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
