“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.
Important Notice: On Monday, I am launching a special offer for
you, my loyal readers. Yes, an official StocksandNews coffee
mug is yours for the keeping if you fill out some very basic
information. I feel like it”s “Pledge Week” at your local PBS
station. I need to know a little more about my audience in order
to begin to fulfill the goals of this site; quality programming at
zero cost. So help me out. And in turn, this microwavable mug,
destined to be a collector”s item, will be yours within two weeks.
Lamb in Command will still be found by clicking on either of the
two links left of center on the home page.
Brian Trumbore
