Nick Rost van Tonningen ~ Gleanings II ~ 523 Posted by John on August 9, 2013

Quote of the Week : “We wanted a President who listens to all Americans – And we have one” -Jay Leno.

Bank of England Governor Mark Carney recently warned the big British banks they may become socially useless unless they start focusing on the real economy and on helping business to invest & create jobs. Furthermore, that mis-selling products just to turn a profit undermines their effectiveness (& their own long-term viability) – a rather interesting comment for a 12-year veteran of the Goldman school of “Job No. 1 is to screw the customer to make a profit” which, however,  helps explain why his career prospects there may have been limited.

British-born Jeremy Grantham, age 74, is CEO & co-founder of Boston-based Grantham Mayo van Otterloo (which has AUM of US$100+BN) & one of a handful of successful, legendary US professional money managers (much of whose success was a function of his longer-than-average time perspective). In a recent interview he called farming one of the two “investable ideas I have real confidence in” (the other being forestry) & has put his money where his mouth is by buying, together with his two sons, one of whom works at Harvard Management, a farm where they seemingly propose to return to more traditional & sustainable management practices (not long ago he also participated, & risked arrest, in an anti-Keystone protest at the White House since he believes strongly that environment-wise the US is on a road to nowhere).       

While the outlook for many commodities is generally deemed not all that positive, there seem to be at least two exceptions, agricultural products & oil. Using the 1977-79 agricultural prices as base 100, they declined to < 40 by 2001 but have since more than doubled & are expected to continue rising in the years to come (with potential socially destabilizing consequences in developing countries where the cost of food may account for 70%, or more, of poor people’s household budgets), unless we start using the food being grown more efficiently. Among contributing factors are the growth of global population (from 4.6BN in the late 70’s to 7BN today & 9.5BN by 2050), the worldwide growth in demand for animal protein, & the slowdown in agricultural productivity growth (for grains, for instance, from 2% annually in the 80’s to half that today, due among others to the paving over of prime farmland for industrial & urbanization purposes and its substitution with lesser quality farmland, the loss of farm land from desertification & salination, and the growing shortage of water for irrigation). As to oil, a lot of older fields (like the big ones in Saudi Arabia, the North Sea, Russia & Mexico) & many of the new shale oil ones are experiencing high depletion rates, no new large, low-cost fields have been found for a long time & the political risk in many producing countries appears to be growing (first & foremost those in the Middle East). Rather interestingly also in this context was the recent Saudi announcement that it was planning to reduce its rapidly growing domestic oil consumption by encouraging the development of alternate energy sources (first & foremost solar energy?) – which some believe means it may be starting to worry about the sustainability of its current production levels.

US economic signs are mixed. The ISM’s PMI Index for July came in at 55.4, up from 50.9 in June & over two points higher than the 53.1 expected, and first time claims for unemployment benefits were down 19,000 to 326,000 (a five year low). On the other hand, construction spending was off 0.6% to a saar of US$ 884BN (while 0.4% growth had been expected).

The official US unemployment rate has been declining. But it tells only part of the story. For the US Bureau of Labor Statistics (BLS) also maintains an ‘employment rate’ data series of the percentage of working age (15 to 64 year) people who have a job. And while it stood at 63.3% in early 2007 (when the unemployment rate was 4.7%), more recent readings were 58.3% (9.9%) in early 2010, & 58.7% (7.4%) at last report, indicative of those who have quit actively looking for a job (& of the degree of the potential underperformance of the economy?).

Since May 6^th the UST 10-year yield has gone from 1.66% to 2.74%, the greatest relative increase in any three months’ period since 1962, with mortgage rates climbing in unison. The latter has dampened demand for new mortgage-, & devastated refinancing-,  applications; thus the Mortgage News Daily Purchase Index  was down  3.4% WoW & up only 3% YoY, and its Refinance Index down 3.8% WoW & a whopping 57% YoY respectively.

Those who are bullish on the US economy on the basis of house prices being up 13.5% YoY, may be well-advised to take note of the following :

$          40% of all homeowners who benefitted from mortgage payment relief under the Home Affordable Relief Plan (HARP) have re-defaulted (which will  result, in the not-too-distant future, in more foreclosures & more repossessed homes coming onto the market);

$          while affordability has been negatively affected by house prices being up 13.5% YoY, going forward this will be reinforced by incomes being up only 1.1% YoY, & mortgage rates one-third over the past three months;

$          investors in June accounted for just 15% of all home sales, a five-year low;

$          the number of new mortgage applications has been falling at its fastest rate in four years &  mortgage refinancing applications are off 57% YoY, while home ownership is at an 18-year low (which would be bullish but for the fact that, with current mortgage-, & rent-,  costs, it takes five years for buying a house to be the better option financially); and

$          the proposed reorganization/restructuring of Fannie Mae & Freddie Mac will, over time, add to the cost of mortgage funding & of home ownership (which could be further increased by any mooted “capping” of the mortgage interest deductibility feature). 

According to Merrill Lynch institutional investors & hedge funds are selling equities as retail investors are loading up on them. Elsewhere it was noted that foreign buying of UST securities is now one-third the rate of three years ago (which may complicate the execution of a tapering decision and/or create a need for higher interest rates to attract replacement buyers). 

In 2012 Wall Street’s ten largest banks generated US$6BN in revenue from commodity trading & warehousing. But in recent weeks there has been significant media coverage of  Goldman making a great deal of money from its control of aluminum warehouses in which it deliberately & needlessly moves aluminum around at the owners’ expense, & slows down the movement thereof from producer to consumer, thereby adding to the cost of aluminum for end users. So on August 1^st aluminum tubing producer Superior Extrusion filed a suit against Goldman (& the LME) for monopolistic practices and on August 5^th CFTC Commissioner Bart Chilton announced  he wants the Fed to reverse a 10 year-old policy allowing banks to trade in commodities, saying “I don’t want banks owning warehouses, whether they are aluminum, gold, silver or anything else … The Fed should reverse the policy.” And JPMorgan has announced plans to exit commodities trading. All of this is deemed moderately bearish for commodity prices. 

Herbalife is a three decade-old Los Angeles-based, NASDAQ-listed company in the ”global nutrition and weight management” business, with 6,200 employees & 2.3MM “distributors” in 88 countries, and US$4+BN in annual sales. It is hugely profitable with reported net after-tax income equal to 11% of sales, and both sales & net income growing at double digit rates. Over the years it has often been in the spotlight, usually due to lack of product quality-, & from time to time illegal “pyramid scheme”-, allegations; in fact, in 2011 the Commercial Court in Brussels officially ruled it to be one of the latter (a ruling still under appeal).

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In April 2012 its share price hit an all-time high of US$72+ (giving it a market capitalization of US$7½ BN). Subsequently Pershing Capital’s Bill Ackman made public a 300-slide presentation reiterating the pyramid scheme allegation & then started shorting the stock big time to the point that by Christmas its price hit $24. Along the way he got into a very public squabble with a major Herbalife shareholder, the legendary Carl Icahn (who already had a reputation as a “corporate raider” before Ackman had even graduated from Harvard), who had fellow hedge fund manager, Robert Chapman of Chapman Capital, in his corner. Since then the stock first recovered to the mid-forties, thereby putting Ackman’s short position  ‘under water’ by hundreds of million dollars, & then, a week or so ago, the Godfather of the hedge fund business, octogenerian George Soros, announced he had taken a position in Herbalife, causing its share price to rocket to over US$67 & prompting Ackman, who is now in the deepest financial hole of his career, to run to the SEC with allegations Soros had engaged in insider trading & had colluded with other hedge fund managers. But with Herbalife’s earnings growing so fast its P/E is expected to decline from the low twenties to the more modest mid-teens or less, Ackman may be ‘fighting the tape’ & end up financially, & more importantly for hedge fund managers reputationally, seriously impaired.           

NSA Head, Gen. Keith Alexander, on July 31^st gave the keynote address at the Black Hat Conference in Vegas (the annual clambake for those interested in computer security). While the audience was largely sympathetic, there were a few hecklers. But when he sought to dismiss one of the latter by saying “Read the Constitution”, the heckler was said to have gotten ‘a loud & broad’ ovation when he retorted “I have. You should too.” – the drift of his talk was along the lines of ‘Trust Us’ (which, more often than not, is the last refuge of a scoundrel).

In Canada, where for some time already the government has taken measures to try & slow down what it fears is an incipient housing ‘bubble’, CMHC, Ottawa’s home loan guarantee arm, this week told financial institutions that henceforth each will be limited to just $350MM/month in guarantee coverage for their home mortgage lending operations. Earlier it had already capped its  coverage for this year to $76BN (vs. $86BN in 2012), of which $66BN had been drawn down as of July 31^st – since there is no way in which $350MM/month per institution will ever add up to anywhere near close to $10BN/month, & $350MM is a mere  drop in the bucket for the Big Five banks, this cannot help but crimp the availability of home mortgage funding in Canada.

There is a hullabaloo in Toronto about a teenager of Syrian extraction with a knife fixation & problems fitting into Canadian society being shot & killed by police on a street car. The facts, in part verified by a nearby convenience store video surveillance camera, seem to be as follows. He was waving a knife but was alone on a street car from which all other passengers had fled. A police officer (with six years’ service who last year made the Province’s “sunshine list” of those making over $100,000 but who now is on leave without pay) shot him three times on the street car (without there being any evidence the officer was in any immediate danger, the sole justifiable cause for discharging a fire arm) & then, as he lay on the streetcar floor, shot him six more times, after which, for good measure, a sergeant tasered him. His lawyer is a former federal Crown Prosecutor who seems to specialize in dodgy police cases; thus last year he had a police officer acquitted on charges of assaulting a G-20 protester during the 2010 Summit demonstrations, he is currently defending one of two police officers charged with beating up a man in a search room at a police station, and in 2004 he defended the now head of the Toronto Police Union, & his brother, both of whom charged with corruption, & succeeded in having all charges against both dropped. Another question now being raised by the victim’s family is why the police investigation is treating only the shooter as a “subject officer” while the sergeant who tasered a man who had been shot nine times, has been categorized as merely a “witness officer” – while in principle always on the side of officers who must make split-second ‘good’ decisions under stressful conditions that ex post facto ‘armchair quarterbacks’ may find easy to find fault with, this is just more evidence that many Canadian police forces are inadequately trained to the point of being unable to exercise good judgment under stress) and that, prompted by the police unions, and aided & abetted by the judiciary, they have an unhealthy tendency to put their wagons in a circle when ‘one of their own’ gets him/herself in trouble.

High food prices have long been an issue in Canada’s North : a head of lettuce that costs as little as 99¢ “down South” may cost as much $20, a three or four dollar bag of apples $15, & a $6-7/kg roast of pork 3x that. While at one time Ottawa subsidized the high foodstuff transportation costs, in 2011 the Harper government tightened the list of eligible foods & switched to paying the subsidy to retailers in the (naive, if not deluded ?) expectation they would pass the benefit thereof on to consumers. And while the government maintains food prices have, as a result, declined, many Northerners aren’t so sure & now, partly at the behest of the three territorial legislatures, Canada’s Auditor-General has agreed to investigate the situation.  

One day last weekend Iqaluit in Canada’s Far North had a daytime high temperature of 27E C, 4x its average 7E daytime high for August. This made it the warmest place that day in all of Canada & broke its previous daytime high record of 19EC. Weather in much of North America is determined by a high altitude West-East “jetstream” that usually more or less follows the Canada-US border, with typically one bulge to the North or South somewhere along its length that affects the weather pattens on the Northern half of the continent. But on this occasion it had the weirdest shape ever : a little way inland from the Pacific it went straight North to the Arctic Ocean, then featured a large, but narrow, ‘sack’ in an Easterly direction only then to turn South, more or less along the Alberta-Saskatchewan border, before resuming its usual Eastern flow pattern – this ought to, but most likely won’t, give climate change deniers food for thought.

In 1980 a Commodore VIC-20 computer, with 5 KB of memory & no monitor, retailed at $299.95, comparable to the price in today’s dollars of a laptop with a million times as much memory (& in 1987 a cell phone had the size & weight of a brick, and its price was cut from $3,500 to $2,800)- such price & quality changes have helped to keep nominal CPI growth down. 

According to the BBC, the father of one Harare resident, a retired school principal living in a rural constituency, was instructed, upon arrival at his polling station for last week’s election, to declare himself “illiterate” so that someone else could fill out his ballot paper “on his behalf”. And previously it had been reported that police raids prior to the election had targeted cell phones & wind-up radios, the latter of which, distributed by a youth NGO, were capable of receiving short-wave-, as well as AM & FM-, signals. The pretext for this was they were “spreading hate propaganda” while in reality it was that they were undermining the state broadcaster’s monopoly

GLEANINGS II – 523

Thursday August 8^th, 2013

THREE URGENT STEPS TO TAKE RIGHT NOW AS INTEREST RATES BEGIN TO EXPLODE HIGHER (Mauldin Economics, John Mauldin)

The market is finally start to override Bernanke’s promise to keep interest rates low; so :

$          exit all government bonds;

$          exit all interest-sensitive stocks, incl. home builders, car makers, utilities & REITs;

$          invest in strong companies that thrive in high interest rate environments.

Others might add cash and companies with strong balance sheets & dividend-growing abilities. 

THE SOVIET-ERA STRATEGY THAT EXPLAINS WHAT RUSSIA’S DOING WITH SNOWDEN (The Atlantic, Olga Khazan)

!           It was then called “whataboutism”, when countries/officials whipped out examples of supposed wrongdoings by their accusers to undermine the legitimacy of their criticism. Putin finally chose to shelter Snowden, after appearing reluctant to do so, to poke Obama in the eye with a stick, create the impression that Russia wasn’t going to be bossed around & prove to the world that the US wasn’t always going to get its way, and to  pump Snowden further about the NSA’s workings. In addition, opinion polls showed it to be a popular move with the Russian public & his political image needed burnishing, and seeing the US’ nose tweeked in public would go over well in the Third World.

The amazing thing about the Snowden affair after Wikileaks is that the NSA seems to have done no contingency planning at all for the eventuality of a serious leak, despite now being headed by a general & the military is typically ‘heavy’ on contingency planning.

NSA ‘DRAGNET’ WIDER THAN PREVIOUSLY EXPECTED (NBCNews, Wilson Rothman)

!           According to unnamed intelligence officials quoted by the NYT the NSA has been sifting through any international emails & text messages that mention foreign targets to an extent that Jameel Jaffer, the Deputy Legal Director of the ACLU says “involves a breathtaking invasion of millions of people’s privacy.” For, whereas Snowden said it was just filtering the electronic communications of people in direct connect with supposed evil doers, they say it has been sifting through those of anyone who even mentions a name, an email address or any info byte with any linkage at all to an overseas target. 

Albeit not a conspiracy afficionado, the current hype about threats emanating from Yemen seems to be coming at a convenient a time for a government entity in, for it, an  unwelcome spot light that seeks, without producing much, if any, by way of concrete evidence, to divert public attention from it & justify its existence & modus operandi.  

DALLAS FED’S RICHARD FISHER SEES GORDIAN KNOT IN TIMING OF TAPERING OF FED’S BOND BUYING (Dallas News, Sheryl Jean)

 !           On August 5^th he told a meeting of the National Association of State Retirement Administrators in Portland, Ore. that the Fed now owns 25% of all MBS outstanding & has been buying more than are being newly issued, that the FOMC is “close to execution mode” in reducing stimulus but is faced with a “monetary Gordian knot[1] dilemma” in doing so, & that the Fed’s balance sheet has ballooned four-fold since 2009.

            Rather interestingly, he also said that candidates other than Messrs. Summers & Cohn and Janet Yellen are being considered for the Fed’s top job (it should be remembered, however, that he was ‘talking his own book’; for he is one of the most hawkish of FOMC members).    

            DOES LARRY SUMMERS HAVE INTEGRITY? (National Journal, Michael Hirsch)

!                       No one questions his formidable intellect, nor are his critics making much of his prickly personality. It’s his integrity they question, & his tendency to be unwilling to acknowledge that in the past he may have given poor policy advice (especially as it relates to deregulation in the 90’s & more recently, in early 2009, to the magnitude of the stimulus needed). And they worry about his tendency to ignore advice that doesn’t fit his preconceived notions & that Obama still doesn’t seem to realize that the mess he inherited upon taking office was in large part of Summers’ making ten years earlier.

            At a practical level his candidacy may be doomed by opposition to his nomination in the Senate on both sides of the aisle that would make Chuck Hagel’s nomination battle look like a bun fight

            FORGET LARRY SUMMERS; WHAT IF ROGER FERGUSON TOOK OVER THE FED?

(WP, Dylan Matthews)

!           Ferguson was Fed Vice-Chairman on 9/11, when Alan Greenspan was stranded in Switzerland, & by all accounts acquitted himself well (according to William Poole, the then St. Louis Fed President, he proved “very competent under fire”). He is said to be a great mentor, and thoughtful, deliberate & conciliatory (i.e. more of a team player than Summers?), and more aware of the potential inflationary risk of pumping so much liquidity into the system &, while less enamoured of QE as the economy’s life-saver than others, incl. Bernanke, also less hawkish than Volcker on the need for much stricter bank regulation. And as CEO of TIIA-CREF (AUM of US$500+BN), he has gained useful hands-on experience running a financial business not given to undue trading.

            Although not among the three people (Yellen, Summers & former Fed Vice Chairman Don Cohn) the President is known to have been talking to, he may just ‘come up the middle’. He is not an unknown quantity for Obama (who has met him at the White House on 14 occasions since 2008). Being African-American may neuter the claims of those pushing Janet Yellen’s candidacy to break the white male stranglehold on the job. His age, he’s 61 vs. her soon to be 67, & his Fed- and private sector experience may work in his favour. And on July 31^st President Obama seemingly felt obliged to defend Summers (indirectly) against liberal Democrats uneasy with  him becoming Fed Chairman when he told a group of Senators he had “talked to a number of candidates” & was “weighing their qualities”, for the first time mentioning Donald Cohn.

            WHERE OBAMACARE PREMIUMS WILL SOAR (CNNMoney, Tami Lubhi)

!                       Under Obamacare all health insurance plans must offer all essential benefits (incl. maternity, mental health & medications) to everyone applying while, before, in many states companies could offer ‘bare bones plans’ & exclude the sick. So while in states like New York & California where this wasn’t the case premiums are expected to decrease-, in others they will increase-, substantially. Among the latter are Florida where an average 35% increase is expected, Ohio (41%) & Indiana (a whopping 72%).

            As to New York & California premiums declining, prices have an unfortunate tendency to be far more sticky on the down-, than the up-, side.

            A REPUBLICAN CASE FOR CLIMATE ACTION (NYT, William Ruckelshaus, Lee M. Thomas, William K. Reilly & Christine Todd Whitman) 

!                       We all served Republican Presidents as EPA Administrators but our message transcends party lines : we must move now to start dealing with climate change. Whatever scientific evidence there ever might have been to question its existence is weakening by the day & there is no longer any credible scientific debate about the facts : the world continues to warm, the last decade was the hottest in modern times, the oceans keep warming more than the atmosphere, sea levels are rising & Arctic ice is melting faster than projected.

!                       A carbon tax would be the best option but isn’t feasible in today’s Washington political environment. But the President’s June climate action plan, to use executive powers to make change, is politically realistic & achievable. In the past we (as EPA Administrators) successfully tackled a number of environmental challenges that climate change is now putting at risk. And we believe we can have both a strong economy & a livable climate if we look at the facts, devise a workable solution & get on with the job of implementing it.     

            Talk about “voices crying in the wilderness” (Isaiah 40:3, John 1:23, Mark 1:3). As to climate change Washington’s problem has less to do with politics than with zealotry & scientific illiteracy (Ruckelshaus was EPA Administrator from its launch in 1970 until 1973, & again from 1983 until 1985, Thomas from 1985-1989, Reilly from 1989-1993 & Todd Whitman from 2001-2003).

            CNRL BLAMES BITUMEN LEAKS ON OLD WELLS (G&M, Carrie Tait)

!                       Bitumen is leaking to the surface at a 20 bbld rate in four places at its Primrose project (with the Company already having “cleaned up” 6,300 bbls) to the point where the Government in late June ordered it to quit “steaming” (pumping live steam underground to make the bitumen underground more viscous, which is the core of the current state-of-the-art SAGD – Steam-Assisted-Gravity-Drainage  – technology for recovering it). CNRL blames faulty engineering in old ‘capped’ wells, saying it travels up in them& then escapes through cracks in the rocks and/or their concrete ‘caps’. But others wonder if the current oilsands technology, that the industry alleges reduces its carbon emissions & footprint, may cause unforeseen problems & lead to more such leaks in the future.

            CNRL is one of the larger oilsands producers & possibly one of the more creative ones. But that doesn’t mean it is any more environmentally-sensitive than rest; for key to industry thinking is the idea that operating in an environmentally-friendly manner has negative bottom lines effect that must be avoided at all cost since maximizing the bottom line is the ‘be-all-and-end-all.

            END OF IMPASSE SPARKS HOPE OF MIDEAST PEACE (G&M, Patrick Martin)

!                       On July 30^th, after a three year stalemate, Israeli & Palestinian representatives, after months of coaxing by US Secretary of State John Kerry, came to the table at the State Department in Washington & a US delegation led by Martin Indyk, Obama’s brandnew Special Envoy for Israeli-Palestinian Negotiations[2], will join the next round of talks in mid-August in either Israel or the West Bank. At this meeting it was all sweetness & light. After saying that “It’s not our intention to argue about the past, but to create solutions and make decisions for the future”, the Israeli Chief Negotiator (& Justice Minister) Tsipi Livni kissed John Kerry on both cheeks & then went to Saeb Erekat, her Paliestinian counterpart & shook his hand, with the latter subsequently declaring “No one benefits more from the success of this endeavour than Palestinians”.

!                       Under pressure from Washington the Palestinians gave way on their two key demands, a cessation of settlement’s building & the border to be negotiated being the 1949 Green Line/June 1967 border & settled for the release of another 104 Palestinian prisoners from Israeli jails (which the Jerusalem Post called “Abbas’ consolation price”).  At Kerry’s insistence the negotiations will initially focus on the border-, & security-, issues, with the former based only loosely on the Green Line, but with a provision for land swaps, in the hope this will help build a degree of trust that may set the stage for a solution of the really sensitive issues, such as the future of Jerusalem & the “right of return”.       

The most positive signs are that Tsipi Livni is Israel’s chief negotiator, that the very next day, July 31^st, a group of Palestinian  MPs, officials & businessmen visited the Israeli Parliament for the first time ever on which occasion the Palestinian flag was prominently on display in the Knesset (but during which one senior Palestinian official stunned all those present with a claim Netanyahu had “recently” & “for many hours” met with a PLO delegation at his home – which, of course, was immediately denied by the Prime Minister’s office), that the Israeli participants included representatives of the ultra-orthodox Shas Party (that isn’t part of the Cabinet), and that, while the very idea of peace negotiations is anathemous to the Jewish Home Party (that is in the Cabinet) & to many members of  the Netanyahu’s own Likud Party, Shelly Yachimovich’s party supports the process (which, no matter what, will give Netanyahu a comfortable majority in the 120-seat Knesset). On the other hand, there has been no suspension of settlement construction, the two-state solution enjoys less & less support among Palestinians, Abbas is really a President without legitimacy, Hamas, though weakened by the overthrow of the Brotherhood regime in Egypt, isn’t part of the process, and the Palestinians seem to have made most, if not all, of the concessions needed to get the parties back to the table (at least for the time being). In the end much may well depend on the extent to which Indyk can shed whatever pro-Israeli bias he may be seen to have by the Palestinians while maintaining sufficient credibility with Netanyahu c.s. to have them relinquish their traditional overbearing attitude vis a vis the Palestinians & to agree to concessions in what they have hitherto claimed are non-negotiables (such as the status of Jerusalem, to name only one), & in one matter seldom mentioned but nevertheless of critical importance, control of the water in the Jordan River & the aquifers underlying the West Bank (Israeli daily average per capita water use is 242 litres – some of it from desalination – vs. 73 litres in the West Bank & the WHO-recommended 100 litre daily minimum).

PRESIDENT-ELECT ROWHANI’S MISQUOTE ON ISRAEL SPARKS UPROAR (G&M Staff)

!           On the day before officially becoming Iran’s President Hassan Rowhani commemorated the last Friday of Ramadan by expressing solidarity with the Palestinians & condemning Israeli control of Jerusalem by saying “in our region, a wound has for many years been sitting on the body of the Islamic world in the shadow of occupation of the holy land of Palestine and the dear [al-] Quds (Jerusalem’s Arabic name)”. While these were mild words compared to the anti-Israel rants of the now former President Ahmadinejad, they were (intentionally?) misquoted by the state media as saying that Israel was a “wound … that must be cleansed.” The latter infuriated Prime Minister Netanyahu who denies  Rowhani is a “moderate”, calling him instead “a wolf in sheep’s clothing”, & who said  “Rowhani’s true face has been revealed earlier than expected”, and whose office steadfastedly maintained, even after learning Rowhani had been misquoted, that “We stand by what we say … the remarks attributed to him – we think, we are sure –  represent his true outlook.” Meanwhile, Hezbollah leader Sheik Hassan Nasrallah said that same day from his South Beirut stronghold “Some might think that the elimination of Israel is a Palestinian interest … but not just that. It is in the interest of the entire Islamic world, it is in the interest of the entire Arab world, and it is also in the national interest for every country in the region.” (The leaders of several of which, however, fear Iran’s quest for regional domination, & the vast majority of whose people are of Sunnis, not Shi’ites.

Not a great background for renewed Israeli-Palestinian peace talks.      

HOW CLOSE IS CHINA TO A CRISIS? Capital Economics, Mark Williams)

!           Its economy is slowing but the much-predicted slump ain’t going to happen. More moderate growth is likely to move China’s economy onto a more sustainable growth path. But there will be short-term consequences : it will generate problems for some commodity producers and domestically overcapacity, first & foremost in steelmaking & shipbuilding, will have to be eliminated. And a real estate sector that accounts for 9% of GDP is not sustainable. But contrary to past downturns there is no industry-wide spike in inventories. So on balance the slowdown will be positive for the economy, even though making its growth fully sustainable will require a cutback in investment that currently accounts for nearly half of all spending.

            Everybody with any common sense knew that 10+% annual growth would not be sustainable over the longer term, & it does seem Beijing is doing OK in managing a “soft landing” as the latest economic numbers seem to support..  

            ACID ATTACKERS TARGET WESTERN TEENS VOLUNTEERING AT ZANZIBAR SCHOOL (NBCNews, Ian Johnston)

!                       Two 18 year-old girls from Manchester volunteering at a Zanzibar school were walking down the street on August 7^th at 7:15 p.m. (i.e. after dark) when attackers threw acid at them, inflicting facial-, chest- & back injuries. There have been several acid attacks on the island in the past year, generally attributed to Uamsho (Awakening), an Islamist separatist group that wants to get out from under the secular regime in Tanzania (to which the island has been joined since 1964, in order to have a separate state under Sharia Law.

            Their idea is likely to scare off the foreign tourists that are a mainstay of its economy.