*Posted 7:30 a.m. If you are looking for extensive Elian
coverage, well, you can check out my news links. You won”t find
anything here.
To my new readers, I don”t always begin with a discussion about
Wall Street so, since the financial markets calmed down some at
week”s end, please indulge me while I lead off with Russia and
Africa.
President Clinton is scrambling for a legacy and that can present
some problems. At the same time, Russian President-elect
Vladimir Putin is rushing to establish himself on the international
scene. Putin knows the West is morally weak and vulnerable.
June 4 marks the first get together between Putin and Clinton.
We have every right to be concerned.
I mentioned last week that Russia”s total government budget is
about $25 billion. This week they announced that the cost of the
Chechnya conflict was, by itself, $260 million for the first quarter.
Currently, both the U.S. and Russia have roughly 6,000 nuclear
warheads. The Russian parliament has now approved the START
II treaty, passed by the U.S. Senate in 1993, which would bring
the number of warheads down to 3,000 to 3,500 by 2007.
Russia, of course, can”t afford even 3,000 so Putin wants to
further reduce the figure to somewhere around 1,000-1,500.
Enter Bill Clinton. Clinton has been in office over 7 years and in
the field of arms control has nothing to show for it (START II
was negotiated by his predecessors). And recently he suffered a
stinging defeat when the Senate voted down the Comprehensive
Test Ban Treaty (CTBT). More like a total humiliation.
Meanwhile, back in Moscow, Putin in just one week has been
able to get the Russian Duma to finally approve START II and, to
trump Clinton, the CTBT as well.
[Note: The CTBT is flawed but Clinton should have shelved it
rather than risk a “Nay” vote.]
Putin also went to London last week to meet with British Prime
Minister Tony Blair to present his credentials. Blair was an easy
mark as he is eager to be peace-maker and mediator between the
U.S. and Russia. So what does Putin do in London? He
launched a scathing tirade against the West for their admonitions
against Russia”s brutal Chechnya offensive. Here is what the
British press said.
“Putin”s outburst dominated his joint press conference and made
chillingly clear that the new minister of the Kremlin is in the
business of giving lessons, not taking them.” — The Times
“Blair found himself completely outclassed (as a performer).”
— The Daily Telegraph
As I mentioned the other week, all of this discussion on arms
control has to do with the ABM (anti-ballistic missile) Treaty of
1972. Under it the U.S. is denied a missile shield against the likes
of Iran, Iraq or North Korea. Blair wants to moderate the
differences between the two sides. Clinton wants his legacy.
This week, columnists William Safire and Charles Krauthammer,
among others, raised serious questions about the state of arms
control and Bill Clinton. And Safire went so far as to call Blair,
Mr. Mediator, “dangerous.”
Folks, we don”t live in a utopian world. Unfortunately, nukes are
here to stay. But as long as they”re around, the U.S. should not
only have the best force, it should also be able to defend itself.
We have a lame-duck President in search of something to do. A
glorious treaty signing in Moscow this June is not in our best
interests.
Issue Two…Africa
I venture to say that no conservative in America has written more
on how the U.S. should be helping Africa than I have over the
past year. It boggles my mind that Republicans haven”t picked up
the ball. But recent events in Zimbabwe and elsewhere are so
troubling that even I admit most Americans, as well as other
Western nations, will soon throw up their arms and say, “Who
gives a damn.” Simply put, the African continent is spinning
wildly out of control.
You may want to check out my 4/20 “Hott Spotts” piece on
Zimbabwe for a little background. Bottom line, President Robert
Mugabe (the only President this country has had since achieving
independence in 1980) has launched a race war against the white
farmers who make up less than 1% of the population. The issue
is land redistribution. Calling the whites “enemies of Zimbabwe,”
Mugabe has sanctioned the killing of innocent civilians by his
manic followers.
As of this writing, 4 have been killed (2 were opposition party
members) and countless homesteads have been torched and
vandalized. Whites dare not get near the farms. One Canadian
Broadcasting team barely escaped with their lives. And Mugabe”s
government is arming the squatters who seek to take over the
land.
[As a side note, one of the victims, Martin Olds, single-handedly
held off up to 100 attackers for 3 hours before he was shot to
death defending his home.]
Let me be clear. Africa suffered horribly from the ravages of
colonialism. And in the case of Zimbabwe, there are some heroic
opposition figures. I”m amazed, frankly, they”re still alive. The
pretext for the violence is parliamentary elections slated for May.
Mugabe was going to have a tough time at the polls. He could,
instead, declare a state of emergency and call the elections off.
Meanwhile, the world will be watching with horror unless
Zimbabwe”s neighbors step in.
Of course when you already have a civil war in the Congo where
14 nations have sent forces, plus countless wars in the Western
part of the continent, you can see that “conflict resolution” is
clearly not part of anyone”s curriculum.
Which brings me to South Africa. Oh, how all of Africa needs a
Nelson Mandela, 20 years younger. But as Mandela fades from
the scene, his successor, President Mbeki, has an AIDS crisis on
his hands (as does virtually the whole continent). For example, 1
in 5 pregnant South Africans has HIV. But Mbeki has been
blasting the West for its “drug cocktail” treatment while scientists
struggle to find a cure. And the sad fact is that the drugs cost
more than any South African laborer can afford. But instead of
building a case for massive international aid and accepting what
drugs he can get his hands on, Mbeki, I kid you not, is surfing the
web, looking for alternative cures. It is truly sad. There are no
easy solutions but while his people suffer through this human
catastrophe, Mbeki is on Yahoo.
And finally, there is the case of Ethiopia where the West clearly
dropped the ball, starting with our own State Department. This
nation has had virtually no rain in 3 years. If your job is to
monitor a particular part of the world and it happens to be
Ethiopia, your responsibility is to know this. Unfortunately, it”s
not enough to fire the employees who are sitting at their desktop
computers playing solitaire while the sun bakes the Ethiopian soil.
Millions are now at risk. Whole villages have gone without
anything to eat for a month or more. And this week, I noticed a
new ploy by Western bureaucrats. Blame the Ethiopian
government. You see, the government has been fighting a
senseless border conflict with neighboring Eritrea. During the last
famine, they diverted food to the army but while some of that may
be taking place today, again, the current crisis is so overwhelming
that it is beyond their control.
So let”s close the circle. A race war in Zimbabwe that, if
unchecked, could spread to neighboring nations. The country
that could be a role model for the continent, the “New” South
Africa, has a president who can”t seem to find the real world and
lastly, a famine of epic proportions.
What do you tackle first? Where do you turn? Where the heck is
our government? Hopefully, you now understand why I have
believed all along that we shouldn”t give two hoots about Elian
Gonzalez. But obviously no one cares about Africa (except the
always heroic Irish aid workers…Saints, every one of them). I”ll
try and save my breath next time.
Wall Street
“The tech wreck will have a much more immediate impact on
consumer spending than the interest rate hikes the Federal
Reserve has given us.”
–Economist Ed Yardeni
Now granted, I was one of those who followed Yardeni like a
lemming to the sea as he issued his Y2K warnings last year, but I
still like the guy and I agree with the above. I would add that
when you couple the tech wreck with more forthcoming rate
increases and an economy that has to slow down, I certainly
wouldn”t be a buyer of most tech stocks at these levels.
I wrote last week that after the huge sell-off we would see violent
rally attempts and on Monday and Tuesday the markets complied.
The Nasdaq registered its two best point gains in history on the
way to its most productive week ever, a 10% move to the 3643
level. However, before you get too giddy, the index is still 28%
from its all-time high of March 10. [The Dow Jones rose 5.2% to
close at 10844.]
Another economist, Bob Barbera, said that in light of the recent
tech debacle, “The impact on the real economy will be faster than
people expect and concentrated in technology.”
Well, you might say to yourself, why are Yardeni, Barbera and
Trumbore so bearish when all I heard last week was that the little
guy was once again buying the dip?
Don”t believe it. The rally in the Nasdaq was certainly on the
narrow side and those high-flyers that came tumbling to earth
over the past few weeks hardly moved. A leading publication on
Thursday made a big deal of the rally in some of these issues,
showing percentage rebounds in the neighborhood of 20%. Of
course, what was conveniently omitted is the following. Some
$200 issues fell to $40 and then rallied to $48. That”s your 20%
rebound. Or as the Charlotte Hornets Derrick Coleman would
say, “Whoop de damn do.”
And if you”re Alan Greenspan, catching up on the events of the
day as you soak in your bathtub (his morning habit), you have to
be thinking, “These guys just don”t learn.” Because the big-name
Nasdaq issues that did rally crept back to the absurd valuations of
a couple weeks earlier. To wit, following are price-earnings
ratios based on 2001, not 2000, earnings estimates for some
Nasdaq leaders (based on the week”s end share price).
Cisco (100), Sun Microsystems (74), Oracle (88), JDS Uniphase
(155), Rambus (91). That”s for 2001!
And this doesn”t begin to address issues like Yahoo and most of
the B2B and biotech crowd where if there are earnings, you can
find them under the sofa cushions.
Last week I railed against the investment banks and the research
analysts who are incapable of a “sell” recommendation. This
week, noted author Ron Chernow had the following comment in
an op-ed piece.
“Our most prestigious investment houses have invented bogus
mathematical formulas to justify stratospheric stock
prices…feeding the inexhaustible appetite of small investors.”
And to my comment last week that my good friends in the stock
brokerage and financial planning arenas are needed now more
than ever, Chernow added, “Professional expertise will come
back into vogue.”
Yes, the first quarter earnings reports have been excellent with
the average company in the S&P 500 reporting about a 21% gain,
in line with expectations. But what you saw at week”s end in the
treatment of stocks like IBM and Intel (and as may be the case
with Microsoft on Monday), who reported earnings in line or
better-than-expected but nonetheless saw their share prices
decline, is perhaps the beginning of a new discipline. “Yeah, we
know things are great now but this is Wall Street and we”re
supposed to be looking to the future.”
Greenspan is going to slow this economy come hell or high water
(both consequences of global warming, incidentally) and it”s
going to be tougher and tougher to meet the already established
rosy forecasts for 2001. Oh, these companies will throw
everything they can think of onto the bottom line, including the
future value of some employee”s son who is a high school
basketball star. An increasingly skeptical investing public won”t
buy it.
I heard one strategist say this week, “Investors will kick
themselves for not snapping up their favorites (after the
debacle).” I would caution, don”t be swept up by these inevitable
rallies. Keep your powder dry and follow investment legend
Leon Cooperman”s simple rules:
–Get off margin
–Know what you own
–Cut your expectations for future returns
*[If you are an investment junkie, please check out my “Wall
Street History” piece of 4/21. I listed some historical facts for the
ages. And if you want someone else”s opinion, check out the
“Help Your Cause” link under the “Finance” tab above.]
More International
China / Taiwan: The administration has decided to accept the
Pentagon”s recommendation and not sell Taiwan advanced
destroyers but, instead, will allow the sale of a long-range radar
to Taiwan which would aid in their defense. China once again
claimed “grave consequences” if we basically sell Taiwan
anything.
Not to beat a dead horse, but the arms package is an important
test of our intentions in how we treat the whole relationship. And
to show you the kind of respect that Bill Clinton has within his
own party, Minority Leader Gephardt shoved China”s pending
permanent trade status back in the President”s face. Plus,
Minority Whip David Bonior is also against it as labor tightens
the screws. So, of course, Clinton depends on the Republicans to
bail him out; the very figures he has constantly been at war with.
Sorry folks, but any other President in our nation”s history would
have had an easy time with this. You get both parties in a room
(possibly smoke-filled), pour some stiff drinks…or sparkling
water, tell a few bad jokes, pat each other on the back, distribute
the pork and voila! A trade bill. But the atmosphere today is
poisonous.
Elsewhere, Iraq announced they would not accept a new UN
weapons inspection plan. Just a reminder, the last inspectors on
the ground there left in December 1998.
Japan”s Nikkei stock index fell 11% this week to close at its
lowest level since January 7. The big reason given for the fall
(aside from a delayed reaction to Wall Street”s 4/14 blood bath)
was an upcoming shift in the composition of the index itself as
old-line industrial companies are replaced by new-line outfits.
Finance Ministry officials still expect the economy to register
solid growth for the first quarter when it is reported in June.
*On Friday, the Russian navy fired on a Japanese fishing vessel in
the disputed Kuril Islands and took control of the boat and its
crew. Ironically, Putin and Japan”s new prime minister are
meeting this week in Moscow.
Random Musings
–A laptop computer containing information classified as “higher
than top secret” was stolen from the State Department recently.
This isn”t the first time that this has happened at our mismanaged
foreign policy tank. As to the classification of the material, I”m
assuming this is similar to double-secret probation.
–And speaking of security, I have been very tough on Los
Alamos scientist Wen Ho Lee, suspected of forwarding nuclear
secrets to China (and possibly Taiwan). New reports show,
however, that Lee”s current indictment may have been
“deceptive” and that some of the disputed files may have been
reclassified “high security” after he was fired. Maybe he has the
above mentioned laptop?
–Oh…if you wondered why Jesse Jackson wasn”t cajoling our
government to do more about the problems in Africa, this week
he was criticizing Coca-Cola for its alleged lack of management
diversity.
–Canadian police arrested a 15-year-old for the recent cyber-
attacks on CNN, Yahoo and other major web sites. The kid, who
goes by the handle “Mafiaboy,” was under surveillance when
police suddenly began hearing conversations concerning the boy”s
father. It seems old Dad was planning to hurt a business
associate. So both dirtballs are now in a heap of trouble.
–Feel good story of the year. In Fayetteville, NC, science teacher
Jane Smith (white) donated one of her kidneys to 15-year-old
Michael Carter (black) when none of Carter”s blood-relatives
were a suitable match.
–The first quarter was the warmest in the U.S. in 106 years of
record-keeping. Speaking of temperatures, scientists have
discovered that some dinosaurs may actually have been warm-
blooded mammals, not cold-blooded reptiles. This could be why
Dino barks.
–Pentagon spokesman Kenneth Bacon, who should have been
fired over recent news leaks, had the following comment on the
Pentagon”s method of handling the food stamp issue in the
military.
“Actually…if you look at [service members”] total
compensation…what their basic pay is, what their housing
allowance is, …the fact that they get free medical care; the fact
that they frequently get…some of the best day care in the
country; and frequently go to some of the best schools around;
the compensation package is actually…better than…working in
McDonald”s or gas stations – other entry-level jobs.” Incredible.
–Back during the Civil War, even Union General McClellan,
known to be the big proscratinator, eventually acted upon the
cajoling of President Lincoln. So, Janet Reno finally made her
move. And how many times is Bill Clinton washing his hands
these days, eh?
–Bill Clinton and Al Gore were interviewed by federal
prosecutors this week in the ongoing 1996 campaign finance
scandal investigation. They are not thought to be the targets,
however.
–Just one other political item of note. Rudy Giuliani”s poll
numbers continue to slide. I hate to say this, but he really isn”t a
likable figure. His overall approval number in New York City has
dropped from 74% (2/98) to 37% today. Among whites it”s
56%, blacks 6% and Hispanics 27%. 58% of whites say race
relations are poor, a sharp increase. Of course, Rudy blames the
media, and he has a point, but his continued outbursts aren”t
helping his cause. Yet there”s still time to turn it around.
Geezuz, hurry up!
–Two studies in the New England Journal of Medicine cast doubt
on the theory that a low-fat, high-fiber diet is useful in preventing
colon cancer. Importantly, though, we need to be made aware
that such a diet is still very useful in helping to prevent heart
disease and other ailments.
–Some deaf folks have filed suit against movie companies and
theatre owners demanding that all films have captions. While
they”re at it, why not just stick the “sign” woman on the screen as
well?
–Last week I blasted those pleading for U.S. investment in
Vietnam. Yesterday, the Wall Street Journal had the following
front page headline. “In Paddies of Vietnam, Americans Once
Again in a Quagmire.” One U.S. entrepreneur said, “Vietnam is
not ready to allow foreign businesses to be successful.”
–Michael Fenne was the chairman of a tech outfit, Pixelon. It
turns out that”s not his real name and he”s in hot water. Among
his lesser indiscretions was throwing himself a $10 million Las
Vegas party awhile back out of $23 million in capital that he had
just raised. I”m only sorry I wasn”t invited, however, as The
Who, Kiss and Tony Bennett performed.
–Humorist Dave Barry on what Americans could do about high
gasoline prices. “File a class-action lawsuit against the cigarette
companies. They have nothing to do with gasoline but juries
really hate them, so we”d probably win several hundred billion
dollars.”
Gold closed at $280. PaineWebber”s Art Cashin once said,
“Always keep enough gold to bribe the border guards.”
Nymex Crude Oil, $27.00 [Weekly inventories came in lower
than expected. Colder weather in the NE helped…if you”re
an energy bull like me.]
U.S. Treasury Interest Rates
1-yr. 6.06% 2-yr. 6.36% 10-yr. 5.99% 30-yr. 5.83%
Returns for the week, 4/17-4/21
Dow Jones +5.2%
S&P 500 +5.8%
S&P Midcap +6.9%
Russell 2000 +6.2%
Nasdaq +9.7%
Returns for the period, 1/1/00-4/21/00
Dow Jones -5.7%
S&P 500 -2.4%
S&P Midcap +3.6%
Russell 2000 -4.5%
Nasdaq -10.5%
Bulls 54.9%
Bears 28.3% [Source: Investors Intelligence]
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Have a blessed Easter and thank you for your support.
Brian Trumbore
