Old vs. New in China
Yes, it”s not just the Dow versus the Nasdaq or the Old Economy
versus the New Economy. Old vs. New applies to China as well.
It is increasingly apparent that something far more serious than
rhetoric may be at work in Beijing. The harsh message sent to
Taiwan, “our way or the highway,” is beginning to enlighten us
all. It just may be that China means business. It”s the job of
our elected leaders to be prepared for all possible scenarios in
this rapidly changing world. With regards to China and Taiwan,
I doubt ours are.
In the philosophical battle between the reformers (New) and the
hard-liners (Old) on the mainland, a rational person can only
conclude that over the past year Old is winning. Just as Russian
President Vladimir Putin concluded that waging all-out war in
Chechnya was the best way to consolidate his power, China”s
leaders may decide that now is the time to take Taiwan. They
have control of Hong Kong and Macau, Taiwan is the missing
piece.
Is China capable of invading Taiwan? Our CIA said this week
that they weren”t, that they didn”t have the transport power to
launch a full-scale landing. But do they really need to send
hundreds of thousands of troops onto Taiwan to ensure victory?
Would a few well-placed missiles cause the Taiwanese people to
back down? And is the U.S. prepared to go to war, risking a
nuclear confrontation, over Taiwan?
And it”s not just playing partisan politics to contemplate what
might have happened during the 1996 presidential campaign in
this country. Certainly, this week”s surprise conviction of
Democratic fundraiser Maria Hsia only helps to fan the flames.
Did any high-ranking Clinton administration officials cut deals
with the Chinese government? If so, would this affect how we
handle any hostile actions against Taiwan? And what happens to
WTO membership for China?
Over the past few months I have wondered aloud why no one
brings up another fact, that being the issue of Taiwan
manufacturing about 50% of the semiconductors for the U.S.
Alas, I”m not alone in this thinking. Jim Grant, a very respected
figure on Wall Street (albeit a perma-bear), wrote the following
on Friday.
“The renewed threat of invasion of the semiconductor-,
motherboard-, and computer notebook-producing nation of
Taiwan by the cadres of mainland China has elicited only muted
investment reaction…The risk of an industrially significant
geopolitical collision in or around Taiwan, although impossible to
quantify, is not zero; it is considerably greater than zero.”
The U.S. House recently passed the Taiwan Security
Enhancement Act, the purpose of which is to help Taiwan defend
itself. Clinton will veto it if the Senate also passes the bill. The
President has a history of not wanting to rock the boat.
Meanwhile, the U.N. issued a report this week spelling out that
repression in China has increased over the past year. Old is
winning out over New, particularly in the case of a 60-year-old
woman.
It seems that this grandmother, a Falun Gong member, died
recently from beatings she suffered at the hands of the police.
They told family members to come pick the woman up where they
found her with her teeth bashed in and blood coming out of both
ears. Human rights groups contend that there have been 11
fatalities since July when the Falun Gong crackdown was
initiated.
And finally, this week Russian and Chinese officials formalized
their new “strategic partnership.” Russia needs China”s money,
China needs Russia”s military technology. This is the New World
Order. How do you like it?
Russia
From time to time I receive some rather nasty mail and such was
the case this week. Regarding my statements on Russia”s
handling of the war in Chechnya, WT wrote:
“If one doesn”t know what they are talking about, one should
keep their mouth shut!”
First off, WT had the guts to sign his name so we exchanged
some pleasantries afterwards. But he also wrote that “this military
action is one of a peace-making nature.”
The dialogue reminded me that I have a ton of new readers who
have no reason to be aware of all my many missives on this
conflict, particularly going back to last August. So let me briefly
state my case.
–I am not a Chechen rebel sympathizer and I do not want Islamic
Fundamentalism spreading through the Caucasus, destabilizing
the whole region. One glance at my series on Islam (see “Hott
Spotts”) will tell you that.
–Russia has every right to defend its own territory and to defend
itself against terrorism (though I, like everyone else, am still
waiting for Russian officials to arrest one Chechen for last
summer”s apartment bombings).
–Russia should have built a buffer-zone within Chechnya and
then negotiated. They didn”t and this week President Putin
refused to open talks with Chechnya”s recognized leader.
–Instead of fighting the rebels (admittedly a tough task in a
guerrilla warfare environment), Russia decided to level a whole
nation, indiscriminately killing thousands of innocent civilians.
Through it all, the West has sat back. Czech President Vaclav
Havel said this week that world leaders must unite in a “firm and
loud” reaction, saying the military campaign could now, without
hesitation, be labeled as “killing off a nation.”
And this week, Radio Free Europe reporter, Andrei Babitsky,
emerged after a strange, as yet unexplained absence where it was
once thought he was dead. Babitsky concluded after his odyssey,
“Everything we”ve ever read about the concentration camps of
the Stalin period, everything we know about German camps
(during World War II), it”s all quite comparable with what”s
going on in Chechnya.”
Lastly, you can not ignore the war of words that has now erupted
between Russia and Poland. Two weeks ago, some Poles
attacked a Russian consulate in Poznan over the war in Chechnya.
The Polish police were accused of just standing by (having spent
a week there this past spring I can attest to this myself). Well,
this week the Polish mission in Moscow was attacked with Polish
authorities saying the “demonstrations were well-programmed.”
This tit-for-tat all started about a month ago when Poland
expelled 9 Russian diplomats suspected of espionage in Warsaw.
Racism
Back on February 12, I wrote in this space of the then developing
story that was the flooding in Mozambique. “I haven”t heard a
word from Clinton offering U.S. aid. Note to Republicans: Say
something to show you care and pick up some votes come
November.”
I was way ahead of the curve on this one. The world began to
fully understand the disaster taking shape on February 26. For
five days a whopping 5 helicopters (with heroic South African
crews) covered a country that stretches the equivalent of
Philadelphia to Miami. Think about that. It”s laughable.
Thousands have died and the toll will keep rising. One million are
homeless in this destitute country.
So much for the Clinton Doctrine which is supposed to stipulate
that the U.S. will get involved in matters where we can make a
difference. Well this wasn”t even a pure military situation. It
wasn”t a Somalia where we may get caught in the crossfire of a
clan war. It wasn”t Burundi or Rwanda (where even Clinton
admitted we didn”t act fast enough). This was strictly a
humanitarian gesture. If I knew there was massive flooding 3
weeks ago, what was the administration thinking?
Why am I upset? Because this is what being a superpower is all
about. We had the ability to help and now we”re launching a half-
ass effort. The richest country in the world, with all of its
dot.com wealth, couldn”t even muster up 5 helicopters on 24-48
hours notice. We have tens of thousands of troops sitting in
Saudi Arabia and elsewhere in the Persian Gulf. It”s about a 4
hour flight.
And where were the likes of Jesse Jackson and Al Sharpton? It
was a freakin” no-brainer. Show the world we give a damn about
the plight of Africans. When the earthquakes hit Turkey, that
ever present rescue crew from Reston, Virginia, was over there in
a day. And, of course, the Republican presidential candidates
missed an opportunity to begin to give black America a reason to
pull the lever for the other side. That would have been
compassionate conservatism.
So when you watch the news this coming week and the networks
show a story of Americans helping out the residents of a
beleaguered nation, remember, we could have been there weeks
earlier and really made a difference.
Wall Street
Silly me. I keep forgetting that the Nasdaq has to hit 5,000, nay,
10,000, before it crashes. You gotta love it when a little hand-
held device called a Palm Pilot, which basically keeps addresses,
phone #”s and your schedule while selling for hundreds of dollars,
becomes the source of an IPO, Palm Inc., whose new market
value exceeds that of McDonald”s, General Motors, and Texaco.
Oh, and did I tell you that the Palm Pilot recognizes your
handwriting? So I”m looking at my $2 address book and $3 daily
planner and I”m thinking…huh? Now granted, I have trouble
reading my own handwriting from time to time so maybe a
computer can help me out. Otherwise, call me old-fashioned.
Of course I do recognize that the coming universe of wireless,
palm-held devices is perfect for web sites like this one so I”ll be
careful whose hand I bite, but, for the record Palm Inc. ( a spin-
off of 3Com) was priced at $38 a share, traded as high as $165 on
its first day of trading, Thursday, and finished Friday at $81. Yes,
a ton of folks between $165 and $81 have sizable losses.
But those sorry saps are about the only losers on the week.
After the first winning Friday in 6 weeks, the Dow stood at
10367, a pickup of 505 points, or 5%. The Nasdaq is now within
a morning rally of 5000 (4914) after its 7% rise. The index is also
now up over 20% on the year, this in spite of two, 10%
corrections, another phenomenal show.
Investors just keep pouring money into technology mutual funds
(at the expense of value funds for the most part) and the portfolio
managers can only go after so many issues. But heck, these funds
are up a grillion percent over the last 5 years. Let the good times
roll, baby! Only one problem. Alan Greenspan is loathe to do
that.
On the economic front, auto and retail sales surged, consumer
confidence slipped ever so slightly, and oil rose most of the week
even though OPEC announced that they would release more
crude in an attempt to bring prices down. But they didn”t say
when or how much and the market is realizing that oil and gas
inventories are so low, it will take quite awhile before an increase
in supply is reflected at the pump. As we get closer to summer
and prices approach $2 a gallon, the clamor among politicians to
raid the U.S. strategic petroleum reserve will grow and grow.
Such a move would be a horrible mistake. #1, it would have little
impact and #2, it sets a dangerous precedent. The reserve would
then become a political hot potato and someday, when we least
expect it, a crisis requiring massive amounts of energy will hit us.
So, again, a little perspective is in order. Gasoline, on an
inflation-adjusted basis, is lower than it was 50 years ago and
crude oil is lower than 25 years ago. Relax. [On the other hand,
as a holder of oil service stocks, whose value has rocketed anew,
I am back to premium beer. Next week could be a different story,
however.]
The big catalyst for Friday”s stock surge was a tame employment
report for the month of February. When the figures showed that
only 43,000 new jobs were created (compared to 384,000 in
January), traders started foaming at the mouth. As if a trend was
really in place. Doubtful. The economy is still cooking.
While the Federal Reserve engineered rise in interest rates has
begun to impact the housing market (I received my new mortgage
payment on my adjustable rate and it hit me in the face like a
brick), every other indicator still points to solid growth. The Fed
will obviously have to keep raising rates. The past few weeks in
the bond pits, however, have been fairly tame, especially when
matched up against January / early February. Following are the
current yields on Treasuries.
1-yr 6.15%, 5-yr. 6.59%, 10-yr. 6.38%, 30-yr. 6.13%.
From time to time it”s interesting to look back at the performance
of some key international markets (strictly as I define them in my
ratty notebook). From the market lows of 10/12/90, with the
Dow Jones at 2398, through Friday, 3/3/00.
Dow +332%
Tokyo Nikkei -11% [yes, off 11%]
London FT-SE +209%
Frankfurt DAX +445%
More International
Iraq: Many in the U.N. want sanctions lifted against Iraq because
thousands may be starving to death. Our State Department is
adamant, however, that sanctions must be left in place. A report
released this week claims that Saddam has built 9 palaces and 40
VIP homes, at a cost of $2 billion, since the end of the Gulf War.
And, obviously, Saddam isn”t using his allotted oil revenues to
buy what the Iraqi people need. Lifting sanctions will only allow
Saddam to rearm more quickly than he already is. But we also
have to get inspectors on the ground. It has been about 15
months since we had any there.
*The same report also noted that in 10 weeks, the Iraqi
government imported 10,800 bottles of whiskey, 350,000 cans of
beer and 7,200 bottles of wine, all totally legal since the booze
qualifies as food under the international laws in place but, yes, this
is illegal under Iraqi law. And no, this is one party I don”t want
to crash.
Iran: Marine General Anthony Zinni testified before Congress this
week and said that despite the political gains by reformers in the
recent parliamentary elections, Iran represents a substantial long-
term threat to the U.S. “The hard-liners still control the
intelligence services which support terrorist groups.” And
Russia, China and North Korea continue to provide Iran with
materials for weapons of mass destruction.
Kosovo: U.S. commander General Wesley Clark said it was
always clear that American soldiers could be shifted around to
other peace-keeping sectors as needed. The administration issued
a sharp rebuke and said U.S. soldiers should stick to their own
defined sphere. Of course the debate is simple. If British or
German troops come under fire, he wants to be able to help his
fellow NATO partners. The administration, on the other hand,
doesn”t want any casualties. They have an election to win, after
all.
Israel: The Israeli parliament passed a bill this week that will
require a new set of standards for approving any Israeli / Syrian
peace pact. In the past, any treaty needed to be approved in a
referendum by a majority of those voting. Now, it will take a
majority of all eligible voters (meaning that based on past
percentages about 60% of those voting will need to approve).
Hard-liners don”t want to see Israel give up the Golan Heights
and since only about 50% of the Israeli population likes what they
hear about a potential peace plan, treaty approval seems
increasingly unlikely.
Northern Ireland: Sinn Fein leader Gerry Adams said the Good
Friday peace accords are now “in tatters.”
India: The government is raising military spending by 28%, the
largest increase in the nation”s history. An already bankrupt
Pakistan won”t be able to match that.
Austria: Freedom Party leader Jorg Haider resigned this week to
concentrate on his governorship. Since he never placed himself in
the new coalition government, the announcement was meant
solely for public relations. Haider will now simply build his base
and run for Chancellor later on.
This Week in Politics
First, the results:
Virginia – 53% Bush, 44% McCain
Washington – 58% Bush, 38% McCain; Gore 68%, Bradley 31%.
North Dakota – 76% Bush, 19% McCain.
And it was a week where John McCain blasted the Christian
Right”s leaders, Jerry Falwell and Pat Robertson, incredibly
mentioning them in the same breath as Louis Farrakhan and Al
Sharpton. It was a terrible, dumb mistake. Now I”m not a big
supporter of the first two but this is something that should be
brought up in private. It was impossible not to alienate their
followers.
And then after McCain admitted he wasn”t truthful about the
Michigan phone calls that blasted Bush for his “anti-Catholicism,”
the “Straight Talk Express” derailed.
McCain let some of us down. William Bennett”s op-ed piece in
Thursday”s Wall Street Journal was right on. After his recent
performance, and the continuing comments of the majority of his
colleagues in the Senate, you have to wonder about his
temperament.
And there was the interesting story in the New York Times
floating the possibility that Ross Perot may endorse McCain if
McCain were to get the Republican nod. [Perot would offer it
after the Republican convention.] I surmised last fall that McCain
should have been the Reform Party candidate all along.
As for Thursday”s debate, I have to admit that Bush is getting
better (slightly). But Gore would still kick his butt, one-on-one.
Oh, and wasn”t that another panderfest at the Democrat”s debate
this week. And Bill Bradley, who has run one of the worst
campaigns of all time, simply gave up. [His old New York Knicks
coach, Red Holzman, never would have stood for that.] And then
there were statements like these from Al Gore.
“The extreme right allow themselves to get carried away and
they”ve lost all perspective.” Ah, Al? How does that square with
your relationship with Al Sharpton?
And this great one in response to a question about the pitiful
living conditions for some in our military. “It is totally
unacceptable that the military is on food stamps.” Ah, Al? What
were you doing about this the last 7 years?
So now we come to Super Tuesday. If McCain doesn”t win New
York it”s over because he is definitely going to lose California
(barring a weekend disaster by Bush). And on March 14, the
delegate rich states of Florida and Texas are Bush states. Ergo,
for all practical purposes the Straight Talk Express could be
running out of gas, somewhere on I-95, about 4:30 a.m. on
Wednesday.
Random Musings
–So I”m reading this piece in the New York Times by Elvis
Mitchell complaining about the recent Grammy Awards and he
has this line, “(But this is) an organization that awarded a Grammy
to Petula Clark over the Beatles.” Yoh, Elvis (and is that your
real name?), Clark won Best Rock ”n” Roll Recording in 1964 for
“Downtown,” a great song. If you”re going to complain, pick on
the Song of the Year selection, “Hello, Dolly!” And the Beatles
did receive Grammys for Best New Artist as well as Best Vocal
Performance Group for “A Hard Day”s Night.”
[The preceding was paid for by the New Jersey chapter of the
Petula Clark fan club, Brian Trumbore, President.]
–The reaction to the Amadou Diallo verdict is understandable.
Yes, I am disturbed in that better training may have led to a non-
violent resolution. But a mixed-race jury saw all the evidence, the
judge opened the proceedings to television, and afterwards, the
jury said race had absolutely nothing to do with their decision.
Said one, “If someone is unhappy with the verdict, they need to
look at the prosecution.” At least two of the four black jurors
have received rather threatening phone calls. Black leaders like
Jesse Jackson, in uttering statements such as, “What planet was
the jury on?” only inflame the situation. And as for the claim that
the verdict would have been different had the trial been held in the
Bronx as opposed to Albany, people are forgetting one very
important factor. The police officers would have been able to
have the case tried by a judge, in lieu of a jury, which is their
prerogative. My guess is that a judge would have ruled, innocent.
–A surgeon at Staten Island Hospital in New York was
suspended because he operated on the wrong side of a patient”s
brain. I hate when that happens.
–Gun control: Stop telling me that the 13 kids who die every day
due to hand guns are like the poor girl in Flint, Michigan. At least
12 of the 13 are drug-dealing thugs. I”m sorry folks, but I
watched the NRA”s Wayne LaPierre on the Today Show, Friday,
and I don”t see the problem. If the President would stop
grandstanding, he could get his gun control legislation. But as
LaPierre said, if he”s looking for 100%, forget it. And also, lock
up the drug dealers.
–Experts now say that if a tornado is approaching, do NOT seek
shelter under a highway overpass. Seriously, the overpass acts to
increase the wind speed as it whips through the opening. Also,
firing your hand gun at the tornado won”t slow it down.
–Did you ever wonder how “timed-release” capsules really work?
–State and federal gasoline taxes have increased from an average
27 cents to 43 cents since 1990.
–Yes, I spend my time following the financial markets and I
stupidly didn”t lock in a good long-term rate on my adjustable
mortgage.
–And finally, an offbeat poll found that 40% of the respondents
would kill themselves rather than be stuck with Al Gore for a
week.
Gold closed at $290
Nymex Crude Oil, $31.45
Returns for the week, 2/28-3/3
Dow Jones +5.1%
S&P 500 +5.7%
S&P Midcap +7.2%
Russell 2000 +7.4%
Nasdaq +7.1%
Returns for the period, 1/1/00-3/3/00
Dow Jones -9.8%
S&P 500 -4.1%
S&P Midcap +7.8%
Russell 2000 +18.5%
Nasdaq +20.8%
Bulls 52.2%
Bears 28.3% [Source: Investors Intelligence]
*I will publish some excerpts from China”s “White Paper” on
Taiwan in my 3/9 edition of Hott Spotts.
**Next Saturday”s Week in Review may be slightly delayed.
Brian Trumbore
