“NBC News in depth, hitting the jackpot, the Big Game Lottery.”
–Wednesday, Tom Brokaw
Note to Mr. Brokaw. I have a been a big fan of yours and I loved
“The Greatest Generation.” But you have full editorial control
over your newscast. What were you thinking? Five minutes on
how to invest lottery winnings?
I submit for your edification a bit from columnist Jim Hoagland.
“In the gold-rush mentality of Clintonian America, the inward,
navel-gazing self absorption of the European Union, the
fragmentation of Russia and the relentless acquisitiveness of
Asian nations, there has been little room for the compassion,
attention and help that the continent of Africa and, most urgently,
Sierra Leone, need today. This has left the field open to monsters
like (rebel leader) Sankoh.”
From U.N. Secretary General Kofi Annan.
“The plight of Sierra Leone and its people has become a crucial
test of (the) fundamental solidarity between peoples, rising above
race and above geography, which is the most basic guiding
principle of this organization.”
And it”s not just Sierra Leone. Every few weeks events are such
on the African continent that they demand our attention. The
whole land mass is imploding. Friday, the simmering war
between Ethiopia and Eritrea erupted again as Ethiopia launched
a massive attack. [I now have to take back what I said a few
weeks ago. The renewed conflict will severely hamper drought
relief efforts and the government will be largely to blame.] The
situation in Zimbabwe threatens to destabilize South Africa. Up
to 14 nations now have forces in the Congo. The AIDS crisis
worsens – and the announcement by the U.S. this week that we
will make cheaper drugs available will have virtually zero impact.
Last Saturday, Nelson Mandela, the continent”s only true
statesman, gave a powerful speech blasting Africa”s leadership.
The Wall Street Journal had an editorial blaming Mandela. They
got it all wrong.
Mandela called for the African people to rise up, violently, against
the tyrants that lord over them. This was solely what the Journal
focused on, but the speech was much more. [The Journal does
deserve credit for at least covering it.] It was all about the
children of Africa and the dictators who throw 10 and 12-year
olds into armies where they are trained to kill while the leaders
make themselves rich. Or the children simply go hungry because
the war machines sop up the limited resources.
No one wants violence but what are these nations to do against
the brutal regimes controlling their destinies?
I”ll tell you what. Threaten to blow them away, just like the
British are in the process of doing in Sierra Leone. Britain”s
actions in the international arena have been interesting to watch
the past 20 years or so (going back to the Thatcher days).
Americans should be thankful that they are trying to reclaim some
of their lost prestige. On 24 hours notice they sent about 1,000
troops to this pitiful nation and, as of this writing, some
semblance of order has been restored in the capital where over the
past year people have been hacked to death. There was a
touching segment on the BBC this week. A group of natives,
obviously scared to death by the wave of terror in their country,
proclaimed that the only troops they trusted and respected were
the British.
Sierra Leone is where we must make a stand and say, “Enough.”
I know there are many Americans who respond, the hell with the
U.N. and thus, by inference, the hell with Africa. If I know one
truth it is this. Should the West abandon this continent, which is
essentially what Clinton has done (rhetoric aside), we will rue the
day here in the U.S.
—
The genesis for the above diatribe goes back to last Saturday
when I trekked into New York to pay my respects to John
Cardinal O”Connor. I didn”t know what the schedule was going
to be but when I arrived at St. Patrick”s a special Spanish mass
was just getting started. I made the decision to sit down and the
whole time I reflected not just on the impact O”Connor obviously
had on the lives of the poor who were seated with me but also on
these incredibly prosperous times we live in, a prosperity which
had clearly bypassed many in this particular audience.
More than one good friend asked me this week, “Why are you
still so gloomy?” Two reasons; one fundamental, the other
philosophical.
Fundamentally, when it comes to the stock market I”m a value
player. Philosophically, I”m troubled at the pervasive greed I see
in our society.
To be fair, I live in a very wealthy section of the country which is
profiting immensely from the great bull market. I also like to live
well just like the next guy. But some of the greed that I see and
read about is unsettling. It”s like the Supreme Court ruled on
pornography. You know it when you see it.
The economist Robert Samuelson wrote a review of a new book
titled, “The Fourth Great Awakening” by Nobel Prize-winner
Robert Fogel. Talking about the times in which we live,
Samuelson writes that “we are a people wedded simultaneously to
materialism and spirituality, mostly religious.”
Samuelson / Fogel conclude, “Abundance breeds anxiety, because
it gives us more freedom…but self-expression can slip into self-
indulgence, sometimes self-destructive. More freedom is better if
we use it wisely, but often we are our own worst enemies.”
And to the poor man sitting beside me at the Cardinal”s mass who
was singing so off-key, it was the most beautiful music I ever
heard.
Wall Street
It got a little scary, again, this week. If you bought the dip on
April 14, you may have been thinking twice on Wednesday. By
day”s end the Nasdaq had plunged 11% in 3 days. It recovered a
bit but the loss of 7.5% for the week was one of the worst ever
and with the index at 3529, it is still 30% from its all-time high of
two months ago. The Dow gained 31 points to close at 10609.
On the earnings front, Cisco registered its 12th consecutive
quarter of beating analysts estimates by one penny. In the prior
11 quarters that was normally enough to take the stock
significantly higher. This time it wasn”t. And so, coupled with an
in-depth negative article in last week”s Barron”s (it made sense to
me!), by Wednesday Cisco had fallen from $68 to $58. It finished
the week at $60, off 12%.
The next day Applied Materials reported and they just matched
expectations. It didn”t matter that the revenue number was off
the charts, down went the stock. It too, however, recovered
some by week”s end.
Finally, Dell reported at the close, Thursday, and it beat estimates
by three cents. Dell rose $5.
The action in these three issues is symptomatic of a market priced
for perfection. You better report news far better than expected or
you”re toast. And the treatment of individual issues is only going
to get harsher because 1) the Federal Reserve is going to keep
raising interest rates, 2) the economy will slow, and 3) meeting
already frothy expectations for the future will grow increasingly
difficult.
So the Fed meets Tuesday and, for arguments sake, I say they
raise rates 25 basis points, unless Tuesday morning”s CPI is
higher-than-expected. If that is the case, they go 50. The bigger
issue is what they do in June and what the inflation / economic
indicators tell us over the summer. If at all possible, the Fed
wants to be finished by September to avoid the appearance of
playing politics ahead of the election. But for every tame number,
like Friday”s producer price index or Thursday”s retail sales
figure, there are bound to be one or two that more than keep the
markets, as well as Greenspan and Co., on edge.
And I get a kick out of the analysts who say the worst is over on
the inflation front because energy prices peaked in March. Ah
guys, is it me or does my paper read $29.60 per barrel?
The bigger fundamental issue, however, is the following. As the
markets were plummeting mid-week, the strategists in the “bull”
camp kept saying that the worst is over for the technology high-
flyers and they will shortly resume their uptrends. Were that to
occur, we”d be right back in our valuation bubble. Every one of
these guys and girls never, ever, talks about valuation. It”s
always, X is a great company, business is good around the world,
ergo, they deserve to go back up to levels never seen before. If
this happens, you think the Fed causes anxiety today? Wait until
you see how they would react then. Do I hear 75…75…100…
Street Bytes
–Concerning the plight of the struggling euro, there was this
editorial comment in France”s Le Monde.
“There is a general feeling of unfairness. Does the U.S. deserve
such a strong currency? The dollar”s superstar status
demonstrates how well Washington is able to steer the
international financial community into overlooking the
weaknesses of the American economy.” [Source: Edmund
Andrews, New York Times.] Oh, stop whining and start putting
in some hours. [But it is an interesting take and not completely
without merit.]
Everyone is wondering what will happen to the symbol of the
New Europe. Again, I don”t see an imminent problem but the
issue of managing eleven disparate economies under one umbrella
is a tough one. Or, as my friend, gold expert Harry Bingham
recently wrote, “The concept of a currency issued by a non-
sovereign entity is untested.”
–Shares in AT&T”s wireless tracking stock are now trading
below the original offering price. I feel sorry for the employees
who took out 2nd mortgages and whipped out the plastic in
expectation of a 100-200% winner. I wish they had gone to a
financial advisor beforehand.
–Motorola stock tanked on Wednesday as a Salomon Smith
Barney analyst cut his rating to “outperform” from “buy.” What
a freakin” joke. “Outperform” what? U.N. peacekeepers? Cubic
zirconium? I wish “60 Minutes” would do a piece on the crap
that passes for Wall Street research. A few weeks ago I showed
you how “sell” recommendations were virtually non-existent. Of
course, a firm that issues a “sell” is blackballed from receiving any
of that company”s lucrative investment banking business. Oh
yeah, Motorola fell about 15% in one day, far “underperforming”
said zirconium.
–The Gartner Group, a major consultant, projects that 85% of
Asian dot-coms will fail. I”d put it at 98.6. That would be
normal.
–Microsoft offered its counterproposal to the breakup solution in
its antitrust case. Look for extensive delays and a moribund
stock. Plus a growing brain drain.
–Applied Materials earnings release contained the fact that 50%
of its products are manufactured in Taiwan, thereby reaffirming
my long-standing point that our economy is awfully vulnerable to
Chinese mischief.
–Many Wall Street heavyweights have said over the past few
months, “Japan is the place to be.” Maybe for sushi but as for
stocks, the Nikkei index is now back where it was last September.
International Plus
Russia: Sometimes my Republican brethren have their priorities
all screwed up. Actually, that”s been the case since Reagan…but
that”s a discussion best left for a Bar Chat (I”m buying). Some
from the Right rant and rave about the funding for PBS. They are
incredibly ignorant. Sure there is some artsy stuff on the network
that may be offensive to some but heck, 50% plus of the crap on
the major networks is highly offensive as well. The reason why
we fund the garbage on PBS is to make sure that the quality stuff
gets an airing, case in point, “Frontline.”
I hope some of you got to watch the episode on Russia this week.
Of course it echoed everything I”ve been writing about. The
situation is incredibly depressing and I see zero hope for the
immediate future. The death rate exceeds the birth rate, drug
abuse among the young is pandemic, threatening an entire
generation, and corruption is so ingrained it will take generations
to eliminate. [And on this score, after 1100 years of it,
“generations” may be too optimistic.]
Looking back at the emergence of Boris Yeltsin and what
transpired thereafter, the largest share of the blame for the current
state of affairs falls on the Clinton administration. [And it is for
this reason that I hope the Bush campaign was at least taping this
particular program. There is lots of ammunition in it.] The report
could not have been more damning of an administration which
totally ignored the advice of their own embassy personnel – the
men and women on the ground whose advice and counsel is
paramount to a successful foreign policy – and instead lent
support to those in Russia who ended up confiscating wealth
rather than creating it. Both Clinton and former Treasury
Secretary Robert Rubin are responsible for it happened under
their watch while bad news from the ground was expunged. All
of our intelligence told us that by 1994, Yeltsin was acting
irrationally. On one hand we spoke of supporting the reformers,
on the other we turned a blind eye to the role of oligarchs like
Boris Berezovsky who essentially ran the government while
pilfering the nation”s best assets.
Clinton continually supported Yeltsin in a very public way (even
though we had to know that Yeltsin was in such bad shape he
would spend hours sitting at his desk staring at a blank piece of
paper). By doing so we did not make it easier for true reformers
to emerge. A former editor for the Moscow Times told Frontline,
“I have never seen a time as hopeless as now.” And that was
before the events of this past week.
The new czar, Vladimir Putin, began to show us what kind of
leader he may be. On Thursday, the offices of a major media
group (MOST), often critical of the Kremlin, were stormed by
armed, masked “tax inspectors” who spent hours rifling through
everything. Just five days earlier Putin had taken the oath of
office proclaiming, “We have to preserve and develop
democracy.” A free press must not be part of his strategy.
On Friday the other major media outlets, like Izvestia, blasted the
Kremlin for the raid (an encouraging sign). As negative as I”ve
been on Russia, the one ray of hope has been the relatively
independent media but this independence has been waning
considerably over the past year as Berezovsky and his cronies
consolidate their holdings. But even Berezovsky”s group
condemned this particular incident.
Perhaps we should pay more attention to another of the lines in
Putin”s inaugural address.
“We have to remember those who created the Russian state and
made it a powerful one.”
Dictators, the KGB and the military, not those who espoused
democracy.
And what can you say about the bizarre scene at the inauguration
where both Gorbachev and the man who engineered the coup
against him, former KGB chief Kryuchkov, were present.
60% of the Russian people still view Putin positively (a slight
decrease from January) but the deteriorating situation in
Chechnya must be of grave concern in the Kremlin. The approval
can disappear quickly, particularly as the Chechen rebels continue
to mount one ambush after another. Early this week, rebel leader
Basayev (who had a leg blown off during the retreat from
Grozny) threatened to spread war into other regions of southern
Russia. Unfortunately for Moscow, he kept his word as at least
18 Russian soldiers were killed in Ingushetia, Chechnya”s
neighbor.
China: The vote on permanent normalized trade status (a
precursor to full WTO membership) is about one week away.
Lost in the wrangling is the fact that China”s own dissidents
support passage. Separately, China will be holding military
exercises after Taiwan”s president-elect Chen Shui-Bian is
inaugurated on May 20. Something tells me our submarine force
will be busy taking notes. [Of course our military is stretched so
thin that makes us vulnerable elsewhere.]
Kosovo: Yes, what was long suspected is coming to pass. Our
military seriously lied to us about the bomb damage during the
war here. For example, the air campaign destroyed 14 tanks, not
120 as claimed. 18 armored personnel carriers, not 220. 20
artillery pieces, not 450. [Source: Newsweek] Said one general,
“We plowed up some fields and hit lots of cars and dummy
targets.”
Aside from the fact we won”t be so quick to believe military
spokesmen in the future, the conduct of the Kosovo campaign has
serious implications for succeeding wars. The fact is NATO
made little progress until they took the action to the people and,
in essence, launched a terror campaign with civilians in the line of
fire. Only then did Milosevic cave. Had we done this from the
start the war may have been over in a week. But Bill Clinton
didn”t want even one casualty. Go back to 1993 and the disaster
in Somalia where 18 brave Marines lost their lives. Because of
this, Clinton has eschewed risk throughout the world and
innocents have paid the price, from Rwanda to E. Timor.
India: A few weeks ago I mentioned that Russia”s annual budget
for munitions was in the neighborhood of $1 billion. By
comparison, what I didn”t know is that a massive fire which
ravaged an Indian arms depot (4/28) destroyed $1.5 billion. It is
a crippling blow, leaving the army with barely enough for
peacetime requirements. The government has launched a furious
effort to build their stockpiles back up. Imagine the situation in
Kashmir if Pakistan decided to try and take advantage of these
shortages. So if you have any anti-tank guided missiles or
artillery shells lying around your yard, ring up the Indian
government. You”ll probably get top rupee.
Iran: In a second round of parliamentary voting, reformers
captured 52 of 66 seats. Now the focus is on May 27 and the
opening of the new, reformist Parliament. Will the hard-liners
attempt to delay it? Just another reason to keep it where it is.
Philippines: What a mess. At least 6 hostages dead (between the
various crises), 2 beheaded. A bus bomb killed another 6. Island
governors with private armies. Total lawlessness. Nope, not a
place to do business, and that”s why this nation will always be a
notch below countries like South Korea in its development.
This Week in Politics
George Bush and John McCain buried the hatchet…kind of…sort
of.
Nationally, Bush leads Gore, 51-43 (L.A. Times), and 49-44
(Washington Post / ABC News). The Times poll found that when
you threw in Ralph Nader and Pat Buchanan, Bush”s lead
remained the same, 47-39-4 (Nader)-3 (Buchanan).
The Times poll also found that Bush led Gore, 48-46, among all
women, significant because Clinton carried this segment by 16
points in ”96.
The Post / ABC poll shows Bush leading Gore by 58-35 in the
race for the white male vote. White women flock to Bush, 53-39.
Jesse Ventura had an interesting appearance this week on CNN”s
“Crossfire.” While I don”t care for the Governor, I did enjoy his
pasting of commentator Bill Press. And I also found compelling
Ventura”s comment that, while he still maintained he is staying
out of the race himself, he thought he could enter the presidential
sweepstakes in August and “steal the election.”
And then there”s Rudy Giuliani. I wrote a few weeks back that
he wasn”t a likable fellow. Now he is even less so. But,
according to the New York City polls, 75% of the voters still
don”t care about his marital situation. Put me in the other 25%.
To me it just shows incredible lack of judgment not to have
sought a legal separation from Donna Hanover a year ago, when
he first met his new lady friend. But then I”m old-fashioned and
those of us in this camp are rapidly becoming extinct.
I, like many others, now hope that Rudy drops out and Governor
Pataki enters the race. As for the First Lady, I have to admit
she”s running an effective campaign.
Finally, we have an interesting Senate race of our own here in
New Jersey. In the race for the Democratic nomination, former
Goldman Sachs CEO Jon Corzine once trailed his opponent,
former Governor Jim Florio, by 24 points. Today, the same poll
has him up by 15. Yes, money talks and Corzine has spent
upwards of $20 million already, a huge sum for a primary
campaign in this state.
Random Musings
–The Miami Heat”s Alonzo Mourning, following a playoff
victory over the Knicks. “God gave us the strength to dig down.”
Just in case you were wondering what He has been up to.
–The Washington Post, certainly not a friend of the Right, had an
editorial titled, “Free Linda Tripp.” In commenting on her
Maryland wiretap case, the Post declared, “To have her end up
the most punished figure in the entire sordid affair, as could
happen were she convicted in this case, would be an inversion of
justice.”
–The Justice Department has launched a new, improved, formal
investigation of former CIA Director John Deutch. Deutch,
you”ll recall, used his home PCs for highly-classified use, opening
up our nation”s secrets to every hacker (or foreign intelligence
service) out there. Last year, Attorney General Reno decided not
to prosecute Deutch. Now, however, the evidence is too
overwhelming. CIA higher-ups, including current Director
George Tenet, had not followed up properly on their own internal
investigation. Basically, the old boys network covered it up. Or,
as the New York Times put it in an editorial.
“The affair once again demonstrates that the CIA can not
adequately investigate itself and that Attorney General Reno has
consistently failed to enforce the law against top Clinton
administration officials.”
[Isn”t it delightful that both the Times and the Post are coming
around to my way of thinking?]
–Approval of gene-altered (insect resistant) crops is slipping in
America, a big issue for America”s farmers. Paranoid Europeans
started this whole debate and it”s taken awhile for it to take hold
here. But to be fair, we really have no idea what the long range
impact of the Frankenfood is. For now, however, I prefer my
veggies without bugs.
–1 in 4 Microsoft products is counterfeit as organized crime has
found a new target.
–Carbon monoxide poisoning killed 6 members of a Long Island
family last week. Evidently, the heating and AC units were in the
same room (not recommended) and the gas had been building up
for some time. When the AC was turned on for the first time this
season, that was it. The family had a detector but it was shut off.
–So I”m watching the Knicks game when I suddenly realize,
“Omigosh, the ”Challenge of the Child Geniuses” is on!” I caught
five minutes, enough for me to see that the kids were far from the
smartest in America. Dick Clark looked bored too. A possible
career killer.
–Brief word on the “Million Mom March” for stricter gun
control. I do want to give them the benefit of the doubt. But it
needs to be mentioned that the founder of the movement, Donna
Dees-Thomases, is the sister-in-law of close Hillary confidant,
Susan Thomases. Our own Harry Trumbore was the first to
interview Donna last year (Harry works for a paper that covers
the town in which Donna lives). It seems like a sincere effort.
Let”s just see how involved Bill and Hillary are on Sunday. In
other words, more later.
–Regarding the Los Alamos fire, congressional budget
forecasters need to lop off $3 billion from any surplus forecast. If
this man-made fire caused $1 billion in damages, the least the
government can do is pay triple. As for Interior Secretary Bruce
Babbitt, a walking conflict of interest to begin with, he should be
fired on the spot. He has to take the responsibility for a policy
that had to have approval from the top.
–Happy Birthday to Burt Bacharach, who turned 71 on Friday.
–Ford says SUVs are dangerous and harmful to the environment.
I say, keep producing them as is because my own portfolio, laden
with energy holdings, loves ”em.
–President Clinton told NPR that the last 8 years in the White
House have been good for his marriage. “We”ve probably had
more time together in our time here than at any point in our
marriage, and I”ve enjoyed that immensely. It”s been wonderful
for us.”
–The National Weather Service has issued its hurricane forecast
and it calls for 11 ”named” storms with 7 reaching hurricane
strength. In case you were wondering what the names will be
they are: Alberto, Beryl, Chris, Debby, Ernesto, Florence,
Gordon, Helene, Isaac, Joyce, Keith. Watch out for Isaac, late
September.
Gold closed at $277
Nymex Crude Oil, $29.62
U.S. Treasury rates:
1-yr. 6.37% 2-yr. 6.89% 10-yr. 6.50% 30-yr. 6.20%
Returns for the week, 5/8-5/12
Dow Jones +0.3%
S&P 500 -0.8%
S&P Midcap -1.6%
Russell 2000 -4.3%
Nasdaq -7.5%
Returns for the period, 1/1/00-5/12/00
Dow Jones -7.7%
S&P 500 -3.3%
S&P Midcap +7.4%
Russell 2000 -2.7%
Nasdaq -13.3%
Bulls 48.6%
Bears 31.2% [Source: Investors Intelligence]
*Check out “Hott Spotts” for more on Sierra Leone. It”s lighter,
I promise.
Brian Trumbore
