First Quarter Summary
Let”s see how your editor did on his “Ides of March” picks.
Russia: I was in Vienna this week, devouring everything I could
get my hands on as far as the European perspective on things, and
I saw a TV spot where a man was sculpting a wax figure of
Russia”s newly-elected president, Vladimir Putin. “I know more
about Ivan the Terrible than I know about Putin,” he said. And
that”s just about the feeling all over the world. Of course, folks in
Central Europe have a particular reason to be concerned. They
are the ones with the past experiences that proved not to be so
kind. And the Russian mob, as well as Russian espionage, is
spreading into these nations. Poland, for example, has a right to
be edgy.
I saw Putin”s post-election press conference, an amazing sight
because he held it at 1:00 a.m. Moscow time. He was alert and
looked impressive. But he said absolutely nothing. The only
newsworthy item I picked up on was his description of the 30%
vote for the Communists as a “protest” vote. That”s not exactly
the way you define an opposition party in a democracy. In the
old days, “protesters” were sent to camps.
As for the 52.5% who did vote for Putin, here were the
prominent reasons given. “The KGB gave him discipline.” “He”s
a James bond type.” [Oh brother]. Or this one…”The U.S. chose
George Bush (the elder, who once headed up our CIA), what”s
the big deal with electing Putin?” Chechnya, that”s what.
Otherwise, I”ve said more than enough for now on this topic.
We”ll all just sit back and see who he selects for his inner circle
and to see if he comes down hard on the oligarchs like Boris
Berezovsky.
China/Taiwan: The Pentagon has drawn up a report that is highly
controversial. It purports to show that Taiwan is woefully
lacking in its military systems. Because of its isolation in the
world community, it is several generations behind in key
technology aspects of a modern military, particularly one that
faces the prospects of an invasion or massive missile strike. The
report is sensitive because it will have a tremendous bearing on
the debate in Congress, not just over WTO but also how much
we attempt to rearm Taiwan.
The Clinton administration continues to pursue WTO status
(through the necessary first step of adopting “permanent normal
trade relations”) but it totally wimps out in making it clear to the
mainland that an attack on Taiwan is an attack on us. Nor does it
come down hard on the human rights issues.
[And one side note on China and the WTO. This week the
European Union broke off talks with Beijing regarding admittance
to the club. The Chinese refused to budge on key trade issues,
namely the refusal to open their markets up to satisfactory levels
in telecommunications and finance. Now you would expect the
Europeans to be lenient with China and yes, they bent over
backwards, including such provisions like “we”ll revisit the (fill in
the industry) issue in ten years…” and still, China wouldn”t bend.
It makes you wonder just what kind of deal we, ourselves, cut
with them if the Europeans are having trouble coming to terms.]
India/Pakistan: Newsweek”s excellent “Conventional Wisdom”
column got it totally wrong this week. Clinton received an “Up”
arrow for his trip. “Bill and Chelsea wow the subcontinent.”
Hardly. One administration official admitted afterwards, “We
broke no new ground on Kashmir” and both India and Pakistan
stuck to their existing positions on their arms buildups.
The Middle East: The Pope showed true courage and skill in
maneuvering around the political mine fields. The lasting impact?
Sorry. None. And Clinton”s summit with Syria”s Assad in
Geneva was a total waste as well.
And now Israel faces huge domestic problems of its own making
with the corruption and finance scandals enveloping former Prime
Minister Netanyahu, the chief rabbi, and Prime Minister Barak”s
own campaign shenanigans of last year (though he himself is not
implicated).
OPEC: Well, I have a personal vested interest in the oil market
and all I have to say is, Go OPEC!!…sorry. As I”ve been saying,
much ado about nothing. The sheiks are no fools and oil has
already dropped from $34 to near $26. And it”s probably headed
a bit lower after the consensus that was reached in Vienna.
Basically, they agreed to add about 1.5 million barrels of
production. More importantly, they have a new mechanism
whereby one of the oil minister”s (Venezuela”s) can maneuver the
production “bands” in tune with market fluctuations. On Friday
OPEC announced that the bands will exist at the $22 and $28
levels. If the price falls below $22, they decrease production, if it
trades above $28, they increase. Obviously, it”s also not a perfect
science but the markets now should have a clear sense where
we”re headed, at least for the foreseeable future.
Here are the flies in the ointment. Iran is ticked. They
complained that the U.S. was exhibiting too much power. Iran
wanted to see the price stick to around $30. But Iran had another
reason for their intransigence. They are already supposedly
operating at near full capacity so they really can”t increase
production if they wanted to.
But since I give the Democrats (and the Clinton administration) a
lot of grief, I do have to give Energy Secretary Bill Richardson
some credit. He tried to be a real diplomat through this whole
mini-crisis (created by our media). He didn”t exploit the issue and
his comments were reasonable. He obviously did his job when it
came to winning over the Saudis and other OPEC members.
And, most importantly, he helped to get Congress to shut up, at
least for a week, by warning both sides that any bombast will only
add fuel to OPEC”s hard-liners. Richardson showed me
something. And again, if oil stays around the $26 or lower level
by Democratic convention time, he”s Gore”s Veep pick. *[If
you”ve picked up over the last few months that I favor quiet
diplomacy in matters of international import over Presidents
taking ill-timed trips in an attempt to build up some legacy, you”re
right. And history also shows that to be the proper avenue.]
Alan Greenspan and the Federal Reserve: I”ve said my piece
here, as well. Greenspan is rapidly losing credibility and
relevance. He”s trying like hell to engineer a soft landing for the
economy. He may pull it off yet. Then again, we might crash and
burn. Guess where I come down?
So no, the world didn”t end in March. But I stick with all of my
comments, particularly from my February 19th warning shot on.
The only one of the six hot spots that improved was in the area of
OPEC. As expected.
Wall Street
Everyone this weekend will be writing about the same thing and I
can”t be different just for the sake of being different, especially if
this is to be a true review of the week”s events.
First off, market guru Abby Cohen reduced her exposure to
stocks in her model portfolios. She opined that we must consider
the “question of valuation.”
Second, globetrotting stock jock Mark Mobius didn”t mince
words in calling for a “crash” in the Internet sector.
Third, hedge-fund maven (it”s thesaurus and clichT time) Julian
Robertson, wrote his shareholders the following:
“There is no point in subjecting our investors to risk in a market
which I frankly do not understand.”
Hey Julian, join the crowd. I”ve been writing that for a long time
now. And as for crashes in the Internet sector, it”s already
happening. Sure there are a couple of survivors, AOL and
Yahoo! to mention a few. But there are a ton of issues like
iVillage.com, eToys. Pets.com, CDNow, and DrKoop.com that
have totally collapsed and left investors (those who invested after
the first day of the issue”s IPO) gasping for air. And let”s face it,
some of these were highly suspect enterprises right from the start.
So you”ve already had a crash in many Internet issues as well as
the Biotech debacle of a few weeks ago. It”s only a matter of
time before the big boys, and they know who they are, get their
comeuppance. Valuation is no longer a dirty word. And you
know what? That”s probably the best news in quite awhile. A
rational stock market. I can”t wait.
For the week, the Nasdaq suffered through its worst point loss in
history, 390, as it plummeted to the 4572 level. It had retreated
to about 4350 on Thursday afternoon, or about 14% off its high,
before rallying. That marked the 4th 10% decline already this
year.
The Dow fared much better, losing only 1.7% this week to close
at 10921.
Bonds were the beneficiary of the turbulence in the Nasdaq, as
investors continued to rediscover an instrument that our parents
used to so enjoy. Safety and income. Clean streets. Doors
unlocked at night. Day baseball. No jivin” hoopsters. No
football players charged with murder….Treasury rates ended the
week as follows:
1-yr 6.22%, 2-yr. 6.49%, 10-yr. 6.01%, 30-yr. 5.84%
Just a few other notes:
–Valuations on technology issues are sky-high, worldwide.
Buyer beware.
–One of the dumber headlines of all-time, from the Wall Street
Journal (who had a few this week): “Pakistani Stocks Have
Soared More Than 70% Since October in Wake of a Military
Takeover.” Unbelievable. Like anyone gives a damn. Seriously,
what is the point of crap like that? Have you ever, in your entire
lifetime, been to a party where a guy starts talking to you about
his Pakistani positions. There probably aren”t more than 6 people
in this country who know how to buy an individual stock there if
they wanted to. [And that”s 6 more than know how to do it in
Pakistan itself.] This was my point last week concerning
emerging markets. With all of the opportunities in this country,
you”re nuts if you read a headline like this and then rush to buy
something in many of the developing countries. There are zero
accounting standards, little liquidity, and in many instances,
tremendous political and currency risks. Thank you. I feel much
better now.
–Oh yeah, Greenspan keeps hiking short rates and the long end
of the curve keeps going down, thereby stoking the growth he”s
trying to kill. Better check that bath tub again.
–A chap by the name of Fred Moldofsky was charged with
posting false profit warnings for Lucent Technologies on the
Internet. He did it about 20 different times. Fred thought he”d
use some fake names to disguise his true identity. Nice going,
Fred. Give the man “life without parole.” That would send a
message to these losers.
–Stock mutual funds recorded record inflows in February. After
the wild ride in March, I wonder how many are happy?
Especially the first-time investors.
–Barron”s deserves a ton of credit for their cover story of two
weeks ago on the Internet sector and the inability of some
companies to survive. The week after the article, all manner of
folks criticized the piece, saying it was unfair. Well, CDNow,
DrKoop and others, as predicted in the article, are now issuing
warnings that yes, they have deep problems.
–Next week I will be re-addressing an issue that keeps bugging
me. That being the Financial Services Reform Act and the issue
of “moral hazard.” And it”s a tale that involves 20-something
hedge-fund operators and other assorted characters.
More International
–North Korea announced they won”t send a high-level delegation
to the U.S. for talks unless we remove the terrorist label on their
nation. Am I missing something? Who the hell is the world”s
only superpower here?
–Udai Hussein, the elder son of Saddam and a certifiable nut job,
won a parliamentary election with “99.99%” of the vote.
Congratulations to Udai for running such a spectacular campaign.
As for the other .01%, well, they were probably shot.
–The democratic president of Montenegro, the smaller of the two
republics remaining in Yugoslavia, keeps warning of an imminent
coup by Slobodan Milosevic”s security units. Actually, for Slobo
this would be a smart move. NATO can”t even handle some
checkpoints in Kosovo. What the heck could they do to help
Montenegro?
–The House approved a massive military aid package to help
Colombia”s army fight the narco-terrorists. Passage in the Senate
is less likely. Personally, we can”t forget Colombia is still a
democracy. Is giving them $1.5 billion in aid throwing money
down a rathole? Maybe. But we need to take the risk. And, of
course, America”s cokeheads could help matters by maybe taking
just one weekend off now and then. Is that asking too much?
–I saw this other ridiculous headline in Friday”s Wall Street
Journal. “War Gets the Headlines. But Peace is Quietly
Advancing.” The utopian author then discussed situations like 12
Catholics and 12 Protestants getting together in Ireland to discuss
their differences. Now God is smiling on these efforts but get
serious.
–Speaking of peace, did anyone notice that riots have been taking
place in Haiti all week? I wonder how much longer Gore will
claim that as another foreign policy “success?”
This Week in Politics
And Mr. Gore is in a heap of trouble. Aside from the lost e-mail
issue (which isn”t likely to just go away, before the election), his
campaign chief, Tony Coelho, is under investigation for shady
dealings (nothing new if you”re familiar with Coelho”s career).
But Gore”s dumb move of the week is his breaking with his own
president on the Elian issue. He managed to do the unthinkable.
Congresswoman Maxine Waters has threatened to pull her
support of Gore for his policy reversal. For you politics geeks
out there, it”s going to be fascinating watching how Gore gets out
of this one.
In the New York Senate race, Rudy Giuliani seemed to take the
advice of your editor and countless others, namely, he lightened
up on the rhetoric. The damage has been done, however, and he
now trails in the polls, 45-42 percent. But Rudy continues to
outraise Hillary by almost 2 to 1 and, at the end of the day, isn”t
that what it”s all about, sports fans? [Speaking of fundraising, I
received a solicitation from Ted Kennedy. Someone has a very
screwed up mailing list.]
And ridiculous as it sounds, former Munster Al Lewis (a k a
Grandpa) could be a force in the N.Y. race. Lewis, who is
something like 846 in vampire years, actually has the Green Party
line on the ballot and he”s attempting to legally change his name
to “Grandpa.” John Zogby, the polling expert, says that if Lewis
accomplishes this, it could cost Hillary a few percent. [I always
hated the Munsters. But now I”m looking at Lewis in a different
light.]
In New Jersey, some of you have undoubtedly taken note of my
sarcastic comments concerning one Jon Corzine, erstwhile CEO
of Goldman Sachs and Democratic candidate for the U.S. Senate.
I”ve questioned his mega-bucks candidacy. Well, this week he
got himself in quite a pickle for derogatory comments he made to
some Italian-American politicos. Something about cement shoes.
He”s not quite ready for prime time, as I guessed correctly.
Finally, I”m sitting in my hotel room in Vienna, catching up on
CNN World, when President Clinton”s press conference comes on
(thus delaying a little trek for a bedtime beer). Soon, he was
wagging his finger at all of us in the manner with which we have
become so accustomed. A reporter had the guts to ask him about
the issue of Gore being an appropriate messenger for campaign
finance reform and Clinton said, “I was outraged” when he found
out that the ”96 campaign may not have been a clean affair. “I
was appalled.” And, “We spent $4 million” to give the various
congressional committees and investigative authorities the
information they requested. Having duly taken my notes, your
intrepid reporter went out seeking the truth.
Random Musings
–If you have a son or daughter who comes to you and says,
“Mom, Dad, I”m going to Uganda to join a doomsday cult,” try
and talk them out of it. The death toll is now over 900 as a 4th
site was unearthed.
–CNBC”s Maria Bartiromo is on the short list to replace Kathy
Lee.
–In the decade of the 90s, shark attacks killed on average 7 a
year, worldwide. Last year it was only 4. No word yet on how
many were killed, financially speaking, by Wall Street”s land
sharks.
–Sexy tennis star Anna Kournikova (actually, has she won
anything? Does it matter?) is in hot water for letting her
miniature Doberman out of its carrying case on an American
Airlines flight. No word on what the dog thought of the food that
was being served.
–So British Prime Minister Tony Blair is about to become a
father for a 4th time. His wife, Cherie, who is normally a behind
the scenes player (and a high-powered attorney in her own right),
wants Tony to basically take off for a few months when the baby
is born. I have nothing further to say until I check the umbrella
policy for this web site.
–The wife of Hillary”s brother, Tony, has filed for divorce. I only
revel in this because Tony, along with the other brother, Hugh,
are the two dirtballs who have been meddling in our foreign
policy with the nation of Georgia, a key ally bordering Chechnya.
And the wife is Nicole Boxer, daughter of Senator Barbara
Boxer. Yes, stocks, news, and gossip…dot-com.
–Sunday night was my first night in Vienna and with the 7-hour
time difference (they turn their clocks ahead one week before we
do) I couldn”t sleep well so I was up at 3:30 a.m. to catch the first
hour of the Oscars. [Yes, the Oscars are huge in Europe as well.]
Billy Crystal is getting a little too precious for me. And note to
Erkyah Badu. You”ve proved your point, honey. Lose the
headware.
–Due to the booming economy, experts now project that the lives
of the Social Security and Medicare trust funds have been
extended, in the case of Social Security until 2037. Since my own
projected life expectancy is probably about another 36 years, that
means I just make it, then we both go…poof!
My Trip to Vienna
Finally, I have to add some personal thoughts on my recent
whirlwind (4 nights) trip to Austria. Long-time readers will recall
my excursion last year to Poland where there was a murder in my
hotel. No, none of that excitement this year. But in my ongoing
effort to further educate myself, I chose Austria specifically
because of all the political turmoil that the world witnessed just
two months ago. I wanted to know what was up. In a nutshell,
for the life of me, now I can”t figure it out.
I was last in Vienna when I was just ten years old, back in 1968.
That time, my family was contemplating a quick trip across the
border into Czechoslovakia to see if we could meet one of our
relatives. Unfortunately, 1968 was the year of the “Prague
Spring” and while we were over in Europe, the Warsaw Pact
decided to have a little military exercise in the streets of Prague.
Well, if you can get over to Vienna, go. It is an absolutely
beautiful city. I love just walking and exploring a new place.
Having a beer with the locals. Soaking up the atmosphere. And
believe me when I say that in 4 days I was all over and had nary a
problem, not even one nasty look. I felt safe walking in places
that were off the beaten track and I later checked out one of the
suburbs (a picturesque spot called Huteldorf). So right now
you”re probably thinking what”s the point? Exactly. Two months
ago, 100,000 people were rioting in the main square of the city
over the selection of the Nazi-tinged Freedom Party to be part of
the ruling government coalition. Today, I saw or felt absolutely
no sign of trouble. I didn”t see one swastika scrawled on an
apartment building or construction site. I saw all of 3 characters
that would probably qualify as skinheads (and they made way for
me on the subway).
[I did see one almost comical sign of graffiti. There was a statue
near the Hofburg Palace of an artist unknown to me. Where the
name should have been, ever so neatly painted across it was
“HAIDER,” the Freedom Party”s controversial leader. Even the
graffiti was clean and uniform.]
So I”m exploring this city and everything seems fine. Then I go
to the Freud Museum. Sigmund spent many a year in Vienna, up
until 1938. I”m reading this English manual of the exhibits and
there in stark terms is the following:
“After Austria”s annexation to Nazi Germany, 3/13/38, anti-
Semitic excesses forced Freud and his family to leave ASAP.
3/15, Freud”s apartment was searched and his sister Anna was
interrogated by the Gestapo. Freud had to pay one-third of his
assets to flee to England but he was finally able to do so in June.
[The lucky ones had to pay a ”tax” for fleeing the Reich.] Four
sisters of Freud stayed in Vienna and were killed in concentration
camps.”
That”s the history of the place and the country. Austria has been
justly criticized for not doing enough to prevent the easy takeover
of their nation. Afterwards, many of its citizens were complicit in
the atrocities. But that was 55-62 years ago. Should the nation
still be condemned?
I addressed the whole Haider issue awhile back. I said it certainly
bore watching as a test case for the new anti-Semitism, anti-
immigrant feeling that is emerging in all of Europe, an undeniable
fact of our times. During my brief trip, I also suffered somewhat
from my own ignorance, that being I didn”t know the German
language. My opportunities for exchange were thus limited.
But I was startled to learn my third day in town that I was the
only American staying in my hotel. The clerks said it wasn”t the
Europeans who were canceling reservations but rather it was the
Americans. It suddenly hit me. I hadn”t heard one American
voice in the museums I was going to! I hadn”t heard one
American in a restaurant or bar. Did our media have that much of
an impact?
So, I”ll go back to Vienna, and soon, but next time I”ll have
learned some German and give Viennese the respect that any
foreigner should give the hosts. And in the meantime, I”ll keep
reading and watching to see what happens next.
**One last story you might find amusing. My first full day it was
about 2:30 p.m., I had already walked a ton, and I was lying
down in my hotel, resting my weary feet, plotting the next
mission, when it started to rain a bit. Perfect, I thought. I”ll take
a cab out to Mozart”s grave site. It was way out on the outskirts
of the city and a cab was the only way I could see getting there.
So I was duly deposited at this massive place. There was a board
at the entrance with all of the key figures buried there (but I only
recognized Wolfgang) so I traipsed off to find him. By now it
was raining pretty hard and I was the only one around.
Well, I spotted Mozart”s grave, all by itself, with a broken pillar,
and I”m standing there paying my respects. Only one problem.
I”m not a huge Mozart fan and I only had a Hall and Oates tune in
my brain (“Private Eyes”). So I tried real hard to think of a
Mozart one and I think I was coming up with Haydn. I guess I
wasn”t in the moment.
So I walk back to where the cab left me off and that”s when it hit
me. How the heck was I getting back to the hotel? There were
no cabs or buses to be found. And I had left my maps back at the
hotel (because I cockily thought, “I know where I”m going.”)
Guess how long my walk home was? Two hours. The beer
tasted good that night.
But to top it off, I read the next day that I wasn”t even paying my
respects to Mozart. All they know is that he was buried in a mass
grave somewhere around that location and they just chose a
memorial spot. As to who I was humming Private Eyes to, if
anyone, hopefully they appreciated it.
Gold closed at $282
Nymex Crude Oil, $26.80
Returns for the week, 3/27-3/31
Dow Jones -1.7%
S&P 500 -1.9%
S&P Midcap +0.3%
Russell 2000 -6.1%
Nasdaq -7.9%
Returns for the period, 1/1/00-3/31/00
Dow Jones -5.0%
S&P 500 +2.0%
S&P Midcap +12.4%
Russell 2000 +6.8%
Nasdaq +12.4%
Bulls 54.1%
Bears 29.4% [Source: Investors Intelligence…or lack thereof]
*If you haven”t already done so, check out the 3/29 edition of
“Bar Chat” for a look at a real American hero, William Steiger,
the man responsible for the current capital gains tax rate.
Brian Trumbore
