Have a holly, jolly Christmas…
It”s the best time of the year…
Well, I picked a bad week to go back into the bear camp but, I
must say, it was a great week for my portfolio, and everyone
else”s for that matter. The Dow (now at 11405), the S&P 500
and Nasdaq (touched 4000 before closing at 3969), all hit records
and it didn”t seem to matter that interest rates kept climbing with
the yield on the 30-year Treasury now at 6.46%, the highest level
in 27 months.
All eyes were on the Federal Reserve, Tuesday, to see if the Fed
would adopt a “tightening” bias as to interest rates. It was a
given they wouldn”t actually raise rates so close to Y2K. So the
Fed decided to keep the existing “neutral” stance (that”s bullish…
kind of…sort of ) but then preceded to tell us that were it not for
Y2K they would have raised rates.
In their statement the Fed said that they remained concerned with
the possibility the economy will continue to grow faster than
preferred and that “in light of market uncertainties associated with
the century date change, the committee decided to adopt a
symmetric (neutral) directive.” The Fed also said they would
assess the total post-Y2K picture in February. So the stock
market rallied and bonds resumed their slide. Confusing? Yup.
There is absolutely no doubt that interest rates are heading higher,
both here and abroad, in the first quarter. The U.S. economy
remains too hot for the Fed”s liking and it”s only a matter of time
before wages pick up (I know this sounds like a broken record so
take the needle off it if bothers you) and, internationally, most
nations are just beginning to grow, with further strength almost a
guarantee.
The euphoria in our own equity markets is unprecedented (except
maybe 1929). Some of these companies that are priced at $400
or $500 per share may be solid citizens but, c”mon! Yes, I”m
jealous I don”t own one, myself, but how can I buy them now
when they”re trading at a grillion times earnings (if they have
any). Geezuz, I wish Lawrence Welk were still alive so we could
all dance to his bubble machine.
Soon it will be earnings season and any corporation worth its salt
will have finagled the books, and talked down analysts, to make
sure they “beat expectations.” Hey, Euphoria Inc. earned 4 cents
and the Street thought it would earn 2 cents. The stock is at
$124. Let”s take it up to $172. What a story! We”re #1! We”re
#1!
You know who I thought of this week? Former Oklahoma
basketball coach Billy Tubbs who used to love to run up the
score. Substitute any number of high-flyers today and you have
the same idea. Pile on, boys!
Economist Henry Kaufman who, admittedly, no one has listened
to since about 1982, said this week, “Every optimistic forecast
about the economy is based on the premise that stock prices will
either go up or change very little. Not since WW II have we been
so dependent on the market.”
And if the consumer stops shopping, or just slows down a bit,
throw those forecasts out the window.
Here are some tidbits gleaned from the past week.
–The major European markets all continued to hit records as
well. Germany announced some positive corporate tax initiatives
and the Frankfurt DAX index rose 4.4%, alone, on Thursday.
–Prudential”s Ralph Acampora is looking for another 25% gain in
the major averages next year. Look for Ralphie to turn tail at the
first bump in the road, however. That”s his track record.
–AOL went public on 3/19/92 at a split-adjusted 9 cents a share.
At its current $80 value, its up well over 90,000%.
–Margin debt is up over 46% this year from last year”s levels,
according to Trimtabs.
–Smart Money magazine picked Monsanto as one of its ten
stocks for the next decade. Then Monsanto merged with
Pharmacia and the stock fell 12% in 2 days. But, to be fair, the
new decade hasn”t started yet, I guess.
–Speaking of the above merger, was it a warning shot that the
following 2 headlines appeared across from each other in the Wall
Street Journal this week? “Investors are Wary of Pharmacia
Merger” and “Big Rail Merger Gets a Cool Reception” (that
being the combination of Burlington Northern and Canadian
National).
–Hey, in being bullish for 7 weeks until this past one, at least I
theoretically participated in 26.4% of the Nasdaq”s gain!
Theoretically, that is.
–As of 12/22, 50% of the issues on the Nasdaq were DOWN for
the year. 60% of those listed on the NYSE were also down.
–Foreigners hold 40% of U.S. debt securities, compared to 20%
five years ago. The problem is that as overseas economies pick
up steam, money may be repatriated, thus making it more difficult
for our interest rates to decline and, obviously, easier for our rates
to rise.
The Russian Vote
“In their ballot choices, Russians showed that they do not want a
return to the Soviet era.”– Washington Post editorial.
Wrong.
“(The parliamentary election) was a peaceful centrist revolution.”
— The Kremlin.
Wrong.
“The election appears to have been clean.” — The Wall Street
Journal.
Wrong.
Here”s the truth. The elections, while important, are but a pre-lim
compared to next July”s presidential election. What you can say is
that Prime Minister Vladimir Putin is well positioned to replace
President Boris Yeltsin. The Communists overall influence
continued to wane as their share of the Duma declined to 24%.
The Putin-backed Unity Party captured a strong 23% (amazing,
since the party was formed just 3 months ago) and the Luzhkov /
Primakov Fatherland-All Russia Party finished a disappointing 3rd
with just 12%. A party needed to gain 5% to be admitted as such
which means that of the 450 members of the new parliament, 150
are independents.
Strategist Richard Pipes came up with the best conclusion. “The
political and economic culture of a nation cannot be radically
changed by government decree. Values and attitudes inculcated
over centuries are so deeply embedded that it takes protracted
new experience to alter them significantly.”
The Duma election was dirty and fraught with fraud. The two
main state-controlled media outlets were shills for Putin and
Unity. The Moscow equivalent of Tom Brokaw would
superimpose pictures of Monica Lewinsky and Mussolini over
Moscow Mayor Yuri Luzhkov”s picture when discussing the
Fatherland Party. Just imagine that happening in the U.S. We”re
not talking Saturday Night Live here. This is NBC or CBS
network news.
[And to those who say Clinton”s getting serviced by Monica was
his own business, well, I rest my case. Our philandering President
was part of the blackmail effort against Luzhkov and Primakov. I
want to see a Brokaw or Rather have the guts to draw this
conclusion. It would sink Gore.]
Economics were not part of the election debate at all. The rise of
Putin and the Unity Party is directly tied to a brutal war. Why
should that be comforting to the Russian apologists? The Journal
did add in one editorial, “In the coming years the shape of Russia
– with all that implies for the world – may yet be decided by the
ultimate outcome in little, bloody Chechnya.”
And what of Chechnya? The Russians are ready to mount the
final assault any day now. In the meantime, as corroborated by
the BBC and U.N. Human Rights Watch, Russian soldiers killed
about 40 civilians in a village near Grozny when villagers tried to
keep the Russian soldiers from looting their homes. I saw a U.N.
official holding a photo which showed a Chechen who had been
beheaded.
No aid has gotten through to Grozny”s citizens in months. There
is no telling what the world will finally see when the Russians are
finished mopping up. And believe me, when the Chechen rebels
inflict some heavy casualties in their last stand in Grozny, that”s
when the Russians call in those special fuel-air explosives that
suck the oxygen right out of the air.
Some final notes on this depressing topic.
–The stage is set for a chaotic, dirty beyond words, presidential
campaign.
–More and more folks are echoing my thought of two weeks
ago. How can we talk about “free” elections when it”s the
government who probably set off the apartment bombs in
Moscow and the other cities? Why doesn”t a reporter ask Clinton
this? [Of course I know it”s too explosive for him to answer].
–What happened to my main man, Alexander Lebed? The former
general is the man needed to be President and he”s disappeared.
He”s tough but honest. I”m setting up campaign headquarters for
him in N.J. Just give me time to file the paperwork.
–And one good thing. U.S. and Russian military authorities will,
after all, be at each other”s nuke facilities over New Year”s to
reassure the other side that any radar blips aren”t an actual attack.
“Must be just a bunch of geese, comrade.”
More International Affairs
In a recent “Hott Spotts” piece I wrote of the Taliban government
in Afghanistan and their involvement in terrorism and Osama bin
Laden. The day is approaching when bombs rain down on them.
I commented last week on Venezuela and their vote for a new
constitution which granted President Chavez dictatorial-type
powers. When I posted the article early Saturday morning, word
was just beginning to hit of the disastrous flooding. Since then
we have learned that the tragedy is of epic proportions.
Curiously, President Chavez has not wanted to speak of the death
toll and has, in fact, minimized it while aid agencies put the figure
at anywhere from 10-50,000. Chavez is only hurting his efforts to
get the aid his nation so desperately needs by downplaying the
human toll.
China officially picked up the gang-infested territory of Macau
from Portugal this week. Macau is a horrible place that is the
center of organized crime in Asia. So, what do the Chinese do as
they took the reigns of power? They began arresting Falun Gong
members for meditating.
And this week William Safire had a piece on an issue I discussed
about 3 weeks ago, that being Israel”s sale to China of
sophisticated radar technology (AWACS) which China can use
militarily against Taiwan. What”s more, it can be used against our
warships, for example, if the U.S. had to come to Taiwan”s
defense. This is part of a pattern of behavior that the Israeli”s
have been engaged in for some time now and we need to chastise
them for it. As Safire put it, “If the freedom of an island with 22
million souls is of no concern to Israel, the world will care even
less about 6 million Jews getting pushed into the sea.”
WTO
Yes, more on the World Trade Organization thanks to an
interesting op-ed piece by Henry Kissinger. He called Seattle
“worse than a diplomatic fiasco; (it) spelled a missed
opportunity…Instead of assuming the mantle of President
Truman”s leadership role in inspiring the structure of the post-
WW II world, Clinton decided to play to the gallery.”
In a different vein, Kissinger said that “the world could evolve
into a two-tiered system in which globalized elites are linked by
shared values and technologies while the populations at large,
feeling excluded, seek refuge in nationalism and ethnicity and in
attempts to become free of what they perceive as American
hegemony. In such an atmosphere, attacks on globalization can
evolve into a radical chic, especially where the governing elites
are small, and the gap between rich and poor is vast and
growing.”
And if you think Seattle was bad, just wait till you see the battle
in Congress over the admittance of China to the WTO. It will be
great theatre.
Brian Trumbore Goes to the Mall
Last week I blasted the prospects for online retailers and maybe I
was too tough on them but you heard the stories for yourself this
week, like ToysRUs totally screwing up. Well, I got a note from
a great supporter, Jeff S., and he said he did all of his shopping
online and had a great experience. Yes, etailers had some
problems but their problem is one of demand exceeding supply,
not a bad problem to have, and Jeff is convinced that etailers will
solve the distribution problem quicker than brick and mortar.
As to the latter, in all my years of excessive shopping, I have
never seen what I witnessed today. Book retailer Borders shelves
were a mess (and I was in the store when it opened), Record
Town”s shelves were half empty and some big hits were nowhere
to be found (though I did scarf up the last Nat King Cole CDs),
and Suncoast Video also was barren and out of basics (including
blank tapes, a Trumbore Family Christmas staple). I asked the 3
retailers if business was that good and they all said, “It”s O.K.”
It”s easy to understand what”s going on. Whether it”s in the stores
or at the distribution level, full employment is taking its toll.
Wages have to go up! And Jeff is probably right. The etailers
will learn from their mistakes…the survivors, that is.
[One aside. My retailer of the year goes to Gap for opening up
their store early, thus saving me 15 minutes.]
This Week in Politics
First, I need to comment on the “Meet the Press” debate last
Sunday between Al Gore and Bill Bradley. I thought they were
both awful but Gore could not have been more disrespectful of
his opponent. On Monday, Russert told Matt Lauer that he was
also amazed just how much these two can”t stand each other.
Gore was totally disingenuous in all of his answers and at one
point said “I never launched a personal negative attack ad and I
never will.” And Bradley correctly said that Gore”s offer to
withdraw TV and radio ads in favor of debating twice a week was
“just a ploy.”
Gore said the defining moment in his life was his decision to serve
in Vietnam. Spare me, the record shows he was the most
protected soldier / reporter in the country (because of his father”s
position as a U.S. Senator). On a different matter he tried to
convince us that the current sanctions against Saddam Hussein
are preventing him from making weapons of mass destruction.
Russert was incredulous. “But we haven”t had inspectors on the
ground there in over a year!” Gore didn”t have a good response
to that. [This week”s “Hott Spotts” details the rise of Saddam up
to the Gulf War. He will be a campaign issue shortly.]
Regarding both candidates fiscal positions, as my friend Johnny
Mac put it, “Just put wings on my wallet now!”
In polling, Gore now leads Bradley, 42-39, in the state of New
York. Just last month Bradley was leading, 47-38. In a
nationwide poll, 3/4s of adults knew enough of Bush and Gore to
have an opinion. Only 42% knew McCain and Bradley, not a
good sign for these two.
Y2K Update:
So we”ve been inundated with warnings about terrorism. No one
should be surprised. Hell, read my series on Islam if you haven”t
already. Losers (the Fundamentalists) can also be cowards. And we
have cowards of the domestic variety, too. No one wants to succumb
to fear because then the bastards have won. But, on this issue, why
anyone would want to celebrate in one of the high profile venues I”ll
never know.
As for the technology side yes, I will be shocked if we don”t have
serious problems overseas that could spill over into the U.S., thus
impacting corporate profits for some multinationals in particular.
Domestically, I don”t see serious problems on the horizon but
why wouldn”t you have a little extra cash and water? As I said
before, the folks in Florida who got ready for Hurricane Floyd
weren”t complaining when Floyd didn”t hit them.
And if Y2K wasn”t something to be concerned with, why was
NASA so careful to put Shuttle Discovery on a schedule that had
it coming back early so as not to risk a Y2K-related problem
(their words)?
Not totally Y2K-related, the General Accounting Office said that
the EPA computer system is highly vulnerable to hackers. While
you might say, big deal, you need to understand that the EPA”s
computer system contains the worst-case scenarios at all of the
nation”s chemical facilities.
Finally, if you need a Y2K fix for your home PC, check out one
of the following web sites: Zdnet, Cnet, Symantec, McAfee.
Random Musings:
–Ralph Nader is going after Robert Rubin for potential ethical lapses
after he left the Treasury Department. There are very strict laws
regulating lobbying once you”ve left government. Rubin denies
he was “lobbying” when he discussed the new financial services
regulation bill with his successor, Treasury Secretary Larry
Summers. Keep on the case, Ralph!
–This will probably be another Christmas when I don”t get a
“Clapper.” When you live by yourself, this could be a neat gift.
[You can make a fool of yourself and no one knows.]
–The other day I picked up some dry cleaning and the cleaner
greeted me like a long lost friend. “Where have you been? My
wife and I were wondering?” Geez, I thought. I didn”t realize I
was that good a customer. I didn”t have the heart to tell him I
wear jeans and polo shirts everyday now. He better not buy any
new equipment on account of my business.
I bring this up because this is the first Christmas in 17 years where
I didn”t get a Wall Street bonus. When I started this new
venture earlier this year, I knew I was leaving a lot on the table. I
didn”t pay myself one this year. Instead, I treated my printer to
some new cartridges. But, honestly, I have no regrets. And you
know what? Trading restrictions are so severe at Wall Street
firms that I actually did real well this year after the shackles came
off. No, I didn”t have any Qualcomm”s in my portfolio but my
beloved oil services stocks treated me well. [Now if they”d only
hang in there until I can pick up the cap gain rate.]
–There is a new sports scandal in New Jersey. High schools are
importing foreign basketball players. Again, that”s high school.
Actually, New Jersey deserves credit. The state is cracking down
and at one inner city school, 3 kids suddenly fled to Florida.
Let”s see if Florida cracks down on this absurd practice.
–Ronald Reagan”s health is deteriorating rapidly. Nancy said he
is now incapable of putting together a sentence and they accept
no visitors. The end is near.
–November was the warmest in 105 years of record-keeping for
the continental U.S.
–Jeff Bezos of Amazon.com was Time magazine”s “Person of the
Year” because of “two great themes – online shopping and dot-
com mania.” Webster”s defines “mania” as “insanity, especially
when marked by extreme excitement.” The definition of “insane”
is “not mentally sound: mad: foolish, wild.”
–Animal of the Century, Snoopy.
–You probably saw the story that Bill and Hillary may ask the
government to pay for their legal fees associated with the
Whitewater and Monica cases (spokesmen for the two issued
denials). The law requires applicants for reimbursement to show
that they would not have been investigated by regular prosecutors
for these cases. Of course the fact that, with regards to Monica, a
federal judge said the President perjured himself doesn”t matter, I
guess. Commented Congressman Bob Barr, “The chutzpah of
this administration knows no bounds.”
–Jacob and Emily were the top names for newborns in 1999.
Next year it will be Qualcomm and Yahoo! I name you…
Qualcomm Robinson.
–Vermont”s High Court ruled gay couples merit equal rights and
benefits but they stopped short of giving them the right to marry.
[You expect me to comment on this? Not a chance.]
–In sub-Saharan Africa, AIDS is exploding. For example, the life
expectancy in Botswana has fallen 14 years since 1990!
–And speaking of sex, big name investment banker Jim
McDermott was charged with violating insider trading statutes in
an operation that involved a porn star, Kathryn Gannon, aka
“Marilyn Star.” McDermott, who, of course, is married, had an
intimate relationship with Gannon who has told others that she
was intimate with other leading Wall Street figures. So ladies, if
your husband works on the Street and he”s acting strange as you
open up your presents, perhaps it”s time to grill him!
–I have been meaning to write about driving habits for awhile
now but this week NBC beat me to the punch. People are
blowing through red lights at an alarming rate. Did you know
that 700 deaths a year can be traced to this crime? And while
we”re on the topic, have you noticed how few drivers use their
turn signals these days? I”m ready to start blasting some folks. Or
at least blow out the tires.
–And speaking of dirtballs, John Rocker of the Atlanta Braves
ranks right up there with the best after his comments in Sports
Illustrated lambasting the inhabitants of New York, specifically
immigrants. You wouldn”t have believed how many folks wrote
me on this when the story broke. Now, just 24 hours later, it
seems like old news. I have written of the rebound in New York
City”s fortunes frequently. Yes, the bull market has something to
do with it as well as Mayor Giuliani”s policies. But the real
strength of New York these days is the new wave of immigrants
who have been contributing mightily.
I have to admit that there was a time, back in 1992, when I
agreed with Pat Buchanan on a number of issues, but I began to
break with him on his constant immigrant bashing. We should
welcome them (the legal ones) and, with the current status of our
economy, we need them. As for Rocker, he”s simply an ignorant
fool who has hurt his reputation irreparably. Put him up there
with Jimmy the Greek and Al Campanis. I may have to go to a
game myself next year to boo the SOB.
[Update: 10/26…I just read the whole Sports Illustrated article.
It really is worse than I first heard. Rocker is toast.]
–If you don”t live in the New York area one of the things you
miss out on is our own Jivin” Reverend Al Sharpton. Man, he
gets involved in everything. But this week, who should show up
at his side but none other than Winnie Mandela. Winnie and Al
railed against police brutality and Sharpton pledged to “recruit an
army of righteous souls that are willing to fight no matter where.”
Mandela then compared police brutality in New York to the
oppression of black South Africans under the system of
segregation she fought to change. Of course it”s Winnie who has
been implicated in a number of murders in her homeland. I think
Reverend Al can come up with a better role model. Otherwise,
he might as well have Rae Carruth standing at his side.
Gold closed at $287
Nymex Crude Oil,$25.87
Returns for the week, 12/20-12/23
Dow Jones +1.3%
S&P 500 +2.6%
S&P Midcap +4.8%
Russell 2000 +3.5%
Nasdaq +5.8% [10-week winning streak, longest in 10 years]
Returns for the period, 1/1/99-12/23/99*
Dow Jones +24.2
S&P 500 +18.6% [+20.0% total return]
S&P Midcap +11.5%
Russell 2000 +14.3%
Nasdaq +81.0%…Praise the Lord!!
Bulls 53.2%
Bears 29.4% [Source: Investors Intelligence]
*Not including dividends.
–For some Christmas cheer, check out the 12/24 Bar Chat.
–Dr. Bortrum discusses the future in his 12/21 column.
–I need to take a week off from Hott Spotts and Wall Street
History to a) start my taxes and b) clean up my office.
Bar Chat, however, will run at it”s regular times during the
holiday week. Next week”s WIR will be posted by noon on New
Year”s Eve…computer willing.
And from Dr. Bortrum, my brother Harry and I….
MERRY CHRISTMAS!!
Brian Trumbore, 12/23
