I’m determined to maintain a positive mental attitude after my little trip to the not-so-deep South. I got my Washington negativity out of the way here, so we can move on after I mention one other very important thing:
The Gonzales firing are likely to be a huge deal. The real story here is not about what the eight attorneys he fired didn’t do to "be loyal Bushies," but what the 85 other attorneys DID DO. How far has the justice system been subordinated to accomplish the political goals of this administration and the degree to which this scandal is far reaching is the topic of conversation outside of the Wall Street Journal. It’s hard for us "business wonks" to get all worked up about what looks like a typical political spat, but the implications of this scandal are astounding.
The firings are shocking as much for who has been appointed as a replacement as much as for the well-qualified people who were fired. The groundwork was laid to take out Bud Cummins (U.S. Attorney in Little Rock) way back in April of last year when Tim Griffin "a Rove aide and longtime GOP operative" began lobbying for the job. Emails show how Kyle Sampson, the AG’s Chief of Staff, used a change in Federal law (how convenient!) to bypass Arkansas’ two Democratic Senators "who had expressed doubts about placing a former Republican National Committee operative in charge of a U.S. attorney’s office."
According to The Washington Post: "In addition to Iglesias, four other fired prosecutors were conducting political corruption investigations of Republicans when they were dismissed. Carol S. Lam of San Diego, for example, oversaw the guilty plea of former Republican representative Randy "Duke" Cunningham, and brought related indictments against a former CIA official and a defense contractor." The current misconception is that these eight firings were unique, but it turns out that what was unique is that these eight (out of 93) attorneys REFUSED or DID NOT GO FAR ENOUGH in perverting their positions of authority into the strong arm of the administration. The question that remains to be answered is how far were the other 85 U.S. Attorneys willing to go to keep their jobs?
So how about those markets?
It’s good to get away once in a while, being wrapped up in the business world makes the political world seem surreal and being wrapped up in the political world does the same to business. Well, as Lennon says, "nothing to get hung up about."
Asia has no hang-ups as those markets plow ever onward, despite $63 oil China’s "rapidly growing demand" doesn’t seem to be phasing the Chinese, who appointed a "pro-market" Communist Party Chief as party secretary of Shanghai. This is very encouraging for Chinese investors as it signals direction for Hu Jintao’s second five-year term as these moves are only made twice a decade. "He’s the kind of guy who knows how to get over the goal line," Paulson has said of Secretary Xi.
Venezuela is working to lock up oil deals in China to lessen its dependence on the U.S. as its principal buyer of crude. This will be much discussed as a factor that will "pressure crude higher" this week, even though the plan calls for exports to China to rise, in fact, from 60,000 barrels a day now to 160,000 barrels a day by 2009. This is out of the 2.7Mbd the country currently produces.
"The United States as a power is on the way down; China is on the way up. China is the market of the future," an Information Ministry statement quoted Mr. Chávez as saying after meeting CNPC President Jiang Jiemin in Caracas.
Meanwhile Japanese household assets rose 1% to $13 trillion with the average Japanese household holding half of that money in cash and savings deposits. Given the very low interest rates they are being paid, the Japanese consumer has been financing the Global market rally with a $7T no-interest loan - let’s hope they don’t wise up anytime soon!
UK home builders Woodrow and Wimpey are doing a $9.8Bn merger, Xstrata is cornering the nickel market by taking out LineOre for $4Bn and Porsche is pretending to want VW but they really don’t (they have to make the offer for contractual reasons). Since GM takes any rumor as an excuse to trade up - this may be a good day to look at $32.50 puts, hopefully around .80.
European markets are flat ahead of our open, which is also flat and very simply for the U.S. markets today, up is good and down is bad - but let’s bear in mind this is the last week of the quarter, probably THE WORST time to try to figure out what stock movement means as the big boys pump and dump everything they can to dress up their portfolios. We are still waiting for volume as there was little last week:
• Dow 12,500 is a must, of course. 50 dma resistance is at 12,473.
• Transports must get over 2,850 for the Dow to get going.
• S&P 1,440 would be a great sign. Downside support should come at 1,425.
• NYSE 9,350 better be no problem, it’s a long way to a 9,500 breakout.
• Nadaq has downside resistance at 2,445 but needs to break 2,470 VERY soon.
• SOX had a lot of trouble at 482, we don’t want to see that and 475 is a danger zone.
• Russel 810 is today’s mark with 800 being the floor we don’t want to fall below.
Iran canceled its meeting at the UN and captured 15 British sailors last week. How is this behavior punished by the international community? The 2Mbd they export has gone up $6 since last Monday, putting $12M per day in the Iranian Government’s pockets as long as they keep the "crisis" going. Does this seem rational to you? Perhaps we should take drug dealers out of school zones and move them into the school cafeterias when they shoot a cop - that will keep them off the streets… that is effectively the plan by which developed countries deal with oil-rich countries that misbehave.
As long as this nation pursues a "comfort at any price" foreign policy, we are doomed to an endless cycle of this nonsense.
If it were a real crisis, gold would be higher than this so just be aware that this is a bunch of manufactured BS of the type that can only be accomplished when everyone is in on the game (Iran, Brits, U.S., Iraq) as it allows for a lot of posturing, name calling, fiery rhetoric and, finally, statesmanlike resolutions of a non-crisis that serves to distract the populations on both sides from the real issues (like the manipulation of the U.S. Justice Department).
Remember when someone from Argentina stepped on a penguin and the British Navy stormed 7,000 miles to take back the Falklands? Tony Blair doesn’t - but he does call the capture of British Marines by Tehran "serious." Oh Maggie, we miss you!