[Posted Saturday, 1:00 AM ET…Rapid City, SD]
“We here in America, hold in our hands the hopes of the world,
the fate of the coming years; and shame and disgrace will be ours
if in our eyes the light of high resolve is dimmed, if we trail in
the dust the golden hopes of men.”
–Theodore Roosevelt, 1912
For a few weeks after the attack, I ridiculed those who advised
that it was our patriotic duty to buy stocks. Instead, I wrote of
protecting your principal, that it was no time to be a hero. Let
the government and our president take care of the war, I said,
you should take care of your family…and the family finances.
I certainly take back nothing, since it was the only prudent
advice to give. If you bought stocks at the bottom, however, and
did it out of a sense that panic breeds opportunity, rather than
because some shill said to do so, well, congratulations. You
have earned an excellent return on your assets. But trust me,
folks, if you bought out of a sense of patriotism, I can assure you
that Mullah Bastardah is not sitting in his cave thinking,
“Omigod! Juniper is back over $20! We have failed…the
infidels have won.” No, while Bastardah may want to bring
down the economy as a secondary reaction, he isn”t following
every tick on Nasdaq. All that those of his ilk care about is how
many Americans they can kill.
I also wrote a few weeks ago that while I wasn”t aggressively
buying stocks, I fulfilled my patriotic duty in getting back to
normal and the first thing I did was to move up the purchase of a
new PC. The second thing was to come out west this week and
rediscover America. After an exhilarating week of driving
through parts of South Dakota, Montana and Wyoming, seeing
some of our national parks, pumping up the economy, supporting
the local establishments (including dropping $100 in a casino in
Deadwood, SD), all the while tipping the suffering merchants far
more than normal just to show my own appreciation, I would
urge all of you to do the same. Our president said get out and
travel and that”s what I did. I”m better for it, you would be too.
I picked up the Teddy Roosevelt quote from Mt. Rushmore. It”s
amazing how appropriate it is for today. Roosevelt was chosen
to be one of the four for the monument by the sculptor Gutzon
Borglum not just for his big ideas, like the Panama Canal, but
also for his thoughts on conservation. After this past week, thank
God for men like TR and the great conservationists who
followed, those with the foresight to preserve our national
treasures and monuments.
To travel this land as I did, you can”t help but continuously
remind yourself just how lucky we are. More than once I yelled
out (an advantage of traveling alone), God I love this country!
And I must say that to drive the stretch of I-90 from Billings to
Sheridan, or Route 14 in Wyoming, which takes you to Devils
Tower, and not be inspired would reflect a weakness of
character that America itself has rarely exhibited throughout its
glorious history.
Back in 1936, President Franklin Roosevelt journeyed to Mt.
Rushmore to dedicate the completion of the 2nd head, that of
Thomas Jefferson. During his speech, FDR openly wondered
what our descendents would think of us, 10,000 years hence?
“Let us hope they give us the benefit of the doubt,” he said. And
then he continued, let us hope that they will say we left them “a
decent land to live in and a decent form of government to operate
under.”
I watched the video of this speech over and over again. What I
found so remarkable was the humble spirit of it all. True, this
was 1936 – in the midst of the Great Depression – but with our
greatest test just a few years away, one that we would pass with
flying colors.
Now we face another test, one that in many ways is just as great,
if not greater, because of the nature of today”s weapons of mass
destruction, and the evil nature of those who may wield them.
And maybe George W. Bush is our new FDR.
I received a few emails from some of you who were inspired by
the president”s performance at Thursday night”s press
conference. Viewing it in my hotel room in Hardin, Montana, I
was inspired as well. [I told you Bush should use the bully pulpit
more often.] The president is leading us on the right path, but it
isn”t going to be easy. This is about so much more than Osama
bin Laden. I pray that the American people will support our
president through thick and thin, especially as we inevitably train
our sights on Saddam Hussein, while what little Arab World
support we have crumbles in a sea of self-pity.
FDR needn”t have worried. This is more than a “decent” land to
live in, it is a great one. Woe to those who forget this, and may
those who try to take away that which makes this nation and its
people so special receive God”s full fury.
—
Wall Street
The spectacular rally back from the depths of 9/21 continued,
with major averages either exceeding or closing in on the pre-
attack levels of 9/10. The Dow Jones picked up another 225
points, 2.5%, to close at 9344 (near its 9/10 close of 9605), while
Nasdaq now sits at 1703, having gained another 6%, to finish
above its 9/10 mark of 1695. Nasdaq is also about 20% above
the 9/21 level of 1423. And most overseas markets continued to
rebound as well. So aside from the fact that a rally is good for
the soul, as well as the financial statement, why would I remain
unimpressed when it comes to the longer-term?
Throughout the bull market of the 90s and early 2000, the game
on Wall Street was to beat expectations, most notably for
earnings. In fact, throughout market history, those that exceeded
expectations were generally rewarded with higher share prices,
while those that fell short were penalized.
But as the 3rd quarter report cards began to trickle in this week,
so help me, I don”t know what all the excitement was about?
Sure, companies matching expectations were cause for
celebration, I guess, in that they didn”t once again disappoint and
fall short of already greatly reduced forecasts, but why the fuss?
For example, Motorola once again fell woefully short and said
the outlook for the 4th quarter remained gloomy, yet its shares
were rewarded. G.E. just met earnings expectations, revenues
were down 8% from year ago levels, and it was rewarded.
Yahoo! reported truly awful results, said it expects these putrid
numbers to continue, and it was rewarded. And then there was
the week”s darling, Juniper Networks. Here I had just written of
the stock last week and played a little valuation game with you
and boom, it”s suddenly over the $20 level I discussed.
But what did Juniper actually do? It hit the numbers the
company itself said it would, months ago, but in this case Wall
Street chose to ignore the company”s advice, it marked down the
estimate further and then, wow! Look at that, Juniper exceeded.
No they didn”t. They did what they themselves said they”d do.
And the company also said the 4th quarter will see much of the
same, results that are so-so for an outfit that has revenues equal
to StocksandNews (well, that”s quite an exaggeration…but the
commentary was getting too serious).
Of course, to be fair there is a good reason for some of the recent
euphoria. Investors have been looking for signs of a bottom and
some companies are finally hitting estimates that, again, were
almost uniformly drastically reduced beforehand. But while I
wasn”t able to follow the markets that closely this week, rare was
the company executive who was sticking his neck on the line and
saying they expect a huge rebound in 2002, and therein lies my
real problem.
Back last April and most of May, as the Dow and Nasdaq
rebounded from the lows of about 9200 and 1630, respectively,
everyone was calling for the corporate profit picture to finally
improve by the late 3rd / early 4th quarter. But as the summer
wore on, the realization set in that this wouldn”t happen and then
we saw the significant declines that were later exacerbated by the
attack.
Today, once again, we are hearing of the big rebound in
economic activity that is to come, perhaps by the first quarter of
next year. There are sound reasons for this, principally
historically low interest rates (which may continue to prop up the
crucial housing market) as well as the economic stimulus
package winding its way through Congress. Some in the Bush
administration, as well as more than a few economists, are
singing “Happy days will be here again, with growth of 3-4%,”
just like before. If they are right, fantastic. I”ll continue to plow
money back into energy stocks and we”ll both ride the wave.
But if they are wrong, and growth is tepid, what of the stock
market and some suddenly frothy valuations? Well, seeing as
I”m writing this from my hotel room in Rapid City, after a
spectacular drive today, I”ll spare you the gory details, which I
don”t have handy anyway.
What I do know is that none of the following has changed and,
yes, this is a song you”ve heard before. Debt levels are
historically high, bankruptcies (at both the corporate…see
Polaroid… and individual level) are rising as are mortgage
delinquencies, consumers are tapped out, there is zero reason to
be optimistic (at least in the short-term) on the capital spending
front, layoffs continue to mount, and if you don”t think there is
another shoe to drop, well, then you are a truly remarkable – and
nanve – individual. So while consumer confidence may have
bottomed for now, I maintain that while we are in the midst of a
soaring high when it comes to the stock market, we will still have
more debilitating lows.
Street Bytes
–U.S. Treasury Yields
6-mo. 2.22% 2-yr. 2.79% 10-yr. 4.66% 30-yr. 5.42%
With the ongoing rally in equities, more money has been flowing
out of fixed income as individual investors and institutions
reallocate assets. This can easily go back into reverse, however.
–Ford cut its dividend 50%.
–Microsoft suffered a defeat when the U.S. Supreme Court
refused to hear its appeal, thus hurting Microsoft”s plans to
continue to delay its day of reckoning regarding the penalty
phase.
–British Airways announced it is freezing pay and canceling
bonuses for 36,000 employees, not a good thing if you were
counting on these folks to help pump up the European economy.
–Retail sales for September were lower-than-expected.
–The average diversified U.S. stock mutual fund fell 18% in the
3rd quarter. Yes, the current rally has put a sizable dent in
that figure.
–If you can make sense of the accounting “spin” being foisted on
the rest of us schleps, you”re a better man than me. Look for
more fun and games as the year wraps up, since companies will
do all they can to make ”01 look as bad as possible in order to
have ”02 come in that much better.
–AIG”s Maurice Greenberg, a giant in the insurance industry,
said that premiums should grow “by leaps and bounds.” Guess
who pays for this?
–California”s state finances are now in disastrous shape thanks to
Governor Davis and his decision to play Russian roulette with
energy prices. The state is now paying far more than the free
market commands. But it”s also another reminder that all states
are suffering fiscally and this cannot be merely discounted by
those touting a buoyant 2002.
–Regarding energy, as of this writing there is still substantial
debate among OPEC”s leaders as to whether or not they should
reduce production further to firm up prices. Part of the problem
today is that the two-plus-year run of compliance among OPEC
members appears to have run its course. And OPEC also has to
deal with increasingly aggressive non-OPEC members like
Norway and Russia. In the case of the latter, Russia is the 2nd-
largest oil exporter in the world, with zero incentive to cooperate
with the cartel, so OPEC is being severely undermined. Oil and
gas not only represents half of Russia”s export revenue, but it is
also one-third of the federal budget, the latter being pegged to an
$18 average price for crude. [My Russian oil play, by the way, is
already up 10% in just 6 days. I love my new best friends!]
–International: To give you a sense of the gloom elsewhere,
Singapore”s recession is deepening. At the beginning of the year,
the government forecast economic growth of 5-7%. Now it is
estimated to contract by 3%, an incredible turnaround.
The Coalition
I said I wouldn”t waste my time, or yours, going into the details
of how we are conducting the war. Suffice it to say I also won”t
complain unless I feel that we are not going after Saddam, and
that”s an issue that won”t be addressed until next year at the
earliest. But that is also another few months, at least, where
Saddam is making more weapons of mass destruction,
unimpeded.
As for the coalition, and the Arab world in general, I”m finding it
increasingly difficult to hold back. Clearly, from my thoughts of
last week you should have received a sense of my true thinking
on Islam. This week I turn to commentator Jim Hoagland, who
had the following thoughts on Arab moderates and their lack of
criticism for the extremists in their midst.
“Islam is at risk from its own submerged internal civil war. The
Arab political system faces a similar risk in refusing to face up to
internal challenges while falsely blaming external factors for its
difficulties.”
And even the Washington Post weighed in with the following
editorial on the supposedly moderate Arabs.
“There is no cogent answer to the propaganda, no real defense of
mainstream Islam or secular government, not even much
insistence on what should be the cardinal point, that terrorism in
pursuit of any aim is wrong.”
Or to put it even more bluntly, much of the defense of Islam and
today”s Arab leadership is a bunch of bull.
Case in point, Prince Alwaleed. Mayor Giuliani was correct in
not accepting the Prince”s offer of $10 million. It is a well
known fact that the Saudi mega-billionaire is typical of the
hierarchy in his native land. Inherit billions and buy off the
enemy by contributing to the terrorists” charities.
And what the hell was Saudi Arabia doing in canceling Tony
Blair”s visit? Just which side are these bastards on? Well, any
right-minded person knows the answer. While from time to time
the likes of Saudi Arabia and Egypt voice support for our
actions, mostly they impede our efforts. But the sad fact remains
that the existing regimes are still better than the alternatives.
It may not be the religion, itself, which is at fault, but I urge you
to go back and read the comments from Professor Toynbee in
last week”s review. If nothing else Islam continues to be
hijacked for its leaders own purposes, not necessarily those
of its adherents. Or to sum up, as analyst Fareed Zakaria said
on “Meet the Press” last week, “The Arab world is a basket
case.”
Just a few more thoughts on developments in other Muslim
lands:
Indonesia: President Megawati isn”t up to the challenge.
Malaysia: Prime Minister Mahathir, never a friend of the West,
strongly denounced the air strikes.
Syria: Well, this is the price we pay in return for a little
intelligence. Syria was selected to the UN Security Council,
with no objection from the U.S., despite the nation being on our
“sponsors of terrorism” list.
[No wonder Israel is miffed and feeling totally isolated. During
the Gulf War it boldly endured Scud missile attacks without
retaliating. And this time Israel has shared intelligence with the
U.S., while a country like Syria, long bent on Israel”s destruction,
gets rewarded. I note this not as a criticism of the administration,
but simply as a reflection of the realities of today and the
complexities of the coalition-building game. It may still come to
pass that Syria becomes a target itself of our anti-terror
campaign.]
Pakistan: President Musharraf is one brave dude. He purged his
officer corps of extremists, including the intelligence chief, and
he has allowed the U.S. to use some of its airbases. If he
survives, you can imagine we will open up the treasury for the
country. That”s “if.”
Turkey: As a NATO member it is obligated to help and it will
contribute troops if requested to do so, even though 80% of the
nation (it is 98% Muslim) is against such an act. But the
government also stated its opposition to action against Iraq
because of the financial losses Turkey has suffered since the Gulf
War. If anyone deserves U.S. largesse it is the Turks.
Random Musings
–I didn”t talk to one hotel, restaurant or park employee who
didn”t say they saw a marked decline in business from what
would be normal for the season.
–Herblock, the political cartoonist for the Washington Post,
finally kicked the bucket. Oh, how the eulogies were glorious.
What a genius, they all said. This guy was the least funny, most
overrated figure in the history of the newspaper industry.
–John Paul held a synod the other day and some a-hole Anglican
bishop told the group that wealthy Western countries had lost
touch with reality and that God was “present to the terrorists.”
I”m really tired of this garbage.
–But wait, there”s more. USA Today had this opinion piece
from a guy by the name of Richard Deats who is with a group
called the “Fellowship of Reconciliation.” “An all out military
assault on terrorists and their supporters is only pulling us further
into a world of terrorist strikes / counterstrikes and deeper
misery.” I think I”m getting sick.
–Mark Green won the Democratic primary for mayor of New
York. Clearly the endorsement of this site carries massive clout.
We”re now picking Green in the general election.
–Canada is contributing forces to the coalition. But who will be
left to defend the country from attack by Iceland?
–Note to my critics: Don”t think about sending me an envelope
containing anthrax. I”m on full alert. It won”t work.
–There is a massive dust storm currently raging on Mars, which
is “obscuring virtually the whole surface of the red planet.” [AP]
Obviously, it”s a massive highway project.
–The Nobel Prize for Literature went to a man who lives in
Trinidad. I heard him described as “severe” in his craft, and as
one “who knows exactly where to put each comma.”
Well, so, much, for, me, ever, winning, the, award.
–I”ve decided that after this week I want to be a cattle rancher,
except that I”m afraid of horses so I”ll have to use a golf cart.
–One radio station I could get anywhere I seemed to travel this
week was “K-Fire…KFRY” out of Bismarck. Some of the call-in
shows were great. One woman with a heavy German accent
called in to complain about the “conspiracy” to get people to stop
eating out. But she was also promoting her own Bavarian
restaurant and the description of her dishes had me drooling.
Another guy said that a national I.D. card would lead to “one
world government.” Soon others were calling in to echo this
sentiment. I was getting a little discouraged until a fellow finally
said, “Hey, you have to give your identity to get a drivers license,
a hunting license, a fishing license, or a passport to travel
overseas, what”s the big deal?” Phew, I was beginning to think
everyone in Bismarck was nuts.
–On the other hand, for those of you, like myself, who live in the
New York area and wondered about the concern of your fellow
Americans, I”m here to tell you the tales are true. On Thursday
night I was watching the local news from Billings and it started
out with two stories on the city”s reaction to the attack – one
month later. Many of those interviewed had tears in their eyes
and the Billings Fire Department was still busy raising money for
the children of the victims. That”s America.
God bless the men and women of our armed forces.
Gold closed at $285
Oil, $22.50
Returns for the week, 10/8-10/12
Dow Jones +2.5%
S&P 500 +1.9%
S&P MidCap +3.2%
Russell 2000 +3.3%
Nasdaq +6.1%
Returns for the period, 1/1/01-10/12/01
Dow Jones -13.4%
S&P 500 -17.3%
S&P MidCap -11.9%
Russell 2000 -11.4%
Nasdaq -31.1%
Bulls 39.2%
Bears 34.0% [Source: Investors Intelligence]
Have a great week.
Brian Trumbore
