[Written Friday, posted Saturday…7 AM ET]
As I write this, I am winging my way back from a 15-day trip
to Turkey, Slovenia and Vienna, while Wall Street will be
wrapping up another tumultuous week. I imagine that most
reviews of the past seven days will be focusing on the ongoing
issue of credibility, or lack thereof, in Corporate America and
Tyco’s disgraced CEO, Dennis Kozlowski, a topic which I’ll
address myself in a moment. But to me there is still nothing
more important than President Bush’s statements on the war on
terror, not Thursday evening’s, but last Saturday’s in his address
to the cadets at West Point.
“We must take the battle to the enemy, disrupt his plans, and
confront the worst threats before they emerge.”
“If we wait for threats to fully materialize, we will have waited
too long.” [Repeated by Secretary of Defense Rumsfeld to
NATO members on Thursday.]
Bush also cited John F. Kennedy and Ronald Reagan, both of
whom refused to gloss over the brutality of tyrants, adding, “This
nation will act.”
This nation will act. I’m beginning to think, when? It’s the duty
of some of us to keep repeating what should be so obvious to the
civilized world. Get Saddam. Next year is too late.
Of course we also still have to deal with, in the simplicity of
John Ashcroft, “the tens of thousands (who) went through the
training camps…(all of whom) want to kill us.”
We’re just 9 months into a battle that will last most of our
lifetimes. Kind of puts it in perspective, doesn’t it?
Dennis Kozlowski
The above also kind of makes the case of the former Tyco
Chairman and CEO even more despicable. We have men and
women in uniform right now, risking their lives for you and me,
so that we can enjoy going to a ballgame, taking in a museum in
New York, or flying to Turkey, for that matter, and the
Kozlowskis of the world, of which it’s beginning to sink in there
are many, try to find every possible way to cheat both the
government and shareholders in order to do things like buying
some art, tax-free, or spending company funds for lavish
personal real estate purchases, to name just a few of his alleged
offenses.
I’m also tired of hearing something like, “But, oh, look how
much he gave to charity!” Sorry, his ilk is scum and worse than
mobsters. May they appropriately rot in hell.
[Shares in Tyco fell $12 on the week, to $10.]
Wall Street
It was another major bummer for U.S. equity investors, and
around much of the world, for that matter, as the Street was
weighed down by further signs that any real rebound in capital
spending will have to wait until 2003. Intel said as much in its
mid-quarter review on Thursday, shocking investors as it reduced
its revenue forecast. Intel also blamed lower demand in Europe,
while a separate report revealed that, industry-wide, PC
shipments were off a staggering 36% from March to April.
Couple this news with further downers from the likes of
Ericsson, and then mix in the Kozlowski case and all the other
crisis of confidence issues and it’s no wonder why the mood
among investors is so surly.
But one other item bears scrutiny, that being the sharp plunge in
auto sales for May. G.M. called it merely an “aberration.” Last
February, you’ll recall, I questioned G.M. in its issuing a rosy
forecast for the year, and beyond, because there was still too
much uncertainty for this guy. I stand by that comment today.
Of course car sales as much as anything are dependent on
employment and consumer sentiment and on this front, at least,
Friday’s jobs figures for May offered a mixed picture, as the
unemployment rate surprisingly fell to 5.8%, but this good news
was tempered by the actual lackluster gain in the labor force of
just 41,000, while the number of long-term unemployed
continues to rise sharply. So all in all it wasn’t enough to hold
back the bears, as the markets had their first opportunity to trade
on Intel’s release and shares in that company fell to $22.
The Dow Jones now stands at 9589, off 3.4% for its lowest
weekly close since early November, while Nasdaq, having lost
another 5%, resides at 1535, its worst level since late September.
In both cases the indexes are below where they were September
10th. I wonder what the likes of Suzie Orman, Bill O’Reilly and
Richard Grasso have to say about that now? They were the ones
pounding the table on the airwaves; step up and be patriotic, buy
American…buy U.S. shares, they said. I, on the other hand,
urged extreme caution and said if you want to be patriotic, buy a
product, instead, not stock. There was simply too much
uncertainty, and to think we haven’t even had a follow-up attack.
That’s the only good bit of news, thank God.
Street Bytes
–U.S. Treasury Yields
6-mo. 1.87% 2-yr. 3.13% 10-yr. 5.06% 30-yr. 5.66%
Basically unchanged, which in light of the drubbing Wall Street
took, isn’t a good sign. No flight to quality action, that’s for
sure.
[I’ll catch up to more of the hard, market news this coming
week.]
–On the bond front, PIMCO’s Bill Gross has been buying beaten
down telecom and energy bonds (the latter in companies such as
Dynegy, Williams and Calpine), though he admits he’s been
early on this call.
–Europe: The continent is certainly not booming, but consumer
confidence for the EU bloc is at a 9-month high and, frankly,
having played around with the new currency, the euro, myself
the past few weeks on two trips to the region, I think it will
eventually be a big positive. This doesn’t mean there won’t be
problems from time to time, as one nation’s deficit and / or
inflation leads to monetary issues with the other euro countries,
but it is far better than the old ways. On the other hand, locals I
met in Vienna, and European nationals elsewhere, were still
mixed on the currency, but they’ll come around, as should
Europe’s economy.
Plus, you have the capital flight out of dollar-based assets factor.
As Eric Pfanner put it in the Herald Tribune the other day, “It’s a
case of ‘buy low, sell high’ write large on a global scale…The
U.S. sucked in capital from all over the world during the last
decade…but with prices still high for these assets…investors are
broadening their portfolios.”
Again, not a panic, just your basic reallocation, which doesn’t
make it necessarily less painful for U.S. market participants.
–Japan: Economic growth for the first quarter came in at a 1.4%
clip, breaking a 9-month string of negative results. Exports
fueled the uptick, but, as the lousy recent performance in the
Nikkei indicates (after breaking through 12,000 last week, it
closed this one at 11,438), when it comes to Japan, it’s as if
you’re really from Missouri, show me…as in show me more.
My friend / financial advisor and I were discussing investing in
Japan a few weeks back and we agreed to wait even longer. I’d
rather miss a move to 13,000 or 14,000 and be a little more
certain of 20,000 in 3 years, then try to time 11,500 to 13-14.
–NBC is reporting strong ad sales for its new season, a solid sign
that the two-year slump in some forms of advertising is over.
However, online sales are still in the dumper, as they should be.
[It’s a waste of money, in case you didn’t catch my drift.]
–A senior executive at Knight Trading Group, the biggest trader
of Nasdaq stocks, has been accused of gross violations in the
firm’s operations, including the illegal practice of “front-
running.” [Taking your order to buy or sell an issue and then
placing their own in front of it, thereby assuring a better price for
their shares.] Line him up with Kozlowski et al. Don’t even
give them a last smoke, because, after all, they smoked us!
–Wal-Mart reported that, once again, its same-store sales for
May beat expectations. The world’s greatest company gets
stronger, it seems, and now they’re going to kick butt in
groceries.
–Our leading trading partner (Canada, in case you forgot), has
had a rather interesting stretch as Prime Minister Chretien sacked
another cabinet member, this time the popular head of the
finance ministry, Paul Martin, who by all accounts has done a
solid job with the nation’s economy. Chretien was worried
Martin would go after the party leadership.
–WorldCom is slashing an additional 16,000 jobs.
–The treasurer at El Paso, another energy company under
investigation for possible accounting violations, killed himself.
Not for nothing, but the death toll following the collapse of the
Bubble is beginning to look like the aftermath from 1929.
–USA Today reports that the market in 2nd homes has soared
27% since 1999. Further prospects for terrorism probably give
this market some legs, before it, too, collapses.
International Affairs
Israel: I was watching a CNN World interview with a victim’s
relative from this week’s car bombing that claimed 17 lives and
she noted, “Israel is the canary in the mine…this is coming to
Europe, you’re next, buddy!”
I get the sense that a vast majority of Europeans don’t really get
it; that they are just as likely to suffer in the terror war as the U.S.
is. If this were to come to pass, however, it would be a huge
mistake for the terrorists, firmly uniting the continent with the
U.S. once and for all, I suspect.
As for the PLO, an increasingly desperate Yasser Arafat offered
cabinet posts to Islamic Jihad (perpetrators of this week’s
carnage) and Hamas, but both rejected the offer. By the way, in
case you missed it, this is part of Arafat’s “reform” program.
Meanwhile, Egypt’s Mubarak, jealous that the Saudis are getting
all the attention with their sham peace plan, is in Washington this
weekend to promote his own, which entails setting a firm
timetable for Israel to give up the West Bank and Gaza, while
working out the details on Jerusalem later.
It doesn’t matter what you think of this or any peace plan you
may have seen proposed by Secretary of State Tom Friedman,
my main point would be that the settlers aren’t leaving, let
alone the fact that the terrorists bent on Israel’s destruction will
never change their own stripes. On the former issue, Israel will
deserve its share of the blame; on the latter, the U.S. has to
maintain its steadfast support for the only democracy in the
region.
India / Pakistan: The Bush Administration is doing the right
thing in injecting itself into the conflict in a big way. But I get a
kick out of Deputy Secretary of State Richard Armitage (the guy
is great). He really should be standing behind Rumsfeld, though,
when the Defense Secretary goes through his own paces in
Islamabad and New Delhi.
“Look, if you two guys don’t sit down and work out a viable
ceasefire, Richard here is going to have to crush you. Get it?”
And then Armitage, biceps bulging, would give that gap-toothed
smile of his and, poof, crisis averted.
But just as in the case of Israel, the situation between India and
Pakistan is such that we will never be able to relax, since you’re
merely waiting for the next attack and then, the reaction depends
on who is heading up the respective governments at the time.
Japan: More than a few politicians are calling for a change in
nuclear policy, allowing the nation to consider building the
bomb. China, of course, finds this all none too pleasing, but for
their sake, some in Japan aren’t so sure they will always be able
to rely on the U.S. for its security, and they’re probably right.
Random Musings
–Never have I wanted to drop the “F-Bomb” in this space more
than I did after reading Maureen Dowd’s piece in last Sunday’s
New York Times. Read the following and ask yourself, this
woman once won a Pulitzer Prize?
“The President should snap out of his jet lag, summon his
national security team…and issue a single remorseless
instruction. ‘Bring me the head of Osama bin Laden. Or Bob
Mueller.’”
This is beyond contemptible.
–Dick Cheney likes Bob Mueller. That’s more than enough for
me and I’m proud to have stuck behind Mueller the past few
weeks when the vast majority of the chattering class, including
many conservatives I normally respect, didn’t have a clue.
–Speaking of the Cheneys, no secret here that I admire the hell
out of Lynne. I have long featured her crusade for the teaching
of more American history in our classrooms, but I think I have
the perfect spot for her in the future. When her husband’s role in
the current administration is over, Lynne Cheney is the one to
form the 3rd party I have secretly (or none too secretly) yearned
for, a good, old-fashioned Conservative Party, featuring core
American values. She could start with one simple principle in
the field of education, for example; if you don’t know what war
the Battle of the Bulge was fought in, you don’t graduate from
high school… period.
–Speaking of what today passes for conservative, I’m sick of
William Safire and his ranting about the new threats to our civil
liberties. When it comes to the FBI conducting investigations
using information gleaned from the Net (Safire’s big concern),
we never had any liberties to begin with in this regard. There are
no secrets anymore, that’s the admittedly depressing fact, so
might as well let the FBI play in the pond, too. As for the
potential for abuse, of course there will be individual cases that
go too far, but that’s what “60 Minutes” is for.
–Furthermore, Attorney General Ashcroft was criticized for the
new immigration proposals, including fingerprinting visitors
from certain lands. It’s a small but necessary tool, as I see it, but
the civil libertarians are all in a lather. Tough, it’s a new world,
get over it.
[In just the past few weeks, Britain, Italy and Denmark have
signed into law provisions of their own that are far more
stringent than what Ashcroft outlined.]
–Speaking of immigration, most of the Germans and Austrians I
met didn’t like the Turks (a large percentage of which are settling
in the region). I can understand how some feel this way, with
their main beef being that the Turks don’t try to assimilate
themselves into society. But at the same time I got them to admit
that this is the case with all first generations, i.e., today’s
Hispanics in America, and they seem to recognize that
succeeding generations will adapt. The problem is what to do
until then, over the next 15-20 years, as anti-immigrant fever
mounts.
–No wonder tensions are high between India and Pakistan. I
saw a 5-day forecast for New Delhi and the average daily peak
was 115 degrees.
–The latest version of El Nino struck Chile with a vengeance,
delivering that nation’s worst floods in 100 years…and it’s
heading our way!
–I caught some of Tuesday’s finale for Queen Elizabeth II’s
Jubilee and I thought it was tremendous. Tony Blair gave a
fitting toast to her that day, discussing the Queen’s steadfastness,
while criticizing the mores of today.
“(We live in a) world that can pay scant regard to tradition and
often values passing fashions above enduring faith.”
Ain’t that the truth. God save the Queen.
–No, I wasn’t invited to Afghanistan’s upcoming “loya jirga,”
where 1,500 tribesmen will be meeting to form a new
government. The warlords are taking over, of course, so it could
resemble the 1968 Democratic Convention in Chicago. I can just
see the late Richard Daley now.
“You can take your loya jirga and shove it up….”
–Uh oh, more for the civil libertarians to concern themselves
with. Russia’s lower house of Parliament passed anti-skinhead
legislation, due to attacks on foreigners and Jewish sites. The
goody-goods in Moscow, of which there are a few, really, need
to understand these folks aren’t entitled to freedoms enjoyed by
others. They are nothing but thugs and killers. Stick ‘em in
Lefortovo.
–If Tom Ridge doesn’t accept the new cabinet level position for
Homeland Security that the President is proposing (and assuming
Congress eventually approves it), most folks feel Rudy Giuliani
would get the job, which could make 2008 all the more
interesting.
Slovenia
Talk about an “emerging” market, this is it. I didn’t have to
speak more than a few words of Slovene to know this much. It’s
a country of just 1.9 million, blessed with exquisite beauty, a
solid infrastructure (better than Ireland’s, that’s for sure),
convenience to all of Europe’s major markets (a 35-minute flight
from Vienna, for example), and an energetic, proud people who
were the first to tell Milosevic and his superior army, “Stick it.”
It seemed like I was following various European Union
commissions around in my 6 days here, as Slovenia vies for
inclusion in 2004 or 2007. It should be a lock (as opposed to
Turkey). Now I have to find some investment opportunities
here.
Random Musings – Slovenia Edition
–Great beer, Union or Zlatarog. Prices are also very low. A 16-
ounce Union costs only $1.25 in the local establishments, while a
3-course meal with two lagers will set you back only $10-$12.
Of course my cholesterol is now 684, what with the heavy fried
food and all, so I’ll have to get to work on that.
–Everyone is an outdoorsman, with motorcycle trekking being
most popular, along with hiking and skiing. If you like hiking,
by the way, plan a trip to the beautiful lake resort of Bled, about
an hour bus ride from the capital, Ljubljana. There is a network
of super trails that take you into the Julian Alps from Bled, one
of which I have to admit I abandoned just 300 feet from the top
because it was in deep forest, I was all alone and the sun was
about to set. What if I hurt myself and got attacked by the
legendary (in these parts) Zlatarog monster, I thought? Who
would pay the bills on the web site? So I scampered back down
and sought the refuge of a sidewalk café.
–Ljubljana is a fantastic little capital of 325,000 with a bustling
university, the best of both worlds. There is good shopping, tons
of cafes, the river cutting through Old Town, and the castle on
the hill (Bled, though, has an even better castle from which to
quaff a lager and admire the scenery). Everyone rides a bicycle
and there are marked paths right on the main sidewalks, a
refreshing, civilized change, especially if you hail from the land
of SUVs. I guarantee you Ljubljana will explode as a tourist
destination in the coming two years. [So snap up that last
apartment in Old Town…the price, already rising, is about to
rocket.]
–Speaking of Ljubljana, it’s now time to address your editor’s
selection for the most beautiful women in the world, 20-35
demographic.
1. Ljubljana…and it’s not even close.
2. Gdansk, Poland…I was only here five hours back in
1999, but that was enough to get the picture.
That’s it. I’m not taking this any further, lest I totally lose all of
my female readers.
–And one Catholic story. I went to Mass last Sunday at this
beautiful, old church in Bled. I was sitting in the back pew, let’s
say there were 20 rows, and when it came time for Communion,
the first ten stood up at once to make their way to the altar and no
one in the back half of the church ever moved. No one. I didn’t
realize I was sitting in the penalty box.
—
Lastly, today as I’ve been flying back, my mother’s side of the
family has been burying our dear Aunt Annie. As I noted in
another link on Thursday, I received an e-mail while in Vienna
that this incredible woman had died and, as our Dr. Bortrum
noted in his space, Annie was a saint.
50 years ago her husband died of black lung from working the
mines, leaving her with 6 kids to care for, a tiny home and little
means of support (benefits for the miners’ widows were scant
back then, if any), yet, through one family tragedy after another,
she not only maintained her dignity, she improved the lot of all
who came in contact with her. It’s not just my family that is
grieving in Greensburg, PA, it’s an entire community.
I guess in life we have memories and then we have dreams. I
have my memories of spending a week or two each summer of
my youth at the gas station which Aunt Annie’s boys owned, a
100-feet from her house. Cousins Joe and A.J. would rack up
100 games on the pinball machine for me, let me eat all their ice
cream and drink up their supply of Mountain Dew, while I was
enthralled with all the locals who would wander in to visit, trade
talk about the Pirates and Steelers, hunting, or the local car races,
you know, life in western Pennsylvania. I’d pump some gas
from time to time, as I got older, and then towards the end of the
day wander down to Aunt Annie’s, where as Bortrum wrote, the
door was always open as she baked away for the entire state, or
so it seemed, while the rest of the world stopped by to unload
their problems on her. Through it all she just smiled, cracked a
joke, calmed everyone down, offered a word of advice…just a
remarkable woman.
Dreams? By now you know one of them. See you down the
road, Aunt Annie. That’s my idea of heaven.
God bless the men and women of our armed forces.
God bless America.
—
Gold closed at $325
Oil, $24.75…lowest since mid-March.
Returns for the week, 6/3-6/7
Dow Jones -3.4%
S&P 500 -3.7%
S&P MidCap -3.7%
Russell 2000 -3.5%
Nasdaq -5.0%
Returns for the period, 1/1/02-6/7/02
Dow Jones -4.3%
S&P 500 -10.5%
S&P MidCap +0.2%
Russell 2000 -3.7%
Nasdaq -21.3%
Bulls 48.9%
Bears 31.3% [Source: Investors Intelligence]
Note:
Thanks to Dr. Bortrum for filling in some of the data while I was
away. It’s back to normal around here for a spell. That’s enough
traveling for me.
Have a great week. I appreciate your support.
Brian Trumbore
