For the week, 3/6-3/10

For the week, 3/6-3/10

Archaic vs. Virgin; Primordial vs. “Fresh as a Daisy”

I”m so sick of “Old Economy” vs. “New Economy” that I went to a

long-lost friend, Mr. Roget Thesaurus, to come up with a different

way to describe the titanic struggle taking place on Wall Street.

Actually, from past writings you know it”s more like “rational vs.

irrational.” And then on Friday, the lead column in the Wall Street

Journal blared, “Conservative Investors Finally Are Saying: Maybe

Tech Isn”t A Fad.”

Of course it”s not a fad. Were the Journal around tens of thousands

of years ago, the headline might have been, “Cro-Magnon Man

Finally Saying: Fire Is Not A Fad.” And later, “Wheel Is For

Real.”

Geezuz. What are we, idiots? [Don”t answer that.] The hula hoop

was a fad. The slinky. Slot cars (sadly). Computers and

wireless communication aren”t. All some of us are saying is, why

should Palm Inc. (the recent spin-off of 3Com that manufactures

hand-held devices) be worth more than the whole U.S. airline

industry put together?

And the big story in the “hoary vs. immature” (thanks again,

Roget) market of this past week was Procter & Gamble. Stock in

the consumer goods giant plummeted 39% on dire earnings news.

Well heck, the stock was trading at a price/earnings multiple of 34

when its shares traded at $87 on Monday. This for a company that,

in a good year, would grow around 10-12% (and there”s nothing

wrong with that). Well, now it”s at $53. It”s not just a matter of

“venerable” companies like P&G suffering from a lack of pricing

power (due to the Internet, over capacity, and other factors), it”s

because the freakin” stocks are, or were, overpriced!

And don”t you forget that what happened to P&G (and before it,

Raytheon, Xerox, and others) can just as easily happen to Cisco

(great company but…) or JDS Uniphase (I must say their CEO

looks like a Viking, again, not that there is anything wrong with

that). It”s just a matter of time.

Which leads me to my next point. As I”ve mentioned before, if you

want to invest in the technology sector and you don”t know what

the Viking at JDS Uniphase does, BUY A TECH MUTUAL

FUND! Don”t try and play the game by picking a name here or

one there. At some point in the not too distant future, it”s going to

get ugly (really and truly) and a diversified fund won”t go down

nearly as much as an individual issue that pulls a P&G.

By the way, in case you didn”t know it, we are currently in a bear

market by some measurements. One study (and I apologize for

forgetting who wrote it) showed that 75% of the stocks in the S&P

500 are down 20% from their recent highs.

As for the U.S. economy, there wasn”t a lot of news this week.

Alan Greenspan tried to talk the market down a few times. The

“primeval” issues largely complied while the “untrodden” told him

to take a hike.

Actually, the Fed”s “beige book,” a survey of the economic activity

across the country, showed that there was still little inflation but

wage pressures were emerging.

And then there was oil. The rest of the world is laughing at how

hot and bothered we”re getting. Nymex Crude Oil hit $34 (highest

since 11/90) before finishing the week at $31.75. Energy Sec. Bill

Richardson (who so desperately wants to be Al Gore”s Veep it”s

almost obscene), was all over the place, largely reassuring us that

OPEC would see the light.

Well, Iran and Saudi Arabia, OPEC”s two largest producers, did

reach an agreement to raise production quotas but we”ll see what

happens after OPEC”s upcoming meeting in Vienna. In the

“politics of oil,” nothing is ever certain. And mark my words, if the

price were to collapse (say, to $18) because of pressure applied by

the U.S., the Sheiks won”t let us forget it. And don”t give me, “But

we protected them against Saddam!” You think these guys care?!

Other Wall Street news:

Congratulations to Advanced Micro Devices (at least for a month

or so). One of my favorite (as well as Wall Street”s) whipping

boys, AMD seems to have gotten its act together and the share price

has zoomed in the past year from $14 into the $50s.

On the downside, have you noticed how sick some of the e-

commerce stocks remain? For starters, while the Nasdaq keeps

hammering out new records, Amazon.com (and its “Man of the

Decade,” Jeff Bezos) has struggled mightily, trading at $67 (40%

off of its high) while eToys has fallen from $86 to $13.

Goldman Sachs analyst Rick Sherlund, an expert on Microsoft,

says the company will settle its anti-trust case with the government

in a matter of weeks.

The bond market was stable without a lot of significant economic

releases (though the Treasury did initiate its first $1 billion

buyback of an expected $30 billion for the year). Current U.S.

Treasury yields:

1-yr. 6.19%, 2-yr. 6.52%, 10-yr. 6.38%, 30-yr. 6.17%

And the American consumer keeps borrowing and borrowing, the

latest fad being 103% mortgages. Of course, a lot of the excess is

finding its way into the stock market.

This Week in Politics

John McCain wasn”t riding on his Straight Talk Express when he

decided to pack it in. No, he chose the beautiful desert rocks of

Sedona, AZ to “suspend” his campaign, an apt setting since the

rocks are known to change color in the setting sun. Republicans

are praying that McCain doesn”t launch a third party run for the

presidency and all indications are that he won”t. He still has a

tremendous amount of leverage and, depending on how involved he

wants to be, he can make or break George W. (and remain viable

for 2004 should he choose).

The Super Tuesday results were fascinating. Bush registered 20%

plus wins in California, Ohio, and Missouri and handily beat

McCain, 51-43%, in New York. On the Democratic side, all you

can say is “Hey, Bill Bradley. What was that all about?” Bradley

was slaughtered, including 30-point defeats in his home state of

Missouri as well as the state where he made a name for himself,

New York.

So now it”s Bush vs. Gore. “No controlling legal authority” vs.

“Bob Jones and the Christian Right.” Gore will pound away at the

economy (praying the stock market hangs in there) while speaking

of Bush”s “risky tax scheme,” while Bush will show videos of Gore

with newly convicted felon Maria Hsia and the Buddhist Temple

fundraising event. It is going to be the dirtiest campaign of modern

times. All the more reason for Bush to adopt some of McCain”s

reform agenda in order to win his full support. There could be no

better henchman than McCain this fall.

As columnist Michael Kelly says, how does Bush beat “the razor-

fanged Gore?” “His only chance is that the relentlessly smarmy

Gore embody the promise of a perpetuation of Clintonian sleaze.”

Both candidates are going after that 30% or so that is traditionally

undecided. And lying in the weeds is Pat Buchanan who, assuming

he gets the Reform Party nod (as now seems likely), will garner 5-

6% in a national election and ruin it for Bush. [Buchanan does

need to get invited to the debates in the fall to have any kind of

impact. The presidential debate commission has ruled that a

candidate needs 15% in the polls to qualify. Buchanan won”t get

that but my guess is the commission, and the networks, will have to

relent.]

And there were some interesting tidbits from a Wall Street Journal

poll, published Thursday, which canvassed the American

electorate. Among the items of note:

–Since 1980, the Republican percentage of the black vote has

fallen between 9 and 12% in each of the last five presidential

elections. The Republican Hispanic vote has been between 21 and

37%. So you can draw two conclusions. First, why am I wasting

my breath giving advice to Republicans on how to attract a non-

existent black voter? Second, with George W”s past success in

courting the Hispanic vote, maybe he can kick that up to 40% or

higher. In what is already going to be an extremely close vote, that

could make a difference.

–Jesse Jackson is deemed by 43% of black voters to be the most

influential black leader. Amazing. And Al Sharpton, Louis

Farrakhan and Charlie Rangel each receive 6%. Colin Powell

garners just 17% (but maybe that”s a sign that the Republicans can

capture more than the aforementioned 9-12%).

–In a surprise item, the percentage of blacks who have seen

progress in race relations from 9/94 to today is about 1%. That”s

all.

–The percentage of all voters who think the country is headed in

the right direction has dropped from 55 to 47% since January,

while the percentage who think we are on the wrong track has risen

from 28 to 35% over the same period of time.

–The most important criteria in selecting a president is one”s

“leadership style and trustworthiness” (44%). Second is “ideas and

policies for the future” (40%).

–61% still approve of Bill Clinton.

International

Well, by the end of this coming week, the confluence of events I

recently labeled as the “Ides of March” will start to come together.

The presidential election in Taiwan, President Clinton”s trip to

India, and now Pakistan, the Pope”s visit to the Holy Land, the

Russian presidential election and the OPEC meeting, all within

about two weeks.

China continues to saber rattle as they attempt to influence the

election in Taiwan. There”s a saying in Taiwan, however, that

goes, “The person China hates, Taiwan voters love.” All three

candidates have expressed an appetite for independence but one,

Chen, is deemed to be the most vociferous on the issue and he

seems to have a shot. Regardless of who wins, however, U.S.

authorities don”t seem too worried that China will do anything

drastic.

A front page headline on the issue in the New York Times this

week said “Likelihood of Attack Deemed Low.” But, admittedly,

the option that experts take most seriously would be a short,

Kosovo-like missile campaign, “intended to devastate Taiwan”s

economy.” But absolutely nothing on how the same attack would

devastate our economy! It”s kind of incredible that people seem to

have trouble connecting the dots. [I”m doing this week”s review on

my Dell laptop, made in Taiwan.]

And this week President Clinton decided to submit the China /

WTO issue to Congress. Both the Senate and the House must first

approve “permanent normal trading status” for China before the

way is clear for China to be admitted to the WTO. And lo and

behold, Clinton suddenly needs Republican support to overcome

the growing Democratic opposition in the House. While passage

seems certain in the Senate, the House is a different matter as the

Democrats have to kowtow to organized labor in an election year.

And, of course, Republicans are not in a magnanimous mood.

Personally, I think we should admit China, warts and all. The

President said the right thing in a speech this week.

“Congress will not be voting on whether China will join the WTO.

Congress can only decide whether the U.S. will share in the

economic benefits of China joining the WTO.”

But now Clinton is paying the price for both his ethical lapses and

the extreme partisanship which he had helped foster. One minute

he is blasting Republicans on the minimum wage, the next minute

he desperately needs their support. For a man who is consumed

with his legacy, he does some pretty dumb things. If the China vote

doesn”t take place soon, it will likely be shelved until after the

election.

And as for the Chinese government, they proved once again just

how tough they can be. A provincial governor was executed for

corruption.

In Russia, President Putin is garnering between 46-60% in the polls

(he needs 50% to avoid a run-off). The Chechen rebels, supposedly

defeated, humiliated the Russian army in a series of ambushes this

week. Russian casualties ran as high as 500. A new group of

refugees was also created in the ongoing fighting.

Russian reporter Andrei Babitsky, he of the recent kidnapping

episode, has been barred from leaving the country. Babitsky said,

“The situation with the press, with free speech, is very bad and it is

growing worse.” He says the West sees only a relatively free press

in Moscow but that outside the city an independent press is

virtually non-existent.

Speaking of the press, independent reporter Artyom Borovik, a

fellow familiar to viewers of “60 Minutes,” was killed in a

mysterious plane crash in Moscow, Wednesday, along with a

leading oil executive who happened to also be Chechen. It”s not

going out on a limb to say that the crash is highly suspicious.

President Clinton decided to add Pakistan to his Asian trip. While

the focus remains on India, after all, the world”s largest democracy,

Clinton, as expected, has aroused the ire of the Indian government.

You”ll recall that there was a military coup in Pakistan last fall and

the leader, General Musharraf, was thrilled that Clinton accepted

his invitation to spend a few lovely hours in Islamabad. Musharraf

said, “(The Clinton visit) vindicates the legitimacy of my

government”s stand and gives credence to our aim to put things

right in our country.”

Of course the fact that the general hasn”t set a timetable for

restoring democracy, coupled with his government”s ties to

terrorism (including Osama bin Laden), doesn”t seem to matter to

Clinton. And, for its part, India doesn”t want U.S. interference over

the tough issue of Kashmir. Oh, and did I tell you this trip is a

security nightmare? A pretty good indication of this was the

assassination on Friday of former premier Shariff”s lead attorney

and two others in their office, just days before closing arguments in

Shariff”s trial.

Elsewhere, the headline in Mozambique”s national paper blared,

“West Closes Its Eyes to Tragedy in Mozambique.” U.S.

helicopters didn”t get involved until Thursday, almost two weeks

since the disastrous flooding began. On Monday, the Air Force

general in charge said that the Clinton administration did not give

the Pentagon the go ahead to participate in the aid effort until two

Friday”s ago, some six days after the fact.

Nelson Mandela”s new bride (after he belatedly ditched the wicked

Winnie), Grace Machel, is the former first lady of Mozambique.

She said of the situation in her homeland, “It seems the world has

no conscience when it comes to human life.”

Another editorial in the ravaged country said, “When the West

wants to intervene militarily anywhere in the world, they get there

in record time.” For once I want to see someone hold Clinton”s feet

to the fire on this one. I”m not holding my breath.

In a related matter, I have railed extensively about U.S. and WTO

trade policies towards the Third World. Currently, there is a bill

before Congress called the African Growth and Opportunity Act

which would reduce tariffs on textiles from 17% to zero. As the

New York Times Thomas Friedman wrote this week, U.S. labor

unions oppose it even though low-cost goods are no longer

manufactured here. We”ve moved on to high-tech, higher value

items.

So what are we worried about? The percentage of our textile

market that is imported from Africa is a whopping 0.8. This means

that Honduras exports 7 times more textiles and apparel to the U.S.

than all 48 nations of sub-Saharan Africa combined.

Friedman also points out that by 2005, all quotas on textile imports

to the country will be reduced to zero anyway. The congressional

bill is important, today, because U.S. manufacturers are already

making decisions for 2005 – whether to stick with plants in China

or branch out to Africa.

And then there”s Kosovo. The day-to-day operations of the

protectorate that NATO established are broke. The director of the

U.N. government in Kosovo (which pays the salaries of workers

and teachers, runs the utilities, makes sure the traffic lights work,

supplies the police force and hires prosecutors) said of the situation,

“This is an absurd, humiliating and self-defeating way to run

anything, let alone a project that embodies the prestige of NATO

and the West.” The NATO governments simply aren”t ponying up.

Judges hired by the U.N. are paid $165 / month while translators

(hired by the Organization for Security and Cooperation in Europe)

receive $555 / month.

In other matters, as a person with Czech roots (though with the

breakup of the country, this half of me is mostly Slovak), I couldn”t

help but laugh at Czech President Vaclav Havel”s suggestion that

U.S. Secretary of State Madeleine Albright (who was born in

Czechoslovakia) replace him when his term expires. Needless to

say, this doesn”t say much about the perceived talent pool in the

Czech Republic. Havel wants Albright because he wants his

countrymen to take a more worldly view. Albright said she is

flattered but, no thanks.

Austria”s Jorg Haider was supposed to have stepped away from the

national stage for a spell but he”s already in trouble again for

calling French President Jacques Chirac a “pocket Napoleon.”

And on a positive note, Moody”s gave Mexico”s government debt

an investment grade rating. They received a “F” for their inability

to fight the drug trade.

Random Musings:

–I am down in Charlotte, NC for the ACC basketball tournament,

which means two things. Right now I”m not at the evening session

and second, please forgive me if there is some editing that yours

truly missed. My alma mater, Wake Forest, did come through and

beat North Carolina this afternoon, making the writing of this

review a little easier. [Plus the fact that they don”t serve beer in the

arena.]

–The U.S. government says Russia, China, Iran, Iraq and Cuba are

developing significant information-warfare capabilities. It really is

amazing our own stock market hasn”t been taken down yet. Must

be waiting for Nasdaq 10000.

–Awhile ago I wrote about the epidemic in this country concerning

the drug “ecstasy.” New information was released this week

showing that in 1997 U.S. customs agents seized about 300,000

pills. In 1999 the total was 3.5 million. For the first two months of

2000, customs had already seized the same amount as last year.

Then, this week at Newark Airport, agents seized 87,000 pills from

a single flight originating in the Netherlands.

–Former Treasury Secretary Robert Rubin is being paid $15

million in each of 2000 and 2001 to be co-chief executive of

Citigroup. His total package is actually about $50 million. But

I”m sure there weren”t any conflicts of interest while he was in the

Clinton administration.

–Some census data: 70% of Cubans in America go on to get a high

school diploma. Only 50% of Mexicans do. So it should come as

no surprise that only 14% of Cubans live below the poverty line

versus 31% of Mexicans.

–President Clinton, deciding that he didn”t already have enough to

do, injected himself into the Amadou Diallo verdict in New York.

Proclaiming “race was a factor,” he went on to say that clearly a

white man in a white neighborhood would still be alive. And as I

mentioned recently, The Politician Formerly Known As The First

Lady, was making hay of the verdict as well. I guess they don”t

believe in our judicial system.

–Forest fires are spreading in Indonesia and the smoke is beginning

to envelope surrounding nations like Singapore. I only bring this

up because it was in 1997 that a similar situation arose, right

before the Asian collapse. Coincidence? You expect me to be

positive?

Gold closed at $290

Nymex Crude Oil, $31.75

Returns for the week, 3/6-3/10

Dow Jones -4.2% [9928, off 438 points]

S&P 500 -1.0%

S&P Midcap +1.0%

Russell 2000 +0.9%

Nasdaq +2.7% [5048, up 133 points]

Returns for the period, 1/1/00-3/10/00

Dow Jones -13.6%

S&P 500 -5.1%

S&P Midcap +8.8%

Russell 2000 +19.6%

Nasdaq +24.1%

Bulls 53.4%

Bears 27.6% [Source: Investors Intelligence]

Note: I didn”t make a big deal of Nasdaq 5000. No particular

reason, except that I”m jealous.

Brian Trumbore