Friday, June 19, 2009
Here's what I read on Friday Jun 19th Quadruple Expiration Day.
Tyco has been trading in a reasonably tight range recently, and that has prompted one options trader to step in.The security company is down just $0.04 on the day to trade at $26.85. It broke above $29 on the first day of the month, after a run up from near $17 in early March. TYC shares have gotten back above the 200 day moving average, through which the stock broke down back in August when the price was above $40. The options trade is out in October, with the 26 puts and the 27.50 calls. There were 6,524 contracts traded in each at the same time. This appears to be a short straddle, with the October 26 puts sold for $2.05 and the October 27.5 calls traded for $2 even. If this was in fact a volatility sale, the trade will profit up to $31.50 and down to $22. This trade would go along with the falling volatility levels. Implied and historical volatility are both around 39 percent, continuing to fall over the last four months and now at their lowest levels since last October.
PLAY 1 - Short Straddle on Jul 27.5 TYC
I didnt know how to take advantage of this today but now sitting here at home with my playbook I am wondering what would happen if I were to do a short straddle myself but do it for July instead. Selling TYCSY this evening if it was possible would net me 1.40. Selling TYCGY would net me 0.75 for a total of 2.15 for the trade. Ofcourse a short straddle has unlimited risk on the upside substantial downside risk but given the low volatility of the stock - collecting 2.15 doesnt sound bad does it? We will revisit this trade on Jul expiration and see where we sit.
I can tolerate a fall from current price to 24.87 to a rise upto 28.87
PLAY 2 - Short Strangle on Jul 26 and 27.5 TYC
Sell TYCSK (Jul 26 TYC Put) - 0.7
Sell TYCGY (Jul 27.5 TYC Call) - 0.75
Yielding a net 1.55
Of the two plays - Play 2 Yields a lower amount but I like it better ! With Play 2, I can tolerate a fall in the stock price upto 24.50 and a rise upto 29. As you can see with Play 2 - I have a better tolerance of swings in price. Looking at TYC charts - I see the 50-200 golden cross (bullish) but a parabolic stop and reverse (bearish). Near term I think the bearish trend wins and we should see price gradually migrate downwards with first resistance at the 50 day MA. If it goes through that the very gradually sloping 200 MA is at around 24. As I think out loud here - perhaps it might be better to wait nearer term to see if TYC bounces at the 50 day MA before jumping into the short strangle. Will update as I have time.
Wednesday, June 17, 2009
Today was an interesting day in the markets and possibly a turning point in the rally we have seen. The last couple of days had seen some intense selling especially in small caps with large beta. I had a bunch of those in my portfolio. The selling was brutal from the open. It actually seemed to diminish as the day wore on. I sold my entire portfolio today (well almost my entire portfolio - I continue to hold UNG and VTG). Natural gas seems to be holding up really well here and its about that time of the year anyway. UNG is a solid play off of Natural Gas futures. VTG is a driller and will be profitable this year. They have also been able to raise money in private placement.
Towards the end of the day - Tim Knight (http://www.slopeofhope.com/) - went short the ES futures at 911.50 and I in turn bought 400 SDS at 56.30. Then around 3:45 - there was very interesting action in AXL, VTG and TEN. Some huge buys came in especially in AXL. Either these were people short covering or actually buying - I am not sure. Regardless, AXL went positive for a short time but fell back down. VTG went positive and stayed positive. In the markets as well - they started turning +ve briefly. Looking at that action - I immediately sold my SDS for a small profit at 56.65 (I intended to sell SDS before end of day anyway). SDS ended the day at 56.83
The S&P is currently sitting ON its 200 day moving average but its MACD has crossed and turned lower. Saw an interesting video by Adam Hewinson of INO.com and Marketclub on the INX (S&P) where he sees it turning lower with the first fibonacci around 881. From previous resistance levels as well S&P seems to be headed to 880. I am in all cash and will be looking to play the short-side tomorrow. Overshadowing all this is whether or not OPEX (which is this week) is messing with us. My impression looking at optionpain.com was that OPEX week would make the markets trend lower given what optionpain.com was suggesting. I was thinking of buying puts on Friday to protect my gains (on Friday - I was sitting on a much better profit level in my portfolio). I didnt buy them and I paid for that mistake. I am now all cash with some small positions.
I have created portfolios in FINVIZ (because the stocks I had purchased are strong small cap names like - VTG, CENX, AXL, GRO, SEED, FEED, HOGS, CHU, BBY, COT, CPY, CENT, FUQI, APWR etc).
Just got an email from Market Club - BMI went higher to 42 (argghhh) and all healthcare stocks seem to be higher today. RDY is looking quite strong. Within small caps - best healthcare action in the last 3 days has been in MRGE. UBET and MNKD also received strong rankings of 100+
Friday, June 5, 2009
The markets seem to have put in a solid bottom in March. I sent out an email to the rest of my office in mid April entitled "The End of the Long Winter."
I believe Obama created this bottom. Smart man. He knows that the driving force in any economy is confidence. Animal spirits if you will. The play a disproportionate role in this economy. And those of you who followed Obama's call to invest in the market are now doing quite well. The S&P bottomed at 666 with a beautiful double bottom and then carved out a beautiful cup and handle formation and has broken out.
Small caps especially Chinese small caps are going absolutely nuts. So are Russian stocks. All are raging buys and are going up as fast and hard as they fell down. Look at the charts of stocks like: SEED, FEED, GRO, SOL, CHU, YTEC, MTL, IGC etc. Look at the macro ETFs of things like RSX, GUR, FXI and INP. Look at TLT crashing and TBT rocking. They all tell a micro and macro story. I am making solid returns in the past month or two on the long side in both stocks and options.
This is a good time to be in the markets. New stocks are powering higher. Look at stocks of companies like AXL, XTXI etc. American Axle a key automotive supplier is now starting to climb. Yes, can you believe it? An automotive supplier. And it has a long way to go as today its only around 2.6 dollars. It could easily be around 15 in the next year. And as it does, I intend on riding it all the way. As always excercise caution and ALWAYS, ALWAYS use a stop loss.
This blog is for informational purposes only for my entertainment and not intended to be investment advice. Follow anything I can and you can and will incur a loss. DO NOT PUT YOUR MONEY TO WORK ON ANYTHING WRITTEN HERE ON THIS BLOG. DONT MAKE ME HURT YOU!
Friday, February 6, 2009
Henry Blodget Jan 6, 09 3:58 PM
Last year, economist Gary Shilling humiliated the rest of the economic forecasting industry by going 13 for 13.
As promised, here are Gary's predictions for this year:
Every one of our 13 investment strategies for 2008 worked last year. Some of them have been fully exploited so we dropped them from this year's list. But others are only partially achieved in view of our dire outlook that the worst global financial crisis and deepest worldwide recession since the 1930s will continue throughout 2009.
So we've retained 10 of our 2008 strategies this year, some in modified form, and added two new ones.
1. Sell homebuilder stocks and bonds.
2. If you plan to sell your house, second home or investment houses anytime soon, do so yesterday.
3. Sell some housing-related stocks.
4. Sell some consumer discretionary spending companies.
5. Sell most commercial real estate.
6. Sell some commodities.
7. Sell emerging market equities.
8. Sell emerging market debt.
9. Buy the dollar.
10. Sell stocks in general. (S&P 500 to 600)
11. Sell consumer lenders’ equities.
12. Buy, carefully, high-grade bonds.
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By Sarah Mulholland
Feb. 5 (Bloomberg) -- Moody’s Investors Service is reviewing the ratings of $302.6 billion in commercial mortgage-backed securities as real-estate values drop and property owners fall behind on payments.
The review encompasses 52 percent of outstanding U.S. commercial mortgage-backed debt ranked by Moody’s, the New York- based ratings company said today in a statement. The ratings of so-called senior and mezzanine AAA bonds, the top two classes of CMBS accounting for about 72 percent of the securities being reviewed, probably won’t be affected, Moody’s said.
The U.S. recession is crimping consumer spending and hurting business growth, making it harder for commercial property owners to make their payments. Should Moody’s decide to cut the ratings, investors including banks and insurers may need to sell CMBS holdings to maintain required levels of capital.
“Property values declined sharply in 2008, and we anticipate further declines over the next 12 to 24 months,” Moody’s analyst Nick Levidy said in the statement. “Delinquencies on CMBS loans are also on the rise, and we expect the pace to accelerate as macroeconomic pressures take a toll on property cash flows.”
Moody’s said it may downgrade the lowest levels of the securities by an average of four to five levels. Many of the securities are trading at levels that already suggest their ratings were lowered.
The gap, or spread, on commercial mortgage-backed bonds relative to benchmark interest rates has soared in the past year on concern that defaults will rise. Top-rated commercial real estate securities are trading at about 10.3 percentage points more than the swap rate, compared with 1.8 percentage points a year ago, Bank of America Corp. data show. The swap rate is currently 3.154 percent.
“This was already a fait accompli in the market,” said David Castillo, a senior trader of structured-finance bonds at Further Lane Securities in San Francisco.
Sales of the securities plummeted to $12.2 billion last year, compared with a record $237 billion in 2007, according to JPMorgan Chase & Co. data.
To contact the reporter on this story: Sarah Mulholland in New York at firstname.lastname@example.org Last Updated: February 5, 2009 16:09 EST
Here we go. Review, Downgrade, Markdown, Bailout. Yee haw! The banks are insolvent dammit. Nationalize them and get this over with. Ofcourse game theory dictates that uncertainty on one hand makes things worse for the economy and on the other hand makes Treasury debt popular. Right now, the Treasury is focused on raising money for the Fed at cheap rates and therefore they'll try to keep certainty from coming back into the market. For now. At some point Obama has to make an executive decision here and say enough with the uncertainty - the damage that is being caused to "animal spirits" in the economy is unacceptable.
Monday, February 2, 2009
Big Risks for U.S. in Trying to Value Bad Bank Assets
As the Obama administration prepares its strategy to rescue the nation’s banks by buying or guaranteeing troubled assets on their books, it confronts one central problem: How should they be valued?
Not just billions, but hundreds of billions of taxpayer dollars are at stake.
The Treasury secretary, Timothy F. Geithner, is expected to announce details of the new plan within weeks. Administration and Congressional officials say it will give the government flexibility to buy some bad assets and guarantee others in an effort to have a broad impact but still tailor the aid for different institutions.
But getting this right will not be easy. The wild variations on the value of many bad bank assets can be seen by looking at one mortgage-backed bond recently analyzed by a division of Standard & Poor’s, the credit rating agency.
The financial institution that owns the bond calculates the value at 97 cents on the dollar, or a mere 3 percent loss. But S.& P. estimates it is worth 87 cents, based on the current loan-default rate, and could be worth 53 cents under a bleaker situation that contemplates a doubling of defaults. But even that might be optimistic, because the bond traded recently for just 38 cents on the dollar, reflecting the even gloomier outlook of investors.
The bond analyzed by S.& P. is just one of thousands that the government might buy or guarantee should it go forward with setting up a “bad bank” that would acquire $1 trillion or more of toxic assets from banks.
The idea is that, free from the burden of carrying these bad assets, banks would start lending again and bolster the faltering economy. The bad bank set up by the government would, over time, sell the assets and recover some or most of what it had paid.
While the government is considering several approaches to helping the banks, including more capital injections, buying or insuring toxic assets is likely to be a centerpiece. Determining the right price for these assets is crucial to success. Placing too low a value would force institutions selling and others holding similar investments to register crushing losses that could deplete their capital and make it harder for them to increase lending.
But inflated values would bail out the companies, their shareholders and executives at the expense of taxpayers, who would swallow the losses if the government could not recoup what it had paid.
Some critics of the plan warn that the government should not buy the assets, because banks will try to get too high a price and leave taxpayers holding the bag.
“To date, the banks have stuck their heads in the sand,” said Lynn E. Turner, a former chief accountant for the Securities and Exchange Commission, “and demanded that they be paid the price of good apples for bad apples.”
But many believe that, given the depth of the problem and the fact that it keeps getting worse, the government has little choice.
Finance experts from Wall Street and academia are advising the administration on other options. To sidestep the thorny valuation problem, some have suggested that the bad bank acquire only assets that have already been marked down significantly and guarantee other assets, but officials would have just as difficult a task in determining how much to charge for insuring risky assets.
Economists predict that the cost of the program will most likely exceed the $350 billion remaining in the $700 billion Troubled Assets Relief Program that Congress approved in October.
They say the Obama administration may need upwards of $1 trillion in additional aid for banks — on top of the more than $800 billion the administration is seeking in an economic stimulus measure moving through Congress.
Many in Washington question whether the rescue has achieved its goal of stabilizing the financial markets. A report by the Government Accountability Office on Friday concluded that whether the bailout program had been effective might never be known.
“While the package helped avoid a financial collapse, many are frustrated by the results — and rightfully so,” President Obama said in hisweekly address on Saturday. “Too often taxpayer dollars have been spent without transparency or accountability. Banks have been extended a hand, but homeowners, students, and small businesses that need loans have been left to fend on their own.”
Mr. Obama and many lawmakers have expressed anger that banks that received the first batch of aid money do not appear to have increased their lending significantly, even as some firms have spent billions on bonuses, corporate jets and other perks. In two weeks the House will hold a hearing to ask chief executives of the eight largest banks about their spending controls.
As early as this week, the Treasury Department may impose new limits on the executive pay of companies receiving financial assistance. The Oversight Panel created by Congress to monitor the program is also expected to publish a report this week looking at whether the government paid too much to the large banks that they have provided with assistance.
A frequent refrain in Washington and on Wall Street is that there are no current market prices for toxic securities. But people who buy and sell these investments say that is a simplistic reading of the problem. They say most kinds of securities can be valued and are being traded, but trading has slowed as sellers and buyers disagree about what that the price should be.
The value of these securities is based on the future cash flow they provide to investors. To determine that, traders have to make assumptions about the housing market and the economy: How high will the unemployment rate go in the coming years? How many borrowers will default? What will homes be worth?
The Standard & Poor’s group, Market, Credit and Risk Strategies, which operates independently from the company’s credit ratings business, has been studying troubled securities for investors and banks. The bond that is trading at 38 cents provides a vivid illustration of the dilemma in valuing these assets.
The bond is backed by 9,000 second mortgages used by borrowers who put down little or no money to buy homes. Nearly a quarter of the loans are delinquent, and losses on defaulted mortgages are averaging 40 percent. The security once had a top rating, triple-A.
Michael G. Thompson, a managing director at the S.& P. group, says his computer models can easily calculate what the bond is worth under different situations. “This is not rocket science, this is straight bond math,” he said. But determining what the future holds is much harder. “We are not masters of the universe who can predict the macroeconomic environment,” he added
Some would-be buyers of these assets fear that a deep recession could drive up default rates and push down home prices much further. They also worry that a cataclysm like the failure of a big bank could send prices tumbling again, just as the collapse of Lehman Brothersdid in September. Others see no reason to bid up prices because those who need to sell are desperate.
Big banks and other owners of mortgage investments have argued that the low market prices reflect fire sales. Many have classified such securities as level-three assets, for which accounting rules allow them to determine values using computer models rather than the marketplace. Mr. Thompson estimates that at the end of September financial firms had $600 billion in such hard-to-value assets.
But critics like Mr. Turner say that the banks’ accounting for these assets cannot be trusted because they have an incentive to use optimistic assumptions.
Policy makers have found such arrangements appealing because they do not require upfront payments and they can be customized for each bank, Douglas J. Elliott, a fellow at the Brookings Institution, wrote in a recent paper.
Still, government guarantees need to be based on sound valuations, Mr. Elliott and others say. If the government underestimates the risks of default, taxpayers could eventually lose tens of billions of dollars. The cost of insuring such assets in the private market is often several times greater than the price the government is charging banks.
Whatever approach the Obama administration takes, investors and policy makers say it should provide more and clearer information about the health of banks and the risks that the government is taking.
Many analysts do not trust what they are told about the quality of the securities and loans held by banks and other financial firms. Most banks provide only a very general description of their holdings, because they consider the information privileged.
But the government, using its power as a big investor, could compel the banks to divulge more specific data, without giving away the names of individual bonds or loans, analysts said. The market could then do its own analysis on what the assets are worth.
“At least it would give the government one objective measure of the value of these assets,” said Anthony Lembke, co-head of investments at MKP Capital Management, a hedge fund firm that is a big investor in mortgages. “In the absence of transparency and clarity, investors are going to assume a value that will be conservative and then add a risk premium.”
Friday, January 30, 2009
Wednesday, January 28, 2009
Report on Russia Missiles Suggests Gesture to U.S.
MOSCOW — A Russian news report on Wednesday that Russia is putting off its plan to deploy missiles near the Polish border raised speculation that the Kremlin is seeking ways to lower tensions with the United States now that a new administration has taken office.
The report, on the Interfax news agency, was attributed to an unidentified Russian defense official, and when contacted later in the day, other Russian foreign and defense officials in Moscow would not confirm or comment on it.
Interfax quoted the unnamed defense official as saying that, “These plans have been suspended,” referring to the Kremlin’s proposal to base Iskander missiles in the western region of Kaliningrad and direct them toward Europe.
The unnamed official was quoted as saying the Russian government had taken the step because Washington is not “pushing ahead” with the Bush administration’s proposal to deploy an anti-missile system in Poland and the Czech republic to defend against what the administration had said was a threat from countries like Iran.
Asked about the Interfax report, NATO said through a spokesman that if confirmed, “It would be a positive step.”
The Kremlin has sharply criticized the Bush anti-missile system, contending that it was aimed at Russia. Bush officials had sought to soothe Russian concerns, but ´the issue had damaged relations between the two countries.
While the official quoted by Interfax said the United States was not going forward with the antimissile plan, the Obama administration is in fact only reviewing the plan, and has not publicly rejected it.
And it would seem unlikely that the Kremlin would offer the concession of shelving the missile plan without first obtaining a promise from the Obama administration that the American plan had been canceled.
While the Kremlin remained silent about the issue on Wednesday, Itar-Tass, the government-run news agency, quoted an unnamed senior defense official as saying that any such reports in the Russian media about the Kremlin pulling back were “pure fiction, total nonsense.”
The unnamed official suggested it would be a mistake for the Russians to withdraw their threat unilaterally while the issue was still playing out.
In an interview with Bloomberg News on Monday, Prime Minister Vladimir V. Putin indicated that he was hopeful that the Obama administration would reject the Bush plan.
“We have heard signals concerning anti-missile defense, and we know that people close to Mr. Obama say they should not hurry and the issue demands further analyses,” Mr. Putin said. “We are glad to hear such statements. Beyond that, our proposal on developing those systems is still on the agenda.”
President Obama and Russia’s president, Dmitri A. Medvedev, spoke on the phone on Monday. The Kremlin said in a statement that the two leaders discussed “their intention to focus their efforts on renewing the potential of Russian-American relations, and on resolving issues in a constructive way.”
Tuesday, January 27, 2009
By Betty Liu and Eric Martin
Jan. 27 (Bloomberg) -- Global stock market declines are increasingly correlated and emerging economies will follow developed nations into a “severe recession,” according to New York University Professor Nouriel Roubini.
Roubini said economic growth in China will slow to less than 5 percent and the U.S. will lose 6 million jobs. The American economy will expand 1 percent at most in 2010 as private spending falls and unemployment climbs to at least 9 percent, he added.
“There is nowhere to hide,” Roubini, an economics professor at NYU’s Stern School of Business who predicted the financial crisis, said from Zurich in an interview with Bloomberg Television. “We have for the first time in decades a global synchronized recession. Markets have become perfectly correlated and economies are also becoming perfectly correlated. This is not your kind of traditional minor recession.”
Roubini said the U.S. government should nationalize the biggest banks because losses will exceed assets, threatening to push them into bankruptcy. The banks could be privatized again in two or three years, Roubini said. The professor reiterated his prediction that U.S. financial losses will more than triple to $3.6 trillion and that global equities will fall 20 percent this year from current levels.
“Nobody’s in favor of long-term ownership of the U.S. banking system by the government, but if you don’t do it this way, you end up like Japan where you kept alive for a decade zombie banks that were never restructured,” he said. “That’s going to be much worse. It’s better to clean it up, nationalize it and sell it to the private sector.”
Japanese policy makers hesitated in addressing a banking crisis in the 1990s and then struggled to revive growth and fight deflation in what is known as the “Lost Decade.”
Roubini recommended holding cash or short-term government debt and said high-yield bonds are cheap relative to U.S. stocks.
In July 2006, Roubini predicted the financial crisis. In February of last year, he forecast a “catastrophic” meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks with mortgage holdings and a “sharp drop” in equities. Since then, Bear Stearns Cos. was forced into a sale and Lehman Brothers Holdings Inc. went bankrupt, prompting banks to hoard cash and depriving businesses and households of access to capital.
Deeper Into Recession
The world’s biggest economies are sliding deeper into recession as the fall-out from the global financial crisis hobbles manufacturing output and punctures consumer spending from New York to Beijing. The U.S. economy probably contracted at 5.5 percent pace in the fourth quarter, the fastest in 26 years, a survey of economists showed.
Caterpillar Inc., Sprint Nextel Corp., Home Depot Inc. and ING Groep NV led companies announcing at least 77,000 job cuts yesterday as sales withered while U.S. jobless claims touched a 26-year high of 589,000 in the week ended Jan. 17. President Barack Obama is pushing congress to approve an $825 billion stimulus package to create 3 million to 4 million new jobs.
In China, the urban unemployment rate, which doesn’t include millions of migrant workers, rose for the first time since 2003 in the fourth quarter. The government is targeting a rate of 4.6 percent for the year, which would be the highest since 1980. The slowdown may destabilize the country’s communist government, Albert Edwards, a strategist at Societe Generale in London, said in a Jan. 15 research note.
Geithner Sets Limits on Lobbying for Bailout Money
WASHINGTON — The Treasury secretary, Timothy F. Geithner, announced on Tuesday that he would crack down on lobbying to influence the $700 billion financial bailout program by the companies that are receiving billions in taxpayer funds.
Mr. Geithner, who was confirmed and sworn in on Monday, said that he would also set new limits intended to prevent political interference with the decisions about which firms receive bailout money.
The announcement followed several reports about efforts by corporate lobbyists and Congressional lawmakers to influence the program, including decisions about which banks should receive taxpayer money.
“American taxpayers deserve to know that their money is spent in the most effective way to stabilize the financial system,” Mr. Geithner said in a statement. “Today’s actions reaffirm our commitment toward that goal.”
The details of the rules — the text has not been completed — were not released. But in a news release, the Treasury Department outlined the Obama administration’s intent to prevent corporate and political lobbying to influence spending of the bailout program.
Among the changes will be rules to “combat lobbyist influence” over the bailout program, including restricting officials from “contacts with lobbyists in connection with applications for, or disbursements of” bailout funds, the department said.
The New York Times reported on Saturday that at least a dozen firms that received billions from the bailout program lobbied the government about the program in the final three months of 2008, according to a review of disclosure forms.
The new rules announced Tuesday will also “ensure that political influence does not interfere” with bailout decisions, “using as a model for these protections the limits on political influence over tax matters,” the Treasury Department said.
A Treasury Department spokeswoman said the tax safeguards that would form the basis of the new bailout policy include a federal statute prohibiting high-ranking executive branch officials from intervening in individual tax disputes, like ordering the Internal Revenue Service to conduct or terminate an audit of a particular taxpayer.
The safeguards include the agency’s refusal “to accept any political interference whatsoever in individual tax matters,” the spokeswoman said.
While such a policy would block high-ranking executive branch officials from steering bailout money to a particular bank, it was not immediately clear whether the rule would also prohibit Treasury officials from talking with lawmakers who are seeking help for banks in their districts.
The Wall Street Journal reported last Thursday that several lawmakers had tried to ensure that bailout funds would go to banks in their districts, although it said there was no way to prove that such efforts were linked to a later decision to give money to a particular bank.
Also on Tuesday, Mr. Geithner said that the Treasury Department’s Office of Financial Stability, in making reports to Congress about how it was disbursing the funds, would certify that each decision was based only on objective “investment criteria and the facts of the case.”
In addition, the department said that it would publish soon a detailed description of its investment review process and that only banks recommended by their primary bank regulator would be eligible for bailout funds.
The announcement on Tuesday represented the latest step by the Obama administration to make the bailout program more open and accountable as it moves to disburse the second $350 billion, following bipartisan criticism over the Bush administration’s handling of the first $350 billion of the bailout program.
The Obama administration has said it will step up monitoring of lending patterns by financial institutions that receive bailout money to make sure the money is being used to ease the credit squeeze. It also said it would seek to limit executive compensation at banks that receive future taxpayer help.
During his Senate confirmation hearings last week, Mr. Geithner said that the bailout program needed “serious reform” and pledged that the Obama administration would impose “tough conditions to protect the taxpayer and the necessary transparency to allow the American people to see how and where their money is being spent and the results those investments are delivering.”
He added: “And we are going to do that. This is an important program and we need to make it work.”
Obama Signals New Tone in Relations With Islamic World
PARIS — In one of his first interviews since taking office, President Barack Obama struck a conciliatory tone toward the Islamic world, saying he wanted to persuade Muslims that “the Americans are not your enemy” and adding that “the moment is ripe for both sides” to negotiate in the Middle East.
His remarks, recorded in Washington on Monday night, signaled a shift — in style and manner at least — from the Bush administration, offering a dialogue with Iran and what he depicted as a new readiness to listen rather than dictate.
Mr. Obama spoke as his special Middle East envoy, George J. Mitchell, arrived in Egypt to begin an eight-day tour that will include Israel, Jordan, Saudi Arabia, France and Britain. Mr. Mitchell planned to meet President Hosni Mubarak.
In a transcript published on Al Arabiya’s English language Web site, Mr. Obama said he believed “the most important thing is for the United States to get engaged right away” and that he had told his envoy to “start by listening, because all too often the United States starts by dictating.”
“Ultimately, we cannot tell either the Israelis or the Palestinians what’s best for them. They’re going to have to make some decisions,” Mr. Obama said. “But I do believe that the moment is ripe for both sides to realize that the path that they are on is not going to result in prosperity and security for their people. And that, instead, it’s time to return to the negotiating table.”
Shortly after the interview was broadcast, an explosion on the Israel-Gaza border on Tuesday killed an Israeli soldier. A Palestinian farmer was shot dead, according to Palestinian witnesses, in retaliatory gunfire. The incidents were the first known fatal incidents since the Gaza fighting ended 10 days ago.
Mr. Obama said Israel “will not stop being a strong ally of the United States and I will continue to believe that Israel’s security is paramount. But I also believe that there are Israelis who recognize that it is important to achieve peace. They will be willing to make sacrifices if the time is appropriate and if there is serious partnership on the other side.”
He also said he believed it was “possible for us to see a Palestinian state — I’m not going to put a time frame on it — that is contiguous, that allows freedom of movement for its people, that allows for trade with other countries, that allows the creation of businesses and commerce so that people have a better life.”
But he also said the Israel-Palestine conflict should not be seen in isolation. “I do think it is impossible for us to think only in terms of the Palestinian-Israeli conflict and not think in terms of what’s happening with Syria or Iran or Lebanon or Afghanistan and Pakistan,” Mr. Obama said.
He spoke at length about America’s future relationship with the Muslim world, saying his “job is to communicate to the American people that the Muslim world is filled with extraordinary people who simply want to live their lives and see their children live better lives.”
“My job to the Muslim world is to communicate that the Americans are not your enemy. We sometimes make mistakes. We have not been perfect. But if you look at the track record, as you say, America was not born as a colonial power, and that the same respect and partnership that America had with the Muslim world as recently as 20 or 30 years ago, there’s no reason why we can’t restore that. And that I think is going to be an important task,” he said.
He drew a distinction between “extremist organizations” committed to violence and “people who may disagree with my administration and certain actions, or may have a particular viewpoint in terms of how their countries should develop.”
“We can have legitimate disagreements but still be respectful. I cannot respect terrorist organizations that would kill innocent civilians and we will hunt them down,” he said. “But to the broader Muslim world what we are going to be offering is a hand of friendship.”
He also said it was “important for us to be willing to talk to Iran, to express very clearly where our differences are, but where there are potential avenues for progress.”
He echoed his inaugural address last week when he said, “If countries like Iran are willing to unclench their fist, they will find an extended hand from us.”
He was not asked whether he would continue the policy of former President George Bush in refusing to exclude military action in the dispute over Iran’s nuclear ambitions.