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[roguedolphin]

Some very,very interesting "tidbits" in this weekly wrapup....

Week in Review

10/1/2005
For the week 9/26-9/30

[Posted 7:00 AM ET]

Racism and Turkey

No, this isn’t out of order. One of the best programs on
television is HBO’s “Real Sports with Bryant Gumbel” and the
other night he did a segment on racism in European football
(soccer). I’ve watched countless contests in many a pub across
Europe but to be honest had never picked up on the extent of
racism that is on display at matches in the likes of Spain and
Italy. It’s ugly and worrisome for the future of the continent.

But for years now I’ve written on this topic in general, talking of
the rise of the far-right in nations like Austria and the
Netherlands, let alone the more obvious examples you see on a
fairly regular basis in Germany. Fascism itself is alive and well.

In the case of European football, though, it’s primarily the black
players who are targeted, while those from the Middle East get
their fair share of abuse as well. It’s so despicable I don’t even
want to describe the actions of the so-called fans. Football has
now become a sort of recruiting tool for many of the far-right
groups and they take over entire sections of a stadium. I can’t
imagine being a parent and even contemplating taking a child to
such an event.

I have a ton of European readers and I know that as soon as I
bring up a sensitive topic like this I probably lose more than a
few. Such is the life of a pundit and analyst of the world scene.

But where I’m heading with all this is the subject of Turkey and
its European Union membership talks that have been slated to
start this Monday, Oct. 3, since last December when the E.U.
agreed to keep Turkey’s hopes alive.

Suddenly this week, however, Austria demanded that Turkey be
granted a “privileged partnership” rather than full membership.
While the other 24 E.U. members maintain the talks should
go on, Austria can veto them. This is all taking place at the last
minute and picture that as many of you read this, Turkey’s
officials don’t even know whether they should show up Monday.

It’s humiliating and dangerous. You all know the arguments by
now. Many in Europe are scared that with the admission of
Turkey there will be a further surge in immigration. But you also
know that the only way Europe can survive, and pay out its
gigantic future pension and medical benefits, is to grow its
economy. But the populations in most of these same countries
are actually declining so they desperately need the immigrants
or Europe faces a social disaster of monumental proportions.

For Turkey not to be admitted to the final talks is a total
“betrayal,” as British Foreign Secretary Jack Straw has put it.
“Turkey would lose from a no decision, but Europe and its
people would lose even more” he added, concluding:

“Anchor Turkey in the West and we gain a beacon of democracy
and modernity, a country with a Muslim majority, which will be
a shining example across the whole of its neighboring region.”

Finally, I get a kick out of Europeans when they blast America.
Often we deserve it. I rail myself on the issue of how little our
people know about history and the pitiful education many of
America’s schoolchildren receive in this regard.

But at the same time, as I travel the world I keep coming back to
the fact America remains the best place on earth when it comes
to tolerance. We are far from perfect, but overall our attitudes on
race are superior to those elsewhere. It’s a lesson Europe should
take to heart……before it’s too late.

Wall Street

Oh yes we need a little Christmas…right this very minute…
candles in the window….

Bah humbug. You’d have to be an idiot not to know already it’s
going to be a lousy holiday season and there’s nothing we can do
about it. Forget the possibility that a foreign policy bummer
could dampen spirits, these days it’s about sliding consumer
confidence, increasing signs we are already reining in spending,
and, most importantly, energy. And forget all these projections
on this winter’s heating bill. They’re way off. Try doubling
them (unless you had the foresight to lock in lower prices). With
receipt of the first big bill in late-November / early-December, I
imagine there are going to be quite a few family conversations
like this one.

“Bobby, Jenny…your mother and I have some bad news.
Christmas is going to be a little less merry this year.”

“But (quiet sob) why, Daddy?”

“Because of this little piece of paper in my hand,” he says, teeth
clenched, blood pressure boiling.

I mean after all, do you realize natural gas averaged between
$4.50 and $5.00 for the period 2000-2004 and is now sitting at
$14?! Forget the cost of gasoline at the pump. At least you see
those numbers rise as you drive around all day, even if you aren’t
actually filling up. The shock is thus minimized. But not when
you receive that first heating bill this year. Expect a large
increase in cardiac incidents.

And knowing this, for the life of me I can’t understand why the
equity market is so sanguine. There is absolutely nothing good
to speak of on the foreign policy front (though hopefully we
catch a break in Iraq in two weeks), real estate, the piggybank of
choice, has peaked, and this little spurt in capital spending
will be short-lived.

And then there is the increasing chance the world financial
system suffers, shall we say, a little accident; like in the
International Swaps and Derivatives Association announcement
that the “notional” value of credit derivatives has soared 128% in
one year to $12.4 trillion. [Financial Times] As in while
notional value is a bit abstract and not necessarily representative
of true risk, we nonetheless need to be concerned that ‘trillion’
has a lot of zeroes in it and one should find this more than a bit
disconcerting. You think these guys and gals throwing this stuff
around the swaps desks all know what they’re doing? Of course
not.

Toss in the fact that a leading user of such instruments, Fannie
Mae, is still jerking regulators around when it comes to figuring
out their actual exposure and, heck, you’ll have to forgive me if I
seem particularly dour these days.

Street Bytes

--Well thank god there are irrational folks who actually play
Wall Street, because if it was up to me these days I’d obviously
sit on my hands, a large amount of cash in a coffee can by my
side, and watch the river flow or something. Alas, the major
averages had a solid week with the Dow Jones advancing 1.4%
to 10568, the S&P 500 tacking on 1.1% to 1228 and Nasdaq
climbing 1.7% to 2151. There was some talk that future earnings
will be just fine, though I would argue that the challenge of rising
energy and raw material prices can not be ignored. Let’s face it,
if I see strong earnings coming out of certain sectors over the
next few weeks I’m just not going to buy it. If you remember an
80s tune by the group The Go-Gos, “Our Lips Are Sealed,” just
re-title it “Our Books Are Sealed.”

--U.S. Treasury Yields

6-mo. 3.92% 2-yr. 4.17% 10-yr. 4.33% 30-yr. 4.57%

Suddenly, the yield curve is flattening again and to some market
participants that’s not good. A few inflation indicators have been
flashing warning signs (aside from energy) and the feeling for
the week was that the Fed has more than enough ammunition to
keep hiking rates, especially following a far stronger than
expected Chicago report on manufacturing. The fact that they’ll
then tank the economy appears not to concern them.

--Dr. Michael Economides of the University of Houston has been
bang on with his energy forecasts, a la Boone Pickens, and this
week he called for $20 natural gas this winter. Were that to
occur, Katy bar the door.

--When will the business press and Wall Street experts ever learn
that when it comes to hurricanes in the Gulf, my adage of waiting
24 hours rings truer than ever. Immediately everyone tries to
calculate the damage and then invariably gets it wrong. As Rita
was churning at CAT 5 status, I was watching the Weather
Channel when they reported one buoy had recorded a 31-foot
wave. I sent a note to Trader George, who’s in the energy
business, and we both immediately knew what that meant.
That’s at least one rig that got beat up.

As it turns out, Rita was the worst ever in terms of damage to
offshore rigs and now one side note is going to be the fact
insurance rates for any such exposure are heading up some
400%. Between Katrina and Rita, 11 refineries also remained
closed, though some of those will hopefully be restarting
operations soon.

--Europe is forecast to have a colder than normal winter and
there are already concerns of fuel shortages here, which means it
wouldn’t be able to send over any reserves to the U.S.

[However, as a junior meteorologist, normally we both don’t
have severe cold at the same time. Just the way the weather
patterns work, you understand. Then again, it often depends
what our friends in Canada feel like doing; which is also why the
U.S. needs to settle the lumber dispute between the two,
posthaste.]

--Fed Chairman Alan Greenspan warned again on “froth” in the
real estate market and he had words of caution on exotic
mortgages. But this is the same man who created the
environment in the first place so many of us have lost a bit of
respect for him as he fades into the sunset, bubble bath waiting.

--The economists at UCLA, who have become experts on the
California housing market (albeit too cautious, too early a la your
editor), now say the market here is 40-45% overvalued.

--As for the actual data on housing, nationwide, existing home
sales registered a surprising pop, up 2% for August, but new
home sales were down 9.9% and inventories continue to rise.
Bottom line, I still see ‘stagnation’ more than an actual popping
of the bubble, but just as in the case of Lawrence Welk at some
point the bubble machine will stop, at which time we’ll all look
around at our neighbors and go ……………..Sell!

--After his big victory in Japan’s parliamentary elections, Prime
Minister Koizumi gave a speech to the body that was all of 14
minutes and offered few details on his economic reform agenda
or key foreign policy issues such as China. It was kind of
strange. Otherwise, for every so-so indicator on the economy
these days, there seem to be two or three positive ones.

--Italy’s Prime Minister Berlusconi was unsuccessful in his
attempt to force the central bank chief, Antonio Fazio, to resign.
[Berlusconi can’t legally remove him.] It turns out Fazio has
been under investigation since August for favoring Italian
domestic banks over Dutch and Spanish ones in takeover bids,
but the prime minister is forced for the time being to move on.

--The trial of Italian dairy king Parmalat’s founder and 15 other
executives began this week and was then adjourned just a few
hours later to December. This is being closely watched on the
continent for it was Europe’s biggest corporate fraud, some $17
billion, and 11 executives have already been sentenced. Many
U.S. investment banks are also implicated for providing their
“expertise.”

--The world’s #1 natural gas producer, Gazprom, acquired
Russia’s #5 oil producer, Sibneft, for $13 billion as the Kremlin
continues to mold its energy business into a second OPEC,
thereby giving it the ability to wield the oil card at a moment’s
notice should it be in an ornery mood…as Poland has
undoubtedly taken note of.

--As a sign of Russia’s oil boom (60% of the market value of its
leading equity index is comprised of energy issues), in the first
half of 2005, 140 Bentleys were sold with an average sales price
of $264,000.

--Continuing with our periodic update on the two major oil
indices, the OSX and XOI….[The former for the service / driller
sector, the latter representing the major integrateds such as
Exxon Mobil.]

OSX…123 (12/31/04)….176 (9/30/05)
XOI….721 (12/31/04)…1076 (9/30/05)

--The Washington Post had a super editorial on federal spending,
post-Katrina, that requires quoting in some depth.

Referring to Louisiana’s demands:

“The state’s representatives have come up with a request for
$250 billion in federal reconstruction funds for Louisiana alone –
more than $50,000 per person in the state. This money would
come on top of payouts from businesses, national charities and
insurers. And it would come on top of the $62.3 billion that
Congress has already appropriated for emergency relief.

“Like looters who seize six televisions when their homes have
room for only two, the Louisiana legislators are out to grab more
federal cash than they could possibly spend usefully. For
example, their bill demands $7 billion for rebuilding evacuation
and energy supply routes, but it also demands a separate $5
billion for road building and makes no mention of the $3.1
billion already awarded to the state in the recent transportation
legislation. The bill demands $50 billion in community
development block grants, partly to get small businesses going,
but it also demands $150 million for a small-business loan fund
plus generous business tax breaks. The bill even asks for $35
million for seafood marketing and $25 million for a sugar-cane
research laboratory. This is the equivalent of New York
responding to the attacks on the World Trade Center by insisting
upon a federally financed stadium in Brooklyn.

“The Louisiana delegation has apparently devoted little thought
to the root causes of the Hurricane Katrina disaster. New
Orleans was flooded not because the Army Corps of Engineers
had insufficient money to build flood protections, but because its
money was allocated by a system of political patronage. The
smart response would be to insist that, in the future, no Corps
money be wasted on unworthy projects, but the Louisiana bill
instead creates a mechanism by which cost-benefit analysis can
be avoided. Equally, Katrina was devastating because ill-
conceived projects have drained coastal wetlands and caused
their erosion, destroying a natural buffer between hurricanes and
human settlements….Rather than grappling with the lessons of
Katrina, Louisiana’s representatives are demanding an
astonishing $40 billion worth of Corps of Engineers projects in
their state. That is 16 times more than the Corps says it would
need to protect New Orleans from a Category 5 hurricane.

“The Louisiana bill is so preposterous that its authors can’t
possibly expect it to pass; it’s just the first round in a process of
negotiation. But the risk is that the administration and
congressional leaders will accept the $250 billion as a starting
point, then declare a victory for fiscal sanity when they bring the
number down to, say, $150 billion.”

--According to the Washington Post, FEMA negotiated a deal for
three Carnival Cruise Lines ships for six months and $236
million, or twice the going rate if at full capacity. But to
compound things, Carnival, which is based in Miami but
incorporated in Panama, paid a mere $3 million in taxes on $1.95
billion in pretax income in 2004.

--The founder and CFO of hedge fund Bayou Group both
pleaded guilty to fraud. It turns out the fund never made money,
though clients received statements to the contrary. At least $100
million of $300 million may have been recovered so investors
could receive some recompense, assuming the attorneys don’t
take it all.

--The World Health Organization is estimating anywhere from 5
to 150 million around the world will die in the next pandemic,
likely as a result of bird flu once it mutates so that it can be
passed from one human to another; rather than the current
situation where those who have died appear to have had direct
contact with sick birds only. Regardless, take the low number.
That would still tank the global economy as travel and trade
froze up.

[For new readers, I have written countless pieces on this topic
going back years ago before the mainstream media picked up on
it. Now, however, as with any story of this kind it eventually
begins to write itself.]

--Scientists have concluded that SARS started with bats, which
doesn’t help bats’ image any. At first it was thought civet cats,
those nasty creatures, were responsible but noooo….turns out it
was the horseshoe bat, “a creature that is both eaten and used for
traditional medicine in China.” [Wall Street Journal] In other
words, the horseshoe bat is not necessarily good luck.

--Heart device maker Guidant faces a criminal investigation over
repeated failures with some of its products. What did the
company know and when did it know it?

--The Chinese government is establishing new restrictions in
posting news on the Net, including stories it says jeopardize state
security.

--Boeing settled with its machinists union…a good thing.

--Supposedly, Senate Majority Leader Bill Frist began discussing
his holdings in HCA stock with the Senate Ethics Committee
back in April, which if true buttresses his position that he was not
trading on inside information when he sold the position in June;
two weeks before the company issued an earnings warning.
Nonetheless, Frist and others who sold around the same time are
the targets of a formal SEC investigation and there is a damning
2003 interview with CNBC’s Allan Murray that in hindsight
makes Frist look like he’s full of it when it comes to the handling
of his blind trust.

--A few weeks ago I listed the World Bank’s top ten ‘easiest
countries to do business in’; #1 New Zealand, #2 Singapore, #3
U.S. ...

This week we have the World Economic Forum’s ‘most
competitive’ survey.

1. Finland
2. U.S.
3. Sweden
4. Denmark
5. Taiwan
6. Singapore
7. Iceland
8. Switzerland
9. Norway
10. Australia

Hmmm….detect a pattern?

I stumbled on this because I’ve been reading a fair amount on
Chile recently and they come in first for Latin America, #23
overall. [Though this week the U.S. ambassador there slammed
Chile for its lax intellectual property rights standards.]

--DaimlerChrysler is laying off 8,500 employees from its
Mercedes Car Group in Germany.

--Apple Computer admitted it had big problems with the screens
on its new iPod Nano. It seems they break rather easily.

--Eastman Kodak’s CEO said his company is “at the worst
possible place” in moving from traditional to digital photography
but, fear not, he added that by 2008 all will be well. That was
2008. In other words, this sad story continues and he’s lost
investors forever.

--So I’m perusing the Journal and saw some new kitchen
gadgets. I mean to tell you, looks like my brother may be getting
me the Egg & Muffin Toaster for Christmas. [Sorry to make it
public, bro, but it’s only $50.] Yes, this baby “toasts an English
muffin or bagel, cooks an egg and heats a sausage patty or other
breakfast meat in four minutes!” And it really, really works.

I also saw that Salton has updated the George Foreman grill; the
new “G5” with removable cooking plates that can be placed in
the dishwasher. Between these two contraptions, why would you
ever eat out again?

--Sports Illustrated is developing content for the mobile phone
market such as swimsuit video, including behind the scenes
footage. Ergo, if you thought drivers on their phone got
distracted before…

--The FTC has levied only four fines against telemarketers
despite the Do Not Call Registry. Personally, I’d like to see the
dirtballs who send unwanted faxes receive the, err, um, you
know….

--My portfolio: A funny thing happened on the way to the end of
the quarter. My carbon fiber play awoke with quite a start on
Thursday, and so despite giving some back on Friday I am
treating myself to premium beer this coming week. I’m also
suddenly about 30% equities, 70% cash; though I’d be the first
one to admit I probably have too much in this one stock.

[After the close on Friday the company announced it was
doubling production. Yes, I’ve been telling you about the
demand for this stuff. It’s real.]

Foreign Affairs

Iraq: We are just two weeks from a potentially titanic moment as
on Oct. 15, Iraqis vote to approve or reject the new constitution.
The two leading Shia clerics, al-Sistani and al-Hakim, have
endorsed it, while we all wait to see if the Sunnis can muster the
2/3s required in 3 of the 18 provinces to defeat the document.

What we do know is that despite al Qaeda’s #2 going down this
week, the violence continued in waves with not just 200+ Iraqi
citizens being killed, but also 13 U.S. soldiers in one four-day
stretch. By the Pentagon’s own statistics, for the period Jan. –
Aug. ’05, some 8,000 Iraqis died in 412 suicide attacks, 8 Xs
higher than a year ago, and this week a leading general on the
scene told Congress that only one Iraqi battalion (about 600 men)
is capable of operating on its own.

But for now it’s all about 10/15. Success or failure for the entire
mission may quickly come into focus on that date.

Iran: The good news is the 35-member board of the International
Atomic Energy Agency voted to approve a resolution putting the
onus on Iran to shape up or risk being reported to the Security
Council. Now before you laugh, this was one moment where
diplomacy carried the day for the U.S. India was slated to
abstain, alongside Russia and China, but opted to side with the
Americans. The final vote was 22 ‘for,’ 12 abstentions, and one
‘no,’ Venezuela.

But, of course, the reality is Russia and China would exercise
their veto in the Security Council should the issue of Iran’s non-
compliance with the Nuclear Non-Proliferation Treaty ever come
to a head. So where are we after all these years? Nowhere. The
IAEA’s Mohamad ElBaradei, who acts like Mr. Magoo as reader
Scott P. so aptly puts it, is of no help and I remain convinced Iran
is much further along in building the bomb than the so-called
experts say it is.

North Korea: As President Bush has been distracted by Katrina
and Rita, it’s become increasingly clear the administration
simply caved in to China as Beijing took charge of the six-party
talks on Pyongyang’s nuclear weapons program. Further
discussions on the agreement in principle are slated for
November, but pre-Katrina the U.S. would never have given in to
the North’s demand for a light-water reactor before it dismantled
its weapons. With China and South Korea opting for this path,
however, it’s as if the White House, suffering from a severe case
of battle fatigue, has merely shrugged its shoulders and said
“whatever.”

In the end, though, there is no way Kim Jong-il gets the reactor
without first giving up his stash, at least one would hope so, but
you never know these days where the Bush administration’s head
is at. Inconsistency has become its hallmark, and that’s
dangerous for the entire free world.

Israel: In a critical Likud Party vote, Prime Minister Sharon beat
back challenger Benjamin Netanyahu, 52-48, in Netanyahu’s
attempt to force early party elections this fall instead of the
scheduled April date. So Sharon at least won a few more months
while Netanyahu keeps up his challenge on Sharon’s withdrawal
from Gaza, which Bibi says is now a “Hamas state.” But there is
a chance Sharon bolts Likud, anyway, to form a new party,
seeing as it’s pretty poor he has to deal with such grief from his
own so-called supporters.

Meanwhile, Israel retaliated against Hamas for the latter’s recent
rocket attacks, 100s of militants were rounded up, and Hamas
announced a ceasefire. Most importantly, as I wrote would
happen a few weeks ago, the international community this time
was quiet when Israel used force because Sharon’s courageous
move to exit Gaza won him plaudits around the world. The onus
is now on the Palestinians. Put up or shut up.

Syria: Arab leaders have been rallying to lend their support to
President Bashar Assad, however, in the face of the UN probe
into the assassination of former Lebanese Prime Minister Rafik
Hariri. Assad’s regime is in big trouble and the UN’s findings
are slated to be released on Oct. 25, at which point we learn just
how high up it believes the plot went.

But Defense News offered some food for thought. There is no
clear alternative to Assad, not even anyone in exile. So if Assad
is forced out is that necessarily good? The situation on the Syria
/ Iraq border could easily get worse, for example, and terrorists
could suddenly decide they have free rein in the area of the
Golan Heights, which heretofore has been quiet.

China: For the first time since Tiananmen in 1989, the
communists have allowed pro-democracy politicians from Hong
Kong onto the mainland; including Martin Lee, a man once
branded a “traitor” by Beijing.

But over on Taiwan, President Chen Shui-bian mused he was
confident the U.S. would prevent China from annexing Taiwan.

Don’t count on it. Aside from the fact the White House is
distracted, this is where I’m increasingly convinced China will
wield the currency card. We always wonder what China will do
with its huge dollar reserves in the event of a crisis. I believe
China could simply threaten to invade Taiwan, telling the U.S.
‘If you interfere we’ll send your dollar and bond markets into a
tailspin.’ Under that scenario (one I first spelled out years ago)
China would be more than willing to accept some short-term
pain in its own economy for long-term gain; plus, any domestic
unrest on the mainland should be outweighed by the nationalistic
fervor that would sweep the country as a result of regaining
Formosa. I assume our leaders in Washington have thought
about this as well.

Poland: The Center Right coalition was successful in capturing
parliament, though the two parties differ on tax policy; one wants
a flat tax, the other doesn’t. One also wants to speed up the
process of privatization, the other doesn’t. So there are some
rather major issues for the two to break bread on. The other big
items of discussion in Poland these days concern Russia’s
domination of the energy supply, neighbor Belarus and 18%
unemployment. A presidential election is being held Oct. 9.

Venezuela: President Hugo Chavez told Newsweek’s /
Washington Post’s Lally Weymouth the U.S. “used chemical
weapons in Iraq.” The Post’s Jackson Diehl noted in an op-ed
that what is so worrisome these days is the fact Latin America’s
moderates are afraid to stand up to Chavez, as the president of
the Castro fan club buys support with oil. Yet despite
Venezuela’s vast energy wealth, extreme poverty in the nation
(defined as living on $2 a day) has risen from 43% to 53% since
Chavez has been in power.

Russia: Back when former Yukos chairman Mikhail
Khodorkovsky first filed his appeal on his trumped up conviction
for tax evasion, President Bush said he would monitor the
process. Well, as we saw following the super-quick denial of the
appeal, Bush then said nothing. You could say Khodorkovsky
was yet another victim of Katrina.

This week, one of Mr. K’s lawyers, a Canadian / U.S. citizen by
the name of Robert Amsterdam, was given 24 hours to leave the
country after five goons came to his hotel room in the middle of
the night. [He was treated well, at least.] Then prosecutors said
three other Russian lawyers representing Khodorkovsky should
be disbarred.

Separately, President Vladimir Putin told a call-in show audience
that he would not seek a 3rd term which would require a change
to the constitution. I still maintain he will, citing national
security.

Algeria: The nation voted in a referendum on a peace plan of
national reconciliation, one that pardons those Islamists not
involved in rape and mass killings resulting from the civil war
that claimed 150,000 lives since an election debacle in 1992.
The government, though, announced 97% approved of the deal
with a 82% turnout; far greater figures in both instances than
commonly believed beforehand. It’s seemingly impossible to
have such a result in a nation where many are unwilling to just
bury the past.

Northern Ireland: The IRA, working through the
decommissioning process, destroyed its weapons, including
grenades, flame throwers and surface-to-air missiles. That’s
right, SAMs. Well, you can imagine the Rev. Ian Paisley railed
against the apparent lack of details as it’s not as if there was film
of the act and the two members of the clergy who observed the
scene were handpicked by the IRA. [A Canadian general also
oversaw the whole effort.] And no doubt many smaller arms
were kept to carry out assassinations and revenge killings.

But nevertheless it’s a positive step and British Prime Minister
Tony Blair hailed the decommissioning and called for the
restoration of the local assembly for the province that has been
suspended since 2002.

Britain: Speaking of Blair, he told a Labour Party conference he
would serve out his term, and for the sake of like-thinking
Americans I hope he does. It was also interesting that Blair
singled out the UK’s lax focus on dealing with petty crime. It’s
the James Q. Wilson broken glass theory, put into practice so
effectively by Rudy Giuliani and William Bratton in New York.

Australia: Prime Minister John Howard approved the adoption of
sweeping new anti-terror laws that allows officials to hold
suspects without charge for 14 days. Another great ally.

Random Musings

--President Bush received some good news this week in the form
of a new USA Today / CNN / Gallup poll that shows he regained
5% in his approval rating, from 40 to 45% following Hurricane
Rita. 71% thought he handled this one well. I have to admit I’m
surprised, though it’s not realistic for the White House to think it
can get back above 50% anytime soon, the country being divided
as it is. [Iraq’s referendum will be critical in this respect.]

The nomination of Judge John Roberts, a real positive, came
after the polling, though the next selection for the High Court
will obviously be far tougher with both sides spoiling for a fight
to re-solidify their bases.

As for Tom DeLay, indicted, and Bill Frist, under investigation, I
said the following in this space over the past few years.

4/23/05: “Republicans need to ask themselves one simple
question when it comes to Tom DeLay. ‘Is this the face of the
party we want going into 2006 and the critical mid-term
elections?’ Not for me.”

12/13/03: “I can’t believe how many pundits seem to think
Republican Senate Majority Leader Bill Frist is presidential
timbre in 2008. You’ve got to be kidding me. He’s been
worthless.”

So despite a tick up in the polls, President Bush is still
struggling. Washington Post columnist Jim Hoagland summed it
up thusly.

“Bush’s floundering since he was caught off base and off guard
by Hurricane Katrina strips the veil from a broad pattern of
recurrent inattention to the duties of governance, of misplaced
loyalty to incompetent subordinates, and a crippling refusal to
look back at and learn from mistakes.

“I take no pleasure from that harsh assessment. I have never
shared the unreasoning conviction of many of his more partisan
opponents that Bush as a national leader is illegitimate, moronic
or both. He isn’t.

“Add this sobering reality: We have three years and change left
on Bush’s second mandate. He has undertaken a vital effort to
establish a new and badly needed foundation for U.S. policy and
the U.S. presence in the Middle East. Hurrying him into lame-
duck, dead-end status ahead of his time will undermine that
effort and harm the nation in other ways.

“But in the American system, only Bush can prevent that from
happening once confidence has been shaken in presidential
leadership as severely as it has been over the past five months. It
is up to Bush to prevent the breaking of his presidency.”

--The Times-Picayune newspaper of New Orleans is leading the
drive to have a reappraisal of the press coverage in the days
following Katrina, citing gross exaggerations of the facts.

Hey, guys, the facts are people did die at both the Superdome
and Convention Center, women were raped, and gangs armed to
the hilt roved the streets. Neither Fox, NBC nor CNN (the three
I watched) exaggerated, as far as I could tell, while obviously, in
hindsight, now former Police Superintendent Eddie Compass and
Mayor Ray Nagin did.

May I suggest that the Times-Picayune has a rather vested
interest in white-washing New Orleans. Let’s say only half the
inhabitants opted to come back. Do you think the Times-
Picayune’s ad revenues would plummet? Do you think jobs
would be lost?

New Orleans was a cesspool of crime and corruption before
Katrina, and as we saw vividly displayed on our television
screens in the days following the storm, nothing transpired to
make me believe otherwise. My hats off to the major networks
for their generally superb coverage.

But I will return to the Big Easy one day….as in a day trip to the
D-Day Museum; then I’m out of there. Don’t want mold
growing on my laptop.

--The oil and petroleum spills from Katrina rival those of the
1989 Exxon Valdez disaster. Rita only added to the problem.
The Bayou is an environmental nightmare of staggering
proportions and we won’t know the full extent of the damage for
years to come.

--The Justice Department announced that since 1993, violent
crime in America is down 57%.

--Pfc Lynndie England was convicted and sentenced to three
years in prison for her role in the Abu Ghraib prisoner abuse
case.

--Once again, as victims of Katrina and Rita line up for their
benefits, I’m reminded of how the good folks of Oklahoma City
were ignored, with victims’ families receiving virtually nothing.
It’s a disgrace and a blot on our nation’s history.

--New Jersey Senator Jon Corzine, now candidate for governor,
has donated or lent black churches in New Jersey a staggering
$2.7 million over the past year, according to the Star-Ledger. Do
you think he’s going to win their endorsement?

--Leo Sternbach died. He was the inventor of Valium and other
medications during a six-decade career with Roche. Yes, Valium
…. “Mother’s Little Helper” as the Rolling Stones’ song went.

--Researchers have caught gorillas for the first time on film using
tools. Heretofore, only chimps and orangutans did. Personally,
I’m thinking the gorillas decided “What do we do next to obtain
better digs for our friends in the zoos?” “How about faking the
use of tools? It worked for the chimps.” “Bingo.”

--You know, in a world bereft of good news, the story of the
Japanese scientists who captured the giant squid, architeuthis,
also on film for the first time ever, and in 3,000 feet of water, is
really spectacular and, as my brother and I agreed, way cool. But
if you think I’m ever going to take another step in the ocean,
you’re wrong.

---

Pray for the men and women of our armed forces.

God bless America.

---

Gold closed at $471…another 17-year high this week
Oil, $66.24…10th week in a row closing above $60

Returns for the week 9/26-9/30

Dow Jones +1.4% [10568]…Q3…+2.9%
S&P 500 +1.1% [1228]…Q3…+3.2%
S&P MidCap +2.2%
Russell 2000 +1.9%
Nasdaq +1.7% [2151]…Q3…+4.6%

Returns for the period 1/1/05-9/30/05

Dow Jones -2.0%
S&P 500 +1.4%
S&P MidCap +8.0%
Russell 2000 +2.5%
Nasdaq -1.1%

*One quarter to go….my forecast for 2005 was for the major
averages to be down 5% and for the 10-year Treasury to finish
with a yield of 4.30%. I wish I could declare victory right now
and go home.

Bulls 53.2
Bears 26.6 [Source: Chartcraft / Investors Intelligence]

Have a great week. I appreciate your support.

Brian Trumbore

Rogue