“When it is a matter of life and death, admirals, generals and state
officials simply must not lie, cheat and think about their
careers…it is blasphemy.”
–Russian newspaper editorial
It was a horrible week for Russian President Vladimir Putin and,
most importantly, the Russian people.
The Russian submarine Kursk went down last Saturday, the
military didn”t announce the fact until the next day, and Putin
didn”t interrupt his vacation to say one word about the tragedy
until Wednesday.
From another Russian editorial:
“Why on earth did (Putin) think it was possible to keep mum for 5
days, when the entire nation has spent those days consumed by
only one thought – will they be saved or won”t they?”
Putin was more concerned with saving face than saving lives.
Picture the mothers of these sailors and the anguish they”ve
endured. No, if you were an optimist on the future for Russia,
your dreams have been shattered.
This is no small incident. And it should come as no surprise that
another generation of Russian leaders have adopted the methods
of lying and cheating. It”s been this way for hundreds of years;
from the reign of the czars, through the Communists, and now to
the new democratically-elected leaders of today.
Many hoped Putin would be some new kind of Russian leader.
As you know I have had my doubts…and it”s also been
interesting to note how the Clinton administration has been very
sparing in its praise of him since he took office.
The Wall Street Journal reached the following conclusion in a
Friday editorial.
“It is worth asking how a government that deals so lightly with
the lives of its own patriots will treat its fellow nations.”
Putin belatedly headed home on Friday to deal with what could
turn into a major government crisis. And soon, he is going to
have to deal with a wrenching mass “state funeral.” Emotions
will run high.
[The only thing that may save Putin is the lack of any viable
alternative; absent my favorite Russian, Alexander Lebed, the
former military leader who brokered the peace in the first
Chechen War back in 1996.]
And as if the Kursk disaster wasn”t enough, I was going to be
leading with Russia this week, anyway, because of a rather
harrowing statement from North Korea”s Kim Jong-il.
You”ll recall that at the recent G-8 summit in Okinawa, President
Putin stole the show when he passed along word to the other
leaders that dictator Kim was willing to dismantle his missile-
building program if the West would help him launch some
commercial satellites. While the U.S. was notably skeptical, the
rest of the group, particularly Germany, took the proposal
seriously. This was Putin”s first time on the full world stage and
he had brought something to the table.
This week, however, while addressing a group of South Korean
media execs, Kim said:
“I just made the statement (to Putin on dismantling the missile
program) as a laughing matter while talking about scientific and
sophisticated technologies.” Kim said he was only “joking” and
then he told the media execs that his country was currently selling
missiles to Syria and Iran. [The West knows this…it”s just crazy
that he admitted it.]
Oh, and in case you didn”t get the message, Kim announced that
he wants North Korea to be taken off the State Department”s
terrorist list as a pretext for establishing formal relations. If I”m
Clinton, I focus on the Middle East these last few months and
leave North Korea to my successor.
So we have a situation where the obviously “not ready for prime
time” Putin has exhibited a total lack of judgment with regards to
his handling of Kim Jong-il and the Kursk tragedy.
A good friend of mine asked the other day why I cared so much
about a bunch of Russian sailors whose ultimate mission is to
attack the U.S.?
True, during the Cold War, I wouldn”t have cared. But the war is
supposed to be over and, yet, Moscow was afraid to ask for help
because the Cold War mentality is slow to die. It”s distressing.
And there is another issue that I first brought to your attention
last July 15. A reminder of what I wrote, in part.
“…remember that Russia continues to dispose of nuclear debris
and spent fuel from the old Soviet Northern Fleet into the sea.
And the ocean is now home to used submarine reactors. Add to
this the fact that plutonium is crisscrossing Russia with abandon
and you have the scary scenario that these supplies will be
hijacked and used in terrorist acts.”
My theme that particular week was that environmentalists have
been attacking the wrong issues. Add the Kursk, and its two
reactors that obviously weren”t cooled properly before the sub
went down, to the graveyard of Russian ticking time bombs.
Of course the protesters in Seattle, Philadelphia and Los Angeles
don”t understand that there is no greater environmental threat in
the world today than the fate of Russian nuclear waste. They
should be organizing worldwide protests to focus attention and
the U.S. has to be more aggressive in targeting aid to get on with
the clean up.
Lastly, if you were looking for a discussion of foreign affairs at
the Democratic Convention, by my accounting you received
about 90 seconds worth. Yes, Americans are focused on
domestic issues but I can guarantee one thing. When the klieg
lights go off, any American president today, whether it”s Clinton,
Gore, or Bush, will be spending 50% of their time in this realm.
Because they all know this truth. It only takes one diplomatic slip
up, one nuclear accident, one attack by India against Pakistan, or
China against Taiwan, to derail consumer confidence and the
boom economy.
Wall Street
I”m not going to create news where there was none. It was
dullsville on the Street. And I don”t care where you live, you
know the feeling. It”s easier to find parking spots, the lines at the
barber shop are shorter, it”s vacation time.
And the market put itself on hold for another reason…waiting for
the Federal Reserve”s meeting on Tuesday. A further increase in
interest rates is simply not in the cards. There hasn”t been one
truly dire inflation number in all the government statistics since
last spring.
But as to the economy, this ain”t no soft landing, folks (if you”ll
pardon the slang…the editor is mentally on vacation). We may
have slowed down a little, particularly from a consumer spending
standpoint, but our old spending patterns will resume in short
order (barring an external shock). And you know the Fed is
worried about that potentiality. But without hard evidence of
incipient inflation, there is no way they can legitimize a rate hike
at this time.
Over the coming months, however, I”m convinced the evidence
will emerge that inflation, ex-food and energy (he wrote with a
smirk…because we all consume food and energy…it”s tough to
just “ex-” out), will rise at a level warranting further rate
adjustments. The Fed will meet in October, a month before the
election. They could be in a real box by that time.
The Dow Jones and Nasdaq both rose for the third consecutive
week with the Dow eeking out a 0.2% gain to the 11046 level.
The Nasdaq, powered by a resurgent semiconductor sector (up
20% in 6 days), rose 3.7% to 3930.
Bonds were little changed. U.S. Treasury yields:
1-yr. 6.15% 2-yr. 6.25% 10-yr. 5.77% 30-yr. 5.69%
Energy
While all-important crude oil inventories rose this week, though
not nearly enough to offset the drain of the previous two, OPEC”s
president issued a statement that the cartel will not lift production
any further until their September 10 meeting. And at that time
there could be a battle royal.
Venezuelan President Chavez used every opportunity to tell the
world that the current high level of oil is just right. And there are
some good fundamental reasons why oil should remain high (well
above $25 a barrel).
For starters, the world”s economies are continuing to chug along,
sopping up supply while demand is only increasing.
Second, nations like Iraq and Iran don”t have the capacity to add
more production; only Saudi Arabia, Kuwait, and UAE can,
among OPEC members, with Saudi Arabia obviously being the
key.
Third, despite all of our complaining, it may behoove us to
support the Russian economy as much as possible at this time.
High energy prices are probably the only thing preventing a
breakdown in that society. Energy is their dominant source of
income. [I recognize I”m probably a minority of one in this instance.]
Fourth, evidently there is a heavy refinery maintenance schedule
slated for this fall. Thus, production will be coming off-stream,
just when we need it most.
Fifth, the now long talked about heating oil crisis that is coming
down the pike this winter.
So get used to the high prices. I think you already have.
Street Bytes
–Some Internet issues like Amazon and eBay rallied this week for
no real apparent reason. Amazon”s Jeff Bezos ran around
showing Wall Street analysts that he really did have some cash
left in his wallet. That seemed to reassure some investors. I
prefer to think of the rally as a dead cache bounce.
–Two notes of interest on the international economic scene. The
Irish economy continues to boom. But the downside is that
consumer prices rose at an annualized rate of over 6% in July.
Between this and bearish inflation news from Germany, the
European Central Bank is about to have a real test of its ability to
keep all of its members in line. The overall inflation target for the
EU is 2%.
And down in Mexico, the government reported GDP growth of
7.6% in the second quarter. President-elect Vicente Fox doesn”t
take office until December 1st, but he”s going to be faced with the
immediate task of preventing the boom-to-bust cycle that is
Mexico”s history.
–Microsoft”s Windows 2000 or ME (Millennium Edition) is
officially being rolled out in September. It is not a “must-have”
upgrade.
Technology Debate
From the 8/28 issue of Business Week, here are some opinions
from two tech titans.
Cisco CEO John Chambers: “There will be nothing in the 10-year
window (10 years from now) except e-companies…click-and-
mortar will become the only means to survival.”
Intel Chairman Andy Grove
Q: Are we in the midst of a second Industrial Revolution that will
lead to vast changes in the way companies are managed?
Grove: “I don”t think we are seeing a phase transition like ice
turning to water…It would (be useful) to go back and ask if the
railroads changed the world.”
Q: Many believe that the speed of transactions will radically
change the way we do business.
Grove: “This business about speed has its limits. Brains don”t
speed up…you can reach people around the clock, but they won”t
think any better or any faster just because you”ve reached them
faster.”
International Affairs
Venezuela: I”m not the only person who thinks President Chavez
is dangerous. Commenting on his trip to Baghdad, a Washington
Post editorial contained the following:
“So far, Mr. Chavez”s dalliances with the world”s anti-American
dictators have not translated into either an imitation of their
methods in his own country, or a major rupture with the U.S.
But after the spectacle in Baghdad, it”s harder to find fault with
those who worry that they eventually might.”
Chavez went from Baghdad to Libya this week where he visited
with Qaddafi (this is the old way of spelling his name, by the
way…I have seen so many newer versions…geezuz, settle on
one, already). The two labeled the 1986 U.S. bombing of Tripoli
a “criminal act.” Oh, c”mon…just because we missed our target
doesn”t mean you have to get sore about it!
Middle East: Egyptian President Hosni Mubarak may finally be
getting the message. Act like a leader. He seems to be urging
Yassir Arafat to delay a formal Palestinian declaration of
statehood, slated for September 13.
Of course Mubarak also said that any compromise over who rules
East Jerusalem and its holy sites would lead to uncontrollable
violence. There could be one more Camp David summit in
October.
Yugoslavia / Montenegro: Slobodan Milosevic seeks reelection in
Serbia on September 24. Of even more importance is what
happens to tiny Montenegro, the other piece of the Yugoslav
federation. In a perfect world, Montenegro would like to be an
independent nation, aligned with the West. Milosevic clearly has
other thoughts and an “October surprise” of his own can”t be
ruled out. His troops are already stationed there and he could
gamble that NATO may not launch a vigorous response if he goes
through with a coup attempt.
Democratic Convention
Bill Clinton
Enough has been written of his convention entrance which,
personally, I found unsettling. I did reread his speech on Tuesday
and, of course, the President single-handedly led America to a
better life. In his own words:
“I have done everything I could to empower the American people
– with their amazing optimism, imagination, and hard work – to
turn our country around and move us forward together.”
I could have picked out something worse but, frankly, I”m tired.
And I don”t know about you but I seem to remember the 80s as
being a pretty good decade and, as for this “horrible recession”
our nation went through in the early 90s, wasn”t that the
shallowest in history?
And what about Clinton”s bizarre reference to the 60s? I seem to
remember that we were on the brink of revolution by the end of
the decade. But the President touted an economic “boom”
without mentioning that it was fueled in large part by the Vietnam
War! Of course he sought to avoid that conflict, so why not
avoid discussing it?
But, most importantly for Al Gore, it was amazing how Clinton
slighted his partner. Here”s what the best Washington reporter,
David Broder, had to say in comparing Clinton”s treatment of
Gore with Reagan”s endorsement of Bush at the 1988 Republican
Convention. First Reagan:
“With George Bush, I”ll know, as we approach the new
millennium, our children will have a future secure with a nation at
peace and protected against aggression; we”ll have a prosperity
that spreads the blessings of our abundance and opportunity
across all America; we”ll have safe and active neighborhoods”;
drug-free schools that send our children soaring in the atmosphere
of great ideas and deep values; and a nation confidently willing to
take its leadership into the uncharted reaches of a new age.
“So, George, I”m in your corner. I”m ready to volunteer a little
advice now and then…or just stand back and cheer. But, George,
just one personal request: Go out there and win one for the
Gipper.”
Broder:
“By contrast, Clinton mustered only these lame cliches: ”He was
always there. He always told me what he thought was right…I
can tell you personally he is one strong leader…Al Gore
understands the future…Al Gore is a profoundly good man.””
Noemie Emery wrote a piece for The Weekly Standard this week
outlining the behavior of our president in his final few months.
“(Clinton) is being himself more than ever, and the sight is not
pretty. The face is becoming more lined. The voice itself is
becoming more wheedling. The assumed layers of civilized
rectitude – Oxford, Georgetown, the Renaissance wonkery – are
peeling away, revealing the soul of the carnival barker, the one
that was there all the time.”
But in listening to Clinton”s litany of accomplishments, I will give
him this, at least when it comes to the economy. In the words of
Charles Krauthammer, he didn”t get in the way…”He didn”t
screw it up.”
Al Gore
It”s impossible to know how the average American views the
convention speeches. If you don”t know the facts, most of what
you listen to makes perfect sense. And so it was with Gore”s
“coming out” address.
For a man who is touted as one of the “greatest vice presidents in
history” (I have never figured out what that really means, though
I have my thoughts on the matter), in the words of Richard Berke
it was amazing how he “skated over (his) service as #2.”
There was Gore and this new “populism.” He blasted “Big
Tobacco, Big Oil, Big Pharmaceuticals,” Big Fries, Big Wheels,
Big Jerks…everything but Big Government. And, of course, that
will be the focus of the debate this fall.
Political Musings
–Harold Ford Jr. gave the Democrats Keynote Speech on
Tuesday, but since he didn”t come on until 11 p.m. ET, few saw
him. Just as well.
Ford finished up by talking about all of the kindergarten
graduations he had been asked to attend and the look of pride he
saw on the faces of both the students and the parents. Oh
brother. It”s only kindergarten!
But I have some trivia for you. I totally stumbled on the fact that
one Friedrich Froebel is responsible for the concept of
kindergarten. Seriously…the original term was
“kleinkinderbeschaftigungsanstalt.” So wow your friends at the
next ceremony. And don”t think anything of the fact that I found
this tidbit while perusing Jacques Barzun”s, “From Dawn to
Decadence.”
–Please, Democrats. Keep Cher out in public. She”s worth 5,
maybe 6 points for the Republicans.
–In one fell swoop President Clinton raised $10 million for his
presidential library. At this particular event, Clinton also said,
“I”m not going anywhere…I”ll try and hang around.” And this.
“How quickly it all passed.” Yup, just like a kidney stone.
–Bill Bradley: I don”t know why I ever liked this man as a
politician. If you saw his convention speech, you saw the real Bill
Bradley, one who exhibits total disdain. I mean, did you catch the
line, “If you”re smart enough…you can make it?” That”s him.
Not this populist he pawned himself off as. Al Gore made a
mistake in singling him out for praise Thursday night. Gore
doesn”t need him.
–Actually, the Gore folks should have taken their cue from CNN.
The network interrupted Bradley”s speech to do an interview with
Teddy and Caroline Kennedy.
–Back in New Jersey, the Senate race between Democrat Jon
Corzine, former CEO of Goldman Sachs, and Republican Bob
Franks is taking a back seat to the Hillary-Lazio race. Out in Los
Angeles, Corzine came up with this gem. “Democrats are
interested in people.” Corzine”s going to win. Pity us.
–David Bositis, a black political analyst, was dismayed how his
fellow Democrats were afraid to mention Clinton”s name. “Black
Americans want to celebrate Mr. Clinton. They don”t worry
about his personal life.”
StocksandNew Exclusive
I had to put the following in a separate category because I know
some of you skip “This Week in Politics.” But now you”re
trapped.
Al Gore sweats…a lot.
And let me tell you why this is important. Some of you may
know that during the first presidential debate in 1960 between
Nixon and JFK, Nixon sweat profusely and, coupled with his five
o”clock shadow and the fact that the Kennedy folks made Nixon
stand when they knew he had a painful knee injury, it all added up
to one sorry looking candidate. What I didn”t know until
perusing a book this week was that the Democrats smartly made
sure that the heat in the studio was turned way up. Nixon was
toast.
I have observed this campaign season that in small, confined
settings, Gore sweats, big time. [You weren”t going to see that in
the cavernous Staples Center.]
Ergo, this may not be such a small issue come the debates this
fall, with those hot TV lights pounding on the participants. Heck,
it”s going to be a close race…it could be the difference. I just
want you to say you heard it here first.
Random Musings…Part Deux
–My buddy MR and I agree that inflation really is rising. The
costs of our haircuts keeps going up.
–In doing some research for “Bar Chat” pieces on JFK, I came
across the following description from the brilliant author, Richard
Reeves (“President Kennedy: Profile of Power”).
“He was intelligent, detached, curious, candid, not always honest,
and he was careless and dangerously disorganized. He was also
very impatient, addicted to excitement, living his life as if it were
a race against boredom. He was a man of soaring charm who
believed that one-on-one, he would always prevail.”
Absent one or two of those characteristics, it”s amazing how this
description fits President Clinton.
–It was unfortunate that the story leaked about the new grand
jury that independent counsel Robert Ray impaneled back in July
to look into whether or not President Clinton should be indicted.
As it turns out, it was a Democratic federal judge who
accidentally spilled the beans. So much for all the cries of “foul”
on Thursday. My guess, though, is that Ray decides not to indict.
But there is one little issue left…what was the White House
covering up in all of those e-mails?
–For the first time ever, more women than men now go online.
–Last week I riddled one Professor Ted Gup for his stance that
Americans make too much of their lack of knowledge regarding
American history and foreign affairs.
This week, Carol Hymowitz, writing in the Wall Street Journal,
had a piece backing up the opinion of your editor. It concerned
an international gathering of business executives and the opinions
of Europeans on their American counterparts.
“Americans are ignorant of world affairs, uncouth, and too
materialistic.”
“(Americans) don”t know anything about European history, let
alone geography.”
Back to you, professor.
–Prince William will be matriculating at Scotland”s St. Andrews
University. Forrre!
–Two striking Verizon employees were electrocuted trying to
sabotage phone lines. [They both survived.] To me, however, it”s
just another example of full employment.
Gold closed at $277
Nymex Crude Oil, $31.99
Returns for the week, 8/14-8/18
Dow Jones +0.2%
S&P 500 +1.4%
S&P MidCap +2.1%
Russell 2000 +1.0%
Nasdaq +3.7%
Returns for the period, 1/1/00-8/18/00
Dow Jones -3.9%
S&P 500 +1.5%
S&P MidCap +17.7% [The sweet spot]
Russell 2000 +2.1%
Nasdaq -3.4%
Bulls 47.1%
Bears 31.7% [Source: Investors Intelligence]
Note: The next Week in Review will be posted a little early, by
Friday afternoon at 2:00 p.m.
