Life in OUR America, The Livyjr Files Volume 7 Options

[Livyjr]

"Berkshire Hathaway opening bond insurer"

By STEPHEN BERNARD, Associated Press

Last updated: 4:52 p.m., Friday, December 28, 2007

NEW YORK -- Town governments, school districts and other municipalities looking to borrow money got a new option Friday when trying to insure their bonds: billionaire investor Warren Buffett.

Buffett's formation of a bond insurance company provided some validation to an industry that has been battered by fears of collapse in recent weeks.

"If I was thinking of investing in financial guarantors, this would give me comfort," said Donald Light, a senior analyst with Celent.

Light owns Berkshire Hathaway shares.

Though analysts said the move by Buffett provides a stamp of approval for the broader business model, which has recently come under fire, shares of Buffett's newest competitors were hammered Friday.

"Any capital new to the space for reinsurance would be a net positive," said Steve Stelmach, an analyst with Friedman, Billings, Ramsey & Co., in an interview.

But if Buffett "uses capital simply as competition, it is a negative," Stelmach said.

MBIA Inc. fell 15.9 percent to close at $18.74 Friday, while Ambac fell 13.8 percent to $25.12.

Earlier in the session, MBIA shares hit a 52-week low of $18.43.

The New York Insurance Department expedited the licensing for Berkshire Hathaway Assurance Corp.

The state's insurance superintendent, in a statement, said the state was doing what it could to help insurers win regulatory approvals needed to keep their businesses going.

Buffett's foray into the bond insurance sector comes at a tumultuous time for his new competitors.

In recent weeks, bond insurers have come under fire as rating agencies have downgraded them, or warned of possible downgrades, because of their exposure to the deteriorating credit markets.

Standard & Poor's downgraded ACA Capital Holdings Inc.'s bond insurance unit to "CCC" from "A" on Dec. 19, while Fitch Ratings has placed two of the largest bond insurers, MBIA and Ambac, on negative credit watch.

Typically bond insurers carry better credit ratings than bond issuers like local governments, allowing the issuers to receive more favorable interest rates on their debt.

That in turn, allows the bond issuers to pass on the savings to tax payers.

In this case, though, the rating agencies are worried the insurers will not have enough capital to cover potential defaults on bonds and debt backed by mortgages, especially subprime mortgages given to customers with poor credit history.

Fitch said both MBIA and Ambac need to find at least $1 billion in additional capital by the end of January or face a downgrade from their current "AAA" ratings, while ACA said in a regulatory filing Thursday it has ceded some control of its business to a state regulator as it tries to survive being downgraded to junk status.

Bond insurers typically need the "AAA" rating to generate new business, and Berkshire Hathaway's unit would be expected to receive such a rating.

On Dec. 14, Fitch affirmed its "AAA" rating on Berkshire Hathaway.

If Berkshire Hathaway leverages its strength and issues reinsurance to other bond insurers as part of its new business, it could help boost firms like MBIA and Ambac, Stelmach said.

Rating agencies said one of the ways MBIA and Ambac could raise new capital is through reinsurance plans to cover their outstanding books of business.

But, if Berkshire Hathaway provides no reinsurance options and instead just issues insurance on new municipal bonds, the new competition is likely to squeeze out some of the smaller insurers, such as Security Capital Assurance, Stelmach said.

Also on Friday, Berkshire Hathaway agreed to buy NRG N.V., the reinsurance unit of ING Group said for about $435.7 million in cash.

The sale of NRG to Berkshire Hathaway is expected to close during the first half of 2008.

ING is expected to take a loss of about $145.2 million in 2007 related to the sale.

[Livyjr]

"Surge in oil prices could crimp growth"

By JOHN WILEN, Associated Press

Last updated: 6:02 p.m., Friday, December 28, 2007

NEW YORK -- Oil's run to nearly $100 a barrel this year jacked up the cost of travel, clothing, beauty products and milk, and many analysts think fuel prices will remain at historically lofty levels throughout 2008.

Record energy prices could sow the seeds of their own destruction.

Along with the housing crisis, they are contributing to an economic slowdown that is sapping the country's energy appetite just as oil producers ramp up production.

"The cure for high prices is more high prices," said Tim Evans, an analyst at Citigroup Inc., in New York.

That doesn't mean oil will plummet -- unless there's a severe recession, said Evans, who expects prices to hover near $70 a barrel.

In the face of such forecasts, OPEC could decide to cut production, as it did last year, to keep prices from falling too low.

Other factors will also keep a relatively high floor underneath prices.

Demand is expanding in China, India and the Middle East.

And political upheaval in oil-producing countries such as Iran, Iraq and Nigeria have sparked worries about possible supply disruptions.

These concerns have prompted banks and hedge funds to make big bets on oil.

Several analysts have boosted their average oil price forecasts for 2008 -- $75 a barrel is a common prediction.

And many expect tight domestic refining capacity to push gasoline prices higher in the spring, possibly threatening last May's record of $3.227 a gallon.

There are already signs that the gargantuan 6-year, 270 percent run-up in crude prices is having an impact on consumers and businesses, and that could curb demand growth.

"I am being a little bit more judicious about where we go and when we go," said Frank Ban, of Bensalem, Pa., loading his Chrysler at a Philadelphia area Wal-Mart one recent morning.

"If I cut back on my heating use any more, my pipes would freeze."

A typical family spends 3.8 percent of its income fueling a single vehicle, up from 1.9 percent in 2002, according to the Oil Price Information Service.

That's not a huge percentage, but combined with increases in prices of other energy-dependent goods and services, a family's income takes some significant hits.

Indeed, prices of consumer goods such as meat and milk are also higher these days, in part due to skyrocketing energy costs that are taxing American farmers.

The cost of corn, used to feed cattle, is rising due to demand from the ethanol industry.

Transportation costs are rising, as is the cost of plastic bottles and rubber tires, which are made from crude.

"Oh, yeah, you see that in groceries," Ban said.

At many companies, particularly in the transportation sector, programs to offset high energy prices have gone from side project to central business strategy.

In addition to raising fares, AMR Corp., the parent of American Airlines is using tractors to tow aircraft from gates to hangers, rather then relying on the planes' own engines, as a way to cut down on jet-fuel consumption.

Nagle Cos., a Walbridge, Ohio-based trucking company, has renegotiated financing with lenders to free up cash and keep its 70 rigs rolling as diesel price soar, said CEO Ed Nagle.

Even Just Born, a candy maker in Bethlehem, Pa., is raising prices of its Peeps, Hot Tamales and TeeneeBeanees to compensate for rising energy costs.

Just Born is also working to ensure machines in its plants are running at their most efficient levels and encouraging employees to turn machines and lights off when they're not in use.

The rising cost of petrochemicals is driving up the price of all kinds of consumer goods.

Lipstick and other makeup derived from oil are up 7 percent in price over the past 12 months, according to Marshal Cohen, chief analyst at NPD Group in New York.

Clothing prices have risen 3 to 5 percent over the same period, Cohen said, with synthetic-based apparel rising fastest.

Manufacturers have found that small changes can lead to big energy savings.

Gary Jones, director of environmental, health and safety at the Printing Industries of America, said commercial printers are pinching pennies by shutting off compressed air machines when not in use, installing motion-sensors for lights and turning computers off at night.

There are many signs oil-demand growth is falling.

The International Energy Agency recently slashed its 2008 forecasts, saying global oil demand will rise by 2.3 percent in 2008 to 87.7 million barrels a day, down from previous estimates of a 2.5 percent increase to 88.2 million barrels a day.

And BP PLC says oil consumption has grown at steadily lower rates over the past three years, falling to a growth rate of 0.7 percent in 2007.

Oil prices have fallen 11 percent since peaking at $99.29 a barrel on Nov. 21, in part because the Organization of Petroleum Exporting Countries has boosted output.

The cartel raised production quotas by 500,000 barrels a day on Nov. 1.

Some members are producing above their quotas, either to cash in on high prices or, in the case of Saudi Arabia, to help bring prices down enough to keep the global economy on track.

Oil companies have benefited immensely from high prices.

Profit growth is slowing because refining margins are falling.

The rise in oil prices this year has outpaced increases in gasoline and diesel prices.

While soaring energy prices are squeezing U.S. economic growth, their impact has been blunted by efficiency gains.

Lester Lave, professor of economics at Carnegie Mellon University's Tepper School of Business, notes that since the oil shock of the early 1980s, America has halved its energy use per unit of gross domestic product.

The economy is less dependent on manufacturing, and car, plane and truck engine technology has improved, letting consumers and businesses to get further on less fuel.

Efficiency has also been gained in areas such as home heating.

"We've become a much more energy-efficient economy than we were in the past," Lave said.

Spending on energy stands at about 5.7 percent of after-tax income, according to Standard & Poor's, well below the all-time high of 7.9 percent, set in 1981.

"This is why $100 crude oil isn't causing an economic meltdown," said Daniel Lippe, principal and consultant at Petral Worldwide Inc. in Houston.

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AP Business Writer John Porretto in Houston contributed to this report

[Livyjr]

"Treasurys rally on weak housing report"

By LESLIE WINES, Associated Press

Last updated: 6:02 p.m., Friday, December 28, 2007

NEW YORK -- Treasury prices rallied Friday, pushing yields lower after news that new home sales hit a more than 12-year low in November, suggesting weak construction will reduce economic growth next year.

Signs of economic softness tend to stir safe-haven demand for government-backed Treasurys and other low-risk assets.

Treasurys bolted higher after the Commerce Department said purchases of new homes last month plunged 9 percent to an annual 647,000 pace.

The Thomson/IFR forecast was for about 720,000 sales.

The sales level was the weakest since April, 1995.

The shortfall was linked to a tough mortgage-writing environment and came despite aggressive price-cutting in many regions.

"Housing demand is unlikely to stabilize until homes prices stop dropping, but home prices are unlikely to stabilize until housing demand significantly reduces the inventory overhang," said Michael Gregory, a senior economist at BMO Capital Markets.

"This is a vicious circle that has pushed homebuilders' confidence to record 22-year lows in the fourth quarter, and points to a deepening housing downturn to start 2008," he said.

The 10-year benchmark Treasury note advanced 26/32 to close at 101 8/32 with a yield of 4.09 percent, down from 4.20 late Thursday.

Prices and yields move in opposite directions.

The 30-year long bond shot up 1 21/32 to finish at 107 29/32 with a 4.51 percent yield, down from 4.62 percent late Thursday.

The 2-year note rose 4/32 to 100 7/32 with a yield of 3.12 percent, down from 3.21 percent the day before.

After hours trade moved some yields from their 3 p.m. Eastern time closing levels.

At 5:30 p.m., the 10-year yield was 4.12 percent, the 30-year yield was 4.50 percent and the 2-year yield was 3.11 percent.

The 3-month yield rose to 3.18 percent from 3.12 percent Thursday as the discount rate increased to 3.10 percent from 3.04 percent.

Another report had positive portents for the economy, showing that manufacturing activity in the Midwest expanded this month.

NAPM Chicago said its business barometer, the Chicago Purchasing Managers Index, stood at 56.6 in December, compared with the previous month's 52.9.

The result topped analysts' expectations for a second straight month.

The index is seen as a precursor of the national manufacturing assessment to be issued by the Institute of Supply Management on Wednesday.

The prices paid category, a gauge of inflation, fell to 63.8 from 76.2, showing that price pressures fell from November levels.

The Treasury market monitors inflation carefully because it cuts into the value of fixed-income.

Worries about the credit markets suffering a liquidity squeeze at year-end were lightened by news that London interbank lending, or LIBOR, rates for dollars, sterling and euros declined Friday, indicating that banks are more willing to lend to each other.

Lower premiums for the loans that banks make to each other signals that banks are not fearfully hoarding funds.

The Federal Reserve and four other central banks have taken extraordinary actions to keep the global monetary system liquid and reassure consumers and banks as 2007 reaches its end.

Separately, investor Warren Buffett's Berkshire Hathaway fund Friday opened a new business, Berkshire Hathaway Assurance Corp, to provide guarantees and insure higher ratings for municipal bonds.

The new business will give muncipal borrowers an alternative to struggling older bond insurers.

This also should reassure investors and could spur higher issuance and buying n the municipal bond market.

Older bond funds like MBIA Inc., Ambac Financial Group Inc. and ACA Capital have come under strain.

Last week, Standard & Poor's downgraded ACA to junk status, making it unlikely ACA will be able to insure any more bonds, until its rating improves.

And Fitch Ratings put Ambac Financial Group Inc. and MBIA on warning that the insurers must raise fresh capital or face downgrades.

These problems raised concerns that municipal bond issuance could slow.

[Livyjr]

"Autos likely to see weak December"

By DEE-ANN DURBIN, Associated Press

Last updated: 1:32 p.m., Friday, December 28, 2007

DETROIT -- Industry analysts are predicting a lackluster end to an already dismal year for automakers, likely the worst in nearly a decade.

Holiday discounts failed to bring consumers out of their funk, and December sales are expected to fall around 4 percent, which would bring the full-year total for U.S. auto sales to 16.1 million vehicles, the lowest volume since 1998.

Sales have been hurt by consumer anxiety over gas prices, the housing crunch and the overall weakening economy.

Industry watchers warn that the 2008 auto sales performance could be even weaker.

"Given the current economic challenges and the uncertainty associated with the upcoming presidential election, we do not anticipate that 2008 will be any more robust for the car business," said Jesse Toprak, chief economist for the auto information site Edmunds.com.

Toprak said there is little promise for a turnaround until 2009.

Bear Stearns analyst Peter Nesvold said in a recent note to investors that he's even more concerned about 2008 sales than he was a year ago, since consumer sentiment and employment levels are continuing to deteriorate.

Nesvold said the country hasn't seen a meaningful downturn in auto sales in 15 years and is long overdue for one.

"In a nutshell, if consumers don't feel good about the world or employment is slipping, they tend to delay major expenditures such as a new house or car, if possible," he said.

December is Ford Motor Co.'s last chance to hold on to its longtime position as the No. 2 automaker by U.S. sales.

Toyota Motor Corp., which outsold Ford by 15,000 vehicles in November, is on track to overtake Ford this year.

Robert Barry, an auto analyst with Goldman Sachs, predicts Ford's sales will fall 3 percent in December compared with a relatively weak December 2006.

Barry said Ford is struggling because it's at a low point in its product cycle, with a major redesign of the F-150 pickup and a new crossover not due out until next year.

In the meantime, it's being hurt by aggressive incentive spending by Toyota and other rivals.

Nesvold predicts Ford's sales could fall as much as 12 percent in December, pointing out that the automaker's newly rebadged Ford Taurus and Mercury Sable sedans and Taurus X crossover have seen disappointing results all fall.

But Nesvold said the Ford Edge crossover and Ford's smaller sport utility vehicles have held up well.

General Motors Corp. could see an even sharper decline of 14 percent due to a planned cutback in sales to rental fleets, Barry said.

In a note to investors, Barry said he expects GM to cut fleet sales by 30 percent in December, the same amount the automaker cut fleet sales in November.

Ford also has been slashing sales to rental fleets all year in an effort to shore up resale value and brand image.

Barry said Chrysler LLC will likely see double-digit drops in December, particularly since the automaker's car sales shot up 48 percent last December thanks to brisk sales of the Chrysler Sebring and 300 sedans.

Chrysler's newly redesigned minivans could significantly boost December sales, Nesvold said.

But if they don't, analysts may have to lower their expectations for the vehicles.

Japanese automakers also are expected to see lower sales in December, particularly as the housing crunch continues to dampen demand in California, their most important market.

Toprak predicts Toyota's sales will be down 3 percent compared with last December, while Honda Motor Co.'s will fall 1 percent.

Nissan Motor Co. will likely be flat, he said.

Nissan has bucked the slow sales trend in recent months on the strength of its new Rogue crossover and Versa subcompact.

[Livyjr]

"Japan prices jump, factory output falls"

By HIROKO TABUCHI, Associated Press

Last updated: 6:52 a.m., Friday, December 28, 2007

TOKYO -- Rising energy costs triggered the biggest jump in Japanese consumer prices in almost a decade while industrial production slumped, the government said Friday, clouding the outlook for the world's No. 2 economy.

The nation's jobless rate unexpectedly fell to 3.8 percent in November, but overall the mixed data cements expectations that the Bank of Japan will keep interest rates unchanged for some time, even as energy-fueled inflation accelerates.

The nationwide core consumer price index, which excludes volatile fresh food prices, jumped 0.4 percent in November compared to the same month a year ago, the Ministry of Internal Affairs and Communications said.

The reading was above analysts' expectations and marked the fastest rise since a 1.8 percent increase in March 1998.

It was also the index's second straight month of gains following a 0.1 percent rise in October.

The core CPI was lifted by a 5.4 percent jump in energy prices.

Gasoline prices surged 10.8 percent on year.

"The rise in prices involves higher oil prices, and so it's not a favorable increase," economy minister Hiroko Ota told reporters.

The Bank of Japan has looked for a rise in consumer prices as a sign the country has fully emerged from years of deflation, a continuous spiraling down of prices that deadens economic activity and brings down wages.

Still, the central bank has been cautious to hike rates too quickly amid concerns over the U.S. subprime loan crisis and the possible impact of the global economic slowdown on Japan's economy.

The Bank of Japan kept its key interest rate unchanged at 0.5 percent at its policy meeting earlier this month, still the lowest rate among major industrialized countries.

Industrial production, meanwhile, fell 1.6 percent in November from the previous month, the first drop in two months.

Industrial output rose 1.7 percent in October after falling 1.4 percent in September, the Ministry of Economy, Trade and Industry said.

The ministry also said manufacturers polled expect that their output will rise 4.0 percent on month in December, but will be flat in January.

Offering some respite was an unexpected drop in the country's jobless rate to 3.8 percent in November from 4.0 percent a month earlier.

The Ministry of Internal Affairs and Communications said the total number of jobless was down 130,000 on year, marking the 24th consecutive month of decline.

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"World outraged, fearful over Bhutto assassination"

By Matthew Tostevin

27 December 2007

LONDON (Reuters) - World leaders voiced outrage at the assassination on Thursday of Pakistan's opposition leader Benazir Bhutto and expressed fears for the fate of the nuclear-armed state.

U.S. President George W. Bush condemned the killing as a "cowardly act" and urged Pakistanis to go ahead with a planned election.

Bush urged Pakistanis to honor Bhutto's memory by continuing with the democratic process and said those behind the attack must be brought to justice.

"The United States strongly condemns this cowardly act by murderous extremists who are trying to undermine Pakistan's democracy," he told reporters at his Texas ranch.

"Making a Martyr of Bhutto"

By ARYN BAKER

27 December 2007

"She was let down by those in Washington who think that sucking up to bad governments around the world is their best policy option."

"Bhutto sent Blitzer security e-mail"

By DAVID BAUDER, AP Television Writer

28 December 2007

NEW YORK - It was a story CNN's Wolf Blitzer hoped he'd never have to report — an e-mail sent to him through an intermediary by Pakistani opposition leader Benazir Bhutto complaining about her security.

Conditions of use: only if she were killed.

Bhutto, who was assassinated on Thursday, wrote to Blitzer that if anything happened to her, "I would hold (Pakistani President Pervez) Musharraf responsible."

Blitzer received the e-mail on Oct. 26 from Mark Siegel, a friend and longtime Washington spokesman for Bhutto.

That was eight days after she narrowly escaped another attempt at her life.

Bhutto wrote to Blitzer that "I have been made to feel insecure by his (Musharraf's) minions," that specific improvements had not been made to her security arrangements, and that the Pakistani leader was responsible.

Blitzer agreed to the conditions before receiving the e-mail.

He said Friday that he called Siegel shortly after seeing it to see if there was any way he could use it on CNN, but was told firmly it could only be used if she were killed.

Siegel couldn't say why she had insisted on those conditions.

Blitzer reported on the e-mail late Thursday.

He noted that Bhutto had written a piece for CNN.com that mentioned her security concerns and that American politicians had tried to intervene on her behalf to make her feel safer.

"I didn't really think that it was a story we were missing out on," he said.

"I don't think the viewers were done any disservice by my trying to hold on to this."

Blitzer was the only journalist sent such a message, Siegel said.

He also sent the e-mail to U.S. Rep. Steve Israel, a New York Democrat.

Siegel said he did not believe Bhutto's opinions had changed since she wrote the e-mail.

Her message specifically mentioned she had requested four police vehicles surrounding her vehicle when traveling; Siegel said it seemed evident from pictures taken at the assassination scene that the request wasn't fulfilled.

Bhutto did not necessarily believe that Musharraf wanted her dead, but felt many people around him did, he said.

Her husband contacted Siegel on Thursday to remind him about the e-mail message and to make sure it got out, he said.

Blitzer said he had no regrets about the way he handled the story.

To report about it while she was still alive would have meant going back on his word, he said.

"I don't think there is a clear black-and-white in this situation," he said.

"I did what I think was right."

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"Bush plans to veto defense policy bill"

By BEN FELLER, Associated Press Writer

28 December 2007

CRAWFORD, Texas - President Bush plans to veto a sweeping defense policy bill on grounds that language exposing the Iraqi government to damage suits stemming from the Saddam Hussein era would derail Baghdad's efforts to rebuild the country.

Administration officials said Bush was expected the veto the bill Friday.

Democratic congressional leaders complained that Bush's move was thrust upon them at the last minute.

The controversy centers on one provision in the legislation dealing with Iraqi assets.

The bill would permit plaintiffs' lawyers immediately to freeze Iraqi funds and would expose Iraq to "massive liability in lawsuits concerning the misdeeds of the Saddam Hussein regime," said White House spokesman Scott Stanzel.

"The new democratic government of Iraq, during this crucial period of reconstruction, cannot afford to have its funds entangled in such lawsuits in the United States," Stanzel said in a statement.

House and Senate Democrats said Friday the first time they'd heard of any White House concerns with the legislation was after Congress sent the bill to Bush for his signature.

"The administration should have raised its objections earlier, when this issue could have been addressed without a veto," Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., said in a joint statement.

"The American people will have every right to be disappointed if the president vetoes this legislation, needlessly delaying implementation of the troops' pay raise, the Wounded Warriors Act and other critical measures."

Sovereign nations are normally immune from lawsuits in U.S. courts.

An exception is made for state sponsors of terrorism and Iraq was designated such a nation in 1990.

After the 2003 invasion of Iraq, however, Congress passed a law and Bush issued a decree stating that Iraq was exempt from such lawsuits.

After that exemption was passed, the administration challenged and successfully overturned a $959 million court ruling for members of the U.S. military who said they were tortured as prisoners of war during the first Persian Gulf War.

The Justice Department also sought to defeat a lawsuit brought by U.S. citizens held hostage during Iraq's 1990 invasion of Kuwait.

That case has been taken over by lawyers for the new Iraqi government and is ongoing in a Washington federal court.

The provision that is causing problems would have allowed the victims of the executed Iraqi dictator Saddam to seek compensation in court, Democrats said.

The Iraqi government has warned that former U.S. prisoners of war from the first Gulf War might cite this legislation in an attempt to get money from the Iraqi government's reported $25 billion in assets now held in U.S. banks, they say.

Unless Bush vetoes the legislation, the Iraqis have threatened to withdraw all of their money from the U.S. financial system to protect it from the lawsuits, Democrats said.

The White House contends the legislation subject to the Bush veto would imperil Iraqi assets held in the United States, including reconstruction and central bank funds.

"Once in place, the restrictions on Iraq's funds that could result from the bill could take months to lift," Stanzel said.

In turn, he said, those restrictions must not be allowed to become law "even for a short period of time."

Shot back Reid and Pelosi:

"We understand that the president is bowing to the demands of the Iraqi government, which is threatening to withdraw billions of dollars invested in U.S. banks if this bill is signed."

The defense policy bill passed by veto-proof margins in the House and the Senate.

Democratic aides said they have not ruled out any legislative options, including passing a technical correction or trying to override Bush's veto.

The sponsor of the contested provision, Sen. Frank Lautenberg, D-N.J., said the provision would allow "American victims of terror to hold perpetrators accountable — plain and simple."

Senate Republican Leader Mitch McConnell of Kentucky called on lawmakers to "move rapidly to fix this section" when Congress returns in January so that the underlying bill can be signed.

"It is my hope that the House and Senate will pass the modification when we return in January, in a bipartisan manner that preserves the important gains our nation has achieved in Iraq during 2007, without further delaying the many valuable programs in the bill," McConnnell said.

The White House says the bill authorizes 0.5 percent of the 3.5 percent pay raise that the nation's troops are expected to receive, and that part will be wiped away by the veto.

Stanzel said the administration will work with Congress to get the additional pay raise approved and retroactive to Jan. 1 under a reworked bill.

He said the bulk of the raise for the troops — 3 percent — is slated to go into effect anyway.

Overall, the bill authorizes $696 billion in military spending, including $189 billion for the wars in Iraq and Afghanistan, for the 2008 budget year.

It aims to provide more help to troops returning from war and set conditions on contractors and pricey weapons programs.

The measure reflects the best Democrats could do this year on their national security agenda while holding such a slim majority.

Powerless to overcome GOP objections in the Senate, the bill does not order troops home from Iraq, as Democrats would have liked.

While it does not directly send money to the Pentagon, the bill is considered a crucial policy measure because it guides companion spending legislation and dictates the acquisition and management of weapons programs.

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"Bhutto sent Blitzer security e-mail"

By DAVID BAUDER, AP Television Writer

28 December 2007

NEW YORK - It was a story CNN's Wolf Blitzer hoped he'd never have to report — an e-mail sent to him through an intermediary by Pakistani opposition leader Benazir Bhutto complaining about her security.

Conditions of use: only if she were killed.

Bhutto, who was assassinated on Thursday, wrote to Blitzer that if anything happened to her, "I would hold (Pakistani President Pervez) Musharraf responsible."

Bhutto wrote to Blitzer that "I have been made to feel insecure by his (Musharraf's) minions," that specific improvements had not been made to her security arrangements, and that the Pakistani leader was responsible.

"Bhutto aides reject government claim"

By RAVI NESSMAN, Associated Press Writer

29 December 2007

ISLAMABAD, Pakistan - An Islamic militant group said Saturday it had no link to Benazir Bhutto's killing, dismissing government claims that its leader orchestrated the assassination.

Bhutto's aides also said they doubted militant commander Baitullah Mehsud was behind the attack on the opposition leader and accused the government of a cover-up.

Meanwhile, attackers opened fire at a motorcade of Bhutto's supporters as they headed back to Karachi after her funeral, killing one man and wounding two others, said Waqar Mehdi, a spokesman for Bhutto's party.

More than two dozen people have been killed nationwide since Thursday's assassination, officials said.

In Rawalpindi, thousands of Bhutto supporters spilled onto the streets after a prayer ceremony for her, throwing stones and clashing with police who fired tear gas to try and subdue the crowd.

Also Saturday, Pakistan's election commission called an emergency meeting for Monday to discuss the violence's impact on Jan. 8 parliamentary elections.

Nine election offices in Bhutto's home province of Sindh in the south were burned to the ground, along with voter rolls and ballot boxes, the commission said in a statement.

The violence also hampered the printing of ballot papers, training of poll workers and other pre-election logistics, the statement said.

The U.S. government, which sees nuclear-armed Pakistan as a crucial ally in the war on terror, has pushed President Pervez Musharraf to keep the election on track to promote stability, moderation and democracy in Pakistan, U.S. officials said.

Prime Minister Mohammedmian Soomro said Friday the government had no immediate plans to postpone the election, despite the violence and the decision by Nawaz Sharif, another opposition leader, to boycott the poll.

Bhutto's Pakistan Peoples Party also called a meeting Sunday to decide whether to participate in the vote.

Her widower, Asif Ali Zardari, told the British Broadcasting Corp. that their son would read a message left by Bhutto and addressed to the party in event of her death.

On Saturday, roads across Bhutto's southern Sindh province were littered with burning vehicles, smoking reminders of the continuing chaos since her assassination Thursday.

Factories, stores and restaurants were set ablaze in Pakistan's biggest city, Karachi, where 17 people have been killed and dozens injured, officials said.

Army, police and paramilitary troops patrolled the nearly deserted streets of Bhutto's home city of Larkana, where rioting left shops at a jewelry market smoldering.

Sharif led a 47-member delegation of other opposition leaders to meet with Bhutto's family to express condolences, said Sadiq ul-Farooq, spokesman for Sharif's party.

Musharraf called Bhutto's husband, Asif Ali Zardari, promising to make every effort to bring the attackers to justice, state-run Pakistan Television reported.

The government blamed Bhutto's killing on al-Qaida and Taliban militants operating with increasing impunity in the lawless tribal areas along the border with Afghanistan.

It released a transcript Friday of a purported conversation between Mehsud and another militant, apparently discussing the assassination.

"It was a spectacular job."

"They were very brave boys who killed her," Mehsud said, according to the transcript.

Interior Ministry spokesman Javed Iqbal Cheema described Mehsud as an al-Qaida leader who was also behind the Karachi bomb blast in October against Bhutto that killed more than 140 people.

But a spokesman for Mehsud, Maulana Mohammed Umer, denied the militant was involved in the attack and dismissed the allegations as "government propaganda."

"We strongly deny it."

"Baitullah Mehsud is not involved in the killing of Benazir Bhutto," he said in a telephone call he made to The Associated Press from the tribal region of South Waziristan.

"The fact is that we are only against America, and we don't consider political leaders of Pakistan our enemy," he said, adding that he was speaking on instructions from Mehsud.

Mehsud heads Tehrik-i-Taliban, a newly formed coalition of Islamic militants committed to waging holy war against the government, which is a key U.S. ally in its war on terror.

Bhutto's Pakistan Peoples Party accused the government of trying to frame Mehsud, saying the militant — through emissaries — had previously told Bhutto he was not involved in the Karachi bombing.

"The story that al-Qaida or Baitullah Mehsud did it appears to us to be a planted story, an incorrect story, because they want to divert the attention," said Farhatullah Babar, a spokesman for Bhutto's party.

After the Karachi attack, Bhutto accused elements in the ruling pro-Musharraf party of plotting to kill her.

The government denied the claims.

Babar said Bhutto's allegations were never investigated.

Bhutto was killed Thursday evening when a suicide attacker shot at her and then blew himself up as she left a rally in the garrison city of Rawalpindi near Islamabad.

The attack killed about 20 others as well.

Authorities initially said she died from bullet wounds, and a surgeon who treated her said the impact from shrapnel on her skull killed her.

But Cheema said she was killed when she tried to duck back into the armored vehicle during the attack, and the shock waves from the blast smashed her head into a lever attached to the sunroof, fracturing her skull, he said.

The government said it was forming two inquiries into Bhutto's death, one to be carried out by a high court judge and another by security forces.

On Saturday, about half a dozen police investigators were still sifting through evidence and taking measurements at the scene of the attack.

More than a dozen officers diverted traffic and provided security for the investigators.

Mobs continued to wreak havoc across the country for a third day.

Business centers, gas stations and schools were closed and many roads were deserted.

Rioters in Karachi set fire to three factories, a restaurant, two shops and several vehicles, said Ehtisham Uddin, a local fire official.

Doctors at hospitals in the city said 26 people were wounded overnight by gunshots, many of them fired by protesters.

Karachi police chief Azhar Farooqi said 17 people had been killed in the city in the violence and other officials said dozens were injured.

Police arrested 250 people, Farooqi said.
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Associated Press writers Zarar Khan in Larkana, Sadaqat Jan in Islamabad, Ishtiaq Mahsud in Dera Ismail Khan and Afzal Nadeem in Karachi contributed to this report.

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"World outraged, fearful over Bhutto assassination"

By Matthew Tostevin

27 December 2007

LONDON (Reuters) - World leaders voiced outrage at the assassination on Thursday of Pakistan's opposition leader Benazir Bhutto and expressed fears for the fate of the nuclear-armed state.

U.S. President George W. Bush condemned the killing as a "cowardly act" and urged Pakistanis to go ahead with a planned election.

Bush urged Pakistanis to honor Bhutto's memory by continuing with the democratic process and said those behind the attack must be brought to justice.

"The United States strongly condemns this cowardly act by murderous extremists who are trying to undermine Pakistan's democracy," he told reporters at his Texas ranch.

"Bhutto aides reject government claim"

By RAVI NESSMAN, Associated Press Writer

29 December 2007

ISLAMABAD, Pakistan - An Islamic militant group said Saturday it had no link to Benazir Bhutto's killing, dismissing government claims that its leader orchestrated the assassination.

Bhutto's aides also said they doubted militant commander Baitullah Mehsud was behind the attack on the opposition leader and accused the government of a cover-up.

The U.S. government, which sees nuclear-armed Pakistan as a crucial ally in the war on terror, has pushed President Pervez Musharraf to keep the election on track to promote stability, moderation and democracy in Pakistan, U.S. officials said.

The government blamed Bhutto's killing on al-Qaida and Taliban militants operating with increasing impunity in the lawless tribal areas along the border with Afghanistan.

But a spokesman for Mehsud, Maulana Mohammed Umer, denied the militant was involved in the attack and dismissed the allegations as "government propaganda."

"We strongly deny it."

"Baitullah Mehsud is not involved in the killing of Benazir Bhutto," he said in a telephone call he made to The Associated Press from the tribal region of South Waziristan.

"The fact is that we are only against America, and we don't consider political leaders of Pakistan our enemy," he said, adding that he was speaking on instructions from Mehsud.

Bhutto's Pakistan Peoples Party accused the government of trying to frame Mehsud, saying the militant — through emissaries — had previously told Bhutto he was not involved in the Karachi bombing.

"The story that al-Qaida or Baitullah Mehsud did it appears to us to be a planted story, an incorrect story, because they want to divert the attention," said Farhatullah Babar, a spokesman for Bhutto's party.

After the Karachi attack, Bhutto accused elements in the ruling pro-Musharraf party of plotting to kill her.

The government denied the claims.

Babar said Bhutto's allegations were never investigated.

"Ruling party sees Pakistan vote delay"

By ZARAR KHAN, Associated Press Writer

30 December 2007

NAUDERO, Pakistan - Supporters of slain opposition leader Benazir Bhutto met Sunday to choose her successor, with either her son or husband seen as favorites, while the country's ruling party said crucial Jan. 8 elections would likely be delayed up to four months.

Bhutto's assassination Thursday plunged the nuclear-armed country into a political crisis and triggered nationwide riots that left at least 44 people dead ahead of the parliamentary elections, seen by the United States and other Western nations as key to promoting stability in the country.

Tariq Azim, information secretary of the Pakistan Muslim League-Q, said the vote would lose credibility if it was held now, with Bhutto's party in mourning and other opposition groups intent on boycotting.

He expected authorities to announce a delay within 24 hours.

"How long the postponement will be for will be up to the Election Commission," he told The Associated Press.

"I think we are looking at a delay of a few weeks ... up to three or four months."

Leaders of her Pakistan People's Party, meanwhile, were meeting Sunday in her ancestral home of Naudero in southern Pakistan to decide on a successor as party chief and its plans for the election.

"We will come up with a consensus, Bhutto's will and the meeting will determine it," Bhutto's husband, Asif Ali Zardari, told reporters when asked whether he wanted the post.

"The party has a lot of brave people and a lot of brave leaders."

The Pakistan People's Party has yet to say whether it would boycott the vote if it goes ahead as planned.

A pullout by the party could destroy the credibility of the elections, already being boycotted by Pakistan's other main opposition leader, Nawaz Sharif.

Police struggled to control the crowds in Bhutto's hometown of Naudero, many of whom had walked miles to get there.

They shouted "Musharraf is a killer!" and called for the separation of Bhutto's home province of Sindh from the rest of Pakistan.

Controversy remained about whether she was killed by gunshots, a shrapnel wound or the concussive force of the blast.

She was buried without an autopsy and the debate over her cause of death was undermining confidence in the government and further angering her followers.

On Saturday, the government rejected suggestions it should enlist foreign help in investigating Bhutto's assassination.

Democratic presidential candidate Hillary Rodham Clinton said Friday that an international probe into Bhutto's death was vital because there was "no reason to trust the Pakistani government."

Others called for a U.N. investigation.

White House spokesman Tony Fratto said Pakistan had not officially requested U.S. help.

"It's a responsibility of the government of Pakistan to ensure that the investigation is thorough."

"If Pakistani authorities ask for assistance we would review the request," he said.

A senior U.S. official, however, said Pakistan was already "discussing with other governments as to how best the investigation can be handled."

With the United States, the discussions "are about what we can offer and what the Pakistanis want."

"Having some help to make sure international questions are answered is definitely an option," the official said, speaking on condition of anonymity because no agreement had yet come from the discussions.

There was no immediate confirmation from Pakistani officials.

British Foreign Secretary David Miliband offered his country's assistance.

"Obviously it's very important that a full investigation does take place, and has the confidence of all concerned," he said.

The government has blamed the attack on Baitullah Mehsud, head of the Tehrik-i-Taliban, a newly formed coalition of Islamic militants along the Afghan border believed to be linked to al-Qaida and committed to waging holy war against the government.

But a spokesman for Mehsud, Maulana Mohammed Umer, dismissed the allegations as "government propaganda."

Bhutto's aides said they, too, doubted Mehsud was involved and accused the government of a cover-up.

"The story that al-Qaida or Baitullah Mehsud did it appears to us to be a planted story, an incorrect story, because they want to divert the attention," said Farhatullah Babar, a spokesman for Bhutto's party.

Authorities initially said Bhutto died from bullet wounds.

A surgeon who treated her later said the impact from shrapnel on her skull killed her.

But Cheema said Friday that Bhutto was killed when the shock waves from the bomb smashed her head into the sunroof as she tried to duck back inside the vehicle.

Bhutto's spokeswoman Sherry Rehman, who was in the vehicle that rushed her boss to the hospital, disputed that.

"She was bleeding profusely, as she had received a bullet wound in her neck."

"My car was full of blood."

"Three doctors at the hospital told us that she had received bullet wounds."

"I was among the people who gave her a final bath."

"We saw a bullet wound in the back of her neck," she said.

"What the government is saying is actually dangerous and nonsensical."

"They are pouring salt on our wounds."

"There are no findings, they are just lying."

Cheema stood by the government's version of events, and said Bhutto's party was free to exhume her body for an autopsy.

The election commission has called an emergency meeting for Monday to decide how to proceed with the parliamentary elections.

Riots have destroyed nine election offices — along with the voter rolls and ballot boxes inside, the election commission said.

In the eastern city of Bahawalnagar, meanwhile, two suspected suicide bombers died early Sunday when they prematurely detonated their bomb near the residence of Ijazul Haq, a senior leader of the Pakistan Muslim League-Q party, police said.

Haq was not at home at the time.

The blast was the first suicide attack in Pakistan since Bhutto's assassination.
____

Associated Press writers John Heilprin in New York, Sadaqat Jan and Munir Ahmad in Islamabad, Ishtiaq Mahsud in Dera Ismail Khan, and Afzal Nadeem and Ashraf Khan in Karachi contributed to this report.

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"Iraq on alert for Saddam anniversary"

By SINAN SALAHEDDIN and HAMID AHMED, Associated Press Writers

30 December 2007

BAGHDAD - Iraqi security forces were on high alert Sunday around Baghdad and in the Sunni heartland north of the capital as the country marked the one-year anniversary of Saddam Hussein's execution.

Iraq army Brig. Gen. Qassim al-Moussawi said security forces were "ready and prepared for any emergencies that might happen."

In Saddam's hometown of Tikrit, hundreds of people and school children visited his burial site to pay homage and lay flowers.

Some gave fiery speeches while others just stood quietly by the tomb, located in a large mausoleum in the Tigris River village of Ouja — the small hamlet just outside Tikrit where Saddam was born.

Children chanted "with our blood, with our souls, we sacrifice for you Saddam," Associated Press Television News footage showed.

The tomb was covered in Iraqi flags and flowers and flanked by large pictures of a smiling Saddam.

Saddam is buried next to his sons Odai and Qusai, who died in a gun battle with U.S. forces in a 2003 in the northern city of Mosul.

Footage of Saddam's Dec. 30 execution, filmed on a mobile phone and showing the former Iraqi leader being taunted just before he was hanged, was leaked to the media and shown across the world.

It provoked an outcry, particularly among many of Iraq's Sunni Arabs, and sparked a horrific day of violence that left 80 people dead from bombings and other attacks.

Iraq then plunged into its bloodiest cycle of violence since the U.S.-led invasion in 2003, and American officials at the time feared the country was on the brink of civil war.

The violence forced them to rethink their strategy and about 30,000 more troops were added.

Jamal Salman, a 35-year-old Sunni in Baghdad, said that "we had wished that Saddam's death would be part of the solution but it became part of a problem."

Saddam was executed shortly after being convicted on charges of killing 148 Shiite men and boys in Dujail, north of Baghdad, after a botched assassination attempt in 1982.

Sunnis were not only outraged that Saddam was put to death on the day that they began celebrations for Eid al-Adha, a major Muslim festival, but many also were incensed by the unruly scene in the execution chamber, in which Saddam was taunted with chants of "Muqtada, Muqtada, Muqtada."

The chants referred to Muqtada al-Sadr, the radical Shiite cleric who leads the Mahdi Army militia.

But a year later, al-Sadr's decision to declare a cease-fire, the influx of thousands of U.S. troops and a decision by tens of thousands of predominantly Sunni tribesmen to back America instead of al-Qaida has managed to turn the tide.

Violence in the past six months has dropped by 60 percent, the U.S. military has said.

But tensions are still rife and the anniversary of Saddam's execution reminded many Iraqis that violence is never far away.

A leaflet scattered in the Sunni north Baghdad neighborhood of Azamiyah and issued in the name of the outlawed Baath party once led by Saddam said that Sunday marked "the first anniversary of the remembrance of the crime of Saddam's assassination committed by the Americans and the Iranian agents they have collaborated with to carry out a fake trial."

But in a predominantly Shiite area in east Baghdad, people wanted to forget Saddam.

"I don't care so much for this occasion, but it was a black page and was turned over."

"We hoped that after his death matters would be more better, but the result was the opposite," said Najim Jamal, 41.

A Shiite, Jamal said violence got worse after Saddam's death before getting better.

A year after the execution, Iraq remains to a great degree divided along sectarian lines, although the U.S. military has said the increased security should help efforts at national reconciliation.

In one such example, the top U.S. commander in Iraq said al-Qaida was becoming increasingly fearful over losing the support of Sunni Arabs and has begun targeting the leaders of tribal councils who have switched allegiances in favor of America.

Gen. David Petraeus made the comments a few hours before a new audiotape of Osama bin Laden emerged, warning Iraq's Sunni Arabs against joining the councils fighting al-Qaida or participating in any unity government.

He denounced Abdul-Sattar Abu Risha, the leader of the Anbar Awakening Council, a tribal force fighting al-Qaida in western Iraq.

Abu Risha was killed in a bombing in September.

The Awakening Council has since morphed into a mass movement that now includes more than 70,000 fighters in Anbar, Baghdad and other Sunni-dominated provinces.

Also known as Concerned Local Citizens, the councils are funded by the United States and have slowly started becoming a political force — organizing themselves and actively seeking more participation in Iraq's Shiite-dominated political life.
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Associated Press Writer Patrick Quinn contributed to this report.

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"Taliban kill 8 in Afghan convoy attack"

By JASON STRAZIUSO, Associated Press Writer

30 December 2007

KABUL, Afghanistan - Taliban militants fired rocket-propelled grenades from their vehicles at a convoy of private security guards on Afghanistan's main highway, killing six guards and two police officers, a police chief said Sunday.

The attack in a dangerous section of Wardak province occurred Saturday afternoon as the security contractors were guarding equipment being driven from Ghazni city to the capital Kabul, said Wardak police chief Gen. Zafaruddin, who goes by one name.

Taliban militants opened fire on the convoy near Maydon Shahr, about 20 miles southwest of Kabul, and six guards and two policemen were killed, he said.

This year has been Afghanistan's most violent since the 2001 U.S.-led invasion drove the Taliban from power.

More than 6,300 people, mostly militants, have been killed in insurgency-related violence, according to an Associated Press count.

Meanwhile, the U.N.'s top representative here, Tom Koenigs, said he was "particularly concerned" that an Afghan consultant who worked for the U.N. remains jailed after he accompanied officials from the U.N. and European Union, allegedly to a meeting with Taliban commanders in Helmand province.

The government asked the two officials to leave the country last week, and detained the Afghan consultant for attending the alleged meeting.

"We've made it clear to the Afghan government that we want to see him released as soon as possible, because even the government has publicly stated that no U.N. staff member was involved in any secret talks," said Aleem Siddique, a spokesman for the U.N. mission.

Koenigs said "underlying assumptions" from some elements within the Afghan government were misunderstandings.

That was an apparent reference to allegations that the two officials met with and may have handed money over to Taliban leaders.

He said the U.N. was not involved in any intelligence operations or paying money to any insurgents.

Koenigs, the head of the U.N. Assistance Mission to Afghanistan for the last two years, left his post on Sunday.

Bo Asplund, a Swedish national, is now the officer in charge until a permanent head is named.

Paddy Ashdown, a former leader of Britain's opposition Liberal Democrats who served previously as Bosnia-Herzegovina's international administrator, is a leading candidate to replace Koenigs.

After two years as special representative, Koenigs said he leaves the country with both hope and concern.

"Afghanistan is moving from being a country decimated by decades of conflict to a progressive Islamic democracy, striving to improve the lives of its people," he said.

"However, I share the same concern as the Afghan people for the security situation, particularly in the south of the country."

Koenigs said UNAMA will continue to back the rights of victims of Afghanistan's nearly three decades of conflict, saying reparations are needed for past abuses.

He said acknowledging past abuses is not a barrier to reconciliation, but rather is a "prerequisite for future peace and stability in Afghanistan."

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"Shady reputation trails Bhutto's husband"

By SADAQAT JAN, Associated Press Writer

30 December 2007

ISLAMABAD, Pakistan - Benazir Bhutto's husband, who took effective control of his slain wife's party Sunday, is a former Cabinet minister who spent eight years in prison on corruption accusations and is known as "Mr. 10 Percent" for allegedly taking kickbacks.

In her will, read Sunday, Bhutto named Asif Ali Zardari her successor as head of the Pakistan Peoples Party in case of her death.

But Zardari, who is viewed with suspicion by many Pakistanis, appointed his son, Bilawal Bhutto Zardari, as official chairman of the party that the 19-year-old's grandfather founded in 1967.

While the elder Zardari is a prominent figure in Pakistani politics, earning a checkered reputation because of allegations that he made big money during Bhutto's government, his son is a suave, English speaking, Oxford student who has spent much of his life abroad.

He said at a news conference Sunday that his father will "take care" of the party while he completes his education.

Asif Ali Zardari, 54, who comes from a feudal family, shot to fame after his arranged marriage to Bhutto, who become prime minister for the first time in 1988, less than three months after giving birth to her son.

Bhutto's husband is generally blamed for many of her political misfortunes, with her twice being forced out of the prime minister's office over allegations of corruption and misrule.

Zardari was jailed for the first time in 1990 on charges ranging from murder to bank fraud when Bhutto's first government was dismissed.

He was released in 1993 and acquitted of the charges, including the accusation that he tried to extort several million dollars from a British businessman by attaching a bomb to his leg.

Zardari and his supporters said the charges were politically motivated.

Zardari became investment minister in Bhutto's second government.

He was nicknamed "Mr. 10 Percent" for allegedly skimming off commissions on government contracts.

He was also accused of spending state money on ponies and the apples to feed them at the prime minister's residence, while the poor lacked bread to eat.

He was jailed a second time in 1996 over corruption allegations and alleged involvement in an attack on Bhutto's brother, Murtaza, who died in a shootout near his home in Karachi.

After years in prison, facing marathon trials in different courts in the country, Zardari was freed in December 2004 and left Pakistan to live with his family in the United Arab Emirates.

Zardari is suffering from various ailments, including a heart problem and back pain that his aides say he developed because of prolonged imprisonment.

Little is known about his son, Bilawal, who has spent most of the past eight years living with his family in the UAE.

He closely resembles his mother, with a long face, sharp nose, dark, keen eyes and thick eyebrows.

While his father addressed the media in the local Urdu language Sunday, Bilawal spoke only in English, raising questions about his facility with Pakistan's national language.

Bhutto herself spent much of her youth abroad and initially struggled with Urdu in her early years in politics.

In his brief remarks, the younger Zardari vowed to continue "the party's long and historic struggle for democracy ... with renewed vigor."

"My mother always said democracy is the best revenge," he said.

Bilawal is believed to share some of his father's feudal pastimes, a love for horses and horse riding, target shooting and taekwondo, in which he is a black belt.

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"World outraged, fearful over Bhutto assassination"

By Matthew Tostevin

27 December 2007

LONDON (Reuters) - World leaders voiced outrage at the assassination on Thursday of Pakistan's opposition leader Benazir Bhutto and expressed fears for the fate of the nuclear-armed state.

U.S. President George W. Bush condemned the killing as a "cowardly act" and urged Pakistanis to go ahead with a planned election.

"Pakistan officials predict poll delay"

By SADAQAT JAN, Associated Press Writer

31 December 2007

ISLAMABAD, Pakistan - Elections in Pakistan appeared set to be delayed by several weeks despite demands by the party of slain opposition leader Benazir Bhutto and other politicians that they take place as scheduled on Jan. 8, officials said Monday.

The Election Commission said it had recommended an unspecified delay in the parliamentary polls following unrest triggered by Bhutto's assassination last week.

It said its final decision would be made on Tuesday.

Separately, a senior government official predicted the elections would be postponed by "six weeks or so as the environment to hold free and fair elections is not conducive."

The official spoke on condition of anonymity because he was not authorized to disclose the information.

Meanwhile, video footage of Bhutto's killing raised new questions about the government's version of how she died.

On Sunday, her party named her 19-year-old son its symbolic leader, while her husband was said to take effective control.

Despite being in mourning, Bhutto's political party and that of Pakistan's other major opposition leader want the polls held on time, perhaps sensing major electoral gains are possible amid sympathy because of Bhutto's death and accusations that political allies of President Pervez Musharraf were behind the killing.

The government has rejected the charges.

Opposition leader Nawaz Sharif, like Bhutto also a former prime minister, said Monday that the election should be held Jan. 8, while also saying Musharraf should resign and be replaced by a national unity government.

"He is a one-man calamity."

"He is responsible for all the trouble in Pakistan."

"The country is burning," Sharif said.

Western governments are also urging the government to go ahead with the polls without major delays.

They see the elections as a key step in U.S.-backed plans to restore democracy to the nation as it battles Taliban and al-Qaida militants.

Bhutto was killed in a suicide bomb and gun attack on Thursday, but disagreements between her supporters and the government over the precise cause of death are undermining confidence in Musharraf and adding to calls for international investigators to probe the killing.

New video footage, obtained by Britain's Channel 4, shows a man firing a handgun at Bhutto from close range as she stands up in an open-topped vehicle.

Her hair and shawl then move upward, suggesting she may have been shot.

She then falls into the vehicle just before an explosion rocks the car.

The government has insisted Bhutto was not hit by any of the bullets and died after the force of the blast slammed her head against the sunroof.

Bhutto's family and supporters say she died from gunshot wounds to her head and neck.

Bhutto's husband said late Sunday he refused permission for doctors to perform an autopsy, meaning that short of exhuming her body — something her supporters have already ruled out — the cause of her death will be difficult to establish.

After days of rioting that left at least 44 dead, life in many Pakistani cities began returning to normal, though soldiers and police patrolled many areas.

The streets were still quiet in the southern city of Karachi, the scene of some of the worst violence, witnesses said.

The country's stock markets tumbled in early trading Monday as the uncertain political outlook and violence triggered a selling spree.

After opening for the first time since the killing, the benchmark Karachi Stock Exchange's 100-share index had plunged by 4.7 percent at midday — one of its biggest single-day falls.

On Sunday, Bhutto's political party named her son, Bilawal Zardari, as its symbolic leader and left day-to-day control to her husband, extending Pakistan's most enduring political dynasty.

"My mother always said democracy is the best revenge," Bilawal said late Sunday at an emotionally charged media conference at Bhutto's ancestral home.

"The party's long struggle for democracy will continue with renewed vigor," he said.

Bhutto's party also appealed to Sharif's party, the country's other major opposition leader, to reverse an earlier decision to boycott the polls.

Sharif's party later agreed.

Tariq Azim, a spokesman for the pro-Musharraf Pakistan Muslim League-Q party, said "we are also ready for the contest on Jan. 8."

Earlier, he predicted the election may be delayed up to four months.

The appointment of Bhutto's husband, Asif Ali Zardari, as effective leader was not without complications.

A former Cabinet minister who spent eight years in prison on corruption accusations, he is known as "Mr. 10 Percent" for allegedly taking kickbacks and is viewed with suspicion by many Pakistanis.

Zardari said the opposition party — Pakistan's largest — had no confidence in the government's ability to bring his wife's killers to justice and urged the United Nations to establish a committee like the one investigating the 2005 assassination of former Lebanese Prime Minister Rafik Hariri.

Several leading U.S. politicians have made similar calls.

The British and U.S. governments had been pushing Bhutto, a moderate Muslim seen as friendly to the West, to form a power-sharing agreement with Musharraf after the election — a combination seen as the most effective in the fight against al-Qaida, which is believed to be regrouping in the country's lawless tribal areas.

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"Record data breaches in 2007, groups say"

By MARK JEWELL, Associated Press

Last updated: 12:22 a.m., Monday, December 31, 2007

BOSTON -- The loss or theft of personal data such as credit card and Social Security numbers soared to unprecedented levels in 2007, and the trend isn't expected to turn around anytime soon as hackers stay a step ahead of security and laptops disappear with sensitive information.

And while companies, government agencies, schools and other institutions are spending more to protect ever-increasing volumes of data with more sophisticated firewalls and encryption, the investment often is too little too late.

"More of them are experiencing data breaches, and they're responding to them in a reactive way, rather than proactively looking at the company's security and seeing where the holes might be," said Linda Foley, who founded the San Diego-based Identity Theft Resource Center after becoming an identity theft victim herself.

Foley's group lists more than 79 million records reported compromised in the United States through Dec. 18.

That's a nearly fourfold increase from the nearly 20 million records reported in all of 2006.

Another group, Attrition.org, estimates more than 162 million records compromised through Dec. 21 -- both in the U.S. and overseas, unlike the other group's U.S.-only list.

Attrition reported 49 million last year.

"It's just the nature of business, that moving forward, more companies are going to have more records, so there will be more records compromised each year," said Attrition's Brian Martin.

"I imagine the total records compromised will steadily climb."

But the biggest difference between the groups' record-loss counts is Attrition.org's estimate that 94 million records were exposed in a theft of credit card data at TJX Cos., the owner of discount stores including T.J. Maxx and Marshalls.

The TJX breach accounts for more than half the total records reported lost this year on both groups' lists.

The Identity Theft Resource Center counts about 46 million -- the number of records TJX acknowledged in March were potentially compromised.

Attrition's figure is based on estimates from Visa and MasterCard officials who were deposed in a lawsuit banks filed against TJX.

The breach is believed to have started when hackers intercepted wireless transfers of customer information at two Marshalls stores in Miami -- an entry point that led the hackers to eventually break into TJX's central databases.

TJX has said that before the breach, which was revealed in January, it invested "millions of dollars on computer security, and believes our security was comparable to many major retailers."

With wireless data transmission more common, hackers increasingly are expected to target what many experts see as a major vulnerability.

Eavesdroppers appear to be learning how to bypass security safeguards faster than ever, said Jay Tumas, the head of Harvard University's network operations, at a recent conference for information security professionals.

"Within a year or two, these folks are catching up," Tumas said.

The two nonprofit groups' 2007 data also show rising numbers of incidents in which employees lose sensitive data, as opposed to cases of hacking.

Besides TJX's problem, major 2007 breaches include lost data disks with bank account numbers in Britain, a hacker attack of a U.S.-based online broker's database and a con that spilled resume contact information from a U.S. online jobs site.

"A lot of breaches are due to inadequate information handling, such as laptop computers with Social Security numbers on them that are lost," Foley said.

"This is human error, and something that's completely avoidable, as opposed to a hacker breaking into your computer system."

Attrition.org and the Identity Theft Resource Center are the only groups, government included, maintaining databases on breaches and trends each year.

They've been keeping track for only a handful of years, with varied and still-evolving methods of learning about breaches and estimating how many people were affected.

Despite those challenges, the two nonprofits say it's clear 2007 will end up a record year for the amount of information compromised, because of greater data loss and increased reporting of breaches.

Both groups acknowledge many breaches may be missing from their lists, because they largely count incidents reported in news media that they consider credible.

Media coverage has risen in part because of the growing number of states requiring businesses and institutions to publicly disclose data losses.

Thirty-seven states, plus Washington D.C., now have such requirements.

Because of proliferation of such laws, "it may take a year or two before things stabilize and we can see what's really happening," Foley said.

"If that's the case, then we'll know whether businesses are practicing better information-handling techniques."

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"Asian markets strong in 2007"

By THOMAS HOGUE, Associated Press

Last updated: 8:22 a.m., Monday, December 31, 2007

BANGKOK, Thailand -- Asian stock markets had a strong, if volatile, year with China leading the pack as investors bet on the region's continued growth prospects.

Several exchanges notched gains of more than 20 percent and among Asia's major markets, only Japan and New Zealand ended the year with losses.

But the outlook for 2008 remained clouded by soaring oil prices, accelerating inflation in both China and India, and above all, the health of the U.S. economy.

"More will be revealed after one or two months of data on the U.S. side to see what's the state of the U.S. economy, especially the consumer spending," said Song Seng Wun, chief executive of CIMB-GK Research Pte. Ltd. in Singapore.

"If (the U.S. economy) can hold, then we should be reasonably intact," Song said.

The Shanghai Composite Index climbed 96.7 percent on the year, the world's best performing major bourse for 2007.

Japan's Nikkei 225 fell 11.1 percent and the benchmark NZX-50 in New Zealand fell 0.3 percent.

Elsewhere, Jakarta's JSX index gained 52.1 percent, the Bombay Stock Exchange's Sensex index rose 47.1 percent and Hong Kong's blue chip Hang Seng rose 39.3 percent.

Other large gains were made in South Korea and Malaysia, where the benchmark indices rose almost a third since the last trading day of 2006.

The main indices in Singapore and Australia gained 16.6 percent and 11.8 percent, respectively, for the year.

Most benchmarks recovered from midyear dips that followed a wave of defaults on risky loans made in the U.S. housing market.

Banks, including powerhouses Citigroup Inc., Merrill Lynch & Co. and JPMorgan Chase & Co., invested heavily in mortgage-backed securities and lost billions.

As the subprime damage spread to Europe and Asia, banks around the globe became more wary about lending money, which sparked concerns about slowing business investment and growth.

On Friday, a report from Goldman Sachs said mortgage-related writedowns at U.S. banks may deepen, helping to send several markets lower on their last trading day of 2007 and fostering broad pessimism about the U.S. economy next year.

In addition, oil prices that looked as if they had given up on their chase for the $100 mark are now back above $96 a barrel, raising new concerns about their impact on growth.

Oil prices and the unfolding credit crisis in the United States have extensive ramifications in Asia, which depends on exports to the world's largest economy for growth.

The U.S. is the world's largest consumer of oil.

In addition to cutting the buying power the American consumer, rising energy costs can cut into industrial demand.

"We will remain hostaged by what's happening overseas, particularly in the U.S. economy ... and also oil prices," said Astro del Castillo, managing director of Manila-based brokerage First Grade Holdings.

"Those are the two major factors that will influence not only the (Philippine) market but also most economies as well," he said.

Asian markets were roiled in their last two days of trading for the year by the assassination of Pakistani opposition leader Benazir Bhutto.

Pakistani stocks suffered their biggest one-day loss ever Monday.

The Karachi Stock Exchange's benchmark 100-share index plunged 694.92 points, or 4.7 percent, to 14,077.16.

The KSE 100 index still finished the year 40 percent higher than at the end of 2006.

Analysts continue to be cautiously optimistic about Asian economies, primarily based on the performance of economic engines running full-tilt in China and India.

Once worry about the credit crisis and its impact on the U.S. and global economies dissipates, many analysts say funds will resume their flow to Asian stock markets.

"Most Asian markets are still moving higher as can be seen by our economic performance."

"Hopefully (fund managers) will be attracted by such," said del Castillo.

The outlook for the broader region next year appears promising, agreed Park So-yeon, a strategist at Korea Investment & Securities Co. in Seoul.

The Kospi -- South Korea's main stock benchmark -- was unlikely to match this year's performance in 2008, though sectors with China exposure were likely to remain strong, she said.

Continued demand for commodities in China and India is likely to fuel growth, she said.

"The Asian business cycle is very good."

"China and Indian demand is very good."

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Associated Press Writers Gillian Wong in Singapore and Teresa Cerojano in Manila, and AP Business Writer Kelly Olsen in Seoul, contributed to this report.

[Livyjr]

"This week brings jobs data, Fed minutes"

By MADLEN READ, Associated Press

Last updated: 7:02 a.m., Monday, December 31, 2007

NEW YORK -- As 2007 comes to a close, Wall Street is almost as jittery as it was over the summer, when worries about the housing slump and banks' losing bets on mortgages first came to a head.

Investors know more now about how much exposure financial institutions have to bad loans -- quite a lot -- but they remain uncertain about how the credit crisis of 2007 will hurt the economy in 2008.

Market participants will be paying close attention to this week's economic data, particularly the monthly report on employment, seen as the most important factor in preventing housing woes from crippling consumers.

Last week, the Dow Jones industrial average ended 0.63 percent lower, the Standard & Poor's 500 index finished down 0.40 percent, and the Nasdaq composite index fell 0.65 percent.

The three major indexes will finish the year with gains, barring any extraordinary drops Monday, but problems with credit, housing and the financial sector are likely to keep Wall Street nervous at least early on in 2008.

It's been a dismal fourth quarter for the stock market, and the "Santa Claus rally" Wall Street often launches at the end of every year failed to gain steam.

The Dow has fallen 3.8 percent since the end of September, when many investors were driving the blue-chip index toward record heights and betting that the worst of the credit crunch was over.

Trading is expected to be very light Monday ahead of the New Year's holiday, though market participants that day will keep an eye on the National Association of Realtors' November report on existing home sales.

Sales are expected to be fairly weak, as they were in October.

On Wednesday, the first trading day of 2008, trading volumes should start rising again.

Wall Street will start the new year with minutes from the Federal Reserve's Dec. 11 meeting, when policy makers lowered key interest rates by a quarter point.

The move at the time disappointed investors who had been hoping for a more aggressive cut to keep the financial system running fluidly.

Any comments implying the Fed is worrying more about inflation and hesitant to reduce rates further could jolt the market.

Also Wednesday, the Institute for Supply Management releases its manufacturing index and the Commerce Department reports on construction spending.

Economists polled by Thomson/IFR anticipate that manufacturing expanded very modestly in December, and that construction spending dipped in November.

On Thursday, the data schedule is light.

Major automakers release their December sales figures, and home goods retailer Bed Bath & Beyond Inc. and seed company Monsanto Co. report their quarterly financial results.

But Friday should be a big day on Wall Street, when the Labor Department releases its December report on payrolls and unemployment.

The solid job market in 2007 gave many investors hope that the U.S. economy can weather the worst housing market in decades without dipping into recession.

Those investors will want to see signs that employment trend is holding up.

Economists forecast a smaller gain in payrolls in the last month of the year than in November, and they expect the unemployment rate to rise to 4.9 percent from the previous month's reading of 4.7 percent.

A drop in payrolls or a bigger jump in unemployment could heighten concerns about consumer spending plunging, and anxiety about significant problems arising in the types of consumer debt that have seen fairly minor upticks in delinquencies and defaults -- such as credit cards, auto loans and prime mortgages.

Even a reasonably firm job market could allow consumer spending to keep slowing, said Henry Herrmann, chief executive officer at investment management firm Waddell & Reed.

"The Christmas selling season showed us the consumer is feeling the effects of the credit and debt build-up over the last few years," Hermann said.

Another portion of the economy that Wall Street hopes will hold up in 2008 as it did in 2007 is the service sector, which has so far weathered the housing market's drop much better than manufacturing.

The ISM releases its December index of non-manufacturing activity on Friday, and economists predict slightly weaker expansion than in November.

Market measures indicate that pessimism is fairly high right now, said Scott Wren, equity strategist for A.G. Edwards & Sons.

That shows investors are already pricing in big problems ahead of the fourth-quarter earnings season -- which could mean an eventual rise in stocks if the corporate profits and the economy don't weaken too much.

But market sentiment remains shifty.

"Early in the year, you're going to want to stay defensive," Wren said.

"If the market's going to retreat at all, it's going to do it at the beginning of the year."

[Livyjr]

"Existing home sales edge up 0.4 percent"

By JEANNINE AVERSA, Associated Press

Last updated: 6:13 p.m., Monday, December 31, 2007

WASHINGTON -- Sales of previously owned homes nudged up in November, but that didn't improve the broader picture of a feeble housing market racked by record-high foreclosures and harder-to-get credit.

The National Association of Realtors reported Monday that sales of existing single-family homes, condominiums and townhouses rose 0.4 percent in November from October, to a seasonally adjusted annual rate of 5 million units.

Even with the small increase, the pace of sales was still the second-lowest on record going back to 1999.

The lowest pace -- 4.98 million -- was registered in October.

"There's little reason to pop open any champagne corks," said Michael Larson, a real-estate analyst at Weiss Research Inc.

To be sure, sales are down 20 percent from November 2006, underscoring the problems plaguing the housing sector.

Economists were calling for sales to either move up slightly or hold steady for November.

Home prices continued to sink.

The median price of a home sold last month was $210,200.

That marked a 3.3 percent drop from a year ago.

It was the fifth biggest annual decline on record.

The median price is where half sell for more and half sell for less.

On Wall Street, the bump up in nationwide home sales failed to ease investors' fears about the economy's outlook.

The Dow Jones industrials tumbled 101.05 points to close at 13,264.82.

For the year, the Dow managed to post a respectable gain of 6.43 percent.

By region of the country, sales were mixed.

Existing home sales jumped 10.3 percent in November from October in the West.

They were flat in the Midwest.

However, they fell by 2 percent in the South and by 3.3 percent in the Northeast.

"There is no doubt that housing is weak and will be weak in 2008," said economist Ken Mayland, president of ClearView Economics.

The inventory of unsold homes in November was 4.27 million homes.

At the current sales pace it would take 10.3 months to exhaust that overhang.

"Inventory is still high and further reduction in prices may be required in some areas to induce buyers back into the market," said the association's chief economist, Lawrence Yun.

A dip in 30-year mortgage rates in November probably helped give nationwide existing-home sales the small boost last month, the association suggested.

Yun thought the small increase could be taken as a sign that the market might be stabilizing.

That said, previous signs of stabilization earlier in the year have been dashed.

A credit crunch which took a turn for the worse in the summer has aggravated housing problems.

It has made it more difficult for people to secure financing to buy a home.

The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005.

Sales turned weak as did home prices.

The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.

Foreclosures have soared to record highs.

A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home.

Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.

"A significant number of mortgages reset in early 2008 will likely increase delinquencies and foreclosures driving prices lower and pushing buyers away," predicted Benjamin Reitzes, economic analyst at BMO Capital Markets Economics.

"This could get even worse before it gets better."

The housing and mortgage meltdowns have raised the odds that the country will fall into a recession.

And, the situation has given Democrats and Republicans-- including those who want to be the next president -- plenty of opportunities to spread blame around.

The economy's growth is expected to have slowed sharply to a pace of just 1.5 percent or less in the final three months of this year.

The big worry is that housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.

To help bolster the economy, the Federal Reserve has sliced a key interest rate three times this year.

Many economists are predicting the Fed will lower rates again when it meets in late January.

Yun said he preferred to see the Fed make one big rate reduction at that time, rather than make a series of modest, quarter-point cuts.

On Friday, the government reported that new-home sales plunged by 9 percent in November to a pace of 647,000, the lowest in more than 12 years.

The new-home numbers are thought to give a more current account of the health of the housing market because they are recorded when a contract is signed.

The existing home figures lag behind because they are based on contract closings, many of which reflect deals negotiated months earlier.

------

On the Net:

NAR: http://www.realtor.org/

[Livyjr]

"Stocks fall on last day of '07"

By MADLEN READ, Associated Press

Last updated: 5:52 p.m., Monday, December 31, 2007

NEW YORK -- Wall Street ended a painful year with another steep loss Monday as investors glumly anticipated that 2008 would bring more of the uncertainty and turbulence of 2007.

The Dow Jones industrials fell 101 points, the latest in a string of triple-digit moves that became commonplace in the just-ended year amid a continuum of bad news about housing, faltering mortgages and shrinking credit.

Thanks to a big first-half advance, they managed to finish 2007 with a respectable increase of 6.43 percent -- not as large as the 16.29 percent jump in 2006, but a better performance than the modest loss in 2005.

The Dow's annual gain came even after it posted its worst fourth-quarter drop in 20 years, amid billion-dollar losses at the world's biggest financial firms and falling spending by consumers whose budgets have been crimped by record-high oil prices and declining home prices.

"Considering all that's going on, the market really acted pretty well," said Todd Leone, managing director of equity trading at Cowen & Co.

It's tough to say what the primary market driver of 2008 will be, but the stock market faces a slew of threats: more adjustable-rate mortgage resets, a still-tight credit market and the possibility of accelerating inflation.

But Leone said the fourth-quarter earnings season in January should shed some light on how U.S. companies are surviving the recent slowdown and credit crunch.

There was more downbeat news on housing Monday.

The National Association of Realtors said November existing home sales rose 0.4 percent to an annual rate of 5 million -- the first rise in nine months.

However, sales are 20 percent below where they were a year ago, and the median existing home price has dropped 3.3 percent over the past 12 months.

Falling home prices have made it hard for struggling homeowners to refinance their mortgages, and the slump in construction activity has hurt homebuilders and other housing-related industries.

Still, there were some slivers of optimism Monday.

The U.K.'s Observer newspaper reported Sunday that Merrill Lynch & Co. was in talks over the weekend to line up capital from investors in China and the Middle East in exchange for portions of the Wall Street firm.

Merrill, like many other financial houses, has seen its portfolio lose billions of dollar in value due to misplaced bets on mortgages.

And as Citigroup Inc., UBS AG, Morgan Stanley and Bear Stearns Cos. have done, it has turned to investors in Asia for much-needed capital -- Merrill has already gotten $4.4 billion this month from a Singapore fund, which bought a 9.9 percent stake in the U.S. brokerage.

The Dow fell 101.05, or 0.76 percent, to 13,264.82.

The blue-chip index remains below its Oct. 9 record high of 14,164.53, at which point it was up more than 13 percent year-to-date.

The Standard & Poor's 500 index and the technology-dominated Nasdaq composite index also declined Monday, but both posted annual gains for the fifth straight year.

The S&P 500 index fell 10.13, or 0.69 percent, to 1,468.36, to end 2007 with a gain of 3.53 percent.

It had reached a record close of 1,565.15 on Oct. 9.

The Nasdaq fell 22.18, or 0.83 percent, to 2,652.28, to finish the year with a 9.81 percent gain.

Despite the market's volatility, this was the best performance for the Nasdaq, still well below its tech boom highs, since 2003.

Government bonds rose.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, slid to 4.03 percent from 4.12 percent late Friday, and is down nearly 17 percent for the year.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange.

Consolidated volume came to a light 2.38 billion shares, up slightly from 2.31 billion Friday.

2007 was a remarkable year on Wall Street.

The market began the year continuing the rally that propelled the Dow above 12,000 for the first time in October.

Then, in late February, came a reminder that stocks were capable of turning tail and plunging -- a skid on China's stock market and an ominous economic outlook from former Federal Reserve Chairman Alan Greenspan sent the Dow down 416 points in one day.

That panic didn't last long.

In April, the Dow barreled above 13,000 for the first time and then glided past 14,000 in mid-July.

But in late July, however, the market realized that the ongoing slump in housing, and a rise in mortgage foreclosures due to resetting adjustable-rate loans, was taking a toll across the credit markets.

Though the housing market started teetering as early as 2005, few people anticipated how much the downturn could affect the global financial system.

Mortgages given to borrowers deemed "subprime" comprised only about an eighth of the $10 trillion U.S. mortgage market -- why would that rattle the world markets?

The problem was, these pieces of debt were chopped up, repackaged and woven into larger fixed-income instruments, on which banks and other investors made billion-dollar bets -- bets that were extremely profitable during the housing boom, but calamitous when borrowers couldn't keep up with their mortgage payments.

When one slice of the instrument defaulted, it pulled the whole thing down with it.

Investors bailed out of anything tied to mortgages, and soon Wall Street discovered that financial institutions in the United States and overseas were holding billions of dollars in assets that were losing value by the day.

The biggest names on the Street -- Merrill Lynch, Citigroup Inc., Bear Stearns Cos. -- announced billions of dollars in writedowns.

Merrill and Citi lost their CEOs, and several financial firms sought out billion-dollar investments to clean up their balance sheets.

In the midst of this turmoil, the credit markets all but seized up, and all these interconnected events pummeled stocks.

The Dow suffered triple-digit drops, recoveries and then drops again as Wall Street stumbled through months of volatility reminiscent of the terrible days after the 2001 terror attacks.

In August and September the Federal Reserve began to act, with interest rate cuts and injections of liquidity.

It helped for a while, and in October, stocks were rallying again taking the Dow to another set of record highs -- only to succumb again to fears about the unknown extent of the credit mess.

Wall Street enters 2008 with that same concern, not to mention oil's surge this year of about 60 percent to nearly $100 a barrel, and the U.S. dollar's tumble to record lows against the euro.

On Monday, the dollar rose against most other major currencies, gold prices fell, and crude oil prices slipped 2 cents to settle at $95.98 a barrel on the New York Mercantile Exchange.

"We've seen the return of volatility."

"I think that will be around for a while, and will govern trading for the new year," said Scott Fullman, director of investment strategy for I. A. Englander & Co.

"Stock selection and strategy will play a very important part in the success of anybody who is trading going into the new year."

"This is not a time where you throw a dart at the board."

In 2007, the technology, energy, industrials and healthcare sectors did well, while the financial industry and small-caps -- usually fledgling companies that rely heavily on loans to grow their business -- lagged.

The biggest gainer among the 30 Dow components was Honeywell Inc., with an annual rise of 36 percent, and the biggest loser was Citigroup, with a loss of 47 percent.

The Russell 2000 index of smaller companies fell 5.73, or 0.74 percent, to 766.03 Monday.

The small-cap index finished the year down 2.75 percent.

------

On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

[Livyjr]

"Ruling party sees Pakistan vote delay"

By ZARAR KHAN, Associated Press Writer

30 December 2007

The government has blamed the attack on Baitullah Mehsud, head of the Tehrik-i-Taliban, a newly formed coalition of Islamic militants along the Afghan border believed to be linked to al-Qaida and committed to waging holy war against the government.

But a spokesman for Mehsud, Maulana Mohammed Umer, dismissed the allegations as "government propaganda."

Bhutto's aides said they, too, doubted Mehsud was involved and accused the government of a cover-up.

"The story that al-Qaida or Baitullah Mehsud did it appears to us to be a planted story, an incorrect story, because they want to divert the attention," said Farhatullah Babar, a spokesman for Bhutto's party.

Authorities initially said Bhutto died from bullet wounds.

A surgeon who treated her later said the impact from shrapnel on her skull killed her.

But Cheema said Friday that Bhutto was killed when the shock waves from the bomb smashed her head into the sunroof as she tried to duck back inside the vehicle.

Bhutto's spokeswoman Sherry Rehman, who was in the vehicle that rushed her boss to the hospital, disputed that.

"She was bleeding profusely, as she had received a bullet wound in her neck."

"My car was full of blood."

"Three doctors at the hospital told us that she had received bullet wounds."

"I was among the people who gave her a final bath."

"We saw a bullet wound in the back of her neck," she said.

"What the government is saying is actually dangerous and nonsensical."

"They are pouring salt on our wounds."

"There are no findings, they are just lying."

"Pakistan officials predict poll delay"

By SADAQAT JAN, Associated Press Writer

31 December 2007

Meanwhile, video footage of Bhutto's killing raised new questions about the government's version of how she died.

Despite being in mourning, Bhutto's political party and that of Pakistan's other major opposition leader want the polls held on time, perhaps sensing major electoral gains are possible amid sympathy because of Bhutto's death and accusations that political allies of President Pervez Musharraf were behind the killing.

Bhutto was killed in a suicide bomb and gun attack on Thursday, but disagreements between her supporters and the government over the precise cause of death are undermining confidence in Musharraf and adding to calls for international investigators to probe the killing.

New video footage, obtained by Britain's Channel 4, shows a man firing a handgun at Bhutto from close range as she stands up in an open-topped vehicle.

Her hair and shawl then move upward, suggesting she may have been shot.

She then falls into the vehicle just before an explosion rocks the car.

The government has insisted Bhutto was not hit by any of the bullets and died after the force of the blast slammed her head against the sunroof.

Bhutto's family and supporters say she died from gunshot wounds to her head and neck.

"Bhutto video, medical report raise doubt"

By RAVI NESSMAN, Associated Press Writer

31 December 2007

ISLAMABAD, Pakistan - Aides to Benazir Bhutto charge that lax security allowed an assassin to approach within a few yards of her.

But authorities insist it was her decision to open a hatch in her bombproof vehicle and chat with supporters that left her vulnerable.

The dispute intensified as a video of the attack and an inconclusive medical report raised new doubts about the official explanation of her death and bolstered calls for an independent, international investigation.

The new video footage, obtained by Britain's Channel 4 television, shows a man firing a pistol at Bhutto from just feet away as she poked her head out of the sunroof to greet a swarm of supporters.

Her hair and shawl then jerked upward and she fell into the vehicle just before an explosion — apparently detonated by a second man — rocked the car.

No police were seen trying to push the crowd away.

Bhutto, who died Thursday in a gun and suicide bomb attack, reveled in personal campaigning, a trait that fueled her popularity but posed a challenge for her security forces.

"She was a very brave lady and sometimes when you see the supporters and cheering crowds there is a tendency not to heed the security department, and that's exactly what happened, unfortunately," Interior Ministry spokesman Javed Iqbal Cheema said.

Even before Bhutto returned to Pakistan in October from eight years in exile, she was warned about suicide squads.

At her homecoming parade in Karachi, twin bombers struck her convoy, killing about 150 people, some of them the police assigned to protect her.

But she complained bitterly in recent months that the government of President Pervez Musharraf was not giving her proper protection and ignoring specific security requests.

"I have been made to feel insecure by his (Musharraf's) minions," she wrote in an October e-mail.

Bhutto, a former prime minister who was leading her party into parliamentary elections, had blamed elements in the ruling party for the threats against her.

The government said an al-Qaida-linked militant leader orchestrated her killing Thursday, a claim both the militant and Bhutto's aides rejected.

At the Rawalpindi rally where Bhutto was slain, hundreds of police ringed the park where she spoke, frisking those entering and making most pass through metal detectors.

Police snipers were in at least four positions on nearby rooftops.

A 10-yard area was cordoned off in front of the stage, which was inspected by security officials, inspected by bomb-sniffing dogs, and flanked by armed, plainclothes guards.

"There were ample security arrangements there," Rawalpindi police chief Saud Aziz said.

The attack occurred when Bhutto's vehicle drove outside the park after the rally.

Cheema said her vehicle was protected by four police mobile units comprising a total of 25 or 26 officers.

"Why was the road not blocked and cleared of people when Benazir Bhutto was coming out, and why was the security so lax in and outside the ground?" asked Aghasiraj Durrani, a senior official in Bhutto's party who helped arrange Bhutto's security.

Talat Masood, a former army general and security analyst, said specially trained officers should have been scanning the crowd for potential attackers and Bhutto's guards should have created a security perimeter.

"The security undoubtedly was below the mark, much below the standards required for a leader of her stature," he said.

Bhutto's aides, including one who rushed her to the hospital, said they were certain she was shot and the video appeared to bolster that claim.

She was buried Friday without an autopsy.

The government, citing a report from doctors at the hospital where she died, said she was not hit by bullets but killed when the force of the blast slammed her head into a lever on the sunroof.

However, a copy of the medical report sent to reporters said the doctors had made no determination about whether she was shot or not.

It gave the cause of death as "open head injury with depressed skull fracture, leading to cardiopulmonary arrest."

The report, signed by seven doctors at the hospital, said no surrounding wounds or blackening were seen around Bhutto's head wound.

"No foreign body was felt in the wound."

"Wound was not further explored," said the report, released by Athar Minallah, a prominent opposition lawyer who is a member of the hospital board.

Bhutto's husband, Asif Ali Zardari, said Sunday he had refused an autopsy because he did not trust Musharraf's government to carry out a credible investigation.

He also rejected the government's account about his wife's death as "lies."

Cheema said Bhutto's family was free to exhume her body.

The dispute undermined already shaky confidence in Musharraf, a former army chief who seized power in a 1999 coup.

Zardari, who now leads Bhutto's party, demanded a U.N. probe similar to the one investigating the 2005 assassination of former Lebanese Prime Minister Rafik Hariri.

Even before her assassination, security around Bhutto was inconsistent.

A reporter walked into a rally days before she was killed without being frisked or passing through a metal detector.

Her supporters pressed up against the stage.

During Bhutto's 10-hour, slow moving procession through the streets of Karachi on Oct. 18, she refused to use a bulletproof glass cubicle built atop her truck, standing instead along a railing to greet the crowds.

"She was a political leader."

"Meeting the people was something she could not avoid," Minallah said.

Anne Tyrell, a spokeswoman for the private security firm Blackwater, said it had been approached about possibly providing security for Bhutto, "but unfortunately, an agreement was never reached."

Durrani, the party official, said foreign guards would have been little help as they could not distinguish easily between local people.

He said the party had used its own armed guards for Bhutto.

Musharraf himself survived two assassination attempts in December 2003.

Afterward, security was tightened for top officials, and roads are sealed off for Musharraf or the prime minister.

But security for others is spotty.

Days before Bhutto's killing, former Interior Minister Aftab Khan Sherpao narrowly survived a suicide bombing in a mosque at his compound that killed 56 worshippers — the second such attack against him in eight months.

Former Prime Minister Nawaz Sharif — who the government said was also under threat — complained Monday that security arrangements for him were "absolutely inadequate."

On a recent campaign trip to Kashmir, Sharif was trailed by a single police van as he rode in an apparently unarmored sport utility vehicle.

At one point, he stuck his head out of the sunroof and greeted hundreds of supporters, much like Bhutto was to do weeks later.
___

Associated Press reporter Zarar Khan contributed to this story from Naudero, Pakistan.

[Livyjr]

"Iraq policy losses cloud Pelosi's year"

By ERICA WERNER, Associated Press Writer

1 January 2008

WASHINGTON - Nancy Pelosi crashed through a glass ceiling when she became the first female House speaker a year ago.

That turned out to be the easy part.

The reality of leading a bitterly divided Congress at odds with a Republican White House is that victories are difficult and disappointments many.

Chief among them for the liberal San Francisco Democrat was failure to deliver on her biggest goal: ceasing U.S. combat missions in Iraq and getting troops on their way home.

The House's final days before winter break were reflective of Pelosi's up-and-down year: a major success — an energy bill including the first increase in vehicle fuel economy standards in 32 years — and two bitter defeats.

Hamstrung by Republican opposition and veto threats from President Bush, Pelosi had to abandon her promise to not add to the budget deficit when the House agreed to a $50 billion tax-relief bill without making up the loss to the Treasury.

The House's final vote was on legislation giving Bush $70 billion for the wars in Iraq and Afghanistan with no withdrawal deadlines attached.

"The war in Iraq is the biggest disappointment for us, I mean the inability to stop the war in Iraq," Pelosi, 67 and in her 11th House term, said in a recent round-table interview.

At the beginning of 2007 she believed Republican support for the war would erode.

It didn't.

In fact, it solidified as the U.S. surge that began in the summer helped reduce the violence.

"They have stayed wedded to the president on this," Pelosi said.

Time and again, the House passed bills setting a timetable for troop withdrawals only to see them fail in the Senate, where Democrats control the Senate 51-49, including two independents who usually vote with them."

Sixty votes are needed to overcome Republican filibusters.

Pelosi's inability to force Bush's hand on Iraq made her a target of an unlikely group: anti-war liberals.

They dogged her at public events and even protested outside her San Francisco home on Easter Sunday.

In August, activist Cindy Sheehan, whose son was killed in Iraq, announced she would run against Pelosi in 2008, contending the speaker had lost touch with people in her district who want troops home now.

Jack Pitney, a government professor at Claremont McKenna College in Southern California, said the war presented Pelosi with an unwinnable dilemma.

Anything short of immediate withdrawal infuriated the left, but Democrats also feared criticism from the right that they were depriving troops in combat of money they needed.

"The base is not going to be satisfied until every American comes home, and realistically that's not something she can deliver," Pitney said.

Pelosi said she will continue to push next year for withdrawing troops and improving the training and equipping of military units.

"The war, the war, the war — it eclipses everything that we do here," she said.

Pelosi accomplished some key elements of her initial legislative agenda, including raising the federal minimum wage, lowering interest rates on student loans, adopting ethics reforms and tightening security at seaports and airports.

But Republicans and some analysts said it was at the expense of another of her promises: a more open, less confrontational culture in Congress.

Echoing complaints Democrats made when they were in the minority, Republicans griped they were shut out of the lawmaking process with limited opportunities to consider legislation or offer amendments before Pelosi rammed bills through.

"I'm very saddened that the one thing that she did promise, that she'd work in a bipartisan way, has been thrown out the window," said Rep. David Dreier, R-Calif.

Pelosi made no apologies.

"It was necessary to push very hard to get all of this accomplished," she said.

Even when Pelosi bent the House to her will, she couldn't push past Senate Republicans' willingness to mount filibusters and veto threats from Bush.

"Overall I'm sure this is not the year she envisioned," said Norm Ornstein, a congressional scholar for the right-of-center American Enterprise Institute.

He credited Pelosi with reviving Congress' oversight role but said she could have fostered a more bipartisan spirit.

For Pelosi the year began on an ecstatic high when, surrounded by children and grandchildren, some her own, she made history by taking the gavel as speaker.

But as the months passed, the reality of the public's dissatisfaction with Congress set in.

In an AP poll in December 2006, 22 percent of respondents said they had a favorable impression of Pelosi and 22 percent said it was unfavorable.

An AP poll last month found her favorability rating the same — 22 percent — but her unfavorability rating had jumped to 38 percent.

Bush's unfavorability rating stood at 61 percent in this month's poll.

Pelosi's predecessor as speaker, former GOP Rep. Dennis Hastert of Illinois, had a 28 percent favorable and just 9 percent unfavorable rating in a Gallup poll 10 months into his first term.

Newt Gingrich, who became speaker after the Republicans took control of the House in 1994, was rated 31 percent favorable and 57 percent unfavorable in a Gallup poll a year after he took office.

Still, Pelosi remains popular among fellow House Democrats, who see her as a strong leader willing to take risks.

She met weekly with freshmen Democrats, many of them more conservative and also more vulnerable to election challenges than she is, and bent a bill on farm subsides to their liking rather than her own inclination.

Early in the year Pelosi outflanked the longest-serving House member, Rep. John Dingell, D-Mich., chairman of the House Energy Committee, by setting up a separate committee to consider global warming, something that falls under his jurisdiction.

Dingell was miffed, but after holding up an energy bill over fuel efficiency standards opposed by Detroit, he ultimately agreed a fleetwide average of 35 miles per gallon by 2020 pushed by Pelosi and Senate Democrats.

Afterward, as Congress prepared for its winter recess, he had only kind words for the speaker.

"Let me quote Will Rogers, who observed that he was a member of no organized political party, that he was a Democrat," Dingell said.

"With regard to Speaker Pelosi, she's a strong and effective leader."
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Associated Press writer Ken Thomas, AP Director of Surveys Trevor Tompson and AP News Survey Specialist Dennis Junius contributed to this report.