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03/12/2011

For the week 3/7-3/11

[Posted 7:00 AM ET]

Note: The following is being posted 90 minutes after word of an explosion at one of Japan’s damaged nuclear plants. I am unable to comment further.

Earth In Crisis

In the past 14 months we have seen not only natural disasters of historic proportions, but the magnitude, the intensity of them, has been on a scale that I can’t imagine our planet has seen before in recorded history, not just one or two events, but about ten of ridiculously devastating proportions.

Earthquakes in Haiti, Chile, New Zealand (twice) and now Japan.

Historic flooding in Australia, China and Pakistan. A Cyclone, Yasi, that was the largest and most intense to ever hit Australia, after the flooding there.

Catastrophic droughts in China and Russia.

Again, we aren’t talking weather events such as Europe’s record-cold December, or the blizzards that struck the east coast and Midwest of the United States this winter. What we’ve witnessed outside the U.S. are natural disasters of immense intensity that hundreds of years from now will be referred to by scientists as a wonder. You also can’t begin to try and explain it and in terms of Friday’s cataclysmic quake and tsunami in Japan, America must do everything it can to help our great ally, an ally that it goes without saying we need more than ever with the rise of China in that neighborhood and the ongoing threat from North Korea.

Ironically, I was going to be reporting this week how distressing the situation was in Japan, politically, and how one American screwed up beyond belief. The government of Prime Minster Kan has been on the ropes as Japan faces another campaign donor scandal, a scandal that this week claimed the foreign minister. Kan was in danger of being just another failed leader when the earthquake hit. It is assumed now he will survive at least for the initial phases of the cleanup.

Earlier, one of our diplomats, Kevin Maher, called Okinawans “masters of manipulation and extortion” in a speech at an American university late last year that just came to light in the Kyodo News.   Maher told Kyodo the account was “neither accurate nor complete,” but the damage had been done. Maher was fired and Kurt Campbell, the assistant secretary of state for East Asia had to apologize on behalf of his government. No doubt the U.S. military has had its issues on Okinawa, though you’ll recall many of our wounds were self-inflicted, as in some high-profile sexual assault trials. The U.S. and Japan are in the midst of a sensitive negotiation to relocate a Marine facility from one part of the island to another. Bottom line, the U.S. desperately needs to keep the presence here because we can’t just keep overloading Guam and expect to be able to rush 50,000 troops into any emergency that may erupt in that area (such as a Chinese attack on Taiwan, or a China-Japan conflict over oil and gas rights in the East China Sea).

So this was the background before Friday’s disaster and now these same U.S. forces are being asked to aid our friends in their time of need. But we need Japan as much as they need us, even if a vast majority of Americans don’t understand the geopolitics of the region that threaten to blow this decade wide open.

Staying on the topic of hot spots, there’s North Africa and the Middle East.

The world is not black and white, as much as some want to paint it as such. Particularly in this vast region, each nation is different. I told you exactly what would happen thus far in Libya and Saudi Arabia and I see no reason to change my tune on either one. In the case of the former, we had further evidence this week that the rebel forces are weak and untrained, whereas Gaddafi has the equipment and disciplined elite fighting units that are also very well paid. It’s why the Director of National Intelligence, James Clapper, who oversees 16 separate intel agencies, told Congress that Gaddafi’s “regime will prevail.” In the case of the Saudis, King Abdullah initially offered $10 billion in social programs to keep the peace and then increased the package to $36 billion, so, when coupled with a massive police presence, the Saudis successfully stunted any thoughts of a “day of rage” among the country’s disaffected.

Of course Mr. Clapper’s remark was immediately knocked down by his bosses at the White House, a place that were events not so serious could be relabeled the Comedy Club because it is downright comical how there is zero uniformity in message these days regarding a part of the world that threatens to spin out of control far worse than what we’ve already seen and this is one time, above all others, that the administration needs to be speaking with one voice and have one message. None of this ‘we’re in,’ ‘we’re out,’ ‘we’re in,’ ‘we’re out’ garbage. 

This doesn’t mean U.S. ground forces need to go everywhere. We know the military is stretched as it is and we also have to weigh whether Country X or Country Y are in our nation’s vital interests.

But by waffling all over the place the message we’ve sent to the likes of both Saudi Arabia and Israel, for starters, is how can you trust the United States when they summarily dump an ally like Hosni Mubarak?

Next week, Secretary of State Hillary Clinton is going to the region and making a high-profile visit to Egypt and lord knows what’s going to come out of her mouth, and how quickly the White House will have to refute it. I would hope for starters that Clinton makes it clear that the Christian minority in Egypt, once again a victim of violent clashes in Cairo this week, needs to have its rights protected.

There is no doubt Egypt is the key to peace in the region. If Egypt goes the way of Islamic extremism, such as with the Muslim Brotherhood, Israel will be basically encircled.

Some opinion…Editorial / Wall Street Journal

“America’s response to the Libyan crisis is stuck in repeat mode. The Obama administration keeps insisting that a ‘full spectrum of possible responses’ are in play to stop Moammar Gaddafi’s war on his people. And in virtually the next breath, it rules out one credible option after another.

“An egregious example concerns the possible supply of military assistance to Libyan rebels. White House spokesman Jay Carney said on Monday that ‘providing weapons’ to the opposition was among a ‘range of options.’ The next day State Department spokesman P.J. Crowley shot this option down.

“ ‘It would be illegal for the United States to do that,’ Mr. Crowley said, citing U.N. Security Council Resolution 1970, which sanctions the Gaddafi regime and only passed with U.S. support on February 26. ‘It’s quite simple. In [the resolution] there is an arms embargo that affects Libya, which means it’s a violation for any country to provide arms to anyone in Libya.’

“One question is how the State Department allowed such a resolution to pass in the first place, President Obama has said he wants Gaddafi to leave, yet his own diplomats negotiate and approve a U.N. embargo that reduces his options in achieving that goal. Why are we still paying Ambassador to the U.N. Susan Rice?”

I’ve always found Ambassador Rice to be pathetic and not ready for prime time.

Bret Stephens / Wall Street Journal

“(The) outcome we risk if Gaddafi survives is the very opposite of the optimal: Friends lost, enemies maintained, and new regimes left to wonder just what, exactly, are the benefits of an alliance with a diffident America.

“Nor is that the worst of it. Iraq’s Shiites did not soon forgive what they saw as America’s gratuitous betrayal after George H.W. Bush had urged them to ‘take matters into their own hands.’ Today’s Egyptians aren’t impressed by the Obama administration’s see-which-side-comes-out-on-top performance during their own uprising. What will Libya’s people say of a U.S. that abandons them to a cruel fate? And what message does that send to the region’s potentially most consequential opposition movement, Iran’s still-defiant Greens? Then again, they already know of what stuff this president is – or rather isn’t – made of.

“It remains possible, even likely, that Libya’s rebels will again seize the initiative and treat the Gaddafi family to the fate they so richly deserve. No doubt that’s the outcome for which the administration is keeping its fingers crossed, on the theory that Libyans will be better served in the long run if they needn’t share the credit for their own liberation. There’s some truth to that.

“But also true is that at the moment when more than just the future of Libya and the safety of its people lies in the balance, Mr. Obama has left things to chance. He thinks he’s lucky. What’s the plan if he isn’t?”

George Will / Washington Post…the other side of the debate.

“In September 1941, Japan’s leaders had a question for Adm. Isoroku Yamamoto: Could he cripple the U.S. fleet in Hawaii? Yes, he said. Then he had a question for the leaders: But then what?

“Following an attack, he said, ‘I shall run wild considerably for the first six months or a year, but I have utterly no confidence’ after that. Yamamoto knew America: He had attended Harvard and been naval attaché in Japan’s embassy in Washington. He knew Japan would be at war with an enraged industrial giant. The tide-turning defeat of Japan’s navy at the Battle of Midway occurred June 7, 1942 – exactly six months after Pearl Harbor.

“Today, some Washington voices are calling for U.S. force to be applied, somehow, on behalf of the people trying to overthrow Moammar Gaddafi. Some interventionists are Republicans, whose skepticism about government’s abilities to achieve intended effects ends at the water’s edge. All interventionists should answer some questions:

“The world would be better without Gaddafi. But is that a vital U.S. national interest? If it is, when did it become so? A month ago, no one thought it was.

“How much of Gaddafi’s violence is coming from the air? Even if his aircraft are swept from his skies, would that be decisive?

“What lesson should be learned from the fact that Europe’s worst atrocity since the Second World War – the massacre by Serbs of Bosnian Muslims at Srebrenica – occurred beneath a no-fly zone?....

“If we decide to give war supplies to the anti-Gaddafi fighters, how do we get them there?

“Presumably we would coordinate aid with the leaders of the anti-Gaddafi forces. Who are they?

“Libya is a tribal society. What concerning our Iraq and Afghanistan experiences justifies confidence that we understand Libyan dynamics?....

“The Egyptian crowds watched and learned from the Tunisian crowds. But the Libyan government watched and learned from the fate of the Tunisian and Egyptian governments. It has decided to fight. Would not U.S. intervention in Libya encourage other restive peoples to expect U.S. military assistance?

“Would it be wise for U.S. military force to be engaged simultaneously in three Muslim nations?”

Which brings me to Iran.

Going back to at least 2006, I was urging the then Bush administration to deal with Ayatollah Hashemi Rafsanjani in an attempt to end-run President Ahmadinejad, the man who defeated Rafsanjani for the presidency in 2005.

Rafsanjani was a leader of the 1979 Iranian Revolution and a former president from 1989-97 when he oversaw Iran’s reconstruction following its devastating war with Iraq.

Rafsanjani has a checkered past, but he is also a pragmatist, as well as a billionaire through his many commercial interests, and he despised Ahmadinejad for his vitriol because he didn’t want to see Iran get hit with the sanctions that ended up killing Iran’s economy.

Rafsanjani, I argued, was the one man the West could cut a deal with on the nuclear front. Since 2007, he was chairman of the Assembly of Experts, an 80-man body that has the power to appoint and dismiss the supreme leader, now Ayatollah Khamenei.

Rafsanjani then supported the opposition in the 2009 presidential election and we know how that went. Rafsanjani’s children were visible in their support of the opposition figures as well and to the best of my knowledge are now all in exile.

The Bush administration, if our president had any intellect on such matters, had an opportunity to stir things up and just as it missed similar opportunities in Lebanon to marginalize Hizbullah following the 2005 assassination of Rafik Hariri, President George W. Bush twiddled his thumbs and his nudnick Secretary of State Condoleezza Rice did the same.

Fast-forward to today and it was clear from day one of the Obama presidency, as I pointed out constantly in these pages, that it was more important to them to try and cut a deal with a whack job, Ahmadinejad, who stole an election, rather than once again work behind the scenes with Rafsanjani, which in effect would have also been supporting the opposition.

And so if you put aside Japan and its tragedy, this past week will be known for another event garnering little press, the ouster of Hashemi Rafsanjani from the Assembly of Experts in favor of an 80-year-old ultra-conservative loyalist, Aytatollah Kani. Check out his picture. He looks like the devil…and he will play the part.

This is awful news. Frankly, it’s the beginning of the end in terms of the West ever being able to deal with the Iranian regime. Just last week I told you that Ayatollah Khamenei would never execute opposition leaders Mousavi and Karroubi because he understood how risky that was. I also told you that if we woke up one day to find either hanged, that would be a sign Khamenei was about to be replaced by one even more conservative than he. That is why the elevation of Kani, and the demotion of Rafsanjani (to a far less influential post) was so important. If there was ever any doubt about Iran’s true intentions, there shouldn’t be now, and for all their own support of terror, it’s why today, more than ever, the United States needs the Saudi royal family. There can be no equivocating. This message must be clear. The Saudis, and their huge stockpile of U.S. armaments, need to be the bulwark to keep Iran’s sphere of influence as it is and nothing more (save for Iraq which seems certain to be swept into Iran’s orbit).

Israel? They’ll be lucky if they only have to deal with Hizbullah. In this arena, Sunday becomes a critical day as Lebanon’s March 14 coalition is celebrating the sixth anniversary of its founding (a day early).

March 14 is the coalition headed by Saad Hariri, former prime minister who is now ‘caretaker’ by title until the new Hizbullah-backed prime minister-designate puts a government together which Hariri’s supporters say they want no part of.

Hariri in turn has become vehement in his calls for Hizbullah to disarm and that there should be one Lebanon, one military, to defend itself against Israel. [I’m not voicing an opinion here, just stating the facts.]

March 14 also insists the Special Tribunal for Lebanon that is investigating Saad’s father’s assassination and which is rumored to be near a formal indictment of members of Hizbullah, be upheld and allowed to proceed. [There are significant breaking developments on this front I’ll get into next time.] Sunday may just be a massive demonstration, generally peaceful, but conflict is inevitable down the road. When it comes to Israel and Lebanon, as former U.S. ambassador to Israel Daniel Kurtzer said, “The mutual deterrence has worked until now to prevent any casual escalation, but it won’t last forever. At some point red lines will be crossed, and if there’s a situation in which either side believes its interests call for it, they’ll take action.” When it comes to Hizbullah, puppet-master Iran hopes to pull the strings at a time of its choosing.

[One other note on the Iran front. There are major questions being raised as to the safety of the Bushehr nuclear plant where fuel rods were recently removed, we have been told, as part of normal maintenance. But some experts worry about the inexperience of the workers there. So as we watch the safety issues with nuclear plants in Japan, post-earthquake, understand that Kuwaitis in particular are concerned about Bushehr as they are immediately downwind from it (the Saudis sit behind Kuwait in terms of any radiation plumes).]

Editorial / Daily Star (Beirut)

“As dramatic events in the Arab world continue to unfold this spring, one frequent topic bandied about by pundits is the impact of the Arab upheavals on the Islamic Republic of Iran.

“The most striking impression one gets from all the chatter about Tehran is the boundless ignorance of too many of the would-be cognoscenti unspooling ready-made theories about the direct results that Tahrir (Liberation) Square will bring about in Tehran. For the most part, the political leadership and the publics’ of the U.S. and European nations receive their wisdom about Iran from think tanks located in the West, in articles penned by commentators sitting in Washington or London – and for the most part these authors have no idea how the institutions of the Islamic Republic or the subtleties of the varied constituencies among Iran’s population of more than 70 million.

“The truth about the Iranian regime is that it has a coherent and long-term agenda for expanding its influence throughout the region, and it pursues that agenda single-mindedly. Regardless of how one feels about the relative qualities of that influence, it must be granted that Tehran has done a remarkable job of achieving so many of its objectives in the 32 years since the clerical regime emerged – and instantly became a bogeyman to many Arab and Western countries….

“In Lebanon we know the intimate relationship between Hizbullah and Iran, but no one should fall under the mistaken impression that Tehran’s sway depends solely on the Shiite faith, or even the propagation of political Islam. The Islamic Republic has significant economic interests, and it has also built its standing and alliances partly on opposition to Israel.

“The Arab popular uprisings riveting the world’s attention are leading Tehran to accelerate the implementation of its agenda. If Iranian leaders feel any trepidation at the collapse of the Egyptian and Tunisian autocracies, they are hiding it well, for they continue to project confidence.”

And regarding Pakistan, President Asif Ali Zardari / Washington Post.

“We will not be intimidated, nor will we retreat. Such acts [Ed. like two recent assassinations of key government officials] will not deter the government from our calibrated and consistent efforts to eliminate extremism and terrorism. It is not only the future of Pakistan that is at stake but peace in our region and possibly the world.

“Our nation is pressed by overlapping threats. We have lost more soldiers in the war against terrorism than all of NATO combined. We have lost 10 times the number of civilians who died on Sept. 11, 2001. Two thousand police officers have been killed. Our economic growth was stifled by the priorities of past dictatorial regimes that unfortunately were supported by the West. The worst floods in our history put millions out of their homes. The religious fanaticism behind our assassinations is a tinderbox poised to explode across Pakistan. The embers are fanned by the opportunism of those who seek advantages in domestic policies by violently polarizing society….

“We are fighting terrorists for the soul of Pakistan and have paid a heavy price. Our desire to confront and deal with the menace in a manner that is effective in our context should not become the basis for questioning our commitment or ignoring our sacrifices.

“If Pakistan and the United States are to work together against terrorism, we must avoid political incidents that could further inflame tensions and provide extremists or opportunists with a pretext for destabilizing our fledgling democracy. The Raymond Davis incident in Lahore…is a prime example of the unanticipated consequences of problematic behavior….We are committed to peaceful adjudication of the Davis case in accordance with the law. But it is in no one’s interest to allow this matter to be manipulated and exploited to weaken the government of Pakistan and damage further the U.S. image in our country.

“Similarly counterproductive are threats to apply sanctions to Pakistan over the Davis affair by cutting off Kerry-Lugar development funds that were designed to build infrastructure, strengthen education and create jobs. It is a threat, written out of the playbook of America’s enemies, whose only result will be to undermine U.S. strategic interests in South and Central Asia. In an incendiary environment, hot rhetoric and dysfunctional warnings can start fires that will be difficult to extinguish.”

Lastly, I warned the first week of the Egyptian crisis that it would be a boon for al-Qaeda. Others said this would not be the case. The following from last weekend backs me up.

Michael Scheuer, chief of the CIA’s bin Laden unit from 1996 to 1999, in an op-ed for the Washington Post.

“All (of what has transpired in the Middle East and North Africa thus far) amounts to an enormous strategic step forward for al-Qaeda. That these victories have come with virtually no investment of manpower or money by the terrorist network, and with self-defeating applause from the Facebook-obsessed, Twitter-addled West, only makes them all the sweeter for bin Laden.

“Peering into the future, the autocrats’ probable successors likewise offer abundant good news for al-Qaeda and kindred groups. In Egypt, Tunisia, Libya, Yemen and any other nation with a U.S.-supported tyranny that sinks in the weeks and months ahead, the role of Islamist groups will become larger – and over time perhaps dominant – if only because the populations in play are almost entirely Muslim and because Islamist groups have the most effective nationwide infrastructures to replace the old guard. And most do and will receive funding, openly or covertly, from always generous donors in Saudi Arabia and other oil-rich Sunni gulf states.

“Each new regime is likely to host a more open, religion-friendly environment for speech, assembly and press freedoms than did Mubarak and his ilk. So it will be easier for media-savvy Islamist groups – whether peaceful or militant – to proselytize, publish and foment without immediate threat of arrest and incarceration. Indeed, Washington and its Western allies will dogmatically urge the new governments to maintain such freedoms, even as the Islamists capitalize on them….

“The revolts also mean that the United States and its Western allies must take on a far greater share of the counterterrorism operations that they previously conducted with the help of Arab regimes. The days of Mubarak, Saleh, Gaddafi and Ben Ali doing the dirty work for American, European and Israeli counterterrorism efforts are over. Soon it will be U.S. and Western special forces and intelligence services that will be ordered to capture or kill militants in Muslim lands – individuals that our tyrannical friends used to dispose of for us.

“How tragic that in the war being waged against the United States by al-Qaeda and its allies precisely because of Washington’s relentless intervention in the Islamic world, the U.S. government will now be forced to intervene even more – or sit on the sidelines and watch al-Qaeda build or expand bases from which to threaten U.S. security….

“Bin Laden and his peers are counting on the fact that the uprisings’ secular, pro-democracy Facebookers and tweeters – so beloved of reality-averse Western journalists and politicians – are a thin veneer across a deeply pious Arab world. They are confident that these revolts are not about democratic change but about who, in societies where peaceful transfers of power are rare, will fill the vacuum left by the dictators and consolidate power. These men also know that the answer to that question will ultimately come out of the barrel of a Kalashnikov, of which they have many, along with the old tyrants’ weapons stockpiles, on which they are now feasting.”

Wall Street

Perversely, stocks rallied Friday even as the devastating news rolled in from Japan. While it’s often futile to describe market action day to day, Friday was as much about lack of protest in Saudi Arabia, which allowed oil prices to move lower to the $100 level after trading much of the week in the $105 neighborhood, as anything else. But it is way too soon to give the all-clear and the issues at two of the nuclear plants in Japan as I go to post are most disconcerting on a number of fronts. It’s customary to say that natural disasters are stimulative to an economy because of the reconstruction efforts that follow, but there is also the sentiment element I spend so much time on and these pictures are as bad as any. It’s a good time to “wait 24 hours.”

Here’s what is factual, however. This week, Wednesday specifically, marked the two-year anniversary off the 3/9/09 market lows as measured by closing averages.

For the two years stocks advanced as follows.

Dow Jones +87%
S&P 500 +95%
Nasdaq +117%

[Gold, incidentally, was up 52%.]

Personally, in terms of my forecasting, I nailed 2009 in predicting the Dow Jones and S&P would finish up 20% that year and Nasdaq up 30% (it did even better than that) and one of my three best moments (the others being my calls on the tech and real estate bubbles) was sticking to my guns March 2009 in staying bullish.

But the past 14+ months I have been too negative in calling for down equity markets (though I have been projecting only minimal losses) because I have been waiting for geopolitical events to overwhelm sentiment, and fundamentals, that only now are beginning to manifest themselves. I certainly stick by my forecast that we finish 2011 down as I just don’t see a great economy in the second half of the year and thus I feel expectations on the earnings front in particular are too high. I grant you that today the market is not necessarily expensive, but it isn’t cheap, and we all know that come June the Federal Reserve is slated to pull the plug on QE2, which PIMCO’s Bill Gross is calling “D-Day” for Treasuries when the support dries up.

I, on the other hand, do not see a huge bond debacle, yet.   I believe that comes next year. For much of 2011, I just feel slower growth and no wage inflation will limit losses in Treasuries. For the record I’ll say the 10-year doesn’t hit 4.50%. Now this means if you were in a Treasury bond fund of any significant duration, you’d lose a sizable amount of your net asset value, but not a total disaster as some are calling for. [In this opinion I side largely with BlackRock.]

On the inflation front, I’ve given my stance. We are seeing a commodities price spike. Yes, it will hurt emerging markets in particular. No, it will not cause panic in the streets of the U.S. And prices will come down. Early in the year I made the bet that the broad-based CRB index of 19 commodities would finish 2011 below 333.90, which is where it was in early January. For simplicity sake, I’ll say it closes below 332.80, the yearend figure for 2010. It currently stands at 351.88, down from the previous week’s 362.88. So we’ll have some fun with numbers in this regard. We’ve already seen significant signs that some of the global harvests may not be as bad as once thought and that the inventory picture could improve. The USDA issued a more optimistic outlook this week, earlier in the year than I thought it would. And in China, where they’ve been dealing with the worst drought in 200 years in their key wheat-producing area, they’ve now had two weeks of rain and snow and the winter wheat crop has been saved for at least 90% of the land, a huge positive. No doubt, though, there will be further spikes to come, I’ve just staked my claim as to where we finish up come New Year’s.

On the oil front, the United States previously received an infinitesimal percentage of its crude from Libya, vs. 9% of our imports coming from Saudi Arabia, 8.6% Nigeria and 4.3% Algeria. Nigeria has constant issues but somehow it gets here.   By the way, as of this week, it’s really only China and India that are still buying Libyan oil but it’s enough to pay Gaddafi $200 million a week from the large refinery he still controls and he’s threatening to retake other facilities.

Lastly, Europe. Going back to last spring I’ve nailed this topic, calling out the occasional European Union official who would step forward and give the ‘all clear.’ Such foolishness has been disproved time and time again and those who also still want to believe Europe’s debt crisis isn’t significant couldn’t be more wrong. Yes, there will be good weeks (which means no news) and bad weeks (which means the truth).   This past one was a bad week.

Europe’s day of reckoning is supposed to be in about two weeks when the final touches are placed on a revamped and reinvigorated bailout program for the likes of Greece, Ireland and any other euro-currency member-state that stumbles on the path to fiscal redemption.

But Moody’s lowered Greece’s debt rating again, talking about its inability to collect revenue and the increased risk of default and debt restructuring, while Ireland’s new government pleaded for a reduced interest rate on its EU bailout funds and suddenly German Chancellor Angela Merkel said, “OK.”

“Really? You’ll actually lower our interest rate?  I never thought you’d do such a thing!”

“Yes, I will…but…you have to raise your Europe-low corporate tax rate of 12.5% which gives you an advantage.”

‘Uh-oh,’ thought the Irish. ‘We can’t do that. Many a corporation has already told us they’re pulling up stakes if the corporate tax rate goes higher.’

Meanwhile, the Spanish government said it had performed some renewed stress tests on its key savings banks, cajas, and that they needed $21 billion in new capital, private money not government funding, and they needed to do so by September.

Only one problem.   Moody’s and Fitch believe the needed amount of capital is closer to anywhere from $50 billion to as much as $150 billion!

How can there be such a difference, sports fans? It’s that old bugaboo, transparency, or lack thereof.

This is the single major issue that continues to plague many European nations and their banks. Just what the heck is on the books when it comes to sovereign debt holdings? Everyone and their mother knows, for example, that the large German and French banks own a boatload of Spanish sovereign paper and that if Spain ever defaulted and was forced to restructure that debt, the German and French banks would suffer massive losses.

But no one knows the actual exposure virtually across the entire continent. For all of America’s banking problems, and we still have some whoppers, our transparency is superior to the European variety. [Our banks also don’t hold a lot of European sovereign debt.]

Finally, two other issues. The split between North and South in Europe continues to widen. This week the Finns were furious over the thought of lending the PIIGS (Portugal, Ireland, Italy, Greece and Spain) any further bailout money (Greece and Ireland being the only two formally receiving such aid thus far).

A Finnish member of the European parliament, Timo Solni, said this week:

“We have been doing our homework, we don’t have a budget deficit, we have done quite well tackling unemployment. Now [we must help] those people who have lied – this is the suspicious mind up north, because quite many people think the south is milking our cow.” [Financial Times]

Financier George Soros weighed in: “The political conditions further down the road will be less favorable than today. The divergence between the surplus countries and the deficit countries is going to get wider.”

And then you have the immigration threat I’ve written so much about, now exacerbated by the turmoil in North Africa. Fears are spreading across much of Europe as the oppressed (and criminals and/or terrorists) wash up on Italy’s and Spain’s shores. Unemployment is already high in Europe. A potential surge of hundreds of thousands simply can’t be absorbed and will do a number on social services. It’s no wonder that anti-immigrant sentiment is soaring and this spells trouble.

A year ago when I was in Paris, I saw how that city has changed in this regard. It is teeming with refugees. It’s also why I’m going back end of April because amidst the beauty I know I’ll feel an increased undercurrent of tension and across Europe it’s going to manifest itself in anti-government, anti-immigrant protests with Europe’s growing far-right parties, such as France’s National Front, grabbing the spotlight. It will be ugly.

Street Bytes

--Stocks suffered their second decline in three weeks with the Dow Jones losing 1.0% to 12044. The S&P 500 declined 1.3% and Nasdaq tumbled 2.5%. For most of the week it was concerns over the Middle East and oil prices that dominated action, as well as further uncertainty in Europe.

--U.S. Treasury Yields

6-mo. 0.13% 2-yr. 0.64% 10-yr. 3.40% 30-yr. 4.55%

Bonds rallied on another flight to safety as well as some well-received debt auctions. At the same time the budget deficit for February came in at $225 billion, the largest ever. For the fiscal year the deficit is projected to come in at $1.5 trillion. In 2012, the markets will take the U.S. out to the woodshed and shoot us.

--Household wealth in the U.S. rose $2.1 trillion in the fourth quarter owing to the rally in equities. Additionally, Americans continue to pare back debt and improve their balance sheets. Overall, net wealth remains about $9 trillion below pre-recession levels. The value of real estate fell $244 billion following the prior quarter’s $629 billion drop.

--AFL-CIO President Richard Trumka said the Wisconsin Senate’s vote to strip collective bargaining for most government unions is a “corruption of democracy” and shows how far Republicans will go to “pay back their corporate donors.” This is laughable coming from him. Trumka said Republicans are “spinning deficits.” He needs to be reminded these phony deficits add up to $125 billion in 44 states and the District of Columbia. Of course Trumka couldn’t care less, knowing he’ll be lounging on some beach in Florida with his massive union-paid pension down the road.

--China’s consumer price report for February came in at 4.9%, the same pace as in January and still well above the government’s 4% target for 2011. On the positive side, retail sales for a combined Jan. and Feb. (to smooth out differences with the Lunar New Year holiday) were up 15.8% and industrial production up 14%. In reporting a surprise trade deficit for February, exports for the month were only up 2.4%, while imports rose 19.4%.

--China is accelerating construction of high-speed railways, despite the fears of huge costs and the scandal enveloping the railways ministry that claimed the minister in charge. But even though passenger traffic figures have been light, the railways ministry said 13,000 kilometers of high-speed railway will have been constructed by the end of the year, a full year ahead of schedule. The problem in China, aside from the lack of traffic thus far, is the huge debts being accumulated.

--U.S. Commerce Secretary Gary Locke was nominated to become the new ambassador to China, in a move described by the Chinese press as showing the utmost importance with which the White House views trade ties with China, Locke also being the first Chinese-American to hold the post if confirmed. He’ll replace Jon Huntsman who may now run for president against Obama.

--Car sales in China rose 2.6% in February from a year earlier, the slowest pace in 23 months, though sales were impacted by the Lunar New Year holiday, which ran from February 2 to 8 as many Chinese go on a buying spree in the weeks heading into the week-long festival. Also, last February sales soared 55.3%.

--Fitch Ratings agency says China faces a 60% risk of a banking crisis by mid-2013 should the property bubble burst. The government in turn is doing all it can to cool the market, including oversight of local-government investment vehicles and continuously increasing reserve requirements.

The above aside, China will invest more than $200 billion this year in affordable housing, both building and renovating 10 million apartments for low-income households.

--AOL will cut 900 jobs following the move to acquire the Huffington Post as the company integrates websites. 700 of the job losses will be in India.

--Be careful investing in defense stocks these days. Due to the turmoil in the Middle East, many governments are already shelving projects because they are redirecting funds to food and other aid programs to keep the people happy, such as the Saudis and the above-mentioned $36 billion. Iraq recently switched $900 million for F-16 fighter jets into food aid.

--The rate of foreclosures is dropping rapidly, down 27% in February from year ago levels, but this is largely because banks are undergoing a major overhaul in their foreclosure process under pressure from federal regulators to revise the way they service loans.

--Economists at UCLA’s Anderson School of Management predict California’s jobless rate will average 11.6% this year and only drop to 9.3% in 2013. 350,000 jobs in the construction and financial services sectors won’t return this decade. The good news is that when the state does start to move, it will grow faster than the nation owing to its relationship with Asia and the export trade.

--I will not be covering the Raj Rajaratnam insider trading trial that closely unless there is something earth-shattering to report. For now, his defense attorney is saying Rajaratnam did his own research, while the prosecution is presenting witnesses who have turned on the hedge fund king, including one, Anil Kumar, a former executive at McKinsey & Co., who supposedly received $2 million in payments in exchange for information about McKinsey clients, including Advanced Micro Devices’ plan to buy ATI Technologies in 2006. Rajaratnam’s attorney, John Dowd, is portraying the government’s witnesses as liars and tax cheats looking to “save their skins.”

--Mexican tycoon Carlos Slim once again tops Forbes magazine’s global ranking of billionaires. His net worth rose $20 billion to $74 billion. Bill Gates and Warren Buffett remain second and third at $56 billion and $50 billion, respectively, though these two have also been giving away much of their wealth.

Moscow replaced New York as home to the greatest number of billionaires with 79 compared with Gotham’s 58. Overall, there are said to be 1,210 worldwide.

--It really is incredible that Starbucks is 40 years old. And this week it became official…Subway has more restaurants than McDonald’s does in terms of units; 33,749 vs. 32,737. I love Subway. Eat fresh!

[Sales at McDonald’s, a leading economic bellwether for yours truly, and another personal fave, rose 3.9% for restaurants open at least 13 months in February, slower than January’s 5.3% rise. But just 2.7% in February in the U.S.]

--Bono is now in charge of salvaging “Spider-Man: Turn Off the Dark.” He replaced Julie Taymor, who staged and co-wrote it, with a man who has staged circus productions for Barnum & Bailey, among other things, which only seems appropriate. A production source told the New York Post, Bono is going to “rip the show apart from top to bottom. They’re going to start from scratch.” Well, I’m still glad I saw it a few weeks ago, even though it sucked. Something to tell the kids. [Wait…I don’t have any kids! Never mind.] The show, by the way, will shut down in a few weeks and then reemerge in June, so they say.

--Continental Airlines announced it would no longer serve free pretzels in coach, thus tying the pretzel industry in knots. The carrier said the move would save $2.5 million a year.

--Now it’s Honda’s turn. Some Honda models have been subject to the same spiders that forced Mazda to recall 65,000 sedans last week, though Honda knew it had a problem back in 2009 and issued a service bulletin for dealers to check Accords for possible infestation by yellow sac spiders. I have an Accord that could be impacted. Nooo!!!!

--My portfolio: My China holding in Fujian preannounced great earnings (as expected) and the stock continued to fall. I refuse to tout this company to the extent of divulging its name but it’s now annualizing earnings at a 40 cent pace and has a p/e nearing 2. At the same time I’ve been writing in this space that sentiment towards Chinese small caps, as well as uncertainty over the direction of the economy there, has been a hindrance. At some point this will all change, it’s just not now. So to those still in it with me, know I continued to buy this week (and in size). But I’m also prepared to hold it into 2013. [There have been some negative announcements on the board front and I’ll get into these next time.]

*I sold out of my uranium play just in the nick of time as it turned out and this had nothing to do with Japan…the sector just got slammed this week.

Foreign Affairs

Afghanistan: Iran was caught shipping missiles into Afghanistan for use by the Taliban. And in the latest survey of civilian deaths, last year there were 2,777 victims, the most of the war. Even more disturbingly was a doubling of assassinations of government officials and tribal leaders allied with NATO. Civilian deaths directly attributable to NATO, however, were down 26% but we have to be virtually perfect.

China: In his address to the National People’s Congress last weekend, Premier Wen Jiabao, in setting inflation targets of 4% and economic growth of 8%, accepted that uneven economic development was a “serious problem.” Wen and all of China’s leaders understand stable prices are key to stability, period.

Wen also said the government will seek to increase subsidies to farmers and the urban poor, and thus stimulate domestic demand, “a long-term strategic principle and basic standpoint of China’s economic development as well as a fundamental means and an internal requirement for promoting balanced economic development….

“We must make improving the people’s lives a pivot linking reform, development and stability…and make sure people are content with their lives and jobs, society is tranquil and orderly and the country enjoys long-term peace and stability.”

But when it comes to political reform, something Wen has long touted, at least for public consumption though obviously not yet in practice, Wu Bangguo, who is officially number two in the leadership behind President Hu Jintao (not Premier Wen), said in his address to the legislature that abandoning the Communist Party-dominated system of governance would lead to chaos.

“If we waver…the fruits of development that we have already achieved will be lost and the country could even fall into the abyss of civil strife.”

In other words, people, don’t even think about marching for change. You’ll be beaten severely.

On the Taiwan front, owing to warming ties with China the Taiwanese military is looking to slash 9,200 troops this year, though the cut will be offset by the use of more advanced weaponry. Over five years, Taiwan is slated to reduce its defense forces from 275,000 by 60,000, or more than 20%. For its part, Beijing once again warned that if the United States wants to maintain good relations it should not sell any more arms to Taipei.

Lastly, the Dalai Lama announced he is ceding political power in the Tibetan exile government. Now 75, the move doesn’t mean he’s no longer the overall leader of the cause, but it allows a new generation to emerge. More on the Dalai Lama below.

North Korea: There seems little doubt this spring will produce another provocation from Kim Jong-il as he seeks to promote the legitimacy of his son and heir, Kim Jong-un.

Russia: Vice President Joe Biden, in a trip to Moscow for talks on mostly economic issues, told students at Moscow State University that Russia had to attack corruption and bring about democratic change to guarantee improved relations. At the same time he praised Russia for advances in the overall relationship.

Turkey: President Abdullah Gul took issue with the arrest of nine journalists and writers on charges of plotting a coup against the moderate Islamist government.

Editorial / Washington Post

“The recent arrests are a good example of what sometimes looks like an assault on liberal democratic values….

“All are charged with participating in a shadowy conspiracy called Ergenekon, which allegedly plotted to overthrow the AK (Justice and Development party) government….Turkey’s journalist association says that 58 journalists have been imprisoned and that thousands could face charges….

“Much of the evidence (the courts) have marshaled looks flimsy and even fabricated….

“It’s good that Mr. Gul spoke up. Bu the real power is Prime Minister Recep Tayyip Erdogan, who does not seem discomfited by the media crackdown.”

Erdogan has blasted the U.S. ambassador when he brings up the journalist arrests. The prime minister is seeking to become a regional leader. But, as the Post concludes:

“If Turkey ceases to become a functioning democracy with unquestionably free media, neither Arab states nor anyone else will look to Turkey as a mentor.”

Spain: The suspected head of the Basque separatist group Eta, whose actions have cost the lives of more than 800 since 1968, was arrested in France. In January, Eta vowed to cease “offensive armed actions” but it has broken such promises before and they are seen as an attempt to reduce the heat on its operations.

France: Far-right leader Marine Le Pen of the National Front shockingly came out ahead in a Le Parisien newspaper poll, capturing 23%, 2% ahead of both President Sarkozy and Socialist leader Martine Aubry.

However, while this generated some buzz (and I wrote the other week that Le Pen, daughter of National Front founder Jean-Marie Le Pen, is going to create a stir), the survey was an online poll rather than a telephone one, these are highly inaccurate, and, the inevitable Socialist candidate, Dominique Strauss-Kahn, wasn’t listed. I know nothing about Aubry but some say she is the most partisan figure in French politics and wouldn’t stand a chance in winning. Strauss-Kahn, however, is a shoo-in and should be announcing this spring.

Random Musings

--According to a USA TODAY/Gallup Poll, while most Americans do not believe U.S. Muslims are too extreme in their religious beliefs, a majority (52% for, 38% against) said Congressman Peter King’s hearing into the radicalization of some members of the Muslim community was entirely appropriate. Prior to the hearing on Thursday, Dem. Cong. Keith Ellison, one of two Muslim members of Congress, said the poll’s findings show that Americans still harbor inaccurate, suspicious views of their Muslim neighbors.

“People’s civil rights cannot be a popularity contest,” said Ellison. “What percentage of Americans would say it’s OK to intern Japanese people in 1941?”

Ellison then proceeded, Thursday, to appear before King’s hearing and gave a sob story that, frankly, didn’t move me in the least and I’m the kind that was going through the Kleenex during last Sunday’s “60 Minutes” piece on the plight of school kids in Florida whose parents are going through tough times. Call me insensitive, then, to Ellison’s testimony, but I’ve only spent the last 12+ years studying and writing on topics like this. I think I know a thing or two.

[Including my instinct, correct as it turned out, that a white supremacist was responsible for the attempted MLK Day bombing in Spokane the other month.]

I’m frankly sickened by so much going on these days, from the White House and Congress on down, as well as the inability of many Americans to see the truth.

But moving on with the King hearing, the New York Republican started it off by declaring:

“To back down (from those saying he was conducting a witch hunt) would be a craven surrender to political correctness. Despite what passes for conventional wisdom in certain circles, there is nothing radical or un-American in holding these hearings.”

King is correct when he says Al-Qaeda is looking to recruit here. They already have, for crying out loud. And he is correct in saying that not all Muslim groups are cooperating with authorities. These are facts.

Democrats on King’s committee countered that the hearings “will stoke a climate of fear and distrust in the Muslim community.” Bennie Thompson (D-Miss.) said:

“I cannot help but wonder how propaganda about this hearing’s focus on the American Muslim community will be used by those to inspire a new generation of suicide bombers. For law enforcement officials, outreach and cooperation may become more difficult.”

Cong. Thompson is probably right, but to do nothing is doubly wrong. If nothing else, I can guarantee one thing. The publicity given the hearings will lead to many more Americans coming forward with information. Some of it good….some of it bad. That which is good, however, will save lives. More Americans will be driven by the simple message:

See something…say something.

Further opinion.

Editorial / Wall Street Journal

“Congressional hearings on the Islamist terror threat inside the U.S. begin today, and our friends on the left are busy portraying them as the McCarthy hearings and Palmer Raids rolled into one. What a pity. Terrorism experts have been warning for years that future attacks will be largely homegrown, and Americans are entitled to an assessment of how serious a threat this is….

“Since 9/11, there have been more than 50 known cases, involving about 130 individuals, in which terrorist plots were hatched on American soil. These include plots to blow up the Brooklyn Bridge in New York, an office tower in Dallas, a federal court house in Illinois, the Washington, D.C. metro, and the trans-Alaska pipeline….

“In a useful report published by the Rand Corporation last year, terrorism expert Brian Michael Jenkins notes that the plotters were a ‘diverse group’…from about 20 countries. Yet all but two of the plotters were Muslim, and those two sought to offer their services to al-Qaeda.

“So much, then, for the notion that it is bigoted for Mr. King to focus on Muslim radicalization. This is where the current threat lies. As Deputy National Security Adviser Denis McDonough pointed out in a speech last week, al-Qaeda operatives ‘make videos, create Internet forums, even publish online magazines, all for the express purpose of trying to convince Muslim-Americans to reject their country and attack their fellow Americans.’”

Heck, look at the situation in Minneapolis-St. Paul with the Somali community, many of whom are being recruited to return to Somalia for training and then come back to the United States to carry out their mission.

Steven Emerson, terrorism expert, in an op-ed for the New York Daily News

“Never in my entire career in Washington have I encountered the hype and scare tactics of those opposing the hearings into Islamic radicalization by Rep. Pete King. A classic example was a headline on MSNBC.com; ‘inquiry by congressional committee looks like inquisition to many Muslims.’

“The line of attack is now familiar…by focusing solely on Muslim extremism, the argument goes, he is betraying his bias.

“This is utterly ridiculous. Our organization, the Investigative Project on Terrorism, recently did an analysis of all terrorism convictions based on statistics released by the Justice Department. These stats show that more than 80% of all convictions tied to international terrorist groups and homegrown terrorism since 9/11 involve defendants driven by a radical Islamist agenda. Though Muslims represent less than 1% of the American population, they constitute defendants in 186 of the 228 cases the Justice Department lists.

“The figures confirm that there is a disproportionate problem of Islamic militancy and terrorism among the American Muslim population….

“(And) one ought to be able to focus on a very real problem – homegrown terrorism fueled by Muslim extremism – without being accused of painting the entire U.S. Muslim population with a broad brush.

“The real underlying story here is how the self-anointed leadership of the Muslim community…are the ones responsible for instilling panic into the Muslim community by suggesting that these hearings will lead to ‘hate crimes’ against Muslims.

“That canard has been used by these groups for years in their attempts to intimidate the media, commentators and critics of radical Islam from truly analyzing the role of these groups and others in radicalizing their constituents in the American-Muslim community.”

Cong. Peter King, in an op-ed for USA TODAY

“As chairman of the House Committee on Homeland Security, it is my obligation to investigate threats to our homeland….

“Three of the top U.S. national security officials have told the American public that we are facing a significant terrorist threat from radicalization inside the U.S. homeland.

“In a hearing before my committee last month, Homeland Security Secretary Janet Napolitano testified that the threat level is at the most ‘heightened state’ since 9/11, and she expressed her concern over the growing threat of domestic radicalization.

“Attorney General Eric Holder has said that radicalization of Americans is something that keeps him awake at night….

“And just last Sunday, President Obama’s deputy national security adviser, Denis McDonough, gave a speech at a mosque in Sterling, Va. He told his audience that the American-Muslim community here in the homeland is being targeted by al-Qaeda.

“The administration is saying it: Al-Qaeda is targeting and attempting to radicalize Muslims within the U.S.”

--In a huge reversal of policy, two years after President Obama vowed in an executive order to close Guantanamo Bay, the administration said it will start new military commission trials for detainees there, an admission that some of those incarcerated will remain in U.S. custody for years, if not life.

--Talk about bad timing, with House Republicans looking to cut all federal funding of public radio and television, NPR’s president and CEO was forced to resign after hidden camera footage of a fellow executive labeling the tea party movement as being “seriously racists” emerged. It was just last fall that CEO Vivian Schiller was castigated by conservatives for firing analyst Juan Williams over comments he made about Muslims.

The fellow in the latest video, Ron Schiller (no relation), who also resigned, said:

“The current Republican Party is not really the Republican Party. It’s been hijacked by this group that is…not just Islamophobic but, really, xenophobic.”

Then Ron Schiller, president of the fundraising arm, stupidly said NPR “would be better off in the long run without federal funding.”

Some Republicans are happy to oblige.

--George Will blasted the Republican presidential field in his Sunday Washington Post column, at least charlatans (my word) like Mike Huckabee and Newt Gingrich. I won’t waste your time with much of Will’s argument but suffice it to say, Huckabee in particular is a nimrod (again, my word).   Will concludes (and I agree):

“There are at most five plausible Republican presidents on the horizon – Indiana Gov. Mitch Daniels, Mississippi Gov. Haley Barbour, former Utah governor and departing ambassador to China, Jon Huntsman, former Massachusetts governor Mitt Romney and former Minnesota governor Tim Pawlenty.

“So the Republican winnowing process is far advanced. But the nominee may emerge much diminished by involvement in a process cluttered with careless, delusional, egomaniacal, spotlight-chasing candidates to whom the sensible American majority would never entrust a lemonade stand, much less nuclear weapons.”

Now one name should be most conspicuous by its absence. Will, who can’t stand this person, ditto moi, doesn’t mention her at all.

And a note to my favorite among the group noted above, Mitch Daniels. In your CNBC appearances, show a little sense of humor. I love that you’re serious, Governor, but geezuz, at least smile now and then.

As for Romney, I know he has the organization, and I know he could be pretty effective raising funds, but he’s a walking hypocrite. I like Barbour, but I told you end of last year that I thought some of his Old South comments doomed him so I can’t be a hypocrite myself. Huntsman I need to learn more about if he decides to make a go of it. Pawlenty? I can’t get fired up in the least about him.

Bottom line, it’s not looking good for some of us. But it’s early.

--Another senator announced he’s not running in 2012, this one Nevada Republican John Ensign, the ethically challenged scumbag who in June 2009 had to admit to an extramarital affair with a former campaign staffer and that he had helped her husband, a member of his congressional staff, obtain lobbying work; even as he was running around preaching family values.

--Speaking of ethics, or lack thereof, it’s official. I always thought it was a tie between Pennsylvania and New Jersey for the most corrupt state, but the past five years, Chris Christie, prior to becoming New Jersey’s governor, helped clean up the state as U.S. Attorney (though we’ll always be a cesspool of corruption), while New York took the lead and continues to lengthen it. New Gov. Andrew Cuomo truly has his work cut out for him as on Thursday, another eight state officials and corporate leaders were arrested in a massive ring that diverted state funds into the hands of lobbyists and cronies in exchange for $1 million in bribes for State Sen. Carl Kruger alone.

Kudos to Manhattan U.S. Attorney Preet Bharara who has been a busy beaver the past few years rounding up the scum in Albany as well as Wall Street.

--Speaking of Gov. Christie, New Jersey voters are split on him in the latest statewide poll (Rutgers-Eagleton). 46% view him favorably, 44% don’t. In December it was 49-39.

Because of the above-noted story on the Republican field, many want the governor to run for president. I’m one who believes that would be a big mistake. He has a ton to do first in New Jersey and I just don’t think he’s ready. Assuming he’s successful in doing much of what he has set out to do, he’d win reelection here and be ready for 2016 with massive name recognition and the ability to raise staggering sums. Of course that’s also assuming Obama wins in 2012.

[Obama, by the way, is viewed favorably by 57% of Jersey voters; all the more reason it just isn’t time for Christie yet.]

--Two weeks ago this day I was at San Diego State for the biggest basketball game in their history and when I got home I learned of a SDSU exchange student who went missing in Madrid, so I took some interest in the case. Sadly it proved to be a parent’s worst nightmare. His body was discovered in a river after a night of partying on the town, alone. There were no signs of foul play. My sympathies to the family and the San Diego State community.

--We note the passing of veteran Washington Post journalist David Broder, 81. I’ve been watching “Meet the Press” so long I feel like I knew Mr. Broder pretty well over the course of his record 400+ appearances, a staggering total. To say the least I didn’t agree with him most of the time, though he distinctly became more of a moderate in his final years, but I respected him because it was clear, such as was the case with the late-Robert Novak, that he did his homework. And when it came to presidential politics, his insights were terrific.

--I started StocksandNews in Feb. 1999 and the first few years I was curious about the traffic to the site. I forget what year but I was the one who alerted you to the issue of click fraud when I was wondering why I was getting an inordinate amount of hits from Uruguay. I was running an ad campaign through a service I can’t even remember the name of now and they literally had folks banging away for pennies at a time. It was a year or so later that the Journal and others began to make a big deal of it but there I was, spreading the word before anyone else after becoming a victim.

So we cleaned things up but in all honesty, the past five or six years I just haven’t cared about traffic, and I haven’t been running any big click-through campaigns so I didn’t need to look for fraud. The last time I really checked I came up with a number I’ve been using ever since when asked but in my case it is so difficult to get anything near an exact number because of my relationship with BuyandHold, let alone all the different sites (all owned by me except B&H) that you can access me through. Without getting into the minutiae, site traffic figures can be as deceiving as Nielsen ratings. Recall for the latter a big issue has been a bar could be showing a football game with 100 patrons but Nielsen only viewed it as one household. By the way, you have no idea how many domain names I own but it’s a lot, and I’m not telling you anymore except to say some of them are, frankly, revolutionary, in the truest sense of that word. Can’t let the feds in on my little secret, you see.

Anyway, the other day I told the tech guys to finally do a sample of my sites in terms of country origin, which is what I used to find most interesting, and I was both startled and disappointed by the findings.

For my last legitimate sampling years ago, China was No. 2, the U.S. obviously being first, followed by Canada and some European countries.

Today, India is a strong No. 2, which I like to see, but you’ll never guess who is a strong 3rd. Pakistan! Uh oh. I hope the ISI isn’t responsible for too many of these hits. But just in case, shout out to my ISI friends! Love ya!

Pakistan is followed by the Philippines, kind of a surprise, but a thank you to all of them, and then Canada, Australia, and New Zealand.

Russia is No. 9 and Indonesia No. 10 (which is as far as I wanted to know because beyond this slot the figures become pretty insignificant).

But there is a shocker in the 8 slot. Not China (I don’t understand what is happening to me there but I’m depressed they aren’t top ten), but rather Nepal! Now what gets me here is that I feel like I’m the only American who has had the guts to diss the Dalai Lama, as in on numerous occasions I’ve called him “overrated.” So I’m curious if my Nepalese readers are furious with me, agree, or are the Chinese government officials based there cheering me on? I’m not so sure I want to go to Nepal to find out.

My tech guys and I are slowly doing some things I’ll be telling you about down the road. I want to stay old school….they want to drag me into the 21st century. But I want to do a daily video newscast, though that would mean I’m working 8 days a week instead of 7 and as far as I know, President Obama hasn’t yet signed an executive order making this possible. But while I’ve told myself I would never use this phrase the rest of my life because it is so idiotically trite, here it is…stay tuned.

--When I was in California the other week, I couldn’t help but think a lot about the weather (as I seemed to thread the needle on my drive down the coast between huge weekend storms, as well as the constant thought of earthquakes).

So I get home and what do I read in a piece in the London Times by John Harlow but the threat California faces from an “arkstorm.” Sorry, my California readers, but I thought I knew about all such things and I didn’t realize how many are taking the threat seriously, including Gov. Jerry Brown, who is examining a recent study by scientists at the Univ. of Southern California, heretofore Tailback U. [Now I’ve really confused some of you.]

“An arkstorm – the name is a reference to the story of Noah in the Bible – is a narrow but intensely powerful hurricane of a kind that last hit California in full force in the winter of 1861 and continued into 1862. Over 45 days, it damaged almost every building.

“Witnesses described a ‘flying river’ that swept away people and livestock. California’s Central Valley, now America’s breadbasket, was turned into an inland sea, impassable for months.”

The USC scientists think another such storm could hit within the decade. The cost could be three times that of a big earthquake, would make more than 1.5 million homeless, and you’d see wind of up to 125 mph in some areas.

Just last December, scientists plotted a minor arkstorm that dumped 9 inches of rain in some Los Angeles area communities. That kind of storm is more commonly known as the Pineapple Express, originating in Hawaii.

The storm may only be about 20 miles wide at its worst, like a smaller hurricane, but then just stream in for days and days. The final rain total in some parts? 20 feet.

--Terrible story from the Great Barrier Reef. Scientists believe the damage from Cyclone Yasi was so severe the reef will take decades to recover. Said one ecologist on the worst-hit areas (where I was in October, by Cairns), “there was hardly a coral to be found left alive.” This will have a huge impact on tourism. For example, the glass-bottom boat I took off one of the islands was part of an industry that took care of thousands every day and now there is nothing really to see. That’s a lot of vacant hotels, empty restaurants and bars, and thousands of lost jobs. Overall, the Great Barrier Reef sees 2 million visitors a year spending about $2 billion.

[What makes the reef recovery so much more difficult compared to past storms is that right before Yasi hit, the area was under threat from flooding rivers along the coast that carried freshwater and fertilizers onto the reef. I also can’t help but imagine Friday’s tsunami didn’t help matters.]

---

Pray for the men and women of our armed forces, and all the fallen.

Our thoughts and prayers go out to the good people of Japan.

God bless them and America.
---

Gold closed at $1421…unchanged on the year
Oil, $100.16

Returns for the week 3/7-3/11

Dow Jones -1.0% [12044]
S&P 500 -1.3% [1304]
S&P MidCap -1.6%
Russell 2000 -2.7%
Nasdaq -2.5% [2715]

Returns for the period 1/1/11-3/11/11

Dow Jones +4.0%
S&P 500 +3.7%
S&P MidCap +5.0%
Russell 2000 +2.4%
Nasdaq +2.4%

Bulls 52.2
Bears 21.1* [Source: Chartcraft / Investors Intelligence]

*Two years ago at the market lows, 3/9/09, the Bull/Bear ratio was 26.4 / 47.2

Have a great week. I appreciate your support.

Brian Trumbore



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-03/12/2011-      
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Week in Review

03/12/2011

For the week 3/7-3/11

[Posted 7:00 AM ET]

Note: The following is being posted 90 minutes after word of an explosion at one of Japan’s damaged nuclear plants. I am unable to comment further.

Earth In Crisis

In the past 14 months we have seen not only natural disasters of historic proportions, but the magnitude, the intensity of them, has been on a scale that I can’t imagine our planet has seen before in recorded history, not just one or two events, but about ten of ridiculously devastating proportions.

Earthquakes in Haiti, Chile, New Zealand (twice) and now Japan.

Historic flooding in Australia, China and Pakistan. A Cyclone, Yasi, that was the largest and most intense to ever hit Australia, after the flooding there.

Catastrophic droughts in China and Russia.

Again, we aren’t talking weather events such as Europe’s record-cold December, or the blizzards that struck the east coast and Midwest of the United States this winter. What we’ve witnessed outside the U.S. are natural disasters of immense intensity that hundreds of years from now will be referred to by scientists as a wonder. You also can’t begin to try and explain it and in terms of Friday’s cataclysmic quake and tsunami in Japan, America must do everything it can to help our great ally, an ally that it goes without saying we need more than ever with the rise of China in that neighborhood and the ongoing threat from North Korea.

Ironically, I was going to be reporting this week how distressing the situation was in Japan, politically, and how one American screwed up beyond belief. The government of Prime Minster Kan has been on the ropes as Japan faces another campaign donor scandal, a scandal that this week claimed the foreign minister. Kan was in danger of being just another failed leader when the earthquake hit. It is assumed now he will survive at least for the initial phases of the cleanup.

Earlier, one of our diplomats, Kevin Maher, called Okinawans “masters of manipulation and extortion” in a speech at an American university late last year that just came to light in the Kyodo News.   Maher told Kyodo the account was “neither accurate nor complete,” but the damage had been done. Maher was fired and Kurt Campbell, the assistant secretary of state for East Asia had to apologize on behalf of his government. No doubt the U.S. military has had its issues on Okinawa, though you’ll recall many of our wounds were self-inflicted, as in some high-profile sexual assault trials. The U.S. and Japan are in the midst of a sensitive negotiation to relocate a Marine facility from one part of the island to another. Bottom line, the U.S. desperately needs to keep the presence here because we can’t just keep overloading Guam and expect to be able to rush 50,000 troops into any emergency that may erupt in that area (such as a Chinese attack on Taiwan, or a China-Japan conflict over oil and gas rights in the East China Sea).

So this was the background before Friday’s disaster and now these same U.S. forces are being asked to aid our friends in their time of need. But we need Japan as much as they need us, even if a vast majority of Americans don’t understand the geopolitics of the region that threaten to blow this decade wide open.

Staying on the topic of hot spots, there’s North Africa and the Middle East.

The world is not black and white, as much as some want to paint it as such. Particularly in this vast region, each nation is different. I told you exactly what would happen thus far in Libya and Saudi Arabia and I see no reason to change my tune on either one. In the case of the former, we had further evidence this week that the rebel forces are weak and untrained, whereas Gaddafi has the equipment and disciplined elite fighting units that are also very well paid. It’s why the Director of National Intelligence, James Clapper, who oversees 16 separate intel agencies, told Congress that Gaddafi’s “regime will prevail.” In the case of the Saudis, King Abdullah initially offered $10 billion in social programs to keep the peace and then increased the package to $36 billion, so, when coupled with a massive police presence, the Saudis successfully stunted any thoughts of a “day of rage” among the country’s disaffected.

Of course Mr. Clapper’s remark was immediately knocked down by his bosses at the White House, a place that were events not so serious could be relabeled the Comedy Club because it is downright comical how there is zero uniformity in message these days regarding a part of the world that threatens to spin out of control far worse than what we’ve already seen and this is one time, above all others, that the administration needs to be speaking with one voice and have one message. None of this ‘we’re in,’ ‘we’re out,’ ‘we’re in,’ ‘we’re out’ garbage. 

This doesn’t mean U.S. ground forces need to go everywhere. We know the military is stretched as it is and we also have to weigh whether Country X or Country Y are in our nation’s vital interests.

But by waffling all over the place the message we’ve sent to the likes of both Saudi Arabia and Israel, for starters, is how can you trust the United States when they summarily dump an ally like Hosni Mubarak?

Next week, Secretary of State Hillary Clinton is going to the region and making a high-profile visit to Egypt and lord knows what’s going to come out of her mouth, and how quickly the White House will have to refute it. I would hope for starters that Clinton makes it clear that the Christian minority in Egypt, once again a victim of violent clashes in Cairo this week, needs to have its rights protected.

There is no doubt Egypt is the key to peace in the region. If Egypt goes the way of Islamic extremism, such as with the Muslim Brotherhood, Israel will be basically encircled.

Some opinion…Editorial / Wall Street Journal

“America’s response to the Libyan crisis is stuck in repeat mode. The Obama administration keeps insisting that a ‘full spectrum of possible responses’ are in play to stop Moammar Gaddafi’s war on his people. And in virtually the next breath, it rules out one credible option after another.

“An egregious example concerns the possible supply of military assistance to Libyan rebels. White House spokesman Jay Carney said on Monday that ‘providing weapons’ to the opposition was among a ‘range of options.’ The next day State Department spokesman P.J. Crowley shot this option down.

“ ‘It would be illegal for the United States to do that,’ Mr. Crowley said, citing U.N. Security Council Resolution 1970, which sanctions the Gaddafi regime and only passed with U.S. support on February 26. ‘It’s quite simple. In [the resolution] there is an arms embargo that affects Libya, which means it’s a violation for any country to provide arms to anyone in Libya.’

“One question is how the State Department allowed such a resolution to pass in the first place, President Obama has said he wants Gaddafi to leave, yet his own diplomats negotiate and approve a U.N. embargo that reduces his options in achieving that goal. Why are we still paying Ambassador to the U.N. Susan Rice?”

I’ve always found Ambassador Rice to be pathetic and not ready for prime time.

Bret Stephens / Wall Street Journal

“(The) outcome we risk if Gaddafi survives is the very opposite of the optimal: Friends lost, enemies maintained, and new regimes left to wonder just what, exactly, are the benefits of an alliance with a diffident America.

“Nor is that the worst of it. Iraq’s Shiites did not soon forgive what they saw as America’s gratuitous betrayal after George H.W. Bush had urged them to ‘take matters into their own hands.’ Today’s Egyptians aren’t impressed by the Obama administration’s see-which-side-comes-out-on-top performance during their own uprising. What will Libya’s people say of a U.S. that abandons them to a cruel fate? And what message does that send to the region’s potentially most consequential opposition movement, Iran’s still-defiant Greens? Then again, they already know of what stuff this president is – or rather isn’t – made of.

“It remains possible, even likely, that Libya’s rebels will again seize the initiative and treat the Gaddafi family to the fate they so richly deserve. No doubt that’s the outcome for which the administration is keeping its fingers crossed, on the theory that Libyans will be better served in the long run if they needn’t share the credit for their own liberation. There’s some truth to that.

“But also true is that at the moment when more than just the future of Libya and the safety of its people lies in the balance, Mr. Obama has left things to chance. He thinks he’s lucky. What’s the plan if he isn’t?”

George Will / Washington Post…the other side of the debate.

“In September 1941, Japan’s leaders had a question for Adm. Isoroku Yamamoto: Could he cripple the U.S. fleet in Hawaii? Yes, he said. Then he had a question for the leaders: But then what?

“Following an attack, he said, ‘I shall run wild considerably for the first six months or a year, but I have utterly no confidence’ after that. Yamamoto knew America: He had attended Harvard and been naval attaché in Japan’s embassy in Washington. He knew Japan would be at war with an enraged industrial giant. The tide-turning defeat of Japan’s navy at the Battle of Midway occurred June 7, 1942 – exactly six months after Pearl Harbor.

“Today, some Washington voices are calling for U.S. force to be applied, somehow, on behalf of the people trying to overthrow Moammar Gaddafi. Some interventionists are Republicans, whose skepticism about government’s abilities to achieve intended effects ends at the water’s edge. All interventionists should answer some questions:

“The world would be better without Gaddafi. But is that a vital U.S. national interest? If it is, when did it become so? A month ago, no one thought it was.

“How much of Gaddafi’s violence is coming from the air? Even if his aircraft are swept from his skies, would that be decisive?

“What lesson should be learned from the fact that Europe’s worst atrocity since the Second World War – the massacre by Serbs of Bosnian Muslims at Srebrenica – occurred beneath a no-fly zone?....

“If we decide to give war supplies to the anti-Gaddafi fighters, how do we get them there?

“Presumably we would coordinate aid with the leaders of the anti-Gaddafi forces. Who are they?

“Libya is a tribal society. What concerning our Iraq and Afghanistan experiences justifies confidence that we understand Libyan dynamics?....

“The Egyptian crowds watched and learned from the Tunisian crowds. But the Libyan government watched and learned from the fate of the Tunisian and Egyptian governments. It has decided to fight. Would not U.S. intervention in Libya encourage other restive peoples to expect U.S. military assistance?

“Would it be wise for U.S. military force to be engaged simultaneously in three Muslim nations?”

Which brings me to Iran.

Going back to at least 2006, I was urging the then Bush administration to deal with Ayatollah Hashemi Rafsanjani in an attempt to end-run President Ahmadinejad, the man who defeated Rafsanjani for the presidency in 2005.

Rafsanjani was a leader of the 1979 Iranian Revolution and a former president from 1989-97 when he oversaw Iran’s reconstruction following its devastating war with Iraq.

Rafsanjani has a checkered past, but he is also a pragmatist, as well as a billionaire through his many commercial interests, and he despised Ahmadinejad for his vitriol because he didn’t want to see Iran get hit with the sanctions that ended up killing Iran’s economy.

Rafsanjani, I argued, was the one man the West could cut a deal with on the nuclear front. Since 2007, he was chairman of the Assembly of Experts, an 80-man body that has the power to appoint and dismiss the supreme leader, now Ayatollah Khamenei.

Rafsanjani then supported the opposition in the 2009 presidential election and we know how that went. Rafsanjani’s children were visible in their support of the opposition figures as well and to the best of my knowledge are now all in exile.

The Bush administration, if our president had any intellect on such matters, had an opportunity to stir things up and just as it missed similar opportunities in Lebanon to marginalize Hizbullah following the 2005 assassination of Rafik Hariri, President George W. Bush twiddled his thumbs and his nudnick Secretary of State Condoleezza Rice did the same.

Fast-forward to today and it was clear from day one of the Obama presidency, as I pointed out constantly in these pages, that it was more important to them to try and cut a deal with a whack job, Ahmadinejad, who stole an election, rather than once again work behind the scenes with Rafsanjani, which in effect would have also been supporting the opposition.

And so if you put aside Japan and its tragedy, this past week will be known for another event garnering little press, the ouster of Hashemi Rafsanjani from the Assembly of Experts in favor of an 80-year-old ultra-conservative loyalist, Aytatollah Kani. Check out his picture. He looks like the devil…and he will play the part.

This is awful news. Frankly, it’s the beginning of the end in terms of the West ever being able to deal with the Iranian regime. Just last week I told you that Ayatollah Khamenei would never execute opposition leaders Mousavi and Karroubi because he understood how risky that was. I also told you that if we woke up one day to find either hanged, that would be a sign Khamenei was about to be replaced by one even more conservative than he. That is why the elevation of Kani, and the demotion of Rafsanjani (to a far less influential post) was so important. If there was ever any doubt about Iran’s true intentions, there shouldn’t be now, and for all their own support of terror, it’s why today, more than ever, the United States needs the Saudi royal family. There can be no equivocating. This message must be clear. The Saudis, and their huge stockpile of U.S. armaments, need to be the bulwark to keep Iran’s sphere of influence as it is and nothing more (save for Iraq which seems certain to be swept into Iran’s orbit).

Israel? They’ll be lucky if they only have to deal with Hizbullah. In this arena, Sunday becomes a critical day as Lebanon’s March 14 coalition is celebrating the sixth anniversary of its founding (a day early).

March 14 is the coalition headed by Saad Hariri, former prime minister who is now ‘caretaker’ by title until the new Hizbullah-backed prime minister-designate puts a government together which Hariri’s supporters say they want no part of.

Hariri in turn has become vehement in his calls for Hizbullah to disarm and that there should be one Lebanon, one military, to defend itself against Israel. [I’m not voicing an opinion here, just stating the facts.]

March 14 also insists the Special Tribunal for Lebanon that is investigating Saad’s father’s assassination and which is rumored to be near a formal indictment of members of Hizbullah, be upheld and allowed to proceed. [There are significant breaking developments on this front I’ll get into next time.] Sunday may just be a massive demonstration, generally peaceful, but conflict is inevitable down the road. When it comes to Israel and Lebanon, as former U.S. ambassador to Israel Daniel Kurtzer said, “The mutual deterrence has worked until now to prevent any casual escalation, but it won’t last forever. At some point red lines will be crossed, and if there’s a situation in which either side believes its interests call for it, they’ll take action.” When it comes to Hizbullah, puppet-master Iran hopes to pull the strings at a time of its choosing.

[One other note on the Iran front. There are major questions being raised as to the safety of the Bushehr nuclear plant where fuel rods were recently removed, we have been told, as part of normal maintenance. But some experts worry about the inexperience of the workers there. So as we watch the safety issues with nuclear plants in Japan, post-earthquake, understand that Kuwaitis in particular are concerned about Bushehr as they are immediately downwind from it (the Saudis sit behind Kuwait in terms of any radiation plumes).]

Editorial / Daily Star (Beirut)

“As dramatic events in the Arab world continue to unfold this spring, one frequent topic bandied about by pundits is the impact of the Arab upheavals on the Islamic Republic of Iran.

“The most striking impression one gets from all the chatter about Tehran is the boundless ignorance of too many of the would-be cognoscenti unspooling ready-made theories about the direct results that Tahrir (Liberation) Square will bring about in Tehran. For the most part, the political leadership and the publics’ of the U.S. and European nations receive their wisdom about Iran from think tanks located in the West, in articles penned by commentators sitting in Washington or London – and for the most part these authors have no idea how the institutions of the Islamic Republic or the subtleties of the varied constituencies among Iran’s population of more than 70 million.

“The truth about the Iranian regime is that it has a coherent and long-term agenda for expanding its influence throughout the region, and it pursues that agenda single-mindedly. Regardless of how one feels about the relative qualities of that influence, it must be granted that Tehran has done a remarkable job of achieving so many of its objectives in the 32 years since the clerical regime emerged – and instantly became a bogeyman to many Arab and Western countries….

“In Lebanon we know the intimate relationship between Hizbullah and Iran, but no one should fall under the mistaken impression that Tehran’s sway depends solely on the Shiite faith, or even the propagation of political Islam. The Islamic Republic has significant economic interests, and it has also built its standing and alliances partly on opposition to Israel.

“The Arab popular uprisings riveting the world’s attention are leading Tehran to accelerate the implementation of its agenda. If Iranian leaders feel any trepidation at the collapse of the Egyptian and Tunisian autocracies, they are hiding it well, for they continue to project confidence.”

And regarding Pakistan, President Asif Ali Zardari / Washington Post.

“We will not be intimidated, nor will we retreat. Such acts [Ed. like two recent assassinations of key government officials] will not deter the government from our calibrated and consistent efforts to eliminate extremism and terrorism. It is not only the future of Pakistan that is at stake but peace in our region and possibly the world.

“Our nation is pressed by overlapping threats. We have lost more soldiers in the war against terrorism than all of NATO combined. We have lost 10 times the number of civilians who died on Sept. 11, 2001. Two thousand police officers have been killed. Our economic growth was stifled by the priorities of past dictatorial regimes that unfortunately were supported by the West. The worst floods in our history put millions out of their homes. The religious fanaticism behind our assassinations is a tinderbox poised to explode across Pakistan. The embers are fanned by the opportunism of those who seek advantages in domestic policies by violently polarizing society….

“We are fighting terrorists for the soul of Pakistan and have paid a heavy price. Our desire to confront and deal with the menace in a manner that is effective in our context should not become the basis for questioning our commitment or ignoring our sacrifices.

“If Pakistan and the United States are to work together against terrorism, we must avoid political incidents that could further inflame tensions and provide extremists or opportunists with a pretext for destabilizing our fledgling democracy. The Raymond Davis incident in Lahore…is a prime example of the unanticipated consequences of problematic behavior….We are committed to peaceful adjudication of the Davis case in accordance with the law. But it is in no one’s interest to allow this matter to be manipulated and exploited to weaken the government of Pakistan and damage further the U.S. image in our country.

“Similarly counterproductive are threats to apply sanctions to Pakistan over the Davis affair by cutting off Kerry-Lugar development funds that were designed to build infrastructure, strengthen education and create jobs. It is a threat, written out of the playbook of America’s enemies, whose only result will be to undermine U.S. strategic interests in South and Central Asia. In an incendiary environment, hot rhetoric and dysfunctional warnings can start fires that will be difficult to extinguish.”

Lastly, I warned the first week of the Egyptian crisis that it would be a boon for al-Qaeda. Others said this would not be the case. The following from last weekend backs me up.

Michael Scheuer, chief of the CIA’s bin Laden unit from 1996 to 1999, in an op-ed for the Washington Post.

“All (of what has transpired in the Middle East and North Africa thus far) amounts to an enormous strategic step forward for al-Qaeda. That these victories have come with virtually no investment of manpower or money by the terrorist network, and with self-defeating applause from the Facebook-obsessed, Twitter-addled West, only makes them all the sweeter for bin Laden.

“Peering into the future, the autocrats’ probable successors likewise offer abundant good news for al-Qaeda and kindred groups. In Egypt, Tunisia, Libya, Yemen and any other nation with a U.S.-supported tyranny that sinks in the weeks and months ahead, the role of Islamist groups will become larger – and over time perhaps dominant – if only because the populations in play are almost entirely Muslim and because Islamist groups have the most effective nationwide infrastructures to replace the old guard. And most do and will receive funding, openly or covertly, from always generous donors in Saudi Arabia and other oil-rich Sunni gulf states.

“Each new regime is likely to host a more open, religion-friendly environment for speech, assembly and press freedoms than did Mubarak and his ilk. So it will be easier for media-savvy Islamist groups – whether peaceful or militant – to proselytize, publish and foment without immediate threat of arrest and incarceration. Indeed, Washington and its Western allies will dogmatically urge the new governments to maintain such freedoms, even as the Islamists capitalize on them….

“The revolts also mean that the United States and its Western allies must take on a far greater share of the counterterrorism operations that they previously conducted with the help of Arab regimes. The days of Mubarak, Saleh, Gaddafi and Ben Ali doing the dirty work for American, European and Israeli counterterrorism efforts are over. Soon it will be U.S. and Western special forces and intelligence services that will be ordered to capture or kill militants in Muslim lands – individuals that our tyrannical friends used to dispose of for us.

“How tragic that in the war being waged against the United States by al-Qaeda and its allies precisely because of Washington’s relentless intervention in the Islamic world, the U.S. government will now be forced to intervene even more – or sit on the sidelines and watch al-Qaeda build or expand bases from which to threaten U.S. security….

“Bin Laden and his peers are counting on the fact that the uprisings’ secular, pro-democracy Facebookers and tweeters – so beloved of reality-averse Western journalists and politicians – are a thin veneer across a deeply pious Arab world. They are confident that these revolts are not about democratic change but about who, in societies where peaceful transfers of power are rare, will fill the vacuum left by the dictators and consolidate power. These men also know that the answer to that question will ultimately come out of the barrel of a Kalashnikov, of which they have many, along with the old tyrants’ weapons stockpiles, on which they are now feasting.”

Wall Street

Perversely, stocks rallied Friday even as the devastating news rolled in from Japan. While it’s often futile to describe market action day to day, Friday was as much about lack of protest in Saudi Arabia, which allowed oil prices to move lower to the $100 level after trading much of the week in the $105 neighborhood, as anything else. But it is way too soon to give the all-clear and the issues at two of the nuclear plants in Japan as I go to post are most disconcerting on a number of fronts. It’s customary to say that natural disasters are stimulative to an economy because of the reconstruction efforts that follow, but there is also the sentiment element I spend so much time on and these pictures are as bad as any. It’s a good time to “wait 24 hours.”

Here’s what is factual, however. This week, Wednesday specifically, marked the two-year anniversary off the 3/9/09 market lows as measured by closing averages.

For the two years stocks advanced as follows.

Dow Jones +87%
S&P 500 +95%
Nasdaq +117%

[Gold, incidentally, was up 52%.]

Personally, in terms of my forecasting, I nailed 2009 in predicting the Dow Jones and S&P would finish up 20% that year and Nasdaq up 30% (it did even better than that) and one of my three best moments (the others being my calls on the tech and real estate bubbles) was sticking to my guns March 2009 in staying bullish.

But the past 14+ months I have been too negative in calling for down equity markets (though I have been projecting only minimal losses) because I have been waiting for geopolitical events to overwhelm sentiment, and fundamentals, that only now are beginning to manifest themselves. I certainly stick by my forecast that we finish 2011 down as I just don’t see a great economy in the second half of the year and thus I feel expectations on the earnings front in particular are too high. I grant you that today the market is not necessarily expensive, but it isn’t cheap, and we all know that come June the Federal Reserve is slated to pull the plug on QE2, which PIMCO’s Bill Gross is calling “D-Day” for Treasuries when the support dries up.

I, on the other hand, do not see a huge bond debacle, yet.   I believe that comes next year. For much of 2011, I just feel slower growth and no wage inflation will limit losses in Treasuries. For the record I’ll say the 10-year doesn’t hit 4.50%. Now this means if you were in a Treasury bond fund of any significant duration, you’d lose a sizable amount of your net asset value, but not a total disaster as some are calling for. [In this opinion I side largely with BlackRock.]

On the inflation front, I’ve given my stance. We are seeing a commodities price spike. Yes, it will hurt emerging markets in particular. No, it will not cause panic in the streets of the U.S. And prices will come down. Early in the year I made the bet that the broad-based CRB index of 19 commodities would finish 2011 below 333.90, which is where it was in early January. For simplicity sake, I’ll say it closes below 332.80, the yearend figure for 2010. It currently stands at 351.88, down from the previous week’s 362.88. So we’ll have some fun with numbers in this regard. We’ve already seen significant signs that some of the global harvests may not be as bad as once thought and that the inventory picture could improve. The USDA issued a more optimistic outlook this week, earlier in the year than I thought it would. And in China, where they’ve been dealing with the worst drought in 200 years in their key wheat-producing area, they’ve now had two weeks of rain and snow and the winter wheat crop has been saved for at least 90% of the land, a huge positive. No doubt, though, there will be further spikes to come, I’ve just staked my claim as to where we finish up come New Year’s.

On the oil front, the United States previously received an infinitesimal percentage of its crude from Libya, vs. 9% of our imports coming from Saudi Arabia, 8.6% Nigeria and 4.3% Algeria. Nigeria has constant issues but somehow it gets here.   By the way, as of this week, it’s really only China and India that are still buying Libyan oil but it’s enough to pay Gaddafi $200 million a week from the large refinery he still controls and he’s threatening to retake other facilities.

Lastly, Europe. Going back to last spring I’ve nailed this topic, calling out the occasional European Union official who would step forward and give the ‘all clear.’ Such foolishness has been disproved time and time again and those who also still want to believe Europe’s debt crisis isn’t significant couldn’t be more wrong. Yes, there will be good weeks (which means no news) and bad weeks (which means the truth).   This past one was a bad week.

Europe’s day of reckoning is supposed to be in about two weeks when the final touches are placed on a revamped and reinvigorated bailout program for the likes of Greece, Ireland and any other euro-currency member-state that stumbles on the path to fiscal redemption.

But Moody’s lowered Greece’s debt rating again, talking about its inability to collect revenue and the increased risk of default and debt restructuring, while Ireland’s new government pleaded for a reduced interest rate on its EU bailout funds and suddenly German Chancellor Angela Merkel said, “OK.”

“Really? You’ll actually lower our interest rate?  I never thought you’d do such a thing!”

“Yes, I will…but…you have to raise your Europe-low corporate tax rate of 12.5% which gives you an advantage.”

‘Uh-oh,’ thought the Irish. ‘We can’t do that. Many a corporation has already told us they’re pulling up stakes if the corporate tax rate goes higher.’

Meanwhile, the Spanish government said it had performed some renewed stress tests on its key savings banks, cajas, and that they needed $21 billion in new capital, private money not government funding, and they needed to do so by September.

Only one problem.   Moody’s and Fitch believe the needed amount of capital is closer to anywhere from $50 billion to as much as $150 billion!

How can there be such a difference, sports fans? It’s that old bugaboo, transparency, or lack thereof.

This is the single major issue that continues to plague many European nations and their banks. Just what the heck is on the books when it comes to sovereign debt holdings? Everyone and their mother knows, for example, that the large German and French banks own a boatload of Spanish sovereign paper and that if Spain ever defaulted and was forced to restructure that debt, the German and French banks would suffer massive losses.

But no one knows the actual exposure virtually across the entire continent. For all of America’s banking problems, and we still have some whoppers, our transparency is superior to the European variety. [Our banks also don’t hold a lot of European sovereign debt.]

Finally, two other issues. The split between North and South in Europe continues to widen. This week the Finns were furious over the thought of lending the PIIGS (Portugal, Ireland, Italy, Greece and Spain) any further bailout money (Greece and Ireland being the only two formally receiving such aid thus far).

A Finnish member of the European parliament, Timo Solni, said this week:

“We have been doing our homework, we don’t have a budget deficit, we have done quite well tackling unemployment. Now [we must help] those people who have lied – this is the suspicious mind up north, because quite many people think the south is milking our cow.” [Financial Times]

Financier George Soros weighed in: “The political conditions further down the road will be less favorable than today. The divergence between the surplus countries and the deficit countries is going to get wider.”

And then you have the immigration threat I’ve written so much about, now exacerbated by the turmoil in North Africa. Fears are spreading across much of Europe as the oppressed (and criminals and/or terrorists) wash up on Italy’s and Spain’s shores. Unemployment is already high in Europe. A potential surge of hundreds of thousands simply can’t be absorbed and will do a number on social services. It’s no wonder that anti-immigrant sentiment is soaring and this spells trouble.

A year ago when I was in Paris, I saw how that city has changed in this regard. It is teeming with refugees. It’s also why I’m going back end of April because amidst the beauty I know I’ll feel an increased undercurrent of tension and across Europe it’s going to manifest itself in anti-government, anti-immigrant protests with Europe’s growing far-right parties, such as France’s National Front, grabbing the spotlight. It will be ugly.

Street Bytes

--Stocks suffered their second decline in three weeks with the Dow Jones losing 1.0% to 12044. The S&P 500 declined 1.3% and Nasdaq tumbled 2.5%. For most of the week it was concerns over the Middle East and oil prices that dominated action, as well as further uncertainty in Europe.

--U.S. Treasury Yields

6-mo. 0.13% 2-yr. 0.64% 10-yr. 3.40% 30-yr. 4.55%

Bonds rallied on another flight to safety as well as some well-received debt auctions. At the same time the budget deficit for February came in at $225 billion, the largest ever. For the fiscal year the deficit is projected to come in at $1.5 trillion. In 2012, the markets will take the U.S. out to the woodshed and shoot us.

--Household wealth in the U.S. rose $2.1 trillion in the fourth quarter owing to the rally in equities. Additionally, Americans continue to pare back debt and improve their balance sheets. Overall, net wealth remains about $9 trillion below pre-recession levels. The value of real estate fell $244 billion following the prior quarter’s $629 billion drop.

--AFL-CIO President Richard Trumka said the Wisconsin Senate’s vote to strip collective bargaining for most government unions is a “corruption of democracy” and shows how far Republicans will go to “pay back their corporate donors.” This is laughable coming from him. Trumka said Republicans are “spinning deficits.” He needs to be reminded these phony deficits add up to $125 billion in 44 states and the District of Columbia. Of course Trumka couldn’t care less, knowing he’ll be lounging on some beach in Florida with his massive union-paid pension down the road.

--China’s consumer price report for February came in at 4.9%, the same pace as in January and still well above the government’s 4% target for 2011. On the positive side, retail sales for a combined Jan. and Feb. (to smooth out differences with the Lunar New Year holiday) were up 15.8% and industrial production up 14%. In reporting a surprise trade deficit for February, exports for the month were only up 2.4%, while imports rose 19.4%.

--China is accelerating construction of high-speed railways, despite the fears of huge costs and the scandal enveloping the railways ministry that claimed the minister in charge. But even though passenger traffic figures have been light, the railways ministry said 13,000 kilometers of high-speed railway will have been constructed by the end of the year, a full year ahead of schedule. The problem in China, aside from the lack of traffic thus far, is the huge debts being accumulated.

--U.S. Commerce Secretary Gary Locke was nominated to become the new ambassador to China, in a move described by the Chinese press as showing the utmost importance with which the White House views trade ties with China, Locke also being the first Chinese-American to hold the post if confirmed. He’ll replace Jon Huntsman who may now run for president against Obama.

--Car sales in China rose 2.6% in February from a year earlier, the slowest pace in 23 months, though sales were impacted by the Lunar New Year holiday, which ran from February 2 to 8 as many Chinese go on a buying spree in the weeks heading into the week-long festival. Also, last February sales soared 55.3%.

--Fitch Ratings agency says China faces a 60% risk of a banking crisis by mid-2013 should the property bubble burst. The government in turn is doing all it can to cool the market, including oversight of local-government investment vehicles and continuously increasing reserve requirements.

The above aside, China will invest more than $200 billion this year in affordable housing, both building and renovating 10 million apartments for low-income households.

--AOL will cut 900 jobs following the move to acquire the Huffington Post as the company integrates websites. 700 of the job losses will be in India.

--Be careful investing in defense stocks these days. Due to the turmoil in the Middle East, many governments are already shelving projects because they are redirecting funds to food and other aid programs to keep the people happy, such as the Saudis and the above-mentioned $36 billion. Iraq recently switched $900 million for F-16 fighter jets into food aid.

--The rate of foreclosures is dropping rapidly, down 27% in February from year ago levels, but this is largely because banks are undergoing a major overhaul in their foreclosure process under pressure from federal regulators to revise the way they service loans.

--Economists at UCLA’s Anderson School of Management predict California’s jobless rate will average 11.6% this year and only drop to 9.3% in 2013. 350,000 jobs in the construction and financial services sectors won’t return this decade. The good news is that when the state does start to move, it will grow faster than the nation owing to its relationship with Asia and the export trade.

--I will not be covering the Raj Rajaratnam insider trading trial that closely unless there is something earth-shattering to report. For now, his defense attorney is saying Rajaratnam did his own research, while the prosecution is presenting witnesses who have turned on the hedge fund king, including one, Anil Kumar, a former executive at McKinsey & Co., who supposedly received $2 million in payments in exchange for information about McKinsey clients, including Advanced Micro Devices’ plan to buy ATI Technologies in 2006. Rajaratnam’s attorney, John Dowd, is portraying the government’s witnesses as liars and tax cheats looking to “save their skins.”

--Mexican tycoon Carlos Slim once again tops Forbes magazine’s global ranking of billionaires. His net worth rose $20 billion to $74 billion. Bill Gates and Warren Buffett remain second and third at $56 billion and $50 billion, respectively, though these two have also been giving away much of their wealth.

Moscow replaced New York as home to the greatest number of billionaires with 79 compared with Gotham’s 58. Overall, there are said to be 1,210 worldwide.

--It really is incredible that Starbucks is 40 years old. And this week it became official…Subway has more restaurants than McDonald’s does in terms of units; 33,749 vs. 32,737. I love Subway. Eat fresh!

[Sales at McDonald’s, a leading economic bellwether for yours truly, and another personal fave, rose 3.9% for restaurants open at least 13 months in February, slower than January’s 5.3% rise. But just 2.7% in February in the U.S.]

--Bono is now in charge of salvaging “Spider-Man: Turn Off the Dark.” He replaced Julie Taymor, who staged and co-wrote it, with a man who has staged circus productions for Barnum & Bailey, among other things, which only seems appropriate. A production source told the New York Post, Bono is going to “rip the show apart from top to bottom. They’re going to start from scratch.” Well, I’m still glad I saw it a few weeks ago, even though it sucked. Something to tell the kids. [Wait…I don’t have any kids! Never mind.] The show, by the way, will shut down in a few weeks and then reemerge in June, so they say.

--Continental Airlines announced it would no longer serve free pretzels in coach, thus tying the pretzel industry in knots. The carrier said the move would save $2.5 million a year.

--Now it’s Honda’s turn. Some Honda models have been subject to the same spiders that forced Mazda to recall 65,000 sedans last week, though Honda knew it had a problem back in 2009 and issued a service bulletin for dealers to check Accords for possible infestation by yellow sac spiders. I have an Accord that could be impacted. Nooo!!!!

--My portfolio: My China holding in Fujian preannounced great earnings (as expected) and the stock continued to fall. I refuse to tout this company to the extent of divulging its name but it’s now annualizing earnings at a 40 cent pace and has a p/e nearing 2. At the same time I’ve been writing in this space that sentiment towards Chinese small caps, as well as uncertainty over the direction of the economy there, has been a hindrance. At some point this will all change, it’s just not now. So to those still in it with me, know I continued to buy this week (and in size). But I’m also prepared to hold it into 2013. [There have been some negative announcements on the board front and I’ll get into these next time.]

*I sold out of my uranium play just in the nick of time as it turned out and this had nothing to do with Japan…the sector just got slammed this week.

Foreign Affairs

Afghanistan: Iran was caught shipping missiles into Afghanistan for use by the Taliban. And in the latest survey of civilian deaths, last year there were 2,777 victims, the most of the war. Even more disturbingly was a doubling of assassinations of government officials and tribal leaders allied with NATO. Civilian deaths directly attributable to NATO, however, were down 26% but we have to be virtually perfect.

China: In his address to the National People’s Congress last weekend, Premier Wen Jiabao, in setting inflation targets of 4% and economic growth of 8%, accepted that uneven economic development was a “serious problem.” Wen and all of China’s leaders understand stable prices are key to stability, period.

Wen also said the government will seek to increase subsidies to farmers and the urban poor, and thus stimulate domestic demand, “a long-term strategic principle and basic standpoint of China’s economic development as well as a fundamental means and an internal requirement for promoting balanced economic development….

“We must make improving the people’s lives a pivot linking reform, development and stability…and make sure people are content with their lives and jobs, society is tranquil and orderly and the country enjoys long-term peace and stability.”

But when it comes to political reform, something Wen has long touted, at least for public consumption though obviously not yet in practice, Wu Bangguo, who is officially number two in the leadership behind President Hu Jintao (not Premier Wen), said in his address to the legislature that abandoning the Communist Party-dominated system of governance would lead to chaos.

“If we waver…the fruits of development that we have already achieved will be lost and the country could even fall into the abyss of civil strife.”

In other words, people, don’t even think about marching for change. You’ll be beaten severely.

On the Taiwan front, owing to warming ties with China the Taiwanese military is looking to slash 9,200 troops this year, though the cut will be offset by the use of more advanced weaponry. Over five years, Taiwan is slated to reduce its defense forces from 275,000 by 60,000, or more than 20%. For its part, Beijing once again warned that if the United States wants to maintain good relations it should not sell any more arms to Taipei.

Lastly, the Dalai Lama announced he is ceding political power in the Tibetan exile government. Now 75, the move doesn’t mean he’s no longer the overall leader of the cause, but it allows a new generation to emerge. More on the Dalai Lama below.

North Korea: There seems little doubt this spring will produce another provocation from Kim Jong-il as he seeks to promote the legitimacy of his son and heir, Kim Jong-un.

Russia: Vice President Joe Biden, in a trip to Moscow for talks on mostly economic issues, told students at Moscow State University that Russia had to attack corruption and bring about democratic change to guarantee improved relations. At the same time he praised Russia for advances in the overall relationship.

Turkey: President Abdullah Gul took issue with the arrest of nine journalists and writers on charges of plotting a coup against the moderate Islamist government.

Editorial / Washington Post

“The recent arrests are a good example of what sometimes looks like an assault on liberal democratic values….

“All are charged with participating in a shadowy conspiracy called Ergenekon, which allegedly plotted to overthrow the AK (Justice and Development party) government….Turkey’s journalist association says that 58 journalists have been imprisoned and that thousands could face charges….

“Much of the evidence (the courts) have marshaled looks flimsy and even fabricated….

“It’s good that Mr. Gul spoke up. Bu the real power is Prime Minister Recep Tayyip Erdogan, who does not seem discomfited by the media crackdown.”

Erdogan has blasted the U.S. ambassador when he brings up the journalist arrests. The prime minister is seeking to become a regional leader. But, as the Post concludes:

“If Turkey ceases to become a functioning democracy with unquestionably free media, neither Arab states nor anyone else will look to Turkey as a mentor.”

Spain: The suspected head of the Basque separatist group Eta, whose actions have cost the lives of more than 800 since 1968, was arrested in France. In January, Eta vowed to cease “offensive armed actions” but it has broken such promises before and they are seen as an attempt to reduce the heat on its operations.

France: Far-right leader Marine Le Pen of the National Front shockingly came out ahead in a Le Parisien newspaper poll, capturing 23%, 2% ahead of both President Sarkozy and Socialist leader Martine Aubry.

However, while this generated some buzz (and I wrote the other week that Le Pen, daughter of National Front founder Jean-Marie Le Pen, is going to create a stir), the survey was an online poll rather than a telephone one, these are highly inaccurate, and, the inevitable Socialist candidate, Dominique Strauss-Kahn, wasn’t listed. I know nothing about Aubry but some say she is the most partisan figure in French politics and wouldn’t stand a chance in winning. Strauss-Kahn, however, is a shoo-in and should be announcing this spring.

Random Musings

--According to a USA TODAY/Gallup Poll, while most Americans do not believe U.S. Muslims are too extreme in their religious beliefs, a majority (52% for, 38% against) said Congressman Peter King’s hearing into the radicalization of some members of the Muslim community was entirely appropriate. Prior to the hearing on Thursday, Dem. Cong. Keith Ellison, one of two Muslim members of Congress, said the poll’s findings show that Americans still harbor inaccurate, suspicious views of their Muslim neighbors.

“People’s civil rights cannot be a popularity contest,” said Ellison. “What percentage of Americans would say it’s OK to intern Japanese people in 1941?”

Ellison then proceeded, Thursday, to appear before King’s hearing and gave a sob story that, frankly, didn’t move me in the least and I’m the kind that was going through the Kleenex during last Sunday’s “60 Minutes” piece on the plight of school kids in Florida whose parents are going through tough times. Call me insensitive, then, to Ellison’s testimony, but I’ve only spent the last 12+ years studying and writing on topics like this. I think I know a thing or two.

[Including my instinct, correct as it turned out, that a white supremacist was responsible for the attempted MLK Day bombing in Spokane the other month.]

I’m frankly sickened by so much going on these days, from the White House and Congress on down, as well as the inability of many Americans to see the truth.

But moving on with the King hearing, the New York Republican started it off by declaring:

“To back down (from those saying he was conducting a witch hunt) would be a craven surrender to political correctness. Despite what passes for conventional wisdom in certain circles, there is nothing radical or un-American in holding these hearings.”

King is correct when he says Al-Qaeda is looking to recruit here. They already have, for crying out loud. And he is correct in saying that not all Muslim groups are cooperating with authorities. These are facts.

Democrats on King’s committee countered that the hearings “will stoke a climate of fear and distrust in the Muslim community.” Bennie Thompson (D-Miss.) said:

“I cannot help but wonder how propaganda about this hearing’s focus on the American Muslim community will be used by those to inspire a new generation of suicide bombers. For law enforcement officials, outreach and cooperation may become more difficult.”

Cong. Thompson is probably right, but to do nothing is doubly wrong. If nothing else, I can guarantee one thing. The publicity given the hearings will lead to many more Americans coming forward with information. Some of it good….some of it bad. That which is good, however, will save lives. More Americans will be driven by the simple message:

See something…say something.

Further opinion.

Editorial / Wall Street Journal

“Congressional hearings on the Islamist terror threat inside the U.S. begin today, and our friends on the left are busy portraying them as the McCarthy hearings and Palmer Raids rolled into one. What a pity. Terrorism experts have been warning for years that future attacks will be largely homegrown, and Americans are entitled to an assessment of how serious a threat this is….

“Since 9/11, there have been more than 50 known cases, involving about 130 individuals, in which terrorist plots were hatched on American soil. These include plots to blow up the Brooklyn Bridge in New York, an office tower in Dallas, a federal court house in Illinois, the Washington, D.C. metro, and the trans-Alaska pipeline….

“In a useful report published by the Rand Corporation last year, terrorism expert Brian Michael Jenkins notes that the plotters were a ‘diverse group’…from about 20 countries. Yet all but two of the plotters were Muslim, and those two sought to offer their services to al-Qaeda.

“So much, then, for the notion that it is bigoted for Mr. King to focus on Muslim radicalization. This is where the current threat lies. As Deputy National Security Adviser Denis McDonough pointed out in a speech last week, al-Qaeda operatives ‘make videos, create Internet forums, even publish online magazines, all for the express purpose of trying to convince Muslim-Americans to reject their country and attack their fellow Americans.’”

Heck, look at the situation in Minneapolis-St. Paul with the Somali community, many of whom are being recruited to return to Somalia for training and then come back to the United States to carry out their mission.

Steven Emerson, terrorism expert, in an op-ed for the New York Daily News

“Never in my entire career in Washington have I encountered the hype and scare tactics of those opposing the hearings into Islamic radicalization by Rep. Pete King. A classic example was a headline on MSNBC.com; ‘inquiry by congressional committee looks like inquisition to many Muslims.’

“The line of attack is now familiar…by focusing solely on Muslim extremism, the argument goes, he is betraying his bias.

“This is utterly ridiculous. Our organization, the Investigative Project on Terrorism, recently did an analysis of all terrorism convictions based on statistics released by the Justice Department. These stats show that more than 80% of all convictions tied to international terrorist groups and homegrown terrorism since 9/11 involve defendants driven by a radical Islamist agenda. Though Muslims represent less than 1% of the American population, they constitute defendants in 186 of the 228 cases the Justice Department lists.

“The figures confirm that there is a disproportionate problem of Islamic militancy and terrorism among the American Muslim population….

“(And) one ought to be able to focus on a very real problem – homegrown terrorism fueled by Muslim extremism – without being accused of painting the entire U.S. Muslim population with a broad brush.

“The real underlying story here is how the self-anointed leadership of the Muslim community…are the ones responsible for instilling panic into the Muslim community by suggesting that these hearings will lead to ‘hate crimes’ against Muslims.

“That canard has been used by these groups for years in their attempts to intimidate the media, commentators and critics of radical Islam from truly analyzing the role of these groups and others in radicalizing their constituents in the American-Muslim community.”

Cong. Peter King, in an op-ed for USA TODAY

“As chairman of the House Committee on Homeland Security, it is my obligation to investigate threats to our homeland….

“Three of the top U.S. national security officials have told the American public that we are facing a significant terrorist threat from radicalization inside the U.S. homeland.

“In a hearing before my committee last month, Homeland Security Secretary Janet Napolitano testified that the threat level is at the most ‘heightened state’ since 9/11, and she expressed her concern over the growing threat of domestic radicalization.

“Attorney General Eric Holder has said that radicalization of Americans is something that keeps him awake at night….

“And just last Sunday, President Obama’s deputy national security adviser, Denis McDonough, gave a speech at a mosque in Sterling, Va. He told his audience that the American-Muslim community here in the homeland is being targeted by al-Qaeda.

“The administration is saying it: Al-Qaeda is targeting and attempting to radicalize Muslims within the U.S.”

--In a huge reversal of policy, two years after President Obama vowed in an executive order to close Guantanamo Bay, the administration said it will start new military commission trials for detainees there, an admission that some of those incarcerated will remain in U.S. custody for years, if not life.

--Talk about bad timing, with House Republicans looking to cut all federal funding of public radio and television, NPR’s president and CEO was forced to resign after hidden camera footage of a fellow executive labeling the tea party movement as being “seriously racists” emerged. It was just last fall that CEO Vivian Schiller was castigated by conservatives for firing analyst Juan Williams over comments he made about Muslims.

The fellow in the latest video, Ron Schiller (no relation), who also resigned, said:

“The current Republican Party is not really the Republican Party. It’s been hijacked by this group that is…not just Islamophobic but, really, xenophobic.”

Then Ron Schiller, president of the fundraising arm, stupidly said NPR “would be better off in the long run without federal funding.”

Some Republicans are happy to oblige.

--George Will blasted the Republican presidential field in his Sunday Washington Post column, at least charlatans (my word) like Mike Huckabee and Newt Gingrich. I won’t waste your time with much of Will’s argument but suffice it to say, Huckabee in particular is a nimrod (again, my word).   Will concludes (and I agree):

“There are at most five plausible Republican presidents on the horizon – Indiana Gov. Mitch Daniels, Mississippi Gov. Haley Barbour, former Utah governor and departing ambassador to China, Jon Huntsman, former Massachusetts governor Mitt Romney and former Minnesota governor Tim Pawlenty.

“So the Republican winnowing process is far advanced. But the nominee may emerge much diminished by involvement in a process cluttered with careless, delusional, egomaniacal, spotlight-chasing candidates to whom the sensible American majority would never entrust a lemonade stand, much less nuclear weapons.”

Now one name should be most conspicuous by its absence. Will, who can’t stand this person, ditto moi, doesn’t mention her at all.

And a note to my favorite among the group noted above, Mitch Daniels. In your CNBC appearances, show a little sense of humor. I love that you’re serious, Governor, but geezuz, at least smile now and then.

As for Romney, I know he has the organization, and I know he could be pretty effective raising funds, but he’s a walking hypocrite. I like Barbour, but I told you end of last year that I thought some of his Old South comments doomed him so I can’t be a hypocrite myself. Huntsman I need to learn more about if he decides to make a go of it. Pawlenty? I can’t get fired up in the least about him.

Bottom line, it’s not looking good for some of us. But it’s early.

--Another senator announced he’s not running in 2012, this one Nevada Republican John Ensign, the ethically challenged scumbag who in June 2009 had to admit to an extramarital affair with a former campaign staffer and that he had helped her husband, a member of his congressional staff, obtain lobbying work; even as he was running around preaching family values.

--Speaking of ethics, or lack thereof, it’s official. I always thought it was a tie between Pennsylvania and New Jersey for the most corrupt state, but the past five years, Chris Christie, prior to becoming New Jersey’s governor, helped clean up the state as U.S. Attorney (though we’ll always be a cesspool of corruption), while New York took the lead and continues to lengthen it. New Gov. Andrew Cuomo truly has his work cut out for him as on Thursday, another eight state officials and corporate leaders were arrested in a massive ring that diverted state funds into the hands of lobbyists and cronies in exchange for $1 million in bribes for State Sen. Carl Kruger alone.

Kudos to Manhattan U.S. Attorney Preet Bharara who has been a busy beaver the past few years rounding up the scum in Albany as well as Wall Street.

--Speaking of Gov. Christie, New Jersey voters are split on him in the latest statewide poll (Rutgers-Eagleton). 46% view him favorably, 44% don’t. In December it was 49-39.

Because of the above-noted story on the Republican field, many want the governor to run for president. I’m one who believes that would be a big mistake. He has a ton to do first in New Jersey and I just don’t think he’s ready. Assuming he’s successful in doing much of what he has set out to do, he’d win reelection here and be ready for 2016 with massive name recognition and the ability to raise staggering sums. Of course that’s also assuming Obama wins in 2012.

[Obama, by the way, is viewed favorably by 57% of Jersey voters; all the more reason it just isn’t time for Christie yet.]

--Two weeks ago this day I was at San Diego State for the biggest basketball game in their history and when I got home I learned of a SDSU exchange student who went missing in Madrid, so I took some interest in the case. Sadly it proved to be a parent’s worst nightmare. His body was discovered in a river after a night of partying on the town, alone. There were no signs of foul play. My sympathies to the family and the San Diego State community.

--We note the passing of veteran Washington Post journalist David Broder, 81. I’ve been watching “Meet the Press” so long I feel like I knew Mr. Broder pretty well over the course of his record 400+ appearances, a staggering total. To say the least I didn’t agree with him most of the time, though he distinctly became more of a moderate in his final years, but I respected him because it was clear, such as was the case with the late-Robert Novak, that he did his homework. And when it came to presidential politics, his insights were terrific.

--I started StocksandNews in Feb. 1999 and the first few years I was curious about the traffic to the site. I forget what year but I was the one who alerted you to the issue of click fraud when I was wondering why I was getting an inordinate amount of hits from Uruguay. I was running an ad campaign through a service I can’t even remember the name of now and they literally had folks banging away for pennies at a time. It was a year or so later that the Journal and others began to make a big deal of it but there I was, spreading the word before anyone else after becoming a victim.

So we cleaned things up but in all honesty, the past five or six years I just haven’t cared about traffic, and I haven’t been running any big click-through campaigns so I didn’t need to look for fraud. The last time I really checked I came up with a number I’ve been using ever since when asked but in my case it is so difficult to get anything near an exact number because of my relationship with BuyandHold, let alone all the different sites (all owned by me except B&H) that you can access me through. Without getting into the minutiae, site traffic figures can be as deceiving as Nielsen ratings. Recall for the latter a big issue has been a bar could be showing a football game with 100 patrons but Nielsen only viewed it as one household. By the way, you have no idea how many domain names I own but it’s a lot, and I’m not telling you anymore except to say some of them are, frankly, revolutionary, in the truest sense of that word. Can’t let the feds in on my little secret, you see.

Anyway, the other day I told the tech guys to finally do a sample of my sites in terms of country origin, which is what I used to find most interesting, and I was both startled and disappointed by the findings.

For my last legitimate sampling years ago, China was No. 2, the U.S. obviously being first, followed by Canada and some European countries.

Today, India is a strong No. 2, which I like to see, but you’ll never guess who is a strong 3rd. Pakistan! Uh oh. I hope the ISI isn’t responsible for too many of these hits. But just in case, shout out to my ISI friends! Love ya!

Pakistan is followed by the Philippines, kind of a surprise, but a thank you to all of them, and then Canada, Australia, and New Zealand.

Russia is No. 9 and Indonesia No. 10 (which is as far as I wanted to know because beyond this slot the figures become pretty insignificant).

But there is a shocker in the 8 slot. Not China (I don’t understand what is happening to me there but I’m depressed they aren’t top ten), but rather Nepal! Now what gets me here is that I feel like I’m the only American who has had the guts to diss the Dalai Lama, as in on numerous occasions I’ve called him “overrated.” So I’m curious if my Nepalese readers are furious with me, agree, or are the Chinese government officials based there cheering me on? I’m not so sure I want to go to Nepal to find out.

My tech guys and I are slowly doing some things I’ll be telling you about down the road. I want to stay old school….they want to drag me into the 21st century. But I want to do a daily video newscast, though that would mean I’m working 8 days a week instead of 7 and as far as I know, President Obama hasn’t yet signed an executive order making this possible. But while I’ve told myself I would never use this phrase the rest of my life because it is so idiotically trite, here it is…stay tuned.

--When I was in California the other week, I couldn’t help but think a lot about the weather (as I seemed to thread the needle on my drive down the coast between huge weekend storms, as well as the constant thought of earthquakes).

So I get home and what do I read in a piece in the London Times by John Harlow but the threat California faces from an “arkstorm.” Sorry, my California readers, but I thought I knew about all such things and I didn’t realize how many are taking the threat seriously, including Gov. Jerry Brown, who is examining a recent study by scientists at the Univ. of Southern California, heretofore Tailback U. [Now I’ve really confused some of you.]

“An arkstorm – the name is a reference to the story of Noah in the Bible – is a narrow but intensely powerful hurricane of a kind that last hit California in full force in the winter of 1861 and continued into 1862. Over 45 days, it damaged almost every building.

“Witnesses described a ‘flying river’ that swept away people and livestock. California’s Central Valley, now America’s breadbasket, was turned into an inland sea, impassable for months.”

The USC scientists think another such storm could hit within the decade. The cost could be three times that of a big earthquake, would make more than 1.5 million homeless, and you’d see wind of up to 125 mph in some areas.

Just last December, scientists plotted a minor arkstorm that dumped 9 inches of rain in some Los Angeles area communities. That kind of storm is more commonly known as the Pineapple Express, originating in Hawaii.

The storm may only be about 20 miles wide at its worst, like a smaller hurricane, but then just stream in for days and days. The final rain total in some parts? 20 feet.

--Terrible story from the Great Barrier Reef. Scientists believe the damage from Cyclone Yasi was so severe the reef will take decades to recover. Said one ecologist on the worst-hit areas (where I was in October, by Cairns), “there was hardly a coral to be found left alive.” This will have a huge impact on tourism. For example, the glass-bottom boat I took off one of the islands was part of an industry that took care of thousands every day and now there is nothing really to see. That’s a lot of vacant hotels, empty restaurants and bars, and thousands of lost jobs. Overall, the Great Barrier Reef sees 2 million visitors a year spending about $2 billion.

[What makes the reef recovery so much more difficult compared to past storms is that right before Yasi hit, the area was under threat from flooding rivers along the coast that carried freshwater and fertilizers onto the reef. I also can’t help but imagine Friday’s tsunami didn’t help matters.]

---

Pray for the men and women of our armed forces, and all the fallen.

Our thoughts and prayers go out to the good people of Japan.

God bless them and America.
---

Gold closed at $1421…unchanged on the year
Oil, $100.16

Returns for the week 3/7-3/11

Dow Jones -1.0% [12044]
S&P 500 -1.3% [1304]
S&P MidCap -1.6%
Russell 2000 -2.7%
Nasdaq -2.5% [2715]

Returns for the period 1/1/11-3/11/11

Dow Jones +4.0%
S&P 500 +3.7%
S&P MidCap +5.0%
Russell 2000 +2.4%
Nasdaq +2.4%

Bulls 52.2
Bears 21.1* [Source: Chartcraft / Investors Intelligence]

*Two years ago at the market lows, 3/9/09, the Bull/Bear ratio was 26.4 / 47.2

Have a great week. I appreciate your support.

Brian Trumbore