Saturday, July 01, 2006

KABC Doug McIntyre - An Apology from a Bush Voter

KABC Doug McIntyre - An Apology from a Bush Voter
Copyright by KABC

There’s nothing harder in public life than admitting you’re wrong. By the way, admitting you’re wrong can be even tougher in private life. If you don’t believe me, just ask Bill Clinton or Charlie Sheen. But when you go out on the limb in public, it’s out there where everyone can see it, or in my case, hear it.

So, I’m saying today, I was wrong to have voted for George W. Bush. In historic terms, I believe George W. Bush is the worst two-term President in the history of the country. Worse than Grant. I also believe a case can be made that he’s the worst President, period.

In 2000, I was a McCain guy. I wasn’t sure about the Texas Governor. He had name recognition and a lot of money behind him, but other than that? What? Still, I was sick of all the Clinton shenanigans and the thought of President Gore was… unthinkable. So, GWB became my guy.

For the first few months he was just flubbing along like most new Presidents, no great shakes, but no disasters either. He cut taxes and I like tax cuts.

Then September 11th happened. September 11th changed everything for me, like it did for so many of you. After September 11th, all the intramural idiocy of American politics stopped being funny. We had been attacked by a vicious and determined enemy and it was time for all of us to row in the same direction.

And we did for the blink of an eye. I believed the President when he said we were going to hunt down Bin Laden and all those responsible for the 9-11 murders. I believed President Bush when he said we would go after the terrorists and the nations that harbored them.

I supported the President when he sent our troops into Afghanistan, after all, that’s where the Taliban was, that’s where al-Qaida trained the killers, that’s where Bin Laden was.

And I cheered when we quickly toppled the Taliban government, but winced when we let Bin Laden escape from Tora-Bora.

Then, the talk turned to Iraq and I winced again.

I thought the connection to 9-11 was sketchy at best. But Colin Powell impressed me at the UN, and Tony Blair was in, and after all, he was a Clinton guy, not a Bush guy, so I thought the case had to be strong. I was worried though, because I had read the Wolfowitz paper, “The Project for the New American Century.” It’s been around since ‘92, and it raised alarm bells because it was based on a theory, “Democratizing the Middle East” and I prefer pragmatism over theory. I was worried because Iraq was being justified on a radical new basis, “pre-emptive war.” Any time we do something without historical precedent I get nervous.

But the President shifted the argument to WMDs and the urgent threat of Iraq getting atomic weapons. The debate turned to Saddam passing nukes on to terror groups. After 9-11, the risk was too great. As the President said, “The next smoking gun might be a mushroom cloud.” At least that’s what I thought at the time.

I grew up in New York and watched them build the World Trade Center. I worked with a guy, Frank O’Brien, who put the elevators in both towers. I lost a very close friend on September 11th. 103 floor, tower one, Cantor Fitzgerald. Tim Coughlin was his name. If we had to take out Iraq to make sure something like that, or worse, never happened again, so be it. I knew the consequences. We have a soldier in our house. None of this was theoretical in my house.

But in the months and years since shock and awe I have been shocked repeatedly by a consistent litany of excuses, alibis, double-talk, inaccuracies, bogus predictions, and flat out lies. I have watched as the President and his administration changed the goals, redefined the reasons for going into Iraq, and fumbled the good will of the world and the focus necessary to catch the real killers of September 11th.

I have watched the President say the commanders on the ground will make the battlefield decisions, and the war won’t be run from Washington. Yet, politics has consistently determined what the troops can and can’t do on the ground and any commander who did not go along with the administration was sacked, and in some cases, maligned.

I watched and tried to justify the looting in Iraq after the fall of Saddam. I watched and tried to justify the dismantling of the entire Iraqi army. I tired to explain the complexities of building a functional new Iraqi army. I urged patience when no WMDs were found. Then the Vice President told us we were in the “waning days of the insurgency.” And I started wincing again. The President says we have to stay the course but what if it’s the wrong course?

It was the wrong course. All of it was wrong. We are not on the road to victory. We’re about to slink home with our tail between our legs, leaving civil war in Iraq and a nuclear armed Iran in our wake. Bali was bombed. Madrid was bombed. London was bombed. And Bin Laden is still making tapes. It’s unspeakable. The liberal media didn’t create this reality, bad policy did.

Most historians believe it takes 30-50 years before we get a reasonably accurate take on a President’s place in history. So, maybe 50 years from now Iraq will be a peaceful member of the brotherhood of nations and George W. Bush will be celebrated as a visionary genius.

But we don’t live fifty years in the future. We live now. We have to make public policy decisions now. We have to live with the consequences of the votes we cast and the leaders we chose now.

After five years of carefully watching George W. Bush I’ve reached the conclusion he’s either grossly incompetent, or a hand puppet for a gaggle of detached theorists with their own private view of how the world works. Or both.

Presidential failures. James Buchanan, Franklin Pierce, Jimmy Carter, Warren Harding-— the competition is fierce for the worst of the worst. Still, the damage this President has done is enormous. It will take decades to undo, and that’s assuming we do everything right from now on. His mistakes have global implications, while the other failed Presidents mostly authored domestic embarrassments.

And speaking of domestic embarrassments, let’s talk for a minute about President Bush’s domestic record. Yes, he cut taxes. But tax cuts combined with reckless spending and borrowing is criminal mismanagement of the public’s money. We’re drunk at the mall with our great grandchildren’s credit cards. Whatever happened to the party of fiscal responsibility?

Bush created a giant new entitlement, the prescription drug plan. He lied to his own party to get it passed. He lied to the country about its true cost. It was written by and for the pharmaceutical industry. It helps nobody except the multinationals that lobbied for it. So much for smaller government. In fact, virtually every tentacle of government has grown exponentially under Bush. Unless, of course, it was an agency to look after the public interest, or environmental protection, and/or worker’s rights.

I’ve talked so often about the border issue, I won’t bore you with a rehash. It’s enough to say this President has been a catastrophe for the wages of working people; he’s debased the work ethic itself. “Jobs Americans won’t do!” He doesn’t believe in the sovereign borders of the country he’s sworn to protect and defend. And his devotion to cheap labor for his corporate benefactors, along with his worship of multinational trade deals, makes an utter mockery of homeland security in a post 9-11 world. The President’s January 7th, 2004 speech on immigration, his first trial balloon on his guest worker scheme, was a deal breaker for me. I couldn’t and didn’t vote for him in 2004. And I’m glad I didn’t.

Katrina, Harriet Myers, The Dubai Port Deal, skyrocketing gas prices, shrinking wages for working people, staggering debt, astronomical foreign debt, outsourcing, open borders, contempt for the opinion of the American people, the war on science, media manipulation, faith based initives, a cavalier attitude toward fundamental freedoms-- this President has run the most arrogant and out-of-touch administration in my lifetime, perhaps, in any American’s lifetime.

You can make a case that Abraham Lincoln did what he had to do, the public be damned. If you roll the dice on your gut and you’re right, history remembers you well. But, when your gut led you from one business failure to another, when your gut told you to trade Sammy Sosa to the White Sox, and you use the same gut to send our sons and daughters to fight and die in a distraction from the real war on terror, then history will and should be unapologetic in its condemnation.

None of this, by the way, should be interpreted as an endorsement of the opposition party. The Democrats are equally bankrupt. This is the second crime of our age. Again, historically speaking, its times like these when America needs a vibrant opposition to check the power of a run-amuck majority party. It requires it. It doesn’t work without one. Like the high and low tides keep the oceans alive, a healthy, positive opposition offers a path back to the center where all healthy societies live.

Tragically, the Democrats have allowed crackpots, leftists and demagogic cowards to snipe from the sidelines while taking no responsibility for anything. In fairness, I don’t believe a Democrat president would have gone into Iraq. Unfortunately, I don’t know if President Gore would have gone into Afghanistan. And that’s one of the many problems with the Democrats.

The two party system has always been clumsy and imperfect, but it has only collapsed once, in the 1850s, and the result was civil war.

I believe, as I have said countless times, the two party system is on the brink of a second collapse. It’s currently running on spin, anger, revenge, and pots and pots and pots of money.

We’re being governed by paper-mache patriots; brightly painted red, white and blue, but hollow to the core. Both parties have mastered the cynical arts of media manipulation and fund raising. They’ve learned the lessons of Watergate and burn the tapes. They have learned to divide the nation for their own gain. They have demonstrated the willingness to exploit any tragedy for personal advantage. The contempt they have for the American people is without parallel.

This is painful to say, and I’m sure for many of you, painful to read. But it’s impossible to heal the country until we’re willing to acknowledge the truth no matter how painful. We have to wean ourselves off sugar coated partisan lies.

With a belated tip of the cap to Ralph Nader, the system is broken, so broken, it’s almost inevitable it pukes up the Al Gores and George W. Bushes. Where are the Trumans and the Eisenhowers? Where are the men and women of vision and accomplishment? Why do we have to settle for recycled hacks and malleable ciphers? Greatness is always rare, but is basic competence and simple honesty too much to ask?

It may be decades before we have the full picture of how paranoid and contemptuous this administration has been. And I am open to the possibility that I’m all wet about everything I’ve just said. But I’m putting it out there, because I have to call it as I see it, and this is how I see it today. I don’t say any of this lightly. I’ve thought about this for months and months. But eventually, the weight of evidence takes on a gravitational force of its own.

I believe that George W. Bush has taken us down a terrible road. I don’t believe the Democrats are offering an alternative. That means we’re on our own to save this magnificent country. The United States of America is a gift to the world, but it has been badly abused and it’s rightful owners, We the People, had better step up to the plate and reclaim it before the damage becomes irreparable.

So, accept my apology for allowing partisanship to blind me to an obvious truth; our President is incapable of the tasks he is charged with. I almost feel sorry for him. He is clearly in over his head. Yet, he doesn’t generate the sympathy Warren Harding earned. Harding, a spectacular mediocrity, had the self-knowledge to tell any and all he shouldn’t be President. George W. Bush continues to act the part, but at this point whose buying the act?

Does this make me a waffler? A flip-flopper? Maybe, although I prefer to call it realism. And, for those of you who never supported Bush, its also fair to accuse me of kicking Bush while he’s down. After all, you were kicking him while he was up.

You were right, I was wrong.

CTM Comments:
This comes from Doug McIntyre. For those who are unfamiliar with McIntyre, he's a Republican radio talk show host on KABC. Enjoy the read.

Yield curve back in spotlight after Treasuries stage rally

Yield curve back in spotlight after Treasuries stage rally
By Jennifer Hughes in New York and Joanna Chung in London
Published: July 1 2006 03:00 | Last updated: July 1 2006 03:00
Copyright The Financial Times Limited 2006

Treasuries rallied and yields fell this week after traders judged that tweaks to the language of the Federal Reserve's statement showed the central bank was softening its line on future interest rate rises.

Before the meeting, investors had priced in an almost 90 per cent probability that this week's quarter-point tightening to 5.25 per cent would be followed by another at its next meeting in August. By yesterday, that had slipped to about 64 per cent.

Yesterday, bonds were heartened that the core personal consumption expenditure price index had held steady at 2.1 per cent in May.

The Fed tracks the inflation measure carefully, and investors were relieved that it had not risen further.

The biggest reaction to the Fed's news was concentrated in shorter-dated notes, "uninverting" the yield curve by leaving 10-year yields above two-year levels for the first time in three weeks. Curve inversions are unusual, since longer-term borrowing carries greater risks and should yield more, and significant or sustained inversions are often followed by economic slowdowns.

From two-year notes yielding 5.270 per cent and 10-years at 5.231 per cent on Monday, the two were level-pegging at 5.175 per cent each yesterday, off early Thursday peaks of 5.292 per cent for twos and 5.255 per cent for 10-year paper.

The shift in the shape of the curve left strategists discussing the potential for "curve-steepening" trades. Analysts at BNP Paribaspredicted a "significant" steepening.

"The two- to 10-year spread is ready to move, and we have an initial target of +5bp, with potential back to the +15 or 20bp area on a one- to two-month view," said strategists in a note.

They think gains for two-year notes would be constrained by the Fed funds rate at 5.25 per cent, since shorter-dated notes track the Fed's targets more closely.

"Consequently, a steepening of the magnitude we envisage would involve a decent sell-off at the long end of the yield curve."

Market watchers at 4Cast, the consultancy, were more wary on the potential for a strong steepening move, attributing much of the recent "uninverting" to the unwinding of previous flattening trades.

*As the first half of the year drew to a close, government bond investors were left nursing negative returns as prices fell and yields tracked interest rate expectations.

Yields on 10-year Treasuries have risen more than 80bp since January, while the 10-year Bund yield added about 76bp to 4.062 per cent and the 10-year UK gilt yield rose more than 60bp to 4.704 per cent. Ten-year Japanese government bond yields were up over 46bp at 1.925 per cent yesterday.

This means 10-year Treasuries and bunds posted negative returns - of about 4.3 per cent each. However, the 10-year gilt and the 10-year JGB fared badly, too, returning -2.56 per cent and -2.90 per cent respectively.

Tossing a coin could well be as insightful to investors as a fund manager

Tossing a coin could well be as insightful to investors as a fund manager
By Philip Coggan
Published: July 1 2006 03:00 | Last updated: July 1 2006 03:00
Copyright The Financial Times Limited 2006

Is it luck or skill? It can be very hard to know exactly why a fund manager has performed well.

That was neatly illustrated this week with an analysis by New Star, the fund management group. Sometimes press releases do not carry the message companies mean to convey. The reader draws a different moral.

New Star looked at the number of managers who had outperformed the median in each of three (and then five) consecutive years. Only one in eight UK equity managers had done so over three years, for example, while over five, the hit rate was one in 34.

To New Star, the message is that investors need to employ an experienced fund-of-funds manager who can sort out the sheep from the goats.

But take a look at those numbers again. The chances of tossing three heads in a row is one-in-eight; five heads in a row is a one-in-32 shot. so it looks as if the chances of a fund manager beating the average are no better than tossing a coin. In other words, performance is entirely random.

If that is the case, why pay an extra fee to a fund-of-funds manager when you can make the same guess yourself? A higher fee will reduce your long-term return.

New Star would retort that it has shown skill in picking managers, by beating its sector substantially over the past four years. Alas, its record is not long enough to prove that skill, not luck, is involved.

The decision between active management and passive (or index-tracking) funds is not an easy one. Implicit in the index-tracking case is the belief that markets are always efficient, something that is hard to believe after the dotcom boom.

Second, having met many intelligent and shrewd fund managers, I find it hard to believe that there is no skill involved in the record of, say, Anthony Bolton or Neil Woodford.

However, the problem lies in spotting such performers in advance, or at least early enough in their career to take advantage.

Unless you have a lot of time to research the sector, the percentages clearly suggest an index-tracking approach. That is also the conclusion of an informative new book* on investment planning by Tim Hale.

Hale points to a US survey that shows, over the 20 years to 2003, more than 80 per cent of active investors failing to beat the market. A second survey found that the average index fund beat the average active fund by 2 percentage points a year over the long term.

Hale favours using index funds as a building block for assembling portfolios. While he certainly has a case for equities, I think the argument is much less convincing for bonds.

If we are talking about corporate bonds, then an index weighting would mean investing most of your capital in the most indebted companies. If we are talking about a domestic government bond index, then the weighting will be highest in short-dated maturities (where issuance is greatest) rather than in long-dated paper which is probably a better match for the investor's liabilities.

Hale also suggests two rules of thumb for deciding the proportion of an investor's portfolio that should be devoted to bonds. One is to make your bond percentage equal to your age; that is, a 50-year-old should have 50 per cent in bonds. That seems a little conservative for younger people.

The second rule is to multiply your investment horizon, in years, by four to get your equity percentage and own bonds for the rest. So if you have 20 years until retirement, you should own 80 per cent in equities and 20 per cent in bonds. This is not a bad rough and ready calculation, although for those with a 25-year time frame owning no bonds at all feels like too big a bet.

Hale also suggests scope for further diversification into asset classes such as property, index-linked bonds, commodities and funds-of-hedge funds.

All of this makes for sensible advice (and a useful book). Diversification does make sense.

But there is a problem with diversification that has become clear this year. When everyone is piling into an asset class, it ceases to be a diversifier. Thus, according to Société Générale, commodities have recently been more correlated with equities than they have been in decades.

So I believe that, in addition to diversification, investors should be willing to make asset allocation decisions on the basis of expected future returns.

Some will dismiss this as "market timing", an approach that has rarely been known to work. But while it is very hard to guess where markets are going in the short term, over the long run there is some evidence of reversion to the mean.

Saying that the equity markets were overvalued in 1998 looked pretty stupid during 1999 and early 2000. But the scale of the market plunge was such that, by 2003, investors had earned far greater returns from bonds than from equities over the previous five years.

Investors should give a greater weight to those asset classes that have underperfomed their historic trends over the medium term (10-20 years or so) and should underweight those asset classes that have outperformed.

Part of the problem for investors was that earlier this year, it was hard to find assets that looked cheap or below trend.

If there is one good thing about the current turmoil, it is that it may once again throw up assets that look unloved. Then, all investors need is the courage to buy.

*Smarter Investing: Simpler Decisions for Better Results by Tim Hale, FT Prentice Hall, £21.99

New York Times Editorial - A victory for the rule of law

New York Times Editorial - A victory for the rule of law
Copyright by The New York Times
Published: June 30, 2006

The U.S. Supreme Court's decision striking down the military tribunals set up to try the detainees being held in Guantánamo Bay is far more than a narrow ruling on the issue of military courts. It is an important and welcome reaffirmation that even in times of war, the law is what the Constitution, the statute books and the Geneva Conventions say it is - not what the president wants it to be.

Salim Ahmed Hamdan, a Yemeni being held in Guantánamo, has been charged with conspiring to help Al Qaeda. The Bush administration has contended that he and the other prisoners there are not covered either by congressional laws governing military trials or by the Geneva Conventions on treatment of prisoners of war. Instead, Hamdan was put on trial before a military tribunal where defendants can be excluded from the proceedings and convicted based on evidence kept secret from them and their lawyers. Prosecutors can also rely on hearsay, coerced testimony and unsworn statements.

The Supreme Court held that these rules violate the standards Congress set in the Uniform Code of Military Justice, which requires tribunals to offer the same protections, whenever practicable, as other military trials. It also ruled that the tribunals fall short of the kind of trial required by the Geneva Conventions. It rejected the administration's claim that these venerable international standards cannot be invoked in an American court.

The Bush administration could go to Congress and ask for a special law that allowed it to create a unique system of justice for Guantánamo detainees. That is an argument for another day. The message of this ruling is that the executive branch cannot continue in its remarkable insistence that because there is a war on terror, it no longer needs to follow established procedures that would subject it to scrutiny by another branch of government. The justices rejected the administration's constant refrain - made in everything from its "enemy combatant" policies to its defense of the National Security Agency's domestic spying - that the authority Congress granted the president to use force after Sept. 11, the exigencies of wartime, or simply the inherent powers of the presidency allow President George W. Bush to trample on existing laws as he sees fit.
The key to the decision was the court's swing justice, Anthony Kennedy. He provided the fifth vote for the majority, and wrote a separate opinion that eloquently distilled the key principles: that "respect for laws" duly passed by Congress and signed into law by the president is particularly necessary in times of crisis, and that "the Constitution is best preserved by reliance on standards tested over time and insulated from the pressures of the moment."

This is the latest in a series of rebukes to the Bush administration. The court has already rejected its claim that the Guantánamo detainees have no right to be heard in American courts, and that an American citizen designated an enemy combatant can be held indefinitely without being brought before a judge.

The current conservative court is not hostile to law enforcement or presidential power. But it is proving to be admirably protective of individual freedom and the rule of law. Rather than continue having his policies struck down, Bush should find a way to prosecute the war on terror within the bounds of the law.