Tuesday, November 20, 2007

Senate Stops All Bush Appointments

The Senate is refusing to actually declare recess because President Bush will no doubt try to slip another crony in his wicked mix.

U.S. Capitol 19914 v. White House
The people of the United States are so beaten down by the Bush Presidency that they are reduced to celebrating the absence of their Senators. If this Senate really wanted to do one thing about thoroughly corrupt President and out-of-control Vice-President, the illegal spying, Katrina, health care, Veterans benefits, the wars and the ongoing use of torture, the Senators would actually meet in working sessions. They could craft and pass legislation that would address the nation's issues and go home to their districts successful. Instead they do no constructive work and give me no reason to vote for the whole lot come election time. We need entirely new legislators, the crooks now in office are destroying this nation.

Tuesday, November 06, 2007

Learning To Love Iran

I know, I know, what an outrageous title for an essay. How could anyone learn to love a nation that still engages in torture or enforces the death penalty for many crimes? How could anyone possibly love a nation that is building new nuclear power plants? Certainly we must detest all other nations that want to acquire the necessary technology for building nuclear weapons. Nations that steal land and invade other nations for the purpose of stealing resources must be shunned at all costs, correct?
Peace 37479
Nevertheless, two articles in the largest U.S. newspapers hold promise that the escalating Iran war rhetoric may at last be subsiding. The Washington Post and the The New York Times reported a U.S. Navy Admiral and Secretary of Defense Robert Gates had something nice to say about the government in Tehran:

A military spokesman said Iran appears to have kept its promise to stop the flow into Iraq of bomb-making materials and other weaponry that Washington says has inflamed insurgent violence and caused many American troop casualties.

Defense Secretary Robert Gates said last week that Iran had made such assurances to the Iraqi government.

''It's our best judgment that these particular EFPs ... in recent large cache finds do not appear to have arrived here in Iraq after those pledges were made,'' Rear Adm. Gregory Smith, director of the Multi-National Force-Iraq's communications division, told reporters Tuesday.

Someone, somewhere inside the massive and often inhumane U.S. government, finally figured out that you catch more flies with honey than you catch with vinegar. For the first time in years, Iran has been credited with doing something favorable in the U.S. government's eyes. This talk may be related to Secretary of State Rice's efforts to hold a Middle East Peace Conference in Annapolis, Maryland. This could also be the result of some diplomat actually looking at the price of gasoline while at the Self-Serve pump. Such glimmers of hope in the success of diplomacy may be all we get for many more weeks. There is also the outside chance that someone got around the reading the report of the Iraq Study Group. This author will always treasure such talk over the specter of a mushroom cloud any day.

Iraq Study Group and Emerging Markets Volatility

Many Chinese stocks collectively represent a huge economic bubble. Stocks like BIDU (, Inc.) are not really valued according to real returns. The ratio of Profits to actual Earnings at BIDU is nearly 200. Yet 345% YTD returns are quite irresistible, especially to experienced investors. So go ahead, dive in, at considerable risk.

PTR (PetroChina Company Limited) today is not really worth more than XOM (Exxon Mobil Corporation), no matter how many investors fool themselves into thinking it is. Shrewd investors ride the roller coaster to the highest point and then sell their shares as the dips begin. The mentality is, "Who cares what the underlying business is worth? If I can make money from the foolish choices of other investors, why not?" This is also referred to as the the Bigger Fool Theory. This mentality led to the Dotcom bubble of the late 90s and the more recent U.S. Housing Bubble.

To be sure, there are distinct differences between stocks valued only on the potential for a web site to attract visitors and stocks based on potential production profits. PetroChina could reap billions from oil fields in the Sudan and South China Sea. Baidu may give Google a run for the money in the on-line advertising business. Communist China is still a great unknown to the most astute analysts.
Skyline Seoul Korea 000006
Elsewhere in Asia, PKX (POSCO, Incorporated), IBN (ICICI Bank Limited), and MT (ArcelorMittal, Inc.) are examples of enterprises sustaining exceptional returns (i.e. greater than 50% YTD) on the basis of solid business growth. Proving it is possible to invest long term overseas and still limit the overall risk involved.

Environmental and natural resource concerns loom large over the unsustainable growth rates of several Asian economies. Delhi, Seoul, Taipei, and Beijing are literally choking on factory and auto exhausts. The amounts of copper, iron ore, oil, and gas required for growth simply may not materialize in sufficient volumes. Resources like oil or copper could eventually reach prices that absorb most profits. Investors should step back and look at the larger picture from time to time.

A large amount of the growth found in China is being fed by demand from the US and European nations. Cheap Chinese goods really help many households in the U.S. cope with reduced purchasing power. Good manufacturing jobs go to Mexico and Asia every month while people learn to live on the lower salaries paid by the Service sector. People that once worked in auto plants are now working the register at WalMart or even filling positions in a local hospital. It is a transition that threatens the dreams of many in Western nations while fulfilling aspirations of millions of young Chinese factory workers.

Investors enjoy it when speculative bubbles inflate but suffer drastic losses quickly if they do not get out when the bubble is largest. Lately, the Chinese market has performed like those puncture-proof tires found on some limousines. Actions by Chinese market regulators recently popped a hole in the bubble but the massive amount of foreign money that wants to invest in China quickly fills the hole. Even the exodus of Warren Buffet's Berkshire money failed to stem the inflows to Chinese energy shares. Besides the energy stocks this is happening in many other shares, most noticeably ( Corporation) Some investors can lose interest quickly as could be the case with BIDU but rest assured other investors will swoop in like vultures to carrion. Clever investors jump from new IPO to new IPO, cashing in quickly on the hype but always ready to take profits and move on to the next big issue.

The Emerging Markets have at least another 3 years of this hectic growth ahead of them. Overall the value of the Emerging markets shares is vastly lower than the combined GDP of the nations that make up Emerging markets (Brazil, India, Russia, and China, aka BIRC, and others). In contrast, in the Developed world (EU, US, etc.) the value of the shares is approximately equal to the GDP. Emerging Markets success is all about "room for growth" though you can still get burned by buying too high in the hot spots. Realize there is a bubble, learn to invest wisely while it exists, and take profits regularly. If you do not take profits you are just like the little kid that keeps riding the same roller coaster all day long. You miss the thrill of the other rides and could eventually get sick and lose it all.

Note: At the time of writing the author directly owns shares or owns shares in mutual funds which hold investments in those firms mentioned above.

Saturday, November 03, 2007

COMING SOON! Nuclear-Equipped Militants in Pakistan

General Pervez Musharraf just declared martial law in Pakistan. This is an understandable action, even as this writer sits in a two-party democracy 20,000 kilometers away. Government troops exert little control over Western Pakistan, Baluchistan, and recently lost the Swat region to militant Islamic leaders. Radical fundamentalists seem to have free reign over Pakistani-held Kashmir and a significant presence in the southern city of Karachi.

It seems fair to say government forces control less than 50% of the territory of Pakistan.

Regardless of what we think about Musharraf, the alternative is the no-girls-schools, chop-your-hand-off, Taliban-inspired, militant Islamists. If they take control of the entire nation of Pakistan they also assume command and control of Pakistan's nuclear arsenal.
Nuclear Blast 1945How long do we have before radical Islamist members of the Pakistani army decide to appropriate a nuclear warhead for catastrophic purposes? This is not beyond the realm of possibility if the Musharraf government fails completely.

In the meantime, George W. Bush and Dick Cheney bang the war drums for the impending invasion of Iran. After all, Iran may just manufacture their first nuclear bomb in the next 5 to 10 years. This represents a far greater threat in the eyes of the Bush Administration than loose Pakistani bombs, already assembled and ready to explode anywhere. Remember, in today's global economy all you need to deliver any weapon is a 20-foot shipping container and a few people along the way willing to support your cause.

If the Musharraf-led state of emergency government in Pakistan cannot control the failing state, those deliveries could be arriving at a port near you.

Note: I realize former Prime Minister Benazir Bhutto represents an alternative to the militant Islamic forces, but her presence appears to be too little, too late.

We need to be equally concerned about the example Musharraf is giving George W. Bush. This idea of imprisoning the Supreme Court justices and instituting martial law would certainly appeal to Cheney & Co. as their term of office expires.