March 2007

The Laurel Comment
“It’s hard to argue against cynics, they always sound smarter than optimists because they have so much evidence on their side”.
-the late Molly Ivins



Commentary

I have likely stated or felt the following a thousand or more times over the course of the Bush Presidency so going through the rote once more shouldn’t matter a great deal.

The difference between neo-conservatives and people such as myself may be easily if not perfectly defined through the comparison that liberals unlike neo-cons possess the distinct understanding that other people, other nations, and other factions within those nations have agendas of their own.

The commoners of all nations wish above all else to find work that will feed, clothe, house and educate their families, whereas the powerful wherever they may reside wish to control the means by which these simple wants are to be either delivered or denied.

The problem inherent within the neo-con philosophy, be it in the Middle East or around the world, lies in its failure to comprehend the goals of those they oppose or even those they believe they are trying to help. These shortcomings become most apparent when the neo-cons gain power and exercise their ideology in what amounts to old world imperialism.

A recent article in the New Yorker by Seymour Hersh does much to describe the present Middle Eastern dilemma. The most frightening aspect of Hersh’s view and of his many previous discovery pieces is that the knowledge of the inner workings of foreign politicos is both available and apparent. The former, if one cares to look and the latter if one has even a modicum of historical knowledge from which to draw conclusions.

It is shocking to know that expert advice in Middle Eastern history as well as intelligence reports from professional officers was not just ignored by the pre-war Bush administration, but ridiculed. The incredible hubris of the gung ho chickenhawks; Perle, Wolfowitz, Feith, Rummy, Cheney and others was not only dismissive of international advice but of their own military and intelligence experts. Tragically this was also true of the conduct of the war itself and the disastrous occupation that followed.

When you take your nation to war you should at least know who your enemy is and who their enemies are. Sunnis, Shi’a, Iraq, Iran were all lumped together and now they are coming apart.

The new U.S. policy in the Middle East is one that has been pondered in this space over the course of the war. Firstly, that Iraq is in the process of being divided along ethnic lines and secondly, by way of achieving this, America is abandoning the Shiites in order to side with the long-term Bush family friends in Saudi Arabia who happen to be Sunni. Just for the record Al Queda is Saudi Sunni as were most of the hijackers and Bin Laden himself. The policy failure of the Iraq expedition is about to morph into something else, something that may turn out to be far more dangerous. Iran is not the problem, America is not the problem. Bush/neo-con policy is the problem.

In Quebec the provincial election campaign has surprised many of us but none more than the Pequistes. It would appear at this juncture that the Liberals might return with minority status if the rise of the ADQ continues. There now appears, at the time of this writing, to be a distinct possibility that the PQ is about to become the third party. Debate night promises to take on more than its usual importance.



Markets

In a bull market everyone is a genius, or so it would seem. The reality is that bull markets always come to a short-term end, an end that can be brutal to those who remain unprepared.

The volatility of the past few weeks was foreseen by many investment professionals and discussed on many levels so it should have come as no surprise to anyone who was paying attention. This five-year bull market has been abnormal in both its length and breadth, it has also been far more real in Euro and gold terms than it has been in U.S. dollar related securities.

Excess liquidity drives markets upwards, the opposite occurs when such liquidity is diminished. In 1999 Alan Greenspan flooded the market with money in advance of what proved to be the Y2K hoax. In February 2000 the rug was pulled from beneath the market.

There is little doubt that the foundation of the world economy is undergoing profound changes as a billion new “Chindia” consumers have most recently proclaimed. Yes, markets will be higher some years down the road, but what is the rush.



Remarkably

The U.S. intervention in Iraq has served to break the Sunni-Shi’a balance of power in the Middle East. The Bush administration has unwittingly opened Pandora’s Box and the reckoning for this dramatic error has only begun. Hundreds of thousands have died in this exercise of hubris and billions of dollars have been wasted. As one of the 2 million Iraqi refugees recently pondered…for what? “There used to be one Saddam, now there are a thousand”.

And finally, unlike many around the world I breathed (heaved is too much) a deep sigh of relief last month when Vice President Dick Cheney escaped the alleged Taliban assassination attempt. The last thing I want is for this son of a bitch to be martyred; I want him and his cohorts to be impeached.

Investment note: Own gold in the face of this coming currency crisis.



Geoff Ryan March 6, 2007.


Geoffreyryan@hotmail.com

February 5, 2007

The Laurel Comment
“The United States of America is still run by its citizens. The government works for us. Rank imperialism and war mongering are not American traditions or values. We do not need to dominate the world. We want and need to work with other nations. We want to find solutions other than killing people. Not in our name, not with our money, not with our children’s blood.”
-The late great Molly Ivins

Commentary

Once upon a time, at the very beginning of the neo con inspired Iraqi expedition, many true believers dreamed of a day when American military might would uproot the present leading dictators of the Middle East and supplant them with democratically chosen favourites of their own making. Alas the fantasy that drove them to such wild expectation has long since been replaced by the trauma of reality.

George W. Bush, the perpetrator in chief of America’s disastrous foreign policy now states that one final surge is required to stabilize the fledgling democracy in Iraq and that the new commander, General Petraeous, is the best man for the job.

If this be the case, the question begs as to why this brilliant officer was not discovered and put in place earlier. Spin, spin, spin, the entire Iraq debacle has degenerated into a face saving exercise for the Bushies, one which is costing America dearly in lives, national treasure and moral authority. I am once again reminded of John Kerry’s finest moment when as a young Vietnam Veteran he asked a 1974 Senate committee hearing “how do you ask a man to be the last man to die for a mistake”. America will be leaving Iraq one day soon, whether it is tomorrow or two years from now everyone will be worse off and many more on both sides and in the middle will be either dead or severely maimed.

My predecessor in this space, Bill Copp, long ago suggested that a dividing Iraq into three sectors was the only solution left to the creators of this havoc. Many, including Senator Joe Biden and conservative columnist David Brooks have since joined with this opinion. This solution may be compared to that used in many historic battles; separate the combatants. Failing this it would appear that this civil war, like all others before it, will end only when the stronger or more numerous side vanquishes its weaker foe.

To this former end America should not be threatening Iran, it should be enlisting its help as well as that of other nations of interest both within the region or geographically removed from it. Cooperation and diplomacy have yet to be tried, is there a reason?

Two final questions; how much more can be asked of National Guardsmen and other troops without there being more than a rumble of discontent? Captain Queeg Anyone?...and what was China doing with that recent missile launch, maybe they were asking who really was in charge?

Markets

Okay, okay, so markets have continued to rise in spite of an inverted yield curve and a pending recession giving many professional investment managers more than a slight headache while proving once more that excess liquidity is capable of driving stocks and commodities well past their normal points of reference to fair value.

The world is awash in money and its credit twin. This vast source of printable energy seems to know no bounds and unlike fossil fuels appears to be an infinite resource. I can only suggest that the greed will eventually be tapped and the fallback position will be precious metals. Although gold has already doubled during the past five years it is not even close to its all time inflation adjusted highs. Look for further gains in the 30% range for 2007.

Ethanol from corn is a joke. It makes no sense practically, environmentally or economically. Cellulitic ethanol may be quite something else. Before Bush and the corn/ethanol lobby rape the American public once more, bear these numbers in mind, or better still, do your own research. It takes eight gallons of gas to produce 10 gallons of corn ethanol a fuel that gets less mileage. Without huge subsidies it would die a natural death. Oil sands in Canada employ one quarter as much energy to provide the same amount of useable gasoline. With clean nuclear power plants, it would be even less. We are on the cusp of a huge proliferation of nuclear based power, a situation which may soon be embraced rather than feared by the “greens” as the disposal of nuclear waste may prove to be more easily controlled than was previously the case.

Trade with caution, own gold, biotechs and special situations in the energy area including oil and gas income trusts.

Remarkably

I was going to finish this column with a supportive comment about former President Jimmy Carter and his latest book “Palestine: Peace not Apartheid” until I discovered that such a favourable comment was akin to criticizing the Muslim Prophet Mohammed in other circles.

Bearing this in mind I decided instead to plumb the depths of the global warming argument which may or may not be safer turf even though these last few weeks in the Northeastern part of the continent have led many of us toward a more welcoming view of the prospect.

Many of you have by now either watched or read about the Al Gore film “An Inconvenient Truth”, a presentation that makes many of us wonder what the world would be like had this articulate and intelligent gentlemen overcome the Florida voting irregularities and kept George W. Bush and the neo cons from the Presidency.

And for what it’s worth on that score I would like to see John Edwards win the Democratic Party’s 2008 nomination.

As for George and the gang of many allow me to paraphrase their most fervent supporters:

“Impeach them all and let god sort them out”.



Geoff Ryan
Feb 5, 2007

January

The Laurel Comment

“History is invaluable for many reasons, none of which have helped the present administration or its creators.”
– William Milton


Commentary

The recent holiday season witnessed the deaths of two vastly different world figures. Gerald Ford as you all know by now was the thirty eighth and first unelected President of the United States. Saddam Hussein was the long term Sunni dictator of the enigmatic region which has been known as Iraq for much of the last century. On the surface of things there appear to be few parallels or connective dots between the careers of these two men yet underneath the glamour of revisionist history we may arguably discover some, if not many, cause and effect circumstances that have bound both world history and our current dilemmas to the actions of these men.

The eulogies given over to President Ford during these past weeks uniformly described him as a conciliator and healer of the nation’s wounds. They spoke not of his leadership skills but of his agreeability. The networks, in their choice of pundits and experts also seem to have decided, with few exceptions that Ford’s defining moment was the Nixon pardon, a gesture for which most have lauded the President and similarly agreed to its being a correct measure in the eyes of history. First among those from whom this patent nonsense was elicited were the two Bushs, Cheney and Rumsfeld, men who gained access to power either directly through Ford or through genetic transfer, as in the case of the White House’s present occupant.

If is a big word when it comes to rewriting history but let us for a moment consider that it was Gerald Ford who elevated Bush Sr., Cheney and Rumsfeld to star status in his White House giving them not just temporary but permanent access to the power levers of the GOP. Without this promotion George senior would never have been considered for the Vice Presidency under Reagan or the candidacy for President thereafter, and need we speculate on the possibility that George W, without his father’s powerful influence would have ever become quasi owner of the Texas Rangers baseball team let alone Governor or President. We think not.

So what exactly is Gerald Ford’s unintended legacy? A Nixon pardon that was immediately rejected by most Americans but lovingly accepted by those about to attain power whose fear of punishment for any crimes yet to come was now less intimidating. Has the legacy not also included the Presidency of Bush Sr. and by unhappy circumstance the subsequent terms of Bush Jr. and the roles of Vice President Cheney and former Defense Secretary Rumsfeld?

This tragically, is the real history of a good man, a conciliatory Republican who might well have been happier on the other side of the aisle.

It has been some time since America discovered that the capture of Saddam Hussein would have little to do with either winning the war in Iraq or even toning down the violence in that troubled region. I suspect that it will take them even less time to figure out the true impact of his execution.

The invasion and occupation of Iraq cannot be blamed on Gerald Ford, a man as we now know, who opposed the war but shamefully chose not to express his views during his lifetime. This might in future be referred to as the Colin Powell syndrome, whereby you are supposed to remain adamantly loyal to people that you know are wrong and to policies that you fundamentally oppose.

The Nixon pardon has already proven to be an enormous mistake for both America and the world because it separated the politicians from the rule of law and left the true actions of the Nixon administration buried in the unseen files of history...subject to revision from time to time or state funeral to state funeral.

As for Saddam he would still likely be alive and in power, not a good thing but compared to what? Iraq as it is now? There was a better way...still is.

Markets

The 2006 market year was one of many surprises many of which were outlined in last month’s column. Canadians are now all too well aware of the Halloween surprise wherein the Harper Conservatives went against all commonly held belief and altered the rules on income trusts and since Finance Minister Flaherty has time and again reiterated his unwillingness to recharter the game I advise everyone to get over it.

Value still exists within this group and it is my view that many trusts will be among the best performers of 2007. So do your homework and make some profitable decisions soon.

On the other hand the general world market situation may be a little less productive in the coming year. At this time it appears that a distinct slowdown if not an outright recession will overtake the U.S. economy during the next six months. Right now America is being held together by China demand and an overactive Federal Reserve whose money printing skills have reached Guiness Book record levels.

There will be a time to pay the piper as the race to buy hard assets ahead of the coming currency crisis runs its course.

Own gold, silver and special situations in the energy area as hedges against the tide.

Remarkably

Federalists, realists and the relatively sane may all breathe a deep sigh of relief both here in Quebec and elsewhere with the election of Stephane Dion to the Liberal Party leadership. Compare for a moment the attributes, shortcomings and personal presence of these three men Boisclair, Duceppe and Dion. Not much else to say...is there?

December

The Laurel Comment
“I believe in being strongly partisan on issues that require choice”.

-Ralph McGill 1963
Publisher Atlanta Constitution
Commentary

The past six weeks have proven to be an exceptionally newsworthy period and perhaps one of watershed proportions. November began with Democrat majority victories in the House and Congress giving the party and the American people important oversight control of committee chairmanships for the first time since 1994 (less their short lived Senate majority in 2001-02 due to the Jeffords defection).

The Iraq civil war continues to rightfully occupy centre stage in the hearts of thoughtful Americans. During the recent election Republicans were seen running from both Bush and his Iraq debacle leading the President to finally dump his incompetent defense secretary Donald Rumsfeld. This has in turn been followed by the resignation of the abrasive U.N. ambassador John Bolton. At this writing we await the release of the Baker Hamilton report on the Iraq war, a document which we expect to have little immediate impact on policy while fully respecting its underlying guidance on future administration decisions.

The Middle East, prior to the Iraq invasion was an area fraught with enormous problems both social and political, and the exercise of American military might has not alleviated but worsened relations in the area. The Bush administration which had little understanding of the Sunni-Shia split at the outset of this ill-conceived adventure is finally learning something about the lay of the land. Look for them to soon abandon both the Shia and the Malaki/Sadr government as they seek backing from their largely Sunni co-conspirators in the rest of the region whose fear of a strong Shia Iran outweighs their distaste for Israel and America.

In Canada, November began with the Harper government’s surprise move on income trusts, a story still in the making and if this wasn’t shocking enough the western based Conservative party reached out to soft nationalists in Quebec with its “Quebec nation” motion. First seen as a political coup for Harper many later understood it as a boon to the Liberals who would no longer have to contend with this divisive issue at their convention. It may be argued that this “coup” allowed “Clarity Act” creator Stephane Dion to win the leadership. At first glance it would appear that the Tories got what they wished for with the victory although many others believe that this underestimated man of character is and will be a force to be reckoned with both in his native province and more surprisingly…across the land.

So as Republicans continue to flee the war and their party’s leadership, we can envision Canadians of all parties flocking to the “practical green” policies of Stephane Dion.

The next Canadian election promises to be about character versus ideology…a strongly partisan choice.

Markets

World markets have also brought us their share of surprises in 2006 as oil, commodities and most broad indexes have enjoyed record performances. On the surface of things this all seems to paint a rosy picture of things to come despite the underlying weakness found in most economic projections.

The failing factor however is something to consider when comparing numerical performance with reality. During the last five years the U.S. dollar has lost 35% of its value against the Euro. The Canadian dollar, even with its recent declines, has gained over 40% on its U.S. counterpart, while gold and silver, considered to be U.S. dollar hedges in some trading circles, are each ahead more than 100% during the same period.

Meanwhile the Dow Jones Industrial Average has soared to new all time highs…or has it? In U.S. dollar terms the Dow is up 26% during the same five year period, more from its absolute lows in late 2002, but you get the point. In essence U.S. dollar buying power has markedly depreciated in this time frame leaving foreign investors of both bonds and equities poorer for their efforts.

While growth in China and India continues to fuel world expansion their U.S. dollar reserves have also appreciated and this too has not been an entirely happy outcome. In recent months there has been much talk of currency diversification among foreign holders, the serious evidence of which we are now seeing in the rise of the Euro and the breakout in precious metal prices.

For Canadians this has been a double edged sword with one side being much more blunt than the other. The TSX and Venture exchanges have done extremely well of late despite the income trust fiasco, lower oil prices and a falling dollar. In effect the saw off is a net benefit to Canadian manufacturers, diminishing breed that they may be.

Finally, this Canadian dollar decline may not be so much a reflection of Canada’s economy or fiscal health as it is of the international attachment it has to its U.S. counterpart. The world is awash in paper currency, the real reason for market strength and the best reason for owning precious metals.

Remarkably

The amazing victory of Stephane Dion was happily coupled with the defeat of born again Albertan Conservative Ted Morton. Maybe this leaves room in America for the emergence of a strong Barack Obama candidacy.


Happy Holidays
Geoff Ryan
geoffreyryan@hotmail.com