501c-6’s (Did You Say SIX-es???) May 12, 2004January 21, 2017 TIPS CAVEAT James Karn: ‘I have a problem with your TIPS recommendation. Correct me if I am wrong, but TIPS are tied to the CPI. There is significant debate in the financial community regarding the way the CPI is calculated and whether it accurately measures inflation. In addition, you have the inherent conflict of interest in that the borrower – the US government – is calculating it. Not that the US government would ever mislead the American public (ahem), but anytime two parties are involved in a financial agreement, it would seem prudent that one of them not have the ability to make up the rules as they go along. There is no way I would ever lend money to the US government with a payout based on inflation and let them calculate inflation.’ ☞ This was more or less the case James Grant made in that Forbes piece I linked to March 23. (Unfortunately – talk about inflation! – Forbes will now charge you $2.95 to read it.) But over the long run, can Uncle Sam grossly under-report inflation? Against the howls of more and more TIPS owners? And even if so, might TIPS not still outperform traditional bonds? I’m not saying it’s an unimportant issue; just that it’s probably something to take into account rather than an out-and-out deal-breaker. THE 501C-6 You probably know that 501c-3’s are non-profit groups to which contributions are tax-deductible. And you may know that non-profits engaged in significant lobbying or political advocacy – and that are, therefore, not deductible – fall under section 501c-4 of the IRS code. In Roman times, there were 501c-1’s and -2’s, but they pertained to gladiator exhibitions and private aqueduct associations, and so no longer apply. In modern America, there are just these two: c-3’s and c-4’s. Like vertebrae. But just as we seem to have discovered a weird new planet – Sedna – so now, out of nowhere, and leapfrogging whatever c-5’s would have been, come 501c-6 organizations. If the foregoing is not completely accurate (if they had viaducts and aqueducts, what about aeroducts?), click here for the real story. While everyone has been railing against “527s,” the press has given the Republicans a pass on their much more secretive 501c-6’s – at least until now.
Meet 43 May 11, 2004January 21, 2017 Mike Dillon: ‘This week has finally pushed me to the point that I deeply regret voting for Nader. I’m not ready to talk about it, except to offer this apology. Good luck in November.’ ☞ America desperately needs a fresh start. Rehiring Bush/Ashcroft for another four years would send the world precisely the wrong message. Instead, I think John Kerry is going to win. After being pummeled with $50 million of cynically deceptive ads designed to destroy his character – as the Bush team so successfully destroyed John McCain and Al Gore – Senator Kerry remains neck and neck with the incumbent. Remarkable, really. (In June of 1992, Governor Clinton was running third behind Bush and Perot.) Nick Drury: ‘Possibly the most misleading ad that I have seen to date is the one in which Bush states that ‘Senator Kerry even voted against body armor for our troops.’ It was Bush who in his rush to war sent many American troops to Iraq without body armor. He later submitted a controversial request to Congress for $87 billion to fund military operations in Iraq and Afghanistan and to provide funds for Iraq re-construction. The cost of the body armor could not have been more than $50 million of that and funds certainly could have been found for the armor without waiting for the passage of the larger bill.’ ☞ After all, they found $700 million in the Afghanistan appropriation to secretly prepare a war in Iraq. Nick goes on to ask: ‘Did Bush delay getting the armor to the troops so that he could get this controversial bill passed? And possibly even to label those who voted against it as uncaring for American troops?’ One wants to scream, no! And ‘no,’ may in fact be the correct answer. But one also remembers the Administration’s nine-month opposition to forming a Department of Homeland Security . . . only then to embrace it with an anti-labor poison pill to get Democrats to oppose it . . . which led to accusations that (for example) Senator Max Cleland – the Vietnam triple-amputee – is unpatriotic. Well, former Senator Max Cleland. Sadly, it worked. But I digress. Here’s what I wanted to offer today: Jacob Weisberg’s May 7 piece in Slate, The Misunderestimated Man – How Bush Chose Stupidity, starts off like just another cheap shot at the President’s intelligence . . . much like that idiotic bogus press release that was going around the Internet a while back from some non-existent ‘Institute’ estimating the President’s IQ at 98. But it is actually much more than that (both the essay and the IQ). I urge those of you thinking of rehiring the President to ignore the parts you’ll find disrespectful and read it anyway. You probably wouldn’t fail to read a critical evaluation of your baby sitter, if one came your way. Well, I would argue that the President’s policies may have as much of an impact on your children’s future as their baby sitter. In small part: Dubya’s youthful screw-ups and smart-aleck attitude reflect some combination of protest, plea for attention, and flailing attempt to compete. Until a decade ago, his résumé read like a send-up of his dad’s. Bush senior was a star student at Andover and Phi Beta Kappa at Yale, where he was also captain of the baseball team; Junior struggled through with gentleman’s C’s and, though he loved baseball, couldn’t make the college lineup. Père was a bomber pilot in the Pacific; fils sat out ‘Nam in the Texas Air National Guard, where he lost flying privileges by not showing up. Dad drove to Texas in 1947 to get rich in the oil business and actually did; Son tried the same in 1975 and drilled dry holes for a decade. Bush the elder got elected to Congress in 1966; Shrub ran in 1978, didn’t know what he was talking about, and got clobbered. Through all this incompetent emulation runs an undercurrent of hostility. In an oft-told anecdote circa 1973, GWB—after getting wasted at a party and driving over a neighbor’s trash can in Houston—challenged his dad. “I hear you’re lookin’ for me,” W. told the chairman of the Republican National Committee. “You want to go mano a mano right here?” Some years later at a state dinner, he told the Queen of England he was being seated far away because he was the black sheep of the family. But read the whole thing.
Your Money – A Slew of New TIPS May 10, 2004January 21, 2017 Amit: ‘On May 4, you suggest TIPS, PCL and TRF as potential investments. Does this mean it is time to get out of ILA, CMM, SYM, TXCO? It was not clear to me what is your current recommendation for these securities.’ ☞ No, I am holding all of those. If I do think it’s time to sell something, I will always note that here . . . unless I forget that I suggested it, which is always possible. But two things are very important to stress: The first – painfully obvious – is that if I were really good at this, I wouldn’t have to write this column. In other words, my suggestions are just that, suggestions, and one of these days, if not sooner, there are bound to be some big disappointments. Which leads me to the second thing to say, which is that in a bad market, almost everything goes out with the tide, even if, eventually, some of it may come rushing back. I worry that we may be in for a bad market. So the third thing to say – and already we are into extra-innings – is that under no circumstances should you be investing in the market with borrowed money (either on margin, directly from your broker, or indirectly, because you have credit card debt outstanding or any other high-interest debt). Indeed, I think this is a good time to keep at least some of your money safely on the sidelines, in case true bargains should come along. One reason for my caution is the possibility of rising interest rates caused by inflation – or the fear of inflation. Market sage James Grant, in his April 23 market letter, draws parallels to 1964, when inflation was under 2% and the Treasury’s long-bond was yielding 4%-and-a-fraction (it would sink all the way through 1982, as the yield rose to 15%). He wonders whether Baghdad in 2003 may not have been, to the financial road ahead, what the Gulf of Tonkin was in August 1964. There are differences of course; for one, the Iraq war is thus far significantly less costly than was the war in Viet Nam, and will almost surely remain so. But both are examples of ‘guns and butter,’ a combination that often leads to inflation. And that leads to TIPS – Treasury Inflation Protected Securities. When last we left TIPS (of which more in a minute), I offered extra credit for anyone who could identify the movie ‘from whence’ the line ‘Get it? Got it? Good’ comes. Michael Gonsior: ‘The meaning of ‘whence’ is ‘from where.’ So when you write ‘from whence it came’ – as you did – you are really writing ‘from from where.’ Don’t feel bad – most folks make this mistake.’ ☞ Thank you! Rob Sartain (and many others): ‘The line comes from The Court Jester (Paramount 1956), right? Oh, I’m smilin’ thinkin’ about Danny Kaye trying to determine if the pellet with the poison is in the vessel with the pestle, or if the chalace from the palace holds the brew that is true.’ ☞ Avoid the flagon with the dragon. Tom Ciullo: ‘That line, spoken by James Cagney, is from the 1961 Billy Wilder comedy One, Two, Three.’ ☞ An homage, perhaps? Charles Wright: ‘What about purchasing TIPS through a mutual fund (in a tax sheltered account)? Assuming that all interest earned goes into purchasing more TIPS that are added to the account – does this make any sense versus purchasing the individual TIPS?’ ☞ The only downside I can see is the annual fee you pay. But if this is for your tax-sheltered retirement account, why not go for the long-maturity TIPS? Well, John offers one reason . . . John: ‘Do mutual funds like Fidelity’s Inflation Protected Bond Fund (FINPX) and Vanguard’s similar fund (VIPSX) have the same advantages as TIPS? Is this a good place to put 401K and IRA dollars given the expectations by many for the return of inflation and higher interest rates? I ask because most 401Ks don’t allow you to buy TIPS.’ ☞ Those funds are fine. Chris: ‘It’s probably not a question of if the fed raises interest rates, in my mind it’s when. Will they do it before the election? Every time Greenspan speaks, it has been wreaking havoc with my portfolio. My TIPS are down about to where I bought them a few months back. I was looking at buying more, but I don’t know the effect that the eventual interest rate hike will have on them. Will they remain neutral in relation to that? I know a regular long-term bond would get killed.’ ☞ Yes, as interest rates rise, the value of long-term bonds falls – always, absolutely. If the general level of long term interest rates rises to 6%, no one is going to pay you 100 cents on the dollar for your 5% bond. But TIPS are different. The return they pay sits on top of inflation. There is no reason they have to fall in price as inflation pushes interest rates up . . . because inflation will boost their value and pay-out as well. Only time will tell, but the demand for TIPS could actually increase if inflation expectations come roaring back, as people look for some reasonable way to stay ahead of it. A thing is worth only what people are willing to pay – $104 million, last week, in the case of a pretty painting of a boy with a pipe (just for the record, that was not me who bought it) – but my own sense is that the TIPS market has been a little illogical. The shorter-maturity TIPS have been priced to yield less than the longer-maturity TIPS. For example, the bonds maturing five years from now, on January 15, 2009, closed Friday at a price that worked out to a 1.4% ‘yield to maturity,’ while the bonds maturing 10 years from now were yielding 2.2% and the bonds maturing 28 years from now (the ones I own) were yielding 2.5%. Granted, there’s not a huge difference there. And granted, they ALL may be a little high – typically, one might hope for a yield more like 3% above inflation. These bonds would have to fall in price before their yield reached that level. But here’s my point. Yes, with normal bonds, the longer the maturity, the higher the yield you normally expect – the higher yield is how the market induces you to take the extra risk. But with TIPS, what extra risk is there? The Treasury is unlikely to default; and the inflation risk is avoided. So might it not make sense for the longer maturity bonds to command a premium? That is, might sensible investors not being will to accept a slightly lower yield on the longer-term bonds than on the shorter-term bonds? I ask, because to me, the extraordinarily attractive thing about TIPS is their guarantee to outstrip inflation. That being the case, which is more extraordinary: A bond that guarantees to outstrip inflation for the next five years? Or one that guarantees to outstrip it for the next 30? I suppose there could be some reasons to buy the shorter term TIPS, even though you get less of a guarantee and less of a return. But in most scenarios, I think I’d go for the combination of greater guarantee and higher return. This is just my opinion, and I did not go to MIT. (I have passed it many times – in the sort of awe one reserves for the kids who could actually do the quadratic equations.) Some of you know more about this than I, and we will all welcome your thoughts. But however overpriced TIPS may still be, yielding less than my rule-of-thumb 3% above inflation, it seems to me that the long-term TIPS, yielding 2.5% above inflation are relatively more interesting than the 5-year TIPS yielding 1.4% above inflation. The last thing to say about this, if any of you are still reading (I myself quit reading several minutes ago to watch ‘The Larry Sanders Show,’ pressing F9, the auto-pilot key that activates a macro – devised at M.I.T., no doubt – that captures the gist of where I was headed and then finishes the column for me), is that the Treasury is about to issue a whole slew of new TIPS, both 20-year and 5-year. Indeed, the prospect of that added supply may be one reason TIPS have fallen off yet a bit more (the 3.375%s of 2032 closed Friday at 116-and-change), and may have further to go. But as I’ve said from the outset, I don’t see TIPS as a way to get rich, but rather as a way to sleep well. Twenty-eight years from now, when mine mature, I expect they’ll be worth about double what they are today – in real, 2004 dollars – which is to say 28 years of 2.5% growth (which is roughly a double) on top of inflation (which is what allows me to imagine all this in ‘today’s dollars’). Not a spectacular return, by any means. But as a core holding within a retirement account? Why not. Tomorrow: Meet Mr. President
Counting the Votes May 7, 2004February 25, 2017 COUNTING THE VOTES John Seiffer sends along two interesting pieces on electronic voting. The first is short and begins: Voters can run, but they can’t hide from these guys. Meet the Urosevich brothers, Bob and Todd. Their respective companies, Diebold and ES&S, will count (using BOTH computerized ballot scanners and touchscreen machines) about 80% of all votes cast in the upcoming U.S. presidential election . . . The, second, from Salon, is free if you watch a short ad – but so interesting, like much of Salon, you may decide you want to subscribe. In very small part: . . . The system stores its votes in a format recognizable by Microsoft Access, a common office database program. If you’ve got a copy of Access and can get physical access to the county machine — or, some activists say, if you discover the county’s number and call into the machine over a phone line — the vote is yours to steal. While I sat at his computer, March helped me open a file containing actual results from a March 2002 primary election held in San Luis Obispo County, Calif. — a file that March says would be accessible to anyone who worked in the county elections office on Election Day. Following March’s direction, I changed the vote count with a few clicks. Then, he explained how to alter the “audit log,” erasing all evidence that we’d tampered with the results. I saved the file. If it had been a real election, I would have been carrying out an electronic coup. It was a chilling realization. . . . In July, a team of four computer scientists at Johns Hopkins University and Rice University announced that they’d uncovered major security flaws in the machines used in Georgia’s elections. “Our analysis shows that this voting system is far below even the most minimal security standards applicable in other contexts,” the team wrote. Diebold has long boasted that votes in its system are stored in an encrypted manner, hidden to anyone who didn’t have a valid password; the computer scientists found that Diebold’s programmers left the “key” to decrypt the votes written into the code, which is a bit like locking your door and placing the key on the welcome mat. . . . Diebold fiercely disputes that its technology is vulnerable to attacks. . . . As for the Hopkins study, Radke says the scientists who looked at the system erred in their assessment by examining only a small bit of the code and by neglecting the “checks and balances” that occur in an actual election. He pointed to a study of the company’s system that was performed by Science Applications International Corp., a consulting firm, at the behest of the state of Maryland. The SAIC report gives Diebold a clean bill of health, and Georgia officials say it proves their system is safe. (The study is available here in PDF format.)
Scary Stuff May 6, 2004February 25, 2017 QUOTES ‘The new administration seems to be paying no attention to the problem of terrorism. What they will do is stagger along until there’s a major incident and then suddenly say, ‘Oh, my God, shouldn’t we be organized to deal with this?’ That’s too bad. They’ve been given a window of opportunity with very little terrorism now, and they’re not taking advantage of it.’ – Paul Bremmer, February 26, 2001 Mebbe, mebbe not. But the Bush Administration makes no apologies. ‘I’m glad I did it. I’m glad I took the time. I enjoyed it.’ – GW Bush, on testifying before the 9/11 commission Dan Flikkema: ‘Think about that comment for a bit. I enjoyed it?! I’m glad I took the time?! What? It’s like he has no idea what he is talking about. Did he play a round of golf with the commission – or did he give testimony about a day 3,000 people were murdered? How would one ‘enjoy’ such a thing? What part exactly was enjoyable?’ SCARY STUFF If Iraq and Saddam’s Republican Guard were not in cahoots with al-Qaeda before 9/11 (as most seem to agree), this report suggests we’ve managed to make that happen. Going after Iraq instead of al-Qaeda is having nightmarish consequences. Fortunately in the minds of some, including at least one American general, our God is bigger than their God, so it may turn out fine. ‘THE JESUS FACTOR’ If you missed this Frontline documentary, you can watch it on-line. Those of you who doubted the sincerity of President Bush’s evangelical faith, or his belief that God wanted him to be President, may doubt less after seeing this. Tomorrow: Counting the Votes
Spelling Radiation CensoRship and More TIPS Clarified May 5, 2004February 25, 2017 SPELLING Chris Fischer: ‘Yes, if all the fsirt and lsat lertets are ucnhnaged, tehn any wrod wtih 3 lertets is esay and wrods with 4 lertets are olny stighly off. But cidsoner scantlifingy lightener lacixel citaniboms wtih recuded particletibidy and tulorbe cloud pilfertorae! (But consider significantly lengthier lexical combinations with reduced predictability and trouble could proliferate.) This has been floating around the Internet for a while.’ RADIATION Doug Simpkinson: ‘In case you are curious about how much radiation our motorcycle driving heroine is receiving [Monday’s column], she’s being very smart and safe. The level of radiation at Chernobyl varies wildly, and that is why she carries a radiation sensor. When her little meter reads ‘500,’ it is approximately as much radiation as one gets while sitting on an airliner cruising across the country. By sitting in that same place for 12 minutes, she’s getting as much radiation as one gets by eating 10 bananas. So just think about that on your next flight from New York to LA – you could have taken the train and eaten 250 bananas instead, but it’s all the same in the end.’ CENSORSHIP Prasanth: ‘I just wanted to bring to your attention this troubling article about how the Sinclair Broadcasting Group, which owns a bunch of ABC stations, censored ‘Nightline’ from reading the list of US soldiers killed in Iraq. They gave some lame excuse that doing so would be too ‘political.’ Interesting how these righteous non-political folks have given money only to George Bush. I don’t want to live in a country where the all content I see is dictated by companies like the Sinclair Broadcasting Group. Now I know why everyone raised a fuss about media consolidation.’ ☞ A fuss, yes; but with the Republican lock on the White House and Congress, the fuss failed. OR YOU COULD BUY THIS BACKPACK According to yahoo, a small backpack maker north of Seattle doubled its sales by adding a sentence, in French, to the little bilingual tag with laundering instructions. The extra sentence reads . . . well, I’ll get in too much trouble with some of you if I say what it reads, so only click the link if you have reservations about our President’s leadership. [Oh, OK. It reads: ‘Nous sommes desoles que notre president soit un idiot. Nous n’avons pas vote pour lui.’ (‘We are sorry that our president is an idiot. We did not vote for him.’)] # [Note on TIPS: When I said yesterday that the 3.375s of 2032, currently 119, would wend their way back down to 100 at maturity, I forgot to explain how TIPS work. Yes, they rise with inflation, but that is not reflected in the price at which they trade. Rather, that is reflected in an inflation ‘factor’ – currently around 5% on that particular bond – that is adjusted periodically. So if they were quoted at 100 instead of 119, each one would actually cost you $1,050 (plus any accrued interest). And 28 years from now, when they mature at 100, the inflation factor may by then be 89% or 193% or who knows what. The point of their trading at 119 today is that they are trading at a 19% premium above their ‘actual’ face value of $1,000 plus the 5% accrued inflation factor. The higher the premium at which they trade, the less attractive they are. Get it? Got it? Good! (Extra credit for anyone who can identify the movie from whence that comes.)] Tomorrow: Scary Stuff
Let’s Talk About Money May 4, 2004January 21, 2017 Enough with the politics! Let’s talk about money. The first thing to say about money (‘enough about me, let’s talk about you, what do you think of me?’) is that Warren Buffett, who has $43 billion, has endorsed John Kerry. Those of you who think Buffett is good at judging management talent and discerning value, please take note. In the same ‘Today Show’ clip yesterday, he said he was delighted with his friend Arnold Schwarzenegger’s performance as Governor of California (so Buffett, whose father was a conservative Republican congressman from Nebraska, is not above endorsing Republicans). And he agreed that the economy is showing signs of real life. And why wouldn’t it be, he implied, considering all the fiscal and monetary stimulus that’s been heaped on. But it is that stimulus that has him, and others, a bit worried about inflation. If it comes, you have two problems: As a consumer, stuff will cost more. As an investor, interest rates will rise and your bonds will automatically fall (in the same way that a glass automatically gets more full as it becomes less empty) and your stocks will have to swim upstream. The current will be against them, because the yield from safer alternatives, like bonds, will be more attractive. Just which way stocks would go depends on the strength of the swimmer (things like corporate earnings, dividend hikes, and investor psychology) and the strength of the current (namely, just how high long-term interest rates, which tend to sit atop inflation expectations, go). Stocks can definitely rise with mild inflation expectations and moderately higher interest rates, when people feel that prospects are good. And they may feel that way. But there are also clouds on the horizon, such as: our massive budget and trade deficits – incurred not to invest in our kids or our infrastructure, but to give tax cuts to the wealthy and finance the world’s war on terror (having failed to inspire the world to share much of the cost); the loss of jobs to eager, capable workers in India, China and elsewhere – which will ultimately make us all more prosperous, but in the short run may become even more of a drag on the job market and consumer confidence than it already has; the uncertainty caused by the election – and the knowledge that ‘tough medicine’ is often taken, when it is taken, in the first two years of a President’s term, not the last two. (This would be true of Bush or Kerry, although it’s also historically true that the economy and stock market do better with a Democrat in the White House than with a Republican.) So there’s reason for optimism, but at least as much reason, in my view, for caution. (This is what happens when you get old. You get cautious. That picture of me, top left? Taken in 1953.) Real estate would eventually bob above inflation in most places, even if higher interest rates temporarily led to rough times. But in places with the crazy prices we’ve discussed in recent weeks . . . well, who’s to say that the condo that was $200,000 three years ago and $550,000 last week could not be $200,000 again? Or $350,000, anyway? I’m not predicting this, but I wouldn’t rush to buy at today’s prices. So what to do with your money? The smartest short-term investment I can think of (after paying off all-your high interest debt) is to keep your money on the sidelines someplace safe, like a bank. The safest long-term investment I can think of (which is not necessarily the same as the smartest) are Treasury Inflation Protected Securities (TIPS), like the 3.375% TIPS maturing April 15, 2032, first suggested here a couple of years ago at 100 that I suggested selling in part at 132 a few weeks ago. They may certainly have further to fall, but are now more attractive again at around 119. At that price (which will eventually wend its way down to 100 on April 15, 2032), you are assured about a 2.4% return on top of inflation. I won’t reprise all the pluses and minuses, ins and outs of TIPS here, but you can use the Search feature of this web site (lower left) to find past columns and click here to see current TIPS prices (scroll down just below the chart to ‘Inflation Indexed Treasury’). If you decide to buy, you would want to do this only within your retirement plan, and would do it by calling your broker. A less safe but I think still quite conservative long-term investment remains timber, via shares in Plum Creek Lumber (PCL) – not as attractive at its closing price of $30.20 last night as it was last August at $26.50; but 20 years from now, what difference will that make? And better at $30.20 than the $33 it touched just five weeks ago. A wildly risky investment I still like for the long-term is Borealis (BOREF), which will make veterans of this column roll their eyes (‘poor boy – and he had such a promising career’), but which continues to report progress. The stock is around $7, up nicely from where most of us bought it, but that’s not the point. This isn’t a stock you buy for a double. This is a lottery ticket you buy hoping for much more. As always, I caution you to invest only dollars you can truly afford to lose without regret. Most lottery tickets do not pay off. And as always, I disclose that I am awash with these shares, because what is life without a dream? As most of you know, I think the bulk of whatever money you want to risk in the stock market should just go the simple, low-expense index-fund route (Vanguard being the most convenient low-cost vehicle). And that some of what you have in the market, if you are fortunate enough to be able to think in these terms, should be diversified into international mutual funds. One closed-end country fund, the Templeton Russia Fund (TRF), suggested here in November of 2002 at 19, touched 46 a month ago. I suggested selling half, which was either smart (it closed last night at $35.70) or stupid (it closed last night at $35.70), depending on which half of your holding you choose to focus on. It’s a better value now than it was at 46 – and that pretty much exhausts my expertise on the topic. OR YOU COULD BUY THIS DRESS Click here. (It gets funnier the further you read.)
Cycling Through the Dead Zone May 3, 2004February 25, 2017 WHY ALL THIS ATTENTION TO SPELLING, ANYWAY? Aoccdrnig to resecrah at Cmabridge Uinervtisy, it deosn’t mttaer in waht oredr the ltteers in a wrod are, the olny iprmoatnt tihng is that the frist and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe. PAUL CRAIG ROBERTS James Blakey: ‘I wouldn’t out too much stock in what Paul Craig Roberts writes. Here is a column he wrote where he compared be a slave in the American South and being a US taxpayer today.’ ☞ Thanks! My point in offering the Roberts column was not, by any means, to endorse all his views; rather, to show that it’s not just liberals who feel President Bush has done a disastrous job. THINGS WE CAN’T SEE OR SMELL CAN KILL US Thomas Whitaker: ‘When you have 15 solid minutes for an interesting read, this is a photo-essay of someone living near Chernobyl, who drove her motorcycle in through the ‘dead zone’ and recorded what lifeless conditions are there now.’ ☞ I meant to run this a week ago, on the April 26 anniversary of Chernobyl. It is well worth the time. And think as you go through it not just of the dramatic – a melt down. Think, too, of the perhaps more insidious . . . such as an accretion of toxic substances in things we eat. Tomorrow, I hope: Money!
Other Points of View April 30, 2004February 25, 2017 Not all of you buy the gist of this past week’s columns. Frank M: ‘No matter how much fear and loathing you dish out, the American people are smart enough to realize that when Democrats had the power you meekly and weakly refused to pull the trigger and deal with Bin Laden. History, under ‘your’ President, shows us that you deliberately chose not to defend the United States, our freedom and liberty when you had the opportunity.’ ☞ I’m not sure it can be fairly said that the Clinton administration deliberately choose not to defend America. Leaving aside the level of prosperity and respect we enjoyed in the world – and the tremendously good military we nurtured – all of which made us strong . . . we did pull the trigger on bin Laden. We shot a cruise missile at him (to hoots of derision from the R’s who said it was to direct attention from Monica Lewinsky) . . . we hunted him with drones . . . we went to ‘battle stations’ when chatter rose . . . we urgently warned the incoming Administration of the growing, ‘tremendous,’ ‘immediate’ threat that he posed. Yet – though urgently warned, both before and after taking office – the Bush folks just pretty much focused on Iraq. Even after 9/11, they let bin Laden get away (first by not going after him ourselves at Tora Bora and then by pulling Special Forces out of Afghanistan to deal with the ‘imminent’ Iraqi threat). Bin Laden will almost surely be captured or killed soon – how could he not be? But why not two years ago, before there was a chance to regroup and metastasize? (And on the topic of defending freedom and liberty, it should be noted we also pulled the trigger for freedom in Kosovo, with considerable success and without alienating the rest of the world . . . and that we pulled lots of triggers in Iraq to enforce the no-fly zone and contain the Iraqi threat.) That said, Frank believes what he believes and is obviously entitled to. Many Republicans, like some I’ve quoted this week, are beginning to disagree. But others remain strongly in the Bush/Cheney/Rumsfeld camp. So let’s end the week with this, from the venerable conservative biweekly, National Review: April 23, 2004, 8:33 a.m. Myth or Reality? Will Iraq work? That’s up to us. By Victor Davis Hanson Myth #1: America turned off its allies. According to John Kerry, due to inept American diplomacy and unilateral arrogance, the United States failed to get the Europeans and the U.N. on board for the war in Iraq. Thus, unlike in Afghanistan, we find ourselves alone. In fact, there are only about 4,500-5,500 NATO troops in Afghanistan right now. The United States and its Anglo allies routed the Taliban by themselves. NATO contingents in Afghanistan are not commensurate with either the size or the wealth of Europe. There are far more Coalition troops in Iraq presently than in Afghanistan. As in the Balkans, NATO and EU troops will arrive only when the United States has achieved victory and provided security. The same goes for the U.N., which did nothing in Serbia and Rwanda, but watched thousands being butchered under its nose. It fled from Iraq after its first losses. Yes, the U.N. will return to Iraq – but only when the United States defeats the insurrectionists. It will stay away if we don’t. American victory or defeat, as has been true from Korea to the Balkans, will alone determine the degree of (usually post-bellum) participation of others. [Whether or not one grants this, is it not true that much of the world now hates us – as they did not when we were going after Bin Laden and the Taliban in Afghanistan? And that by invading Iraq, we have inspired untold numbers of new fanatical enemies? It seems to me these are not small things – especially as they were largely avoidable. – A.T.] Myth #2: Democracy cannot be implemented by force. This is a very popular canard now. The myth is often floated by Middle Eastern intellectuals and American leftists – precisely those who for a half-century damned the United States for its support of anti-Communist authoritarians. Now that their dreams of strong U.S. advocacy for consensual government have been realized, they are panicking at that sudden nightmare – terrified that their fides, their careers, indeed their entire boutique personas might be endangered by finding themselves on the same side of history as the United States. Worse, history really does suggest that democracy often follows only from force or its threat. One does not have to go back to ancient Athens – in 507 or 403 B.C. – to grasp the depressing fact that most authoritarians do not surrender power voluntarily. There would be no democracy today in Japan, South Korea, Italy, or Germany without the Americans’ defeat of fascists and Communists. Democracies in France and most of Western Europe were born from Anglo-American liberation; European resistance to German occupation was an utter failure. Panama, Granada, Serbia, and Afghanistan would have had no chance of a future without the intervention of American troops. All of Eastern Europe is free today only because of American deterrence and decades of military opposition to Communism. Very rarely in the modern age do democratic reforms emerge spontaneously and indigenously (ask the North Koreans, Cubans, or North Vietnamese). Tragically, positive change almost always appears after a war in which authoritarians lose or are discredited (Argentina or Greece), bow to economic or cultural coercion (South Africa), or are forced to hold elections (Nicaragua). [Well, South Africa and the Former Soviet Union do seem to be rather large and recent examples of countries we did not have invade to effect positive change. By contrast, the spectacularly costly military effort in Vietnam failed to produce democracy.] Myth #3: Lies got us into this war. Did the administration really mislead us about the reasons to go to war, and does it really now find itself with an immoral conflict on its hands? Mr. Bush’s lectures about WMD, while perhaps privileging such fears over more pressing practical and humanitarian reasons to remove Saddam Hussein, took their cue from prior warnings from Bill Clinton, senators of both parties including John Kerry, and both the EU and U.N. If anyone goes back to read justifications for Desert Fox (December 1998) or those issued right after September 11 by an array of American politicians, then it is clear that Mr. Bush simply repeated the usual Western litany of about a decade or so – most of it best formulated by the Democratic party under Bill Clinton. Indeed, we opted to launch that campaign in large part because of Iraq’s work on WMDs. No, the real rub is whether Iraq will work: If it does, the WMD bogeyman disappears; if not, it becomes the surrogate issue to justify withdrawing. [It wasn’t Iraq the Clinton-Gore folks told the incoming Administration represented a tremendous, immediate threat. And as war clouds began to gather, I remember many saying he thought it would be wiser to focus on al-Qaeda and Afghanistan. So I’m not sure it’s fair to put too much of this on Clinton/Gore.] Myth #4: Profit-making led to this war. Then there is the strange idea that American administration officials profited from the war. Companies like Bechtel and Halliburton are supposedly “cashing in,” either on oil contracts or rebuilding projects – as if any company is lining up to lure thousands of workers to the Iraqi oasis to lounge and cheat in such a paradise. This idea is absurd for a variety of other reasons, too. Iraqi oil is for the first time under Iraqi, rather than a dictator’s, control. And the Iraqi people most certainly will not sign over their future oil reserves to greedy companies in the manner that Saddam gave French consortia almost criminally profitable contracts. Indeed, no Iraqi politician is going to demand to pump more oil to lower gas prices in the country that freed him. Some imperialism. All U.S. construction is subject to open audit and assessment. A zealous media has not yet found any signs of endemic or secret corruption. There really is a giant scandal surrounding Iraq, but it involves (1) the United Nations Oil-for-Food program, in which U.N. officials and Saddam Hussein, hand-in-glove with European and Russian oil companies, robbed revenues from the Iraqi people; and (2) French petroleum interests that strong-armed a tottering dictator to sign over his country’s national treasure to Parisian profiteers under conditions that no consensual government would ever agree to. The only legitimate accusation of Iraqi profiteering does not involve Dick Cheney or Halliburton, but rather Kofi Annan’s negligence and his son Kojo’s probable malfeasance. [Well, some of us are skeptical. Some of us wonder at the influence of secret energy-task-force participants and the Saudi royal family in the formulation of policy. As for ‘a zealous media’ . . . when it comes to auditing government contracts, so far as I know, neither Michael nor Janet Jackson has ever won such a contract.] Myth #5: Israel has caused the United States untold headaches in the Arab world by its intransigent policies. The refutation of this myth could take volumes, given the depth of daily misinformation. Perhaps, though, we can sum up the absurdity by looking at the nature of West Bank demonstrations over the past few months. The issues baffle Americans: Some Arab citizens of Israel, residing in almost entirely Arab border towns and calling themselves Palestinians, were furious about Mr. Sharon’s offer to cede them sovereign Israeli soil and thus allow them to join the new Palestinian nation. Others were hysterical that two killers – who promised not merely the “liberation” of the West Bank, but also the utter destruction of Israel – were in fact killed in a war by Israelis. Both of the deceased had damned the United States and expressed support for Islamicists now killing our soldiers in Iraq – even as their supporters whined that we did not lament their recent departures to a much-praised paradise. Elsewhere fiery demonstrators were shaking keys to houses that they have not been residing in for 60 years – furious about the forfeiture of the “right of return” and their inability to migrate to live out their lives in the hated “Zionist entry.” Notably absent were the relatives of the hundreds of thousands of Jews of Baghdad, Cairo, Damascus, and other Arab capitals who years ago were all ethnically cleansed and sent packing from centuries-old homes, but apparently got on with what was left of their lives. The Palestinians will, in fact, get their de facto state, though one that may be now cut off entirely from Israeli commerce and cultural intercourse. This is an apparently terrifying thought: Palestinian men can no longer blow up Jews on Monday, seek dialysis from them on Tuesday, get an Israeli paycheck on Wednesday, demonstrate to CNN cameras about the injustice of it all on Thursday – and then go back to tunneling under Gaza and three-hour, all-male, conspiracy-mongering sessions in coffee-houses on Friday. Beware of getting what you bomb for. Perhaps the absurdity of the politics of the Middle East is best summed up by the recent visit of King Abdullah of Jordan, a sober and judicious autocrat, or so we are told. As the monarch of an authoritarian state, recipient of hundreds of millions of dollars in annual American aid, son of a king who backed Saddam Hussein in the first Gulf War, and a leader terrified that the Israeli fence might encourage Palestinian immigration into his own Arab kingdom, one might have thought that he could spare us the moral lectures at San Francisco’s Commonwealth Club – especially when his elite Jordanian U.N. peacekeepers were just about to murder American citizens in Kosovo while terrorists in his country tried to mass murder Americans with gas. Instead we got the broken-record Middle East sermon on why Arabs don’t like Americans – as if we had forgotten 9/11 and its quarter-century-long precursors. Does this sensible autocrat – perhaps the most reasonable man in the region – ever ask himself about questions of symmetry and reciprocity? Is there anything like a Commonwealth Club in Amman? And if not, why not? And could a Mr. Blair or Mr. Bush in safety and freedom visit Amman to hold a public press conference, much less to lecture his Jordanian hosts on why Americans in general – given state-sponsored terrorism, Islamic extremism, and failed Middle Eastern regimes – have developed such unfavorable attitudes towards so many Arab societies? What then is the truth of this so-often-caricatured war? On the bright side, there has not been another 9/11 mass-murder. And this is due entirely to our increased vigilance, the latitude given our security people by the hated Patriot Act, and the idea that the war (not a DA’s inquiry) should be fought abroad not at home. The Taliban was routed and Afghanistan has the brightest hopes in thirty years. Pakistan, so unlike 1998, is not engaged in breakneck nuclear proliferation abroad. Libya claims a new departure from its recent past. Syria fears a nascent dissident movement. Saddam is gone. Iran is hysterical about new scrutiny. American troops are out of Saudi Arabia. True, we are facing various groups jockeying for power in a new Iraq; and the country is still unsettled. Yet millions of Kurds are satisfied and pro-American. Millions more Shiites want political power – and think that they can get it constitutionally through us rather than out of the barrel of a gun following an unhinged thug. After all, any fool who names his troops “Mahdists” is sorely misinformed about the fate of the final resting place of the Great Mahdi, the couplets of Hilaire Beloc, and what happened to thousands of Mahdist zealots at Omdurman. So, we can either press ahead in the face of occasionally bad news from Iraq (though it will never be of the magnitude that once came from Sugar Loaf Hill or the icy plains near the Yalu> that did not faze a prior generation’s resolve) – or we can withdraw. Then watch the entire three-year process of real improvement start to accelerate in reverse. If after 1975 we thought that over a million dead in Cambodia, another million on rickety boats fleeing Vietnam, another half-million sent to camps or executed, hundreds of thousands of refugees arriving in America, a Soviet invasion of Afghanistan, an Iranian take-over of the U.S. embassy, oil-embargos, Communist entry into Central America, a quarter-century of continual terrorist attacks, and national invective were bad, just watch the new world emerge when Saddam’s Mafioso or Mr. Sadr’s Mahdists force our departure. This war was always a gamble, but not for the reasons many Americans think. We easily had, as proved, the military power to defeat Saddam; we embraced the idealism and humanity to eschew realpolitik and offer something different in the place of mass murder. And we are winning on all fronts at a cost that by any historical measure has confirmed both our skill and resolve. But the lingering question – one that has never been answered – was always our attention and will. The administration assumed that in occasional times of the inevitable bad news, we were now more like the generation that endured the surprise of Okinawa and Pusan rather than Tet and Mogadishu. All were bloody fights; all were similarly controversial and unexpected; all were alike proof of the fighting excellence of the American soldiers – but not all were seen as such by Americans. The former were detours on the road to victory and eventual democracy; the latter led to self-recrimination, defeat, and chaos in our wake. The choice between myth and reality is ours once more. [It should be noted that John Kerry does not plan to cut and run. It should also be noted that tone matters. Humiliation and disrespect are not always the best diplomatic tools – whether it be the U.S. expressing its contempt for ‘old Europe’ or Israel and the U.S. dictating terms of a settlement, however favorable, rather than allowing it to be won in a negotiation. My own feeling, of course, is that the U.S. and Israel are ‘in the right’ on almost every point of substance. But – maddeningly – being right is not always enough to win people over.]
Next Week – Back to Money, I Promise April 29, 2004February 25, 2017 Don: ‘Your advice to Todd Vogel, of Seattle, about buying in Vancouver to take advantage of a boom in case Bush wins – please, please, please don’t buy here. The Vancouver housing market is bad enough as it is without you encouraging your readers to buy what little is left (fewer than 400 properties on the market). Note to Todd: It rains here even more than in Seattle.’ Sue: ‘I have been an avid reader of your column for some time, but your recent links have been really over the edge. One column reads like an anti-Semitic exposé of a Zionist plot to cause unrest in the Middle East. The other, like the greatest conspiracy of all time to take over the Middle East like a modern day Hitler. You are right that we were misled into this war. You are right that Bush ignored the rest of the world and alienated our allies. But quoting these idiots doesn’t enhance your case, it just makes you look as nutty as they are.‘ ☞ I certainly hope the columns I linked to are nutty. I’m just less certain than you that they are. Meanwhile, here‘s what you might view as a more thoughtful one . . . from the Washington Times, no less (not generally thought of as biased against the right wing) – highlighted for speed-readers: Road maps and detours By Bruce Bartlett Published April 21, 2004 ——————————————————————- On Monday, the New York Times reported growing numbers of conservatives are turning against President Bush on Iraq. This follows an inarticulate defense of the Iraq operation by him in a press conference last week and growing attacks on our troops. It is now becoming increasingly clear the basic rationale for the war was not well thought through and that postwar planning was deeply flawed at a minimum. These may result from a basic weakness in this White House’s policymaking and decisionmaking process. I have to say my own feelings on the war parallel those of many others who previously supported the war but now feel deep misgivings. Although I don’t often write on foreign policy, I felt I had an obligation to take a stand on Iraq before the war started. In a February 2003 column, I reluctantly supported the war because at the time I thought there was credible evidence of weapons of mass destruction (WMDs) in Iraq. With that country ruled by a lunatic dictator with known ties to terrorist groups, I felt President Bush deserved the benefit of the doubt. Since then, I have been very disturbed by the lack of WMDs. I am not yet convinced Mr. Bush manufactured evidence for their existence as a pretext for war. But I do believe he has fostered a White House culture that contributes to error, by stifling internal debate, a decisionmaking process that seems to shortcircuit research and analysis, and an obsession with loyalty and secrecy that makes the Nixon White House appear a model of openness and transparency. In this respect, I have been strongly influenced by Ron Suskind’s recent book, The Price of Loyalty, which was based on interviews with former Treasury Secretary Paul O’Neill and thousands of internal documents provided by him. That book paints a picture of an administration in which it appears Mr. Bush often makes key decisions with little if any analysis or discussion among those who are to carry out the decisions. In short, President Bush often seems to operate like the character from “Alice in Wonderland” who declared, “Sentence first — verdict afterwards.” Instead of figuring out why and how things should be done before acting, the White House seems to act first and then create ex post facto rationalizations for that decision in lieu of serious deliberation. Although I claim no inside knowledge of the national security process in this administration, I do know Mr. Suskind and Mr. O’Neill’s characterization of its domestic policy operation rings true. While it is conceivable a completely different process operates in the national security arena, I think that is highly unlikely. Presidents establish a style and tone for their White House staff operations and it operates across the board. Therefore, I have every reason to believe the same weaknesses that exist on the domestic side exist within the national security operation as well. Contrary to what conspiracy theorists imagine, I don’t think President Bush ever ordered up invented facts to justify the Iraq war. Rather, I think there was a great deal of what economists call self-selection bias. Facts that confirmed what Mr. Bush wanted to believe tended to filter up to him, while conflicting facts tended to be sidelined. This sort of thing happens on every issue in every White House. But in this White House, the system of deliberation, debate, analysis and discussion seems unusually weak. As a consequence, there was no way of leveling the playing field, with the result decisions were made on the basis of biased presentations rather than objective analysis. In previous administrations, one safety valve has been the press. When participants in the decisionmaking felt the president was not fully taking into account certain facts or views, they would be leaked. At least then there was a chance that they would come to his attention. But in this administration there is very little of that, with loyalty and secrecy being enforced to an amazing degree that appears unprecedented. Moreover, President Bush is, self-admittedly, not a big consumer of news from outside sources. Consequently, alternate ways of communicating facts and views to him are shut down. Of course, one cannot know whether a more open and honest debate on Iraq would have led to a different result. But I for one would not have supported the war if I thought its principal justification was the liberation of the Iraqi people, which is what the White House now says was its primary mission. Our military exists to defend the nation, not be the world’s policeman. If there is a linkage, President Bush has yet to make it. Bruce Bartlett is senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist. Sarah: ‘I am disappointed that Paul Roberts associates Christian fundamentalist ‘agitation to escalate the Middle Eastern conflict’ with Zionism. There is no Zionist agitation to escalate the Middle Eastern conflict; on the contrary, it is the Zionists, represented by the Israeli government, who are pushing for a Middle East peace. As Sandra L. said, If all Arabs put down their weapons, there would be peace; if Israel put down her weapons, there would be no Israel.’ Lynn: ‘The question is not how we got here, it is: what do we do NOW?’ ☞ I agree. We have the wolf by the ears. Now what? My own feeling is that we need to show the world we are not comfortable with the leadership that has gotten us here. Firing the CEO would send the right message and give us a fresh start. The new CEO could then reestablish our alliances and formulate with our allies the best way to proceed. It may even be that they decide THIS is the best way to proceed (more or less) – especially now that the President has asked the UN to determine whom to hand partial sovereignty to, which was clearly not his original plan. But just having others see our genuine dismay at the way we were misled . . . and offering a believable commitment to international cooperation and the prospect of better judgment . . . could improve our effectiveness in fighting terrorism and, now that we’re there, stabilizing Iraq. Jon Frater: ‘Here is an even more devastating article by Paul Craig Roberts – whose politics I almost never agree with, but very much worth reading. [The piece Jon links to makes the case that over the past 25 years or so we have destroyed Iraq. – A.T.]’ ☞ One of the things I think we have to remember in considering this tragedy is that as monstrous as Saddam was, it was we, under Reagan/Bush, who gave him the WMD to use on the Iranians (and told him where to drop them). We, under Bush-Quayle-Cheney-Rumsfeld, who doubled his trade credits the year after he gassed his own people. And we, via communication from our ambassador, April Glaspie, who may even have at least partially green-lighted his invasion of Kuwait. None of this is to say we should not be thrilled Saddam is gone. (But at what cost?) Or that we should not be deeply proud of, and grateful to, our troops. (The mind boggles at the bravery and sacrifice of their service*.) It is just to suggest that little of this is simple, except perhaps to President Bush, who knew long before September 11, 2001, that Iraq needed to be invaded; who doesn’t read newspapers; and who at his most recent press conference couldn’t think of a single mistake he had made. * And at the way so many National Guard families are being bankrupted while the Bush Cabinet gets millions of dollars in income tax cuts. Tomorrow: An Opposing View. Next Week (Please!): Back to Money