[Posted 7:00 AM ET…Daytona Beach]
From conservative commentator George Will, in an op-ed last
Sunday for the Washington Post.
“(The President) is far from midseason form, and his
accumulating errors are undermining the premise of his
reelection campaign, which is: Wartime demands hard choices
and sacrifices, and a president who is steady, measured and
believable…
“After the war, in May, on Polish television, President Bush said,
‘We found the weapons of mass destruction. You know, we
found biological laboratories.’ No, we did not. ‘So what’s the
difference?’ said the president in December about the failure to
find WMDs, because ‘if [Saddam Hussein] were to acquire
weapons, he would be the danger.’ Such casualness, which
would be alarming in any president, is especially so in one whose
vaulting foreign policy ambitions have turned his first term into
Woodrow Wilson’s third term, devoted to planting democracy
and ‘universal values’ in hitherto inhospitable places.
“Once begun, leakage of public confidence in a president’s
pronouncements is difficult to staunch. This president’s certitude
that $400 billion ‘is enough to meet our commitments’ for 10
years under the new Medicare prescription drug entitlement was
followed by a one-third upward revision of the estimate.”
—
In his interview with NBC’s Tim Russert our president
formalized the change in rationality for going to war from WMD
to Saddam could build and use them. Folks, it’s not enough to
say, well, look at what all the other intelligence agencies said,
and look at what the Clinton administration believed, and then
just dismiss our massive mistakes and say, so what? President
Bush just two weeks before the interview was adamant about
Saddam and WMD, now he’s admitting he doesn’t have any.
The White House has also now had to admit the president flat-
out lied in his 2002 State of the Union address when he said
diagrams of U.S. nuclear power plants had been discovered in
Afghanistan. No they hadn’t, it turns out. And you’ll recall that
was a time of great concern in America over threats of this
nature.
Look, we all know that dangers such as the above nonetheless
exist today and for decades to come, whether our leaders concoct
them out of thin air for public discourse or not. I wonder as
much as anyone, if not more, why the U.S. hasn’t been attacked
again and when a report out of the Middle East surfaces about
possible suitcase bombs being transferred to al Qaeda from
Ukraine years ago I’m not in the least bit surprised. I used to
walk through the World Trade Center long before the ’93
bombing wondering if there was a device hidden in some corner
of the PATH station or the shopping mall. I wrote of the dangers
we faced in this very space long before 9/11.
But while I’m a Republican, I am not going to be a Sean
Hannity-type sycophant and praise our president when he is
deserving of scorn.
Even Bill O’Reilly this week apologized for his blanket support
of Bush and administration claims on WMDs. Of course this is
the same O’Reilly who I blasted last spring for his insensitive
remarks on casualties and I have to remind new readers I
castigated the president for his “mission accomplished” theme of
last May.
Speaking of which, Bush told Tim Russert he is “not surprised
by the intensity of the resistance” in Iraq. Bull. Why the hell did
he allow the parents of our armed forces to believe the mission
was essentially over in May then? I, for one, will never forgive
the president for this. It was cruel, fueled by arrogance.
Supporters of the president and the war, including yours truly on
most facets, need to acknowledge that big mistakes were made
and while war with Iraq and ridding the world of Saddam was
inevitable, and a good thing, it still must be established whether
or not we were being manipulated. I doubt President Bush
purposefully lied to us, at least that’s still my judgment, but
others lied to him and I want that exposed and the individuals
responsible forced to walk the plank. It doesn’t bring back some
of the soldiers who died because we were so ill-prepared for the
post-war phase, but history demands the truth be written so that
future generations of leaders learn the right lessons.
But before I end on a more optimistic note, I need to address
another serious issue that came up last week following my
comments on the powerful sugar lobby. The next day, Sunday,
the U.S. and Australia finally reached agreement on a free trade
pact after years of negotiation. But President Bush, the man who
has told us he’s a “war president” and it’s all about the war on
terror personally insisted that the sugar industry retain its
exclusivity in America, denying access to Australian exports of
the product. We can lose the war because of moves like this and
I’ll tell you why.
Forget the fact that our outrageous subsidies for the sugar kings
are costing U.S. consumers $2 billion a year through higher
prices, as well as countless jobs. The powerful barons give huge
amounts of campaign cash to both political parties and Bush
couldn’t lose any votes in Florida, a big state for the product and
its donors. So what’s the danger? We just screwed one of our
two best friends (the other being Britain), and for what? Some
freakin’ votes.
For his part, Australian Prime Minister John Howard allowed the
pact to go through, gun held to his head, because he didn’t want
to axe the entire treaty over one or two sectors (the U.S. beef and
dairy industries also kept their sweetheart deals). But Howard,
co-winner of my man of the year for 2003, now faces incredible
heat from his own people for giving in after the tremendous
support the Aussies have lent in the war on terror. In addressing
his people, he tried to explain that he did not want to deny “this
country a generational opportunity to build a stronger future.”
And so when Howard leaves the scene he could easily be
replaced by someone not nearly as staunch an advocate of U.S.
policy. Not to have a strong ally in a region rife with Islamic
fundamentalists is dangerous indeed. The effort and support
could be seriously lacking and this could have deadly
consequences. President Bush let the American people down.
But I said I’d end on a more optimistic note and despite all of the
above, maybe Bush pulls it off. Maybe the U.N. and Ayatollah
al-Sistani will work out a viable election process in Iraq. Maybe
Iraq will develop into a stable democracy. Maybe world pressure
on Iran will force Tehran to give up its WMD. Maybe Kim
Jong-il will suffer a heart attack and a new leader will emerge, an
enlightened one seeking to pull his people into the modern world.
[I’ve already said this nation will be the new destination for
outsourcing were this to be the case.] Maybe we catch bin Laden
and instead of unleashing a final spasm of terror it leads to the
collapse of al Qaeda because they’ve lost their chief fundraiser.
If much of this happens, George W. Bush will go down as one of
our nation’s greatest presidents. Despite my criticisms of the
man, I’m a patriot and I sincerely pray this proves to be the case.
Wall Street
Federal Reserve Chairman Alan Greenspan strode before
Congress for his semi-annual testimony on the state of the
economy and all things monetary and the market reacted with
glee, why, I don’t know. Later, it got religion and coupled with a
desultory report on consumer confidence on Friday sunk back to
pre-Greenspan levels.
For sure, the chairman was positive on the state of the economy
and future job creation (traders didn’t notice he had his legs and
fingers crossed when he said this) and he reiterated that the Fed
can be patient in hiking interest rates because there is no
inflation, which the bond market took to mean ‘never’ as the 10-
year Treasury briefly fell below 4% again.
On the other hand, Mr. Greenspan had some serious warnings for
the financial markets and all investors, be they professional or
amateur. Current U.S. government debt levels, including the
ever-soaring trade deficit, are a serious risk factor that “could
cause difficulties even in the relatively near term,” adding, “an
appreciable back-up in long-term interest rates is possible.”
Greenspan is also worried about spikes in energy prices.
Regarding this last bit, OPEC didn’t do us consumers of black
gold any favors by announcing it would cut production levels by
April 1st not only to sop up cheating (production by OPEC
members in excess of stated quotas), but also to add a buffer for
historically slack demand in the spring. In other words, OPEC
loves $28-$30 oil, not at $22-$25. OPEC is also blaming the
devalued U.S. greenback as another reason for seeking a higher
price.
So back to Greenspan and his concerns, the chairman has long
warned of energy’s impact on the economy and he knows that
internally the U.S. has potentially severe problems on the
refinery side in meeting summer gasoline demand, some of
which is subject to various state restrictions on emissions
requiring special blends. Thus, if the price at the pump surges
well above $2, a distinct possibility, the economy will suffer as
the consumer is forced to cut back elsewhere, and with an equity
market already priced for perfection on the corporate earnings
front, that spells ‘market downdraft.’
But with all this uncertainty, why is the bond market so
sanguine? Where are the bond vigilantes, as PIMCO’s Bill
Gross and others have mused? Oh, they’re still out there, ready
to pounce on the unwary. Just one stronger than expected
number on the inflation or jobs front will do it. Remember, bond
fund holders, your net asset value can go down. Will you be able
to sleep at night if you suddenly lose 4-8% on your principle? If
so, roll over. If not, keep one eye open, just as we do here at
StocksandNews every night of the year. And remember, your
Federal Reserve has been encouraging you to take risk for some
time now, but in the end you’re on your own.
Street Bytes
–Stocks finished mixed, with the Dow Jones and S&P 500
registering slight gains to 10627 and 1145, respectively, while
Nasdaq declined 11 points to 2053. The big story on the week
was Comcast’s hostile bid for Disney, especially since it involves
media properties and the media eats this stuff up. I thought the
other story was a most positive one, Dell Computer’s
pronouncement that it sees steady improvement in corporate
demand as revenues rose a solid 18% for the last quarter.
–U.S. Treasury Yields
6-mo. 0.97% 2-yr. 1.67% 10-yr. 4.05% 30-yr. 4.92%
The short end of the yield curve reacted best to Greenspan’s
seeming intention to keep the federal funds rate unchanged well
into the future, but the long end gave up most of its gains by
week’s end. Earlier, the G-7 finance ministers decried excess
volatility in the currency markets and called for flexibility, while
singling out China and Japan for manipulating their own coin to
keep their currencies from rising too much versus the dollar. But
Japan’s finance minister said, “We will act as needed.” In the
end, the dollar fell some more against the euro…despite lousy
fundamentals in the latter. In fact the European economy (as
represented by the euro nations) grew just 0.3% in the fourth
quarter of last year and only 0.6% for all of 2003.
–Terrific piece by Peter S. Goodman and Philip Pan of the
Washington Post on Wal-Mart and its relationship with China.
80% of WMT’s worldwide suppliers are now based in there and
Wal-Mart continues to squeeze them to the bone. China’s
business community puts up with it; adopting the policy it’s
better than having nothing, for now. The average worker in
China making a Wal-Mart product earns $75-$110 a month,
often for an 80 hour week. Wal-Mart does have, however, 100
auditors who are running around trying to keep the bad headlines
to a minimum.
–The investigation into dairy giant Parmalat continues to deepen
as 7 banks, including U.S. majors such as Citigroup, are being
fingered for their possible complicity in hiding the company’s
debt. Was there a cover-up? Or as Chief Investigator Elsie the
Cow asks, “What did the banks know and when did they know
it?” [Elsie came out of retirement for this one.]
–Not that you didn’t already know this, but our congressional
leaders are for the most part a sorry lot. Take the case of
Senator Susan Collins of Maine. She is on the committee
responsible for overhauling the mutual fund industry and a top
target for action is the 12b-1 distribution / marketing fee. So
Senator Collins is on CNBC and more than once called it “12 1-
B.” Nitpicking? Hardly. Collins can’t possibly have a grasp of
the issues she seeks to reform if she doesn’t even know the
correct names.
[Paid for by “People Against Electing Idiots,” Brian Trumbore,
Treasurer]
–Microsoft waited months to tell us Windows has another
“critical” security flaw and then it had to reveal that a portion of
the source code for its operating systems was leaked on the
Internet, thus handing hackers and virus writers more fodder for
extreme mischief.
–Juniper Networks acquired Internet security firm Netscreen for
$4 billion. NetScreen execs and employees, many of whom were
probably viewed as “geeks” in high school, just became very rich
and are deservedly sitting back on Necker Island going,
“Remember our quarterback? What a loser he was.”
–The bid by Oracle for PeopleSoft will most likely be opposed
on anti-trust grounds.
–Speaking of software and the current environment on the sales
side, a good friend in the industry whose name must be withheld
offered up the following commentary for when a sales executive
sits down with his customer. Client: “You owe me for all we
have paid and what little we have accomplished in the last ten
years.” Ouch. Part of the problem is the clients underestimated
the effort they needed to expend on their end, according to my
source.
–The Martha Stewart case is open and shut, despite a
prosecution setback on Friday. We’re also all realizing just what
a scary woman she truly is. Ironically, Imclone’s cancer-fighting
Erbitux finally received FDA approval this week.
–Inflation Watch…another exclusive of StocksandNews: Mark
R. reports that Heinz Gravies are up 11% and Litehouse Blue
Cheese Dressing (the best, M.R. claims) up 10%. Perhaps of
more import is the plight of John K., who wired in that Lehigh
University just informed him tuition for his two girls attending
this fine institution will be up another 7% for the 2004-2005
academic year. And if you live in Los Angeles County, the
median home price here has skyrocketed 26.6% from a year
earlier to $352,000. [L.A. Times]
–Congratulations to my former employer, PIMCO Funds, for its
super performance in an annual survey of 75 fund families for
Barron’s. PIMCO ranked #3 overall, #1 for the past 5 years.
–Years ago, when it was still on the drawing board, I said that
Dean Kamen’s Segway vehicle was a joke and would never be a
hot product. Well, Segway has been out there for a while now
and it’s failing miserably with sales of just 6,000 when up to
100,000 was projected for the last year. Kamen now faces a cash
crunch. Of course it didn’t help when the product was recalled
for a software defect that could cause riders to crash and fracture
their skull.
–Correction: Last week I initially posted the incorrect IPO price
for China Life. The correct figure is $19. Thanks to my full-
service broker David P. for setting me straight.
–My portfolio: The biggest play, an oil refiner, continues to
wrack up solid gains, otherwise I pretty much treaded water this
week. Oh, and that Polish oil and gas play that I sold after a
relatively small 25% gain because I felt uncomfortable with it is
now up over 100% from where I jettisoned the damn thing. Not
that I’m thinking about it that much. Overall I’m about 44%
equities, the rest cash, mostly singles. [Hey, it’s all the
bartenders have down here in Florida.]
International Affairs
Pakistan: The intelligence community and organizations such as
the International Atomic Energy Agency (IAEA) are just
beginning to understand the scope of the nuclear weapons
technology network headed by Dr. A.Q. Khan. President
Musharraf was briefed back in October by Deputy Secretary of
State Richard Armitage and supposedly it wasn’t until then that
Musharraf realized the extent of Khan’s mischief as Dr. Nuke
passed secrets and components on to the likes of Libya, Iran and
North Korea. Now, however, the relatives of scientists who
worked under Khan and are now in prison are going public with
their opinions that the military had full knowledge of all such
activities and that the scientists, who have no access to legal
counsel, are being made the scapegoats. This is important
because the Bush administration continues to praise Musharraf
for helping expose the network. Then again, all sides are lying in
this one.
Iran: But regarding the above, on Thursday reports surfaced of a
new plant in Iran that facilitates the production of highly-
enriched uranium. The IAEA discovered this as part of the Khan
/ Libya link, so while no one should be surprised the Iranian
government has been lying to the world community about its
own efforts on the weapons front, it will all come to a head in
March when the IAEA next meets with officials in Tehran.
Meanwhile, the sham parliamentary election here is held next
Friday.
Israel: While the Bush administration wrestles with Prime
Minister Sharon’s plans to basically scrap the road map and
unilaterally take down Israeli settlements in Gaza as well as re-
draw the borders, the PLO has been struggling internally over
Yassir Arafat’s massive corruption. Of course this has been
going on for decades and yet the Palestinians have stupidly
allowed him to ruin their lives. And now we have the case of
Arafat’s sleazy wife, Soha, who is under investigation herself in
France for money-laundering. She learned at the foot of the
master, after all.
North Korea: President Bush told Tim Russert “we are making
good progress” here. Really?
Iraq: Over 400 Iraqi policemen have been killed by the terrorists,
a tragedy of huge proportions. But one has to admire the courage
of those citizens who nonetheless keep lining up, not just because
it’s a way to put bread on the table, but because they truly want a
better nation. Separately, Fred Hiatt wrote in the Post that there
is a danger in the current U.S. troop rotation, that being that key
relationships with Iraqi community leaders are being broken up
at a critical time. Of course the soldiers deserve to go home, but
this is simply a fact we must deal with.
China / Taiwan: A senior Pentagon official, Assistant Secretary
of Defense Douglas Feith, told Beijing that it should withdraw its
missiles directed at Taiwan if it truly wants to engage Taiwan
diplomatically, a significant move by the Bush administration
after it had blasted Taiwan over its coming referendum and
presidential election on March 20. China knows that if it acted
militarily before then, such as in a missile test, it would only
strengthen the hard-liners on the island.
Russia: Forget the farce concerning the disappearance and re-
emergence of a lightweight presidential candidate, the significant
event of the week was President Vladimir Putin’s campaign
speech in which he declared that the demise of the Soviet Union
was a “national tragedy on an enormous scale” from which “only
the elites and nationalists of the republics gained.” So there you
have it, in case you were skeptical of the claims by yours truly
and others that Putin seeks to do all he can to recreate at least a
semblance of the former empire. Prior to this speech, he himself
hadn’t spelled it out so forcefully.
Indonesia: A Pew Research Center survey reveals that only 15%
of the people here have a favorable opinion of the United States.
As recently as 1999 it was 75%. [Wall Street Journal] See
earlier discussion on Australia.
France: As expected, by a 496-34 vote the National Assembly
banned the wearing of Muslim headscarves, as well as Jewish
skullcaps and large Christian crosses in public schools. The
government said this was a necessary step to help curb a surge in
racism and anti-Semitism.
Netherlands: The government here is moving to curb its own
immigrant population in announcing it will deport 26,000 asylum
seekers over the next 3 years. This nation used to be viewed as a
bastion of liberalism, but attitudes have changed and the step is
part of the legacy of Pim Fortuyn, the hard-right politician who
was assassinated a few years ago.
Jordan: Time for an acknowledgement of King Abdullah’s
government for performing a most valuable service for the U.S.
and its allies in allowing the coalition to train a new Iraqi army in
Jordan.
South Korea: We also note that the parliament here has just
approved the sending of 3,000 troops to Iraq to aid in
reconstruction efforts.
Cyprus: In a victory for Kofi Annan and the U.N., Greek and
Turkish Cypriot leaders have agreed to meet the U.N.’s plan for
reunification by May 1st.
Haiti: There’s a revolution going on as rebels attempt to
overthrow the government of President Aristide. Frankly, I
couldn’t care less. The human heart and mind are only capable
of so much concern and this is not one of mine.
Brazil: When President Luiz da Silva (Lula) ran for office in
2002 he promised to be a champion of the poor and create jobs.
His own background as a labor leader lent credibility to his
claims. But now his approval rating has fallen to just 40% as he
has been freezing spending as part of a tough fiscal plan. It’s the
right thing to do, but the peasants will only put up with it for so
long before they take action.
Random Musings
–Campaign 2004: I’m assuming that the Internet stories
concerning John Kerry’s alleged infidelity are not as explosive as
they currently read. Should they prove to be correct, however,
it’s a whole new ballgame. Hillary could step back into the
picture, for starters.
Otherwise, the early polls pitting Kerry and Bush are overrated at
this stage. Of more import is President Bush’s approval rating,
still around 50% in various surveys which really isn’t that bad
when taken in historical context. But what should be particularly
troubling for the White House is the Time / CNN poll that shows
only 44% believe Bush is a leader “you can trust,” while 55%
have “doubts and reservations about his leadership.”
But in the end I still say one need only know where the Dow
Jones Industrial Average is and if it’s at 10000 late August /
early September, and barring a negative October surprise, the
president should win because a market at this level means
interest rates and inflation remain low and the economy is
growing at a solid enough pace to finally begin creating decent
levels of new jobs. Conversely, a Dow below 10000 means the
markets see inflation as being an imminent concern, the Fed has
begun raising interest rates and / or the bond vigilantes are doing
the Fed’s bidding as long-term rates rise and finally put a dent in
the housing sector and…a forecast of slower growth in the
economy will lead to downward revisions in corporate earnings.
I still view the latter scenario as being the most likely.
–Pat Buchanan remarked on “The McLaughlin Group” that there
is no way President Bush fires CIA Director George Tenet at this
late stage before the election because Tenet would simply come
back at Bush if the president did so. Tenet is a buffer for the
White House.
–Will our president finally show some leadership in terms of
fiscal discipline? The Senate passed a $318 billion highway and
mass transit bill, with the House preparing to up that stupendous
price tag, while the White House has said all along that it would
accept only $256 billion or the president will veto the measure.
Could it be? His first veto? Some of us would go into cardiac
arrest were this to be the case.
–If you thought I was harsh last week in my critique of today’s
music, you only needed to watch the Grammys to see my point.
It was dreadful. But, lest you think I only listen to 60s music, I
just thought I’d list a few of my favorites outside this era: Earth,
Wind & Fire, Ozark Mountain Daredevils, Marshall Tucker, U2,
Swing Out Sister, George Strait, Randy Travis, Shania
(especially the pictures), any Strauss Waltz, Chopin,
Rachmaninoff, and my main man, Jack Jones of “Wives and
Lovers” fame. “Hey, little girl, with your hair, up in cur-lers…”
–Haven’t seen any yak on the beach here yet. Doesn’t mean
there aren’t any.
–John Kerry’s big problem, especially if there is any truth to the
latest rumors, is obviously Teresa. She’s liable to kill him.
–Lots of controversy concerning the Atkins diet after the report
was leaked that the good doctor was 258 pounds when he died.
Of course we quickly learned this was all water weight, but it just
goes to show that with all the talk these days about PCBs in
farmed salmon and mad cow, your editor’s Chex Mix and beer
diet is looking mighty good. I expect the FDA to elevate it on
the food pyramid for recommended eating and drinking.
–I have commented extensively on the steroid issue for years
now elsewhere on this site, but with this week’s indictment of 4
suspects in California and the ties to professional athletes,
including baseball great Barry Bonds, we’ve obviously reached a
new level. Baseball, in particular, must take a hard look at its
revered record book, starting with Bonds’ 73 home runs in 2001,
at a time when he was clearly taking what are now deemed to be
banned substances. For those of us who love the sport, it’s a
damn shame. At the least, some players deserve asterisks by
their inflated statistics.
–Speaking of asterisks, place one next to each of the gay couples
allowed to marry at San Francisco’s City Hall even as the state
constitution forbids it. And now it appears a nationwide
constitutional amendment to define marriage as between man
and woman will be a dominant campaign issue. Just super.
–The average age of network nightly newscast viewers is 60.
–So I’m down here for the NASCAR races both Saturday and
Sunday. The weather forecast is miserable and I’m kind of
bummed. But the president is supposed to be at the track for the
500. I promise not to shove this piece in his face.
—
God bless the men and women of our armed forces. I marveled
at the soldier who was interviewed on “60 Minutes” last week,
face and skull partially blown off in Iraq, yet he was still eager to
get back to his men. It’s why we pray for these great Americans
every week.
God bless our country. Guide our leaders to always do the right
thing.
—
Gold closed at $410
Oil, $34.56…big rebound
Returns for the week 2/9-2/13
Dow Jones +0.3% [10627]
S&P 500 +0.3% [1145]
S&P MidCap +1.3%
Russell 2000 +0.2%
Nasdaq -0.5% [2053]
Returns for the period 1/1/04-2/13/04
Dow Jones +1.7%
S&P 500 +3.1%
S&P MidCap +4.6%
Russell 2000 +5.1%
Nasdaq +2.5%
Bulls 56.6
Bears 19.2 [Source: Investors Intelligence / Chartcraft]
Note: Next week I’ll have some special remarks. We’ve reached
a milestone.
Have a great week. I appreciate your support.
Brian Trumbore
