“The world can grow perilous with astonishing speed.”
–Robert Kagan and William Kristol
No, maybe not this week. And maybe not this year but the Kagan
/ Kristol piece, which appeared this week, is worth further
analyses. Among the other points they made:
“The present danger is one of declining strength, flagging will and
confusion about (the US) role in the world.”
“Ten years from now, and perhaps earlier, we likely will be living
in a world in which Iraq, Iran, North Korea and China all will
possess the ability to strike the US with nuclear weapons.” [Of
course China already can].
“Americans must shape this (new international) order, for if we
refrain from doing so, we can be sure that others will shape it in
ways that reflect neither our interests nor our values.”
I got a kick out of some of the fawning news stories on Clinton”s
trip to India. Don”t believe them. The last thing India is about to
do is give up their nuclear weapons. And they shouldn”t. After
all, with a failed nuclear state like Pakistan on one side, and the
confused nation of China on the other, would you? But we
hypocritically keep asking them to disarm and sign treaties even
we haven”t signed. No, India has huge problems but they are a
nation on the rise. Embrace them.
As for Pakistan? See above. Embrace India.
And talk about diplomacy, Clinton was hardly a diplomat himself.
He no sooner touches down on Indian soil and he”s calling the
region the “most dangerous place in the world.” Well, of course
it is. But save that talk for your closed door national security
meetings, or let Congressmen say it (or web editors for that
matter). Note to President: It”s called “respect.” And here”s
how India”s President (admittedly, a largely ceremonial potentate)
put it in a toast to our man Bill.
“It has been suggested that the Indian subcontinent is the most
dangerous place in the world today and Kashmir is a nuclear flash
point. These alarmist descriptions will only encourage those who
want to break the peace and indulge in terrorism and violence.”
Ouch! Enjoy your curry, Mr. Clinton.
Peter Jennings had an outstanding documentary this week on
tensions in the region. Yes, it is scary. Jennings summed it up by
saying, “Mr. President, good luck.”
[And just a note on security for Clinton”s trip, an issue I have
hammered away at. You saw how his own people were
scrambling to reshuffle the schedule when a legitimate terrorist
threat from Osama bin Laden emerged. And they actually seemed
surprised?!]
On to China and Taiwan. The DPP candidate, Chen Shui-bian,
won the presidential election and avoided inflammatory references
in his early remarks but he also pledged not to let Taiwan become
another Hong Kong or Macao. For its part, Beijing was rather
quiet. Of course everyone tried to read way too much into every
grunt from either side. Let”s just wait and see.
The bigger picture is that China is a relic. And as to the Clinton
administration”s reaction, columnist Jim Hoagland put it
succinctly. “(The administration) treats the thrilling reaffirmation
of Taiwan”s commitment to democracy as a dangerous burden
instead of the act of liberation it is.”
William Safire wrote, “As Taiwan”s party of power bows to the
will of a victorious plurality, Russia”s party of power perpetuates
a fraud on the Russian people. That”s the difference between a
successful and failing democracy.”
So what of Russia? The biggest surprise in the coronation of
Vladimir Putin is whether or not he receives 50% of the vote and
thus avoid a runoff (which if there is one would be held April 16).
50% of the electorate also needs to go to the polls in order to
validate the election.
And which Putin will emerge? A swashbuckling democrat or a
KGB operative? And after the election, will he turn on those who
put him in office?
There are already signs that he is lacing his court with all manner
of spooks. Among his cryptic comments of the week was, “We
can pin hopes for a worthy future only if we prove capable of
combining the universal principles of a market economy and
democracy with Russian realities.” One political commentator
said therein lies the danger. “Putin will trample on citizens” rights
in the name of a powerful state.”
It should take about a month to begin to find out. But if you
want some clues read my Hott Spotts series on Yuri Andropov,
Putin”s mentor and idol. You can probably guess what side of the
fence I come down on.
Finally, there is the Pope. He was my personal choice for “Person
of the Century.” But I also felt he shouldn”t have gone to the
Holy Land; that it would have been a mission better suited for his
successor, presumably with fresh, new ideas. I was wrong.
The Pope won”t be around much longer. In a world which is
sorely lacking in principles and values, you always know where
John Paul II stands. As a Catholic, I try and understand how non-
Catholics view him. There has to be at least an overriding sense
of respect. And we are all better off for his presence.
But it”s also too simple to say that his journey will make much of
a difference in the peace process. In the case of the Palestinians,
they are now energized. At the same time, the Israeli hard-liners
are well-entrenched too. And ditto for expecting Israelis to ratify
any treaty with Syria that gives up the Golan Heights. But that
also means you don”t stop praying.
Wall Street
Alright, here”s the deal with this Old vs. New garbage. I finally
figured it out. The Wall Street Journal”s Jake Schlesinger had a
good piece on the blurring of old and new as old becomes more
Internet-oriented. I would take it one step further. Techs have
always been new. And just because Clorox introduces a web site
or joins an Internet alliance, that doesn”t make them “new.” So
why don”t we go back to saying “techs” and “non-techs, or
cyclicals?” Brilliant, ain”t it? I thought so. And that”s what we
will do here at StocksandNews since I painted myself into a
corner and promised never to use Old and New again.
And if I”ve held your attention thus far, please note to check out
my Wall Street History link and my 3/24 piece on Charles Ponzi.
Pay particular attention to the very last paragraph, a quote from
the great market historian, Robert Sobel. Because if the action in
a good deal of the technology sector isn”t a ponzi scheme, well,
then this is all just a waste of time, isn”t it?
First off, it was another stupendous week for the equity markets
with the Dow Jones finishing up another 517 points, closing at the
11112 mark. The two-week gain is almost 1200. Throw in a
colon in the middle of those 4 digits and we can debate whether
it”s 12 noon or 12 midnight.
I probably haven”t made it clear enough that I”m not trashing
many of the traditional companies that are trading at reasonable
valuations. I”m participating myself in the rally through some of
these very issues.
But I have to share with you the action in a few stocks which is
quite telling and points out the casino nature of today”s market.
[Below, I have listed the 52-week range, with the highs having
been attained in just the past 3 weeks or so, as well as a price
level reached this past Tuesday.]
Protein Design Labs (338-13) $72
Millennium Pharmaceuticals (316-29) $107
Myriad Genetics (232-8) $65
Abgenix (413-12) $150
MicroStrategy (333-7) $86
Now most of these rallied back some and I didn”t bother listing the
week”s close but you get the picture. Do you really think the
folks dabbling in these stocks are investing? I realize some of you
may be. But in the case of MicroStrategy, did you have a clue
that their accounting was, shall we say, on the aggressive side? Of
course not. No one did or it wouldn”t have hit $333. But then the
SEC said, “Whoa. We seem to have a problem here.” “What”s that
officer?” said the CEO. “I say, Mr. Saylor, you seem to be booking
revenue before you really earned it!” “You mean I can”t do that?”
[I was on a radio show about a month ago discussing my
thoughts on emerging markets. Why anyone would ever plunk
down significant dollars to play around with some unknown
company in Thailand where the accounting standards are poor, at
best, is beyond me. We have the best standards right here and
some of our corporate chieftains are still pulling the wool over
our eyes.]
And how about the valuation of two of the largest corporations in
the solar system, Cisco and Intel. There was some amazing
symmetry between the two at the close on Wednesday and before
Cisco shares split, 2-for-1. Both closed at about $144. Cisco
then had a market cap of about $500 billion, Intel $480 billion.
Cisco”s price / earnings ratio was 200, Intel”s 68. For their fiscal
year ending 7/01, Cisco is estimated to earn $1.31 (pre-split).
Let”s say they handily beat expectations and earn $1.50. That”s
still a p/e of 96 on 7/01. And Intel”s multiple is for what had
supposedly become a more cyclical, as opposed to growth, issue!
Oh, you can go on and on. Or as the 3-card monte dealers say in
New York, “$20 gets you $40.”
Now there is undoubtedly some great fundamental news out
there. And not just in this country. Clearly, Asia”s economic
recovery continues at a swift pace and Europe”s is too (though
Germany had some troubling inflation numbers this week). It”s
just these price levels that bother….Actually, as I”m writing this I
feel like Charlie Brown when he”s banging his head against the
wall. The world”s not listening. The April 3rd issue of Business
Week has a cover story on market hype. If you are fairly new to
the investment game, it”s worth reading.
And then there”s Fed Chairman Alan Greenspan, a man who
seems increasingly irrelevant. For the fifth time since June of last
year the Fed raised interest rates and the markets stuck it to him.
In the old days, if the Fed raised rates 3 times the adage was “3
steps and a stumble,” meaning the market was due to tumble.
Not anymore. Now it must be, “5 steps to prosperity.”
In raising interest rates the Fed announced that they are still
concerned that “increases in demand will continue to exceed the
growth in potential supply which could foster infla…..Hey, get
back here! We”re talking to you! You listen to us! You……
The Fed next meets May 16. From the notes of Tuesday”s
confab, there is suddenly some concern that the Fed will raise
rates 50, not 25, basis points when they get together next.
The yield curve now looks like Mount Etna, or is it a ski jump?
1-yr. 6.28%, 2-yr. 6.62%, 10-yr. 6.19%, 30-yr. 5.99%
The 30-year is reacting to the ongoing supply issue as well as
some official talk that “agency” paper, Freddie Mac and Fannie
Mae, for example, should not be treated as if it has the full
backing of the US government (like Treasury bonds do). So
agencies were sold off for Treasuries in mid-week.
Other tidbits:
Congratulations to our friends up north. The Toronto Stock
Exchange”s key index crossed the 10000 mark for the first time
this week. Labatt”s all around!
Monday”s OPEC meeting is obviously huge as far as sentiment
going forward. Who knows what the cartel will say or, more
importantly, actually do. It”s one thing to say they will release 2
million barrels more a day. It would be another if it turned out to
be 2.5 or 3 due to “cheating” on the production quotas (and
cheating is always part of the equation). But if I”m a Sheik,
observing (and probably participating) in our casino, or other
casinos around the world, I must be thinking, it”s a Ponzi scheme
and oil is already down from $34 to $28 in just two weeks. Why
the heck am I trying to appease these spoiled children? Of
course, the Sheiks don”t want to shut off growth worldwide so
they”ll act responsibly (said the editor, sitting on his oil service
stocks).
Inflows into mutual funds for the week ending Wednesday were
evidently at record levels. More rocket fuel.
The US posted another record trade deficit for the month of
January. Our deficit with China alone was $6 billion. No one
cares…yet.
Shares in Rambus closed Tuesday at $266. They opened the next
morning at $329. If you”re playing these high-flyers, don”t ever
put in an order to “buy at the opening.” The potential to get
screwed is rather high.
Barron”s had an excellent piece on the Internet segment and the
cash that many dot-coms are burning through, to the point where
the immediate survivability of some is in question. In addition,
insider selling is “off the charts.” Who are they selling to? Five
seconds…
I noticed on Monday morning that the Washington Post had
raised prices for home delivery by 5-10%. Which means that
when the inflation numbers come out, experts will take out food,
energy, tobacco, and the Washington Post.
The Microsoft antitrust case could be settled soon.
More International
Iraq has executed 26 political prisoners in the past few months.
Also, Iraq blamed Iran for a mortar attack on an apartment
complex in Baghdad which killed two. Evidently, there have been
some major skirmishes on the Iran-Iraq border of late. That”s an
interesting development.
Sudan: Last week I said the Clinton administration should
publicly blast the government in Sudan for the slaughter of
Christians in the ongoing civil war. This week, columnist William
Safire gave another reason for stepping up the verbal attacks.
Sudan may be building missiles for Iraq, allowing Saddam to
evade the West”s prying eyes. North Korea is allegedly aiding in
the effort.
Speaking of North Korea, according to U.S. News, the Clinton
administration wants to remove them off of the State
Department”s list of nations who sponsor terrorism, if the North
cuts its links and arms sales to terrorist groups. But see above.
Kosovo: Columnist Richard Reeves summed up the current state
of affairs, and echoed my feelings, where the administration is
scared one of our soldiers will scrape their knee. “The KLA can
drive us out anytime it chooses by turning only a few guns in our
direction.”
This Week in Politics
Just a few tidbits. According to the polls, George Bush is not
putting his best face forward. Increasingly, voters are using the
words “cocky” and “arrogant” to describe his personality. My
advice? Take off until the convention. We”re in the season
where nothing positive can be gained so sit back and hope Gore
shoots himself in the foot.
Of course Gore already has a problem, the new Justice
Department investigation into White House e-mails from the ”96
campaign (I warned of this a few weeks ago). It”s too early to
tell if Justice is serious. Obviously, their track record on these
kinds of queries leaves something to be desired if you”re a
Republican like moi. But one thing is clear, the number of
witnesses now coming forward saying that they were warned
repeatedly not to retrieve the missives is growing. Again Mr.
Bush, lie in the weeds for awhile, and bone up on foreign policy.
And then there is Rudy Giuliani, an outstanding mayor. But
geezuz, Rudy, calm down! You”re acting like a jerk.
What is intriguing about the Rudy / Hillary Senate race is the fact
that almost 90% of the electorate in New York had already made
up their mind last fall. Folks, that is rare indeed in American
politics. Let”s call it a 45-45 race right now. His mishandling of
the latest police shooting case (Patrick Dorismond”s) could tip the
scales. If he”d cool it with some of the rhetoric he”d make the
opposition look foolish and 6 of the remaining 10 percent would
see the Democrats recent maneuverings for what they are, a
vicious vendetta. [On Friday, Rudy seemed to lighten up a tad.]
Random Musings:
–According to an automakers survey, the typical Suburban
household earns $94,700 compared to $54,000 for the Taurus
buyer.
–Over the coming months, the failed Iridium phone venture will
lead to the “deorbiting” of the 66 satellites, meaning scientists will
attempt to control the timing of their fall to earth, with the hope
that they will burn up in the earth”s atmosphere. That leaves
2,559 other satellites up there (seriously) plus an estimated 6,017
pieces of “junk.” [I guess by the latter they mean things like the
Edsel and most modern art.]
–Last Sunday, the Washington Post had a front page article on
the unregulated dietary supplements industry. One of the
supplements, GHB (used for body building), almost killed NBA
star Tom Gugliotta when he had no idea of the particular side
effects. One study found that one-third of 260 imported Asian
herbals were spiked with drugs not listed on the label.
Remember, supplements don”t have to be prescreened by the
FDA. Columnist Paul Krugman later commented on this piece.
His point is that the world is making a stink about genetically
modified food (a huge trade issue) even though extensive testing
has found there to be no harmful side effects. Yet with untested
supplements, everyone wants them. As for me? Thanks to this
article I discovered that I was taking St. John”s “Port,” not
“Wort,” thus my increasingly gloomy view of the world scene.
–The simulation held to determine if there was any FBI
involvement at Waco appears to be inconclusive. Not good.
–Last week on “The Sopranos,” a witness to a killing was shown
at home reading Robert Nozick”s “Anarchy, State and Utopia.”
Hey, I was supposed to read that in college!
–eBay gets my “Corporate Villain of the Year” award. Talk
about dirtballs. The site displayed two of actor Jerry Orbach”s
1958 contracts, complete with his social security number! Orbach
is suing and I hope he takes them to the cleaners. So much for his
identity.
–Awhile back I wrote of the fuel additive MTBE (as has our own
Dr. Bortrum). The government has wised up and is going to
phase it out.
–Pantomimist Marcel Marceau turned 77 this week. I hate
mimes.
–An iceberg twice the size of Delaware has broken off the
Antarctic ice cap. That”s Delaware, the first state to ratify the
U.S. Constitution back in 1787. The state insect is the ladybug.
Here in New Jersey, it”s the mosquito.
–Speaking of insects, researchers at Celera announced that they
have mapped the full genetic code of the fruit fly. So if you”re
walking by a park bench and you hear a faint, “Help me! Help
me!,” look closely.
–I was just kidding about St. John”s Port.
–ABC”s Wednesday edition of “Good Morning” program opened
with a segment on Elian Gonzalez. Let”s see, the Pope is on his
historic mission, Clinton is playing around with new nuclear
powers and we”re still supposed to care about this kid? Or the
Jon Benet Ramsey case? Oh yeah, that”s a book I”m buying!
–You may have heard of the settlement in a sex discrimination
case filed against the U.S. Information Agency back in 1977.
1977! Why wasn”t it settled earlier! [Both Republicans and
Democrats are to blame]. Do you realize this delay cost US
taxpayers $500 million! Pitiful. And we can”t ask for a tax cut?
–35,000 immigrants with criminal records have been released into
US communities by the government (INS). 12,000 of these have
gone on to commit new crimes, including murder. Upset? You
think Pat Buchanan will use this?
–And now…Bill and Chelsea”s Excellent Adventure (at taxpayer
expense). Among the statements made by our President this
week were the following:
“I”ve always wanted to ride on an elephant.”
“I”ve always wanted to see the Taj Mahal.”
And, at a tourist attraction where monkeys roam the grounds, a
group of them approached the President, evidently attracted to
the flower lei around his neck. Our President, one sharp dude,
gave the monkeys the flowers before they attacked him. Said
Bill, “Once I was deflowered they didn”t pay attention to me.”
Yuck yuck.
On another occasion , there was the clip of Clinton amidst a
group of women who showered him with rose petals. Our
President was giddy with joy. And, you know, the women love
Bill Clinton. So it was apparent to me what was on his mind at
that moment, what was on mine, and what had to be on the mind
of 99.9% of the people who saw the episode. Sadly, that”s his
true legacy.
Gold closed at $285.
Nymex Crude Oil, $28.05
Returns for the week, 3/20-3/24
Dow Jones +4.9%
S&P 500 +4.0%
S&P Midcap +2.3%
Russell 2000 -0.1%
Nasdaq +3.5%
Returns for the period, 1/1/00-3/24/00
Dow Jones -3.3%
S&P 500 +4.0%
S&P Midcap +12.0%
Russell 2000 +13.7%
Nasdaq +22.0%
Bulls 55.7% [Getting up there. A contrarian signal.]
Bears 26.4% [Source: Investors Intelligence]
Note: I”m heading overseas for a few days to get some real news.
The site will be updated as usual, but I won”t be answering any of
your e-mails until I return. Also, the site may be down for a brief
spell late Monday night / Tuesday morning for maintenance.
Brian Trumbore
