Monday, April 16, 2007

April 2-April 9, 2007

April 2, 2007

News Views
Random Thoughts on The Morning News

This is the kind of backtalk my poor wife has listen to over morning breakfast as I scan the morning paper. Poor woman. I figured why should she suffer alone. So here, join the morning grumble session:

Iraq victory not possible: Kissinger

April 1, 2007 - Former US Secretary of State Henry Kissinger, who helped engineer the US withdrawal from Vietnam, says the problems in Iraq are more complex than that conflict, and military victory is no longer possible...."It is a more complicated problem," Kissinger said. "The Vietnam War involved states, and you could negotiate with leaders who controlled a defined area." (More)

Oh really. Leave it to slippery Henry to know when it's time to get clear of a ticking shit-bomb. It's his M.O. Just ask him what he had do with the Vietnam War and, by the time he gets done telling you his version of events, he sounds like George McGovern. The truth, of course, is that Henry shares responsibility, along with Robert McNamara, for at least 40,000 of the 60,000 names carved on the Vietnam Memorial Wall. If any two Americans ever deserved a thorough hanging it's Kissinger and McNamara.

I only mention all that to put Henry's Iraq war skirt-cleaning comments in context. Until just a few weeks ago Henry served as George W. Bush's Rasputin on the Iraq adventure. Basically it was the same manner of Dr. Strangelove advice Henry once peddled to Richard Nixon about the importance of "winning" in Vietnam. But now that it's clear to anyone with more than two IQ points to rub together that the US is losing Henry's second-favorite war of choice, he is slithering back under his “Kissinger & Associates” rock where he is furiously updating his memoirs.

(Henry to Word Processor - Search/Replace: word: “Encouraged,” to “Warned.” - Replace All.)

McCain touts Iraq plan in Baghdad

April 2, 2007—AP BAGHDAD, Iraq -- After a heavily guarded trip to a market, Sen. John McCain said Sunday that a U.S.-Iraqi security crackdown in the capital was working...."These and other indicators are reason for cautious, very cautious optimism about the effects of the new strategy," said McCain, who led a Republican congressional delegation to Iraq. (More)

Oh what a tangled web he wove when Mr. Straight Talk decided to blame the media for the public's dire views on the Iraq war. McCain straight-talked himself right into a trip to Iraq. It all began when he claimed that the troop surge had already made some streets in Baghdad safe enough for an American to stroll down. And that the American media based in Iraq haven't been reporting that fact. US media folk in Iraq, where 90 reporters have been killed strolling down those very streets, took umbrage. “Oh yeah, McCain,” they replied, “Prove it.”

With support for his Presidential bid already slipping, and contributors sitting on their wallets, McCain had no choice but to take up the challenge. He had to go to Iraq and stroll down a street. So he did ... accompanied by General Petraus and several hundred security forces providing “perimeter security.” After which McCain said, “See, I told you so.” (Another mission accomplished.)

What McCain did not mention at his Baghdad news conference was that other Americans “strolling” down Iraqi streets that same day didn't enjoy their walks as much as he did. Six US soldiers were killed Sunday in southwest Baghdad, a British soldier was killed, and 20 bullet-riddled bodies were found Sunday, most of them in Baghdad. In Tuz Khormato, north of Baghdad, a bomb killed three people and wounded four at a market. In Mosul, a suicide truck bomber killed two civilians and wounded 22 people, including 15 soldiers, at an Iraqi army building, a police spokesman said.

Memo to McCain: Meet Henry Kissinger for lunch, ASAP. He has a reality check for you.

500 Iraqi Civilians Killed last Week
April 2. Baghdad -- After a violent week that claimed the lives of some 500 Iraqis, and the weekend combat deaths of six U.S. soldiers, U.S. and Iraqi military officials acknowledged Sunday that it will take time for the effects of a much-vaunted security crackdown in Iraq to be felt. (More)

The Surge is “working?” I don't know about you, but I measure progress a bit differently. If this is “working” I can't wait to see what failure looks like. All Bush's surge did is move the murderous venue from the heart of Baghdad to the suburbs and beyond. (The toothpaste tube effect.)

But Bush's Baghdad surge did do Shiite militia leader, Muqtada al-Sadar, a huge favor. Before the surge al-Sadar's militia had become an unruly lot. Lots of wanna-be fighters joined up, but not all for the same reasons. Some just wanted a license to kill. Others wanted to license to steal. Al-Sadar was finding it harder and harder to control his own militia. Bush's surge offered him a way to purge the posers and disobedient. When the surge began Al-Sadar ordered his fighters not to oppose it. That explains the drop in violence in Shiite-controlled areas of Baghdad. Then those fighters who disobeyed al-Sadar's orders where left to fight, be captured or killed. Disobedience problem, solved – thanks to George W. Bush. That little favor came on the heels of getting rid of Saddam for the Iranians. (Heck of a job, Georgie.)

Memo to World Tryrants: Need a hand? Call George.

Hillary Clinton Raises Big Cash
NY Sun, April 2 -- Senator Clinton's record-breaking fund-raising numbers in her bid for the Democratic presidential nomination may be met or surpassed by Senator Obama, her leading Democratic opponent...The $26 million Mrs. Clinton raised during the first quarter of fund-raising in the 2008 presidential cycle nearly triples first-quarter fund-raising records by any past Democratic candidate. (More)

I don't know who is giving Hillary all this money, or why, but Democratic Party leaders better get the wooden stake pounded into that creature's heart before she actually bags the nomination. Because if she does end up being their party's nominee there are only two possible outcomes, and neither is good. First she could lose to the Republican nominee. Or she could win. And if you think there are millions of Republicans mourning the day they caste a vote for George W. Bush, just wait and see what four years of President Hillary Clinton does to the Democratic Party. The only good news is that Obama seems to have raised almost as much money as Hillary. And you can bet that the Duchess is “not amused” by that.

Memo to Obama: Hire someone to start your car for you until she cools off.

Gonzales Has To Wait Until April 17 To Testify
April 2, 2007 -- Washington, D.C. (AHN) - Democrats are now the ones stalling over hearing testimony from Attorney General Alberto Gonzales concerning his role in the firings of eight U.S. prosecutors. Gonzales is scheduled to testify on April 17. And although the White House had earlier objected to Gonzales testifying under oath, it is now pushing Congress to move that date up....We are absolutely confused by the White House position," said Sen. Dick Durbin, D-Ill., speaking on "This Week," CNN news reported Monday. "For the longest time, Alberto Gonzales wasn't going to come, maybe much later. Now the White House can't wait to bring him in." (More)

So, you asked yourself, “what's that all about?” What it's about is that Seedy Gonzales wants to testify before disaffected (read “fed up,”) career DOJ employees leak any more internal documents showing that Gonzales and Rove operated a two-man political hit-squad to “put the Bush imprint on DOJ for decades to come.” The sooner Gonzalez can testify the less evidence he will have to deny exposing himself to Libby-ization.

Memo to Gonzalez: Resign and let the experts over at the White House do their own lying. They've had more practice.

Planet Earth warned its on "highway to extinction"
April 2, 2007 -- International experts are meeting in Brussels to discuss the impact of global warming. Belgium's Prime Minister, Guy Verhofstadt, opened the talks with a reminder of the last summit's stark warning. "The consequences of global warming are becoming ever clearer and their impact looks like being far more dramatic then we had previously imagined."... A key element of the conclusions due Friday is that earth is on a so-called "highway to extinction" with the number of species dying out rising in relation to the heat, as does the number of people who may starve, or face water shortages, or floods. (More)

Great. As things get ugly in the years ahead, just remember the conservatives who were paid off by the energy lobby to do for them what the “smoking doesn't causes cancer” deniers did for Big Tobacco – lie. This is another instance where the term, “get the rope,” resonates with me.

GAO: Looming Threat to US Oil Supply
Friday 30 March 2007 --A report released Thursday by the non-partisan Government Accountability Office concludes that worldwide oil production will eventually grind to a halt and the United States has no strategy in place to deal with the possible catastrophic results.....Congressman Roscoe Bartlett (R-MD) called the report "a clarion call for leadership at the highest level of our country to avert an energy crisis unlike any the world has ever before experienced." (More)

This story may actually be the only piece of good news in the litter today. Since we seem determined to continue down the path of least resistance nothing short of running short of oil may be what it takes for us to switch to something that's not going to end life on earth as we know it. Having said that though I have to add that I am appalled that so far the best “Plan B,” folks in Washington have come up with is burning food (corn) for fuel. It's no accident that the corn/ethanol bandwagon is being sponsored by an unholy alliance between Big Energy and Agri-business. If they succeed with their ethanol-from-corn scam, get ready for the $15 a pound steak, the $10 a box morning cereal and $5 Mars Bar (corn syrup, you know.)

Sweet deal, huh?

Weekend Edition

Duck and Cover
(Your Assets)

The free enterprise system is a powerful force for both good and ill. Every Yin has it's Yang.

So I'm not a lefty who believes that capitalism is at the root of all the world's ills. Nor am I a free market moonie who believes that, if government would just get out the way, free enterprise could solve everything. The truth, of course, lays somewhere between those two extremes.

When economic times are good, advocates of laissez-faire markets are quick to remind us that the reason things are good is because free markets are self-correcting organisms. They say the many individual parts that make the economy perk along are so tightly dependent on one another that they self-regulate -- out of self-interest. Why, the free marketeers ask, would one player in bountiful economic food chain abuse their role in a way that could cause that chain to collapse? And why would the others in that chain let him?

Nevertheless, even the most devout free market advocates admit the obvious, that bad apples, like Ken Lay and Charlie Keating, come along from time to time. But when that happens, they claim, the business-ecosystem cleanses itself of these pollutants, not out of any sense of right and wrong, but out of pure self-interest and self-defense.

And it often works just that way -- just not often enough. From time to time distortions in a vertical market segment (can you say, "sub-prime?") can create powerful perverse incentives, incentives that actually make doing the wrong thing collectively more profitable to everyone involved than doing the right thing.

I first saw this during what matured into what is now remembered as the savings and loan fiasco of the 1980s. While the good times rolled back then, nearly half a trillion dollars flowed in and out of the pockets of those in that financial food chain comprised of lenders, borrowers, developers, thrifts, title companies, appraisers and of course accounting firms. Lots of folks in each of those businesses knew - in the gut if not in their head -- that it couldn't last, and that when it ended that there would be hell to pay.

Nevertheless the incentives to keep the money flowing were enormous for each member in the S&L business-chain -- which had devolved from a robust home lending industry into the business-world equivalent of a giant circle-jerk. Everyone was getting theirs so no one wanted to be the one to break up the party. Eventually, as all such Ponzi schemes do, it collapsed. And when the smoke cleared nearly half the savings and loans in the nation were insolvent, busted, leaving taxpayers and innocent shareholders holding the tab.

We saw this phenomena again when Mike Milken discovered how to game the junk bond market by making it worth the while of those up and downstream from him to play ball. Bond markets depend on complex interrelationships between issuers, insurers, buyers, sellers, fiduciaries and bankers and those accounting firms again. Milken couldn't have gotten to first base with his junk bond Ponzi without the eager cooperation of each and everyone of them.

The dot-com bubble is another object lesson, and another instance where I “enjoyed” a front row seat. I was a founding employee of one of those dot-com juggernauts. In less than three years the company grew from 12 to over 430 employees. Venture capital firms elbowed one another out of the way to stuff tens of millions of dollars into our bank account, even though we were not making a dime and had no prospect of ever doing so. In March 2001, and $166 million later, the company lay stone-cold dead in bankruptcy court and disappeared, along with hundreds of similar dot-com mirages.

Once again the marketplace had created perverse incentives to all those involved. The venture firms told us not to worry our little heads that we were not making money. They said to just focus on using the money they gave us to grow, grow.. grow... grow like a tumor. Why? So they could get the company noticed by Wall Street, take it public and cash the hell out. After that they could care less what happened to the company – or all those the suckers that bought their stock in it.

During that process I kept saying things like, “Wait, this makes no sense. We have no tangible product, no articulable business plan, we are burning through $6 million a month and have virtually no income streams.” All that earned me was heartache and a nickname. Whenever I came into a meeting the CEO would remark, “Oh, Oh. Here comes Mr. Trouble.”

It's human nature. When members of one of these business food chains are busy stuffing themselves like Jonestown geese, the last thing they want is for some killjoy pointing out that all that abundance may be the product of deceit, phony-baloney, cooked books, twisted numbers, slight of hand, winks and nods, scratching of backs, the greasing of palms, in other words, everything but sustainable, above board, by the numbers, by the book, "generally accepted accounting principles."

Which explains the reluctance we are witnessing today to recognize the clear and present warnings that another day of reckoning in the offing. Nevertheless the early signs that the end is near for this cycle of business excess abound, at least for those willing to pay a bit closer attention.

Just listen the next time Federal Reserve Chief, Ben Bernanke, goes before Congress and whistles past the graveyard, soft-peddling the impact of such major disturbances in the force now impacting one of the economy's central supports -- new and existing home sales. And imagine the impact of an ongoing war that requires America to borrow $12 million an hour, every hour, everyday. Imagine that! Now try to imagine that kind of borrowing by your government for non-productive spending will not, at some point, impact the economic health of our economy. You'll need quite an imagination to pull that one off.

Watch the US stock market. The DOW now spends it's time crashing one day, then clawing it's way back up a wall-of-worry the next, only to crash again when investors reach the top of that wall are terrified by what they see on the other side. It's a classic see-saw chart pattern we've seen before just before the bottom falls out. The market rises as institutional investors sitting on large positions prop up the market just long enough to dump their positions. On who? Onn ordinary smucks who, every time, fall for their clap trap that, "it's just a market correction," and that “a down market is really just a buying opportunity.” You would think the smucks would be suspicious when big investors are more than happy to sell them their shares. ("Hey buddy. Take my shares -- please!")

And where's the proof for that claim? Just have to follow the money, honey:

Assets in Money Funds Hit Record
Investors contributed $5.61 billion into money-market funds in the week ending Tuesdays, brining the total assets in money-market funds to a record $2.4 trillion breaking a previous record reach March 13." (WS Journal 3/29/07)

The doubters will retort, "Come on Mr. Trouble. That doesn't prove institutional stock investors are deserting stocks for the safety of money funds."

Oh yes it does. Read further.

"Institutional investors $7.3 billion (so far in March) compared to $1.69 billion by individual, or "retail" investors."


Among other reasons institutional investors are bunkering down maybe found in a piece written by Dennis Berman that also ran this week in the Wall Street Journal. In that piece Berman disclosed that precisely the same kind of risky lending that sunk the home mortgage markets, is alive and well and running full-throttle in the corporate bond market.

“Lenders have been doling out increasingly large sums of money and accepting increasingly crummy terms.... Remember those “low-doc” loans that got sub prime home buyers in trouble? These (loans) are their corporate cousins.” (Berman)

Last year alone corporate lenders issued over $145 billion in such sub-prime corporate loans, securitized them as bonds and pawned them off on investors thirsting for high returns. Like the dot-com venture capitalists of the 1990s, these lenders care less if the bonds go belly up once they've bundled them up and sold them to investors on Wall Street. (In the world of accounting such behavior even has a name... it's called a "moral hazard.")

How can we be sure that a corporate sub-prime crisis is in the offing? Because, you don't need to ask what's about to happen when you see the smartest rat jump off a ship. In this case that rat would be Bill Conway, co-founder of the Carlyle Group – a private investment house that serves a who's who of who's who in American business and politics.

This week Conway warned, that while Carlyle had made a bundle on corporate debt over the last few years, that the party is over and he is lowering Carlyle's exposure because of what he described as “a corporate debt bubble.” He also warned corporate lenders that they were sitting atop “a house of cards.

“The fabulous profits we have been able to generate (from corporate debt), Conway wrote to Carlyle's employees and investors, “resulted in large part from the availability of cheap debt.” The bankers,” he added, “are making very risky credit decisions. (Conway)

And they're still at it, because the fees generated issuing sub-prime corporate debt are staggering.

“In other words,” Berman ended his WSJ piece, “don't worry how it will end. Just know that everyone will be getting paid until that day arrives. No worries, indeed.”

Just as the evidence is now pouring in documenting the first negative effects of global warming, so too does evidence abound of severe stresses mulitplying within the business eco-system. Deniers can be found in both cases. For some global warming won't become a fact until it directly impacts them personnally. Even then some hardcore conservatives will still deny human excesses were the cause.

The same goes effects of the growing excesses and toxicities building within the US economy. I'm no longer interested in trying to convince my conservative friends on this count either. It's too late anyway. And I am under no illusion that, when the stuff finally hits the fan, that they will repent, admit they were wrong, and finally agree that some degree of government regulation is not only justified, but healthy. (And you gotta know that when all their econmic chickens come home to roost they will blame the woes on those who tried to sound the warning for "spooking the markets.")

I will not elaborate further. Some reader recently accused me in my last post of being “long winded.” So I will shut up now and simply provide you -- and my conservative friends -- a few links to just a bit of the freshest evidence.

Then you, and they, can decide for yourselves if I am a Chicken Little or realistic. Then act accordingly.

Video of the Week
I couldn't have said it better myself
(And didn't.)