For the week, 11/1-11/5

For the week, 11/1-11/5

“I have yet to meet anyone who knows off the tip of their tongue

who the president of Chechnya is.”

–George W. Bush spokesperson, Karen Hughes, after Bush was

able to name only one of the four leaders of Chechnya, India,

Pakistan, and Taiwan.

I have had a queasy feeling about George Dubya the past few

weeks. Before, I was confident that a Bush administration would

be a strong one for one primary reason. He would have a cabinet

loaded with experienced, respected hands like Colin Powell and

Dick Cheney. That”s a positive. But the man who would be head

of state looks increasingly shaky.

This week a reporter ambushed Bush with the above question.

Now I”m proud of the fact that I have covered those four “Hott

Spotts” extensively in just the past two months. Many of you

could name at least two of the leaders. [In order of the nations

listed, they are Maskhadov, Vajpayee, General Musharraf, and

Lee Teng-hui].

Believe me, I”m not trying to make more of this than is

warranted, but the whole issue points to the arrogance many of

our leaders exhibit towards the rest of the world. We”re #1!

We”re #1! Just remember one very important thing as we

continue along with the Technology Revolution. Yes, the U.S.

will invent most of the great products in the future. But it is

increasingly easy to copy them. Say this to yourself. We invent

it. They copy it. And they will be able to make it much cheaper.

Yes, maybe it”s more a story for tomorrow. But we elect

Presidents to be “Big Picture” guys. I hate to say this because as

a Republican I so desperately want to win this time. George

Dubya seems like a pretty small man to me. But I”ll give him time

to prove otherwise. And George, do yourself a favor, start

reading this site.

Wall Street

It was a good week to be a bull. Hopefully, I made my stance

clear last week. [I apologize if I confused some of you with my

St. Martin”s story. No, I didn”t really go there. That was satire].

Yes, even I had a certain bounce in my step. Passersby remarked

how much better I looked (well, not really, but I hoped they

would). Forget the action in the Dow Jones, which fell 25 points,

-0.2%, to close at 10704. That was due in large part to IBM, off

$8, or about 40 Dow points, as well as weakness in issues like

Exxon and Disney. The broad market, on the other hand, was

splendiferous. The Nasdaq rose 4.6% and has now reached

record territory 6 straight sessions. And one of the bears ongoing

worries, market breadth (advances over declines), was lessened as

we have now witnessed 7 straight days where the # of advancers

has exceeded the # of decliners.

The perfect environment for stocks continued this week. Last

week, a report showing GDP growth of 4.8%, coupled with a

tame employment cost index, was just what the doctor ordered.

This week, the government released its jobs report for October

and the unemployment rate fell to 4.1%, while average hourly

earnings rose just 0.1%. Again, nirvana. I turned bullish because

I was sick of denying the evidence. Forget the past data, the

economy is now slowing. Big 3 auto sales are slipping (albeit

from still record levels) and growth in manufacturing seems to be

slowing as well. This is good. And there is no inflation. That is

good, too.

But I reserve the right to turn bearish again at the drop of a poor

inflation report or two! And one can not deny that the word

“euphoria” was used more than once this past week, a major

warning signal.

There is this futures trader, we”ll call him Jack, who appears on

CNBC quite frequently. When the market was sliding in early

October, Jack was barking that the world was going to end. “If

we break through 10000 on the Dow, we”re going down to

9000.” Well, we hit 9982 and bounced way up. Anyway, on

Friday, right after the great employment report was released, Jack

started foaming at the mouth about the next “30-40 years” being

great for stocks due to the revolution in technology, the greatest

we”ve seen since the Industrial Revolution. It was an awesome

display. He practically jumped through the screen at you…And

when you see stuff like this, that”s when you should worry.

That”s a mania. IPOs soaring 400-500% on the first day; big,

large cap companies like Qualcomm rising 32% in one week! Oh

well, I feel like a hypocrite when I wrote a few weeks ago that I”ll

pass on the last 7, 8, 9 percent and try and raise more cash. It”s

just that the economic numbers are too good to ignore.

And there is something else I can”t ignore. History. Do yourself

a favor and check out my “Wall Street History” piece for 11/5. I

rushed this out to beat everyone else. Election years are

awesome. Why? The Federal Reserve normally tries to stay

neutral (and generally accommodative…except in 1992 when they

cost Bush the election…but that”s another story) and Congress

accomplishes nothing because they are more focused on getting

re-elected. Of course a do nothing Congress is normally good for

all of us.

So what will the Fed do now? Well, I haven”t missed an interest

rate call for at least the last 6 Fed meetings and I won”t waffle on

my position that they”ll stand pat on November 16th. Yes, I still

think inflation is coming back next year, what with the global

recovery that is taking shape, I just don”t think the Fed will act

the rest of this year.

Alan Greenspan gave a speech this week that was very tame, in

other words, no warning shot for a Fed rate hike. The speech,

interestingly enough, focused on real estate. He said the boom in

home sales has had a bigger impact on the country”s prosperity

than soaring stock prices. Profits on real estate, realized or

unrealized, encourage more consumer spending than cap gains

from stocks and, the key statement to me, “While home prices do

on occasion decline, large declines are rare.” Do you see anything

bad there? I don”t. Oh my gosh…Greenspan, himself, is getting

euphoric! My good friend George, a reformed schizoid trader,

has always told me that a rumor floats around from time to time

that has Greenspan slowly losing his faculties. Maybe he”s right!

The yield on the 30-year Treasury fell to 6.04% this week,

continuing the awesome two-week rally from the 6.40% level,

even as the European Central Bank and the Bank of England were

raising their respective interest rates in an effort to nip inflation

in the bud. The European recovery seems to be firmly in place

(granted, it”s spotty in some countries). Just another reason for

capital to begin to leave our shores for increasing returns

elsewhere. But that”s bearish…and now I”m a bull.

Note: I was a little off schedule on Friday, my writing day, and

thus I won”t comment in detail on the Microsoft ruling except to

say that Judge Jackson ruled that Microsoft was a monopoly and

that their dominance is stifling innovation and hurting consumers.

This ruling, however, is just stage one. Undoubtedly, Microsoft

will now seek to settle with the government, instead of dragging

the case out further. I”ll have much more next week.

International Affairs

Russia is under increasing foreign pressure for its actions in

Chechnya. After blocking the flow of refugees fleeing Chechnya

for neighboring Ingushetia (you had to pay bribes to the soldiers

to be let through), the Russians are allowing more people to flee.

President Clinton met with Prime Minister Putin this week and

expressed our dissatisfaction with the civilian casualties in

Chechnya. Putin, in turn, handed Clinton a letter from Boris

Yeltsin expressing his dismay over the administration”s attempt to

rework the Antiballistic Missile Treaty. Yeltsin said that if the

U.S. moves forward with an antimissile program (currently

banned by the treaty) it would be “extremely dangerous.” Russia

then test fired an antimissile defense of its own a few days later.

[Without getting into more specifics, under ABM each side can

protect its key city, Moscow and Washington, but you can”t build

a broad-based system like the U.S. wants. Russia was testing its

Moscow defense].

Michael Gordon, reporting in the New York Times, wrote this

week that Russia is beginning to play games in denying U.S.

authorities access to some of their key nuclear sites (a process

allowed under various agreements). What”s important here is that

these are the facilities which produce plutonium, an ingredient

easily smuggled to terrorists or rogue nations like Iran and Iraq.

In other words, U.S.-Russian relations continue to deteriorate.

And we are increasingly placed in a box over the whole ABM,

Comprehensive Test Ban Treaty issues. It”s not just Russia who

wonders what our true policy is, the world is having difficulty

figuring us out as well. But when you have a foreign policy team

stocked with the likes of Sandy Berger and Madeleine Albright,

what do you expect?

And speaking of helter skelter, the administration now wants to

forge a deal to bring China into the World Trade Organization.

We could have had a deal last spring (which I would have agreed

with) only it was blocked by Rubin and Co. because the

Democrats needed to kowtow to the unions to lock up the AFL-

CIO endorsement for Gore. China was prepared to make major

concessions back then. [Clinton, once again, lied about this issue

in his press conference this week. That nose just gets longer and

longer]. Now, China is rightfully playing hardball.

So while trade talks go on, China also plays with the Falun Dafa

religious sect. Up to 3,000 members have now been arrested

since September 30th. According to a Hong Kong-based rights

group, police beat to death a female adherent when she refused to

renounce her beliefs. The current Chinese leadership is obviously

having difficulty dealing with dissent, yet the White House

ignores this assault on human rights because they want the trade

deal.

Now here”s a complicated issue and you may be surprised by my

response. Iran has evidently been definitively linked to the Kobar

Towers bombing in Saudi Arabia which claimed a number of

American soldiers lives. Ordinarily, an American President would

threaten retaliation. But the bombing occurred before Iran

elected a moderate president, Khatami. Now we want Khatami to

succeed and saber-rattling would only complicate the issue. I

agree. Give diplomacy more of a chance. Except I cringe to

think who the diplomats might be.

A Congressional panel found there is “significant evidence” that

North Korea is continuing to develop nuclear weapons, even after

Clinton”s 1994 agreement supposedly put a stop to it. Of course,

you readers knew this wasn”t the case but now Congress has

confirmed it.

The Middle East peace process will be an election issue next year.

This is virtually guaranteed by the fact that Israel and the

Palestinians are to have reached a final comprehensive agreement

by next September. If this turns out to be the case then obviously

the Democrats will benefit.

More “This Week in Politics”

As of this writing, it appears a budget compromise will be

reached. Around this time each year the same dance is played out

and, except when Gingrich was out-maneuvered by Clinton, both

parties gravitate to the middle. I”ll comment further, next week,

when I see the details but if Republicans are responsible for

borrowing from the Social Security trust fund, that will certainly

make for an ugly commercial or two.

Abby Cohen, Goldman Sachs chief strategist and market darling,

was giving a speech this week when she crossed the line and

found her way into this part of my commentary. She said that the

fiscal discipline imposed by the Clinton administration when he

took office in 1993 was largely responsible for the bull run in the

financial markets. Abby, before you really look like an ass

(donkey), perhaps you need to be reminded of a simple fact.

When Clinton took office in January of 1993, the first thing he

wanted to do was put in place a huge fiscal stimulus program

(and later, the healthcare proposal). The bond market rebelled at

the thought and markets were roiled. The Republicans insisted

that the stimulus package wasn”t needed and that cutting the

deficit was more important. Clinton, to his credit, eventually saw

the light. So Abby, next time you”re giving your stump speech,

give us elephants a little credit.

John McCain and Al Gore came under fire for different reasons

this week. First McCain. His home state newspaper, The

Arizona Republic, ran an editorial which basically said that

because of McCain”s temper he wasn”t fit to be President. Now

all McCain did the last Senate election was garner about 70% of

the vote. So clearly this is a vendetta against McCain staged by

the paper. But why? Well, it seems that back in 1994, McCain”s

wife, Cindy, admitted to having a problem with an addiction to

certain pills. The Republic ran a vicious cartoon which many

outside observers said was the worst of its kind they had ever

seen. [The paper won”t release the cartoon anymore]. So

afterwards, John McCain, in defense of his wife, simply stopped

returning the paper”s calls. Now the Republic feels they have to

destroy him.

And then there is the case of Al Gore and Naomi Wolf. Wolf is

hard to classify. She is a bit of a feminist but more of an author

who sometimes writes about sex in rather explicit terms. Even

I”m too embarrassed to write some of the things she has. [I also

advertise in my church bulletin!]. Wolf has been a consultant to

the Gore campaign for months now, though this just became

clear since Gore was trying to hide the fact that not only was she

an advisor, she was also being paid $15,000 a month (since

reduced to $5,000).

So why would Gore try and conceal Wolf from the press? After

all, a candidate has the right to seek advice from anyone he or she

wants to. Well, the problem is that Naomi is the one responsible

for the “new” Gore. She is the one who has told him to search

for his identity and Wolf is encouraging Gore to be an “alpha

male” (aggressive, one who leads the pack) and not a “beta” male

(one who simply follows). She is also responsible for his new

wardrobe, more olive green, brown and shades of tan, as well as

those spiffy blue French shirts. [Maybe that”s my problem. I only

own white button-downs. Naomi, I”ll pay you $6,000].

What this all comes down to is the issue of why the heck does

Gore, after all his years in Washington, need coaching of this

sort? Why should I vote for a new Gore? What”s wrong with the

old one? When I gave my Bradley / Gore debate analysis last

week I used a poor choice of words when I described Gore”s

performance as being “awful.” That was careless on my part. I

should have written it was “phony.” Yes, phony, thy name is

Gore.

This past week”s elections were very light on newsmaking races.

The only one I would comment on is the Philadelphia mayoralty,

a race won by Democrat John Street. From what I know of this

guy he is a real loose cannon and with the Republicans holding

their convention in Philly next summer, look for Street to do

something real stupid which will backfire in the Democrats faces.

Some assorted polls:

Gore leads Bush, 50-45 among women, an improvement for

Gore. Nationally, Bush leads Gore, 53-39, and Bradley, 49-41.

Of Pat Buchanan”s supporters, 62% would vote for Bush, 27%

Gore, if Pat wasn”t in the race. That is rather telling as to the

impact a Buchanan 3rd party run could have. Even if he were to

get about 5% nationally, he could swing some key states to the

Democrats.

A New York Times / CBS poll shows Giuliani leading Hillary 46-

42, a statistical dead heat.

John McCain has suddenly closed the gap between himself and

Bush in New Hampshire to just 8 points.

Y2K

A few quick notes. In Japan, the government is advising folks to

stock up on water, food and flashlights. Around the world, oil

companies say they are ready for a rise in demand for gasoline

come year-end. I don”t believe this, so I”m building a big trench

in front of my home for my own tank. I just hope the neighbors

don”t notice. An official in Russia said “the banking system is

much less reliant on computer systems,” so there won”t be any

problems. I just love a barter economy, don”t you? And also in

Russia, they announced that their power grid will switch to

manual control on December 31st to avert any problems. “Sergei,

where are the hamsters?”

Random Musings:

–Someone asked me my opinion of the Egypt Air plane crash. I

told them I felt bad that I didn”t care more about this tragedy. I

suspect I”m not alone. Many of us are becoming desensitized to

these events (especially if you live in the New York area where all

the big crashes have been taking place) and that”s probably not a

good thing. I”m of course assuming it was an accident and it”s a

policy of mine not to dwell on them. Stuff happens. What is

troubling, however, are the other problems Boeing seems to be

having throughout the production process. Yes, accidents

happen. Building planes with highly flammable insulation (one of

this week”s company admissions) is a totally different matter.

–And speaking of airplanes, Airbus rolled out plans for a new

1,000 passenger airline, complete with elevators. Now how

stupid is this. You suddenly hit a rough patch of turbulence and

you”re on an elevator. Or the elevator has an electrical problem

and the planes goes into a death-dive. Why create extra risks?

Someone is looking down on this planet just shaking their head.

“Idiots,” they”re thinking.

–According to reports, ex-CIA Director John Deutch not only

improperly transferred files to an unsecured home computer but,

as the Feds investigated, he supposedly tried to erase all the files.

Just another great Clinton appointee.

–A few weeks ago I ran an exclusive on the new computer

system that is being installed at the Post Office service desks. At

the time, the employees were unhappy. Well, this week I asked

the folks for an update. They”re still displeased. “The old system

was better at correcting mistakes.” I”ll stay on the story.

–Four members of the International Boxing Federation (IBF)

were indicted this week on various corruption charges, including

the allegation that some boxers were forced to make cash

payments to the IBF in order to be ranked among top contenders,

get better bouts and receive higher purses. I love a good boxing

match as much as the next guy but just shut the sport down for a

year and then start over.

–Doonesbury has been running a hilarious spoof on IPO mania.

It”s worth going online to track down if it hasn”t been in your

newspaper of choice.

–I”m a member of the History Book Club and the selection of the

month is “Dutch.” You call that history?

–The New York Knicks and Cleveland Cavaliers met in the first

game of the season, bringing together the “Paternity Kings,”

Larry Johnson and Shawn Kemp, who between them have

fathered about 15 kids through 12 women. Our S&N

microphone was there to record the conversation that took place

between them before the game.

Shawn: “Got any baby pictures?”

Larry: “Yeah. Check this one out.”

Shawn: “Good looking kid. Who was the mother for this one?”

Larry: “Damned if I know!”

–“60 Minutes” had a fascinating interview last week with

“Peanuts” creator Charles Schulz. Schulz has now been at it 50

years and, as a huge fan, I hope he can keep it up for years to

come. Schulz was described as an “unreconstructed Eisenhower

Republican.” Yes, he certainly is and I loved his response to

Steve Kroft”s question, “Is the world getting better or is it just the

same?” Schulz said, “What makes us survive is the great middle

class. They mow the lawn, shovel the walk. They just keep

going.”

–Finally, I was at the annual awards dinner for the New York

province of Jesuits last night. I had forgotten that it was also the

10th anniversary of the murder of 6 Jesuit priests in El Salvador.

There are some remarkable people in this world, the Jesuits being

among them. Because of their efforts the “little people” have a

chance to live a life of dignity.

Gold closed at $290

Nymex Crude Oil, $23.00

Returns for the week, 11/1-11/5

Dow Jones -0.2%

S&P 500 +0.5%

S&P Midcap +3.5%

Russell 2000 +3.2%

Nasdaq +4.6%

Returns for the period, 1/1/99-11/5/99*

Dow Jones +16.6%

S&P 500 +11.5%

S&P Midcap +5.4%

Russell 2000 +4.9%

Nasdaq +41.5%

Bulls 42.1%

Bears 38.6% [Source: Investors Intelligence]

*Not including dividends.

**Check out Dr. Bortrum and his article on champagne.

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Brian Trumbore