For the week, 11/29-12/3

For the week, 11/29-12/3

For $1,000…

Hsing-Hsing was a) a giant panda b) a sea turtle c) a dolphin

d) a human

5 seconds…

The correct answer is “a,” a panda.

For $2,000…

A Chechen is a) a sea turtle b) a dog c) a human d) a biscuit

I”ll wait…

The correct answer is “c,” a human.

Now for $1,000,000…

Who is more important in the grand scheme of things, a panda,

or, a human?

Times up. Sorry, but my value system says that humans are still

more important than panda bears. But from the reaction to the

death of Hsing-Hsing last weekend, you”d think it was the other

way around.

If you thought my review of last week was a bit overly dramatic

as to the shelling of the Chechen capital of Grozny, it turns out I

was way too conservative in my estimates. Multiply my worst

case by another ten-fold. Conservatively, well over 250 civilians

were killed in the first 48 hours of shelling. The Russians

promised an escape route for the people and it never materialized.

Footage, taken this Friday, showed 70-year old women cowering

in their basements.

The war in Chechnya is approaching a climax. On Friday, various

legitimate reports stated that one Russian unit of 250 was totally

wiped out. Specifically, the AP reported that Chechen guerrillas

killed 200 and took the remaining 50 prisoner, until their throats

were slit. The Russians immediately sealed off the border with

Ingushetia, stranding thousands of refugees. In one incident, 40

refugees were killed when their convoy was hit by Russian fire as

they attempted to flee the fighting. The 230,000 already in

Ingushetia are literally freezing to death.

Russia has about 100,000 troops in Chechnya. Best estimates

have the guerrilla force at about 12,000. The Chechens have been

digging in, awaiting a final assault and the Russian military

announced that the climatic attack on Grozny is imminent. What

happens in the next few weeks in this far away, destitute land,

will, over time, speak volumes about future Russian / U.S.

relations. The Russian generals will not accept defeat as they did

in 1994-96. When word of the slaughter of the Russian unit

begins to reach the families, public opinion may begin to turn

unless the Russians can end the battle quickly. Expect the

generals to pull out all the stops that we have discussed the last

few months.

Russia”s parliamentary election is still slated for December 19th.

Former Prime Minister Primakov this week accused the Kremlin

of buying off his Fatherland-All Russia party members in an effort

to slow support for his bloc. The vote may be largely free, the

process hasn”t been. As President Yeltsin lies in a hospital bed

for the umpteenth time, the intrigue around him grows darker and

scarier. And I”m doing my part to make it appear even more so.

I am continually amazed at the nanve commentary that is delivered

time and time again when it comes to Russia. For example, this

week a Salomon Smith Barney Emerging Markets “expert”

commented on the fact that Russia”s economy may grow by 2%

this year. “About a year ago people were talking about

hyperinflation in the Russian economy and implosion, but that”s

all proved misplaced.”

You, sir, are an idiot. Of course there was no talk of the fact that

the Russian economy had contracted some 40% plus over the

previous 5 years, nor any acknowledgment that the growth is due

simply to rising oil prices (Russia is a major exporter) and nothing

more than that. Plus, most importantly, the average citizen is

seeing none of the fruits of this spectacular 2% growth (as

compared to the U.S. where the average worker has shared in the

bounty of our own economic success).

NBC News had a piece this week on a doctor in Oklahoma City

who had struck up a friendship a few years ago with a Russian

counterpart from a fairly large city. The U.S. doctor has been

attempting to ship excess medical supplies to his friend who is in

dire need of assistance at the hospital where he works. The

Russian government is not allowing the supplies to reach his

friend. The report showed the working conditions in the hospital

and it was enough to churn your stomach. The doctors reuse

catheters for 6 months at a time and also reuse their medical

gloves until they wear out. God knows what else goes on.

No folks, I really couldn”t give a damn about Hsing-Hsing. I

went to the Washington Zoo a few times when I was living there

and old Hsing-Hsing was always under wraps. There are more

important things going on in the world.

Wall Street

“Money, money, money, Mah-nay….MAH-NAY!”

— The O”Jays

A lot of folks are making a bundle these days. And this great

American economy, which if we don”t watch it may yet propel Al

Gore to the White House, on the whole keeps producing stellar

results. This week various government releases were

disseminated. The manufacturing sector continued to grow and

the Christmas season looks robust (good for retailers / etailers

and their earnings), while consumer confidence is rising again

after a 4-month slide (albeit a minimal one). Taken as a whole,

excellent, except these indicators still had the bond market

worried that we would witness too much of a good thing over the

holidays and the Federal Reserve would have to raise interest

rates sooner than later. As a result, the equity markets were

largely marking time until Friday”s release of the November

employment report. The economy added over 230,000 new jobs,

the unemployment rate remained at just 4.1%, but, most

importantly, average hourly wages rose just 0.1% for the month.

Superb. Traders said, “See ya!” to the old levels and the S&P

500 and Nasdaq indexes promptly hit new records while the Dow

Jones finished at 11286, just about 40 points shy of its all-time

high. The Nasdaq is now up 61% for the year.

While I turned bullish about 6 weeks ago simply because I

couldn”t ignore the economic evidence any longer, I keep waiting

for wage pressures to emerge. Since I”m no longer in corporate

America I guess I”m missing the big picture. Geezuz…aren”t you

guys asking your boss for more than 3%? [Actually, in 19 years

in the workplace, I never once complained about a raise, so I”m

not one to talk].

So for a look at the real world I called on my friend Wayne. Now

Wayne is the local manager of a Record Town store (and also the

preeminent expert in the world on 60s music). I asked Wayne

how business was going. “Brian, it”s so busy, it”s unbelievable.

But the biggest problem we have is finding good help.” Wayne

then related that 2 weeks ago he hired two new employees. Both

were fired their first day. Both were caught stealing. Clearly,

both were also real dirtballs. And that, my friends, is “full

employment.” If you want good help, eventually you”re going to

have to pay up…and more than 3%.

The preceding example aside, the bond market chose to focus on

the positive employment report rather than Wayne”s World and

the 30-year Treasury rallied from the 6.32% level to finish the

week with a yield of 6.25%.

As for stock valuations, in many cases they are absolutely absurd.

But, as I mentioned the other week, that”s not enough to cause

more than a correction. Rates have to keep climbing for the

market to suffer much worse than that and, eventually, I think

they will.

Just a few corporate notes. That stock I wrote of last week, Ariel

Corp., which hit $57 last Friday, closed at $11 yesterday.

And then there is the case of Plains All American Pipeline LP

which took an All American loss, to the tune of $160 million,

thanks to a rogue trader who, unbeknownst to company officials,

made a trade on the company”s oil inventories which didn”t go

too well. The anonymous trader is expected to remain just that,

anonymous, as company officials attempt to jam his face through

a 3-inch pipe.

International

The Colombian economy is expected to contract 5% in the third

quarter while Mexico expects a 4% rise in theirs for the full year.

Now this means one thing. Mexico is doing a better job of

utilizing its drug profits.

Speaking of Mexico, at week”s end it would appear that the

“killing field” in Juarez may not be as extensive as first thought.

Less than ten bodies, not 100 or more, have been recovered. The

other bodies are probably scattered all over the country. And

former DEA chief Thomas Constantine made a startling

admission this week. In his 5 years as head of our nation”s Drug

Enforcement Agency, he never once met with President Clinton.

That is absolutely incredible. Constantine also said the Mexican

drug lords operate in a virtual sanctuary.

France is projecting 3% growth in 2000. Oui Oui! Actually,

consumer confidence is at an all-time high there. Meanwhile, it”s

neighbor, Germany, is having a tough go of it. The biggest

reasons for the plunge in the Euro (to parity with the U.S. $) are

the screwups in policy committed by the German government.

Chief among these is the bailout of the construction firm

Holzmann. Additionally, former Chancellor Kohl, the kingpin for

over 20 years, admitted that he was aware of secret party bank

accounts, though he swears this wasn”t bribe money. Nothing

like tarnishing the old image there, Helmut.

Iran”s reform cleric, Abdullah Nouri, was given 5-years in prison

for “apostasy;” in other words, in the eyes of the judges,

slamming Islam. What”s worrisome is that Nouri is a close friend

of moderate President Khatami. Just when you think that Iran is

emerging from the Dark Ages, they take a step backwards.

China arrested 15 more Falun Gong leaders for doing their

stretching exercises.

Malaysia”s President Mahathir won a 5th term in parliamentary

elections held this week.

Northern Ireland

In the two years I have been writing this column (including with

pimcofunds.com), I have written extensively of my beloved

Ireland. Ten times in the last ten years I have visited this

enchanting land and I have witnessed some incredible changes.

First off, the Irish economy has exhibited the most startling

growth of any country in the world and these great people are

reaping the rewards they so richly deserve. And then there is the

North.

With apologies to some old friends who have read this before, I

have only traveled to the North once, in 1992, to visit the town of

Newcastle (for you golfers out there, the home of Royal County

Down). In ”92 attitudes were beginning to change, so I thought,

until my friends and I went into a Catholic pub and learned of the

hatred that still existed, even in this rather uncontroversial town,

between the Protestants and Catholics. There is a real chance

that the developments of the past week will finally begin to break

away at this animosity.

First off, credit should go to President Clinton and former

Senator George Mitchell, the latter”s efforts being truly heroic.

[And if Al Gore is the next President, his first cabinet slot should

go to Mitchell for Secretary of State]. What we now have in

Northern Ireland is a return to rule by local authorities, not the

home rule of the past 27 years by Britain. Yes, Britain maintains

control of some key functions, like the police and taxation, but

the new 12-member cabinet controls most everything else. It is

the makeup of the cabinet which is one of the fascinating details.

There are 4 parties now dividing power in Northern Ireland. It is

necessary to place admittedly too simplistic labels in order to gain

some clarity. On the Protestant side you have the Ulster Unionists

(moderates) and the Democratic Unionists (radicals) while on the

Catholic side you have the Social Democrats and Labor Party

(moderates) and Sinn Fein (radicals). Each of the moderate

parties has 4 seats at the cabinet table while the radicals each

received 2.

In choosing who would gain the various slots, it was much like a

pro sports draft selection. The Ulster Unionists had the first slot,

the Social Democrats the 2nd and so on. Sinn Fein leader Gerry

Adams selected former IRA chief Martin McGuinness to be the

new Education Minister, which means he will oversee

predominantly Protestant state schools as well as the separate

Catholic system. The Democratic Unionists, led by the bombastic

Ian Paisley, immediately promised never to sit in the same room

as McGuinness ( a promise which I believe has already been

broken). Meanwhile, Paisley”s longtime aide, Nigel Dodds, was

selected as the new Minister for Social Development. Dodds was

almost killed by the IRA just 3 years ago. My suggestion? Serve

Guinness at each Cabinet meeting and everyone will get along just

fine. Actual policy-making, right now, isn”t important.

The moderate Ulster Unionists said, optimistically, “We”re all in

government with Sinn Fein now. We have to make the best of it

to show people in our long-suffering communities that politics

can work, and to hope the IRA delivers their side of the bargain

by decommissioning their weapons soon.”

This last point is the main stumbling block. If the IRA doesn”t

disarm by February, the Protestants could back out. It is up to

leaders like Adams and McGuinness to convince the radical

elements to comply. It won”t be easy but we have to keep the

faith.

And is unification with the Republic of Ireland now possible? Not

for awhile and the Republic now knows not to press the issue.

Just give it time.

The World Trade Organization

UN Secretary General Kofi Annan, who I slammed extensively

during the lead-up to the war in Kosovo, has uttered some things,

recently, that I actually agree with. He made the following

comment on the WTO talks, specifically as it relates to the theory

that economics has become global, but politics remains largely

local.

“Globalization should not be made a scapegoat for domestic

policy failures. The industrialized world must not try to solve its

own problems at the expense of the poor. It seldom makes sense

to use trade restrictions to tackle problems whose origins lie in

other areas of policy…such restrictions often make the problems

even worse. Rich countries average tariffs on manufactured

products imported from developing countries are now four times

higher than those they levy on products which come mainly from

other industrialized countries. Quotas and antidumping penalties

are also used to keep Third World imports out of First World

markets, especially in areas such as agriculture and textiles.”

The protests at the WTO summit in Seattle certainly warrant a

comment or two. For starters, even as a free trader, I certainly

recognize the concerns of many of the protesters. The issues of

jobs, the environment and human rights are very real ones. I”m

against “drift nets” and for the protection of sea turtles (though

I”ve yet to figure out how I”ve ever been helped by one) and I

certainly am for the protection of human rights in places like

China. The WTO is far from perfect. But it”s still potentially the

best mechanism for settling disputes. [As I”m writing this I keep

thinking, gee, Trumbore, this is rather liberal of you, but if you

have a better solution for our now interconnected world, let me

know]. The vast majority of the protesters were peaceful and

participants were simply exercising their constitutional rights.

Now as for the “white trash” (my term) who decided it was a

good time to loot and break the law, get a friggin” job and take a

bath.

One other WTO note, President Clinton went to Seattle and did

nothing but screw things up. Against his own aides advice he

made dumb comment after dumb comment, one moment

pandering to all who would listen and then the next threatening

sanctions against developing nations who are often struggling just

to feed their people (the very issue that Annan railed about).

Mark my words, until our loose cannon of a President is shown

the door, it is going to be one long year.

This Week in Politics

–George Bush did what he had to do during his first debate in

New Hampshire, i.e., he was composed and there were no major

gaffes. John McCain opted not to attack Bush. In both parties

there are statistical dead heats between Bush-McCain and Gore-

Bradley in the Granite State. The primary is February 1st (the Iowa

Caucuses are Jan. 24th).

–Al Gore continues to totally ignore Clinton. On most of his

campaign stops there literally isn”t one word about the President.

–Bill Bradley gave his definitive foreign policy speech. He

advocates deep cuts in the nuclear arsenals of the U.S. and Russia

while he also said the U.S. “can not give an open-ended

humanitarian commitment to the world.”

–George Bush offered up his tax plan, a rather generous one if I

may say so. Aside from a substantial cut in the personal income

tax rates, he wants to eliminate estate taxes.

–Veteran columnist David Broder said Hillary Clinton has a “tin

ear.” “She seems oblivious to the effect she is having on people

in the room.” That”s kind of like Homer Simpson, isn”t it?

Random Musings:

–In case you missed it, Bill Clinton”s Thanksgiving Day golf

partners included Roger Clinton, producer Harry Thomason (of

Travel Office fame) and Hillary”s brothers, Hugh and Tony

Rodham. The latter two I wrote of about 3 months ago for their

escapades in the Republic of Georgia, where they tried to

undermine the President, Eduard Shevardnadze, almost

precipitating a major foreign policy disaster.

–Columnist Charles Krauthammer had the following comment on

Bill Clinton”s globe-trotting and his incredible ability to shoot his

mouth off. Recently, when he was in Kosovo Clinton said, “The

Kosovars must not be ”focused on hatred and past wrongs and

getting even,” said the man who gave us James Carville.”

–The Italian press has finally woken up to the fact that Roberto

Benigni is a total jerk. They have been skewering him for his

antics at a dinner in Florence that Clinton and other world leaders

were attending.

–So who is going to be Time magazines “Person of the

Century?” I still say Pope John Paul II. Historian Stephen

Ambrose is encouraging Time to select “the American G.I.,” a

great choice.

–Far be it for me to inject myself into this controversy but with

regards to the $1.25 billion Holocaust settlement, the money

should go to the victims and their families, not these

“philanthropic” groups who are now clamoring for their share.

–A new scientific study shows that if your cholesterol is less than

200, your blood pressure is 120/80 and you don”t smoke, you

may live 6-9 years longer than what is normal.

–Ah yes, the Budweiser holiday commercials. Still the best.

–Hopefully, NASA makes contact with the Mars Polar Lander

which was to have landed on Mars Friday afternoon. A

microphone is attached to the lander to pick up, for the first time,

any sounds that may exist. I”ll be very disappointed if we

suddenly hear “Rock & Roll Part II” (the “Hey” anthem).

–Charles Schulz went home this week after his cancer treatment

and Dick Clark turned 70. Clark finally looks 50.

–The Institute for Medical Study released its highly controversial

study which estimates that anywhere from 44-98,000 people in

America die each year from “medical errors.” The biggest

problem is the lack of computerization of medical records. Many

people die simply because doctors and nurses misread someone”s

handwriting, an all too fatal mistake. I”ll never forget reading the

obituary of a local figure about a year ago. This man was just 38

and the obituary said only that “he died suddenly.” I was

suspicious and I asked a doctor from that hospital if she knew

anything about the case. All she said was “You don”t want to

know.”

–Super Bowl spots sold for $2 million for 30 seconds. At week”s

end, the final few were actually fetching as much as $3 million.

–A new study shows that mice exposed to cell phones suffer

from a loss of memory. No word on the impact on humans yet.

–Did I tell you that mice exposed to cell phones suffer from a

loss of memory?

–Despite warnings from nuclear scientists around the world, on

November 26th Ukraine reopened the third reactor at Chernobyl,

site of the world”s worst nuclear disaster in 1986. Ukraine

claimed it had to run the plant to meet the nation”s energy needs

while it seeks Western aid for a new plant. Scientists have been

worried the third reactor wasn”t Y2K compliant. So on Dec. 2nd I

read the tiniest little blurb. After 6 days the plant was shut down

because of a malfunction in the emergency cooling system! Not

one word on the nightly news, nothing. Sorry folks, but I”m back

on Y2K watch. This new problem may or may not have been

Y2K-related but I suddenly have a queasy feeling about New

Year”s and the vulnerability of Russian nukes. So, let”s segue

into the…

–Y2K Update: Airlines like Virgin Atlantic and Singapore

Airlines are refusing to fly over New Year”s. Singapore admitted

their decision was based on uncertainty in the world”s air traffic

control system. Others are claiming purely business reasons, i.e.,

low demand. FAA spokesman Paul Tckemoto said, “It”s going to

be dead. No, wait. Maybe I should use another word.”

But the biggest news on the Y2K front was the sudden reversal of

opinion from economist Ed Yardeni. Years ago, Yardeni was the

first legitimate financial figure to begin to warn of the impact

Y2K would have on the world economy. As recently as a month

ago, he felt that the U.S. economy could fall as much as 7% in the

first quarter (before eventually rebounding). So this week he sent

out a note to his institutional clients which said he was “feeling

more optimistic and bullish about the future, beyond the year-

2000 problem.” While he still sees the possibility of a global

recession (a greatly diminished one), Yardeni added that he “has

spent too much time this year worrying about what could go

wrong. Instead, everything has gone very right.” Don”t leave me

now, Ed!! Ed?!

Americans have become so complacent. My broker friend Griff

was telling me that his office sent out a mailing for a seminar they

were going to hold on Y2K and the future of the markets. Not

one person wanted to attend. For a similar year end seminar last

year, the branch had 30 attendees.

–“60 Minutes” ran a piece last Sunday on the whole issue of the

Net and privacy. Specifically, it spoke at length about how many

sites employ “cookies” to capture all kinds of information on your

viewing habits which can then be sold to others. I thought, “Oh

hell, now no one will ever order a coffee mug.” Let me assure

you, my loyal readers, that the minimal survey you fill out to

order a mug generates nary a cookie. There is a shipping

database and a totally separate main database. With regards to

the latter there are no name matches with the data and I, as sole

proprietor of this site, have absolutely no plans to sell the

information I may collect. Frankly, any information gleaned will

eventually be used as part of a broad business plan. Enough said.

So order away. And remember, the coffee mug makes for a great

stocking stuffer!

–Commerzbank AG plans an Islamic mutual fund which will obey

shariah law. I guess this means the fund can only invest in

women”s scarf manufacturers.

–Billionaire financier Edmond Safra was murdered Friday in

Monaco. Seeing as his Republic Bank blew the whistle on

Russian money laundering, who do you think perpetrated the

crime?

–Finally, when he”s not trying to see how many 4-letter words he

can cram into a single sentence, Chris Rock is the funniest

comedian around. The other night he suggested a new game

show with little kids as the contestants and NBA stars on the

panel. The show would be called, “Who”s Your Daddy?”

Gold closed at $280…yuck

Nymex Crude Oil, $25.81 [Could be more volatility on Monday

as the UN approved only a one week extension of Iraq”s oil-for-

food program].

Returns for the week, 11/29-12/3

Dow Jones +2.7%

S&P 500 +1.2%

S&P Midcap +1.7%

Russell 2000 +1.2%

Nasdaq +2.1%

Returns for the period, 1/1/99-12/3/99*

Dow Jones +22.9%

S&P 50 +16.6%

S&P Midcap +10.4%

Russell 2000 +10.1%

Nasdaq +60.6%

Bulls 53.0%

Bears 28.7% [Source: Investors Intelligence]

*Not including dividends.

Web Tips: You may have noticed a new link by this name. If you

are still a novice on the web, like yours truly, you may find it

useful. My good friends at CSI Multimedia have created it and,

from time to time, we will try and update it with timely

information. Actually, I”m quite proud of it. Certainly it”s a first

on a site of this kind.

Hott Spotts: This week, Islam Part Deux. My friend Mark R.

says I”m bound to be New Jersey”s answer to Salman Rushdie.

The hard stuff actually starts with Part III this coming week.

**And folks, after two years of posting a Week in Review on Sat.

or Sun., I need to change the routine for just one week. Next

Saturday I”m running in a marathon in Kiawah, SC. Bottom line,

I”m not taking a laptop. So, I will be posting a mini WIR around

noon on Thurs., and I hope to complete it by Monday morning.

That is unless I keel over, a distinct possibility since my training

consists of lots of 4-mile runs and not a heck of a lot of runs over

that distance.

Brian Trumbore