hurt gunmaker Smith & Wesson’s sales as the
company warned on future earnings. Hunters went to the beach
rather than pick off pheasants and grizzly bears. Dick Cheney
was hunting locally this week and didn’t pick off any humans, as
best as we can ascertain, though this could be easily covered up.
“Your husband was hunting with the Vice President, Mrs.
Crabapple, when he fell into some quicksand. We’re sorry for
your loss.”
Foreign Affairs
Iraq: The U.S. death toll was 39 in October, the 2nd-lowest in
two years and down from 84 in August. Civilian deaths are also
way down as the surge takes hold and some insurgents have tired
of the fight. Of course the Iraqi government remains a total
disaster, as is the reconstruction effort, and perhaps most telling
was the comment by the U.S. Army Corps of Engineers that the
“most dangerous dam in the world” is one near Mosul, that,
should it collapse, could kill, get this, up to 500,000. The Army
Corps is arguing with its Iraqi counterparts as to the severity of
the situation, with the Iraqis saying, ‘no problemo.’
But the big news in country remains the situation between the
Kurdish rebel group, the PKK, and Turkey, with the U.S. and
Iraqi government, finally, at least acting like it will do its best to
reinforce the border (and thus slow the supply lines to the PKK,
let alone the ability to launch attacks inside Turkey). But this
comes after Kurdish President Barzani said any move by Turks
into Kurdish territory would be a declaration of war. Then he
had the gall to call on the Turks to “take a peaceful approach.”
However, it all boils down to Monday and a meeting between
Turkish Prime Minister Erdogan and President Bush in
Washington, where I’m sure the president will promise
everything, but deliver little.
Iran: We’re to learn over the next two weeks just how serious the
West is on confronting Tehran and its uranium enrichment /
nuclear weapons program. The U.S. has vowed that within this
period it will go ahead with tougher sanctions, along with
France, Britain and Germany, even if Russia and China balk,
while by mid-November, the International Atomic Energy
Agency is to issue a key report on the state of Iran’s program,
though we already know one conclusion will be that Iran is at
least three years away from having the bomb.
Gerard Baker of the London Times, writing in its sister paper the
New York Post, said it has gone largely unnoticed that in the
latest request for spending on the wars in Iraq and Afghanistan
was an additional $88 million “to modify B2 stealth bombers so
that they can carry a 30,000-pound bomb called the massive
ordnance penetrator, or MOP. The MOP is an advanced form of
a ‘bunker buster,’” and is obviously intended for destroying
portions of Iran’s nuclear program.
Baker concludes:
“Of all the silly arguments that pass as conventional wisdom in
(the debate over the threat posed by the mullahs) is the claim that
the U.S. would be crazy to start a war with Iran. It’s a silly
argument because America is already at war with Iran. Every
day U.S. soldiers in Iraq are attacked by Iranian-financed
paramilitaries, with Iranian-produced weapons in pursuit of
Iranian political objectives. Iran is manipulating the Iraqi
Government in ways that undercut the steady progress the U.S. is
making in Iraq. The only real question about the next phase in
this war is whether an escalation by the U.S., in a pre-emptive
strike against Iranian nuclear facilities, would further American –
and Western – objectives, or impede them. The evidence is
increasingly suggesting that the costs of not acting are equal to or
larger than the costs of acting.
“Military action is not inevitable; yesterday the U.S. again
emphasized the diplomatic option with a strengthening of
economic sanctions. And it’s still possible that someone will
prevail on the Iranians to ditch their menacing and destructive
aims. But it is starting to look as though, with not much more
than a year left in his term, President Bush has decided, as he
surveys the unedifying global territory of ideological and state-
backed terror, that he needs to clean house. And a 30,000-pound
MOP might just do the job.”
But on the home front, Iranian President Ahmadinejad is facing
growing criticism on the performance of the economy, with the
official inflation rate at 15.8%, and the unofficial one closer to
22%. Many leaders are complaining Iran is spending its oil
revenues as soon as they come in. But, separately, one way Iran
is avoiding the full impact of economic sanctions is to shift its
trade focus from the likes of Germany to the Far East, where
China has now become Iran’s #1 trading partner, surpassing the
Germans.
In light of the above criticism, though, what have I been saying
for years now? End-run Ahmadinejad. The Washington Post’s
David Ignatius, in his column of Oct. 28, notes:
“Behind the scenes in Tehran, another drama is playing out, as
rivals jockey for control of the Islamic Republic. President
Mahmoud Ahmadinejad makes the most noise, so people
wrongly tend to assume he’s in control. In fact, he faces growing
resistance, starting with former president Ali Akbar Hashemi
Rafsanjani. Sources tell me that Rafsanjani’s allies have been
advising officials in Europe and the Middle East that
Ahmadinejad is weak and vulnerable. The hard-liners have
counterattacked by installing a new head of the Revolutionary
Guard Corps who has written on revitalizing the Islamic
revolution worldwide. In another dangerous move, the Guard’s
militant al-Quds Force was recently given responsibility for
defending much of Iran’s coastline.”
Ignatius’ conclusion is that “with each step it takes closer to
conflict, (the Bush administration) is walking toward a well-
planned trap.”
Lebanon: Since the assassination of former Lebanese prime
minister Rafik Hariri in Feb. 2005, I have screamed the U.S.
abandoned Lebanon at the worst possible time and history has
proven this to be so. It’s also been about arming the Lebanese
Army, to a large extent. The Oct. 29 issue of Defense News has
an editorial opining on same.
“The key to thwarting Iran’s regional ambitions lies in helping
those nations that are trying to reject Tehran’s sway – and if
necessary, tearing down bureaucratic roadblocks that slow the
flow of aid.
“In Iraq, it means stopping the flow of fighters, expertise and
funds that support insurgent violence and fuel sectarian strife.
“In Gaza, it means reducing the influence of Tehran’s proxy
Hamas.
“In Lebanon, it means giving the Lebanese Armed Forces the
arms they need to establish the government’s monopoly on
armed force, and bring Hizbullah and other armed groups to heel.
“Earlier this year, the woefully ill-equipped Lebanese Army
surrounded a refugee camp infiltrated by more than 500 members
of a Syrian- and Iranian-backed al-Qaeda-affiliated group. The
siege lasted for more than 100 days, punctuated by brutal
fighting that displaced thousands of civilians and cost Lebanese
troops their lives. Beirut asked its allies for help: weapons and
vehicles and spare parts. The primary target of the requests was
the United States, which decades ago had supplied the largest
part of the country’s arsenal.
“America answered the call, but several factors slowed and
diluted the response. Some of the equipment was so old that it
was no longer in U.S. stocks. Other requests were for advanced
arms – cluster bombs, for example – that would have introduced
qualitatively new capabilities into a region, which is against U.S.
policy.
“But the biggest problem was bureaucratic. Six years into the
global war on terrorism, the U.S. government can’t move quickly
enough to redirect money to cover emerging needs.”
As it turned out, the turning point in the refugee camp battle was
a personal visit from the chief of the U.S. Central Command,
Adm. William Fallon, who within hours had paved the way for
100 missiles from American stocks in Iraq. The Lebanese
Army’s eventual victory was decisive and an important
watershed event. But far more needs to be done to continue to
strengthen the military, and it’s probably too late as Hizbullah
continues to regain ground it lost during the 2006 war with
Israel. The Israelis claim Hizbullah has tripled one class of
destructive missiles since then; this while Parliament leader Saad
Hariri, son of Rafik, claims to have evidence Syria has plans to
assassinate both himself and Prime Minister Siniora.
It didn’t have to be this way, but now we live with a failed White
House policy.
Israel: Palestinian Authority President Mahmoud Abbas claimed
Hamas is looking to overthrow his PA government in the West
Bank. “We have information that Hamas is planning to copy the
Gaza coup,” he said, adding Iran and Syria are supporting
these efforts of course.
As to Israel’s raid on the suspected Syrian nuclear reactor, as the
Wall Street Journal reported the episode is exposing rifts
between hardliners in Washington and the Israeli government,
with Israeli Prime Minister Ehud Olmert making overtures to
Damascus in the aftermath; in sharp contrast to Israel’s position
on Iran and its declared nuclear program.
Jay Solomon / Wall Street Journal
“Israel’s emerging strategy for handling Syria, say U.S. and
Israeli officials, is to identify clear red lines for Damascus not to
cross militarily, but to also keep the window open for
negotiations. On the nuclear issue, those officials say, Israel is
hoping the attack will serve as a deterrent, not a provocation .
“[For its part] the Bush administration is offering few signs it
would be willing to support Israeli efforts to engage Mr. Assad.
Indeed, the Bush administration has moved to ratchet up
financial sanctions and travel bans on Syrian officials for alleged
attempts to overthrow the Lebanese government of Prime
Minister Siniora.”
Newsweek, incidentally, reports that photographic evidence
reveals the suspected Syrian reactor was actually in existence in
2003, at least the main building was up, and if true it represents
another significant intelligence failure by American and other
Western spy agencies.
North Korea: Pyongyang has promised to start disabling the
nuclear weapons program at Yongbyon shortly, but it’s the
degree which is important, as in how quickly would the North be
able to restart Yongbyon, if at all? It was in December 2002,
after all, that North Korea restarted Yongbyon after an eight-year
hiatus. And what of Kim Jong-il’s other nuclear operations?
Russia: December 2 is the referendum on President Vladimir
Putin’s rule, in effect, as he looks for a foothold after he leaves
office next spring following the presidential vote. For now, as
Putin heads up United Russia going into the parliamentary vote,
the party’s popularity has risen from 55% to 68% since the
announcement he would lead the ticket. Personally, I’m kind of
excited by my upcoming trip here as the campaign will be in full
force by then. I should be able to give you some unique insight,
especially in as much as the Kremlin told the Organization for
Security and Cooperation in Europe that no more than 70
observers would be allowed to monitor the vote, compared with
450 in 2003. In other words, ballot stuffing for United Russia is
even more of a certainty and could ensure a parliamentary
majority large enough to change the constitution, thus allowing
Putin to remain in office.
And along the lines of Putin’s move against the OSCE, he told
European leaders, many of whom have criticized Russia on
human rights and democracy issues, that he was planning to set
up his own think tank for freedom and democracy in Brussels or
another European capital in an effort to counter Western
nongovernmental organizations’ activities in Russia. The
Kremlin in the past has accused the NGOs of complicity in both
Georgia’s Rose and Ukraine’s Orange revolutions, as well as
interfering in Moscow’s domestic affairs. Russia does have a
point, somewhat, in the way ethnic Russians are discriminated
against in parts of the former Soviet Union.
Meanwhile, Russia will be filing a claim with the United Nations
by year end to the mineral wealth below the Arctic Seabed,
calling it an extension of the Siberian continental shelf.
Japan: In a big blow, symbolically, to the White House, Japan is
pulling its minimal support for the War on Terror by bringing its
ships home that were fueling coalition forces fighting in
Afghanistan. The opposition demanded it and won. Tokyo’s
latest government is a mess.
Taiwan: President Chen Shui-bian assured lone supporter
Washington that he would consult the U.S. before attacking the
mainland. Really.
Britain: A state visit by Saudi King Abdullah stirred up a
hornet’s nest after Abdullah claimed British intelligence didn’t
act on tips from his country that could have stopped the 2005
London bombings. Human rights groups were furious that
Abdullah came to Britain in the first place and was feted so in
light of Saudi Arabia’s record in treating its own citizens.
Spain: In the Madrid bombings trial, prosecutors failed to
convince the three-judge panel of an al-Qaeda link for the
mastermind and some defendants walked away. But, remember,
seven leading suspects blew themselves up three weeks after the
event.
Italy: The anti-immigrant backlash sweeping much of Europe the
past few years received an unfortunate boost with a brutal, high-
profile murder in a Rome suburb where the wife of a naval
captain died after being raped, beaten and thrown into a drainage
ditch, with a 24-year-old Romanian immigrant the suspect.
Romanians are being blamed for a crime wave in Rome’s major
cities since January, when Romania joined the European Union.
Italy’s parliament is now debating a measure that would allow
police chiefs to expel EU citizens who posed a threat to public
security, as well as immigrants outside the EU.
Argentina: Cristina Fernandez de Kirchner is the nation’s new
president, taking over for her husband a nice trick. She
becomes Argentina’s first elected female president. [Evita Peron
was never president, in case you were just musing.] Neighbor
Chile also has a female president, Michelle Bachelet. In
Argentina, though, many predict Cristina Kirchner will fall on
her face in trying to deal with some huge problems, including
still intractable poverty, a 9% unemployment rate, and rising
inflation, including a severe energy shortage.
Random Musings
--Robert Kagan, in his monthly op-ed for the Washington Post,
comments on the surprising resiliency of autocratic regimes such
as those in China, Russia and Venezuela.
“After the Cold War, many insisted that in a globalized
economy, nations had to liberalize to compete and the economic
liberalization would produce political liberalization. As national
economies approached a certain level of per capita income,
growing middle classes would demand legal and political power,
which in turn would provide the basis for democracy. Some
pundits pointed to the desirability of ‘liberal autocracy’ – the
dictator who could steer his nation through the necessary stages
of development until stable democracy could take hold. [Ed.
Pinochet is an example here.] .
“But for now, it hasn’t worked out as predicted. Rather than
reforming themselves or withering in the globalized world,
autocracies have been adapting. In Russia and China, booming
economies based on expanding international commerce have not
undermined but strengthened autocrats. Richer authoritarian
governments monopolize television and radio stations and keep a
grip on Internet traffic, with eager help from foreign
corporations. The growing Russian and Chinese middle classes
appear willing to keep their noses out of politics so long as the
money keeps rolling in and the penalty for political activity
remains imprisonment or death .
“Autocrats create state power over which they can exercise a
monopoly, like the security forces. But they are the enemy of
impartial administrative institutions that a developing society
needs and that are essential for liberalism. Rather than
strengthen the state, ‘autocrats habitually misuse the state.’
[Thomas Carothers / Carnegie Endowment] They keep
institutions weak, unthreatening and under their control .
“Minxin Pei, another Carnegie scholar, once had high hopes for
the rule of law in China. Today he sees a ‘predatory’ ruling
oligarchy more interested in holding power and enriching itself
than in building an impartial legal system. And it’s not just
China. As Carothers concludes, ‘The idea that rule-of-law
development under autocracy is a natural precursor to democracy
gets the story backwards.’ It is ‘the lack of democracy’ in many
countries that prevents the rule of law from taking root.”
--President Bush thought Michael Mukasey was a safe choice to
replace Alberto Gonzalez as attorney general, but with
Mukasey’s refusal to say whether he considers waterboarding
torture, the nomination was in jeopardy until late Friday when
two key Democratic senators said they would vote for
confirmation.
However, on the specific issue of waterboarding, I continue to
agree with Republican senators John McCain and Lindsey
Graham, who while favoring Mukasey’s nomination, urge him
never to let it be used.
--I thoroughly enjoyed the Democratic presidential debate from
Philadelphia the other day. [No, I didn’t attend.] Hillary
performed miserably, for the first time, and with just two months
to go before Iowa caucus-goers cast their lot, we could yet have a
race despite the national polls showing Hillary whipping her
opposition like a dominatrix.
--In a South Carolina poll, with the Republican primary there
slated for Jan. 19 and Democrats, Jan. 26 [Absurd as is
everything else about the ’08 election], Fred Thompson, Rudy
Giuliani and Mitt Romney are in a dead heat, while Hillary still
has a 10-point lead over Obama, 33-23.
--Democratic presidential candidate Dennis Kucinich questioned
President Bush’s mental health, then, during the Philly debate,
called for his impeachment a number of times (and that of Vice
President Cheney). But when questioned about news stories that
have him believing in UFOs, Kucinich said he had indeed seen
one. I’m assuming it was a hybrid.
--According to various polls, half say they would consider voting
for faux commentator / candidate Stephen Colbert. The highly
legitimate Rasmussen Reports found Colbert taking 13% in a
contest with Hillary and Rudy. We truly are a nation of idiots.
--Karen Hughes’ two-year stint as our nation’s chief
spokesperson, or public diplomat, was an unmitigated disaster.
Anti-U.S. sentiment grew under her watch, in what was one of
the dumber moves by the administration to select her for this
position in the first place.
--International Olympics Committee President Jacques Rogges
issued another warning to Beijing, which Rogges alleges has no
alternative plans whatsoever should pollution levels be too
dangerous for the athletes next summer.
--A shark was found in an Iraqi river, some 160 miles from sea,
and locals are blaming the U.S. military. One teacher told
Reuters that there is a “75% chance” Americans had put the
shark in the water to kill kids that swim in it. Oh brother. You
see something like this and it probably gives Democrats their
best case for folding our tents and leaving the stupid place.
--So I get my sample election ballot for New Jersey in the mail
and not knowing what “public questions” were on the docket, I
perused them.
#4 Constitutional Amendment Concerning the Right to Vote
for Certain Persons
“Shall the amendment of Article II, Section I, paragraph 6 of the
Constitution, agreed to by the legislature, revising the current
constitutional language concerning denial of the right to vote by
deleting the phrase ‘idiot or insane person’ and providing instead
that a ‘person who has been adjudicated by a court of competent
jurisdiction to lack the capacity to understand the act of voting’
shall not enjoy the right of suffrage, be adopted?”
Well, in reading the ‘Interpretive Statement,’ it says “The phrase
‘idiot or insane person’ is outdated, vague, offensive to many,
and may be subject to misinterpretation.”
Misinterpretation by whom? Seems like an apt description to
me. It’s how I’d describe the above Iraqi, for example. I’m
voting this one down.
--Finally, I visited the National Constitution Center in Philly for
the first time, a must see, and there is a terrific multimedia
production titled “Freedom Rising” that sets the tone. You walk
out of the theater with pride in your heart for all that America has
accomplished since its founding, and amazing respect for the
men who shaped our future and gave us the document by which
all else flows.
But at the same time I can’t help but also mention that I watched
the show with mixed emotions from the standpoint that we are
falling short in so many ways these days. We’re a good people,
but we haven’t been doing a lot of great things recently.
Advances in medicine are about the only thing I can point to and
say, ‘Way to go!’ Our leaders in Washington are as pathetic as
any we’ve had in our history, and our materialistic ethos, at all
costs it often seems, is really quite laughable in the grand scheme
of things. Or just look at Wall Street and Corporate America, if
you needed further evidence, and the games it’s been playing
with the law, its books, and just good citizenship. I would also
argue that respect for one’s fellow man has dipped to new lows
in this country, though I may be tainted in this regard by the area
in which I live.
So is America great these days? While the reaction to the
California wildfires, neighbor helping neighbor, was one of our
better moments, overall, it’s a toss-up. I wouldn’t live anywhere
else, but you’re only kidding yourself if you don’t think we need
to do better and soon.
---
Pray for the men and women of our armed forces.
God bless America.
---
Gold closed at $808...first cross over $800 since 1/80
Oil, $95.93
Returns for the week 10/29-11/2
Dow Jones -1.5% [13595]
S&P 500 -1.7% [1509]
S&P MidCap -1.0%
Russell 2000 -2.9%
Nasdaq +0.2% [2810]
Returns for the period 1/1/07-11/2/07
Dow Jones +9.1%
S&P 500 +6.4%
S&P MidCap +10.2%
Russell 2000 +1.3%
Nasdaq +16.4%
Bulls 53.8
Bears 23.1 [Source: Chartcraft / Investors Intelligence]
Have a great week. I appreciate your support.
Brian Trumbore
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