[For the record, posted at 7:15 a.m.]
It”s possible that the U.S. Supreme Court will finally effectively
resolve this presidential election. In the meantime…
Liberal commentator Richard Cohen, Washington Post, 11/24.
“I voted for Al Gore…(but) I now think that under current
circumstances he would not be the right man for the presidency.
If I could, I would withdraw my vote.
“…Given the present bitterness, given the angry irresponsible
charges being hurled by both camps, the nation will be in dire
need of a conciliator, a likable guy who will make things better
and not worse. That man is not Al Gore. That man is George W.
Bush.”
As a long-time reader of Mr. Cohen, I was floored by his Friday
missive. The longer this election drags on, I suspect the more
you”ll see of this. Here”s the bottom line, as I”ve enumerated
many times before.
Al Gore has no real friends, just supporters.
Al Gore is not a likable person, especially as viewed from afar,
which is how we all get to see our Presidents these days.
Congressman J.C. Watts added this week, Gore is “a candidate
who will not win or lose honorably, but will try to do so through
cutthroat tactics that eight years under President Clinton have
taught him.”
And as to the issue of the absentee ballots, particularly those from
the men and women of our armed forces, George Will commented.
“Imagine the media meltdown of indignation if Republicans had
circulated to their workers a memo on how to suppress, through
challenges, voting in minority precincts, as the Democrats” memo
did concerning how to suppress voting by the overseas military.”
Probably the best statement I heard concerning the military ballots
came from a serviceman stationed in Kosovo. “Heck, our vote
should count twice!”
Yes, it”s kind of sad when a legitimate absentee ballot is refused
while an “interpreted” one gets a second or third look.
Who knows when and how this all will end, especially now that
the Supreme Court has decided to review a Bush appeal. We”ve
all become election officials, judges, and pundits.
I really can”t improve much on what I wrote during Week One.
I”m tired of people feeling “disenfranchised” who also fail to take
responsibility for the simple act of being a good citizen and
properly executing a ballot. As my brother said the other day in
discussing dimpled chads, we seem to be bending over backwards
for a bunch of stupid people. I”m losing my patience. I suspect
many of you are too.
—
Note to Joe Lieberman, who blasted the “organized”
demonstrations on behalf of Bush-Cheney this week in a
statement on Friday. Far be it for the Democrats to raise this
issue when they have surrogates like Jesse Jackson working their
own magic.
If Gore-Lieberman want a more civil dialogue, they should look
no further than their own lackey, Paul Begala. In case you missed
it, here is what the truly detestable Begala wrote in the week
following the election.
“Yes…tens of millions of good people in Middle America voted
Republican. But if you look closely at that map [showing states
won by George W. Bush in red] you see a more complex picture.
You see the state where James Byrd was lynched – dragged
behind a pickup truck until his body came apart – it”s red. You
see the state where Matthew Shepard was crucified on a split-rail
fence for the crime of being gay – it”s red. You see the state
where right-wing extremists blew up a federal office building and
murdered scores of federal employees – it”s red. The state where
an Army private who was thought to be gay was bludgeoned to
death with a baseball bat, and the state where neo-Nazi skinheads
murdered two African Americans because of their skin color, and
the state where Bob Jones University spews its anti-Catholic
bigotry: they”re all red too.”
Columnist Michael Kelly says Mr. Begala “can be counted on to
spelunk the lowest level of the sewer.”
Wall Street
The traditional Friday after Thanksgiving rally could not have
come at a better time. It was as if traders said, “Dammit, enough
of this negative talk and this election B.S. I”m doing some
buying.” And the rally in the Nasdaq was well-deserved because,
before Friday, the declines for it and the other major indexes from
their respective all-time highs were rather ugly.
Percentage decline to Wednesday”s intra-day low:
Dow Jones -12%
S&P 500 -13%
Wilshire 5000 -18% [The broadest measure for the whole
market]
Russell 2000 -25%
Nasdaq -45%
And here are some technology issues with the date of their all-
time or 52-week high, the peak level and Wednesday”s low.
Amazon.com (12/9/99) $113, $22
Cisco (3/27/00) $82, $50
Dell (3/22/00) $60, $23
eBay (3/27/00) $127, $29
EMC (9/25/00) $105, $78
Intel (8/28/00) $76, $41
Juniper (9/25/00) $240, $110
Nortel (7/25/00) $89, $37
Oracle (9/1/00) $46, $22…lost another key executive
Sun Micro (9/1/00) $129, $80
Yahoo (1/4/00) $250, $38…I refuse to add the exclamation
point.
All of the above did rally on Friday.
But for the week the Nasdaq still lost 4% to close below 3000
(2904) while the Dow Jones lost 1.5% (10470). It could have
been much worse, though, as the Nasdaq lost 9% the first 3 days
for a total post-election drop of 19% up to that point.
So what”s the Big Picture at the moment? Or, do you like your
landing hard or soft?
Most people, if they had their druthers, would prefer to have a big
cushion at the bottom if they were being dropped head first from
a 10-story building. And soft landing adherents can take comfort
from the fact that a Federal Reserve Bank of Philadelphia survey
of economists calls for GDP growth of 3.3% in 2001 with only
2.7% inflation. If we get those figures that would be all well and
good and definitely would limit the downside in indexes like the
Dow and the S&P 500. But it wouldn”t necessarily mean that we
are back off to the races because you still have the issue of
decelerating profit growth.
First Call, the keeper of earnings estimates, is now calling for a
rise in 4th quarter S&P 500 earnings of 10.7%. This is down
sharply from the 15.5% estimate for Q4 as of October 1st. With
apologies to PETA, it”s time to beat a dead horse again. When
the trend is down, it isn”t good. It was rising expectations for
technology spending of all kinds that was a primary source of the
tech boom through this past spring. Now that has reversed.
The economic news of the week supplied bulls with one positive
item. The University of Michigan”s key index of consumer
sentiment actually showed a rise for November. Personally, I
don”t believe it…must have been a clerical error, or some
dangling chads.
So those of us who believe that the odds increasingly favor a hard
landing point to a slowdown in Europe, growing problems in
Latin America (Argentina being the prime example), ongoing
political problems in Asia, a global tightening of liquidity, rising
debt levels of all sorts, rapidly slowing auto sales (Chrysler
obviously has major problems), and the potential for a so-so to
poor holiday shopping season. Regarding the latter, Neiman
Marcus announced this week that they expect sluggish sales for
their current quarter which carries through January, certainly not
a great prognosis.
Is there any real long-term relief out there from the grind
downward? There is a lot of cash on the sidelines, after all,
which could help fuel a sustainable move and, clearly, a resolution
of the election would supply some temporary relief as well.
But if the election process drags on to the point where Congress
has to get involved (and, again, the Supreme Court may have
something to say before it got to this point), there is no way that
that would be viewed in a positive light by the markets. Which in
the mind of your intrepid editor leaves one man who can stabilize
matters, that being Federal Reserve Chairman Alan Greenspan.
The Fed”s Open Market Committee next meets December 19 and
they could give the Street a boost by adopting a “neutral” stance
on interest rates. Greenspan continues to worry about items like
rising wage and housing costs but you can easily make the case
that these are close to peaking, if they haven”t already.
To sum up, I think the watchword going forward will be
“malaise.” Or maybe it”s just the fact that I”m getting older and
find myself increasingly in need of a nap.
Street Bytes
–What had been another horrible week for dot-coms was
salvaged somewhat by Friday”s rally as e-tailers surged on the
hope that the holiday shopping season will bail them out. EToys,
for example, closed around $1.75, only 98% off of its 52-week
high of $70, typed the editor with dripping sarcasm.
–Amazon”s Jeff Bezos was on the tube recently defending his
company”s business model. To say the least, he was rather
disingenuous. And now he has a new problem as some of the
workers want to unionize because they are upset their stock
options are now worthless. Welcome to the real world, guys.
My buddy George and I actually have a little contest going to see
where Amazon finishes the year. Months ago I said $17.50,
George said $9. [It finished the week around $28.] The prize is a
can of Dinty Moore Stew. Actually, George owes me about 5
cans which I will gladly donate to the foodbank of his choice.
–E-Stamps closed Wednesday at 34 cents a share, or exactly the
cost for a first-class stamp come January. Now that”s fair value!
[The stock was $44 earlier in the year.]
–Internationally, Tokyo”s Nikkei index stands at a 20-month low,
while Germany”s business confidence barometer fell for a 5th
straight month. Separately, the OECD expects euro zone growth
in GDP next year to be 3.1%; a disappointment because they
project the U.S. at 3.5% and it was anticipated that Europe would
surpass the U.S. rate of growth by next year. But there”s still
time, boys.
–The long end of the U.S. Treasury yield curve rallied on the
election uncertainty as well as an ongoing flight to quality from
stocks.
U.S. Treasury Yields
1-yr. 6.20% 2-yr. 5.86% 10-yr. 5.62% 30-yr. 5.67%
–Oil: There was some improvement in the inventory picture this
week as long-awaited crude begins to slosh up on our shores.
[Actually, it”s more orderly than that.] But the oil market is
trading not just on the supply / demand situation but increasingly
on the weather forecast. The week just past was colder-than-
normal for much of the nation while the next few days will be
milder. But your official StocksandNews outlook (with an assist
from the Weather Channel) is calling for a return to colder
weather by week”s end. Ergo, don”t expect much of a relief in
the prices for heating oil and natural gas.
The Big Picture also remains bullish for oil, barring a total
worldwide economic collapse. Demand continues to surge in the
developing world as more and more cars take to the roads. Yet
the major oil companies are still very reluctant to make the large-
scale investments needed to meet this future demand. This is
where the volatility in oil prices has been a killer for strategic
planners.
Which leads your editor to believe that while prices will inevitably
come down by next spring, the chances that we see crude much
below $25 are slim. But one must continue to keep an eye on the
global economic picture for further guidance.
–With the ongoing slaughter in the technology sector, there is the
growing chance that many mutual funds will not only issue large
capital gains at year end, but the performance of these portfolios
could be substantially into negative territory. The combination is
awfully tough to swallow.
–Lucent and AT&T continue to crater. The impact on real
estate, particularly in New Jersey, will be significant as the pink
slips begin to mount.
International Affairs
Middle East: There were a number of gruesome attacks in the
Israeli-Palestinian conflict this week, foremost being the bombing
of an Israeli school bus which killed two and left a number of
children without limbs. Israel then retaliated, killing 4 Muslim
extremists and Egypt proceeded to recall its ambassador, the
first time they have done so since 1982…and a highly significant
move since Egypt has to be the glue to keep any semblance of a
peace process going forward. And at week”s end, Yasser Arafat
was in Moscow seeking Russian help.
There is no doubt that major players like Egypt”s Mubarak,
Arafat and Prime Minister Barak recognize we are now at the
precipice and matters can quickly spiral totally out of control. It”s
just that extremist elements on all sides are increasingly calling the
shots.
Iraq: Saddam opened an oil pipeline to Syria for the first time
since 1982, in obvious violation of U.N. sanctions and the oil-for-
food program by which crude revenues are to go only into escrow
accounts administered by the U.N.
The only good news to emerge out of Iraq is the word that
Saddam”s military still has a way to go before it is an effective
fighting machine. U.S. News reported that when Saddam
recently moved some troops towards Jordan as a show of support
for the Palestinians, 80% of the trucks appeared to be out of
service, a key to logistical support for any true operation.
Balkans: On Sunday, Slobodan Milosevic, incredibly, will be
named head of the Socialist Party. Yes, he”s back. President
Kostunica didn”t want to arrest him and he may pay the price.
Plus, Albanians have killed at least 4 Serbs in renewed fighting
along the border between Kosovo and Serbia. The head of the
U.N. effort in Kosovo proclaimed this week that “Kosovo
remains in crisis.” Kostunica will be under increasing pressure to
renew the conflict if Albanian rebels continue their attacks. [I
have more on the issue in this week”s “Hott Spotts.”]
Russia: Jim Hoagland of the Washington Post broke the story this
week that Russia is pouring weapons back into Iran, in defiance of
the 1995 secret agreement reached between former Prime
Minister Chernomyrdin and Vice President Gore which banned
such transfers. The initial accord, seemingly in violation of
congressional rules, was a late campaign issue. The State
Department, however, was notified of Russia”s intransigence
before November 7, but managed to keep it quiet until now.
China / Taiwan: Taiwanese investment in China has soared 98%
in the first 10 months of this year due to cheaper labor as well as
lower land costs and property taxes. Taiwan”s business leaders
are urging an end to the political squabbling which threatens the
leadership of President Chen.
So, as a follow-up to my discussion of last week wherein I
wondered why China wouldn”t just launch a few missiles and let
the Taiwanese Government cave in to its wishes, I”m more
convinced than ever. China can simply cut deals with the business
leaders, many of whom are undoubtedly corrupt, to support rule
from Beijing. It would be almost a silent coup.
Separately, this week the U.S. waived sanctions against China for
past missile technology transfers to Iran and Pakistan but imposed
them on the latter two for receiving the equipment. China has
pledged to clean up its act. Yeah right.
Terrorism / Missile Defense / Rogue Nations
On the issue of missile transfers and a national missile defense,
former Defense Department official Frank Gaffney wrote in
Defense News that even if Vice President Gore prevails, “he will
almost certainly be obliged to rethink his longstanding antipathy
to missile defense. For one thing, the threat is continuing to
metastasize, with China, North Korea, Iran, Libya, Syria, Iraq,
and Pakistan just a few of the nations aggressively developing or
seeking to acquire long range missile technologies.”
I have argued we must proceed with testing for NMD even
though a true attack from a rogue nation or terrorist group may
come by other means. Blackmail becomes much easier if we
simply ignore one way of delivering a threat.
Which brings me to our own border. Writing in the November /
December issue of Foreign Affairs, strategist and Coast Guard
Commander Stephen Flynn had some salient facts which are
rather startling. Each year 475 million people, 125 million
vehicles, and 21.4 million import shipments come into our
country. People and goods arrive at more than 3,700 terminals in
301 ports of entry. So it”s amazing we”ve been able to thwart
potential attacks like that which was planned for Seattle last New
Year”s Eve. And here”s a very doable terrorist scenario, as
described by Flynn.
“Osama bin Laden could have a front company in Karachi,
Pakistan, load a biological agent into a container ultimately
destined for Newark, New Jersey, with virtually no risk that it
would be intercepted. He could use a Pakistani exporter with an
established record of trade in the U.S. The container could then
be sent via Singapore or Hong Kong to mingle with the half a
million containers that are handled by each of these ports every
month. It could arrive in the United States via Long Beach or
Los Angeles and be loaded directly onto a railcar or truck for the
transcontinental trip. Current regulations do not require an
importer to file a cargo manifest with U.S. Customs until the
cargo reaches its ”entry” port – in this case, Newark, 2,800 miles
of American territory away from where it first entered the country
– and the importer is permitted 30 days” transit time to make the
trip to the East Coast. The container could be diverted or the
weapon activated anywhere en route, long before its contents
were even identified as having entered the country.”
Peru: President Fujimori resigned, incredibly doing so while
traveling in Japan, where he will live out his days since he proved
to the Japanese Government that he is technically a Japanese
citizen. But, instead of chaos, longtime congressional leader
Valentin Paniagua was selected to be the interim president.
Paniagua (cool name) then turned around and named former U.N.
Secretary-General Javier Perez de Cuellar as prime minister, a
brilliant move. There is hope for this important country.
India/Pakistan: The Indian Government announced they will hold
a cease-fire in Kashmir during the Muslim holy month of
Ramadan (starting end of this month). But the militants,
supported by Pakistan, said “Ramadan, Schmamadan…bombs
away.” [Actually, I don”t think the dirtballs said that, but it”s
close.] And I read something the other day that should scare you;
only 40% of Pakistanis are literate.
Vietnam: Just one day after President Clinton left this country, a
top general warned against threats to undermine socialism and
that Vietnam would crush any threat to “peaceful evolution.”
And how about the picture of Clinton smiling at the monument to
Ho Chi Minh? I can”t imagine too many Vets were pleased at
that.
Japan: Prime Minister Mori, he of the 20% approval rating,
survived a raucous session of parliament during which he was in
danger of being deposed. At one point a supporter of Mori”s
threw a glass of water on opposition members. [A taste of
things to come in our own Congress!]
So, having survived for at least a few more weeks, Mori put
through economic stimulus package #784, piling on more
government debt.
Canada: It”s heating up before Monday”s election. My Canadian
friend, Harry K., commented that while the race appears to be
tightening, he still thinks the ruling Liberals will win. “Too bad,”
said Harry, “as they are bereft of ideas, arrogant and corrupt.”
Prime Minister Chretien called for an early election because he
thought it would be an easy victory and their campaign strategy
has been to “vilify the opposition and steal their ideas.”
Europe: Felix Rohatyn, investment banking legend and U.S.
Ambassador to France, said Europeans “are looking at our
election and tend to criticize the whole system and question the
legitimacy of our leadership.”
But as Rohatyn may be the first to admit, Europe better spend
more time worrying about their own problems. Business Week
had a powerful story (11/27) on sweatshops in Europe and the
underground economy (which represents 28% of Italy”s GDP, for
example). What is even more worrisome is that a new criminal
hierarchy is emerging throughout the continent.
And, once again, it needs to be reported that this week the
German Government intensified its efforts to ban the National
Democratic Party, a neo-Nazi group. The skinheads have also
been arming themselves for possible terrorist attacks.
Unfortunately, these kinds of groups are all connected through
the Internet so their influence on Americans of this ilk is
considerable. We”re going to have to learn to deal with it.
Finally, Europeans are increasingly having to deal with Mad Cow
Disease, which has spread to at least 6 nations with the admission
by German officials that their own beef supply is now tainted.
Global Warming: The U.N. is currently holding its conference on
climate change with the main issue being the “Kyoto Protocol”
and how best to control greenhouse gases. The U.S. produces
one-quarter of these and is under intense pressure to reduce its
current levels. American officials are loathe to comply because it
could have a significant impact on the economy. Thus, the heated
rhetoric will add to the warming trend, further melting the ice
caps, leading to flooded coastal cities worldwide. All of this
could happen in two weeks.
Actually, it”s a good topic for next week”s “Hott Spotts” and I
will explore the issue in more depth at that time.
Yemen: Officials there are saying that two Saudi nationals are
responsible for the attack on the USS Cole. The FBI has largely
been kept in the dark, however.
Turkey: Now it”s the French Senate which passed their own bill
excoriating Turkey for its “genocide” against Armenians in 1915.
And U.S. Senator Joseph Biden wants to block a sale of
helicopters to Turkey for various reasons. Geezuz. Cut these
guys some slack before the military takes over again in Ankara.
Haiti: I really couldn”t give a damn, but it”s liable to be news next
week. The nation is going to bring back former President
Aristide.
Random, Somewhat Haphazard Musings
–So the other evening I popped in an ABC News video of the
1960 Kennedy- Nixon debates. Like all of you, I had seen clips
before but never anything extensive. Well, let me tell you. Back
in 1960, Americans had a choice between two outstanding
candidates.
The dialogue was invigorating and, by the way, Kennedy was
awesome. Yet if poor Nixon hadn”t been sweating like a pig
during the first debate, for reasons I have discussed in my “Bar
Chat” link, and if Chicago and Texas hadn”t turned out a ton of
dead people, Nixon would have won.
One of the key issues of the time is still being discussed today,
Social Security. [Back then, incidentally, the monthly check was
$78.] Which forces me to say, as I did when George W. first
proposed it, that privatization of even a portion of Social Security
is one incredibly stupid idea.
–Another incredibly stupid idea is Internet voting.
–One does not get a Pulitzer Prize using the phrase “incredibly
stupid.”
–The Wall Street Journal had a big story on Marc Weill, the son
of Citigroup Chairman Sandy Weill. It seems that Marc, who was
managing beaucoup dollars for the company, has a little drug
problem. His coworkers said that one of the tell-tale signs were
his charred fingertips, burned from holding his crack pipe. Let
that be a lesson to you, boys and girls. Use gloves.
–Only 38% of 18-29-year-olds voted this year. The other 62%
will tell you, “I feel disenfranchised!” Oh, get over it. Some of
them need a good swift kick in the butt.
–One of my neighbors was telling me about his recent trip to
New Zealand and he said something interesting. He was staying
at a local”s house and the host commented, “You don”t know
how much you (Americans) are changing us,” and not for the
best.
–Israelis eat 50.6 lbs. of turkey per capita each year. Americans
are second at 18 lbs. In Chad, they eat 18 lbs. of cardboard.
–You may have noticed a new picture of yours truly at the top of
the page. When I was at my reunion the other week, the hotel we
were staying at was also the scene of a hairdressers convention.
So I asked a group what I should do with my hair. “Oh, puh-
leeze. Dye it!” Nope. Ain”t gonna do it. Wouldn”t be prudent.
–A University of Michigan psychologist, Christopher Peterson,
says that people who live a “pessimistic lifestyle” have an
increased risk of dying before age 65. “Such individuals who
catastrophize (sic) their experiences suffer from poor decision
making and are most likely to be perpetually in the wrong place at
the wrong time.” [Source: Richard Morin / Washington Post]
Aagh! That”s me!!
Gold closed at $266
Oil, $35.40…4th Quarter profits for this sector will once again be
spectacular.
Returns for the week, 11/20-11/24
Dow Jones -1.5%
S&P 500 -1.9%
S&P MidCap -0.6%%
Russell 2000 -2.2%
Nasdaq -4.1%
Returns for the period, 1/1/00-11/24/00
Dow Jones -8.9%
S&P 500 -8.7%
S&P MidCap +12.8%
Russell 2000 -6.5%
Nasdaq -28.6%
Bulls 55.0% [Reminder…10-day lag…and this may be incorrect.]
Bears 28.5% [Source: Investors Intelligence]
Have a great week. Punch a chad!
Brian Trumbore
