Iraq conquered. Administration hawks push regime change in Iran and support direct military action there just in case the nuclear program at Natanz is not decomissioned. The force of this logic is staggering. Since Saudi Arabia rulers began their putsch six months ago of the most militant mullahs, just under 2000 of the 80,000 religious leaders have been fired. Officially they've been sent for "reeducation". This is the opening salvo in an as yet undeclared civil war in the kingdom. And should any in the ruling faction favor accommodation with the mullahs, the bellicose approach to Iran by the coalition will so inflame the militant mullahs that there will be no accommodation possible in Saudi Arabia. The more beligerent the coalition towards Iran the more impetus for an otherwise divided and/or uncommitted Saudi ruling class to exterminate militant Islam in their own backyard. It's a survival thing. Priceless.

The Treasury Department (news - web sites) had warned it needed the extension by next week "to preserve the confidence in the U.S. government and to prevent uncertainty that would adversely affect our economic recovery." The current $6.4 trillion limit was breached earlier this year, and Treasury paid its bills by shifting money from government retirement and other funds, maneuvers it said it could not make again. Ken Lay call your office

May 12, Bad Hair Day for House of Saud:

Zealot bombers killed 30+ souls at 3 kaffir housing compounds in Riyadh. The good news is that apparently more Saudi shadid died than American kaffirs. Will the princes send 25k to the families of the shadid as they do to the martyrs' families in Palestine? Nah. It's tough to make the case that the martyrs weren't fighting Zionist crusaders, so expect the checques to go out from the disloyal opposition.

So now it gets interesting...until recently according to the princes there weren't any militant zealots in the Kingdom. Only rival alcohol traders. Then all of a sudden, a week before the simulcast bombings there's a published alert to the populace by the police for 19 zealots which was immediately countered by fatwas from 3 mullahs opposing the princes that said explicitly that these 19 were to be sheltered. Expect the 19 to find lots of support on the ground. This all is an unpardonable affront to the princes.

Good. Now they'll have to take out the backers of the shadid. The dudes who should know better but are obsessed by the lure of real virgins left behind by the martyrs. These folks lurk in the security services, business elites, and radical mosques. The outcome of the pogrom to ensue is far from knowable. But count on it, lots of bad guys on both sides will be dead soon.

It's a perpetual motion machine now.

This calls for a drink.

Saddam Hussein's future is not bright. Assuming he's still with us he's now as dangerous as a wounded bear. All those microbes encased in tupperware avaliable for the asking to worthy holy warriors. And with this act come to peace with his maker and rival Sallauddin. Atone for a secular life and become an arab saint while offing the enemy by the tens of millions. A cancer on humanity, unleashing his malignancies in a cascade of violent insanity. That Iraq may soon become another proving ground for assymetry like Chechnya appears to be the least of our worries. What about the stuff that was in the mobile lab the coalition found recently? Whither to?

Makes you wonder.

Facetime is Out; The Web is the Cure:

Since September 11, 2001 it has been said again and again that things are different. After SARS things get different by an order of magnitude. It's one thing to fear some pencil-necked extremeist with a bulge at the torso, it's another to fear anybody reaching for a handkerchief. By extension, the fear of the space occupied by the handkerchief weilding assassin may just make retail bricks and mortar edifices untenable. Similarly an upgrade to 1st class on an airplane seems like a lateral move. How about an upgrade to my own bottle of oxygen for the duration of the flight?

Prominent stocks and indices in this country have risen above and held at levels above flattening 200 day moving averages for long enough to question the persistence of the bear trend of the past three years. Yes things are different. The obvious financial victims of SARS (air travel, lodging, leisure travel) were already zeroed out in terms of their impact on the indices by The War on Terror. But what wasn't obvious is that if we hope to avoid the raging contagion, we're a whole lot more likely to become users and customers of all things Internet. Suddenly, getting groceries anonymously online sounds sensible. And so does a whole range of web-based goods and services. While it is a stretch to posit the cure for tech wreck it is becoming clear that many firms are about to enjoy increased demand for their cyber products and services.

When the going gets different, the different turn pro.

I Think I'm Turning Japanese; I Really Think So:

Used to be Europe/Great Britain was the leading indicator of securities trends here in the USofA. No longer. Asia now leads the curve in investment trends and the time lag appears to be around a decade. 1990 began with the Nikkei 225 Index at its zenith ~39,000. Think bubble. Think of Japan unable to get out of its own way for 13+ years. http://www.nipponstock.com/visitor/apps/html/indexe.html Sky-high taxes, corporate malfeasance, structural rigidity, low liquidity and the associated high gearing ratios, regulatory/political collusion, and the absence of political will to restructure. Long bonds at unthinkable yields combined with a volatile and ultimately declining currency. Insurance companies insolvent due to negative portfolio returns. Sound familiar? It gets better.

Let's call this background for securities price discovery in Japan. Everyone in the bull camp for US securities now hangs their hat on one time tested guage. The Three Year Rule. American stocks never go down more than three years running. We endured three years eating grass and dirt and now for the bulls there surely is an up year in the cards for 2003.

Back to Japan. Nikkei didn't make it in year four but year five was a marginal improvenent. Five years before a plus tick! The bad news: Year ten was a pretty decent one in percentage terms though it essentially went nowhere. Dear Reader, Nikkei is still building a base thirteen years on and it is at twenty year lows! So much for retained earnings and free cash flow.

Market participants are getting scarcer but those who will admit to being stock or index traders here speak of failed rallies and breaks. Trying times for sure. But just the beginning, if Japan is any indication. From 1992 to 2000 Nikkei traded in a range between 15,000 and 21,000. Which indicates that the Nikkei was able to mount 30% rallies and 25% breaks but money was steadily flowing out and making serious yen was unthinkable.

And then it tanked. At ~8,000 it's on the low side of one half of the 9 year congestion area.

In the US we mark time to a Japanese Karaoke tune. Bonds go higher, but slowly, and the currency punishes all investors inexorably.

There is a way out. One that the Japanese lacked the will to implement.

Money goes where it's well treated. Can anyone doubt this? Raise interest rates and slash taxes. Reward investment thereby. As capital flows in, in anticipation of its pampering, an optimism will accompany it that negates the ennui of the last thirteen years in Japan and adds the marginal investment yen which in turn fuels additional optimistic flows. Here in these United States were we to slash tax burdens and raise interest rates capital inflows could cure Japanese Disease in its acute stage before it becomes a chronic affliction.

The Japanese Disease is not without an antidote.

From today's WSJ: Syria, meanwhile -- which has been accused by the U.S. of experimenting with chemical weapons and charged by Israel with hiding Iraqi chemical or biological weapons -- said it would propose to the U.N. that the Middle East be declared a zone free of weapons of mass destruction. The move was pointedly aimed at Israel, which is widely believed to have nuclear weapons.

I think this is worth a letter of support for this initiative. Send a letter to your representatives in support of disarming both Israel and Iran. Then it's off to Pakistan, N Korea, and India.

Imagine Whirrled Peas.