This bit just came in over Stratfor Site Reps:

0116 GMT - Saudi Arabia's Interior Ministry said Aug. 26 that authorities have arrested 28 people since the Aug. 18 raid that killed local al Qaeda leader Saleh al-Oufi. Al Arabiya television also aired footage of Saudi special forces engaged in firefights with militants and destroying buildings where militants were believed to be hiding. The Interior Ministry said the arrests prevented attacks inside the kingdom.

Hokay, you're watching Al Arabiya, you can hear the gunfire and explosions in the distance. How can you know that the special forces are not zealots in uniform driving stolen police cruisers demolishing buildings where the security forces dwell?

But it's not war, and I'm not short crude, WHEW

What passes for incessant and widening budget and current account deficits is really the unfolding of J. Peter Grace's contention in 1981 that compound interest and time would wipe out any amount of $$. " Given twenty years time and compounding there isn't enough money" ( read: without hyperinflation ) to pay for the future dimension of these programs, Medicare/Medicade; Soc Sec; et alia. Twentyfour years on the money is sloshing out of the US because it's going to pay off outsider's claims on a first come first served basis...don't forget to get paid before the feds do what they're so good at: breaking promises. While Congress crushed Grace for calling them clowns (he apologized "Only half of them are clowns") , Greenspan meanwhile is "credited", in the last government action on Soc Sec, with upping the age to retire while simultaneously taxing the benefits . Add to that the consumer here reflexively piling on the debt. Soc Sec will force the feds hand and all kinds of "reforms" like new borrowing, increased taxation, reduced benefits will come spilling out of congress. Let's be sure to get paid before the money runs out. Do not be fooled by a record low in the implied volatility of S&P 500 options. It's sure to rebound and in a big way as government bonds reverse. Consider spreading the out of the money puts.

BOYCOTT CITGO NOW

Castro's shill, Chavez and Venezeula own Citgo. Venezuela delivers US lots of crude/day. They own the marketeer, Citgo. They need to sell Citgo before they really attempt to inconvenience the US and since Citgo handles the thick crude from Venezuela if we boycott, they are really awash in thick, read discounted, crude they need to market elsewhere....thereby increase their shipping $$. Chavez is on the march in Ecuador, Bolivia, Columbia, do you have a problem with that?

Roid Rage

Prominent athletes enhancing performance through the use of drugs is nothing but another chapter in the successful evolution of the species. Drugs are one of many regimens used by athletes to overreach themselves in the grand tradition of species enhancement. The hue and cry against the genie now out of the bottle is a familiar song of the millenia. Imagine the neanderthal back from a hunt with the biggest pile of prey being named and shamed by less prominent hunters for using a sling. The Lunatic Fringe is a longtime supporter of what works. If you're counting RBI's then if roid use leads to more of them, then by all means let's disclose their role and move on.

It's still the early innings in the development of performance enhancing substances. For the early users the science of performance enhancers may be a net loser. Like early flight, many accidents appear incautious or tragic. But when disclosed and exposed to the light of day much progress can be anticipated. A greying population would do well encourage the use and improvement of performance enhancing substances as an alternative to being laid to waste by the aging process.

LOVE THE TSUNAMI

Imagine the crocodile tears shed by the ruling classes of the nations hardest hit. Let's take Indonesia. It doesn't get any better than this. Instead of a couple millions per year to monitor the surrounding oceans, the gross negligence of government there will result in a windfall to the ruling elites. After losing ~ 230,000 subjects killed and missing in a cataclysm, the effects of which were largely avoidable just in case tidal monitors were deployed, the opportunities for baksheesh are mindboggling. So far pledges of $1,700,000,000 have been made for the first year. The Indonesian government has made assurances that this fortune will be monitored to prevent corruption. More likely any monitoring will have the goal of making sure the skim makes it back to the relevant players. A conservative baksheesh level of 15% yields a quarter of a billion in skim the first year! Indonesian corruption suggests that conservative levels of baksheesh will be breached. And yet this is only a headline number. The windfall has multiple facets, eg, kickbacks from resort developers who will construct concrete playgrounds on the beaches once littered with indigenious losers.

The fires still burn in Indonesia that result from escalating swidden farming of the interior. Remember the smog covering the whole of SE Asia in 1997?

There is no cost to the ruling elites for gross negligence. Instead of jail for failing in the first responsibility of government these folks will prosper like never before.

And how.

U.N. Nuclear Chief Offers to Go Personally

The U.N.'s chief nuclear inspector, Mohammed ElBaradei, called on North Korea's leader to allow the International Atomic Energy Agency to return to his nation, offering in an interview released Saturday to go personally if it would help.

And why not. Similar calibre and understanding, Mr. Kim, MR. ElBaradei. Expect big things.

Today, the SEC asked Berkshire Hathaway's General Re unit to provide information related to insurance products aimed at mitigating financial losses. Hmm, and the purpose of purchasing insurance would be exactly what if not to mitigate loss in the financial sense?

At Powerline as Hindrocket told Time magazine, "The world is full of smart people who have information about every imaginable topic, and until the Internet came along, there wasn't any practical way to put it together."

The distributed nature of the blogsphere yields intelligence that is successful at rates that vanquish verticality in the Intelligence Services, viz. National Director of Intelligence. Give 100 groups 5 Million $ each for a year. Allow them to freely and securely communicate amongst themselves and see what they come up with. The 500Million cost is less than one tenth of one percent of the budget of Department of Defense when the costs of Iraq and Afghanistan are added in. A mere bagatelle. At the end of the year cull nonperforming groups and add those which seem, in light of the recent product of the distributed groups, promising.

It is the outcome of Rathergate, which took 24 hours to unmask in the distributed blogsphere, that is wanted and not a vertical system which couldn't respond to islamofacists who wanted to fly but not land.

Co-Optation for Peace

Maybe we could co opt the islamofacist agenda. Say we begin with 4$/gallon gas that contains an additional $1.5 in state and federal tax, tailored/incentivised to reduce deficits and fund entitlement programs Simultaneously, disarm the grand instigator, Israel, of her nukes. Remove, in a flash, the raison-d-etre of the mullah's and sheikh's need to go nuclear. Likely you'd see less gas consumption, more outsourcing, more globalization, morbetter air, morbetter information technologies. Ayman and Osama and their friends die miserable deaths in this example. Same treatment for that small percentage ofIsraelites who will never make peace, they must be exterminated because it is in the interest of peace...killing the israelofacists is just as necessary as killing the islamofacists. Tell that to cBS. Isn't it in the interest of peace to bring Israel to the UN along with Iran. certainly that approach seems to be less costly in terms of lives lost. As long as we don't see the need to bring Israel to heel in a nuclear free zone we will never constrain those wacky mullahs.

Outcome Based Management

Also known as smoothing. FNM records 9 Billion loss that was previously hidden. FRE records 5 Billion in gains also previously hidden.

We can see that as a result of a major circle jerk in mortgage-backed derivatives that FNM has BLOWN 4 Billion (9-5).

Does that = Musical Chairs over? Is it time to rip the guts out of bonds? Suggest the prudent investor start with U$D bonds.

The Nuclear Race Is Almost Over

In 2001 Rafsanjani lost his cool at Friday prayers: "If a day comes when the world of Islam is duly equipped with the arms Israel has in possession, the strategy of colonialism would face a stalemate because application of an atomic bomb would not leave any thing in Israel but the same thing would just produce damages in the Muslim world", Ayatollah Ali Akbar Hashemi-Rafsanjani told the crowd at the traditional Friday prayers in Tehran.

Mr Rafsanjani's pre-revolutionary credentials earned him a place among the trusted advisers of Ayatollah Khomeini, founder of the Islamic Republic of Iran.
He established himself as a powerful figure soon after the revolution as co-founder of the Islamic Republican Party. The party played a major role in Iranian politics until its disbandment in 1987 following internal wrangling over policy.
Mr Rafsanjani was Majlis speaker from 1980-89. In the last year of the 1980-88 war with Iraq, Ayatollah Khomeini appointed him acting commander-in-chief of the armed forces.
He is seen as the main influence behind Ayatollah Khomeini's acceptance of the UN Security Council resolution which ended the war.

Well folks, it appears that Iran has been sprinting toward a nuclear device, then cloning their new weapon. A Q Kahn, father of the Islam Bomb goes unpunished in Pakistan ( only an Afghanistan away ). Remember when militant Islam went unpunished by Carter, Reagan, Clinton?

The Lunatic Fringe takes its responsibility to come from a different angle with utmost respect. In that view: we wish to posit that nuclear exchange is quite imminent.

Who fires first is unknown but certainly one is coming. Iran's nuclear weapons program is buried in multiple diffuse sites domestically. Israel will not allow the situation to develop wherein Iran is a missle based nuclear power. Certainly not. Israelis pray that the good 'ole USofA will go in. But Israelis may be mercy to successes in Iran's nuclear weapons program. They cannot afford to miss all these hardned underground bunkers with conventional smart bombs. 20% of the bunkers survive and it's curtains for the Jews in Israel.

Israel will nuke Iran and maybe Pakistan just as soon as those wacky ayatollas get their wish: a nuclear bomb.

After that Israel will be down to just a couple hundred nukes.

"Viruses are faster spreading, they're more complex in their payloads and the way the affect machines," Mr. Bridwell said. "When a virus like Slammer can affect the globe in less than 10 minutes, it's almost impossible for antivirus products or humans to react fast enough."

This from an article on the new mo' betta' virulence of computer viruses in today's WSJ: Damage Caused by Viruses
Rose Last Year, Survey Finds

By RIVA RICHMOND

It struck me like science fiction. A fortelling of our world to come, as genetics leaves infancy. You know, the terror to come. Maybe Bush was kinda prescient about the importance of manned travel to Mars.

The Right Amount

Civil law judgements against wall st investment banks, specialists ( many owned by same investment banks ) & mutual fund companies amount to several billion U$D. This is just scratching the surface of the lemon. For decades as an independent trader, I paid mostly 1c per share. It is true that concurrently the big boys, the mutual fund investors, with real clout were paying ~5c per share on several trillions of shares per year for many years. This was business as usual, custom and usage and all that that implies. Convenient that the costs of research were shifted by fund managers to investors as commissions through soft dollar arrangements. These costs were genuine costs of business for managers and advisors --a cost of doing business surreptitiously shifted to the mutual fund consumer (us). Isn't it the case that by paying 5x what was avaliable to an ordinary professional participant ( me ), that the 4c per share is forfeit from the fund management companies in favor of their client shareholders? Next to the question of treble damages....Serious Dough.

Kerry for President?

March 8 media sez Kerry was told by heads of state that he had their vote, White house responds promptly, asking for specifics and Kerry's people are silent. Then come's the Boston Globe reporter for political reporting saying the transcription was bungled and "foreign" leaders was in fact "more" leaders...This took place late in the day on 15 March ( the Ides of March ) one week after the story broke. Was Patric Healey fishing in the Artic Circle?...was he in a coma?... what took Kerry's people so long to corral this local boy?? is the question that niggles. Is this any indication of the focus or lack of focus on the part of Kerry's campaign and can we expect a more favorable alacrity in a Kerry administration?

Add Back the Legal Fees: Interesting juxtaposition of articles in today's Wall Street Journal.

Grasso Lawyers, NYSE Exchange Letters

By KATE KELLY
Staff Reporter of THE WALL STREET JOURNAL


The attorney representing former New York Stock Exchange chairman Dick Grasso has penned a strongly-worded letter to the Big Board, stating that he has no plans to return the $139.5 million retirement pay that forced his departure last fall, according to exchange representatives.

The letter, written by Williams & Connolly trial lawyer Brendan V. Sullivan, was first reported this morning by The Washington Post and the Financial Times. In it, according to published reports, Mr. Sullivan states that Mr. Grasso "has no intention of returning any portion of his compensation to the Exchange," and that "if the Exchange believes it has a valid claim, it should file it, rather than conducting a campaign through the press…in an attempt to pressure Mr. Grasso."

Mr. Sullivan's letter, which was sent yesterday, was in response to a Feb. 12 letter written by interim Big Board chairman John Reed, demanding that Mr. Grasso, who left under pressure last September amid an outcry over his compensation package, return $120 million of the nest egg to the exchange, according to the representatives. Mr. Reed wasn't immediately available for comment, and a spokesman for the Big Board had no comment.

The correspondence highlights the fact that despite referring its investigation of how Mr. Grasso's pay was set and given out to state and federal regulators last month, NYSE officials -- namely Mr. Reed -- are still working to take back some or all of Mr. Grasso's nearly $140 million compensation. On Jan. 8, the NYSE board voted to pass a report prepared by former prosecutor Dan K. Webb on Mr. Grasso's compensation on to both New York State Attorney General Eliot Spitzer and to the U.S. Securities and Exchange Commission to determine whether state not-for-profit laws (under which the NYSE is incorporated) or federal securities laws were violated.

At issue is not only the $139.5 million that Mr. Grasso received last year, but an additional $57.7 million he believes he is owed -- $48 million in future retirement pay that he was contractually slated to receive, and another $9.7 million in severance pay that would be due him if his ouster were deemed tantamount to being fired.

Until recently, NYSE officials had remained largely silent on the compensation flap, despite Mr. Reed's past statements that the pay flap was "an embarrassment" to the exchange that he would try to resolve. But earlier this week, in his first pointed comment on the Grasso pay dispute, newly-installed NYSE chief executive John Thain said that he would like the NYSE to obtain a "very substantial return" of the "excessive" payout made to Mr. Grasso. Mr. Thain has refused to elaborate on the NYSE's plans to take back any of the pay, beyond saying in previous meetings with reporters that the exchange would cooperate with the regulators who are involved.

Write to Kate Kelly at kate.kelly@wsj.com

Updated February 27, 2004 1:21 p.m.

AND:

Freddie Mac Paid Parseghian,
Ex-CEO, $19.4 Million for Job


DOW JONES NEWSWIRES

WASHINGTON -- Freddie Mac, the mortgage powerhouse under investigation for possible securities violations, paid Gregory Parseghian roughly $19.4 million in salary, cash bonuses, stock and other compensation for his six-month stint as chief executive of the company.

Mr. Parseghian stepped in as CEO in early June 2003, after Freddie's board forced out the company's top three executives amid an accounting scandal that resulted in a massive reaudit and net increase in earnings for 2000 through 2002 of $5.1 billion.


But the company's primary regulator, the Office of Federal Housing Enterprise Oversight, started calling for his removal in August after investigations revealed his involvement in many of the most egregious accounting abuses, while he ran the company's investment strategy.

New data released by the company Friday show that Freddie rewarded Mr. Parseghian and others handsomely for helping to steer the company out of its current crisis.

Richard Syron, who succeeded Mr. Parseghian in the top spot at the beginning of the year, was awarded $8.8 million in restricted stock and just over $100,000 in other compensation in 2003.

Freddie also disclosed that it has paid about $2.2 million in legal fees for current and former employees who have provided testimony in regard to the numerous lawsuits and federal investigations affecting the company and its executives.

Write to Dow Jones Newswires editors at djnews@dowjones.com

Updated February 27, 2004 11:16 a.m.


I think Grasso got ~139 Millions for 8 years; At Parseghian's rate over 8 years we're talking 310 millions. Again Grasso is working cheap!

The contributor wishes to point out that as of this posting he had no position in the shares of Mr Grasso. But wishes he did.

Thank You, Mr Grasso

Dick Grasso has just resigned as President and Chairman of the Board at The Exchange, aka New York Stock Exchange. He was shown the door because his board had compensated his superior stewardship with cash awards. Option awards were unavaliable given the corporate structure at NYSE. Had he been awarded an annual salary of single digit millions and options as is common in corporate America this tempest would not have materialized... just the same soup, different day. But in the brave new world of stock awards and cash his remunerative success, ~ 150 millions after forgiving another ~50 millions, Mr Grasso is a grasping ghoul fouling The Exchange and corporate culture.

Appointed President and COO in 1988 under Bill Donaldson the current head of the SEC , he was named to the Chairmanship in 1996 upon Donaldson's departure. For 7 years it was his show. And what a show it was. Bull and bear markets of monumental scale, rapid technological change and the concomitant competitive threats, major scandals involving member firms as well as floor members, the exposure of corruption at the highest levels of American corporate culture, and war. Had the NYSE made missteps at any one of these junctures the financial costs alone to the institution would have been measured in orders of magnitude to Mr Grasso's compensation. Can it be reasonably asserted that the institution was uninjured, unscratched through just dumb luck? His stewardship not only saved centimillions in potential fines to the institution he saved the day time and again and as a result there is still an NYSE.

Could this sad outcome be laid at the feet of the same board that granted the compensation? Could they fear the former Chairman, Grasso's old boss who now heads the SEC? Do they cringe in the face of a guy they paid ten cents on the dollar to when compared to Mr Grasso's paycheck?

Forget Mr Donaldson. Grasso's the guy who knows where all the bodies are buried and Elliot Spitzer is on the prowl.

28 Pages of National Security:

Princess Haifa, wife of the Prince Bandar, Saudi Ambassador to Washington for two decades, donates $130,000 to some woman named Ibrahim who she's never met who's married to some guy named Basnan who it turns out is a Saudi double agent. Omar al Bayoumi, a Saudi official of the Saudi Civil Aviation Authority and Basnan's bud, befriends two evildoers, Almidhar and Alhamzi, gets them an apartment next to his and fronts them a couple month's rent with money sent by the Princess to Basnan's wife. It's worth noting that the Saudi double, Basnan, neglects to tell his FBI handlers any of this. Almidhar and Alhamzi land AA 77 on the Pentagon. Basnan meets with Saudi Interior Minister Prince Nayef in Houston in April 2002 while Crown Prince Abdullah is eating barbecue down at Crawford Texas with President Bush. While all this is old news it was awhile before anybody in the media reminded us that Princess Haifa was bankrolling al-Bayoumi and Basnan. The Weekly Standard was first but it took a few days. So this is the likely contents of the 28 page redaction by the Bush administration of the Congressional Report on 9/11. Reason given: National Security. Most everyone has decided that all this reflects negatively on Bush and the accomodation with the House of Saud and Reagan/Bush in 1982 which passed for energy policy that he inherited. He's just covering his backside, yadayadayada.

Wrong.

The revelations stricken from the Conressional Report on 9/11 are truly embarassing to all concerned. To paraphrase a colleague: They know we know, we know they know we know.... So why the concern? Fact is there's a civil war underway in Saudi Arabia that is being fought between essentially centrist Crown Prince Abdullah and fundamentalists under Interior Minister Prince Nayef. Prince Abdullah doesn't need the heat of the stricken revelations just at the moment he attempts to turn the Interior Misisters flank. Our President is inclined to support Prince Abdullah but would be unable to do so just in case the intelligence connection between the Saudi Interior Ministry and AA Flight 77 became undeniable.

Were the putch underway sub rosa in Saudi Arabia to break out into the open, financial markets here and abroad could roil sufficiently to snuff the nascent recovery underway globally.

Think Iran, 1979.

Child Soldiers: Central to the following argument is the following equation: A 12 year old Liberian is more mature than an 18 year old American. In terms of self sufficiency, political sophistication, and emotional maturity the child soldiers of the third world are less children than adults. The 18 year olds volunteering for our armed services are more children than adults. If child soldiers are a bad idea let's clean our own house first. Our troops could easily comprise adults in middle age with no loss in effectiveness and with concrete advantages to the armed services and our nation. I refuse to submit my children to the fray until I'm dead and gone in the service of my nation and freedom. A test of the merits of armed conflict should include the willingness of those who support that conflict to risk their personal safety in its prosecution. After the 50 somethings then sacrifice the 40 somethings and so on down. Let elders lead by example. And let children work to prevent armed conflict and the loss of their parents assisted by adults who know the difference between imperial adventure and just war.

Donald Regan is dead. In his eighties, this former Chairman of Merrill Lynch and Ronald Reagan's Treasury Secretary and Chief of Staff, lost none of the clarity of thought he demonstrated as he and his president moved decisively to reduce federal income taxes from nosebleed levels ( top rate > 70% ). In a bald act of copyright infringement I retransmit here Mr Regan's editorial published in the WSJ after his passing. May he find peace.

A Reaganomic 'GPS'

By DONALD T. REGAN

The recent debate over President Bush's tax proposal had so many echoes of the Reagan era that I could almost recite the parts of the various players from memory. Amid all the clamor, few have stepped back -- as President Reagan did in 1981 -- and asked three basic questions: Where are we, where do we need to go, and how are we going to get there? Unfortunately, we have no GPS that could pinpoint where we are and how to navigate from here to there.

The 1981 tax debate occurred when the economy had serious ills. It was entangled in a strange phenomenon known as stagflation -- a combination of slow growth and inflation that could not be accounted for by the dominant Keynesian economic theory of the time. Keynesian economists believed that slow growth -- or no growth -- was the cure for inflation, but somehow both were happening at the same time. Tax cuts, it was feared, would only create more deficits, stimulate more inflation and raise interest rates -- already in the high teens -- further into the stratosphere.

Ronald Reagan, however, was not troubled by this state of affairs. To answer the question of where we were, he recognized that growth was held back by high tax rates and excessive regulation. As for where we needed to go, his answer was that the first priority was economic growth; other problems would take care of themselves as long as the Federal Reserve maintained a steady and moderate rate of monetary expansion. And his policy for how we were going to get there was breathtakingly simple -- the government was going to get off the back of the American people by taxing and regulating less.

The opponents of Mr. Reagan's program were saying many of the same things they said in response to the Bush tax cut proposal: We can't cut taxes, it will increase inflation and raise interest rates; deficits are already too high; tax cuts will only deprive the government of the revenues it requires to meet the many needs of the American people.

Thanks to President Reagan, we know a lot more today, although it seems that many in Congress didn't get the memo. We know that tax cuts spur economic growth by improving incentives to work and invest and by making more money available for new ventures and small business, where the real job growth occurs in our economy. There are many examples of this in recent history, from the Kennedy tax cuts of 1962, through the Reagan cuts of 1981 and 1986. We also know that deficits do not cause inflation or cause interest rates to rise. Although the deficits during the Reagan period were higher (as a percentage of gross domestic product) than the deficits projected today, interest rates declined after the Reagan tax plan was adopted.

As I interpret Mr. Bush's tax program, I think I see that he has tried to answer the same three questions that President Reagan always kept in mind -- even though the economic problems he faces are different. We are not in a period of inflation. Quite the opposite; inflation and interest rates are at historic lows. We are, however, in the midst of a slow economic recovery, in which jobs are not coming back as quickly as we might have hoped. In fact, the whole economy is changing right before our eyes, and will continue to change. Unskilled or semiskilled jobs are going overseas, and jobs involving knowledge and skill -- technology, specialized services, finance, health care, energy, entertainment and communications -- are the growth areas here at home.

The Bush tax program is ideally suited to address this new economy. Whereas Mr. Reagan saw generalized economic growth as essential, the Bush plan has both a stimulative component to start the engine and a long-term component to advance the process of moving our economy into the new areas of future growth. That's what the dividend tax cut and the cut in the capital gains rate are all about. As companies increasingly pay out dividends, and pay less of a penalty for making profits, investors will have funds to invest in new ventures. Our economy, already the most dynamic in the world, will continue to change and grow in response to the growing skills of the American people, particularly in the service sector.

President Bush should also aim to extend his tax-relief vision beyond financial transactions such as dividends and capital gains. In a knowledge economy, education and learning are real factors of production. Americans who add to their knowledge and skills are, then, adding to the stock of the nation's productive assets. The president's next tax bill should recognize this with tax credits for individuals that match the investment tax credits that have been available to business. That's a program that assesses where we are, where we need to go, and how we are going to get there.

Mullah Ashcroft testified before the Senate Judiciary Committee yesterday. No doubt fresh from a prayer meeting in his office at Justice, the Mullah stated that: "No major terror attack has occurred on American soil since September 11th." While outlining the specific accomplishments in the fight against the evildoers he pointed to the following: "Over 1,000 new and redirected FBI agents dedicated to counter-terrorism and counter-intelligence; 250 new Assistant U.S. Attorneys; and 32 new Joint Terrorism Task Forces".

These guys are good, but do they have email yet?

Few remember the nuclear physicist, Lee Wen Ho, Ph.D. who was taken down by the FBI as a spy for the PRC while at Los Alamos. Lee really did download files onto his notebook and take them home to work on (former CIA head Woolsey kept classified files on his home computer after leaving government service; not a problem). After nine months in solitary confinement (with the light on) FBI dropped 58 of 59 felony counts, Lee copped to one felony and was released for time served. The Mullah wouldn't comment on the investigation and prosecution of Lee since "There are lots of times, especially in international intelligence security matters, when we don't release things because it's not in the national interest to do so,".

No fooling. If folks understood just how lame the security services are as a group there would be so much fear and loathing and gnashing of teeth that national security would indeed be at risk.

Don't be late for prayers.