By Michael P. Regan and Mark Gilbert
Nov. 25 (Bloomberg) -- Stocks and commodities advanced, while the dollar approached a 14-year low against the yen, as reports on home sales, jobless claims and consumer confidence spurred optimism that the economic recovery is strengthening.
The Standard & Poor’s 500 Index added 0.2 percent to 1,107.79 at 10:31 a.m. in New York. Gold climbed to a record on demand for a store of value as the dollar weakened against 15 of 16 major currencies and broke 88 versus the yen for the first time since January, when it slid to the weakest since 1995.
U.S. reports today showed weekly jobless claims slid to the lowest level since September 2008, while home sales, consumer confidence and personal spending topped estimates. The Federal Reserve yesterday raised its forecast for 2010 U.S. growth to a range of 2.5 percent to 3.5 percent, from 2.1 percent to 3.3 percent, and signaled it will tolerate a weaker U.S. dollar.
“The U.S. is our planet’s greatest consuming nation, so a healthy U.S. economy, a healthy U.S. consumer is a strong symptom of improving global demand,” said Lawrence Creatura, a Rochester, New York-based money manager at Federated Investors Inc., which oversees $390 billion. “You’re seeing equity markets respond to that globally, as well as commodity markets.”
Europe Gains
The Dow Jones Stoxx 600 Index of European shares added 0.1 percent as raw-material producers climbed with metals. BHP Billiton Ltd., the world’s largest mining company, advanced 2.3 percent in London.
France Telecom SA gained 1.7 percent in Paris. Europe’s third-biggest phone company will merge its Orange Switzerland unit with TDC A/S’s Sunrise Communications SA division to expand in Switzerland and pay 1.5 billion euros ($2.25 billion) for a majority stake.
Equities pared gains after Dubai World, the government- owned holding company struggling with $59 billion of liabilities, said it is seeking to delay repayment on all of its debt, even after Abu Dhabi banks provided $5 billion for Dubai’s support fund.
The MSCI Asia Pacific Index added 1.3 percent. Fuji Heavy Industries Ltd., the maker of Subaru cars, rose 5.3 percent in Tokyo after the exports data.
Commerce Department reports showed consumer spending increased 0.7 percent last month, beating the median estimate of 0.5 percent from economists surveyed by Bloomberg News, and new home sales increased 6.2 percent. Separate data from the Labor Department indicted that the number of Americans filing claims for unemployment benefits fell to 466,000 last week. The Reuters/University of Michigan final index of consumer sentiment was 67.4, higher than the 67 forecast by economists.
Treasuries were little changed before the government’s $32 billion Auction of seven-year notes.
‘Excessive Speculation’
Fed officials are concerned that record-low interest rates might fuel “excessive” speculation in financial markets and possibly dislodge expectations for low inflation, according to minutes of their Nov. 3-4 meeting published yesterday. The European Central Bank is debating whether to modify the loans it makes available as it starts to scale back support for the region’s banks.
Australian central bank Deputy Governor Ric Battellino said the economy has entered a “new upswing,” while the U.K. reported that gross domestic product shrank less than forecast.
Vietnam’s central bank devalued its currency and raised interest rates to rein in inflation and a widening trade deficit that’s eroding confidence in the dong.
Vietnam Devalues
The State Bank of Vietnam lowered the reference rate 5.2 percent to 17,961 against the dollar, after the gap between spot and black-market rates widened to the most in a decade. Policy makers narrowed the dong’s daily trading band to 3 percent, from 5 percent, effective tomorrow.
Emerging-market bond yields fell 4 basis points relative to U.S. Treasury notes, pushing JPMorgan Chase & Co.’s benchmark Emerging Markets Bond EMBI+ Index of total returns to a record high of 496. The index measures the average return on emerging- market international bonds since December 1993.
The MSCI Emerging-Markets Index of equities gained 0.4 percent. South Africa’s rand climbed 1.4 percent against the dollar, leading gains in developing-nation currencies. The Australian dollar climbed 0.7 percent against the U.S. currency.
The falling dollar sent gold to record highs in New York, London and Shanghai, helped by a report in the Financial Chronicle newspaper that India may purchase more bullion for its central bank reserves. Three-month lead gained 1.6 percent to $2,370 a metric ton on the London Metal Exchange, and copper advanced 0.5 percent.
Soybeans for January delivery climbed for a second day in Chicago, rising 0.8 percent to $10.54 a bushel, on speculation demand will increase in China, the world’s biggest oilseed importer. Wheat for March delivery climbed 11.75 cents, or 2.1 percent, to $5.65 a bushel, rebounding from a five-day, 7.2 percent retreat.
By Shobhana Chandra
Nov. 25 (Bloomberg) -- Purchases of new homes in the U.S. rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired.
Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low.
Rising demand shows the administration’s incentive for first-time buyers, which earlier this month was extended into next year and expanded to include current owners, may help housing recover from the worst slump since the Great Depression. Home values may remain under pressure as builders are forced to compete with mounting foreclosures as unemployment climbs.
“We are getting some help from the Federal Reserve in terms of low rates, lower prices and of course the tax credit,” said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. “People are coming off the fence and getting into the market. We have seen a bottom. I’m pretty confident that the turn in the housing industry is behind us.”
Sales were projected to climb to a 404,000 annual pace from an originally reported 402,000 rate in September, according to the median estimate in a Bloomberg survey of 75 economists. Forecasts ranged from 350,000 to 425,000. The government revised September’s reading up to 405,000. Commerce Department also said.
U.S. stocks rose after the report. The Standard & Poor’s 500 Index increased 0.2 percent to 1107.66 at 10:36 a.m. in New York.
Sales in the South
The entire increase in sales was in the South, while the other three U.S. regions registered a decline.
“The South is the largest region by size, accounting for over 50 percent of new home sales, so that the gain is still significant, even though a broader improvement would have been more favorable,” Ryan Wang, an economist at HSBC Securities USA Inc. in New York, said in a note to clients.
The median price of a new home in the U.S. decreased to $212,200, from $213,200 a year earlier.
Sales of new homes were up 5.1 percent from October 2008, the first year-over-year gain since November 2005.
Inventories dropped. The number of homes for sale fell to a seasonally adjusted 239,000, the fewest since May 1971. The supply of homes at the current sales rate decreased to 6.7 months’ worth, the lowest level since December 2006.
Timely Indicator
While accounting for less than 10 percent of the housing market, new-home purchases are considered a timelier indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier.
President Barack Obama this month extended the $8,000 tax credit for first-time homebuyers until April 30 from Nov. 30, and expanded it to include some current homeowners.
Borrowing costs may stay low as Fed policy makers have signaled they will hold the benchmark interest rate near zero for an extended period.
“The housing sector continued to recover, on balance,” central bankers said in minutes of the Nov. 3-4 meeting released yesterday.
Lower rates and stimulus efforts are reviving demand. Existing home sales jumped in October to the highest level since February 2007, the National Association of Realtors reported this week.
Tax Credit
The timing of the tax incentive’s extension indicates existing home purchases may jump again this month, decline in December and early 2010, before picking up again, the Realtors group said this week.
The erosion in prices is also abating, the S&P/Case-Shiller home-price index showed yesterday. Home prices in 20 cities rose in September from the prior month, the fourth straight gain. Compared with September 2008, the gauge had the smallest year- over-year decline since the end of 2007.
The labor market needs to turn around to ensure a sustained rebound in housing, according to economists. The unemployment rate, which rose to a 26-year high of 10.2 percent last month, will exceed 10 percent through the first half of 2010, a Bloomberg survey showed.
Foreclosure filings surpassed 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay bills, according to RealtyTrac Inc. data.
Home Improvement
Companies seeing signs of stability include Home Depot Inc., the largest U.S. home-improvement retailer. The Atlanta- based company’s third-quarter profit beat the average estimate of analysts as it slashed costs, and the chain gained market share.
Home Depot “continued to see signs of stabilization in the markets that were hardest hit by the housing crisis,” Chief Executive Officer Frank Blake said on a conference call with analysts on Nov. 17. “Despite this positive momentum, caution is appropriate.”
Happy Franksgiving
Happy Franksgiving
How FDR tried, and failed, to change a national holiday.
MELANIE KIRKPATRICK
Last I checked, Thanksgiving is still scheduled to take place tomorrow. The economic news may be gloomy, but unlike President Franklin D. Roosevelt during the Great Depression, President Barack Obama has not tinkered with the date of the holiday.
In 1939, FDR decided to move Thanksgiving Day forward by a week. Rather than take place on its traditional date, the last Thursday of November, he decreed that the annual holiday would instead be celebrated a week earlier.
The reason was economic. There were five Thursdays in November that year, which meant that Thanksgiving would fall on the 30th. That left just 20 shopping days till Christmas. By moving the holiday up a week to Nov. 23, the president hoped to give the economy a lift by allowing shoppers more time to make their purchases and—so his theory went—spend more money.
Roosevelt made his decision in part on advice from Secretary of Commerce Harry Hopkins, who was in turn influenced by Lew Hahn, general manager of the Retail Dry Goods Association. Hahn had warned Hopkins that the late Thanksgiving, Nov. 30, might have an "adverse effect" on the sale of "holiday goods."
In an informal news conference in August announcing his decision, FDR offered a little tutorial on the history of the holiday. Thanksgiving was not a national holiday, he noted, meaning that it was not set by federal law. According to custom, it was up to the president to pick the date every year.
It was not until 1863, when Abraham Lincoln ordered Thanksgiving to be celebrated on the last Thursday in November, that that date became generally accepted, Roosevelt explained. To make sure that reporters got his point, he added that there was nothing sacred about the date.
Nothing sacred? Roosevelt might as well have commanded that roast beef henceforth would replace turkey as the star of the holiday meal, or that cranberries would be banned from the Thanksgiving table. The president badly misread public opinion. His announcement was front-page news the next day, and the public outcry was swift and loud.
First to complain was Plymouth, Mass., home of the Pilgrims and location of the first Thanksgiving in 1621. "Plymouth and Thanksgiving are almost synonymous," intoned the chairman of the town's board of selectmen, "and merchants or no merchants I can't see any reason for changing it."
College football coaches also objected. The United Press news service noted mildly that coaches would find the date change "a considerable headache." The Associated Press predicted that the Roosevelt plan would "kick up more clamor than a hot halfback running the wrong way." By 1939 Thanksgiving football had become a national tradition. Many colleges ended their football seasons with Thanksgiving Day games, a custom that dated back to the 19th century. In Democratic Arkansas, the football coach of Little Ouachita College threatened: "We'll vote the Republican ticket if he interferes with our football."
FDR's proclamation of the date of Thanksgiving had the force of law only in the District of Columbia and the territories of Hawaii and Alaska. A few states mandated that Thanksgiving be marked on the date set by the president, but in most states governors issued pro forma ratifications of the date the president proclaimed.
Now, however, the celebration became a political hot potato. Governors had to read public opinion, examine the local business climate, consider political loyalties, and decide which date to select as the official Thanksgiving.
Do they stick with tradition and celebrate Thanksgiving on Nov. 30, or follow FDR's lead and change the date to Nov. 23? It wasn't long before people started referring to Nov. 30 as the "Republican Thanksgiving" and Nov. 23 as the "Democratic Thanksgiving" or "Franksgiving."
Public sentiment ran heavily against Roosevelt's plan. Ten days after the president's announcement, Gallup published the results of a national poll finding that 62% of Americans surveyed disapproved of the date change. By the time November arrived, the 48 states were nearly evenly divided. Twenty-three decided to stick with the old Thanksgiving, and 22 decided to adopt FDR's date—Texas, Mississippi and Colorado said they would celebrate on both days.
For the next two years, Roosevelt continued to move up the date of Thanksgiving, and more states resigned themselves to celebrating early. By 1941, however, the facts turned against Roosevelt.
By then, retailers had two years of experience with the early Thanksgiving, and data were available regarding the 1939 and 1940 Christmas shopping seasons. In mid-March 1941, The Wall Street Journal reported the results of a survey done in New York City. The Journal's headline put it succinctly: "Early Thanksgiving Not Worth Extra Turkey or Doll." Only 37% of stores surveyed favored the early date. In Washington, the federal government reported that the early Thanksgiving resulted in no boost to retail sales.
And so, on May 20, 1941, FDR called a press conference at the White House and announced that he was changing Thanksgiving Day back to its traditional date. The early Thanksgiving had been an "experiment," he said, and the experiment failed. It was too late to move the 1941 Thanksgiving back to the traditional date, but in 1942 Thanksgiving would revert to the last Thursday of the month. This was "the first time any New Deal experiment was voluntarily abandoned," a Washington Post columnist wrote.
Thankfully, there is a happy ending to this tale of Washington folly: On Dec. 26, 1941, Roosevelt signed a joint resolution passed by Congress making Thanksgiving a national holiday and mandating that it be celebrated on the fourth Thursday in November.
Ms. Kirkpatrick is a former deputy editor of the Journal's editorial page.
Despite its fumbles, the Federal Reserve is crucial to a better regulatory regime.
By MORTIMER ZUCKERMAN
In the grip of our Great Recession, with more job losses to come, we have yet to fix the broken financial system that is an underlying cause of this whole mess. The long history of financial panics wrecking American lives had led to what we thought was a tight regulatory system. But the system did not keep pace with fast-moving changes in the financial industry.
It is true that the Federal Reserve, perched at the top of the financial system, is blamed for creating the orgy of debt by failing to see the dangers in the rapid growth of securitization and derivatives, and for maintaining the federal-funds rate at a very low 1% in 2003-2004. Critically, while the regulators looked to their conventional issues of the safety and soundness of individual institutions, no one was responsible for protecting the entire system from the ricochets of interconnected risks.
It is also true that the wisdom that led to the Glass-Steagall Act, which separated commercial banks from investment banking during the Great Depression, was discarded. In 1999, President Bill Clinton and Congress revoked the act, thereby accelerating financial consolidation through mergers and acquisitions. So we got huge firms whose failure would bring down the whole house of cards. The too-big-to-fail phenomenon led to bailouts with taxpayer money, provoking a deep-seated public anger that has been further aggravated by the recent pile of executive bonuses.
The too-big-to-fail firms, in short, lie at the heart of the current crisis. Some are now even bigger, in part because the government had to sponsor and support several mergers that made them larger. The presumption was that big meant diversified and sophisticated and, therefore, less risky. That presumption proved false.
The dangers posed by a too-big-to-fail financial firm surely must be dealt with by new legislation, and one change needed is that the price large banks pay for the privilege of size should be significantly increased. If they benefit from explicit or implicit protection from the government, they should not be able to ride free on the backs of taxpayers.
Their risk of failure should be reduced one of two ways: by increasing capital requirements or by providing the option for the banks to be smaller or less systemic. This can be done either by narrowing what businesses they can be in or by making them less interconnected. In the worst-case scenario, the final backstop has to be bankruptcy or dissolution through a series of well-ordered procedures that do not imperil the whole economy or adversely affect our market-based system of credit.
Some also suggest that we go back to Glass-Steagall, and once again separate investment from commercial banks. This could keep the banks at least shielded from Wall Street's wild ways—but it does not deal with the financial consequences of the failure of giant investment banks or other financial institutions.
Moreover, it must be remembered that the size of many of our financial institutions, despite its role in bringing on the crisis, has also greatly benefited the U.S. economy. Size, for example, enables our big financial firms to compete against others in Europe and Asia.
The too-big-to-fail institutions operate around the world, participating with similarly large financial partners to execute diverse and large transactions. They offer a full range of products and services, from loan underwriting and risk management to local lines of credit, providing financing to states and municipalities as well as firms of all sizes.
Should we fragment and constrain the system and cap the size of banks, it would undoubtedly limit the competitive level of service, breadth of products, and speed of execution. Clients could turn to foreign banks that don't face the same restrictions. Ill-judged reform could undermine one of the most important ingredients of American global power: our financial know-how, intellectual firepower, and size.
So before any radical limits on the size of financial firms are imposed, we should test whether we can accomplish our goals through new regulatory measures, including lowering permissible leverage by imposing higher capital liquidity requirements. Regulators also should have the capacity to pressure erring firms, wind down some of their risk exposure, or wind down the firm itself. Never again should we be forced to choose between bailouts and financial collapse.
And however we go about protecting the financial system, it is critical that the Federal Reserve remain at the center of new regulatory efforts. The Fed may be less popular today on Capitol Hill, but there is no other institution—certainly not Congress—with the sophisticated understanding and detailed knowledge to monitor the financial health of the banking firms. No other institution possesses the relative degree of independence from political pressures that the Fed has exhibited over many years.
The central bank may have fumbled a bit in the evolution of the bubble economy. But once the crisis hit, it was the Fed, under Chairman Ben Bernanke, whose innovative, imaginative response to the crisis literally saved the financial world.
Mr. Bernanke's Fed found new ways to pump liquidity into the credit markets that were on the verge of a total freeze-up. This could only have happened because of the Fed's independence, experience in and understanding of the financial world, and its wide-ranging authority. No one could respond better than the Fed if the next crisis is anywhere near as severe as the last one.
Should Congress undermine the Fed, we could face a world-wide collapse of confidence in the dollar that would inevitably lead to higher interest rates. Congress is always playing the blame game, but it would be irresponsible to undermine the Fed and its capacity to handle the new financial world that we will all be living in.
Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.
Tim Geithner is not the Democrats' biggest problem.
Preparing to write about yesterday's downward revision in third-quarter GDP, we were tempted to say the Obama Administration has hit a speed-bump on its promised exit out of the recession. But it is the American economy that has hit a speed bump, and on the evidence of the policy mix emerging now from Democratic Washington, the road ahead for the economy is bump, bump, bump, bump, bump. Other than a few lucky banks, few seem be enjoying the ride.
What last month had appeared to be third-quarter growth of 3.5% in gross domestic product turns out to have been a more modest 2.8%. Consumer spending was pared back to 2.9% from 3.4%. The cash-for-clunkers subsidy produced fewer new-vehicle purchases than first estimated. In short, we aren't getting much bang for our $787 billion stimulus bucks. But you already knew that.
The frustrated Congressional Democrats who designed and enacted the stimulus seem more surprised, and they are now circling the wagons and starting to look for someone else to blame.
The Democrat catching most of the bullets is Treasury Secretary Timothy Geithner. Democratic Congressman Peter DeFazio of Oregon last week called on Mr. Geithner to resign. No surprise there. More noteworthy was that not a peep of support emerged for Mr. Geithner from the Obama White House. We've had our differences with the Treasury secretary, but how throwing Mr. Geithner off the wagon train would turn around the unemployment rate is, to put it mildly, far from clear.
The panicked Democrats' biggest problem is that Congress and the President have erected the biggest overhang of economic policy uncertainty that anyone can remember.
One big difference between Washington and private markets is that politicians think everything they do is free-standing. Markets, however, combine all the potential costs of Washington's policies and then decide whether to invest, or not. Consider what private decision-makers see in their future:
A 2,074-page, trillion-dollar health-care bill to redesign 17% of the U.S. economy. A carbon tax—cap and trade—that remains an Obama priority ahead of the Copenhagen climate summit next month. A falling dollar and gyrating commodity prices, with no idea where those prices will go next.
Democratic liberals are talking about an income tax surcharge to pay for any commitment in Afghanistan. Card check, to expand unionization of the private economy, remains a priority. Domestic discretionary spending in fiscal 2010 is set to rise at 12.1%, with inflation near zero.
Nurturing a fragile economic recovery into a durable expansion requires policies that restore public confidence and reassure investors, risk-takers and employers. The Democratic agenda is doing precisely the opposite, which is how you get subpar growth and fewer new jobs.
Economic Data Lift Stocks
Economic Data Lift Stocks
DONNA KARDOS YESALAVICH
Stocks were modestly higher Wednesday as data on new-home sales, consumer sentiment, consumer spending, personal income and weekly jobless claims all came in better than expected, although a disappointing durable-goods report limited investors' appetite for risky investments.
The Dow Jones Industrial Average was up 23 points, or 0.2%, at 10457 in recent trading. Alcoa was its strongest performer, up 1.1% as metals futures climbed. Consumer-discretionary stocks including Home Depot and Walt Disney also rose, gaining 1% and 0.7%, respectively. However, the gains were held in check as Kraft Foods dropped 1%. The food giant meets Wednesday with labor representatives for Cadbury PLC's workers to discuss its plans for the U.K. confectioner.
The technology-heavy Nasdaq Composite climbed 0.3%. The Standard & Poor's 500 rose 0.3%, led by the materials and consumer-discretionary sectors. Its energy sector was the only category in the red recently, hurt by a drop in crude-oil futures. Halliburton and Schlumberger were among the energy sector's decliners.
In other markets, the dollar fell against the euro and the yen, while Treasurys were lower, with the 10-year note recently off 7/32 to yield 3.329%.
The action came after reports showed last week's initial jobless claims fell by more than predicted and spending by Americans bounced by in October as their incomes rose slightly more than expected.
In addition, new-home sales unexpectedly climbed 6.2% in October despite bad weather and uncertainty over a big tax credit for first-time buyers.
And while the University of Michigan/Reuters preliminary consumer sentiment index moved lower to 67.4 from 70.6 in October, it came in above the expected level of 66.8, as well as the preliminary reading of 66.
Still, the boost from those reports was limited as the Commerce Department said Wednesday demand for long-lasting goods unexpectedly fell in October, and a barometer of capital spending by businesses tumbled in another sign of the recovery's sluggishness.
Nevertheless, Eric Thorne, senior vice president at Bryn Mawr Trust, noted that the market's reaction to all the data Wednesday won't mean as much as its reaction next week, when volume comes back after the Thanksgiving holiday.
"Durable goods is somewhat of a concern but not a major concern right now, as it's really housing that we think will drive things and ultimately drive consumer confidence," Mr. Thorne added.
Still to come Wednesday is the Kansas City Fed Manufacturing Survey.
Among stocks in focus, Tiffany climbed 4.1% after the jeweler Wednesday raised its sales and earnings outlook for the year.
Dobbs Reaches Out to Latinos, With Politics in Mind
PETER WALLSTEN
Former CNN anchor Lou Dobbs, pondering a future in politics, is trying to wipe away his image as an enemy of Latino immigrants by positioning himself as a champion of that fast-growing ethnic bloc.
News Hub: Lou Dobbs Offers Latinos Olive Branch
1:57Former CNN anchor Lou Dobbs reaches out to the Latino community, possibly ahead of a political run. WSJ reporter Peter Wallsten says Mr. Dobbs is even for legalizing the undocumented now.
Mr. Dobbs, who left the network last week, has said in recent days that he is considering a third-party run for a New Jersey Senate seat in 2012, or possibly for president. Polls show voters unhappy with both parties, and strategists believe Mr. Dobbs could tap populist anger over economy issues just as Ross Perot did in the 1990s.
First, though, Mr. Dobbs is working to repair what a spokesman conceded is a glaring flaw: His reputation for antipathy toward Latino immigrants. In a little-noticed interview Friday, Mr. Dobbs told Spanish-language network Telemundo he now supports a plan to legalize millions of undocumented workers, a stance he long lambasted as an unfair "amnesty."
Lou Dobbs, shown appearing on NBC's 'Today' show last week, is working to repair his reputation for antipathy toward Latino immigrants.
"Whatever you have thought of me in the past, I can tell you right now that I am one of your greatest friends and I mean for us to work together," he said in a live interview with Telemundo's Maria Celeste. "I hope that will begin with Maria and me and Telemundo and other media organizations and others in this national debate that we should turn into a solution rather than a continuing debate and factional contest."
Mr. Dobbs twice mentioned a possible legalization plan for the estimated 12 million illegal immigrants in the U.S., saying at one point that "we need the ability to legalize illegal immigrants under certain conditions."
Mr. Dobbs couldn't be reached Tuesday. Spokesman Bob Dilenschneider said Mr. Dobbs draws a distinction between illegal immigrants who have committed crimes since arriving in the U.S. and those who are "living upright, positive and constructive lives" who should be "integrated" into society. He said Mr. Dobbs recognizes the political importance of Latinos and is "smoothing the water and clearing the air."
After a career as a broadcaster and Internet entrepreneur, Mr. Dobbs turned himself into a populist firebrand, campaigning against labor outsourcing, free trade and immigration.
Mr. Dobbs left CNN saying he wanted to become an advocate. Immigration advocates, including Ms. Celeste, had long called for his ouster; critics in particular cite a 2007 report on his show that cited erroneous data suggesting illegal immigrants were tied to a spike in leprosy cases in the U.S. Mr. Dobbs told Ms. Celeste the report was a mistake, and blamed a reporter ad-libbing on the air.
Frank Sharry, who heads America's Voice, a group that advocates for legalizing undocumented immigrants, said Mr. Dobbs's conversion isn't credible, given his history of opposing efforts to liberalize immigration policies.
Jim Gilchrist, founder of the Minuteman Project, which seeks strict border enforcement and opposes legalization, said he admired Mr. Dobbs and will "watch him for several months before drawing a conclusion."
Political strategists, however, aren't dismissing the potential power of a Dobbs run. Ed Rollins, a Republican consultant who advised Mr. Perot, said Mr. Dobbs has two big factors in his favor: name recognition and a turbulent economic time that can help a populist, third-party figure.
During his Telemundo appearance, Mr. Dobbs was both defensive and conciliatory as Ms. Celeste ticked off what she said were the Latino community's grievances about Mr. Dobbs. "Many Hispanics consider you to be the No. 1 enemy of Latinos," she told him. "Do you think that the community is somehow misjudging you?"
"Oh, not somehow. Definitively, absolutely," Mr. Dobbs responded. "By the way, I don't believe for a moment that the Latino, Hispanic community in the United States believes that of me at all. It has been the efforts of the far left to characterize me in their propaganda as such."
Mr. Dobbs's relationship with Latinos will be crucial if he chooses to run against Sen. Robert Menendez (D., N.J.), the Senate's lone Hispanic. In response to the possibility, Menendez spokesman Afshin Mohamadi said: "I'm sure that he would relish eventually having an opponent from so far out of the mainstream who has never delivered a thing to the hard-working people of New Jersey."
Surge Targets Taliban Bastion
Surge Targets Taliban Bastion
MICHAEL M. PHILLIPS
KANDAHAR, Afghanistan -- Commanders in Afghanistan say they will devote the majority of the fresh troops expected from the White House to securing the country's troubled south and will especially target this volatile city, the Taliban's main power base.
A U.S. soldier snaps an image of an Afghan man's iris to be used for identification. Commanders will concentrate any new troops in the southern part of the country, putting a ring around the Taliban power base of Kandahar.
President Barack Obama will announce his revamped war strategy in an address Tuesday night from the U.S. Military Academy at West Point, the White House announced Wednesday morning. He is widely expected to adopt a plan that sends between 20,000 and 40,000 more troops to bolster a flagging military campaign and the 68,000 U.S. troops now fighting it.
But even before Mr. Obama takes his case to the public, military commanders on the battlefield are ready to implement a plan that makes a defensive ring around Kandahar a linchpin of the fight to come. No matter how many troops the president decides to authorize, the Kandahar campaign will be an early, large-scale test of U.S. Gen. Stanley McChrystal's plan of refocusing allied military, political and economic efforts on population centers and away from sparsely peopled rural areas.
The new commander of coalition forces in southern Afghanistan, British Maj. Gen. Nick Carter, and his staff detailed how they will put the McChrystal approach into action, in interviews with The Wall Street Journal: They plan to mass thousands of troops now scattered around the south and pack them into a tight cordon around the outskirts of Kandahar city.
At the same time, the coalition plans to pour economic, police and political assistance into the urban core to try to persuade residents that the Afghan government serves them better than the Taliban alternative. "We have to regain the initiative, and we have to get some momentum going," said Gen. Carter.
As Gen. McChrystal's team scrambles to reverse Taliban gains in Kandahar, they will also dispatch thousands of American soldiers to secure the major highways that pass through the city to Pakistan and southern Afghanistan.
As soon as this weekend, officers expect to order the fast-moving armored Stryker Brigade to devote itself full time to securing roads plagued by hidden bombs and illegal checkpoints run by insurgents, bandits and corrupt police.
Commanders say the Kandahar campaign will force them to pull troops away from less-urgent fights. "There's no slack out there," said U.S. Brig. Gen. Frederick "Ben" Hodges, director of operations in the south. "Additional forces -- I need them big time. I can't dominate all of the places I want to dominate."
Thousands of the new troops also would likely be deployed to expand the Kandahar approach to the most densely populated districts of the Helmand River Valley in neighboring Helmand province. Together, the two areas contain about two million of the estimated three million residents of southern Afghanistan.
A U.S. soldier from the armored Stryker Brigade, soon expected to secure roads in the Kandahar area, patrols the city recently.
The new southern strategy is an explicit recognition that a move this past summer to position a few thousand Canadian and U.S. troops outside Kandahar failed to stop insurgents from infiltrating the city.
For years the coalition paid little attention to the city, despite a huge allied presence at the airfield outside town. That neglect allowed the Taliban, whose Islamist movement was born in Kandahar, to again make inroads.
Insurgents have intimidated residents with threats and bombings and set up rudimentary courts to adjudicate local disputes -- a direct challenge to the government's right to control the instruments of justice.
Gen. McChrystal's urban strategy has its detractors, among them Arturo Munoz, a senior political scientist at Rand Corp. "Retreating from rural areas to focus on populated areas would put us in the same position as the Russians at the end of their failed campaign" in Afghanistan a generation ago, Mr. Munoz wrote in an email. "They held the cities, but the insurgents held the countryside. If we cannot engage the enemy in the countryside, then we have lost already."
But allied and Afghan officials say Kandahar is too crucial to lose. "The history of Afghanistan always was, always is and always will be determined from Kandahar," provincial Gov. Tooryalai Wesa said in an interview.
Regional Violence
Follow events in Afghanistan and Pakistan, day by day.
The Military Toll
U.S. and coalition casualties in Afghanistan
![[Afghanistan]](http://s.wsj.net/public/resources/images/OB-EX211_afghan_D_20091116161835.jpg)
The city is a crossroads on trade routes to Pakistan. The Taliban came to power in the 1990s in part on the strength of their ability to make the roads safe for travelers and truckers. The Taliban were toppled by the U.S.-led invasion after the 2001 attacks on America.
Now insurgents, common criminals and corrupt police officers set up illegal checkpoints along the highways. Allied officials say such insecurity has crippled the local economy and that Gen. Carter's plan to protect roads is central to establishing credibility for the government and the coalition.
The Stryker Brigade will have road engineers and intelligence teams on board, and will likely use high-tech surveillance equipment to try to ensure that insurgents don't plant explosives or extort money from passersby, officials say.
For security reasons, allied officers don't want to publicize how many soldiers will be involved in the Kandahar operation. They say their plan will boost the troops encircling Kandahar by 50%, while reducing the area they cover by 90%, making the cordon harder for insurgents to penetrate.
Gen. Carter is wary of inserting large numbers of foreign troops into the center of Kandahar, an ethnically Pashtun city in a Pashtun insurgency. There is a small Canadian security and economic-aid team inside the city and a 150-man U.S. military-police company. Gen. Carter plans to boost that with another small MP unit to bolster the Afghan National Police.
Details Emerge in Obama's Afghanistan Plan
2:09President Barack Obama is expected to send in 34,000 additional troops -- less than his top commander wants, but more than some of the president's allies want. Video courtesy of Fox News.
The Taliban's influence in the city is so pervasive that the Afghan police are often too frightened of kidnapping and assassination threats to move about the city freely, especially at night. One precinct commander refuses to go downtown from his station house unless accompanied by five armed patrolmen. "The Taliban would kill me," said the commander, Lt. Col. Abdul Qader.
One of Gen. Carter's priorities is to persuade local political authorities to organize a Kandahar council of tribal elders, or shura, to help guide the city and make peace with insurgents amenable to reconciliation. In Afghan culture, such institutions are used to resolve disputes.
The coalition also plans to flood Kandahar and its environs with economic aid, including a $50 million Canadian irrigation system, a U.S. farm-and-jobs project and a new electrical-distribution network expected to cost some $20 million.
The economic surge is intended to generate employment and address festering complaints that the Karzai government and its international backers cannot provide a better life for Kandahar residents.
Mr. Obama met most recently with his war council on Monday to discuss his troop plans, in the first such meeting since just before his nine-day trip to Asia. On Tuesday, he told reporters at the White House: "After eight years -- some of those years in which we did not have, I think, either the resources or the strategy to get the job done -- it is my intention to finish the job."
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Tuesday, November 24, 2009
How to reinvent China’s growth
How to reinvent China’s growth
By John Gapper
Shooting down the multi-lane highway from Qingdao airport to the centre of the coastal city this week, I had the usual impressions of a visitor to China. The roads were immaculate, the drive into town took a long time because of the sprawl of what is only a medium-sized Chinese city – only 8m or so people in the metropolitan area – and buildings sprouted on all sides.
I also noticed that I, the sole westerner in the Audi cruising in from the airport, was the only passenger wearing a seatbelt.
That is a metaphor for China itself in the week when Barack Obama paid a visit. It is travelling rapidly along the path of development into one of the world’s largest economies, without much room for error.
The US president’s visit this week has focused minds on the tensions in the US-China relationship in the wake of last year’s financial crisis. America relies on China to finance its trade deficit, while China needs the US to buy its goods in order to keep export-led growth on track.
Trade spats between the two, US pressure for China to allow the revaluation of its currency against the dollar and Chinese criticism of US economic policy (as a major holder of US Treasury bonds) led to some frosty body language between President Obama and President Hu Jintao at the summit.
Even if the US had no stake in the outcome, China would still want to reduce its reliance on exports, and perhaps allow its currency to appreciate . Unless it makes its pattern of growth more balanced, it risks being unable to sustain growth at between 8 and 10 per cent.
That involves changing course from relying on export-oriented companies to produce growth and encouraging the private sector to become more capital-efficient, pay workers more and shift from manufacturing into services.
It also means allowing job losses and getting municipalities that control corporate investment in local enterprises to step back and let a liberalised financial sector take over. It is, in short, a risky business.
Qingdao, where the FT Chinese website this week held its annual forum, is a good place from which to see the changes because it is, although prettier than many, a typical export-oriented Chinese city. A former German and Japanese colony, it is home to electronics groups including Haier and Hisense, and to Tsingtao beer. It is the ninth biggest Chinese city ranked by gross domestic product, relies on manufacturing and basic industries such as textiles for wealth creation, and has an ageing population, with 1.6m over-60s and 210,000 over-80s.
Qingdao thus encapsulates both China’s achievement and its future challenge. How does an economy with an average GDP of $3,200 per head, which relies heavily on trade, become more self-sufficient?
Michael Spence, the Nobel prize-winning economist, told the forum that China is in “a very complex and perilous transition phase” as it tries to transform from a middle-income, high-growth, very big developing economy into an advanced economy with a diversified industrial base.
The world is not big enough to keep on absorbing China’s export growth, and it faces the waning of what Arthur Kroeber, a managing director of Dragonomics, the economic consultancy, calls its “demographic dividend”.
The surge in young people eager to move from rural areas to coastal cities to work in textile and manufacturing plants is ending. China needs better-paid citizens to consume more of its output. Many, including the Chinese government itself, have focused on the need for better social and medical benefits to dissuade people from saving as much of their income, but employees also need to earn more in the first place.
The problem with the Chinese economic system is that municipalities such as Qingdao encourage local companies to expand by directing capital towards them. Bureaucrats have incentives to fund growth rather than to ensure companies achieve high margins and pay their workers well.
To ensure the latter, China must cultivate financial institutions and investors that demand higher returns on capital. It could do this by liberalising the financial sector so that decisions pass from state-controlled banks to capital markets. One difficulty with this is that it means loosening the grip of technocrats on how capital flows. The threat is not simply that somebody else gets to make the decisions, but that local jobs will be lost as low-value manufacturing is squeezed or a company from another province acquires a local one.
“This is the hard part of creative destruction – the destruction,” says Prof Spence. In China’s case, it would have an impact not only on people who lost their jobs but on the balance of power between central and local government.
In the long term, however, it would allow higher value enterprises to emerge, and create higher paid jobs. Mr Kroeber compares it to the liberalisation of China’s state-owned enterprises between 1998 and 2003, which led to job losses but then unleashed a wave of wealth creation.
Ultimately, China may not have a choice. Its unequal trade relationship with the US has led to the complaints that soured the atmosphere at this week’s summit and, even if it wanted to keep going down the same road, export-led growth would eventually hit its limits. A better balance is in China’s interests as well as the US. China cannot keep going this fast along its current road, with so little protection against an economic collision.
The Wilding of Sarah Palin
The Wilding of Sarah Palin
By Robin of BerkeleyWhen I was in college, I read a book that changed my life. It was Susan Brownmiller's tome, Against Our Will: Men, Women, and Rape, which explained rape as an act of power instead of just lust. What I found particularly chilling was the chapter on war -- how rape is used to terrorize a population and destroy the enemy's spirit.
Hatred paralyzes life; love releases it. Hatred confuses life; love harmonizes it. Hatred darkens life; love illuminates it.
In these dark times, with spiritually bankrupt people at the helm, thank God we have bright lights like Sarah Palin to illuminate the darkness.
If he does decide to increase troop numbers, the reaction from his own party will be all important 
