Wednesday, August 29, 2007

If I was a betting man...

I would bet that Craig will resign before Congress reconvenes on Tuesday, September the 4th.

September 1, 2007- This afternoon Larry Craig announced his resignation from the Senate. He did the right thing for his country, his party, and most of all for his family.

Update #2:
Mankind is inherently flawed...
... some people more than others. Mr. Craig did the honorable thing, showing that his now public "flaw" need not cause him to flinch from doing that which is the selfless thing, that which is best for those ideals and people he cares about. Thank you Mr. Craig.

There is no system of politics, term limits, or government that will nullify these kinds of things. What is needed, as always, are more men and women who, when behind closed doors, labor to be individuals of integrity, self-discipline, and solid character.

Fidel's endorsement...

Could the dying dictator of Cuba bring about a new Hillary/Obama version of that old sixties favorite...

"It takes two baby,
It takes two....
Me and you...
Just takes two!"

I couldn't resist...

The Katrina aftermath:

"Ray, I know it was you... You broke my heart!"

Monday, August 13, 2007

Iraq: Give our military their due...

The U.S. military is our best ambassador to the people of Iraq. Under General Petraeus the good news of the continued success of "the surge" is not only winning the support of the Iraqi people but also gaining currency in our media, and even in the Democratic Party. Demands for withdraw of our forces by the Dems and the conventional wisdom that Iraq is a lost cause are fading in the face of Petraeus' carefully executed strategy.

But now cries are magnifying in Washington of "Not enough!", bemoaning the lack of "political progress" as the Iraqi parliament has gone on vacation with seemingly little accomplished regarding the standards set by the arm chair generals in our nation's capital. To be sure, things could be much better on the Baghdad macro-political front. But on the all important micro-local level (what the media here in America likes to call the important grassroots level) much is happening and it is good.

The MSM and the Democrats are slowly changing their storyline of irrevocable failure in Iraq to accommodate the reality on the ground. Their vice-grip embrace on defeat in Iraq is loosening, not out of a change of heart regarding "Bush's War" but out of the political calculation of necessity. The tide is turning for the good in Iraq.
- Jack

Here are some snippets from Michael Yon's latest dispatch from Iraq:
"There may be little progress on political goals crafted in America, to meet American concerns, by politicians who have a cushion of 200 years of democracy. Washington might as well be on the moon. Iraqis don’t respond well to rules imposed from outside their acknowledged authorities, though I have many times seen Iraqi Police and Army of all ranks responding very well to American Marines and soldiers who they have come to respect, and in many cases actually admire and try to emulate.

“To say there has been no political progress in Iraq in 2007 is patently absurd, completely wrong and dangerously dismissive of the significant changes and improvements happening all across Iraq. Whether or not Americans are seeing it on the nightly news or reading it in their local papers, Iraqis are actively writing their children’s history.

1. Iraqis are uniting across sectarian lines to drive al Qaeda in all its disguises out of Iraq, and they are empowered by the success they are having, each one creating a ripple effect of active citizenship.
2. The Iraqi Army is much more capable now than they were in 2005. They are not ready to go it alone, but if we keep working, that day will come soon.
3. General Petraeus is running the show. Petraeus may well prove to be to counterinsurgency warfare what Patton was to tank battles with Rommel, or what Churchill was to the Nazis.

… Large numbers of Iraqis detested us after the prisoner abuse stories, and some over-the-top attacks on Fallujah, for example. But through time, somehow the American military has managed to establish a moral authority in Iraq. It’s not the only authority, but the military has serious and increasing moral clout. In the beginning, our influence flowed from guns, or dropped from the wings of jets. Later it was the money. Today, the clout still is partially from the gun, and definitely the money is key, but there is an intangible and growing moral clout and it flows from an increasing respect among Iraqis for our military. Washington has no moral clout in Iraq. Washington looks like a circus act. The authority is coming from our military. The importance of this fact would be difficult to understate.”

Friday, August 10, 2007

Have another drink or... the Fed monetary policy

The irony of it all. The unrestrained creation of excess dollars (liquidity) via the Fed and the credit markets over the last 10 years is the underlying problem in today's financial upheavals. When the tech stock market bubble popped back in March of 2000, followed by 9/11 in 2001, the Fed dropped interest rates to 1% and pumped boat loads of dollars into the financial system for the next several years. They overreacted. The result was a mild economic downturn followed by the new favorite investment vehicle of all those low interest dollars sloshing around... the housing market, soon to be bubble. Well as the prices of homes rocketed up from 2002 through 2007 everyone seemed to love it because buying became so simple with all the easy credit. But in order to cash in even more on the party, lending institutions lowered their standards to the point where anyone with a pulse, the ability to fill out an application, and a wink and a nudge could get a loan. Not just any loan, but loans that required nothing down, no interest for a set periods of time, and all other sorts of "innovative" financing that was the equivalent of throwing caution to the wind for the buyer and the lender.

Well that hissing sound over the last number of months has been the sound of the air going out of that housing bubble as prices began turning down, and in many markets dropping drastically. All too quickly homeowners with adjustable rate mortgages found themselves with rising payments as interest rates began going up. People began waking up with negative equity (value of the house less than the purchase price) in their homes. As banks have now understandably tightened credit standards, there are many less buyers for many more houses on the market. It's a recipe for foreclosures (which are mushrooming) and soured loans for mortgage companies. And gobs of loans have been going bad, real bad.

The credit squeeze has now been affecting the various financial markets, hedge funds, and financial/trading institutions that invest in and trade those loans securities here and in Europe. Instead of allowing the painful consequences of the careless decisions of the market players and it's own irresponsible money creation, the Fed along with the central banks of the world are grabbing for the bottle once more and pouring drinks on the house for all the patrons who are reeling... the only thing the Fed seems to know to do... create more money out of thin air, pump it into the system to keep the party from ending. Always needing more and more dollars to keep the high intact or the hangover from beginning. More dollars worth less and with an increased moral hazard mentality (don't worry if investments are risky and may fail... the profits are too good, the Fed will bail us out if things get bad) injected into the profit seeking calculations of the market players, only worsening the systemic problem.

From The Wall Street Journal (after hours):
"Central banks continued to pump money into distressed markets for the second day and investors concluded that a rate cut soon by the Federal Reserve is increasingly likely and expected rate increases in Europe and Japan may be deferred.

Explaining that it was "providing liquidity to facilitate the orderly functioning of financial markets," the Fed injected $38 billion Friday on top of Thursday's $24 billion. The European Central Bank, saying that its "liquidity-providing fine-tuning operation" were aimed assuring orderly market conditions, added $83.56 billion (€61.5 billion) on top of the $130 million it injected to euro-zone markets Thursday. The Bank of Japan put in 1 trillion yen ($8.4 billion). Central banks from Australia, Singapore, Canada Norway and Switzerland also pumped money into their markets; others said they were prepared to do so if necessary."

And on A WSJ Economists React Forum: "Today we do not have only a liquidity crisis like in 1998; we also have a insolvency/debt crisis among a variety of borrowers that overborrowed excessively during the boom phase of the latest Minsky credit bubble. First, you have hundreds of thousands of U.S. households who are insolvent on their mortgages. And this is not just a subprime problem: the same reckless lending practices used in subprime – no downpayment, no verification of income and assets, interest rate only loans, negative amortization, teaser rates – were used for near prime, Alt-A loans, hybrid prime ARMs, home equity loans, piggyback loans. More than 50% of all mortgage originations in 2005 and 2006 had this toxic waste characteristics. That is why you will have hundreds of thousands – perhaps over a million - of subprime, near prime and prime borrowers who will end up in delinquency, default and foreclosure. Lots of insolvent borrowers." – Nouriel Roubini, Roubini Global Economics

Thursday, August 9, 2007

A disturbance in the land of Goldilocks...

What a bear... things are starting to get real nasty as the troubles in the mortgage sectors have now moved up the food chain from the sub-prime lenders to United States' largest mortgage company. The Dow down almost 400 points. After several years of unprecedented easy credit and lowering of credit standards, the chickens coming home to roost... or is that "bears" coming home for a visit?

Countrywide is down about 12% so far in after hours trading.

From the Wall Street Journal:
Countrywide Hit by Credit Market Woes
August 9, 2007 7:31 p.m.

Countrywide Financial Corp. faces "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition, the Calabasas, Calif., lender said in a regulatory filing. (Read the SEC filing)

The company, the largest U.S. home mortgage lender in terms of loan volume, said reduced demand from investors is prompting it to retain more of its loans rather than selling them. The company also has been shoring up its finances. "While we believe we have adequate funding liquidity," it said in a quarterly filing with the Securities and Exchange Commission, "the situation is rapidly evolving and the impact on the company is unknown."

And from
The ECB said today it provided the largest amount ever in a single so-called “fine-tuning” operation, exceeding the 69.3 billion euros given on Sept. 12, 2001, the day after the terror attacks on New York.

“This is an old-fashioned credit crunch,” Chris Low, the chief economist at FTN Financial in New York, said in a report today. “This is not a small thing. A credit crunch, when the short-term credit markets seize up, is extraordinarily serious, almost always the precursor of a significant recession.”

“Somewhere out there, there are several people that are in trouble — it’s hard to put your finger on it,” said Andrew Busch, global foreign-exchange strategist at BMO Capital Markets in Chicago. “I cannot name names. We know BNP has issues with three funds. But you do not see a movement in overnight rates like that unless there is a huge concern about liquidity and funding.” Full article HERE.

Tuesday, August 7, 2007

The Surge is working... the tide turning?

My two cents:
War is never a straight line kind of operation. There are advances. There are pullbacks. There are periods of losing and periods of pressing forward to victory. In the Civil War it took three years of fighting with tens of thousands of casualties for the Union forces to turn the tide against the South's armies, and another 2 years of horrific battles to secure victory. Likewise, the losses sustained in the first several years of World War II were massive and intensely discouraging. One could easily have assessed by the end of 1942 that the Allied forces were not only losing against Germany and Japan but they could very well actually go down in defeat. In both of those wars, the Union forces and the United States military suffered grievous mistakes and defeats. But they were learning... the thing is that they became wiser from those mistakes, adjusted their strategies, redoubled their efforts and pushed on to victory.

In the same way, mistakes of strategy and force deployment have been made in the Iraq War. Fighting a non-uniformed enemy, not understanding their tactics, and not securing the safety of the population are part of the saga of the last three to four years. But our military has been learning and adjusting. And al Qaeda is on the defensive. The tide is turning.

From the Associated Press: as reported at ABC News... Analysis: Military Makes Gains in Iraq

From The New York Times: MICHAEL E. O’HANLON and KENNETH M. POLLACK longtime critics of the Iraq War have just returned from Iraq and in their article, A War We Just Might Win state "Here is the most important thing Americans need to understand: We are finally getting somewhere in Iraq, at least in military terms. As two analysts who have harshly criticized the Bush administration’s miserable handling of Iraq, we were surprised by the gains we saw and the potential to produce not necessarily “victory” but a sustainable stability that both we and the Iraqis could live with."

From The National Review: Michael Barone's article "Defeating Defeatism: Perceptions are starting to shift. Quoting the authors from the above article, “There is enough good happening on the battlefields of Iraq today that Congress should plan on sustaining the effort at least into 2008.”