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12/29/2007
For the week 12/24-12/28
[Posted 7:00 AM ET]
2007 2008
Before I take a look back at some predictions, warts and all, and
make some new ones, a few words on the crisis in Pakistan.
This was totally predictable as the reckless Benazir Bhutto,
mother of three, clearly had a death wish; like one of those
‘suicide by cop’ stories you read of where the criminal just wants
to get gunned down. And while many are saying Bhutto was
Pakistan’s last best hope for democracy, that isn’t saying much
about the country and its inability to produce real leaders.
Benazir Bhutto was not a great figure, as I’ve noted before. The
following is from Ralph Peters / New York Post.
“We need have no sympathy with her Islamist assassin and the
extremists behind him to recognize that Bhutto was corrupt,
divisive, dishonest and utterly devoid of genuine concern for her
country.
“She was a splendid con, persuading otherwise cynical Western
politicians and ‘hardheaded’ journalists that she was not only a
brave woman crusading in the Islamic wilderness, but also a
thoroughbred democrat.
“In fact, Bhutto was a frivolously wealthy feudal landlord amid
bleak poverty. The scion of a thieving political dynasty, she was
always more concerned with power than with the wellbeing of
the average Pakistani. Her program remained one of old-school
patronage, not increased productivity or social decency.
“Educated in expensive Western schools, she permitted
Pakistan’s feeble education system to rot – opening the door to
Islamists and their religious schools.
“During her years as prime minister, Pakistan went backward,
not forward. Her husband looted shamelessly and ended up
fleeing the country, pursued by the courts. The Islamist threat –
which she artfully played both ways – spread like cancer.”
I loved the stories the past 24-48 hours of how tragic it was that
this woman, “who was leading a good life in Dhubai and
London,” still felt compelled to come home and save her
country; with zero mention that she was living a life of luxury
because she had looted Pakistan when she was in power; such as
the stories of how she set up all the secret Swiss bank accounts.
And how much can you respect someone who carelessly placed
her followers at risk, with over 170 of them dying in the two
attacks since her October return?!
But what now? Never was there more of a reason to invoke my
“wait 24 hours” rule than today. What I do know, as I wrote in
my 12/8 column, is that the other opposition figure, former prime
minister Nawaz Sharif, “is plotting a coup, post-Jan. 8.”
Sharif is another very bad player, only unlike Bhutto he has
allies in the Islamist movement. Also remember it was Pervez
Musharraf who deposed Sharif in the 1999 coup. It is totally
impossible for these two to form a coalition of any sort, so there
will be a battle between them.
As for the proposed Jan. 8 election, I get a kick out of those who
say Bhutto was set to win the vote. Both Bhutto and Sharif
agreed it was going to be rigged by Musharraf’s supporters,
despite his claim, clearly for public consumption in the West,
that he wouldn’t mind seeing Bhutto get a third term as prime
minister (which went against the constitution).
Obviously there is another victim of this week’s events, that
being the Bush administration for spending $10 billion on what
has been a failed policy. But I would urge the White House at
this time to back off. We will only inflame tensions further by
trying to impose our will. Personally, I am not concerned as yet
about control of Pakistan’s nuclear weapons. For today our
bigger threat remains the loose material in the former Soviet
Union.
---
Here is some of what I wrote 12/30/06, in looking ahead to 2007.
“It’s about 2008, really. In China the lead up to the Olympics in
Beijing and in Russia the lead up to a possible presidential
election should Putin actually step down. I still maintain he will
find a reason to hang on and the constitution will be amended by
next fall .
“Watch the Balkans as the issue of Kosovo gets center stage for a
spell. Nothing too deadly, but between increasing concerns over
Russia’s intentions and the need for vigilance in the Balkans as
well as what should be an increased presence in Afghanistan,
NATO is going to have to confront the fact it is turning
increasingly into a paper tiger and must, therefore, recommit
itself to the security of Europe and beyond.
“France’s presidential election in April could lead to some
fireworks. It should be an exciting race between the comely
Socialist Party leader Segolene Royal and Conservative Nicolas
Sarkozy. Sarkozy will eke out a win.
“Watch Colombia. A growing political crisis could encourage
Venezuela’s Hugo Chavez to grab some territory. Otherwise,
Chavez will be quiet but behind the scenes Iran will be spreading
its agents around the continent to plan for an explosive 2008.
“The Dow Jones will have two dreadful days. One when Iran
tests a crude nuclear device. The second when there is a major
assassination in the Middle East.
“North Korea will test another nuclear bomb, but otherwise will
remain the hermit kingdom as talks over its weapons program
continue to go nowhere.
“Iraq will show solid improvement by July, but it may not be
enough to placate the American people as casualties continue to
mount.
“Afghanistan will stabilize some after a bad 2006. The Taliban,
however, will only be regrouping in Pakistan, along with al-
Qaeda .
“Castro will not die.”
You know, taken in total, not too shabby, really. I missed badly
in the case of Iran and North Korea didn’t test another nuke as it
did enter talks, though the result of them may not in the end
really be to our liking.
The Taliban made its move in Afghanistan a little sooner than I
thought but I had the right idea. Chavez and Colombia are still at
loggerheads (see below), Sarkozy won, Kosovo remains very
much a potential flashpoint, I wasn’t really wrong on the Putin
front, as he does indeed stay in power, and it’s still all about
2008 when it comes to China.
As for Iraq, I claim I nailed this one. Within 30 days of my
target we did indeed see improvement but a majority of the
people would still prefer to see the troops come home, depending
on how the question is phrased by the pollsters.
Lastly, I have to tell you I’m proud about the Castro prediction
(hang in there another few days, Fidel!) because you’ll recall that
one year ago, we had all manner of CIA reports saying he was on
his deathbed. Yes, our “intelligence” is more often than not a
joke.
2008
So what will the next year bring on the foreign policy front?
Iraq: Wait to see if they finally hold a referendum on the status of
oil-rich Kirkuk, which the Kurds want to control, and when
looking at the dynamic between the Kurdish rebels and Turkey,
follow the actions of the Kurdish terror enabler President
Barzani. The Kurds will strike back and launch a series of deadly
attacks in Istanbul and Ankara and the U.S. will be under
immense pressure to remove him.
Iran: March 14 looms as a huge date Iran’s parliamentary
elections and the battle between the hardline supporters of
President Ahmadinejad and the ‘moderates’ led by Rafsanjani.
Ahmadinejad’s forces will lose, thus putting pressure on
Mahmoud to resign as the people revolt over soaring inflation.
[More below on this one.]
Palestinian leader Mahmoud Abbas will be taken out, while
scandals will force Israeli Prime Minister Olmert from office as
he also comes under increasing pressure from Israeli
conservatives to step down over what they’ll see as appeasement
of the Palestinians (before my projected Abbas incident).
As for Israel, Iran and the latter’s nuclear weapons program,
Israel will launch a strike at some point in 2008.
Vladimir Putin and Dmitry Medvedev will face a growing crisis
in Russia over labor issues and soaring inflation here as well.
You will also begin to hear more and more of Kremlin infighting
among the former KGB factions that have set up shop there. It
could get dicey for the tsar.
Kosovo will remain a big issue and could yet explode depending
on how far Russia wants to support its client Serbia.
Kim Jong-il will die, or be incapacitated to the point where his
son will have to take over. The world will shudder as South
Korea gears up for war until the generals who have been behind
Kim all these years reveal their hand, which will be to support
the new Great Leader while standing down the military.
China will face a major crisis on March 22, the date of Taiwan’s
presidential election and a proposed referendum on applying for
UN membership under the name “Taiwan.” Moderates will win
the election and the referendum will be defeated (assuming it
goes through as planned), China long claiming this would be an
act of war.
But prior to the Olympics, an old issue will rear up; that being
the U.S.-EU arms embargo that was imposed on China following
the 1989 Tiananmen Square massacre. France takes over the
presidency of the EU in July and Nicolas Sarkozy will seek to lift
the ban for both personal and commercial reasons, the former
related to a summit planned for China later in the year.
The debate will be fierce, on both sides of the pond, and will be a
particularly thorny one before the Olympics as China is
pummeled by Congress and whomever emerges as a presidential
candidate over the issue of human rights.
China will fight back, but the stage will be set for a very tense
Summer Games and some of the events will take on a tone
similar to the height of the Cold War when there was no better
drama than a U.S.-Soviet Union boxing match or duel on the
track.
The sleeper issue of the year could be chaos in South Africa as
the ANC’s new leader, Jacob Zuma, seeks to take control earlier
than scheduled from Thabo Mbeki. Just this Friday, Zuma was
ordered to stand trial on new corruption charges but I’m
assuming he will be acquitted. The country will be in an uproar
throughout the process. Our concern should be over the safety of
its nuclear facilities, as spelled out last week.
Lastly, look for Pope Benedict to continue his dialogue with
Muslim leaders. Al-Qaeda will scream about it, but if you’re
looking for something positive, maybe there is a surprise or two
on this front.
Wall Street
I wrote the following about 2007 on 12/30/06:
“Those who are trying to convince us housing has bottomed and
that it’s soon back off to the races are nuts. There is absolutely
no way housing, at least as represented by prices, has a good
2007.
“Housing was in a bubble, period. Bubbles, witness Nasdaq in
1999/2000, don’t just pop and then return to old prices. But I’ll
grant you the housing sector could just stagnate for all of 2007,
though I believe instead we will see another leg down.
“Remember, it’s still largely about affordability and not one of
the optimist shills ever brings this up. Prices have only retreated
slightly in the bigger bubble markets and, as represented by the
huge percentage of first-time and new-home buyers who are
taking out subprime mortgages the past 12-24 months, a large
percentage of Americans are still stretching way beyond their
means .
“So in our three-legged stool; housing, the consumer, and capital
spending, housing remains a problem.
“And it will increasingly wear on consumer spending. This
hasn’t happened as quickly as I thought it would, nor has the
market stagnated long enough for psychology to begin to wear
thin. But at some point in 2007 reality will begin to hit
Americans in the face; their leading asset has stopped
appreciating, best case. The reverse wealth effect will then come
into play .
“Bottom line, stocks will meander around the breakeven mark in
’07, call it up or down 3% for the troika – the Dow, the S&P
and Nasdaq – when the final bell rings next December. But then
all hell breaks loose in 2008.”
I then continued the following week, 1/7/07:
“What we will see is rising default levels for individuals; a
harbinger of things to come in 2008. A reason why I’m not
calling for outright disaster just yet is because, yes, there is a
tremendous amount of cash sloshing around and spending at
the top levels of our society will more than make up for shortfalls
at the middle- and lower-income levels. For a while longer, that
is.”
I’m giving myself an ‘A’ for ’07, at least when looking at the Big
Picture. Oh, I got some things wrong, such as calling for just
1.5% growth when the average, after a presumed 1.0% reading
for the 4th quarter, will be closer to 2.5%, and I said the dollar
“will remain largely a non-issue in ’07.” Then again, except for
Americans traveling overseas and a little rumbling on the trade
front, the sliding dollar wasn’t the cause of any panics, rather it
was the credit crunch, which I didn’t foresee in terms of the
securities wrapped around housing.
2008? More of the same. In fact it’s pretty simple. Ditto. Only
this time we do indeed get the recession, as classically defined;
two or more negative quarters in a row in terms of the nation’s
GDP, though for now I’ll say it’s fairly shallow.
After years of overspending, the consumer, weighed down by
their number one asset, their home, will finally cut back in a big
way. It’s not going to help matters any, either, that the big
slowdown will be global. In many parts of the world this is
already the case. Housing has certainly peaked in Western
Europe, and you are seeing strong signs that my long discussed
theme of a global real estate boom/bust has indeed taken hold.
The speed of the decline will of course vary depending on the
size of the bubble. Spain, the UK, and Ireland, for instance, will
take it on the chin far worse than the U.S.
There is a common comment that goes something like this.
“Once we get the credit crisis out of the way ..” Wrong! The
spillover from housing is just getting started. Around the world,
consumers are overstretched and weighed down by personal debt
loads of record proportions. What ameliorated the situation thus
far has been the fact both stocks and home values had continued
upward in much of the world, but now that is no longer the case.
And as the global economy sputters and then grinds to a halt
(with a few exceptions such as China), you will hear all manner
of talk about trade wars. It’s going to take a maximum effort on
the part of world leaders to keep it from spinning out of control.
You are also going to be inundated with more talk of just how
dirty the Street is. The other day the Journal had a story titled
“Pricing Probes on Wall Street Gather Steam: SEC-Led
Investigations Focus on Public Notice, In-House Discrepancies.”
As reported by Susan Pulliam and Kara Scannell:
“The credit crunch that has hurt some homeowners and led to the
Wall Street writedowns has highlighted an unnerving reality in
the financial world: Investors increasingly have no way of
knowing with any certainty the value of many of the securities
now traded .
“In one investigation, the SEC is examining a situation this year
in which a trader at a now-defunct hedge fund of UBS’s Dillon
Read unit was confronted and then ousted after he valued
mortgage securities at prices below the value assigned the same
securities elsewhere at UBS.” [An incident previously disclosed
by the Journal.]
In Japan, they labeled 2007 the year of “deception,” or the big
lie. That was certainly the case in the U.S. as well and it will
continue in ’08 and beyond until we get some leadership in
Washington that the people can respect; that which understands
that U.S. capital markets have indeed become a joke as I ranted
much of the fourth quarter. Wall Street, broadly defined to
include some of the big banks and mortgage lenders, has been no
better than some Third World systems on the transparency front.
This must change, and soon. But as the global economy swoons,
led by the United States, it’s going to be more about finger-
pointing than actual solutions.
Street Bytes
--The reports on holiday retail sales have not been great and
when it all shakes out over the coming weeks, sales will come in
below the National Retail Federation’s 4.8% annual rate of the
past decade. But thus far, most of the surveys still have it pegged
at 3%-4%. I said it would be closer to 2%, but any increase is a
last spasm of activity before the fall. Target, for example, said its
same-store December sales figures will be down 1% to up 1%,
max, a huge disappointment and not auguring well for ’08.
On the housing front, the S&P/Case-Shiller index revealed that
for the month of October, the average home price declined in
value a whopping 6.7% in ten major metropolitan areas from
year earlier levels, while new-home sales for November
collapsed to an adjusted annual rate of 647,000 when it was
forecast to come in around 715,000; a gigantic miss for this data
point. Year over year new-home sales are 34.4% lower than
November 2006. The median price declined just 0.4% to
$239,100, while the average price actually rose a bit to $293,300.
I bring this last one up because as I’m continually harping on the
fact we are in the midst of a global real estate bubble, consider
that this week it was announced the average home price in
England and Wales was $348,000! No surprise then that prices
there have been in decline for three straight months.
--For the holiday-shortened week the major averages all declined
less than 1%. No Santa Claus rally this year. As for my own
predictions for stocks in 2008, equities are not grossly
overvalued, even if earnings expectations are too high. For this
reason I am once again not calling for dire trouble but do say the
Dow, S&P and Nasdaq will finish the year off 3% to 5%.
--U.S. Treasury Yields
6-mo. 3.43% 2-yr. 3.11% 10-yr. 4.08% 30-yr. 4.49%
Rates plunged Friday on the housing news and renewed hope for
further Fed rate cuts.
Seeing as we have one more trading day for bonds in ‘07, I’ll
wrap this topic up next time and address ’08 then.
--Oil surged anew to close the week at $96 on both tensions in
Pakistan and the chances it could spill over into oil-producing
nations in the region, as well as the fact that for a 6th straight
week there were significant drawdowns in crude inventories here
in the U.S. My closely watched gasoline futures figure surged to
$2.46 not good for those looking for gasoline at the pump to
back down below $3.00 any time soon. Instead we’re talking a
national average of $3.15 if we hold current levels.
--Professor Jeremy Siegel had an op-ed in Friday’s Wall Street
Journal on the “January Effect,” the outperformance of small
stocks in the first month of the year. Some of his observations:
“Over the past 80 years, all the outperformance of small stocks
over large stocks has taken place in the first month .In fact, if
you held the S&P 500 index for the 11 months from February
through December and then switched to a small stock fund for
the month of January, your returns would soar to nearly 15% a
year. This return is almost five percentage points above the
market, beating almost all active money managers .
“(The) January Effect (though) has been far weaker since it was
widely publicized in the 1980s. From 1990 through January
2007, the average January return on the Russell 2000 index has
been 1.36%, only slightly more than the 0.70% percent return on
the S&P 500 .
“There has, however, been a bit of a revival of the January Effect
in recent years. Since 2000 the average return on small stocks in
January has risen to 1.68%, versus 0.21% for large stocks.”
--For the archives, various outside opinion on the markets for
’08.
Rich Bernstein / Merrill Lynch 1525 on the S&P, 12/08
Tobias Levkovich / Citigroup 1675
Abby Cohen / Goldman Sachs 1675
Laszlo Birinyi / Birinyi Associates 1700
Francois Trahan / ISI 1750
Ed Hyman / ISI fed funds 3.50%, 12/08
David Rosenberg / Merrill Lynch 2.50%
Brian Wesbury / First Trust 5.25%
[Source: Barron’s / Business Week]
--The projected $14.5 billion budget gap in California will
require drastic cuts in state services and sweeping job cuts at a
time when the state is already in recession by some measures due
to the housing crisis. Governor Schwarzenegger has told agency
heads to plan for 10% reductions across the board for the fiscal
year beginning July 1.
But it’s going to be great for up to 30,000 prisoners who could be
released as one of the cost-cutting moves.
--Canadian Prime Minister Stephen Harper said his government
won’t bail out investors holding $33 billion in shaky commercial
paper (30-90 days maturity); just another example of the
spreading credit crisis. This is not an insignificant amount for
our friends up there.
--ExxonMobil has been denied permission to start work on a gas
pipeline to China from the key Sakhalin-1 project, as well as to
invest in oil deposits discovered near Sakhalin-1’s boundaries.
Gazprom has told Exxon it needs the gas from Sakhalin-1 for
domestic consumption. I just bring this up because it is a further
example of the rough road “Big Oil” faces when it tries to
compete with the growing “State Oil” behemoths around the
globe. It’s why you shouldn’t be surprised to see how tough it is
for the likes of Exxon to replace their reserves when you read the
earnings reports.
--Economist Robert Samuelson / Washington Post
“In a booming world economy, (trade) tensions have so far
remained muted. China’s discriminatory trade practices, for
example, have excited angry rhetoric, but not much else. The
Chinese have generally deflected protests by, among other
things, announcing large import orders at crucial moments.
When European officials recently visited, there was a placating
order for 160 Airbus planes worth an estimated $15 billion.
“But would a global slowdown change that if other countries
blamed Chinese exports for destroying their domestic jobs?
Would import quotas or tariffs follow? Already, China has
turned from the world’s largest steel importer to the largest
exporter .In the United States, the present pattern of global
trade is viewed with increasing hostility: U.S. deficits are seen as
eroding industrial jobs while providing surplus countries with the
dollars to buy large pieces of American firms.
“The world economic order depends on a shared sense that most
nations benefit. The more some countries pursue narrow
advantage, the more others will follow suit. ‘What’s the glue
that holds all this together?’ asks (Harvard political scientist
Jeffry) Frieden (sic). ‘Is there a common agreement about
cooperation that allows governments to give up something to
maintain the international order?’ It’s an open question whether
these conflicting forces – growing economic interdependence
and rising nationalism – can coexist uneasily or are on a collision
course.”
--Commentator Ben Stein / New York Times
“Today, in the midst of the mortgage mess, we see people
breaching their fiduciary duty and getting away with it. A few
may lose their jobs and wander off to a wealthy retirement. But
the ordinary stockholders of the banks and mortgage companies
are staggered. Entities that sought a marginally better return on
their money and were sold exposure to the C.M.O.’s
[collateralized mortgage obligations] are pauperized because of
the losses. And there are reports that Wall Street is expecting $38
billion in bonuses this year.
“I keep hearing well-meaning people say that America is not a
nation if it doesn’t have control over its borders. But are we a
nation if there is no meaningful restraint on what people can do
with an offering statement and a computer screen inside our
borders? We surely cannot remain a republic under law if there
is no law except the axiom from ‘Richard II’ that ‘they well
deserve to have, that know the strong’st and surest way to get.’”
--Goldman Sachs CEO Lloyd Blankfein is taking home a record
$68 million in cash and prizes (stock) for 2007, while Morgan
Stanley’s John Mack and Bear Stearns’ Jimmy Cayne were
forced to give up any bonuses due to their firms’ dreadful
performance in the wake of the subprime mortgage crisis. So
you just know Mrs. Mack and Mrs. Cayne have spent the
holidays screaming at them.
--Merrill Lynch, as rumored, was forced to sell a $5 billion stake
to Singapore’s sovereign wealth fund, Temasek, while Davis
Selected Advisers took down $1.2 billion. But what was pitiful
about the Temasek stake is that Merrill offered it shares at $48 a
share, well off the then price of $58 (before details came out),
thus significantly diluting existing shareholders. A rights
offering would have been the correct way to go but time was
obviously of the essence and provides yet another clue just how
desperate some of the investment banks are to raise capital
before the regulators are forced to question whether their levels
of capital meet federal standards.
--Warren Buffett acquired a 60% stake in the Pritzker family of
Chicago’s Marmon Holdings for $4.5 billion, with the other 40%
to be acquired over the next five or six years. Marmon is
comprised of the kinds of “fundamental businesses” that Buffett
loves, in his own words; wire and cable, railroad tank cars and
water treatment systems.
[Buffett also said it was not time to go bottom-fishing in the
banks, and then he later announced he was creating his own
mortgage insurance firm to pick up the pieces from Ambac and
MBIA, who in turn saw their shares tumble on the news of a
brand new competitor with the Buffett moniker.]
--Speaking of water treatment systems, Barron Hilton is donating
nearly all his $2.3 billion fortune to his family’s philanthropic
foundation that supports projects for safe drinking water in
developing countries and other like causes worldwide. Good for
him. As I’ve noted in the past, those seeking to provide
computers to kids in the African bush with an average life
expectancy of 30 are wasting their time and money if the same
kids don’t have drinking water first.
--Tokyo’s stock market, closed Monday, finished 2007 down
11.1% as measured by the Nikkei Stock Average, its first down
year since 2002.
--We had further confirmation online sales growth this holiday
season slowed to 18% to 19%, according to two leading surveys,
down from the 25% to 30% growth rates of recent years. Of
course no one could expect the previous pace to continue forever,
but the slowdown is considerable and obviously mirrors what’s
happening in the overall retail sector.
Separately, Amazon.com said its biggest shopping day had been
Dec. 10.
--Sallie Mae’s problems continue. The student loan king
revealed the Education Department is investigating its
accounting practices, while due to a credit crisis Sallie was
forced to issue $2.5 billion in common and preferred stock aimed
at shoring up its books; this as the shares hit their lowest level
since 2001, down 66% from the 52-week high.
But I do have to mention that last week I was indeed quoting
CEO/Chairman Albert Lord as he wrapped up his conference call
with an expletive. I received some notes afterwards and realize I
should have made that clearer.
--Once-great portfolio manager Bill Miller continues to
underperform the S&P 500 by a huge margin with his flagship
Legg Mason Value Trust. The fund on a total return basis was
12% behind the S&P as of 12/27.
--Billionaire investor Joseph Lewis, a high-school dropout,
continues to raise his stake in Bear Stearns, now 9.6%, even
though most of what he has purchased to date is significantly
underwater. Then again, who am I to question a man who at 15
was a waiter in his father’s catering company, expanded the
business into a chain of eateries and souvenir shops, and then
made a gazillion in currency trading?!
--While for the month of October (the latest recording period)
casino revenues outside Las Vegas were off 5% or more, such as
at the two giant Indian casinos in Connecticut (Mohegan Sun and
Foxwoods), on the Vegas Strip revenues were up 19.8% over a
year ago despite the jittery economy. As reported by Gary Rivlin
in the New York Times, much of Vegas’ success has to do with
its ability to attract Asia’s high-rollers who have a penchant for
baccarat. At the Venetian and other like properties, for example,
baccarat produced four times more revenue than a year earlier
and now competes with blackjack as the top table game.
--Seeing as we have one more trading day in the year, I’ll get
into my final scorecard for 2007 next time in terms of returns vs.
my recommended mix. I will admit to a lot of tax-selling in
some minor positions of mine this past week, though not in my
major holdings, including the biodiesel play many of you know
of.
Foreign Affairs
Afghanistan: French President Nicolas Sarkozy said all the right
things in a trip to Kabul, including recommitting his nation’s
1,300 troops to the mission, but NATO needs to do far more and
there is no indication Sarkozy will supply significantly more
forces. New Australian Prime Minister Kevin Ruud also traveled
to Afghanistan and recommitted his nation’s force of 900, though
he is sticking to his campaign promise to withdraw the 550
Aussies in Iraq. [South Korea’s parliament voted to extend its
minimal Iraqi presence.]
Iran: What have I been saying for well over a year now? Talk to
former Iranian President Hashemi Rafsanjani, the real #2 in the
country these days, with President Mahmoud Ahmadinejad being
#3. So what happened last weekend? Rafsanjani blasted
Ahmadinejad’s economic policy, “accusing him of fighting
inflation with slogans,” according to a report by Agence France
Presse and the Daily Star.
The pragmatic Rafsanjani said, “Take this issue [inflation] very
seriously .It should be dealt with using economic expertise and
not with slogans and political games. Avoid slogans and
incorrect statistics and bring out realities.” Inflation is 19% as of
the end of November.
Iraq: Turkey continued its air campaign against suspected
Kurdish rebel (PKK) targets, saying at least 150 had been killed
while the PKK says only a handful were. U.S. Maj. Gen. Rick
Lynch, meanwhile, said continued success with the ‘surge’ is all
about jobs, or the forces now aligned with the U.S. will go back
to fighting. “It’s tenuous. It could still go backward.” There is
also renewed talk of infighting between the two main Shia
factions, as well as the reluctance of the Shia leadership to accept
that some Sunnis have truly changed stripes.
Russia: There seems to be a major difference of opinion on
whether the Kremlin is providing Iran with yet another
sophisticated air defense system. Russia denies it is; this after an
Iranian official said the contract had been signed.
In the presidential race, there are officially just five candidates.
Dmitry Medvedev, communist Gennady Zyuganov, nationalist
Vladimir Zhirinovsky, former prime minister Mikhail Kasyanov
and Andrei Bogdanov. A sixth, reformist Boris Nemtsov, pulled
out, saying “Goebbels-like propaganda, force and bureaucratic
pressures are being used against the opposition.” With no equal
access to the media nor debates, the likes of Nemtsov and fellow
reformer Garry Kasparov were just spinning their wheels.
North Korea: Pyongyang has thus far refused to dispose of
unused nuclear fuel and destroy a cooling tower, per the six-party
agreement, which means it would only take Lil’ Kim and his
Orcs three months to restart Yongbyon. The North is bitching
that promised aid has not been forthcoming.
Thailand: After being deposed in a coup 15 months ago, former
Prime Minister Thaksin is angling to return from exile following
his People Power Party’s victory in parliamentary elections,
winning 233 of 480 seats in the lower house. Thaksin is wildly
popular among the poor, even though he was an incredibly
corrupt ruler who still hasn’t faced charges. The ruling military
has vowed he will be arrested should he return.
Israel: The government continues to build settlements, in total
disregard of the ‘roadmap,’ and the White House just sits back,
expecting there to be some magical peace agreement before
President Bush leaves office. It’s comical.
Lebanon: Yet another vote for president was canceled on
Friday, the 11th such instance since it was to have originally
taken place Sept. 25, owing to Syria and Hizbullah putting
up one roadblock after another. While both sides agree the
commander of the Lebanese Armed Forces, General Michel
Suleiman, is the consensus choice, the parties remain at odds
over how to amend the Constitution to allow a senior public
servant to become president, who would lead a new government,
and how many Cabinet seats each camp would get.
For its part, a leading Syrian legislator told an Arab newspaper
that “if Syria feels threatened by Israel, it will be hard to stop our
missile operators from responding to the Israeli aggression by
attacking the Dimona nuclear reactor,” emphasizing Dimona is
“within range” of Syrian missiles. [Jerusalem Post] Not to be
flip about a serious topic, but I would question the accuracy of
Syria’s weaponry.
Taiwan: Secretary of State Condoleezza Rice blasted President
Chen Shui-bian for his proposed March referendum on United
Nations membership, calling it “provocative” for raising tensions
in the Taiwan Strait “unnecessarily.”
China: I found this item interesting from a piece in the Financial
Times.
“Former Nanjing university professor Guo Quan on Wednesday
claimed his ‘New Democratic party’ enjoyed widespread backing
for its goal of ending Communist ‘one-party dictatorship’ and
introducing multi-party elections. ‘We must join the global
trend,’ Mr. Guo said. ‘China must move toward a democratic
system.’”
Light a candle for this man’s safety.
Serbia / Kosovo: There is an intense debate going on within the
Serbian leadership over the issue of Kosovo. Prime Minister
Kostunica condemned the United States. “America is openly
striving for the destruction of the international order. America,
which once seemed like a symbol of freedom, now advocates the
policies of force.” Serbia’s president, though, Boris Tadic, said
that while the country must strive to keep Kosovo, it should not
give up “its European future” in the effort.
Venezuela / Colombia: President Hugo Chavez may have pulled
off a public relations coup in securing the release of some
prominent hostages held by Colombia’s largest rebel group,
FARC. One of them is a former congresswoman, though 44
other high-profile hostages, including three American defense
contractors, remain in custody. Colombian President Alvaro
Uribe had told Chavez to butt out of negotiations, but FARC
clearly has an affinity for their fellow socialist.
Random Musings
--Here we go Thursday, Iowa. Jan. 8, New Hampshire. Who
will have the Big Mo after these two? Real Clear Politics takes
an average of all recent polls. Rounding off
In Iowa, it’s Hillary 29, Obama 27, Edwards 24. For the
Republicans, it’s Huckabee 29, Romney 26.
In New Hampshire, it’s Hillary 32, Obama 29; while for the
elephants it’s Romney 30, McCain 26.
[A late Bloomberg / L.A. Times survey in Iowa has Hillary 29,
Obama 26, Edwards 25; while in New Hampshire it’s Obama 32,
Clinton 30.]
In other words, this is going to be fun, sports fans!
[I’m deferring comment on Huckabee’s Pakistan remark until I
see his explanation on “Meet the Press.” For now, let’s just say
it was a “Not Ready for Prime Time” performance.]
--The Washington Post’s Charles Krauthammer wrote the
following:
“Just four months after Sept. 11, George Bush identified Iran,
Iraq and North Korea as the ‘axis of evil’ and declared that
defanging these rogue regimes was America’s most urgent
national security task. Bush will be judged on whether he
succeeded.”
This is only partially correct. Bush is going to be judged by
historians on the direction taken by Russia and China as much as
the other three.
But I do agree with Mr. Krauthammer when he reminds us that
taking down Saddam was not the only story, it was about “his
monstrous sons,” too. Many are forgetting that Uday and Qusay
would have been total nightmares in their own right.
--The Air Force has been forced to ground hundreds of F-15s
because of dangerous structural defects.
It seems the F-15 is the sole fighter at many of the 16 or so
“alert” sites around the country, where planes and pilots stand
ready to intercept hijacked airliners or other threats, and the first
alternative, the F-16, is in high demand for Iraq operations.
Military officials are trying to convince us not to worry, but the
fact is, for example, California’s Air National Guard is standing
watch for the entire West Coast, the first time in its history it has
had to do so.
Enter Canada. For three weeks in November, Canadian CF-18s
filled in for the F-15s over Alaska, according to Scott Lindlaw of
the AP, and several times the Canadian fighters were forced to
scramble to identify Russian bombers flying exercises outside
U.S. airspace.
Now if I’m a Democratic presidential candidate with a resume of
being a hawk on defense (see Hillary), I’d make major hay of
this issue; not that I’m giving her any advice, mind you. I’m
assuming John McCain is bringing it up as part of his overall
program to reform the Pentagon.
--Funny piece by Julie Bosman of the New York Times on John
Edwards and his penchant for being late. “He routinely begins
events more than 45 minutes or even an hour past the scheduled
starting time, keeping dozens or, lately, hundreds of people in
jam-packed rooms awaiting his entrance.”
Yoh, John. The race is close enough as it is. Can you truly be
this stupid?!
--Back on 12/15 in this space I wrote of the New York
Philharmonic being invited to play Pyongyang in February and
how it should be forced “to play some Shostakovich” in an
attempt to drive the Commies crazy, forcing them to divulge all
their nuclear secrets.
So what do I see in Terry Teachout’s Wall Street Journal column
of 12/22?
“(It) is not the job of the New York Philharmonic to enact
foreign policy, much less to besmirch its own honor by taking
part in what, in a previous column on this topic, I called ‘a
puppet show whose purpose is to lend legitimacy to a despicable
regime.’ .
“How might the Philharmonic emerge from this misbegotten
venture with its honor intact? The answer came from the
musician who accompanied me to last Friday’s concert. In the
hush that followed the rage and anguish of the first movement of
Shostakovich’s Fourth Symphony, she leaned over to me and
whispered, ‘Forget Gershwin – this is what they ought to play in
North Korea.’ And so they should. Instead of handing out
musical bonbons to Kim Jong il, Mr. Maazel and the
Philharmonic could pay tribute to his innocent victims by
performing a piece that speaks with shattering eloquence of the
devastation wrought on an equally innocent people by an equally
vicious tyrant.”
Mr. Teachout and I have slightly different goals, but we use the
same methods. I’ll admit some, though, would probably
compare it to waterboarding.
--The U.S. population is up to 301.6 million. Nevada is #1 with
a gain of 2.9% in 2007, while Arizona is next at 2.8%; two of the
hottest real estate markets, coincidentally. Rhode Island and
Michigan lost population, while two local states with super high
taxes, New Jersey and New York, came in at #43 and #47,
respectively, with basically flat growth. Here in Jersey, my
friends and I talk of all those fleeing the state. It’s home, and
comfortable, and I like being near New York, but from an
economic standpoint it’s a total disaster.
--Good news on the crime front. Los Angeles will record less
than 400 homicides for the first time since 1970, or about 1/3
1992’s total. And in New York, there will be fewer than 500, the
lowest ever since accurate records have been kept going back to
1963.
--In an annual USA Today / Gallup survey of the most admired
men and women in America, President Bush is named by 10%,
his lowest since he took office, with Bill Clinton next at 8%.
[Presidents almost always come in first.] Hillary Clinton takes
first among the women for a 12th time with 18% to Oprah’s 16%.
Then it’s a big drop to third, Condoleezza Rice at 5%.
Personally, I’d go with Gen. David Petraeus and Peggy Fleming.
[For you younger folk out there, think 1968 Winter Olympics.]
--Speaking of Petraeus, it’s time for the “Week in Review /
Person of the Year.” For my purposes it must go to a political
figure; the consequences of governance, or lack thereof, being
central to what we explore in this column. As you can see
below, if there is no obvious choice, I’m not naming one.
2001 – George W. Bush
2002 – no one cited “unfinished business in Iraq”
2003 – George W. Bush, Tony Blair and John Howard
2004 – Hamid Karzai
2005 – Ariel Sharon
2006 – no one
2007 – Gen. David Petraeus and Defense Sec. Robert Gates
In stretching my ‘political’ definition slightly in naming the
general, in particular, this tandem was able to change the tenure
of the debate. It’s funny how a few weeks ago I was spelling out
a scenario for a brokered convention, in either party, and how my
dream was to have Petraeus ride in on his white horse to save us,
and this past weekend on “Fox News Sunday” the general said he
had absolutely no interest in politics when asked. Of course
you’d expect him to say that, but there are more than a few
others with my thinking on the subject out there.
As for Gates, what an incredibly refreshing change from his
predecessor. He is the ultimate pragmatist, at a time calling
exactly for that.
Here at StocksandNews, I also select a “Dirtball of the Year,”
awarding this to the one person who has negatively impacted the
lives of millions while shunning accepted standards of behavior.
2000 – Robert Mugabe
2001 – Osama bin Laden
2002 – Mugabe
2003 – Saddam Hussein and bin Laden
2004 – Abu Musab al-Zarqawi
2005 – Zarqawi
2006 – Mahmoud Ahmadinejad
2007 – Mugabe
Over the past decade, no one has ruined a country like Robert
Mugabe has done with Zimbabwe.
And just a word on the heat some are giving Time for selecting
Vladimir Putin as its “Person of the Year.” I couldn’t care less
about the magazine, but the mandate there has been to select the
person who made the most news “for better or for worse.” I have
a different definition for my site and thus couldn’t pick Putin. On
the other hand, I thought about him for “Dirtball,” but when you
have an 80% approval rating from your own people, it would
have been non-sensical for me to do so. That said, I defend
Time’s selection to the hilt. It was the right call for them.
--That Mars / asteroid story I noted last time is going to be big
real big. But a report from McClatchy-Tribune News Service
notes:
“If many scientists get their Christmas wish, an asteroid the size
of a Boeing 737 jet will slam into Mars late next month, leaving
a crater that could be more than half a mile wide.”
But don’t you see? They’d blame us! So we’re damned either
way. If our cameras observe the asteroid is shot out of the sky,
we have a serious issue. But if the Martians’ defense systems
aren’t quite up to snuff, they won’t ask any questions – not that
we’d be able to understand them – and just send their legions
here.
--The Washington Post reported that yet another Smithsonian
museum director, in this case the founding director of the
National Museum of the American Indian (a lousy one,
incidentally), W. Richard West Jr., spent more than $250,000 in
institution funds over the past four years on first-class
transportation and plush lodging, including some spots you
ordinarily wouldn’t associate with American Indians, such as
New Zealand, Australia, Greece and Sweden; the latter to visit
Chief Lars Lundgren of the Reindeer tribe, I imagine.
--Tony Blair converted to Catholicism and, interestingly, there
are now more Catholics than Anglicans (Church of England) in
Britain, but only 6% attend church regularly throughout the
country vs. about 40% in the U.S.
--Finally, at midnight Christmas Mass, Pope Benedict offered the
following:
“Man is so preoccupied with himself, he has such an urgent need
for all the space and all the time for his own things, that nothing
remains for others – for his neighbor, for the poor, for God. And
the richer men become, the more they fill up all the space by
themselves .
“Do we have time for our neighbor who is in need of a word
from us, from me, or in need of my affection? For the sufferer
who is in need of help? For the refugee who is seeking asylum?”
---
Pray for the men and women of our armed forces.
God bless America.
---
Gold closed at $842
Oil, $96.11
Returns for the week 12/24-12/28
Dow Jones 0.6% [13365]
S&P 500 -0.4% [1478]
S&P MidCap -0.7%
Russell 2000 -1.8%
Nasdaq -0.7% [2674]
Returns for the period 1/1/07-12/28/07
Dow Jones +7.2%
S&P 500 +4.2%
S&P MidCap +7.3%
Russell 2000 -2.0%
Nasdaq +10.7%
Bulls 54.9
Bears 23.1 [Chartcraft / Investors Intelligence]
Happy New Year! And a Happy Birthday to our own Dr.
Bortrum. It’s a big one. Like five times Jamie Lynn Spears’
age, if you catch my drift.
Brian Trumbore
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