Bowyer has put his finger on much that ails Democrats. A factional party will fraction over time as focus on single issue concerns predominates and dictates. (See 1 below.)
Maybe McCarthy has also put his finger on something - you "should" be known by the company you keep. Details, details, details - who needs 'em when you are allowed to avoid them. (See 2 below.)
Obama has his own tooth Fairey. Why not Procter and Gamble, since Obama goes with the "Tide?" (See 3 below.)
Not as useful without the exhibits, which I don't have the computer skills to reprint, but what John Mauldin writes is always worth reading. I agree with Mauldin - the market probably has more downside but many stocks have careened to levels that make fairly decent entry points if you take a long term view and have the fortitude to add to them should what you initially buy decline another 10 - 20%. (See 4 below.)
Glick always clicks with me. (See 5 below.)
Can one doubt serious trouble lies ahead with Hamas and Hezballah arming and Iran moving persists toward becoming a nuclear nation with delivery capability? Olmert is a damn fool to sit and wait like Godot! (See 6 below.)
1) Pennsylvania Divide
By JERRY BOWYER
As a Pennsylvania voter, I'm disheartened by the identity politics now playing out as both Hillary Clinton and Barack Obama battle for votes among Democratic Party factions.
One in five supporters of Mrs. Clinton here say they won't vote for Mr. Obama should their candidate lose (and vice versa, according to pollster Terry Madonna of Franklin & Marshall College). Only 12% of nonwhite Pennsylvania voters support Mrs. Clinton. Only 29% of white ones support Mr. Obama. Gender and age cohorts break along similarly sharp lines, with women and older voters going for Mrs. Clinton, men and young voters trending toward Mr. Obama.
As a student of political history, I see these poll results as something deeper than a passing nomination squabble. For at least 40 years, Democrats have been playing identity politics and empowering factional blocs within their party.
Though others might pick a different starting point, I'd trace the start of that process to 1968 Chicago, where antiwar protestors rioted outside of the party's national convention and party leaders inside responded by creating the McGovern-Fraser commission. That commission went on to write presidential nomination rules establishing delegate quotas based on age, race and gender. State parties followed suit by structuring caucuses to favor organized activist groups such as unions.
And so now Pennsylvania Democrats, like their brethren around the country, are splitting along race, age, gender and geographical lines as they are forced to choose between Mrs. Clinton and Mr. Obama. But then, why shouldn't they? Democratic voters are just doing what they've been trained to do – thinking of themselves in group terms.
I find all of this disheartening because allowing the narrow interests of political factions to force decisions and policies onto the whole is something that James Madison warned us against. In a pro-Constitution editorial (which history has come to know as Federalist 9), he described in prescient terms precisely why political factions are dangerous.
When there is liberty, he argued, some men will create more wealth than others. Property and class factions are the result. Members of these different economic classes are tempted to pass laws which help themselves at the expense of the overall public good. Over time this excessive self-regard distorts the gift of reason and causes people to think and speak in ways that seem strange to the country at large.
If that sounds a little like the Democratic Party today, it may be because the party of Thomas Jefferson and James Madison has come to be dominated by factions. In the Keystone State, those factions include African-Americans who dominate the inner-cities, upper-class white voters in the suburbs, working-class voters in the middle regions of the state, and Latinos, seniors and college students who are dispersed in geographic pockets. And of course, ubiquitous unions.
Voters head to the polls in Pennsylvania on April 22 in a process that is supposed to lead eventually to a Democratic presidential nominee. But in watching Mrs. Clinton and Mr. Obama traverse the state, it's hard to see how one candidate will emerge from the many Democratic factions slugging it out.
Mr. Obama is hoping to overcome Mrs. Clinton by energizing college students. And anecdotal evidence suggests that a surge of support among college-age voters may be helping him. Recent statewide polls show the race tightening. My mother, who is volunteering to help the Northampton County Department of Elections process new voter registrants, is watching the Obama surge first hand. Among the new registrants she sees, the vast majority are Democratic college students, most of whom, we can presume, will vote for Mr. Obama.
Mrs. Clinton is trying to turn out her own supporters, who include traditional working-class Democrats, middle-class suburbanites and, of course, women and seniors.
Last month, it appeared that Mr. Obama's campaign was to be split apart on the edge of growing fears among white Democrats over incendiary and, at times racially charged, comments his pastor, Rev. Jeremiah Wright, delivered from the pulpit over a 20-year period that Mr. Obama attended his church in Chicago. All the while, Mr. Obama hadn't raised an objection to Rev. Wright's sermons.
To save his campaign he showed up in Philadelphia – the city where Madison and the rest drew up the Constitution in 1787 – and gave what some called "The Speech" on race in America. In doing so, Mr. Obama likely saved his presidential campaign. And he did it, in part, drawing a line all the way back to "that group of men [who had] gathered" across the street in Constitutional Hall in 1787 to write one of the founding documents of the nation. In other words, by reaching beyond the factional politics of the Democratic Party.
Democrats might have once hoped that Pennsylvania would settle their nomination fight. Instead, it has shown how dangerous it is to put voters into factional blocs that can then be exploited along racial lines. To the extent that Democrats suffer this year for not learning that lesson earlier, well, to quote Mr. Obama's pastor (who himself was quoting Malcolm X): "the chickens have come home to roost."
2) The Company He Keeps
By Andrew McCarthy
Meet Obama’s circle: The same old America-hating Left.
Why is Barack Obama so comfortable around people who so despise America and its allies? Maybe it’s because they’re so comfortable around him.
He presents as the transcendent agent of “change.” Sounds platitudinous, but it’s really quite strategically vaporous. Sen. Obama is loath to get into the details of how we should change, and, as the media’s Chosen One, he hasn’t had to.
But he’s not, as some hopefully dismiss him, a charismatic lightweight with a gift for sparkling the same old vapid cant. Judging from the company he chooses to keep, Obama’s change would radically alter this country. He eschews detail because most Americans don’t believe we’re a racist, heartless, imperialist cesspool of exploitation. The details would be disqualifying.
So, instead, we get glimpses. The most profound influence in his life, his wife Michelle, is notoriously less circumspect than her careful husband about where she’s coming from. Her college thesis, which Princeton tried to keep under lock and key, testifies to a race-obsessed worldview. She may have refined it, but she’s never grown out of it.
After four years at one of America’s most esteemed academic institutions, Michelle recoiled at the thought of “further integration and/or assimilation into a white cultural and social structure that will only allow me to remain on the periphery of society; never becoming a full participant.” That the sky has been the limit for her, that she has managed to ride the “periphery” from Princeton to Harvard Law School, to one of the country’s top law firms, and to a plethora of prestigious institutional positions, has not much altered her perspective. Through the windows of her mansion on Chicago’s south side, American society still appears as a caste system.
The United States, says she, is “just downright mean.” Never, prior to her husband’s presidential run, had she had a reason to feel proud of it, she told a campaign throng. But by last November, with Barack’s pursuit of the brass ring catching momentum, she suddenly got plenty proud. And confident: so much so that she was moved to tell MSNBC, “Black America will wake up and get it” — unite and carry him over the finish line.
THE REV. WRIGHT
Years earlier, the Obamas had gravitated to the baleful Rev. Jeremiah Wright, an unapologetic racist and hard Left firebrand. They were comfortable with him — and he with them.
By the senator’s own account, Wright is the inspiration for his memoir, The Audacity of Hope — the title is cribbed from a Wright sermon (“The Audacity to Hope”). For Michelle, who had written that a racial “separationist” would have a better understanding of American blacks than “an integrationist who is ignorant to their plight,” Wright’s Trinity Church mission statement had to resonate, right from its opening declaration:
We are a congregation which is Unashamedly Black and Unapologetically Christian… Our roots in the Black religious experience and tradition are deep, lasting and permanent. We are an African people, and remain ‘true to our native land,’ the mother continent, the cradle of civilization.
Rev. Wright inspired his congregation — of which the Obamas were 20-year members — with “black liberation theology.” The doctrine is itself the inspiration of James Hal Cone, a professor of “Systematic Theology” at Union Theological Seminary in New York City. Cone is also the author of several books, which a tendentious Wright urged Sean Hannity to read during a recent interview.
It’s a useful suggestion. For example, there is Cone’s 1969 opus, Black Theology and Black Power, in which he helpfully explains:
Black theology refuses to accept a God who is not identified totally with the goals of the black community. If God is not for us and against white people, then he is a murderer, and we had better kill him. The task of black theology is to kill Gods who do not belong to the black community.... Black theology will accept only the love of God which participates in the destruction of the white enemy. What we need is the divine love as expressed in Black Power, which is the power of black people to destroy their oppressors here and now by any means at their disposal. Unless God is participating in this holy activity, we must reject his love.
Black liberation theology, as Wright has elaborated, is closely aligned with the “liberation theology” of Nicaragua during the seventies and eighties: i.e., the doctrine that catalyzed Marxist revolutionaries. It spurred an unabashedly Leftist movement that emphasized, you guessed it, the crying need for “change” — as George Russell aptly described it in a 2001 Time magazine analysis, “social change in the process of spiritual improvement.”
It is this same drive for upheaval, for supplanting a political order which purportedly treats blacks as “less than human,” that impelled Wright’s plea for God to “damn America.” In the oppression narrative, the murder of 3000 Americans on 9/11 isn’t terrorism but social justice. America, after all, had it coming. For Wright, it was “chickens coming home to roost.” Indeed, Wright sometimes prefers to call our country “the U.S. of KKK A” — a grotesque sentiment which, we shall see, is shared by others with whom the Obamas choose to associate themselves.
For their part, the Obamas couldn’t get enough of Wright. Barack and Michelle had him marry them. They chose him to baptize their children, who were routinely exposed to Wright’s race-baiting bombast.
Obama and his supporters brusquely dismiss the drawing of sensible inferences from these gestures of admiration as “guilt by association.” In point of fact, though, the Obamas didn’t just associate with Wright. They subsidized him to the tune of over $20,000 — not exactly chump change from a couple without great means or any history of philanthropy to speak of. And until recent public attention to the pastor’s noxious rants threatened to derail his White House bid, Sen. Obama kept Wright officially on board as part of his campaign’s “African American Religious Leadership Committee.”
BILL AYERS AND BERNADINE DOHRN
With this as background, is it really all that startling that Sen. Obama enjoys a friendly relationship with Bill Ayers and his wife, Bernadine Dohrn, a pair of terrorists?
I want to be clear here: Not terrorist sympathizers. Terrorists.
The mainstream media, in their zeal to elect a Democrat, are assiduously airbrushing Ayers: “an aging lefty with a foolish past,” as the Chicago Sun-Times has so delicately put it. In fact, it is the press that is rife with foolish, aging lefties. Ayers, by contrast, is an unapologetic terrorist with a savage past — one who beat the system he so reviles when, after his years of fugitivity, terrorism charges were dropped due to government surveillance violations. He’s “guilty as sin,” by his own concession, but “free as a bird.”
Ayers didn’t just carry a sign outside the Pentagon on May 19, 1972. He bombed it. As his memoir gleefully recalled, “Everything was absolutely ideal on the day I bombed the Pentagon. The sky was blue. The birds were singing. And the bastards were finally going to get what was coming to them.”
Whether Pentagon bombing day was more or less ideal than other days, when he, Dohrn and their Weathermen comrades bombed the U.S. Capitol, the State Department, and sundry banks, police stations and courthouses, Ayers does not say. But on each occasion, there was surely optimism that the bastards were finally going to get what was coming to them.
There were lots of bombs. There is no remorse. “I don’t regret setting bombs,” he told the New York Times in 2001, sorry only that he and the others “didn’t do enough.” Like what? We can’t be sure, though National Review Online’s Jonah Goldberg recounts Ayers’s sentiments back in the day: “Kill all the rich people. Break up their cars and apartments. Bring the revolution home, kill your parents, that’s where it’s really at.”
Ayers and Dohrn have done the actual dirty work of terror, while Jeremiah Wright draws the line at waving pom-poms. But the prism through which they assay the dirty work is precisely the same: America has it coming.
For them, that makes all the difference. It’s not terror, just chickens coming home to roost. “Terrorists destroy randomly,” Ayers rationalizes with nauseating arrogance, “while our actions bore ... the precise stamp of a cut diamond. Terrorists intimidate, while we aimed only to educate.” Right. As her companion Discover the Networks profile illustrates, Dohrn now goes even further: insisting their bombings weren’t terrorist acts at all: “We rejected terrorism. We were careful not to hurt anybody.”
Maybe she’s forgotten the “bastards getting what was coming to them” part. Or maybe she’s just lying. She was, we can be confident, something less than a model of compassion back then — like at the Weathermen “War Council” meeting in 1969, when she famously gushed over the barbaric Manson Family murders of the pregnant actress Sharon Tate, coffee heiress Abigail Folger, and three others: “Dig it! First they killed those pigs, then they ate dinner in the same room with them. They even shoved a fork into the victim’s stomach! Wild!”
Charming. The “War Council,” it should be noted, concluded by first condemning the United States for — what else? — its pervasive racism, then formally declaring war against what the Weathermen called “AmeriKKKa.” Rev. Wright would have understood.
It was at the Chicago home of Ayers and Dohrn that Obama, then an up-and-coming “community organizer,” had his political coming out party in 1995. Not content with this rite of passage in Lefty World — where unrepentant terrorists are regarded as progressive luminaries, still working “only to educate” — both Obamas tended to the relationship with the Ayers.
Barack Obama made a joint appearance with Bill Ayers in 1997 at a University of Chicago panel on the outrage of treating juvenile criminals as if they were, well, criminals. Obama apologists say, “So what? People appear with other people all the time.” Nice try. This panel was orchestrated by none other than Michelle Obama, then an Associate Dean of Student Services. Ayers didn’t happen to be there — he was invited by the Obamas to educate students on the question before the house: “Should a Child Ever Be Called a ‘Super Predator?’”
And here’s how the University’s press release chose to describe this would-be super predator:
William Ayers, author of A Kind and Just Parent: The Children of Juvenile Court (Beacon Press, 1997), says “We should call a child a child. A 13-year-old who picks up a gun isn’t suddenly an adult. We have to ask other questions: How did he get the gun? Where did it come from?”
Ayers, who spent a year observing the Cook County Temporary Juvenile Detention Center in Chicago, is one of four panelists who will speak on juvenile justice[.]
The other panelists included “Illinois State Sen. Barack Obama … who is working to block proposed legislation that would throw more juvenile offenders into the adult system.” The goal was to promote change, to actuate the vision of “Chicago reformer” Jane Addams, who’d sought “the establishment of a separate court system for children which would act like a ‘kind and just parent’ for children in crisis.” Never mind the crises they’d caused the victims of their wanton murders and mayhem — the fault for those, surely, was our downright mean society.
The Ayers and Obama, meantime, kept up. There was yet another panel in 2002, Obama and Ayers waxing on “Intellectuals in Times of Crisis.” Dohrn, too, was asked to weigh in, on a panel addressing the question, “Why Do Ideas Matter?” I’m sure it was, er, wild.
In the interim, Ayers and Obama had teamed up for three years on the board of the Woods Fund, a Chicago charitable organization. Together, they voted to donate $75,000 of the largesse they controlled to the Arab American Action Network. The AAAN was co-founded by Rashid Khalidi, a longtime supporter of Palestinian “resistance” attacks against Israel, which he openly regards as a racist, apartheid state. Despite considerable evidence to the contrary, Khalidi peremptorily denies having been a PLO operative or having directed its official press agency for six years (from 1976 to 1982). There can be no gainsaying, though, that he was an influential apologist for Yasser Arafat, the terror master who spawned two Intifadas and ordered the murder of American diplomats.
In the mean, besotted United States, of course, being a terrorist, a terror apologist, or simply raging at the machine qualifies one for a cushy academic soapbox. Thus did Khalidi eventually land on his feet at the University of Chicago, where he ran in the same circles as Associate Dean Michelle Obama, Law Professor Barack Obama, University of Illinois-Chicago Education Professor Bill Ayers, and Northwestern Law Professor Bernadine Dohrn (who prepared for a career in instructing future officers of the court with a stint in federal prison for flouting a judge’s order that she testify in a grand jury investigation into the Weathermen’s infamous Brinks robbery-murders).
For Khalidi, though, greener pastures called: the opportunity to become a professor of Arab Studies at Columbia University. There, he now directs Edward Said’s legacy: Columbia’s notoriously Israel-bashing Middle East Institute — though, much to the University’s chagrin, he was scratched in 2005 from a program designed educate teachers on instructing their young students about the Middle East. New York City schools chancellor Joel Klein concluded Khalidi’s splenetic meanderings mightn’t be the best model.
They didn’t faze Barack Obama, though. He was front and center with Ayers and Dohrn at a farewell bash when Khalidi left Chicago for New York. It was only right. Khalidi, after all, had hosted a fundraiser for Obama in 2000, when the latter launched an unsuccessful campaign for a seat in the U.S. House of Representatives. And so it goes. A few weeks ago, Khalidi told worldnetdaily.com he supports Obama’s presidential run “because he is the only candidate who has expressed sympathy for the Palestinian cause,” and because Obama has promised negotiations with Iran.
Ayres, too, provided a minor ($200) contribution to Obama, in 2001. That was the year of September 11, just a few days before the Times published its excerpt of Ayres’s remembrances of bombings past. Read the short interview and ask yourself: Could anyone, let alone someone as sophisticated as Barack Obama, chat with Bill Ayers for about 30 seconds and not know exactly where is coming from?
Could they really have been friends? Well, Ayers is virtually channeling Michelle Obama and Jeremiah Wright when he wails that American “society is not a just and fair and decent place.”
“God, what a great country,” he scoffed to the Times. “It makes me want to puke.”
Hey, right back at you there, Professor. At least that’s how most of us are likely to feel. But not Sen. Obama. And that’s why Ayers — like Khalidi and Wright and Michelle Obama, and others who know the senator well while we’ve been told precious little — sees in Barack Obama the change he’s been waiting for.
3) Obama as an art form
By Meghan Daum
Will those images by Shepard Fairey that are spreading across the landscape help or hurt the candidate?
April 12, 2008
Barack Obama's face is throwing me into an existential tailspin. I'm talking about those red, cream and blue art posters all over town. If you don't know what I mean, take one look around a Trader Joe's parking lot, paying special attention to the rear windows of Priuses or bio-diesel vehicles, and I guarantee that you'll see one of these things on proud and ultra-hip display.
The posters, which depict a blocky, silk-screen-style image of Obama's shoulders and face, exist in a few versions, bearing the words "Hope," "Change" or "Progress."
The creator is Shepard Fairey, an L.A.-based artist and marketing designer who became known (to some people at least) in the early 1990s when he made stickers portraying a stenciled image of professional wrestler Andre the Giant. Capturing a style that might be described as Bolshevik constructivism meets skate-punk graffiti art, the stickers, which included the words "Obey Giant" and which he slapped on every surface he could find, quickly ascended to the realm of underground art phenomenon. Fairey, who's been arrested several times on charges of defacing billboards and other property, eventually parlayed the sticker enterprise into a not-so-underground T-shirt business.
Today, the concept of "obey" does double duty for Fairey as a business name as well as a sort of de facto free-ranging form of political protest. He sells his artwork through his own gallery as well as Obey Giant Art Inc. and licenses apparel though Obey Clothing. His website -- which sells stickers, posters and prints -- bills itself as an agent of "worldwide propaganda delivery."
The Obama poster has spread Fairey's fame, but is the image good for the candidate? Like the photograph-turned-icon of Che Guevara -- which graces the T-shirts of countless hipsters who barely know who the guy is -- Fairey's Obama poster is rooted in the graphic style of agitprop. There's an unequivocal sense of idol worship about the image, a half-artsy, half-creepy genuflection that suggests the subject is (a) a Third World dictator whose rule is enmeshed in a seductive cult of personality; (b) a controversial American figure who's been assassinated; or (c) one of those people from a Warhol silk-screen that you don't recognize but assume to be important in an abstruse way.
This cannot be the Obama campaign's idea of good public relations, I find myself thinking as I stare at one of the ubiquitous Fairey posters while waiting for my soy chai latte. It's just too bohemian and too vulnerable to misinterpretation, too much the visual equivalent of your parents smelling incense and thinking it must be pot.
As it turns out, the Obama folks think it works just fine. That even goes for the candidate, who wrote Fairey a letter in February that included the line, "I'm privileged to be a part of your artwork." (A photograph of the letter appears on Fairey's website.) At that time, Fairey had just one "Progress" version of the poster that, despite a run of only 350 copies, had gone viral on the Internet. ("Hope," which was widely distributed as a poster and a sticker, came shortly thereafter.)
Then the Obama campaign asked Fairey to do another version using the word "Change" and showing the candidate's face from a different angle (in Fairey's own editions, Obama's head is tilted; in the campaign's version, his head is straight, a classic three-quarter portrait).
When I called Fairey to ask if he worried whether the proselytical style of his work -- not to mention his penchant for self-promotion -- would undermine Obama's campaign, he emphatically said yes. He'd initially shown Obama's likeness wearing a lapel pin that depicted the Andre the Giant graphic, he explained. But when the image began to get traction, he took it off, worried that that alone could be misinterpreted. (The original iteration is still sprinkled around the urban landscape like four-leaf clovers.)
"I didn't want to hijack his awesomeness," said Fairey, whose enthusiasm for Obama now extends to T-shirts, stickers and a 16-by-30-foot banner on the side of his office building in Echo Park. "As for the propaganda aesthetic, it has been called a communist poster. But people tend to categorize things in a lazy way. The Works Progress Administration that FDR set up used the same aesthetic. They just didn't use the color red. I used red because I intentionally used a derivation of the typical USA political color palette."
Fairey told me he thinks it's solely his use of red that makes some people uneasy. I'm not so sure. He's an artist; his adoption of propaganda tools -- the graphic style, the underground distribution, and, OK, the color red -- is at least in part ironic, a comment on political-machine communiques, a subversion of them. Although, let's be honest, most people don't look at the world through the meta-tinted glasses that this genre of art requires. They may get a whiff of critique, but what if they get a stronger whiff of something they can't quite identify? And what if that confusion leads to some form of heebie-jeebies when it comes to Obama?
Still, the most radical aspect of this whole phenomenon is not the artwork itself but how it conveys Obama's sharp divergence from the generic, easily digestible cultural coding that's always been associated with getting elected. As Fairey says, Obama has "radical cachet."
But if you like Obama and you'd like to see him elected president, it's worth asking yourself exactly why none of the other candidates has dipped an ironic toe into agitprop, and whether their freedom from images that conjure mass idol worship, however archly, might not help them in the end.
On the other hand, have you seen Marc Jacobs' Hillary Clinton T-shirt, which depicts a frighteningly perky Clinton in a pearl necklace and American flag pin? It's all commodity. As a result, no one's commenting. At least Obama knows a conversation piece when he sees one.
3) Is it a Bull, Bear or Cowardly Lion Market?
By John Mauldin
Are we in a bull, a bear, or a cowardly lion market? As we will see, the answer can make a huge difference in your investment portfolio. This week I am at my Strategic Investment conference in La Jolla. About four times a year I take a break from writing the letter and bring in a guest writer. This week Thoughts from the Frontline will have the very distinguished analyst and author Vitaliy Katsenelson.
In his recent book, Active Value Investing: Making Money in Range-Bound Markets (Wiley, 2007), he exhorted investors to fasten their seat belts and lower expectations for the next decade or so.
He also provided a strategy for improving returns in this environment, what he calls range-bound or cowardly lion markets. Long-time readers will recognize some themes consistent with my own research, but Vitaliy adds some very interesting twists that I believe will make you think. In today's letter, Vitaliy runs through his analysis of what will happen and provides an overview of how investors can make money in what will otherwise be an ocean of stagnant returns. Warning: the letter will print long, but that is because there are a lot of great charts.
Let me also highly recommend Vitaliy's book, Active Value Investing. I think as you read today's letter, you will get a sense of why I am so enthusiastic about his work. You can get you copy of Bull, Bear, and Cowardly Lion Marketsby Vitaliy Katsenelson at Amazon.com.
For the next dozen years or so the US broad stock markets will be a wild roller-coaster ride. The Dow Jones Industrial Average and the S&P 500 index will go up and down (and in the process will set all-time highs and multiyear lows), stagnate, and trade in a tight range. At some point during the ride, index investors and buy and hold stock collectors will realize that their portfolios aren't showing much of a return.
I know this prediction has a mild sci-fi feel to it. After all, how could I possibly know what the market will do, especially that far into the future? Though I'll explain in more detail in just a second why I have the audacity to make this prediction, let me offer you a little factoid: over the last 200 years, every full-blown, long-lasting (secular) bull market (and we just had a supersized one from 1982 to 2000) was followed by a range-bound market that lasted about 15 years. Yes, this happened every time, with the exception of the Great Depression, over the last two centuries.
Though we tend to think about market cycles in binary terms - bull (rising) or bear (declining) - in the long run markets spend a lot more time in bull or range-bound (sideways) states, roughly half in each, and visit a bear cage a lot less often then we think. This distinction between bear and range-bound markets is extremely important, as you'd invest very differently in one versus the other.
Are bull markets driven by superfast economic growth? Are range-bound markets caused by subpar economic growth? Could the subpar market performance be related to high or low inflation?
The answer to all these questions is undoubtedly - "no." Though it is hard to observe in the everyday noise of the stock market, in the long run stock prices are driven by two factors: earnings growth (or decline) and/or price-to-earnings expansion (or contraction).
As is apparent from Exhibits 1 & 2, either by a decade at a time or a market cycle at a time, it is difficult to find a link between stock performance and the economy (e.g., GDP, corporate earnings growth, or inflation). The connection does exist, but periods of disconnect appear to last for decades at a time.
What about interest rates? Exhibit 3 shows P/Es for the S&P 500 (based on one-year trailing earnings) and inverse long-term bond yields - the implied P/E - the famous Fed Model. This model, despite its name, is NOT endorsed by the Fed; it indicates the existence of a tight relationship between (inverse of) long-term Treasury bonds and P/Es of the S&P 500.
By taking a look at the last full 1966-2000 range-bound/bull market cycle (see Exhibit 3), we can see that the Fed Model perfectly predicted the direction of equities in relation to interest rates (okay, assuming you could predict interest rates). Long-term interest rates were rising from 1966 to 1982, while implied and actual P/Es were falling. Whereas from 1982 to 2000 interest rates were dropping, and implied and actual P/Es were rising. Intellectually that makes sense, because stocks and bonds compete for investors' capital, and thus higher interest rates make equities less attractive and vice versa.
However, it is hard to find ANY relationship between interest rates and the animal with its name on the secular market if you look at the first 66 years of the 20th century. None!
It is difficult to dismiss the role interest rates play in stock valuations, but they seem to be a second fiddle in the orchestra conducted by economic growth and valuation. If the Fed Model worked flawlessly, how could we explain declining P/Es of Japanese stocks in the last decade of the 20th century, when interest rates declined and were scratching zero levels?
It is valuation! If earnings growth in the long run remains consistent with the past, P/E is the wild card that is responsible for future returns. Though continued economic growth appears to be a wildly optimistic assumption given the meltdown of the housing industry in particular, and job layoffs, it is not particularly unrealistic to predict that we will see economic growth overall. With the exception of the Great Depression (see Exhibits 1 & 2), though it had its ups and downs, economic growth was fairly stable throughout the 20th century. Earnings, though more volatile than real GDP, grew consistently decade after decade, paying no attention to the animal (bull, bear ... or cowardly lion - my pet name for range-bound markets, whose bursts of occasional bravery lead to stock appreciation, but which are ultimately overrun by fear that leads to a subsequent descent) lending its name to the stock market.
Though economic fluctuations were responsible for short-term (cyclical) market volatility, as long as economic performance was not far from the average, long-term market cycles were either bull or range-bound. Valuation - the change in price to earnings, its expansion or contraction - was the wild card that was mainly responsible for markets being in a bull or range-bound state.
Market Cycle Math
So let's examine the stock market math for secular bull, range-bound, and bear markets. The following Exhibit 4 shows sources of price appreciation in past bull, range-bound, and bear markets.
During bull markets, a vibrant, peaceful combination of P/E expansion (a staple of bull markets, a great source of return) and earnings growth brings outsize returns to jubilant investors. Prolonged bull markets start with below- and end with above-average P/Es.
P/Es are some of the most mean-reverting creatures, and range-bound markets act as clean-up guys: they rid us of the mess (i.e., deflate high P/Es) caused by bull markets, taking them down towards and actually below the mean. P/E compression wipes out most if not all earnings growth, resulting in zero (or nearly) price appreciation plus dividends.
Bear markets are range-bound markets' cousins; they share half of their DNA: high starting valuations. However, where in cowardly lion markets economic growth helps to soften the blow caused by P/E compression, during secular bear markets the economy is not there to help. Economic blues (runaway inflation, severe deflation, subpar or negative economic or earnings growth) add oil to the fire (started by high valuations) and bring devastating returns to investors.
A true secular bear market has not really taken place in the US, but one has occurred across the pond in Japan. The market decline caused by the Great Depression, though referred to as the greatest decline in US stocks in the 20th century, only lasted three years and thus doesn't really fit the traditional "secular" requirement of lasting more than five years. Japan's Nikkei 225 suffered (see Exhibit 5) through a true secular bear market: stock prices declined over 80 percent from their 1989-1991 highs until they bottomed in 2003 (the market seems to be coming back now). For more than a decade the country struggled with deflation caused by its banking system coming to a near halt on the heels of a collapsing real estate market and the bad loans that came with it. Of course, all this took place on the heels of a huge bull market, and thus very high valuations.
A unique aspect that contributed to the severity and longevity of the Japanese deflation was a cultural issue: the Japanese government intervened and did not allow structurally defunct companies to go bankrupt, thus tampering with the nucleus of capitalism (and Darwinism as well), creative destruction. I must admit, it seems that lately we've been importing a lot more from Japan than their cars and flat-screen TVs, as the US government steps in to "fix" our troubled financial firms. (In the following articles I argue against government bailing out homeowners and against the Fed bailing out the economy).
Where Are We Today?
Today stocks may appear cheap at first glance, at least if you look at valuations of the late 1990s. They are not! To minimize the impact of cyclical profit volatility, let's first take a look at stock market historical and current valuations, based on 10-year trailing earnings, as shown in Exhibit 6. This way we capture a full economic cycle.
The conclusions we can draw are:
* Secular bull markets end at P/Es much above average. The 1982-2000 bull market ended at the highest valuations ever!
* Secular range-bound markets ended when P/Es were below average.
* Markets spent very little time at what is known to be a "fairly valued" state of 15 times 12-month trailing earnings. Historically, stocks only saw average valuations on the way from one extreme to the other. From 1900 to 2006 the S&P 500 spent less than 27% of the time between P/Es of 13 and 17.
* Today, after eight years of plentiful volatility and no returns, what the WSJ called a "lost decade," stocks are not cheap. If you look at ten-year trailing earnings, they are still at levels where previous range-bound markets started. In other words, based on 10-year trailing earnings, stocks are still at 64% above their average stated valuations.
Now, if you look at historical valuations where P/Es are computed based on one-year trailing earnings (see Exhibit 7), the picture is not that exciting but less grim. At about 18 times trailing earnings, US stocks don't appear that expensive.
Unfortunately, the cheapness argument falls on its face once you realize that (pretax) profit margins are hovering at an all-time high of 11.5%, about 35% above their historical (since 1980) average of 8.5%. Similarly to P/Es, profit margins are extremely mean-reverting. As companies start to earn above-average economic profits, new competition waltzes in and competes these excess profits away - arrivederci fat profit margins. Once this happens, the "E" in the "P/E" equation will decline as well, and P/Es will rise from 18 to 22. An additional point: as you see in Exhibit 8, margins don't have to revert and stop at the mean; historically they've gone below the mean - that is how the mean is created. (In the February 4th, 2008 issue of Barron's I rebuffed common arguments against profit-margin mean reversion.)
As a side note: The bulk of excesses in overall profit margins, 54.5% to be exact (see Exhibit 9), were in "stuff" stocks (i.e., energy, materials, and industrials). Profit margins will deflate when the global economy slows down. This goes far beyond oil and commodities. Companies that make "stuff," which historically have been very cyclical (today is no different) have benefited from tremendous operational leverage that contributed to considerable improvement in margins. However, leverage works both ways: lower sales and high fixed costs will push margins to the other extreme.
Financials were responsible for 22% of the excess in margins, as they benefited from tremendous liquidity hosed down by the Fed over recent years; now they are drowning in it. Their margins are compressing at a faster rate than you can read this.
Finally, the "new" economy stocks are responsible for 17% of the excess. However, I'd argue that these industries have transformed substantially since 1988, so that higher-margin software and services now account for a much larger portion of technology and telecom sales. It is kind of like Microsoft (ironically the "new" economy) vs. IBM in 1988: the hardware company (the old economy) vs. the new. Of course IBM of today is lot more of a software and service company than the hardware company it was in the 1980s. Thus the "new" economy stocks should have higher margins than they did in 1988, but by how much? I don't know, but they likely will face a lower margin compression than "stuff" and financials.
The bottom line: Remember those long-term double-digit returns you were promised by stock market gurus during the last bull market? Well, an average passive buy-and-hold investor will be lucky to have very low single-digit returns for the long term. In fact, during the last 1966-1982 range-bound market, investors received almost zero real total returns.
Analyze and Strategize
Fairly depressing stuff, and it sounds like the investor is going to have to eat lower returns. However, there are strategies to improve portfolio performance so that one can do well, even in a trading range. Whether you are a buy-and-hold or stalwart value investor, there are opportunities that don't require you to day trade stocks. You don't have to change your investment philosophy, but you have to tweak your stock analysis and strategy a little to adapt it to range-bound markets.
Modify your analysis: To clarify, I created an analytical framework where stock analysis is broken down into three dimensions: Quality, Valuation, and Growth.
Quality. Though often it is in the eye of the beholder, in my book I clarify what constitutes a quality company (i.e., sustainable competitive advantage, strong balance sheet, great management, high return on capital, and a lot more). But the lesson here is, you want to compromise as little as possible on this dimension, because it is very difficult to recover from significant losses in the range-bound market. Stick to quality.
Growth. This dimension consists of earnings (cash flows), growth, and dividends. When you own companies that grow earnings, time is on your side. Dividends are extremely important in range-bound markets, in fact 90% of the returns in past range-bound markets came from dividends, vs. less than 20% in past bull markets. Also, today an average stock (i.e., S&P 500 index) yields only 1.7%. Do you really want 1.7% to be 90% of your total return?
Valuation. This dimension requires the most modification: the valuations that we saw in the 1982-2000 bull market are not coming back anytime soon, but don't step into what I call the relative valuation trap. Don't buy stocks based solely on their relative cheapness to their prices in the past, but rather based on what their future cash flows will bring. To combat a constant P/E compression, in the range-bound market increase your required margin of safety.
That value (i.e., low P/E stocks) beats growth (high-valuation stocks that have high expectations built in) has been historically documented by numerous studies. After doing extensive study of the 1966-1982 range-bound market, I found that value kills growth. Cheaper stocks had a lower P/E compression and generated bull-market-like returns, plus they had a natural advantage: their lower P/Es led to higher dividend yields. Stock selection matters in the range-bound market. Blindly throwing money at market indices - a strategy that did wonders in the past bull market - will bring market-like returns, which likely will not pay for your dream house or fund your retirement.
Strategize: Once you have determined, based on the Quality, Valuation, and Growth framework, what stocks are to be bought and at what prices, you can start applying a range-bound market strategy.
A long-lasting secular range-bound market consists of many mini (months to several years long) cycles. For instance, the last 1966-1982 range-bound market consisted of five mini bull, five bear, and one range-bound market (See Exhibit 10).
Successful investing is a lonely place, as it requires an independent thought process that often goes contrary to the herd mentality. In the range-bound market, a contrarian mindset comes in especially handy, as you'll be selling when everyone else is buying. Your stocks will be hitting their fair value, and you'll be buying when everyone else is selling - during the mini bear markets.
This is not to suggest that you need to be a market timer, not at all. Market timing only looks easy with the benefit of hindsight, and it is very difficult to do on a consistent basis. Instead, time (price) individual stocks, one at a time. Buy when they are undervalued and sell when they are fairly valued, and repeat the process over and over again. In other words, instead of focusing on the bowling alley (the market) focus on the ball (individual stocks).
Selling is looked upon as a four-letter word, and therefore a sin, in a bull market. A buy-and-hold strategy (which is often just buy and forget to sell) is rewarded richly in secular bull markets - every time you made a "don't sell" decision, stocks go higher. And though buy and hold is not dead but in a coma (waiting for the next bull market), it takes investors to a place of no returns. Forgive yourself the "sin" of selling and become a buy-and-sell investor.
The almighty US constitutes 4% of the world population, but its stock market capitalization represents more than a third of the world's wealth. It has been comfortable for us to buy US stocks; it felt safe. However, by solely focusing on US stocks we are insulating ourselves from a greater pool of stocks to choose from. You don't need to become an Indiana Jones of international investing by venturing into fourth-world countries like South Paragama or Liberania (ok, I made those up, didn't want to offend folks in Turkmenistan or some other places heading towards the stone age), but there are plenty of countries that have a stable political regime and the rule of law.
I could be wrong but I doubt it
What if I am wrong and the range-bound market I describe is not in the cards? After all, history is prolific about the past but mute about the future. What if they find life on Venus and our economy starts growing at double digits and the secular bull market thunders upon us? Or the current credit market problems spill into a Japanese-like prolonged recession, causing a bear market? Every strategy should be evaluated not just on a "benefit of being right" basis, but at least as importantly on a "cost of being wrong" basis. An active value-investing strategy has the lowest cost of being wrong in comparison to other investment strategies, as you'll see in Exhibit 11.
5) Ahmadinejad's smile
By CAROLINE GLICK
The regime-affiliated Iranian Fars news agency published a sensational story this week. According to the Fars report, Saudi Arabia and Israel collaborated in killing Iranian terror-master Imad Mughniyeh in Damascus in February. The story is important regardless of whether it is true. It is important because it says something important about the nature of Iran's relationship with Syria. Specifically, it says that Iran views Syria as a vassal state.
If Tehran were not convinced of its control of the Syrian regime, it would never have dared to publish a story that places the Assad regime in an open confrontation with Saudi Arabia. An even partially independent Syria would never go along with such an open challenge to Saudi Arabia.
Syria, of course, is not Iran's only proxy in the Arab world. There is the Hamas regime in Gaza as well. On Thursday the Intelligence and Terrorism Information Center released an in-depth report on Hamas's military buildup since Israel's withdrawal from Gaza in September 2005. The report notes that Hamas receives arms and funding from Iran and Syria and sends its fighters for extending training at camps in Iran and Syria.
By directly supporting Hamas and by supporting Hamas indirectly through Syria and Hizbullah, Tehran has transformed Gaza into a wholly-owned subsidiary of Iran. While Hamas may have independent interests, the fact is that any independent will Hamas may have had at one time has become entirely subservient to Tehran. This is so because Tehran has rendered itself Hamas's indispensable ally and protector. Without Iran, Hamas would have no staying power.
Then there is Lebanon. The weak Saniora government, which was brought to power by the anti-Syrian and anti-Iranian March 14 Democracy Movement three years ago, is clearly no match for Iran and its proxies. Presidential elections have been held up for five months due to Hizbullah's Syrian- and Iranian-ordered refusal to agree on a compromise candidate. The Saniora government needs Hizbullah's agreement because Iran's proxies have murdered a sufficient number of cabinet ministers and members of parliament to take away Saniora's parliamentary capacity to elect a successor to the Syrian-puppet, former president Emile Lahoud.
The assassination of political opponents in Lebanon, of course, began in earnest with the March 2005 assassination of pro-Western and pro-Saudi former prime minister Rafik Hariri. This week in Washington, Sen. Arlen Specter asked Secretary of State Condoleezza Rice to comment on an interesting Syrian offer. According to Specter, during Jordanian King Abdullah's visit to Washington last month, he suggested that Syria might be willing to rein in Hizbullah and Hamas in exchange for an offer of immunity for President Bashar Assad in the UN's probe of Hariri's murder. Rice rejected the offer, but that is not what is interesting.
What is interesting is that Syria would feel comfortable making what amounts to a confession of control over Hizbullah and Hamas. While at first glance the Syrian offer seems to contradict the assertion that Syria is an Iranian proxy, it actually does no such thing. It shows that Iran is willing to shuffle some proxies around to protect other ones. To protect Assad, for instance, Iran may be willing to have Hamas leader Khaled Mashaal temporarily decamp to Tehran or Qatar or Bahrain. While such a move would have absolutely no impact on Iran's continued control over its proxies, it could neutralize the UN tribunal's threat to the Syrian regime.
To sum up, through its proxy strategy, Iran has taken control of Syria, has paralyzed and is increasingly calling the shots in Lebanon, and has effective control over Gaza, from which it can attack Israel and Egypt at will. And of course, it is the primary sponsor of the insurgency in Iraq.
LED BY Saudi Arabia and Egypt, the Sunni Arab states are well aware of Iran's proxy strategy for attaining regional dominance, and they are not pleased. The partial boycott of the Arab League summit in Damascus last month was the Sunni Arab states' way of showing their displeasure with Iran's domination of Syria and Lebanon.
On a more operational level, this week the Syrian media reported that the Syrian oppositionist National Salvation Front run by the Muslim Brotherhood and former Syrian vice president Abd al Halim Khaddam will launch an anti-regime satellite television channel in a few months. Presumably wealthy Gulf kingdoms are bankrolling the project.
Strategically, the Sunni Arab states have voiced varying degrees of interest in building their own nuclear programs to compete with the Iranian nuclear program But diplomatic snubs, jihadist television stations with anti-regime bents, and loud plans to build nuclear reactors will not suffice to defeat Iran or even to slow down its bid for regional domination. And the fact is that the Sunni states are aligned with most of Iran's policies. They keep Iraq at arm's length and loudly criticize US operations in the country. They continue to back Hamas and ostracize Israel. And they have taken no substantive stands against Hizbullah's subversion of the Saniora government since the end of the Second Lebanon War.
The main reason that the Sunni Arab countries cannot contend with Iran is that their publics share Iran's jihadist ideology. And their publics share Iran's general jihadist ideology because the Sunni states have indoctrinated their publics to believe in jihad through their state-controlled media.
Egypt, Saudi Arabia and their Sunni Arab brothers are in no position to argue with Iran publicly or to confront Iran's Arab proxies because they can't explain to their own people why Iran's bid to destroy Israel and to dominate the world in the name of Islam is a bad thing.
The attraction of Iran's jihadist ideology for so many Muslims has also helped Tehran expand its army of proxies. Acting as the avant guard of global jihad, Iran has collected otherwise adversarial terror groups in their hours of need and has transformed them into Iranian proxies over time. After the al-Qaida leadership fled Afghanistan in late 2001, for instance, many of its leaders received sanctuary in Iran from which they continued to operate.
The late al-Qaida in Iraq commander Abu Musab Zarkawi received medical care in Iran and entered Iraq from Iran. He received his operational orders from the al Qaida leadership in Iran.
In a recent interview with the Qatari Al-Arab newspaper translated by MEMRI, Ahmad Salah al-Din, who serves as the spokesman for the Iraqi Sunni jihadist group Hamas-Iraq, alleged that al-Qaida in Iraq today is wholly subservient to Iran. Salah al-Din claimed, "We found Iranian toman [currency] at an al-Qaida headquarters that we uncovered. We have also captured Iranian weapons, not to mention audio and video recordings containing announcements by al-Qaida fighters that they had received training in Iranian military camps and that al-Qaida wounded were being transported to Iran for medical treatment."
So too, Iran has a long history of collaboration with Fatah dating back to the early 1970s, when Ayatollah Khomeini's future revolutionary leaders received training in PLO camps in Lebanon. In 1999, as Yasser Arafat geared up his terror armies ahead of the launch of his terror war against Israel in 2000, Iran began funding Fatah terror cells. Today, after sponsoring Hamas's rout of Fatah in Gaza last June, Iran no longer needs to deal with the Fatah leadership. Through Syria, Hamas and Hizbullah it controls Fatah terror cells directly.
IRAN'S POLICY of combining a proxy war strategy with a popular revolutionary ideology is almost an exact reenactment of the Soviet Union's Cold War strategy for fighting the US. Two things, however, distinguish Iran's war against the West today from the Soviets' war against the West in the 20th century. First, Iran is much less powerful than the Soviet Union was. Second, the Iranian regime is far less open to deterrence than the Soviets were.
As David Wurmser, US Vice President Richard Cheney's former Middle East adviser noted recently at an address before the Philadelphia-based Middle East Forum, the Iranian regime is motivated by a messianic ideology with a strong apocalyptic component. This renders useless the threat of mutually assured destruction.
The other main distinction between the Soviet war against the West and the Iranian war against the West is that the US-led West embraced a dual strategy of confrontation and containment against the Soviets. Today, the same US-led West follows no coherent strategy for contending with Iran.
The only battleground where Iranian proxies are directly confronted today is in Iraq. After the 2006 Iranian proxy war against Israel, the US largely abandoned its support for the Saniora government. Hizbullah has been permitted to rebuild its forces and its arsenal and to reassert control over much of south Lebanon and to extend its control north of the Litani River. Rather than confront Hamas, at the US's insistence, Israel has done nothing to prevent Hamas's military buildup in Gaza or even to prevent it from continuing its rocket campaign against the western Negev.
Then too, by supporting the defeated Fatah leadership, the US and Israel are indirectly strengthening Hamas. During the Arab League summit, Fatah leader Mahmoud Abbas announced that he spends some 58 percent of his US, Israeli and European supplied budget on paying the salaries of 77,000 officials who serve under the Hamas regime in Gaza. So by funding Fatah, which supports Hamas, Israel and the US are strengthening Iran's control of Gaza through its Hamas proxy. They are also facilitating the weaker Fatah's incremental absorption into the Iranian axis.
As for Syria, both Israel and the US consistently ignore the fact that Syria is no longer an independent actor. By effectively adopting the Baker-Hamilton Iraq Study Group's recommendations from 2006, the Bush administration and Israel give credence to the notion that Syria will moderate its behavior if Israel surrenders the Golan Heights, and so encourage Iran to continue its aggression by seeming to reward it.
Then too, while allowing Sunni states to support the Muslim Brotherhood as a presumed counterweight to Iran, Israel and the US ignore the repeated pleas of Syrian Kurds for assistance in their campaign to overthrow the Syrian regime in favor of a federal, anti-Iranian democratic state. The Syrian Kurds receive no assistance from either the US or Israel in their own bid to set up a pro-democracy satellite television station to broadcast into Syria, even as they are violently repressed by the regime.
In the absence of a strategy of confronting Iran either directly or through its proxies, the only coherent course that remains is one of containment. But this option is raft with danger. With Iranian President Mahmoud Ahmadinejad's announcement this week that Iran is introducing 3,000 upgraded centrifuges to its Natanz nuclear installation, it is clear that international sanctions have had no impact on Iran's quest for nuclear weapons. It is also clear that if Iran acquires nuclear weapons, it will be impossible to confront its proxies, who will operate under Iran's nuclear umbrella.
So as Iran progresses forward with its grand strategy for regional hegemony, the West dithers and so assists it. No wonder Ahmadinejad is always smiling.
6) Israel fears Iran may ship Hezbollah arms via Beirut port
By Barak Ravid
Israel is concerned that Iran might start moving weapons to Hezbollah by means of ships that anchor in the Beirut port, government sources in Jerusalem said. The sources said oversight of marine vessels by UNIFIL (the United Nations Interim Force in Lebanon) was not efficient enough to enforce an embargo on weapons shipments into Lebanon and to pinpoint such shipments.
A government source in Jerusalem said Saturday that a year ago Israel transmitted to Germany, which at that time commanded UNIFIL's marine forces, that it suspected Iran would transfer weapons to Hezbollah by sea. The source said Israel voiced its concerns over the marine forces' insufficient control over the coast, and that Germany promised to increase its supervision.
"The problem is that UNIFIL's checks are not strict enough and are simply not serious," the source said. He said that UNIFIL soldiers do not physically examine the cargo in suspicious vessels, making do with comparing the vessel's name and registration number to the registration of the ships in the Beirut port. "We are afraid that many ships registered in the port as carrying certain cargo are in fact carrying cargo of a totally different kind," the source said.
A response from UNIFIL could not be obtained over the weekend.
Iran concedes that it provides moral support and money to Hezbollah, but denies supplying it with weapons, which would be in violation of a UN resolution. The Israel Defense Forces said last month that Iran is sending Hezbollah weapons by means of planes and trucks, passing through Turkish territory without the knowledge of the government in Ankara, and from there to Syria and Lebanon.
In the two years since the Second Lebanon War, Hezbollah has been working to rehabilitate itself and increase its strength. The organization has considerably increased the number of rockets in its possession, and it now has tens of thousands of them. According to the Israeli government source, Hezbollah has placed two thirds of these rockets south of the Litani River in the area under UNIFIL control, where the organization is not allowed to operate.
Over the past month, Israel has been lobbying in the UN to promote the release of a presidential statement by the Security Council regarding the ongoing smuggling of weapons to Hezbollah despite the arms embargo. However, the lack of consensus among the countries on the Security Council, along with American and French concerns over a worsening of the political crisis in Lebanon, have impeded progress on the statement.
About a month ago, responsibility for UNIFIL's marine forces was transferred from Germany to Italy. The marine force has been operating since October 2006, when European gun boats began patroling Lebanon's territorial waters, allowing Israel to lift the sea blockade it had enforced upon the outbreak of the war.
When the force, which consists of 11 ships and works closely alongside the Lebanese navy, locates a suspicious vessel, it sends it to be checked by the Lebanese authorities, usually at the Beirut port. The force has so far preliminarily checked 13,000 vessels, but has sent only 70 suspicious ones for comprehensive examination by the Lebanese authorities.