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03/26/2011

For the week 3/21-3/25

[Posted 7:00 AM ET]

Crisis in the Middle East

Can you figure out what is going on in Libya? Anders Fogh Rasmussen, a good man who is NATO Secretary-General, said it’s a “coalition operation and a NATO operation” but as I go to post, even as I see just a few hours ago NATO has agreed to enforce the no-fly zone as well as command all military operations, the questions are still many. In two polls, Reuters/Ipsos and CNN, though, 79% and 77% of Americans, respectively, believe the U.S. and our allies should remove Gaddafi. But our own president, who once called for Gaddafi’s ouster, now doesn’t specify if this is part of the mission.

As for the coalition itself, the U.S., France, the U.K., Denmark, Canada, Spain, Italy, Belgium, Qatar and the U.A.E., as best I can figure, it’s the first three really leading the charge and nothing would have happened had France’s Nicolas Sarkozy and Britain’s David Cameron not dragged Obama kicking and screaming into the fray like a child who had just been told the high school kids were taking over the basketball court. There was a time that Sarkozy wanted to do the entire operation himself because he can argue he has the most to lose with four French-speaking countries strategic to France in the region: Tunisia, Algeria, Chad and Niger, let alone that it imports oil from Libya, with French oil giant Total controlling an important Libyan oil field.

Both France and Italy, though, understand what the real issue is with turmoil in Libya. Immigration. Italy has already seen 15,000 from Tunisia cross the sea to land on the Italian island of Lampedusa and Italy’s foreign minister has projected that unless the region cools down, up to 350,000 will eventually flood Italy, France and all points north and east. It’s why I keep talking about the rise of the far-right, anti-immigrant parties in Europe and unrest in Tunisia, Libya, and Egypt, for starters, is fueling this rise as the immigrants stress social services already under the gun through austerity budgets, let alone the rise in crime that follows such waves.

But back to the “coalition,” there is also stern opposition. China expressed “deep concern” and warned of a “humanitarian disaster” in Libya if its calls for a ceasefire aren’t met. China and Russia were among the five Security Council members abstaining in the U.N. vote that authorized the creation of the no-fly zone.

Speaking of Russia, Prime Minister Vladimir Putin said, “The resolution is defective and flawed. It allows everything. It resembles medieval calls for crusades.” [At least President Medvedev fired back that “In no way is it acceptable to use expressions that in essence lead to a clash of civilizations…Otherwise everything may end up far worse.”]

Turkey’s Prime Minister Erdogan vented his anger at French President Sarkozy.

“I wish that those who only see oil, gold mines and underground treasures when they look in that direction, would see the region through a prism of conscience from now on.” Erdogan went on to say that the same people who were reluctant to let Turkey into the EU (read France) now spoke in terms of “crusades” in Libya, echoing Putin’s criticism.

Republican Sen. Richard Lugar (Ind.), as respected a foreign policy voice as there is in Congress, summed it up.

“There needs to be a plan about what happens after Gaddafi. Who will be in charge then, and who pays for this all? President Obama, so far, has only expressed vague hopes.”

On big issues like this one, seeing as I continue to write a history of our times, I want to add opinion from all sides, including from the isolationist wing of the Republican Party.

Editorial / The Times of London

“Would somebody please tell the members of the coalition orchestrating a no-fly zone over Libya that there’s a war on? In particular, could they tell President Obama? Could they also mention that, when the United Nations backs a plan to stop Colonel Gaddafi bombing his own people, then that should be the sole focus of your efforts – rather than squabbling over whether the mission is under the command of NATO, or something ‘Natoesque’?

“While they’re at it, could somebody tell Turkey that, if you’ve thrown your hat into the ring to help to combat Colonel Gaddafi’s despotism, it looks bad if you stall progress by criticizing coalition partners?

“And that, just because France is lukewarm about your joining the EU, you don’t sulk and get your Prime Minister, Recep Tayyip Erdogan, to fight an entirely different diplomatic war by sniping at the French for using ‘utterly inappropriate terms’ such as ‘crusade’ before, last night, belatedly assenting to giving NATO control of the mission? If Ankara felt snubbed not to be invited to join world leaders in Paris to discuss the no-fly zone, then this has not been the week to settle diplomatic scores.

“Most crucially, could someone – anyone! – remind Barack Obama that there are lives at stake? That, now that he has finished salsaing his way across South America, the coalition, the people of Libya and his own country need him to show leadership rather than play what looks increasingly like a surreal diplomatic version of Where’s Wally?

“It is not just that, when the leader of the free world fails to lead, America debases both its military muscle and its diplomatic currency. It is that by taking only a walk-on part in this drama, the U.S. president is giving Colonel Gaddafi succor. Mr. Obama’s silence may yet be counted in Libyan lives.”

Editorial / Daily Star of Beirut

“The Arab world’s handling of the intervention in Libya has amounted to another disgrace for a region where the people are finally rising up against their leaders’ seemingly boundless capacity for ineptitude.

“The Arab League and the GCC [Gulf Cooperation Council] voted their clear support for imposing a no-fly zone over Libya; correctly, they sought U.N. Security Council blessing for the mission. However, when it came time to scramble the aircraft and commence the operation, the Arab nations were reduced to their traditional posture of immobility as the U.S., U.K. and France coordinated and carried out the implementation of Resolution 1973.

“To be sure, Qatar is contributing a whopping four jets to the effort – the planes, though, have yet to join in with the mission….[Ed. note. On Friday, the U.A.E. said it would contribute 12 jets but what they will do is not yet known.]

“If the issue was so clear to the various Arab heads of state that Gaddafi had to be stopped, then why didn’t they do anything about it themselves? If such a legitimate cause for military intervention arose in the Arab world, why couldn’t the Arab nations manage any significant part of that intervention on their own?

“Alas, the military capabilities of Arab states represent just one more item on the list of failures of the Arab world’s largely tyrannical and corrupt leaders. Hundreds of billions of dollars have been wasted in the Middle East to fashion armies that can charitably be called impotent.”

Charles Krauthammer / Washington Post

“President Obama is proud of how he put together the Libyan operation. A model of international cooperation. All the necessary paperwork. Arab League backing. A Security Council resolution. (Everything but a resolution from the Congress of the United States, a minor inconvenience for a citizen of the world.) It’s war as designed by an Ivy League professor.

“True, it took three weeks to put this together, during which time Moammar Gaddafi went from besieged, delusional thug losing support by the hour – to resurgent tyrant who marshaled his forces, marched them to the gates of Benghazi and had the U.S. director of national intelligence predicting that ‘the regime will prevail.’

“But what is military initiative and opportunity compared with paper?

“Well, let’s see how that paper multilateralism is doing. The Arab League is already reversing itself, criticizing the use of force it had just authorized. Amr Moussa, secretary-general of the Arab League, is shocked – shocked! – to find that people are being killed by allied airstrikes. This reaction was dubbed mystifying by one commentator, apparently born yesterday and thus unaware that the Arab League has forever been a collection of cynical, warring, unreliable dictatorships of ever-shifting loyalties. A British soccer mob has more unity and moral purpose. Yet Obama deemed it a great diplomatic success that the league deigned to permit others to fight and die to save fellow Arabs for whom 19 of 21 Arab states have yet to lift a finger….

“This confusion is purely the result of Obama’s decision to get America into the war and then immediately relinquish American command. Never modest about himself, Obama is supremely modest about his country. America should be merely ‘one of the partners among many,’ he said Monday. No primus inter pares for him. Even the Clinton administration spoke of America as the indispensable nation. And it remains so. Yet at a time when the world is hungry for America to lead – no one has anything near our capabilities, experience and resources – America is led by a man determined that it should not.

“A man who dithers over parchment. Who starts a war from which he wants out right away. Good God. If you go to take Vienna, take Vienna. If you’re not prepared to do so, better then to stay home and do nothing.”

Peggy Noonan / Wall Street Journal

“I cannot for the life of me see how an American president can launch a serious military action without a full and formal national address in which he explains to the American people why he is doing what he is doing, why it is right, and why it is very much in the national interest. He referred to his aims in parts of speeches and appearances when he was in South America, but now he’s home. More is needed, more is warranted, and more is deserved. He has to sit at that big desk and explain his thinking, put forward the facts as he sees them, and try to garner public support. He has to make a case for his own actions. It’s what presidents do!”

[Ed. note: The other week I did something I never do…write a letter to the editor, in this instance to U.S. News & World Report, which they published in their newsletter. I said Obama had to speak to the people in an oval office setting on the deficit, but knew why he wouldn’t for political reasons, which also doomed his legacy. In this case we’re learning he’ll finally address us on Monday night, though not from the Oval Office but rather a setting with an audience it would seem, the National Defense University. I’m anxious to see how it’s staged.]

George Will / Washington Post

“In Libya, mission creep began before the mission did. A no-fly zone would not accomplish what Barack Obama calls ‘a well-defined goal,’ the ‘protection of civilians.’ So the no-fly zone immediately became protection for aircraft conducting combat operations against Gaddafi’s ground forces.

“America’s war aim is inseparable from – indeed, obviously is – destruction of that regime. So our purpose is to create a political vacuum, into which we hope – this is the ‘audacity of hope’ as foreign policy – good things will spontaneously flow. But if Gaddafi cannot be beaten by the rebels, are we prepared to supply their military deficiencies? And if the decapitation of his regime produces what the removal of Saddam Hussein did – bloody chaos – what then are our responsibilities regarding the tribal vendettas we may have unleashed? How long are we prepared to police the partitioning of Libya?

“Explaining his decision to wage war, Obama said Gaddafi has ‘lost the confidence of his own people and the legitimacy to lead.’ Such meretricious boilerplate seems designed to anesthetize thought. When did Gaddafi lose his people’s confidence? When did he have legitimacy? American doctrine – check the Declaration of Independence – is that governments derive their just powers from the consent of the governed. So there are always many illegitimate governments. When is it America’s duty to scrub away these blemishes on the planet? Is there a limiting principle of humanitarian interventionism? If so, would Obama take a stab at stating it?”

Editorial / The Economist

“Libya is not Iraq. The West has learned through bitter experience to avoid the grievous mistakes it made from the outset of that venture. For one thing, the current mission is indisputably legal. For another, it has, at least for now, the backing of Libya’s own people and – even allowing for some wobbles from Turkey and the Arab League – of most Arab and Muslim countries. Libya’s population is a quarter the size of Iraq’s, and the country should be easier to control: almost all its people, a more homogeneous lot albeit with sharp tribal loyalties, live along the Mediterranean coastal strip. If Colonel Gaddafi’s state crumbles, the West should not seek to disband his army or the upper echelons of his administration, as it foolishly did in Iraq. The opposition’s interim national council contains secular liberals, Islamists, Muslim Brothers, tribal figures and recent defectors from the camp of Colonel Gaddafi. The West should recognize the council as a transitional government, provided that it promises to hold multiparty elections. Above all, there must be no military occupation by outsiders. It is tempting to put time-limits on such a venture, but that would be futile.

“Success in Libya is not guaranteed – how could it be? It is a violent country that may well succumb to more violence, and will not become a democracy any time soon. But its people deserve to be spared the dictator’s gun and be given a chance of a better future.”

Niall Ferguson / Newsweek

“Obama, a novice in foreign affairs, is a president without a strategy. Once a critic of American military intervention in the Middle East, once a skeptic about the chances of democratizing the region, he now finds himself with a poisoned chalice in each hand. In one there are the dregs of the last administration’s interventions: military commitments in Iraq and Afghanistan that he is eager to wind down. In the other is a freshly poured draft of his own making.

“Make no mistake. Whatever the wording of the United Nations Security Council resolution, the United States is now at war with the Libyan government, and the aim of this war is the overthrow of Gaddafi….

“This was the right thing to do. But it should have been done weeks ago, when it first became clear that Gaddafi, unlike Mubarak, was able and willing to unleash military force against his opponents.”

Mr. Ferguson hits on what I first said when the crisis began to unfold in Tripoli and Benghazi. We had a window of opportunity, Obama dithered, and now look where we are. Once Gaddafi began to attack his own people it was a game-changer, only Obama failed to see it as such.

But Libya is but one leak in the reactor core that is the Middle East (a reactor that for generations was cooled by oil, which tended to keep the despots in place and the masses beaten down).

Others…in no particular order:

Bahrain: 70% of the population is Shia, ruled by a Sunni monarchy supported by neighbor and fellow Sunni partner, Saudi Arabia. Iran is stoking the flames of dissent and the monarchy’s goons (backed by a Saudi-led Gulf Cooperation Council force) killed a number of protesters. By week’s end Bahrain was warning Iran of “conflict” if it didn’t keep out of its affairs. Plus there are signs Hizbullah has operatives on the ground in Bahrain. Iran’s Supreme Leader Ayatollah Ali Khamenei warned himself on Monday, “Do not turn the anti-despotic movement of a nation into a Shia-Sunni problem. We will not make a differentiation between Gaza, Palestine, Bahrain, Yemen, Egypt, Libya and Tunisia,” he asserted. [Tehran Times]

You want to really get sick? Khamenei then said that Bahrainis are only seeking a legitimate demand of “one man one vote” in their country, seemingly forgetting his country’s own totally sham presidential election.

Syria: The minority Alawite rule of President Bashar al-Assad suddenly was on shaky grounds as Assad’s hated secret police cracked down on protesters in the city of Deraa, with at least 85 killed at last report in various clashes (and the violence spreading to other cities on Saturday). By Thursday, Assad was offering all manner of goodies to placate the masses, including the end to a 40-year state of emergency, as well as increased pay and benefits for state workers, but demonstrators rejected the offers and suddenly the unthinkable, the fall of the House of Assad, was at least thinkable, if not doable.

I love that U.S. Defense Secretary Robert Gates, who has been rocking the world with his Candor Tour as he wraps up his decades of government service and clearly couldn’t give a damn what anyone else thinks about what comes out of his mouth, told the Syrian people that they should follow Egypt’s lead and the country’s army should “empower a revolution.” Understand that while this is something you and I would like to say, standing behind a unit of Navy Seals, preferably, it is the Obama administration that has aggressively “courted” Assad and yet here is Gates telling the Syrian, ‘Your time is up, scum. Now get the hell out.’ Of all of Gates’ great moments in his career, this could go down as the finest.

But with the sudden turmoil in Syria, it should be no surprise that the Assad government is frantically trying to get Lebanese Prime Minister-designate Najib Mikati to form a government of his own. Syria is warning its Hizbullah-led allies in Beirut to act fast before regional events overwhelm Mikati and Co., which would be to the detriment of Syria and its efforts to claw back into Lebanon after being booted out in 2005 following the assassination of Rafik Hariri.

[Separately, regarding Lebanon, there was a disturbing development in the Bekaa Valley, Hizbullah’s main headquarters outside of its Beirut stronghold, when seven Estonian tourists were kidnapped. There is a theory that this was actually the work of Gaddafi’s henchmen, as he had warned he would retaliate against Western civilians and the Estonians may have been under surveillance in Syria before crossing into Lebanon in Bekaa.]

Yemen: In another fast-moving development, as I go to post President Saleh, who has been in power for 32 years, supposedly reached an agreement with the top general who this week defected to the opposition. Both would step down in favor of a civilian-led government, but no one seems to know just who would comprise this new government and what would happen to terror efforts by the likes of al-Qaeda in the Arabian Peninsula. But then on Friday, Saleh said he wouldn’t step down. Regardless, it seems certain the United States will lose another ally in the war on terror, Saleh, for all his many faults, at least doing some good on this front.

Egypt:  Last Sunday voters overwhelmingly approved a referendum on changes to the constitution that was the first step towards parliamentary elections as early as June and a presidential vote in August or September.

Slow down! say some. The only beneficiary of such rapid change is the Muslim Brotherhood, the only remotely organized political force in Egypt. Other opposition parties, just getting formed, will in no way be ready for a June election.

When it comes to the constitutional amendments, Article 2 cites Islamic law as the basis for Egyptian law. What about protecting the rights of the Christians (or Copts)?

And while I’m not a fan of Mohamed ElBaradei, the former top U.N. nuclear official and probable presidential candidate, he was stoned when he went to the voting booth. ElBaradei opposed the amendments. His supporters said the mob showering him with rocks was paid off. [New York Times]

The only good thing happening in Egypt is thus far the army and Field Marshal Tantawi have stuck to their promise to honor all treaties with Israel, but with the Muslim Brotherhood headed towards victory in parliament, and with the Brotherhood seemingly getting along with the military council thus far, you don’t have to be a genius to see that this train is headed down the wrong track.

As for Israel, tension is high following a number of Hamas rocket attacks and a bombing in Jerusalem that killed one. Israel’s retaliation has been muted thus far. The bigger immediate issue for the Israelis is still Hizbullah at some point in the next few months.

Ray Takeyh of the Council on Foreign Relations and a true expert on the region had some of the following thoughts in an op-ed for the Washington Post.

“The ideology of Islamists is predicated on the notion that religion is a comprehensive belief system that is both eternal and transnational. The moderation that these groups have exhibited in the past few decades in places such as Egypt was pragmatism born out of compulsion, not some kind of intellectual evolution. Relieved of the constraints of Arab police states, they are free to advance their illiberal, anti-Western agendas.

“The plight of Islamist associations resembles the communist parties that did so much to derail Europe’s liberal age in the 1920s. Like the Islamists, the communists never commanded much popular support, but they used their parliamentary and paramilitary presence to undermine the prospects of fledgling democracies; Germany and Italy are two examples. In due course, their devotion to the Soviet Union and their subordination of national interests to the cause of the global proletariat did much to facilitate the rise of fascism.

“Islamist parties can be counted on to similarly menace an inexperienced democratic order. Their deputies are extremely likely to press discriminatory legislation; their religious leaders will stimulate passions against women’s rights groups and nongovernmental organizations; and their militias will threaten secular politicians and civil society leaders who do not conform to their template. Such agitations may not garner absolute power but could still provide an opportunity for national militaries to end the region’s democratic interlude in the name of stability and order.”

But you can’t exclude the parties from the political process.

“So the United States and its allies must strengthen the political center and the democratic regimes that are coming to power in the midst of economic crisis and without the benefits of mature institutions.

“A massive package of economic assistance to countries such as Egypt and Tunisia would tether these nations to the United States and would allow Washington to be clear that extremism in any guise will cause cessation of support. Even in an age of budgetary constraints, Washington may be able to generate substantial sums by channeling military aid to civilian pursuits and by collaborating with the European Union, the World Bank and the International Monetary Fund. The United States may not be able to determine the outcome of the Mideast uprisings, but it can still impose conditions and offer incentives that diminish the appeal and potency of militant actors….

“The notion that America’s interventions in the Arab world have made it a toxic agent that should stand aside is a presumption of the Western intelligentsia – and one rejected by Arab protesters, the majority of whom have not uttered anti-American slogans. The springtime of the Arab world offers the United States an opportunity to reclaim its values and redeem its interests. America has a stake in the future of the Middle East and should not shy away from cultivating the nascent democratic movements sweeping the region.”

Fat chance that Congress would ever approve the kinds of sums necessary to make an effort like the above work given our budget and deficit turmoil. And fat chance given we have a president who doesn’t respect the American people enough to tell them just what he is doing?

Wall Street

There is zero reason for the equity markets to be rallying as they have the past six-seven days, period.   It doesn’t mean they should have been tanking, but the biggest rally since last July? C’mon. 

I was watching Bob Pisani, CNBC’s floor reporter on the New York Stock Exchange, and on Thursday he was speaking about the low volatility and light volume on the Street despite the sudden rally in the face of some awful news and he inadvertently issued a loaded statement. The low-volume, low-volatility days are because “you don’t have the high-frequency trading,” which only enters the picture on the high-volatility days.

Of course high-frequency trading takes Wall Street’s casino to the hundredth degree. In other words, sports fans, yeah, we rallied back after our little hiccup of the past few weeks as oil soared amid Middle East strife and then Japan hit the front page in horrifying fashion, and it was an orderly rally, powering ever higher, but when the volatility picks up again we’ll see the reemergence of the computers making thousands of trades in milliseconds and then we’ll have a real market again! It’s enough to make you sick, as if the hard news headlines of the day don’t have you reaching for the trash can already.

Oh, there is semi-rational trading going on if, say, a Research in Motion misses estimates or gives poor guidance, or a Caterpillar is an obvious beneficiary of increased mining or construction projects in the Far East, but otherwise, more often than not the day-to-day action is a joke.

What isn’t a joke these days, however, is Japan. It remains an unmitigated disaster.

There isn’t one person on the planet who can tell you definitively what is going to happen with the nuclear plant at Fukushima, for example. I mean think about some of the things we’ve been told in just the past week. At first, with the power out at the facility, there was the rush to dump seawater on the reactors and to replenish the cooling pools that were drying up. But it took a week before anyone started saying the seawater could corrode the pipes! Ah, let’s see. We have 99,000 gallons of salt water over here, and these pipes weren’t designed for 99,000 gallons of salty water, and…omigod! These pipes could corrode and release more radiation!

And away from the plant, but dealing with Japan’s power issue and production disruptions of all kinds (including shipping lines restricting or barring their ships from calling on ports in Tokyo Bay over radiation concerns, as reported by the New York Times Saturday as I go to post), consider this. Japan’s power grid is essentially in four parts. Think of it like America’s east and west coasts, and then divide the rest of the country into north and south. It’s my understanding that in Japan, none of the four regions can help each other out. A shortage on the east coast of the country can’t be picked up by transferring power from the southwest, let’s say.  Now as bad as America’s grid is, and it’s truly pathetic, we at least have the capability to borrow from other regions if one goes down (or borrow from Canada which supplies much of northeast America with either direct power or backup…yet another reason to support our great friends by drinking Canadian beer).

You see, those talking about Japan’s resilience are missing some essential points. They might be able to rebuild a road quickly, but they have a power grid that wasn’t designed for disasters even though the entire country is basically living on a fault line.

The initial cost for Japan to rebuild is $310 billion and the World Bank says it will take five years. I obviously have no idea how close either figure will prove to be, or what the radiation impact on food and water will eventually end up being either.

What I do know is as much as we want the Japanese people to succeed, they have some mammoth issues that can’t be papered over by some news analyst saying, “Boy, you just don’t know the spirit of the Japanese.”

As I told you last week, I do know it’s a country that has a hopelessly corrupt political system and while it’s still king in some high-tech areas, the economy hasn’t done squat in two decades. 

This week Morgan Stanley said Japan would go through a “short and deep recession;” a GDP shortfall of minus 3% when Morgan Stanley had forecast growth of 2% this year. I’ll say it’s long and deep.   

Of all the people whose analysis I read, if I had to pick just one for clear-headed thinking it would be former Morgan Stanley Asia chairman Stephen Roach. I present his opinion in depth.

Stephen Roach / Daily Star

“The devastation – both human and physical – from the earthquake and tsunami in Japan is unfathomable. It is impossible at this point to gauge the full extent of the damage with any degree of precision. But we can nonetheless begin to assess its potential spillover effects on the rest of Asia and other major economies around the world….

“On the surface, the world’s two largest economies have little to fear. Japan accounts for only 5% of America’s exports and 8% of China’s. Under the worst-case outcome of a complete disruption to the Japanese economy, the direct repercussions on the United States and Chinese economies would be small – shaving no more than a few tenths of a percentage point off their annual growth rates.

“Within the so-called G-10 developed economies, Australia has the largest direct exposure to Japan, which absorbs about 16% of their total exports. South Korea, the third-largest economy in East Asia, is at the other end of the scale, relying on Japanese demand for only about 6% of its exports.

“But the narrow view misses the most critical consideration: this ‘Japan shock’ has not occurred at a time of great economic strength. That is true not only of Japan itself, where two lost decades have left a once-vigorous economy on a less-than-1 percent growth trajectory since the early 1990s. But it is also true of the broader global economy, which was only just beginning to recover from the worst financial crisis and recession since the 1930s.

“Context is vital. Notwithstanding the euphoric resurgence of global equity markets over the past two years, the world economy remains fragile. What markets seem to have forgotten is that post-bubble, post-financial-crisis recoveries tend to be anemic. Economies grow at something much closer to their stall speeds, thus lacking the cyclical ‘escape velocity’ required for a self-sustaining recovery. As a result, post-crisis economies are far more vulnerable to shocks and prone to relapses than might otherwise be the case.

“Alas, there is an added complication that makes today’s shocks all the more vexing: governments and central banks have exhausted the traditional ammunition upon which they have long relied during times of economic duress. That is true of both monetary and fiscal policy – the two mainstays of modern countercyclical stabilization. Policy interest rates are close to zero in the major economies in the developed world, and outsize budget deficits are the norm. As a result, unconventional – and untested – policies, such as so-called ‘quantitative easing,’ have become the rage among central bankers.

“All along, such unconventional policies were viewed as a temporary fix. The hope was that policy settings soon would return to pre-crisis norms. But with one shock following another, the ‘exit strategy’ keeps being deferred….

“This raises perhaps the most troublesome concern of all: with a post-crisis world getting hit by one shock after another, and with central banks having no latitude to cut interest rates, it is not hard to envision a scenario of open-ended monetary expansion that ends in tears. The dreaded inflationary endgame suddenly looms as a very real possibility.

“None of this detracts from the resilience factor. Yes, Japan will rebuild….

“But, just as the post-Kobe rebuilding (1995) did little to end the first of Japan’s lost decades, a similar outcome can be expected this time. The upside of rebuilding…is only a temporary palliative for an impaired economy….

“The Japanese economy has, in fact, been on the leading edge of many of the more serious problems that have afflicted the global economy in recent years. From asset bubbles and a dysfunctional financial system to currency suppression and monetary-policy blunders, Japan has been in many respects the laboratory of our future.

“Unfortunately, the world has failed to learn the lessons of Japan. And now it risks missing another important clue. The significance of the earthquake and tsunami of 2011 is not the relatively low magnitude of Japan’s direct impact on the broader global economy. The more meaningful message is how these shocks box the rest of us into an even tighter corner.”

Editorial / The Economist

“Japan has gone without effective leadership for so long, with an endless procession of faceless prime ministers and their cabinets, that it has made political dysfunction look almost like well-practiced art. But this crisis has shone a pitiless light on that failure. (Prime Minister Naoto) Kan, who has promised political change, now needs to bring it about. Japan’s people can help, adopting a different attitude to their government. Stoicism – however good for coping with adversity – is bad for bringing on change. Time for the Japanese to unleash some righteous anger on a system that has let them down.”

Then there is Europe and the 17 nations employing the euro currency. Incredibly, even though it’s been on the calendar for months, March 24-25, the time when everyone was supposed to agree to some kind of longer-term solution for its debt issues and how to handle the likes of Greece, Ireland and now Portugal, EU officials and political leaders went home Friday night and for the life of me I can’t see what they accomplished.

This week, Portugal’s political opposition voted down the ruling party’s austerity measures, thus forcing Prime Minister Jose Socrates out of office (see, a cool name still doesn’t guarantee success), but with the austerity program out the window, it seems Portugal needs your basic 70 billion euro bailout, or 100 billion in dollars. You can imagine Portugal doesn’t have $100 billion (they actually have something like $4 billion in their treasury….I have 12 cans of coins they can have if they’ll take ‘em to CoinStar, which I’m loath to do myself because I don’t want to start rumors about my financial well-being here in town…but enough about me).

The thing is Portugal is now being obstinate even though they have huge funding costs coming up in April and June and a caretaker leader, Socrates, with a cool name but no power as the country awaits new elections.

Meanwhile, German Chancellor Angela Merkel, she of the best economy on the continent but a people fed up with bailing out their sick neighbors, while also blasting the woman whose shoulders George W. Bush once rubbed, causing her to shriek!, because she had extended the life of some of Germany’s nuclear plants last year, prior to Fukushima, and now 70% of the German people are against nuclear power, period, is up for reelection in 2012, has already seen her party go down in flames in two key state votes this year, and faces another five over the balance of 2011, including one on Sunday, and let’s just say she and the party leadership are, you know… not in a good way.

On top of all this, Ireland just registered a minus 1.6% GDP figure for the fourth quarter, making it three straight years of contraction (which equals a depression), and Moody’s downgraded 30 Spanish banks because the government is incapable of writing anymore blank checks, ergo, Spain is the next target after Portugal on the Euro-17 Debt Tour, though everyone and their mother is assuring us Spain is addressing its issues and there is no need to worry.

This is a total crock because anyone who tells you Spain’s real estate bubble is not as bad as the others, like Ireland, is lying.

Here’s the bottom line on Europe. It matters, but just as we’ve seen for almost a year now it’s a rolling crisis. There are good weeks and months, meaning stability, and there will be more bad weeks and months. The debt loads are real, massive and, in some cases, still incalculable due to lack of transparency. Europe’s banks have huge exposures to each other. Just on Friday, in the Irish Independent, I saw this little nugget.

“Figures published by Germany’s Bundesbank yesterday show German banks had ‘foreign claims’ totaling 88.4 billion euros (a cool $123 billion or so by my back of the beer coaster calculation) on Irish entities at the end of last year.” This is both to Irish banks and Irish businesses. True, much of this is still solid. But much of it is not and this is but one example of the issues faced continent-wide.

What Europe needs, though, as I’ve been writing ad nauseum since last summer, is growth, and growth is going to be hard to come by with the austerity measures now being enacted, or just as bad, rejected. I also continue to warn, look out for May Day.

Lastly, we have the real estate situation in America. This week the figures on new- and existing-home sales were again the worst since, yes, the 1884 Beaver Dam Bubble. Or more accurately, in the case of new-home sales the worst ever since they began keeping records. The problem here is jobs. Lots of ‘em. The housing boom was great for the construction trade and there is no sign of a recovery.

On the existing-home front, the median home price for February, $156,100, was the lowest figure since Feb. 2002. Talk about wealth destruction.

Now back in Nov. 2008, I predicted that the median home price would bottom in April 2009 and then “sit there” for a long spell, which we’ve obviously done. The median home price did get below the figure then of around $164,000, owing to machinations with the $8,000 first-time home buyer credit (remember that?), but resumed its climb and hit $182,900 last June before tumbling again.

For those talking of a double-dip, though, to be intellectually honest I believe you have to take the $164,000 April 2009 figure and lop off at least 10% from that, so say $148,000. If we get down there I’ll admit we’re in a double-dip, though history shows rising home prices in the spring selling season so we’ll see.

Add all of the above up, Japan, Europe, and the U.S., and you shouldn’t be surprised I think the past rally we’ve witnessed, also in the face of $105 oil, is unwarranted.

Street Bytes

--The Dow Jones rose 3.0% to close at 12220, or essentially back to the levels before Libya blew up and oil was $85. The S&P 500 rose 2.7% and Nasdaq climbed 3.4%.

--U.S. Treasury Yields

6-mo. 0.17% 2-yr. 0.73% 10-yr. 3.44% 30-yr. 4.50%

Yields rose on Friday amidst talk among some Fed governors that QE2 needed to be wrapped up.

Separately, the Fed announced it would break with tradition and talk to the media four times a year after policy meetings. The Fed on those four days will also release its statement at 12:30 p.m. ET rather than the normal 2:15 p.m., which means some of us may have to adjust our tee times.

--The unemployment rate fell in 27 U.S. states in February, including a drop in Nevada from 14.2% in January to 13.6%. California gained 96,500 jobs. North Dakota continues to have the lowest unemployment in the nation at 3.7%

--AT&T announced a massive $39 billion merger with T-Mobile USA from Deutsche Telekom that, if approved, would create the largest carrier in the nation, which also means we are one step closer to having just two giant players, the other being Verizon (Sprint Nextel not being much of a factor compared to these two).

The AT&T/T-Mobile combination would account for about 42% of all wireless subscribers in the U.S., with Verizon next at 31%. T-Mobile customers would have the option to buy an iPhone, helping stem AT&T’s current battle to prevent migration to Verizon.

The deal requires approval from both the Justice Department and the FCC, and in such matters in other industries, AT&T would be required to sell off various operations or systems. 

But how does Verizon emerge a winner? More pricing power with less competition.

--I think I’ve made it pretty clear over the years I’m ambivalent about gold, but I’ve listed the price every week for the 12 years of “Week in Review” simply out of habit.

Of course the price of gold has taken on new meaning the last few years in particular and this week it hit another new high, though despite all the turmoil in the world the first few months of 2011 is up less than 1% this year.

Nonetheless, I must make note of a Financial Times story that said Moammar Gaddafi is sitting on a pot of gold worth, at today’s prices, about $6.5 billion. So how has it been moved out of Tripoli’s central bank, which is where it had been stored until now, to some location in the south of the country? Wish I could tell you.

--The New York Times ran a story on Friday that is bound to stir up some debate, this being the fact General Electric, despite $5.1 billion in profits from its operations in the U.S., paid zero American taxes. “In fact, G.E. claimed a tax benefit of $3.2 billion,” writes David Kocieniewski.

“Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department…is often referred to as the world’s best tax law firm….The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.”

G.E. did report its tax burden was 7.4% of its American profits, but this includes taxes “that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.”

Needless to say, G.E. spends millions on lobbyists to secure, and retain, various tax credits, such as on its leasing business. Nothing illegal about this, but then the Times describes G.E.’s relationship with Congressman Charles Rangel, then chairman of the Ways and Means Committee, which decides the fate of many tax breaks, and how Rangel once approved an extension of a popular provision for G.E. and the following month, Rangel and G.E. CEO Jeff Immelt were side by side as G.E. announced a $30 million award to New York City schools out of its foundation, including $11 million in benefits to Rangel’s district. Again, not necessarily illegal, just the way our lousy system works.

[Ronald Reagan, incidentally, overhauled the tax system while in office to the extent that G.E. was forced to pay its fair share, but since those days the company has chipped away at the rules and helped add new ones to benefit it.]

--The Japanese triple disasters are going to severely impact tourism in the U.S. For example, 305,000 Japanese visitors traveled to Los Angeles last year, spending $279 million, according to the Los Angeles Times, and a look at one local tour operator reveals that 40% of tours for Japanese this year have already been canceled. Others say half.

In 2010, 3.4 million Japanese visited America, spending on average $4,500 per person per visit, behind only the Chinese and the Aussies in terms of spending.

--I’m not into such forecasts but for the archives I note that the World Bank’s chief economist said this week that China has the potential to grow 8% annually for another 20 years. Justin Yifu Lin said, “By the year 2030, measured by purchasing power parity, China’s economic size may be twice as large as the U.S.”

--While China is still going to have to import a lot of food, the government is determined to bring in its eighth consecutive bumper grain harvest. Said the minister of agriculture, “China is facing increasing inflationary pressures this year, and so more grain output is required.”

--There is no doubt that California farmers will have ample water for 2011’s growing season. North to south it’s been a deluge. And with each video I see of the Pacific Coast Highway, boy am I glad I drove it when I did. Let’s just say the detours don’t add the hour I talked of last week, but more like 3 ½ hours in some spots (to get to Big Sur for instance).

And in a different part of the state, one source of mine, Pete M., reports that Mammoth Mountain is now up to a season snow total of…brace yourself…589 inches! 5-8-9. Records are beginning to fall all over the state.

But, if you think that’s a lot, just a cursory Web search (and I’m not saying this is definitive) reveals that back in the 1998-99 snow season, Mt. Baker ski area in northwestern Washington State recorded a U.S. record 1,140 inches. [It was verified by the National Climatic Data Center.]

--After being closed for nearly two months following the overthrow of the Mubarak government, Egypt’s stock market finally reopened and promptly tanked. It is now down 26% from the January high.

--In an embarrassing revelation, Bank of America said the Federal Reserve vetoed its plans for a modest dividend increase in the second half of 2011, this as the Fed has allowed most of BofA’s competitors to do so. [Morgan Stanley is another that hasn’t been notified it can proceed yet.]

In Bank of America’s case, the Fed cited concerns over the institution’s giant mortgage business, let alone the ongoing investigation by state attorneys general over same.

--The air traffic controller who fell asleep at Reagan National in Washington, D.C., was suspended. Incredibly, he was the only one in the control tower of this critical airport. Because it was late at night, only two flights had to make it in on their own before the guy woke up.

--Speaking of airplanes, I’m sure those of us who saw the Miami International Airport fuel farm fire thought the same thing. ‘This isn’t good.’ But while the morning after they talked of flight delays and service disruptions, it’s so bad that American Airlines, to cite but one example, canceled 188 Miami flights on Friday, 1/3rd of their daily schedule there.

Here’s the thing. American was forced to use 10 tanker trucks, as reported by Bloomberg, to haul the fuel to the tarmac and get this. Normally it takes 45 minutes to refuel a wide-body plane such as a Boeing 777. But using the trucks it takes 5 hours! An airlines spokeswoman said it’s “like trying to fill up an aircraft with an eyedropper.”

--Database software king Oracle reported another kick-ass quarter with net income of $2.1 billion, exceeding expectations as revenue jumped 37% to $8.8 billion. So look for CEO Larry Ellison to build another few super yachts for himself…because he can.

--Meanwhile, Research in Motion, maker of the BlackBerry family of smartphones, warned that its current quarter could be disappointing owing to costs associated with the launch of its PlayBook tablet device. Shares tanked 11% on the news. RIM also said it would sell 13.5 million smartphones in the current quarter vs. 14.9 million in its fiscal fourth-quarter.

--The Postal Service is looking to eliminate 7,500 administrative jobs and is offering $20,000 buyouts to thousands of veteran workers. The move was previously announced but now the agency specified seven district offices would be eliminated, but that’s only 420 of the positions. The rest will come from the 20,000 workers who retire or leave their jobs annually. Letter carriers and other union workers are not eligible for the buyout program. Overall, the Postal Service has 500,000+ employees and lost $8.5 billion in 2010.

--New Jersey has seen a 60% jump in public retirees, avoiding givebacks of $250,000 in benefits per person as proposed by Gov. Chris Christie. Barron’s reports Maryland retirements are up 65% so far this year. Such moves create a funding gap.

--A condo at Manhattan’s Plaza hotel sold this week for $48 million, the highest price for a single condo ever sold in New York City. The buyers were Russian composer Igor Krutoy and his wife.

A composer? My goddaughter is a composer. Hey, Dale…do you need some clerical help? I’m a good typist.

--The New York Times reports that the New York Mets are bleeding profusely, and it’s not just from ownership’s alleged role in the Madoff scandal. It’s now estimated the team lost $50 million last year. As Opening Day approaches, my enthusiasm for my Metsies is underwhelming.

--Best Buy reported that fourth-quarter revenue was down 4% in the U.S. owing to weak demand for flat-screen TVs and notebook computers as it struggles to remake its business, including plans for 150 more smaller-format stores.

--According to the latest publicly available tax filings, for 2009, Crain’s New York Business found that the “50 highest-paid hospital executives and employees in the New York area pulled in nearly $120 million.” [In 2008, it was $156 million before the recession hit.]

Dr. Mark Sultan, the head of plastic surgery at Beth Israel Medical Center and St. Luke’s-Roosevelt Hospital Center topped the doctors’ list with $4.7 million in cash compensation. 10 specialty-care physicians in all at Beth Israel made a cumulative $30 million, whereas the median compensation for specialty physicians nationwide in 2009 was around $235,000.

But what got me were the sums raked in by hospital executives. The leading one was John P. Ferguson of Hackensack University Medical Center, whose total compensation was $7.694 million.  

--From USA TODAY:

“An Indiana Court of Appeals this week took up the case of a woman who claims she got sick on a Carnival cruise ship because it was going too fast.”

Doris Beard in her complaint noted that her body “swayed terrible” on the unnamed Carnival ship. “I had bleeding, which I had not has [sic] in three years.”

Stop the ship…I want to get off!

--Nathan Myhrvold, the former chief technology officer of Microsoft and a mega-millionaire, authored a cookbook, “Modernist Cuisine: The Art and Science of Cooking,” a five-volume set that lists for $625!

But the 2,438 pages of text and photos is in such demand, a second printing of 25,000 copies on top of the original 6,000 sets is on its way from China, where he had it printed. [In a telling footnote, he had to switch to China when he couldn’t reach his original Japanese paper manufacturer after the earthquake and tsunami.]

Amazon is discounting the book to $467 and a majority are being bought by professional chefs or others in the food business, according to Crain’s New York Business. Actually, I think he was on Charlie Rose the other day so check it out.

“Aside from recipes,” reports Lisa Fickenscher, “the books discuss the science of the culinary arts – tackling such questions as why plunging food in ice water doesn’t stop the cooking process and when boiling cooks faster than steaming.”

I just want to know why it is when I cook my Stouffer’s lasagna in the microwave I’m supposed to leave it in there for 2 or 3 minutes after cooking. [I never do…that’s 2 or 3 minutes wasted.]

--Headline in the Wall Street Journal:

“The Sudden Disappearance of the Miniskirt”

Noooo!!!!

Foreign Affairs, part II

Afghanistan: President Hamid Karzai laid out his plan for Afghan security forces to take charge of securing seven areas across the country, the first step towards his goal of having the police and army protect the entire nation by the end of 2014. In a speech filled with vitriol towards the current international effort Karzai said the Afghan nation “does not want the defense of this country to be in the hands of others anymore.” He then reiterated his call for the Taliban to join the peace process and said night raids had bolstered the insurgents. Once again he also said more should be done to go after the safe havens in Pakistan.

Meanwhile, Gen. David Petraeus has said that “while the security progress achieved over the past year is significant, it is also fragile and reversible.”

As for the Taliban, this week they forced the shutdown of all mobile telephone networks in the province of Helmand, getting the mobile companies to comply with the order. It’s the first time the Taliban has forced a total shutdown and in so doing warned the companies they would be held responsible for any losses they suffer, the Taliban knowing their movements are tracked through mobile networks. So then you could ask yourself, well what good does this do the Taliban, since they use mobile phones? Good point. But I’m not about to ask them why. You do it.

North / South Korea: Seoul conducted a series of live-ammunition air and ground exercises to further warn Pyongyang that if it acts up again, this time the response will be robust.

Russia: Vladimir Putin’s approval rating has fallen to the lowest level since mid-2005 on perceptions of economic stagnation, though it still stands at a robust 69% from 73% in February, while President Medvedev’s rating fell to 66%, the lowest since he took office in 2008. Any U.S. politician would kill for such readings. Nonetheless, the declines should be worrisome to the Kremlin. The poll for the independent Levada Center also shows that 42% of Russians believe the country is going in the wrong direction, 40% say it’s headed in the right one.

But I saw a picture of Putin in the Moscow Times from this past Wednesday where he attended a football match in Belgrade and in classic Putin fashion, he’s sitting with a seemingly hardcore biker club, the Serbian branch of the “Night Wolves” dressed like a thug.

Brazil, Chile and El Salvador:

Mary Anastasia O’Grady / Wall Street Journal

“President Obama’s trip to Brazil, Chile and El Salvador this week, while war rages in Libya, has been sharply criticized as proof of dangerous detachment from a world that badly needs U.S. leadership.

“Yet there is a case to be made for going – to Brazil anyway. Arguably Santiago and San Salvador could have been postponed. Chile is already a stable ally and the stop in El Salvador, to mouth platitudes about hemispheric security while Central America is going up in narco-trafficking flames, only highlights the futility of the U.S. war on drugs.

“Going to Brasilia to meet with Worker’s Party President Dilma Rousseff, on the other hand, was important.

“Unfortunately, Mr. Obama discredited s trip even before it began by peddling it as a trade mission to create jobs and boost the U.S. economy. With those goals in mind, he would have been better off staying home and lobbying Congress to drop the 54 cents per gallon tariff on Brazilian sugar ethanol, and to end all U.S. subsidies on cotton, which have been ruled illegal by the World Trade Organization in a case brought by Brazil. Or he could have sent the Colombia and Panama free trade agreements to the other end of Pennsylvania Avenue, where they would be easily ratified.”

Mexico: Carlos Pascual, the U.S. ambassador to Mexico, resigned after the publication of diplomatic cables, courtesy of WikiLeaks, that criticized Mexico’s war against drugs, further infuriating Mexican President Calderon, who not for nothing has all manner of reasons to be ticked off at Uncle Sam (despite those fake appearances in Washington the other week when Calderon met with President Obama). Calderon demanded Pascual’s resignation.

But imagine. In four years Mexico has confiscated 110,000 weapons, including more than 50,000 assault rifles, 11,000 grenades and more than 150 high-powered sniper rifles, at least 85% of which were smuggled in through the U.S. One of the guns was used to kill a U.S. special agent in Mexico in February.

Canada: Prime Minister Stephen Harper’s Conservative government lost a no confidence vote, triggering an election as early as May 2. The main issue was Harper’s proposed budget that calls for corporate tax cuts while opposition parties have argued a growing deficit would only be made worse by the plan. Plus, the opposition argues against Harper’s proposal to spend $9 billion on 65 F-35 Joint Strike Fighters for the military.

Harper’s Conservatives would still be expected to win a new vote, but it could yet govern with a minority.

Random Musings

--Francis Fukuyama, noted historian, in Newsweek.

Q: Will the Fukushima catastrophe squelch the global nuclear renaissance?

“It already has. But it’s too bad because it’s just as dangerous to, say, be addicted to oil in the Middle East and every 10 years or so have to go to war for it.

Q: Is Washington more prepared (for an event such as a massive earthquake in California) than Tokyo?

“More likely here is a terrorist attack. But my suspicion is that if there was, say, a biological weapon in downtown Washington, we wouldn’t handle it very well.”

I totally concur. We wouldn’t.

--Thomas Friedman / New York Times

“If you listen to Obama, he eloquently describes our energy, climate and fiscal predicaments: how we have to end our addiction to oil and cut spending and raise revenues in an intelligent way that also invests in the future and doesn’t just slash and burn. But then the president won’t lead. When pressed on energy, he will say that he just doesn’t have the Republican votes for a serious clean energy policy. But the president has never gotten in the G.O.P.’s face on this issue. He has not put his own energy plan on the table and then gone out to the country and tried to sell it.

“It is what a lot of Obama supporters find frustrating about him: They voted for Obama to change the polls not read the polls.

“On fiscal policy, the president has put forth a decent opening budget bid and has opted for the same inside game of letting Congress take the lead in forging a compromise with the G.O.P. that would bring spending under control and raise revenues. That inside game worked for the president in producing health care reform and the stimulus, but in those cases he had a Democratic majority to push through decent legislation. I fear this time he will not have the votes for the kind of serious, sensible, Simpson-Bowles-like budget cuts and tax increases we need – without his leading and enlisting the public in a much more aggressive way.

“Republicans, by contrast, are insisting that we can somehow drill our way out of our energy problems, and House Republicans just reported out of committee a bill that would block the E.P.A. from taking any action to reduce greenhouse gases, while also slashing government funds to keep air and water clean. So far, the G.O.P. is calling for cuts in the things we need to invest more in – like education and infrastructure – while leaving largely untouched things we need to reduce, like entitlements and defense spending. A country that invests more in its elderly than its youth, more in nursing homes than schools, will neither invent the future nor own it.

“The world is caught in a dangerous feedback loop – higher oil prices and climate disruptions lead to higher food prices, higher food prices lead to more instability, more instability leads to higher oil prices. That loop is shaking the foundations of politics everywhere. That’s why the world needs a strong America more than ever, and that’s why it is vital that we fix our structural problems – now.

“If we leave it for the market and Mother Nature to make the adjustments for us, we will be sorry – and so will the world. We are the keystone holding up the global system. If we go weak, our kids won’t just grow up in a different America; they will grow up in a different world.”

--Yochi J.Dreazen / National Journal (Global Security Newswire)…on whether U.S. nuclear plants are vulnerable to terrorism.

It’s always been thought such fears were overblown, but now Fukushima is shedding a different light on the topic.

“Nuclear reactors across the United States are encased in enough concrete to withstand a direct hit from an airliner and can be shut down remotely in case of a terrorist strike or natural disaster. But that is true in Japan as well, and something entirely different caused the disaster there: the failure of the cooling systems that prevent nuclear reactors from overheating. The cooling systems aren’t encased in concrete, and key components – from pumps to water-intake pipes – sit outside the reactor complexes and are far less protected, leaving them vulnerable to a well-planned terrorist strike or a natural disaster. As the dire situation in Japan shows, disabling or destroying the cooling equipment – regardless of how it happens – can trigger a full-scale nuclear emergency.

“ ‘Even if you shut a reactor down, you still need to cool it off. That’s just physics,’ said Charles Faddis, a retired CIA operations officer and former head of the agency’s unit on countering terrorism threats involving weapons of mass destruction. ‘If terrorists have disabled the cooling system, the reactor heat will eventually lead to a complete meltdown. They won’t produce mushroom clouds, but the results – clouds of radioactive materials drifting over vast areas – would be just as horrific.’….

“Americans’ worries about terrorism have faded in recent years…Gallup runs a regular tracking poll with an open-ended question about what voters consider the most important problem facing the country. In its most recent survey, conducted March 3-6, 28% of respondents chose the economy, while 26% said unemployment. Terrorism was near the bottom, with just 2%.

“The horrifying images from Japan may awaken dormant fears of a terrorist strike on a U.S. nuclear facility. That, in turn, would focus new attention on the private-security firms charged with keeping them secure – and on the evidence that suggests they might not be up to the job.

“The Nuclear Regulatory Commission, an independent arm of the federal government, is tasked with monitoring security at nuclear plants. It uses teams of mock assailants to test readiness. At half the plants tested before September 11, the mock attackers were able to simulate the destruction of enough equipment to trigger a meltdown, ‘even though operators typically received six months’ advance notice of which day the test would occur,’ the Union of Concerned Scientists noted in a 2007 report.

“The commission has given the private-security firm Wackenhut a lucrative contract to provide the faux terrorists. Wackenhut also provides many of the guards protecting the plants. In a 2006 report, the Government Accountability Office found that one plant’s security personnel did better during a mock attack because they were given advance knowledge of the planned scenario. The following year, a Wackenhut guard named Kerry Beal videotaped security personnel sleeping in the inaptly named ‘ready room’ at the Peach Bottom nuclear plant in Pennsylvania. CBS later broadcast the tapes, and Wackenhut lost several of its security contracts.

“NRC spokeswoman Prema Chandrathil said that the government continues to employ Wackenhut to provide fake assailants. She acknowledged that plants receive advance word of impending mock attacks, but said that the pretend raiders were kept separate from Wackenhut’s guards to ensure the integrity of the tests….

“ ‘Our plants are very secure,’ said Steve Kerekes, a spokesman for the group. ‘We’ve gone well beyond where the Japanese had been in terms of preparing for either a natural disaster or a terror attack.’

“Federal personnel search all passengers trying to board commercial airliners, but they leave the security of the nation’s nuclear plants – which pose far greater potential dangers – in the hands of private guards. With luck, those guards will never be put to a real test. But luck, as Japan attests, sometimes runs out.”

--Am I the only one to think it’s a sign of amazing chutzpah for Kentucky Republican Sen. Rand Paul, just elected last November, to be thinking of running for the White House already? “The only decision I’ve made is I won’t run against my dad,” Paul said on Monday after visiting South Carolina. Then again, that’s what Obama did. Never mind. Meanwhile, Tim Pawlenty was the first Republican to officially form an exploratory committee.

--Corky Siemaszko / New York Daily News

“Vice President Joe Biden referenced the 1994 Violence Against Women Act in an attack on the GOP’s budget slashing offensive at a Democratic Party fund-raiser in Philadelphia.

“Biden said the GOP was deploying a ‘blame the victim’ strategy to justify rewarding the rich with tax breaks while balancing the books on the backs of middle class Americans.

“ ‘When a woman got raped, blame her because she was wearing a skirt too short, she looked the wrong way or she wasn’t home in time to make dinner,’ Biden said. ‘We’ve gotten by that.’

“Reminding the audience that recession began on former President George W. Bush’s watch, Biden said that as Democrats and Republicans debate how much to cut from the federal budget, the GOP is bent on punishing the people who are suffering the most from their failed fiscal policies.

“The Republicans’ ‘philosophy threw us into this God awful hole we’re in, gave us the tremendous deficit we’ve inherited,’ Biden said. ‘They’re now using the very economic condition they have created to blame the victim – whether it’s organized labor or ordinary middle-class working men and women. It’s bizarre.’

“The Republican National Committee condemned Biden’s remarks.

“ ‘Using a rape analogy to describe one’s political opponents is inexcusable & beneath the office of the Vice President,’ RNC Chairman Reince Priebus tweeted.”

Ah yes, the 2012 campaign is already in full swing and so much for Tucson and our gentler discourse, Mr. Vice President.

--From Helen Kennedy / New York Daily News:

“An unusual on-air spat broke out between rivals CNN and Fox News in Libya on Monday, breaking open bitter feelings between reporters in a war zone.

“Fox reported that an allied attack on Col. Moammar Gaddafi’s compound Sunday was aborted because journalists, including a CNN crew, had been taken on ‘a propaganda trip’ to see bomb damage there.

“Fox said its correspondent, Steve Harrigan, didn’t go because he didn’t want to be used as a human shield.

“CNN’s Nic Robertson fired back live on the air, saying the reporters were only allowed to film the compound briefly before being hustled away. He said Fox did send a staffer on the trip, and for good measure, he added that Harrigan rarely leaves his hotel room.

“ ‘I see him more times at breakfast than I see him out on trips with government officials here,’ Robertson said.

“ ‘If I sound angry, it is because I am. I expect lies from the government here, I don’t expect it from other journalists.’”

Now I’ve been watching and listening to both networks, and I’ve heard Rush Limbaugh’s bashing of Nic Robertson on the radio, but I’ve gotta give this round to CNN. I know that NBC’s Jim Maceda also declined to see the first strikes on Gaddafi’s compound because he, too, brought up the human shield idea but if it was me, I’d go. Being a human shield pays well, doesn’t it?

--Pretty incredible that according to the Census Bureau Detroit’s population has fallen 25% in the past decade to 714,000, the lowest level for the city since 1910, when auto production was starting up. Local officials thought the figure would be closer to 800,000. [Detroit peaked in the 1950s at two million.]

Of the drop of more than 237,000 residents, 41,000 were whites and 185,000 blacks.    The latter are moving into neighboring Macomb and Oakland counties.

Among other big cities for the decade 2000-2010, New Orleans saw its population fall 29% for obvious reasons, while Cleveland’s dropped 17%, Cincinnati’s 10% and Pittsburgh’s 9%.

Overall, the Hispanic population grew 43% in the decade to over 50 million. They now make up 16% of the USA’s 308.7 million. Non-Hispanic whites comprise 64% of the population. There are 37.7 million blacks and 14.5 million Asians.

--Lastly, we note the passing of Elizabeth Taylor.
Editorial / New York Post

“She was one of the last survivors of Hollywood’s golden age – an era when the term ‘movie star’ truly meant something.

“Simply put, Elizabeth Taylor lit up the universe.

“Director Joseph L. Mankiewicz called her ‘the most incredible vision of loveliness I have ever seen in my whole life.’

“Doubtless she benefited from the evolving cinematic technology of her time, but she was also a compelling dramatic actress who leaves behind a range of unforgettable performances.

“She grew up on screen, first capturing hearts at age 12 in ‘National Velvet,’ then going on to star in such classics as ‘Father of the Bride,’ ‘A Place in the Sun,’ ‘Raintree County, ‘Cat on a Hot Tin Roof,’ ‘Giant’ and ‘Butterfield 8,’ winning a Best Actress Oscar for the latter.

“But it was her stunning performance in Edward Albee’s ‘Who’s Afraid of Virginia Woolf,’ in which she co-starred with then-husband Richard Burton and for which she won her second Oscar (she was nominated for three others), that cast aside any doubts about her talent.

“The on-screen drama, of course, was regularly eclipsed by her tempestuous private life…though by contemporary standards the tumult all seems a bit quaint.

“Taylor, it also must be noted, was an AIDS activist before it was cool; her passing truly marks the end of an era.”

Editorial / USA TODAY

“It could be said of the death of Elizabeth Taylor: Now she belongs to the ages. But the truth is, Taylor has always belonged to the ages – it’s why her absence is so significant to millions. How can it be that Dame Elizabeth Rosemond Taylor won’t be around to admire, envy and gawk over, ever again?

“Taylor once said she wanted her tombstone to read: ‘She lived.’ And oh, did she ever.”

C. David Heymann, one of her biographers, said, “She was a comet, an 80-year comet.”

USA TODAY:

“She was the most notorious, the most tempestuous, the most bejeweled, the most generous, the most blessed, the most tragic screen star in the Hollywood firmament. She was a supernova celebrity who pioneered a new standard of fame even before 24/7 media.”

Biographer William Mann said, “She showed that you take the parts of your life that will resonate with the public and use them to your advantage. Everything that is standard about celebrities today can be traced to Elizabeth Taylor, whether it’s causes or personal lives or the marketing.”

But she didn’t court the attention, as William Mann added, “She got the media exposure because of the way she lived her life. She wasn’t out there seeking it. It came to her.”

Editorial / Los Angeles Times

“(We) watched over the years as she went from voluptuous to fat to slim again. We watched as her hair went from blue-black to a stunning silver, which she flaunted. We watched as she suffered illnesses and mishaps, reading with curiosity and concern the reports about her failing health, her difficulty walking. She seemed to always recover….

“In the last few decades she came to embody the best use of Hollywood clout, as one of the earliest supporters of AIDS causes (and the founding international chair of the American Foundation for AIDS Research) at a time when its sufferers were practically considered lepers. And so we watched nonstop….

“Taylor stopped making movies so long ago that you’d be hard pressed to remember the last time you saw her onscreen in a theater. But it’s unlikely that many people who heard the news of her death uttered that sad remark often heard when old Hollywood stars die: ‘Oh, I thought she was already dead.’”

I was watching Dennis Miller on “The O’Reilly Factor” when he was wrapping up his segment but made sure he got in one last thing amid the talk of Libya and the other issues of our times.

“Liz Taylor, RIP! She was a cool dame.”
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Pray for the men and women of our armed forces, and all the fallen.

God bless America.
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Gold closed at $1429
Oil, $105.70

Returns for the week 3/21-3/25

Dow Jones +3.0% [12220]
S&P 500 +2.7% [1313]
S&P MidCap +2.9%
Russell 2000 +3.7%
Nasdaq +3.8% [2743]

Returns for the period 1/1/11-3/25/11

Dow Jones +5.5%
S&P 500 +4.5%
S&P MidCap +7.0%
Russell 2000 +5.1%
Nasdaq +3.4%

Bulls 50.6
Bears   22.4 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore



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-03/26/2011-      
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Week in Review

03/26/2011

For the week 3/21-3/25

[Posted 7:00 AM ET]

Crisis in the Middle East

Can you figure out what is going on in Libya? Anders Fogh Rasmussen, a good man who is NATO Secretary-General, said it’s a “coalition operation and a NATO operation” but as I go to post, even as I see just a few hours ago NATO has agreed to enforce the no-fly zone as well as command all military operations, the questions are still many. In two polls, Reuters/Ipsos and CNN, though, 79% and 77% of Americans, respectively, believe the U.S. and our allies should remove Gaddafi. But our own president, who once called for Gaddafi’s ouster, now doesn’t specify if this is part of the mission.

As for the coalition itself, the U.S., France, the U.K., Denmark, Canada, Spain, Italy, Belgium, Qatar and the U.A.E., as best I can figure, it’s the first three really leading the charge and nothing would have happened had France’s Nicolas Sarkozy and Britain’s David Cameron not dragged Obama kicking and screaming into the fray like a child who had just been told the high school kids were taking over the basketball court. There was a time that Sarkozy wanted to do the entire operation himself because he can argue he has the most to lose with four French-speaking countries strategic to France in the region: Tunisia, Algeria, Chad and Niger, let alone that it imports oil from Libya, with French oil giant Total controlling an important Libyan oil field.

Both France and Italy, though, understand what the real issue is with turmoil in Libya. Immigration. Italy has already seen 15,000 from Tunisia cross the sea to land on the Italian island of Lampedusa and Italy’s foreign minister has projected that unless the region cools down, up to 350,000 will eventually flood Italy, France and all points north and east. It’s why I keep talking about the rise of the far-right, anti-immigrant parties in Europe and unrest in Tunisia, Libya, and Egypt, for starters, is fueling this rise as the immigrants stress social services already under the gun through austerity budgets, let alone the rise in crime that follows such waves.

But back to the “coalition,” there is also stern opposition. China expressed “deep concern” and warned of a “humanitarian disaster” in Libya if its calls for a ceasefire aren’t met. China and Russia were among the five Security Council members abstaining in the U.N. vote that authorized the creation of the no-fly zone.

Speaking of Russia, Prime Minister Vladimir Putin said, “The resolution is defective and flawed. It allows everything. It resembles medieval calls for crusades.” [At least President Medvedev fired back that “In no way is it acceptable to use expressions that in essence lead to a clash of civilizations…Otherwise everything may end up far worse.”]

Turkey’s Prime Minister Erdogan vented his anger at French President Sarkozy.

“I wish that those who only see oil, gold mines and underground treasures when they look in that direction, would see the region through a prism of conscience from now on.” Erdogan went on to say that the same people who were reluctant to let Turkey into the EU (read France) now spoke in terms of “crusades” in Libya, echoing Putin’s criticism.

Republican Sen. Richard Lugar (Ind.), as respected a foreign policy voice as there is in Congress, summed it up.

“There needs to be a plan about what happens after Gaddafi. Who will be in charge then, and who pays for this all? President Obama, so far, has only expressed vague hopes.”

On big issues like this one, seeing as I continue to write a history of our times, I want to add opinion from all sides, including from the isolationist wing of the Republican Party.

Editorial / The Times of London

“Would somebody please tell the members of the coalition orchestrating a no-fly zone over Libya that there’s a war on? In particular, could they tell President Obama? Could they also mention that, when the United Nations backs a plan to stop Colonel Gaddafi bombing his own people, then that should be the sole focus of your efforts – rather than squabbling over whether the mission is under the command of NATO, or something ‘Natoesque’?

“While they’re at it, could somebody tell Turkey that, if you’ve thrown your hat into the ring to help to combat Colonel Gaddafi’s despotism, it looks bad if you stall progress by criticizing coalition partners?

“And that, just because France is lukewarm about your joining the EU, you don’t sulk and get your Prime Minister, Recep Tayyip Erdogan, to fight an entirely different diplomatic war by sniping at the French for using ‘utterly inappropriate terms’ such as ‘crusade’ before, last night, belatedly assenting to giving NATO control of the mission? If Ankara felt snubbed not to be invited to join world leaders in Paris to discuss the no-fly zone, then this has not been the week to settle diplomatic scores.

“Most crucially, could someone – anyone! – remind Barack Obama that there are lives at stake? That, now that he has finished salsaing his way across South America, the coalition, the people of Libya and his own country need him to show leadership rather than play what looks increasingly like a surreal diplomatic version of Where’s Wally?

“It is not just that, when the leader of the free world fails to lead, America debases both its military muscle and its diplomatic currency. It is that by taking only a walk-on part in this drama, the U.S. president is giving Colonel Gaddafi succor. Mr. Obama’s silence may yet be counted in Libyan lives.”

Editorial / Daily Star of Beirut

“The Arab world’s handling of the intervention in Libya has amounted to another disgrace for a region where the people are finally rising up against their leaders’ seemingly boundless capacity for ineptitude.

“The Arab League and the GCC [Gulf Cooperation Council] voted their clear support for imposing a no-fly zone over Libya; correctly, they sought U.N. Security Council blessing for the mission. However, when it came time to scramble the aircraft and commence the operation, the Arab nations were reduced to their traditional posture of immobility as the U.S., U.K. and France coordinated and carried out the implementation of Resolution 1973.

“To be sure, Qatar is contributing a whopping four jets to the effort – the planes, though, have yet to join in with the mission….[Ed. note. On Friday, the U.A.E. said it would contribute 12 jets but what they will do is not yet known.]

“If the issue was so clear to the various Arab heads of state that Gaddafi had to be stopped, then why didn’t they do anything about it themselves? If such a legitimate cause for military intervention arose in the Arab world, why couldn’t the Arab nations manage any significant part of that intervention on their own?

“Alas, the military capabilities of Arab states represent just one more item on the list of failures of the Arab world’s largely tyrannical and corrupt leaders. Hundreds of billions of dollars have been wasted in the Middle East to fashion armies that can charitably be called impotent.”

Charles Krauthammer / Washington Post

“President Obama is proud of how he put together the Libyan operation. A model of international cooperation. All the necessary paperwork. Arab League backing. A Security Council resolution. (Everything but a resolution from the Congress of the United States, a minor inconvenience for a citizen of the world.) It’s war as designed by an Ivy League professor.

“True, it took three weeks to put this together, during which time Moammar Gaddafi went from besieged, delusional thug losing support by the hour – to resurgent tyrant who marshaled his forces, marched them to the gates of Benghazi and had the U.S. director of national intelligence predicting that ‘the regime will prevail.’

“But what is military initiative and opportunity compared with paper?

“Well, let’s see how that paper multilateralism is doing. The Arab League is already reversing itself, criticizing the use of force it had just authorized. Amr Moussa, secretary-general of the Arab League, is shocked – shocked! – to find that people are being killed by allied airstrikes. This reaction was dubbed mystifying by one commentator, apparently born yesterday and thus unaware that the Arab League has forever been a collection of cynical, warring, unreliable dictatorships of ever-shifting loyalties. A British soccer mob has more unity and moral purpose. Yet Obama deemed it a great diplomatic success that the league deigned to permit others to fight and die to save fellow Arabs for whom 19 of 21 Arab states have yet to lift a finger….

“This confusion is purely the result of Obama’s decision to get America into the war and then immediately relinquish American command. Never modest about himself, Obama is supremely modest about his country. America should be merely ‘one of the partners among many,’ he said Monday. No primus inter pares for him. Even the Clinton administration spoke of America as the indispensable nation. And it remains so. Yet at a time when the world is hungry for America to lead – no one has anything near our capabilities, experience and resources – America is led by a man determined that it should not.

“A man who dithers over parchment. Who starts a war from which he wants out right away. Good God. If you go to take Vienna, take Vienna. If you’re not prepared to do so, better then to stay home and do nothing.”

Peggy Noonan / Wall Street Journal

“I cannot for the life of me see how an American president can launch a serious military action without a full and formal national address in which he explains to the American people why he is doing what he is doing, why it is right, and why it is very much in the national interest. He referred to his aims in parts of speeches and appearances when he was in South America, but now he’s home. More is needed, more is warranted, and more is deserved. He has to sit at that big desk and explain his thinking, put forward the facts as he sees them, and try to garner public support. He has to make a case for his own actions. It’s what presidents do!”

[Ed. note: The other week I did something I never do…write a letter to the editor, in this instance to U.S. News & World Report, which they published in their newsletter. I said Obama had to speak to the people in an oval office setting on the deficit, but knew why he wouldn’t for political reasons, which also doomed his legacy. In this case we’re learning he’ll finally address us on Monday night, though not from the Oval Office but rather a setting with an audience it would seem, the National Defense University. I’m anxious to see how it’s staged.]

George Will / Washington Post

“In Libya, mission creep began before the mission did. A no-fly zone would not accomplish what Barack Obama calls ‘a well-defined goal,’ the ‘protection of civilians.’ So the no-fly zone immediately became protection for aircraft conducting combat operations against Gaddafi’s ground forces.

“America’s war aim is inseparable from – indeed, obviously is – destruction of that regime. So our purpose is to create a political vacuum, into which we hope – this is the ‘audacity of hope’ as foreign policy – good things will spontaneously flow. But if Gaddafi cannot be beaten by the rebels, are we prepared to supply their military deficiencies? And if the decapitation of his regime produces what the removal of Saddam Hussein did – bloody chaos – what then are our responsibilities regarding the tribal vendettas we may have unleashed? How long are we prepared to police the partitioning of Libya?

“Explaining his decision to wage war, Obama said Gaddafi has ‘lost the confidence of his own people and the legitimacy to lead.’ Such meretricious boilerplate seems designed to anesthetize thought. When did Gaddafi lose his people’s confidence? When did he have legitimacy? American doctrine – check the Declaration of Independence – is that governments derive their just powers from the consent of the governed. So there are always many illegitimate governments. When is it America’s duty to scrub away these blemishes on the planet? Is there a limiting principle of humanitarian interventionism? If so, would Obama take a stab at stating it?”

Editorial / The Economist

“Libya is not Iraq. The West has learned through bitter experience to avoid the grievous mistakes it made from the outset of that venture. For one thing, the current mission is indisputably legal. For another, it has, at least for now, the backing of Libya’s own people and – even allowing for some wobbles from Turkey and the Arab League – of most Arab and Muslim countries. Libya’s population is a quarter the size of Iraq’s, and the country should be easier to control: almost all its people, a more homogeneous lot albeit with sharp tribal loyalties, live along the Mediterranean coastal strip. If Colonel Gaddafi’s state crumbles, the West should not seek to disband his army or the upper echelons of his administration, as it foolishly did in Iraq. The opposition’s interim national council contains secular liberals, Islamists, Muslim Brothers, tribal figures and recent defectors from the camp of Colonel Gaddafi. The West should recognize the council as a transitional government, provided that it promises to hold multiparty elections. Above all, there must be no military occupation by outsiders. It is tempting to put time-limits on such a venture, but that would be futile.

“Success in Libya is not guaranteed – how could it be? It is a violent country that may well succumb to more violence, and will not become a democracy any time soon. But its people deserve to be spared the dictator’s gun and be given a chance of a better future.”

Niall Ferguson / Newsweek

“Obama, a novice in foreign affairs, is a president without a strategy. Once a critic of American military intervention in the Middle East, once a skeptic about the chances of democratizing the region, he now finds himself with a poisoned chalice in each hand. In one there are the dregs of the last administration’s interventions: military commitments in Iraq and Afghanistan that he is eager to wind down. In the other is a freshly poured draft of his own making.

“Make no mistake. Whatever the wording of the United Nations Security Council resolution, the United States is now at war with the Libyan government, and the aim of this war is the overthrow of Gaddafi….

“This was the right thing to do. But it should have been done weeks ago, when it first became clear that Gaddafi, unlike Mubarak, was able and willing to unleash military force against his opponents.”

Mr. Ferguson hits on what I first said when the crisis began to unfold in Tripoli and Benghazi. We had a window of opportunity, Obama dithered, and now look where we are. Once Gaddafi began to attack his own people it was a game-changer, only Obama failed to see it as such.

But Libya is but one leak in the reactor core that is the Middle East (a reactor that for generations was cooled by oil, which tended to keep the despots in place and the masses beaten down).

Others…in no particular order:

Bahrain: 70% of the population is Shia, ruled by a Sunni monarchy supported by neighbor and fellow Sunni partner, Saudi Arabia. Iran is stoking the flames of dissent and the monarchy’s goons (backed by a Saudi-led Gulf Cooperation Council force) killed a number of protesters. By week’s end Bahrain was warning Iran of “conflict” if it didn’t keep out of its affairs. Plus there are signs Hizbullah has operatives on the ground in Bahrain. Iran’s Supreme Leader Ayatollah Ali Khamenei warned himself on Monday, “Do not turn the anti-despotic movement of a nation into a Shia-Sunni problem. We will not make a differentiation between Gaza, Palestine, Bahrain, Yemen, Egypt, Libya and Tunisia,” he asserted. [Tehran Times]

You want to really get sick? Khamenei then said that Bahrainis are only seeking a legitimate demand of “one man one vote” in their country, seemingly forgetting his country’s own totally sham presidential election.

Syria: The minority Alawite rule of President Bashar al-Assad suddenly was on shaky grounds as Assad’s hated secret police cracked down on protesters in the city of Deraa, with at least 85 killed at last report in various clashes (and the violence spreading to other cities on Saturday). By Thursday, Assad was offering all manner of goodies to placate the masses, including the end to a 40-year state of emergency, as well as increased pay and benefits for state workers, but demonstrators rejected the offers and suddenly the unthinkable, the fall of the House of Assad, was at least thinkable, if not doable.

I love that U.S. Defense Secretary Robert Gates, who has been rocking the world with his Candor Tour as he wraps up his decades of government service and clearly couldn’t give a damn what anyone else thinks about what comes out of his mouth, told the Syrian people that they should follow Egypt’s lead and the country’s army should “empower a revolution.” Understand that while this is something you and I would like to say, standing behind a unit of Navy Seals, preferably, it is the Obama administration that has aggressively “courted” Assad and yet here is Gates telling the Syrian, ‘Your time is up, scum. Now get the hell out.’ Of all of Gates’ great moments in his career, this could go down as the finest.

But with the sudden turmoil in Syria, it should be no surprise that the Assad government is frantically trying to get Lebanese Prime Minister-designate Najib Mikati to form a government of his own. Syria is warning its Hizbullah-led allies in Beirut to act fast before regional events overwhelm Mikati and Co., which would be to the detriment of Syria and its efforts to claw back into Lebanon after being booted out in 2005 following the assassination of Rafik Hariri.

[Separately, regarding Lebanon, there was a disturbing development in the Bekaa Valley, Hizbullah’s main headquarters outside of its Beirut stronghold, when seven Estonian tourists were kidnapped. There is a theory that this was actually the work of Gaddafi’s henchmen, as he had warned he would retaliate against Western civilians and the Estonians may have been under surveillance in Syria before crossing into Lebanon in Bekaa.]

Yemen: In another fast-moving development, as I go to post President Saleh, who has been in power for 32 years, supposedly reached an agreement with the top general who this week defected to the opposition. Both would step down in favor of a civilian-led government, but no one seems to know just who would comprise this new government and what would happen to terror efforts by the likes of al-Qaeda in the Arabian Peninsula. But then on Friday, Saleh said he wouldn’t step down. Regardless, it seems certain the United States will lose another ally in the war on terror, Saleh, for all his many faults, at least doing some good on this front.

Egypt:  Last Sunday voters overwhelmingly approved a referendum on changes to the constitution that was the first step towards parliamentary elections as early as June and a presidential vote in August or September.

Slow down! say some. The only beneficiary of such rapid change is the Muslim Brotherhood, the only remotely organized political force in Egypt. Other opposition parties, just getting formed, will in no way be ready for a June election.

When it comes to the constitutional amendments, Article 2 cites Islamic law as the basis for Egyptian law. What about protecting the rights of the Christians (or Copts)?

And while I’m not a fan of Mohamed ElBaradei, the former top U.N. nuclear official and probable presidential candidate, he was stoned when he went to the voting booth. ElBaradei opposed the amendments. His supporters said the mob showering him with rocks was paid off. [New York Times]

The only good thing happening in Egypt is thus far the army and Field Marshal Tantawi have stuck to their promise to honor all treaties with Israel, but with the Muslim Brotherhood headed towards victory in parliament, and with the Brotherhood seemingly getting along with the military council thus far, you don’t have to be a genius to see that this train is headed down the wrong track.

As for Israel, tension is high following a number of Hamas rocket attacks and a bombing in Jerusalem that killed one. Israel’s retaliation has been muted thus far. The bigger immediate issue for the Israelis is still Hizbullah at some point in the next few months.

Ray Takeyh of the Council on Foreign Relations and a true expert on the region had some of the following thoughts in an op-ed for the Washington Post.

“The ideology of Islamists is predicated on the notion that religion is a comprehensive belief system that is both eternal and transnational. The moderation that these groups have exhibited in the past few decades in places such as Egypt was pragmatism born out of compulsion, not some kind of intellectual evolution. Relieved of the constraints of Arab police states, they are free to advance their illiberal, anti-Western agendas.

“The plight of Islamist associations resembles the communist parties that did so much to derail Europe’s liberal age in the 1920s. Like the Islamists, the communists never commanded much popular support, but they used their parliamentary and paramilitary presence to undermine the prospects of fledgling democracies; Germany and Italy are two examples. In due course, their devotion to the Soviet Union and their subordination of national interests to the cause of the global proletariat did much to facilitate the rise of fascism.

“Islamist parties can be counted on to similarly menace an inexperienced democratic order. Their deputies are extremely likely to press discriminatory legislation; their religious leaders will stimulate passions against women’s rights groups and nongovernmental organizations; and their militias will threaten secular politicians and civil society leaders who do not conform to their template. Such agitations may not garner absolute power but could still provide an opportunity for national militaries to end the region’s democratic interlude in the name of stability and order.”

But you can’t exclude the parties from the political process.

“So the United States and its allies must strengthen the political center and the democratic regimes that are coming to power in the midst of economic crisis and without the benefits of mature institutions.

“A massive package of economic assistance to countries such as Egypt and Tunisia would tether these nations to the United States and would allow Washington to be clear that extremism in any guise will cause cessation of support. Even in an age of budgetary constraints, Washington may be able to generate substantial sums by channeling military aid to civilian pursuits and by collaborating with the European Union, the World Bank and the International Monetary Fund. The United States may not be able to determine the outcome of the Mideast uprisings, but it can still impose conditions and offer incentives that diminish the appeal and potency of militant actors….

“The notion that America’s interventions in the Arab world have made it a toxic agent that should stand aside is a presumption of the Western intelligentsia – and one rejected by Arab protesters, the majority of whom have not uttered anti-American slogans. The springtime of the Arab world offers the United States an opportunity to reclaim its values and redeem its interests. America has a stake in the future of the Middle East and should not shy away from cultivating the nascent democratic movements sweeping the region.”

Fat chance that Congress would ever approve the kinds of sums necessary to make an effort like the above work given our budget and deficit turmoil. And fat chance given we have a president who doesn’t respect the American people enough to tell them just what he is doing?

Wall Street

There is zero reason for the equity markets to be rallying as they have the past six-seven days, period.   It doesn’t mean they should have been tanking, but the biggest rally since last July? C’mon. 

I was watching Bob Pisani, CNBC’s floor reporter on the New York Stock Exchange, and on Thursday he was speaking about the low volatility and light volume on the Street despite the sudden rally in the face of some awful news and he inadvertently issued a loaded statement. The low-volume, low-volatility days are because “you don’t have the high-frequency trading,” which only enters the picture on the high-volatility days.

Of course high-frequency trading takes Wall Street’s casino to the hundredth degree. In other words, sports fans, yeah, we rallied back after our little hiccup of the past few weeks as oil soared amid Middle East strife and then Japan hit the front page in horrifying fashion, and it was an orderly rally, powering ever higher, but when the volatility picks up again we’ll see the reemergence of the computers making thousands of trades in milliseconds and then we’ll have a real market again! It’s enough to make you sick, as if the hard news headlines of the day don’t have you reaching for the trash can already.

Oh, there is semi-rational trading going on if, say, a Research in Motion misses estimates or gives poor guidance, or a Caterpillar is an obvious beneficiary of increased mining or construction projects in the Far East, but otherwise, more often than not the day-to-day action is a joke.

What isn’t a joke these days, however, is Japan. It remains an unmitigated disaster.

There isn’t one person on the planet who can tell you definitively what is going to happen with the nuclear plant at Fukushima, for example. I mean think about some of the things we’ve been told in just the past week. At first, with the power out at the facility, there was the rush to dump seawater on the reactors and to replenish the cooling pools that were drying up. But it took a week before anyone started saying the seawater could corrode the pipes! Ah, let’s see. We have 99,000 gallons of salt water over here, and these pipes weren’t designed for 99,000 gallons of salty water, and…omigod! These pipes could corrode and release more radiation!

And away from the plant, but dealing with Japan’s power issue and production disruptions of all kinds (including shipping lines restricting or barring their ships from calling on ports in Tokyo Bay over radiation concerns, as reported by the New York Times Saturday as I go to post), consider this. Japan’s power grid is essentially in four parts. Think of it like America’s east and west coasts, and then divide the rest of the country into north and south. It’s my understanding that in Japan, none of the four regions can help each other out. A shortage on the east coast of the country can’t be picked up by transferring power from the southwest, let’s say.  Now as bad as America’s grid is, and it’s truly pathetic, we at least have the capability to borrow from other regions if one goes down (or borrow from Canada which supplies much of northeast America with either direct power or backup…yet another reason to support our great friends by drinking Canadian beer).

You see, those talking about Japan’s resilience are missing some essential points. They might be able to rebuild a road quickly, but they have a power grid that wasn’t designed for disasters even though the entire country is basically living on a fault line.

The initial cost for Japan to rebuild is $310 billion and the World Bank says it will take five years. I obviously have no idea how close either figure will prove to be, or what the radiation impact on food and water will eventually end up being either.

What I do know is as much as we want the Japanese people to succeed, they have some mammoth issues that can’t be papered over by some news analyst saying, “Boy, you just don’t know the spirit of the Japanese.”

As I told you last week, I do know it’s a country that has a hopelessly corrupt political system and while it’s still king in some high-tech areas, the economy hasn’t done squat in two decades. 

This week Morgan Stanley said Japan would go through a “short and deep recession;” a GDP shortfall of minus 3% when Morgan Stanley had forecast growth of 2% this year. I’ll say it’s long and deep.   

Of all the people whose analysis I read, if I had to pick just one for clear-headed thinking it would be former Morgan Stanley Asia chairman Stephen Roach. I present his opinion in depth.

Stephen Roach / Daily Star

“The devastation – both human and physical – from the earthquake and tsunami in Japan is unfathomable. It is impossible at this point to gauge the full extent of the damage with any degree of precision. But we can nonetheless begin to assess its potential spillover effects on the rest of Asia and other major economies around the world….

“On the surface, the world’s two largest economies have little to fear. Japan accounts for only 5% of America’s exports and 8% of China’s. Under the worst-case outcome of a complete disruption to the Japanese economy, the direct repercussions on the United States and Chinese economies would be small – shaving no more than a few tenths of a percentage point off their annual growth rates.

“Within the so-called G-10 developed economies, Australia has the largest direct exposure to Japan, which absorbs about 16% of their total exports. South Korea, the third-largest economy in East Asia, is at the other end of the scale, relying on Japanese demand for only about 6% of its exports.

“But the narrow view misses the most critical consideration: this ‘Japan shock’ has not occurred at a time of great economic strength. That is true not only of Japan itself, where two lost decades have left a once-vigorous economy on a less-than-1 percent growth trajectory since the early 1990s. But it is also true of the broader global economy, which was only just beginning to recover from the worst financial crisis and recession since the 1930s.

“Context is vital. Notwithstanding the euphoric resurgence of global equity markets over the past two years, the world economy remains fragile. What markets seem to have forgotten is that post-bubble, post-financial-crisis recoveries tend to be anemic. Economies grow at something much closer to their stall speeds, thus lacking the cyclical ‘escape velocity’ required for a self-sustaining recovery. As a result, post-crisis economies are far more vulnerable to shocks and prone to relapses than might otherwise be the case.

“Alas, there is an added complication that makes today’s shocks all the more vexing: governments and central banks have exhausted the traditional ammunition upon which they have long relied during times of economic duress. That is true of both monetary and fiscal policy – the two mainstays of modern countercyclical stabilization. Policy interest rates are close to zero in the major economies in the developed world, and outsize budget deficits are the norm. As a result, unconventional – and untested – policies, such as so-called ‘quantitative easing,’ have become the rage among central bankers.

“All along, such unconventional policies were viewed as a temporary fix. The hope was that policy settings soon would return to pre-crisis norms. But with one shock following another, the ‘exit strategy’ keeps being deferred….

“This raises perhaps the most troublesome concern of all: with a post-crisis world getting hit by one shock after another, and with central banks having no latitude to cut interest rates, it is not hard to envision a scenario of open-ended monetary expansion that ends in tears. The dreaded inflationary endgame suddenly looms as a very real possibility.

“None of this detracts from the resilience factor. Yes, Japan will rebuild….

“But, just as the post-Kobe rebuilding (1995) did little to end the first of Japan’s lost decades, a similar outcome can be expected this time. The upside of rebuilding…is only a temporary palliative for an impaired economy….

“The Japanese economy has, in fact, been on the leading edge of many of the more serious problems that have afflicted the global economy in recent years. From asset bubbles and a dysfunctional financial system to currency suppression and monetary-policy blunders, Japan has been in many respects the laboratory of our future.

“Unfortunately, the world has failed to learn the lessons of Japan. And now it risks missing another important clue. The significance of the earthquake and tsunami of 2011 is not the relatively low magnitude of Japan’s direct impact on the broader global economy. The more meaningful message is how these shocks box the rest of us into an even tighter corner.”

Editorial / The Economist

“Japan has gone without effective leadership for so long, with an endless procession of faceless prime ministers and their cabinets, that it has made political dysfunction look almost like well-practiced art. But this crisis has shone a pitiless light on that failure. (Prime Minister Naoto) Kan, who has promised political change, now needs to bring it about. Japan’s people can help, adopting a different attitude to their government. Stoicism – however good for coping with adversity – is bad for bringing on change. Time for the Japanese to unleash some righteous anger on a system that has let them down.”

Then there is Europe and the 17 nations employing the euro currency. Incredibly, even though it’s been on the calendar for months, March 24-25, the time when everyone was supposed to agree to some kind of longer-term solution for its debt issues and how to handle the likes of Greece, Ireland and now Portugal, EU officials and political leaders went home Friday night and for the life of me I can’t see what they accomplished.

This week, Portugal’s political opposition voted down the ruling party’s austerity measures, thus forcing Prime Minister Jose Socrates out of office (see, a cool name still doesn’t guarantee success), but with the austerity program out the window, it seems Portugal needs your basic 70 billion euro bailout, or 100 billion in dollars. You can imagine Portugal doesn’t have $100 billion (they actually have something like $4 billion in their treasury….I have 12 cans of coins they can have if they’ll take ‘em to CoinStar, which I’m loath to do myself because I don’t want to start rumors about my financial well-being here in town…but enough about me).

The thing is Portugal is now being obstinate even though they have huge funding costs coming up in April and June and a caretaker leader, Socrates, with a cool name but no power as the country awaits new elections.

Meanwhile, German Chancellor Angela Merkel, she of the best economy on the continent but a people fed up with bailing out their sick neighbors, while also blasting the woman whose shoulders George W. Bush once rubbed, causing her to shriek!, because she had extended the life of some of Germany’s nuclear plants last year, prior to Fukushima, and now 70% of the German people are against nuclear power, period, is up for reelection in 2012, has already seen her party go down in flames in two key state votes this year, and faces another five over the balance of 2011, including one on Sunday, and let’s just say she and the party leadership are, you know… not in a good way.

On top of all this, Ireland just registered a minus 1.6% GDP figure for the fourth quarter, making it three straight years of contraction (which equals a depression), and Moody’s downgraded 30 Spanish banks because the government is incapable of writing anymore blank checks, ergo, Spain is the next target after Portugal on the Euro-17 Debt Tour, though everyone and their mother is assuring us Spain is addressing its issues and there is no need to worry.

This is a total crock because anyone who tells you Spain’s real estate bubble is not as bad as the others, like Ireland, is lying.

Here’s the bottom line on Europe. It matters, but just as we’ve seen for almost a year now it’s a rolling crisis. There are good weeks and months, meaning stability, and there will be more bad weeks and months. The debt loads are real, massive and, in some cases, still incalculable due to lack of transparency. Europe’s banks have huge exposures to each other. Just on Friday, in the Irish Independent, I saw this little nugget.

“Figures published by Germany’s Bundesbank yesterday show German banks had ‘foreign claims’ totaling 88.4 billion euros (a cool $123 billion or so by my back of the beer coaster calculation) on Irish entities at the end of last year.” This is both to Irish banks and Irish businesses. True, much of this is still solid. But much of it is not and this is but one example of the issues faced continent-wide.

What Europe needs, though, as I’ve been writing ad nauseum since last summer, is growth, and growth is going to be hard to come by with the austerity measures now being enacted, or just as bad, rejected. I also continue to warn, look out for May Day.

Lastly, we have the real estate situation in America. This week the figures on new- and existing-home sales were again the worst since, yes, the 1884 Beaver Dam Bubble. Or more accurately, in the case of new-home sales the worst ever since they began keeping records. The problem here is jobs. Lots of ‘em. The housing boom was great for the construction trade and there is no sign of a recovery.

On the existing-home front, the median home price for February, $156,100, was the lowest figure since Feb. 2002. Talk about wealth destruction.

Now back in Nov. 2008, I predicted that the median home price would bottom in April 2009 and then “sit there” for a long spell, which we’ve obviously done. The median home price did get below the figure then of around $164,000, owing to machinations with the $8,000 first-time home buyer credit (remember that?), but resumed its climb and hit $182,900 last June before tumbling again.

For those talking of a double-dip, though, to be intellectually honest I believe you have to take the $164,000 April 2009 figure and lop off at least 10% from that, so say $148,000. If we get down there I’ll admit we’re in a double-dip, though history shows rising home prices in the spring selling season so we’ll see.

Add all of the above up, Japan, Europe, and the U.S., and you shouldn’t be surprised I think the past rally we’ve witnessed, also in the face of $105 oil, is unwarranted.

Street Bytes

--The Dow Jones rose 3.0% to close at 12220, or essentially back to the levels before Libya blew up and oil was $85. The S&P 500 rose 2.7% and Nasdaq climbed 3.4%.

--U.S. Treasury Yields

6-mo. 0.17% 2-yr. 0.73% 10-yr. 3.44% 30-yr. 4.50%

Yields rose on Friday amidst talk among some Fed governors that QE2 needed to be wrapped up.

Separately, the Fed announced it would break with tradition and talk to the media four times a year after policy meetings. The Fed on those four days will also release its statement at 12:30 p.m. ET rather than the normal 2:15 p.m., which means some of us may have to adjust our tee times.

--The unemployment rate fell in 27 U.S. states in February, including a drop in Nevada from 14.2% in January to 13.6%. California gained 96,500 jobs. North Dakota continues to have the lowest unemployment in the nation at 3.7%

--AT&T announced a massive $39 billion merger with T-Mobile USA from Deutsche Telekom that, if approved, would create the largest carrier in the nation, which also means we are one step closer to having just two giant players, the other being Verizon (Sprint Nextel not being much of a factor compared to these two).

The AT&T/T-Mobile combination would account for about 42% of all wireless subscribers in the U.S., with Verizon next at 31%. T-Mobile customers would have the option to buy an iPhone, helping stem AT&T’s current battle to prevent migration to Verizon.

The deal requires approval from both the Justice Department and the FCC, and in such matters in other industries, AT&T would be required to sell off various operations or systems. 

But how does Verizon emerge a winner? More pricing power with less competition.

--I think I’ve made it pretty clear over the years I’m ambivalent about gold, but I’ve listed the price every week for the 12 years of “Week in Review” simply out of habit.

Of course the price of gold has taken on new meaning the last few years in particular and this week it hit another new high, though despite all the turmoil in the world the first few months of 2011 is up less than 1% this year.

Nonetheless, I must make note of a Financial Times story that said Moammar Gaddafi is sitting on a pot of gold worth, at today’s prices, about $6.5 billion. So how has it been moved out of Tripoli’s central bank, which is where it had been stored until now, to some location in the south of the country? Wish I could tell you.

--The New York Times ran a story on Friday that is bound to stir up some debate, this being the fact General Electric, despite $5.1 billion in profits from its operations in the U.S., paid zero American taxes. “In fact, G.E. claimed a tax benefit of $3.2 billion,” writes David Kocieniewski.

“Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department…is often referred to as the world’s best tax law firm….The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.”

G.E. did report its tax burden was 7.4% of its American profits, but this includes taxes “that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.”

Needless to say, G.E. spends millions on lobbyists to secure, and retain, various tax credits, such as on its leasing business. Nothing illegal about this, but then the Times describes G.E.’s relationship with Congressman Charles Rangel, then chairman of the Ways and Means Committee, which decides the fate of many tax breaks, and how Rangel once approved an extension of a popular provision for G.E. and the following month, Rangel and G.E. CEO Jeff Immelt were side by side as G.E. announced a $30 million award to New York City schools out of its foundation, including $11 million in benefits to Rangel’s district. Again, not necessarily illegal, just the way our lousy system works.

[Ronald Reagan, incidentally, overhauled the tax system while in office to the extent that G.E. was forced to pay its fair share, but since those days the company has chipped away at the rules and helped add new ones to benefit it.]

--The Japanese triple disasters are going to severely impact tourism in the U.S. For example, 305,000 Japanese visitors traveled to Los Angeles last year, spending $279 million, according to the Los Angeles Times, and a look at one local tour operator reveals that 40% of tours for Japanese this year have already been canceled. Others say half.

In 2010, 3.4 million Japanese visited America, spending on average $4,500 per person per visit, behind only the Chinese and the Aussies in terms of spending.

--I’m not into such forecasts but for the archives I note that the World Bank’s chief economist said this week that China has the potential to grow 8% annually for another 20 years. Justin Yifu Lin said, “By the year 2030, measured by purchasing power parity, China’s economic size may be twice as large as the U.S.”

--While China is still going to have to import a lot of food, the government is determined to bring in its eighth consecutive bumper grain harvest. Said the minister of agriculture, “China is facing increasing inflationary pressures this year, and so more grain output is required.”

--There is no doubt that California farmers will have ample water for 2011’s growing season. North to south it’s been a deluge. And with each video I see of the Pacific Coast Highway, boy am I glad I drove it when I did. Let’s just say the detours don’t add the hour I talked of last week, but more like 3 ½ hours in some spots (to get to Big Sur for instance).

And in a different part of the state, one source of mine, Pete M., reports that Mammoth Mountain is now up to a season snow total of…brace yourself…589 inches! 5-8-9. Records are beginning to fall all over the state.

But, if you think that’s a lot, just a cursory Web search (and I’m not saying this is definitive) reveals that back in the 1998-99 snow season, Mt. Baker ski area in northwestern Washington State recorded a U.S. record 1,140 inches. [It was verified by the National Climatic Data Center.]

--After being closed for nearly two months following the overthrow of the Mubarak government, Egypt’s stock market finally reopened and promptly tanked. It is now down 26% from the January high.

--In an embarrassing revelation, Bank of America said the Federal Reserve vetoed its plans for a modest dividend increase in the second half of 2011, this as the Fed has allowed most of BofA’s competitors to do so. [Morgan Stanley is another that hasn’t been notified it can proceed yet.]

In Bank of America’s case, the Fed cited concerns over the institution’s giant mortgage business, let alone the ongoing investigation by state attorneys general over same.

--The air traffic controller who fell asleep at Reagan National in Washington, D.C., was suspended. Incredibly, he was the only one in the control tower of this critical airport. Because it was late at night, only two flights had to make it in on their own before the guy woke up.

--Speaking of airplanes, I’m sure those of us who saw the Miami International Airport fuel farm fire thought the same thing. ‘This isn’t good.’ But while the morning after they talked of flight delays and service disruptions, it’s so bad that American Airlines, to cite but one example, canceled 188 Miami flights on Friday, 1/3rd of their daily schedule there.

Here’s the thing. American was forced to use 10 tanker trucks, as reported by Bloomberg, to haul the fuel to the tarmac and get this. Normally it takes 45 minutes to refuel a wide-body plane such as a Boeing 777. But using the trucks it takes 5 hours! An airlines spokeswoman said it’s “like trying to fill up an aircraft with an eyedropper.”

--Database software king Oracle reported another kick-ass quarter with net income of $2.1 billion, exceeding expectations as revenue jumped 37% to $8.8 billion. So look for CEO Larry Ellison to build another few super yachts for himself…because he can.

--Meanwhile, Research in Motion, maker of the BlackBerry family of smartphones, warned that its current quarter could be disappointing owing to costs associated with the launch of its PlayBook tablet device. Shares tanked 11% on the news. RIM also said it would sell 13.5 million smartphones in the current quarter vs. 14.9 million in its fiscal fourth-quarter.

--The Postal Service is looking to eliminate 7,500 administrative jobs and is offering $20,000 buyouts to thousands of veteran workers. The move was previously announced but now the agency specified seven district offices would be eliminated, but that’s only 420 of the positions. The rest will come from the 20,000 workers who retire or leave their jobs annually. Letter carriers and other union workers are not eligible for the buyout program. Overall, the Postal Service has 500,000+ employees and lost $8.5 billion in 2010.

--New Jersey has seen a 60% jump in public retirees, avoiding givebacks of $250,000 in benefits per person as proposed by Gov. Chris Christie. Barron’s reports Maryland retirements are up 65% so far this year. Such moves create a funding gap.

--A condo at Manhattan’s Plaza hotel sold this week for $48 million, the highest price for a single condo ever sold in New York City. The buyers were Russian composer Igor Krutoy and his wife.

A composer? My goddaughter is a composer. Hey, Dale…do you need some clerical help? I’m a good typist.

--The New York Times reports that the New York Mets are bleeding profusely, and it’s not just from ownership’s alleged role in the Madoff scandal. It’s now estimated the team lost $50 million last year. As Opening Day approaches, my enthusiasm for my Metsies is underwhelming.

--Best Buy reported that fourth-quarter revenue was down 4% in the U.S. owing to weak demand for flat-screen TVs and notebook computers as it struggles to remake its business, including plans for 150 more smaller-format stores.

--According to the latest publicly available tax filings, for 2009, Crain’s New York Business found that the “50 highest-paid hospital executives and employees in the New York area pulled in nearly $120 million.” [In 2008, it was $156 million before the recession hit.]

Dr. Mark Sultan, the head of plastic surgery at Beth Israel Medical Center and St. Luke’s-Roosevelt Hospital Center topped the doctors’ list with $4.7 million in cash compensation. 10 specialty-care physicians in all at Beth Israel made a cumulative $30 million, whereas the median compensation for specialty physicians nationwide in 2009 was around $235,000.

But what got me were the sums raked in by hospital executives. The leading one was John P. Ferguson of Hackensack University Medical Center, whose total compensation was $7.694 million.  

--From USA TODAY:

“An Indiana Court of Appeals this week took up the case of a woman who claims she got sick on a Carnival cruise ship because it was going too fast.”

Doris Beard in her complaint noted that her body “swayed terrible” on the unnamed Carnival ship. “I had bleeding, which I had not has [sic] in three years.”

Stop the ship…I want to get off!

--Nathan Myhrvold, the former chief technology officer of Microsoft and a mega-millionaire, authored a cookbook, “Modernist Cuisine: The Art and Science of Cooking,” a five-volume set that lists for $625!

But the 2,438 pages of text and photos is in such demand, a second printing of 25,000 copies on top of the original 6,000 sets is on its way from China, where he had it printed. [In a telling footnote, he had to switch to China when he couldn’t reach his original Japanese paper manufacturer after the earthquake and tsunami.]

Amazon is discounting the book to $467 and a majority are being bought by professional chefs or others in the food business, according to Crain’s New York Business. Actually, I think he was on Charlie Rose the other day so check it out.

“Aside from recipes,” reports Lisa Fickenscher, “the books discuss the science of the culinary arts – tackling such questions as why plunging food in ice water doesn’t stop the cooking process and when boiling cooks faster than steaming.”

I just want to know why it is when I cook my Stouffer’s lasagna in the microwave I’m supposed to leave it in there for 2 or 3 minutes after cooking. [I never do…that’s 2 or 3 minutes wasted.]

--Headline in the Wall Street Journal:

“The Sudden Disappearance of the Miniskirt”

Noooo!!!!

Foreign Affairs, part II

Afghanistan: President Hamid Karzai laid out his plan for Afghan security forces to take charge of securing seven areas across the country, the first step towards his goal of having the police and army protect the entire nation by the end of 2014. In a speech filled with vitriol towards the current international effort Karzai said the Afghan nation “does not want the defense of this country to be in the hands of others anymore.” He then reiterated his call for the Taliban to join the peace process and said night raids had bolstered the insurgents. Once again he also said more should be done to go after the safe havens in Pakistan.

Meanwhile, Gen. David Petraeus has said that “while the security progress achieved over the past year is significant, it is also fragile and reversible.”

As for the Taliban, this week they forced the shutdown of all mobile telephone networks in the province of Helmand, getting the mobile companies to comply with the order. It’s the first time the Taliban has forced a total shutdown and in so doing warned the companies they would be held responsible for any losses they suffer, the Taliban knowing their movements are tracked through mobile networks. So then you could ask yourself, well what good does this do the Taliban, since they use mobile phones? Good point. But I’m not about to ask them why. You do it.

North / South Korea: Seoul conducted a series of live-ammunition air and ground exercises to further warn Pyongyang that if it acts up again, this time the response will be robust.

Russia: Vladimir Putin’s approval rating has fallen to the lowest level since mid-2005 on perceptions of economic stagnation, though it still stands at a robust 69% from 73% in February, while President Medvedev’s rating fell to 66%, the lowest since he took office in 2008. Any U.S. politician would kill for such readings. Nonetheless, the declines should be worrisome to the Kremlin. The poll for the independent Levada Center also shows that 42% of Russians believe the country is going in the wrong direction, 40% say it’s headed in the right one.

But I saw a picture of Putin in the Moscow Times from this past Wednesday where he attended a football match in Belgrade and in classic Putin fashion, he’s sitting with a seemingly hardcore biker club, the Serbian branch of the “Night Wolves” dressed like a thug.

Brazil, Chile and El Salvador:

Mary Anastasia O’Grady / Wall Street Journal

“President Obama’s trip to Brazil, Chile and El Salvador this week, while war rages in Libya, has been sharply criticized as proof of dangerous detachment from a world that badly needs U.S. leadership.

“Yet there is a case to be made for going – to Brazil anyway. Arguably Santiago and San Salvador could have been postponed. Chile is already a stable ally and the stop in El Salvador, to mouth platitudes about hemispheric security while Central America is going up in narco-trafficking flames, only highlights the futility of the U.S. war on drugs.

“Going to Brasilia to meet with Worker’s Party President Dilma Rousseff, on the other hand, was important.

“Unfortunately, Mr. Obama discredited s trip even before it began by peddling it as a trade mission to create jobs and boost the U.S. economy. With those goals in mind, he would have been better off staying home and lobbying Congress to drop the 54 cents per gallon tariff on Brazilian sugar ethanol, and to end all U.S. subsidies on cotton, which have been ruled illegal by the World Trade Organization in a case brought by Brazil. Or he could have sent the Colombia and Panama free trade agreements to the other end of Pennsylvania Avenue, where they would be easily ratified.”

Mexico: Carlos Pascual, the U.S. ambassador to Mexico, resigned after the publication of diplomatic cables, courtesy of WikiLeaks, that criticized Mexico’s war against drugs, further infuriating Mexican President Calderon, who not for nothing has all manner of reasons to be ticked off at Uncle Sam (despite those fake appearances in Washington the other week when Calderon met with President Obama). Calderon demanded Pascual’s resignation.

But imagine. In four years Mexico has confiscated 110,000 weapons, including more than 50,000 assault rifles, 11,000 grenades and more than 150 high-powered sniper rifles, at least 85% of which were smuggled in through the U.S. One of the guns was used to kill a U.S. special agent in Mexico in February.

Canada: Prime Minister Stephen Harper’s Conservative government lost a no confidence vote, triggering an election as early as May 2. The main issue was Harper’s proposed budget that calls for corporate tax cuts while opposition parties have argued a growing deficit would only be made worse by the plan. Plus, the opposition argues against Harper’s proposal to spend $9 billion on 65 F-35 Joint Strike Fighters for the military.

Harper’s Conservatives would still be expected to win a new vote, but it could yet govern with a minority.

Random Musings

--Francis Fukuyama, noted historian, in Newsweek.

Q: Will the Fukushima catastrophe squelch the global nuclear renaissance?

“It already has. But it’s too bad because it’s just as dangerous to, say, be addicted to oil in the Middle East and every 10 years or so have to go to war for it.

Q: Is Washington more prepared (for an event such as a massive earthquake in California) than Tokyo?

“More likely here is a terrorist attack. But my suspicion is that if there was, say, a biological weapon in downtown Washington, we wouldn’t handle it very well.”

I totally concur. We wouldn’t.

--Thomas Friedman / New York Times

“If you listen to Obama, he eloquently describes our energy, climate and fiscal predicaments: how we have to end our addiction to oil and cut spending and raise revenues in an intelligent way that also invests in the future and doesn’t just slash and burn. But then the president won’t lead. When pressed on energy, he will say that he just doesn’t have the Republican votes for a serious clean energy policy. But the president has never gotten in the G.O.P.’s face on this issue. He has not put his own energy plan on the table and then gone out to the country and tried to sell it.

“It is what a lot of Obama supporters find frustrating about him: They voted for Obama to change the polls not read the polls.

“On fiscal policy, the president has put forth a decent opening budget bid and has opted for the same inside game of letting Congress take the lead in forging a compromise with the G.O.P. that would bring spending under control and raise revenues. That inside game worked for the president in producing health care reform and the stimulus, but in those cases he had a Democratic majority to push through decent legislation. I fear this time he will not have the votes for the kind of serious, sensible, Simpson-Bowles-like budget cuts and tax increases we need – without his leading and enlisting the public in a much more aggressive way.

“Republicans, by contrast, are insisting that we can somehow drill our way out of our energy problems, and House Republicans just reported out of committee a bill that would block the E.P.A. from taking any action to reduce greenhouse gases, while also slashing government funds to keep air and water clean. So far, the G.O.P. is calling for cuts in the things we need to invest more in – like education and infrastructure – while leaving largely untouched things we need to reduce, like entitlements and defense spending. A country that invests more in its elderly than its youth, more in nursing homes than schools, will neither invent the future nor own it.

“The world is caught in a dangerous feedback loop – higher oil prices and climate disruptions lead to higher food prices, higher food prices lead to more instability, more instability leads to higher oil prices. That loop is shaking the foundations of politics everywhere. That’s why the world needs a strong America more than ever, and that’s why it is vital that we fix our structural problems – now.

“If we leave it for the market and Mother Nature to make the adjustments for us, we will be sorry – and so will the world. We are the keystone holding up the global system. If we go weak, our kids won’t just grow up in a different America; they will grow up in a different world.”

--Yochi J.Dreazen / National Journal (Global Security Newswire)…on whether U.S. nuclear plants are vulnerable to terrorism.

It’s always been thought such fears were overblown, but now Fukushima is shedding a different light on the topic.

“Nuclear reactors across the United States are encased in enough concrete to withstand a direct hit from an airliner and can be shut down remotely in case of a terrorist strike or natural disaster. But that is true in Japan as well, and something entirely different caused the disaster there: the failure of the cooling systems that prevent nuclear reactors from overheating. The cooling systems aren’t encased in concrete, and key components – from pumps to water-intake pipes – sit outside the reactor complexes and are far less protected, leaving them vulnerable to a well-planned terrorist strike or a natural disaster. As the dire situation in Japan shows, disabling or destroying the cooling equipment – regardless of how it happens – can trigger a full-scale nuclear emergency.

“ ‘Even if you shut a reactor down, you still need to cool it off. That’s just physics,’ said Charles Faddis, a retired CIA operations officer and former head of the agency’s unit on countering terrorism threats involving weapons of mass destruction. ‘If terrorists have disabled the cooling system, the reactor heat will eventually lead to a complete meltdown. They won’t produce mushroom clouds, but the results – clouds of radioactive materials drifting over vast areas – would be just as horrific.’….

“Americans’ worries about terrorism have faded in recent years…Gallup runs a regular tracking poll with an open-ended question about what voters consider the most important problem facing the country. In its most recent survey, conducted March 3-6, 28% of respondents chose the economy, while 26% said unemployment. Terrorism was near the bottom, with just 2%.

“The horrifying images from Japan may awaken dormant fears of a terrorist strike on a U.S. nuclear facility. That, in turn, would focus new attention on the private-security firms charged with keeping them secure – and on the evidence that suggests they might not be up to the job.

“The Nuclear Regulatory Commission, an independent arm of the federal government, is tasked with monitoring security at nuclear plants. It uses teams of mock assailants to test readiness. At half the plants tested before September 11, the mock attackers were able to simulate the destruction of enough equipment to trigger a meltdown, ‘even though operators typically received six months’ advance notice of which day the test would occur,’ the Union of Concerned Scientists noted in a 2007 report.

“The commission has given the private-security firm Wackenhut a lucrative contract to provide the faux terrorists. Wackenhut also provides many of the guards protecting the plants. In a 2006 report, the Government Accountability Office found that one plant’s security personnel did better during a mock attack because they were given advance knowledge of the planned scenario. The following year, a Wackenhut guard named Kerry Beal videotaped security personnel sleeping in the inaptly named ‘ready room’ at the Peach Bottom nuclear plant in Pennsylvania. CBS later broadcast the tapes, and Wackenhut lost several of its security contracts.

“NRC spokeswoman Prema Chandrathil said that the government continues to employ Wackenhut to provide fake assailants. She acknowledged that plants receive advance word of impending mock attacks, but said that the pretend raiders were kept separate from Wackenhut’s guards to ensure the integrity of the tests….

“ ‘Our plants are very secure,’ said Steve Kerekes, a spokesman for the group. ‘We’ve gone well beyond where the Japanese had been in terms of preparing for either a natural disaster or a terror attack.’

“Federal personnel search all passengers trying to board commercial airliners, but they leave the security of the nation’s nuclear plants – which pose far greater potential dangers – in the hands of private guards. With luck, those guards will never be put to a real test. But luck, as Japan attests, sometimes runs out.”

--Am I the only one to think it’s a sign of amazing chutzpah for Kentucky Republican Sen. Rand Paul, just elected last November, to be thinking of running for the White House already? “The only decision I’ve made is I won’t run against my dad,” Paul said on Monday after visiting South Carolina. Then again, that’s what Obama did. Never mind. Meanwhile, Tim Pawlenty was the first Republican to officially form an exploratory committee.

--Corky Siemaszko / New York Daily News

“Vice President Joe Biden referenced the 1994 Violence Against Women Act in an attack on the GOP’s budget slashing offensive at a Democratic Party fund-raiser in Philadelphia.

“Biden said the GOP was deploying a ‘blame the victim’ strategy to justify rewarding the rich with tax breaks while balancing the books on the backs of middle class Americans.

“ ‘When a woman got raped, blame her because she was wearing a skirt too short, she looked the wrong way or she wasn’t home in time to make dinner,’ Biden said. ‘We’ve gotten by that.’

“Reminding the audience that recession began on former President George W. Bush’s watch, Biden said that as Democrats and Republicans debate how much to cut from the federal budget, the GOP is bent on punishing the people who are suffering the most from their failed fiscal policies.

“The Republicans’ ‘philosophy threw us into this God awful hole we’re in, gave us the tremendous deficit we’ve inherited,’ Biden said. ‘They’re now using the very economic condition they have created to blame the victim – whether it’s organized labor or ordinary middle-class working men and women. It’s bizarre.’

“The Republican National Committee condemned Biden’s remarks.

“ ‘Using a rape analogy to describe one’s political opponents is inexcusable & beneath the office of the Vice President,’ RNC Chairman Reince Priebus tweeted.”

Ah yes, the 2012 campaign is already in full swing and so much for Tucson and our gentler discourse, Mr. Vice President.

--From Helen Kennedy / New York Daily News:

“An unusual on-air spat broke out between rivals CNN and Fox News in Libya on Monday, breaking open bitter feelings between reporters in a war zone.

“Fox reported that an allied attack on Col. Moammar Gaddafi’s compound Sunday was aborted because journalists, including a CNN crew, had been taken on ‘a propaganda trip’ to see bomb damage there.

“Fox said its correspondent, Steve Harrigan, didn’t go because he didn’t want to be used as a human shield.

“CNN’s Nic Robertson fired back live on the air, saying the reporters were only allowed to film the compound briefly before being hustled away. He said Fox did send a staffer on the trip, and for good measure, he added that Harrigan rarely leaves his hotel room.

“ ‘I see him more times at breakfast than I see him out on trips with government officials here,’ Robertson said.

“ ‘If I sound angry, it is because I am. I expect lies from the government here, I don’t expect it from other journalists.’”

Now I’ve been watching and listening to both networks, and I’ve heard Rush Limbaugh’s bashing of Nic Robertson on the radio, but I’ve gotta give this round to CNN. I know that NBC’s Jim Maceda also declined to see the first strikes on Gaddafi’s compound because he, too, brought up the human shield idea but if it was me, I’d go. Being a human shield pays well, doesn’t it?

--Pretty incredible that according to the Census Bureau Detroit’s population has fallen 25% in the past decade to 714,000, the lowest level for the city since 1910, when auto production was starting up. Local officials thought the figure would be closer to 800,000. [Detroit peaked in the 1950s at two million.]

Of the drop of more than 237,000 residents, 41,000 were whites and 185,000 blacks.    The latter are moving into neighboring Macomb and Oakland counties.

Among other big cities for the decade 2000-2010, New Orleans saw its population fall 29% for obvious reasons, while Cleveland’s dropped 17%, Cincinnati’s 10% and Pittsburgh’s 9%.

Overall, the Hispanic population grew 43% in the decade to over 50 million. They now make up 16% of the USA’s 308.7 million. Non-Hispanic whites comprise 64% of the population. There are 37.7 million blacks and 14.5 million Asians.

--Lastly, we note the passing of Elizabeth Taylor.
Editorial / New York Post

“She was one of the last survivors of Hollywood’s golden age – an era when the term ‘movie star’ truly meant something.

“Simply put, Elizabeth Taylor lit up the universe.

“Director Joseph L. Mankiewicz called her ‘the most incredible vision of loveliness I have ever seen in my whole life.’

“Doubtless she benefited from the evolving cinematic technology of her time, but she was also a compelling dramatic actress who leaves behind a range of unforgettable performances.

“She grew up on screen, first capturing hearts at age 12 in ‘National Velvet,’ then going on to star in such classics as ‘Father of the Bride,’ ‘A Place in the Sun,’ ‘Raintree County, ‘Cat on a Hot Tin Roof,’ ‘Giant’ and ‘Butterfield 8,’ winning a Best Actress Oscar for the latter.

“But it was her stunning performance in Edward Albee’s ‘Who’s Afraid of Virginia Woolf,’ in which she co-starred with then-husband Richard Burton and for which she won her second Oscar (she was nominated for three others), that cast aside any doubts about her talent.

“The on-screen drama, of course, was regularly eclipsed by her tempestuous private life…though by contemporary standards the tumult all seems a bit quaint.

“Taylor, it also must be noted, was an AIDS activist before it was cool; her passing truly marks the end of an era.”

Editorial / USA TODAY

“It could be said of the death of Elizabeth Taylor: Now she belongs to the ages. But the truth is, Taylor has always belonged to the ages – it’s why her absence is so significant to millions. How can it be that Dame Elizabeth Rosemond Taylor won’t be around to admire, envy and gawk over, ever again?

“Taylor once said she wanted her tombstone to read: ‘She lived.’ And oh, did she ever.”

C. David Heymann, one of her biographers, said, “She was a comet, an 80-year comet.”

USA TODAY:

“She was the most notorious, the most tempestuous, the most bejeweled, the most generous, the most blessed, the most tragic screen star in the Hollywood firmament. She was a supernova celebrity who pioneered a new standard of fame even before 24/7 media.”

Biographer William Mann said, “She showed that you take the parts of your life that will resonate with the public and use them to your advantage. Everything that is standard about celebrities today can be traced to Elizabeth Taylor, whether it’s causes or personal lives or the marketing.”

But she didn’t court the attention, as William Mann added, “She got the media exposure because of the way she lived her life. She wasn’t out there seeking it. It came to her.”

Editorial / Los Angeles Times

“(We) watched over the years as she went from voluptuous to fat to slim again. We watched as her hair went from blue-black to a stunning silver, which she flaunted. We watched as she suffered illnesses and mishaps, reading with curiosity and concern the reports about her failing health, her difficulty walking. She seemed to always recover….

“In the last few decades she came to embody the best use of Hollywood clout, as one of the earliest supporters of AIDS causes (and the founding international chair of the American Foundation for AIDS Research) at a time when its sufferers were practically considered lepers. And so we watched nonstop….

“Taylor stopped making movies so long ago that you’d be hard pressed to remember the last time you saw her onscreen in a theater. But it’s unlikely that many people who heard the news of her death uttered that sad remark often heard when old Hollywood stars die: ‘Oh, I thought she was already dead.’”

I was watching Dennis Miller on “The O’Reilly Factor” when he was wrapping up his segment but made sure he got in one last thing amid the talk of Libya and the other issues of our times.

“Liz Taylor, RIP! She was a cool dame.”
---

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

God bless America.
---

Gold closed at $1429
Oil, $105.70

Returns for the week 3/21-3/25

Dow Jones +3.0% [12220]
S&P 500 +2.7% [1313]
S&P MidCap +2.9%
Russell 2000 +3.7%
Nasdaq +3.8% [2743]

Returns for the period 1/1/11-3/25/11

Dow Jones +5.5%
S&P 500 +4.5%
S&P MidCap +7.0%
Russell 2000 +5.1%
Nasdaq +3.4%

Bulls 50.6
Bears   22.4 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore