If you were seeking news from overseas this week, you were
largely out of luck. I can”t blame the networks this time, though,
because our presidential campaign deserved the coverage it
received…only to what degree is the subject a little later in this
review.
Frankly, the news scene has been a little light but there were some
rumblings from overseas that warrant concern…and for once, I”m
not talking about Russia or China.
This past spring there was some cause for optimism in Iran as
reformers won a parliamentary majority in an election that
appeared to be remarkably free of major fraud. I said, though,
that it wasn”t time to pull out the party streamers and, sure
enough, there was some troubling news this week as the Islamic
hard-liners who are still in real control shut down the last reform
newspaper, making it 23 such publications since April that have
suffered this fate. The Ayatollah, Khamenei, is winning. The
president, Khatami, seems powerless. Another revolution appears
to be unavoidable and the reformers could be crushed.
And…when your neighbor is Iraq…that”s not a good thing.
Saddam emerged from one of his bunkers this week to blow off
some steam against the leadership of the Arab world and second,
to welcome Venezuelan President Chavez.
I warned long ago that Hugo Chavez was bad news. Now
everyone else knows. Chavez became the first democratically
elected leader to visit Iraq since the Gulf War. Saddam jumped
for joy. Two dirtballs in the desert.
So while the U.S. blasted Chavez for the visit, and Chavez fired
back that Venezuela”s foreign policy was none of our business,
you can also be sure that Chavez and Saddam discussed more
than OPEC, Chavez”s stated reason for checking out the cuisine
in Baghdad. What exactly, I”m not quite sure, but the political
scientist in me says Colombia, Venezuela”s neighbor, may have
been on the agenda.
As you know, our presence will be growing in the land of Juan
Valdez and guerrilla fighters. Chavez is capable of mischief…for
now, I”ll leave it to everyone”s imagination as to what that may
be.
And the third major item of foreign intrigue this week concerns
the dispute between India and Pakistan over the fate of Kashmir.
A New York Times report by Judith Miller and James Rosen
stated that last spring the CIA reported to President Clinton that
the dangers of a nuclear exchange had escalated. The two nations
have no early warning systems, no joint programs of any kind
(like those that exist between the U.S. and Russia), and often
fanatical populations. Most importantly, India refuses to talk to
Pakistan.
Now, after the latest attempt at peace talks between Pakistani-
supported Islamic Fundamentalists and the Indian government
failed, the terrorist attacks in Kashmir resumed. India”s President
Vajpayee comes to Washington later this month.
Traditionally, we have sided with Pakistan over India, a last
vestige of the Cold War when we sought to counterbalance
India”s relationship with the Soviet Union.
Today it”s different…and more volatile. China sends Pakistan
missile technology, India buys weapons from Russia and the U.S.
slaps sanctions on both India and Pakistan because of their
nuclear weapons testing.
It”s time to pick sides. We need India as a staunch ally. After all,
they are the largest democracy in the world. Clinton should
embrace Vajpayee in a most public display, for consumption back
home in Delhi and Bombay.
Wall Street
The Dow Jones busted through the upper end of its trading range
in impressive fashion this week, closing above the 11000 (11027)
mark for the first time since April 25. Strong figures for
productivity and a tame report on producer prices solidified the
case of the soft-landing adherents once again, and most experts
are in agreement that the Federal Reserve will hold the line on
interest rates when they convene August 22.
The productivity report was also important in that it showed that
labor costs fell in the quarter, further evidence that workers are
more efficient because of technology.
The bond market lapped it up, on the longer end of the curve, as
the yield on the benchmark 10-year U.S. Treasury bond hit
5.78%. Since mortgages are pegged to this rate, it could signal a
revival in homebuilding.
As more and more folks talk of a soft-landing, old-line cyclical
issues of all stripes, including Dupont, 3-M, and General Motors,
posted solid gains. It was really quite refreshing. Valuations on
many of the Dow issues are certainly reasonable, in my book.
But what happened to Nasdaq? Cisco Systems and Applied
Materials could not have been more bullish in their comments
following earnings reports which beat the Street. But their
stocks, after an initial bump up, fell back. Pray tell, whassup?
Rational behavior?
It certainly appears that way. Cisco”s glowing report on future
prospects had some analysts raising 2001 earnings estimates to
$0.74. Cisco ended the week at $64. At $74, the P/E is
100…on next year”s earnings. And it”s that realization that is
undoubtedly holding some investors back.
And then there was Dell, falling short of its revenue target while
beating the Street”s earnings forecast by a penny. The market
slammed it to the tune of $4 on Friday.
Yes, when you have a market priced for perfection, and
perfection is seen to have its limits, it”s tough for the Nasdaq to
find legitimate reasons why it should rise to new highs. It sits at
3789, 25% off its record of 5048.
The main fear is that the tech sector, in a slowing economy, will
only experience decelerating earnings, reversing the trend of the
past few years. A fear well-founded.
But wait…is there light at the end of the tunnel? After all, retail
sales for July were robust and lent credence to my theory that the
economy is just taking a breather before resuming a pattern of
robust growth. Ergo, maybe future earnings won”t be as light as
some now forecast.
You might be asking yourself about now, “Do you mean the
editor may actually turn bullish on technology stocks in the
future?”
Maybe. But not at these levels.
Street Bytes
–Is Dr. Koop dead? His stock sure is.
–U.S. Treasury Yields
1-yr. 6.22% 2-yr. 6.24% 10-yr. 5.78% 30-yr. 5.71%
–Bridgestone / Firestone blew it. By their previous actions in the
Middle East and Latin America, they knew a problem existed with
their tires. This is as clear a case of liability as you”re going to
find. Your heart goes out to those families who needlessly have
suffered personal tragedies. And, as an aside, this issue is tailor-
made for Ralph Nader.
–AOL launched AOL / Latin America, or AOLA, this week. The
IPO was a dud. And, as you”d expect, management was forced
to utter what has become the clichT of the year. “It”s a marathon,
not a sprint.”
–After my lead statement of last week, Merrill”s Internet analyst
Henry Blodget proceeded to downgrade a number of Internet
issues on Monday. The fact that many of these were already
down 80-90% made it a rather ridiculous call. Wall Street
yawned.
–The above was in keeping with my earlier statement that Wall
Street analysts are losing clout. However, one analyst at
Goldman Sachs, Marc Cohen, made an interesting call on Friday
concerning Philip Morris when he established a 12-18 month
price target of $85 for a stock that finished the day at $31. Cohen
is convinced the tobacco litigation is largely over and that MO”s
parts are worth far more than its current price indicates.
–Eli Lilly got creamed when the courts ruled that Lilly could no
longer prevent generic alternatives for its flagship Prozac drug.
The stock fell some $30 in one day.
–The Bank of Japan, deciding that the Japanese economy had
bottomed and was on its way up, raised interest rates (from near
zero) for the first time in a decade. The government was miffed,
claiming that the move was premature. Regardless, currency
markets took it in stride as the decision was well telegraphed.
–I keep track of weekly closes for the Dow going back a number
of years. [No, it”s not available…I have it on scrap paper.] So,
in keeping with our upcoming election, I was curious as to the
levels of the Dow since President Clinton officially took office.
1/22/93 3257 [An article I saw said 3240…I”m using the 3rd
Friday, not inauguration day.]
1/20/95 3865 [Republican Congress takes control]
1/17/97 6833 [Republicans still in control of Congress]
1/22/99 9120 [Republicans still in control of Congress]
Today 11027
Draw your own conclusions. Go ahead, boys, share the credit.
–The SEC has approved Regulation FD…or fair
disclosure…meaning that corporations are now supposed to
release the same pertinent information to the public that they give
to selected analysts. Among other things, this is designed to level
the playing field. I really don”t see it having much of an impact,
though, one way or the other. And now, if you”re a shareholder
and want to waste your time sitting in on a company conference
call, you can.
–Energy: Oil inventories continued to tighten and are now at
their lowest levels since 1976. Prices headed back over $30 a
barrel. My personal portfolio has perked up. But aside from that
last selfish remark, we are setting ourselves up for one hell of an
upward spike this winter unless the inventories are significantly
replenished. And, while rising oil hasn”t hindered world
economic growth, yet, we could be in for a shock down the road.
Oh, and by the way, after completing his vacation, one of the first
comments made by Al Gore against the Republicans was the
following assessment of their convention.
“Behind the flashing video wall is an agenda of rising gas prices
and smog-filled skies that is of Big Oil, by Big Oil, and for Big
Oil.”
Go back to your economics textbooks, Mr. Vice President. It”s
called supply and demand. And seriously, this administration has
done nothing to raise fuel efficiency standards on SUVs for 8
years.
International Affairs, Part Deux
Middle East: While the Israeli Parliament takes a break, allowing
Prime Minister Barak to catch his breath, Yassir Arafat is
traipsing around the Middle East and Europe, picking up support
for the Palestinian cause. There is a ”buzz” in the area, like that of
a bazaar. Yassir is looking for the Arab leadership to gang up on
Israel.
But, believe it or not, Russia could be a big help as it has recently
strengthened its relationship with Israel because of the heavy
Russian immigrant influence. Just as the U.S. should have
brought Russia into the process in Kosovo before we had to go to
war, we shouldn”t hesitate to use them on this issue. Arafat
visited Moscow and Putin was careful not to endorse the
Palestinians full position.
Russia: Moscow was the scene of another horrific bomb blast as
at least 8 died and over 100 were seriously injured. The
government initially blamed the Chechens and rounded up two
suspects, only to announce the next day they probably had
nothing to do with the act. I give President Putin a little credit for
acknowledging they really didn”t know who might have set it off.
Remember, last fall when a series of apartment bombs killed over
300, the Chechens were blamed. I said I thought the government,
itself, set them off and, since then, not one arrest has been made.
What is clear is that the Chechen rebels are having supplies
airlifted from the Republic of Georgia (though the Georgian
government does not appear to be involved). If Putin had a more
credible conventional force, you can be sure Russia would have
invaded Georgia by now. If that day ever comes, the U.S. and
Europe would have to respond.
Indonesia: The days of President Wahid are rapidly drawing to a
close. The sometimes heroic leader, who charged former
president Suharto with massive corruption but couldn”t come up
with a viable economic plan, was forced to relinquish day-to-day
authority to his vice president, Megawati Sukarno, the daughter
of the founder of the nation.
Malaysia: Former deputy prime minister Anwar Ibrahim, once the
protTgT of current Prime Minister Mahathir, was sentenced to 9
years for sodomy, after a trial that gripped the nation. Coupled
with an earlier 6-year term for corruption, Ibrahim is not eligible
for release until 2014. While it is difficult to separate fact from
fiction in this matter, what is known, however, is that Mahathir
has effectively eliminated any real threat to his power. Between
Indonesia and Malaysia, I don”t know why anyone would want to
invest there.
Spain: Not for nothing, but have you noticed how Spain is acting
more like Northern Ireland these days…than Northern Ireland
itself is? The Basque separatists guerrilla force, the E.T.A., has
killed 9 thus far in 2000.
Now I don”t know much about the Basques myself. But I do
know they are proud inhabits of the land that straddles northern
Spain and southwest France, an area covering the Western
Pyrenees mountains. They are about 5 million strong, with a
language totally unlike any other, and have always sought
independence…often employing violent methods.
In the Eastern Pyrenees, however, reside the 62,000 residents of
the independent nation of Andorra. Of course you can”t expect
Spain or France to allow the Basques to carve out a Basque state
at this point. I”m now just curious how Andorra got it done.
Colombia: The leader of this nation”s leading right-wing death
squad proclaimed in a television interview this week that U.S.
Drug Enforcement Administration agents sought his group”s help
in combating drug traffickers. Explosive, if true. President
Clinton is slated to go to Colombia on August 30. Another
reckless adventure. Congress approved the $1.3 billion aid
package he long sought. But this is the most dangerous country
in the world right now.
Sierra Leone: Over a year ago the U.S. was heavily involved in
negotiating a peace settlement between rival factions that left the
devil, Foday Sankoh, in power so his rebels could cut off the arms
and legs of innocents. Then, when U.N. peacekeepers got in
trouble this spring, Britain stepped up to the plate and helped
establish some semblance of order (using the term loosely).
Now, wouldn”t you know it, but 3 months from our election,
President Clinton goes a courtin” the black vote as we send a few
hundred troops over to Nigeria for the purpose of training them
to become a military power in Western Africa.
Folks, as I have well-documented in both this space and “Hott
Spotts,” we should have done this in the beginning. Clinton is
still scheduled to go to Nigeria after the convention (he has a full
schedule…last chance to rack up those frequent flyer miles). He
will pray for a slow news week so he gets full coverage of what a
great friend of the African people his administration has been.
Trust me…they haven”t done squat.
This Week in Politics
It”s kind of funny how things work out, when 85-90 percent of
the media are of one political mind.
First off, when George W. Bush selected Dick Cheney to be his
running mate, the immediate cry was that this was a good man,
respected on both sides of the aisle for his previous service in
Congress. And it was also pointed out that when Cheney was up
for nomination to be Secretary of Defense, the Senate approved
him, 92-0.
Well, this good feeling lasted about, oh, 1-2 hours. Now Cheney
is portrayed to be the devil.
Enter Joe Lieberman. Another good man. You won”t find me
bashing this Senator, even as he flip-flops on previously
established opinions.
Lieberman, like Cheney, is also well-liked by representatives of
both parties. But Lieberman”s honeymoon will last far longer
than Cheney”s did. And within hours, I was made to feel guilty if
I didn”t vote for the Gore-Lieberman ticket.
So I present to you three different comments, from both sides of
the political spectrum.
Paul Goldman ran Douglas Wilder”s campaign for governor in
Virginia. Wilder, you”ll recall, was the first black elected to this
office.
“Gore seems to me to be asking for your vote at least in some
measure because his running mate is Jewish.”
Goldman pointed out that it was taboo to bring up the issue of
race in Wilder”s campaign. And this stance frustrated the heck
out of the media. It is Goldman”s position that Gore will be
making a big mistake if he continues to play the religion card.
Robert Scheer, syndicated columnist for the Los Angeles Times,
is as ”left” as they get. But the following is quite an interesting
appraisal.
“What a gutless wonder Al Gore is turning out to be. Instead of
rising to the defense of an administration that deserves to be
celebrated, he turns for his running mate to Joseph Lieberman, a
carping Clinton critic. It”s a misguided attempt to distance the
Gore campaign from Bill Clinton, but what Gore has never
understood is that it is Clinton people like and Gore who bores
them to tears.
“…At a time when the vice president could be – and should be –
boasting about the record of the Clinton-Gore years, Gore instead
has picked someone whose anti-Clinton sound bites…could make
up the entire ad campaign for George W. Bush.”
But what should offend everyone, is the double-standard
employed by the media when it comes to “talk of God.” Michael
Medved spelled it out in the Wall Street Journal.
“The answer lies in the basic assumption by most in the media
that liberals are at heart good people – so that any expression of
religiosity only seems to amplify and reflect core goodness,
conventional wisdom holds. On the other hand, that a
conservative outlook emerges from selfishness and cruelty, so
that when a conservative speaks of religious faith it is merely an
attempt to mask his inherent heartlessness with ”Elmer Gantry”
pieties. When “progressives” (Jesse Jackson, Clinton) cite
religious sources in public debate, they do so to “uplift” or
“inspire” America. If conservatives refer to the same biblical
authority, then they are cast as Ayatollahs who want “to ram their
values down our throats.”
Hopefully, after Labor Day the debate will focus on Bush and
Gore and the differences between them.
The polls were all over the board this week. It”s safe to say,
however, that after Los Angeles they should reflect a tightened
race.
And it”s also possible that come November 7, Bush could win the
popular vote by 3 or 4 points…but lose in the electoral college.
Newsweek had a graphic with the following results. [270
electoral votes needed to win.]
207 are leaning or considered safe for Gore
209 are leaning or considered safe for Bush
122 are a tossup
This was before the Lieberman announcement. To me this then
throws the tossup states of Connecticut and New Jersey (23 votes
between the two) into the Gore camp, giving him a 230-209 lead.
This much is clear; assuming Florida (25 votes – leaning Bush),
California (54 – leaning Gore), and New York (33 – leaning Gore)
come in as expected, tossups Pennsylvania (23), Michigan (18)
and Ohio (21) will decide it. And it”s in these 3 states that you
will see the candidates spend a tremendous amount of time.
Poli-tidbits
–Hillary is back on top in New York, leading Rick Lazio by 46-
43.
–U.S. News reports that a potential October surprise could be
Clinton shutting down Congress so Gore can run against a “do
nothing” Congress.
–Regardless of your political affiliation, I hope you agree that the
talk of “class-warfare” is bunk.
–If the Reform Party can”t decide who gets the $12.5 million in
federal funds, I”ll take it.
Random Musings
–David Ropeik, from the Harvard Center for Risk Analysis,
wrote an op-ed piece that I couldn”t agree with more. Here in the
Northeast, we are spending millions to protect ourselves from the
West Nile Virus. Last year, 6 died in New York City (though all
the victims were susceptible, i.e., a little on the frail side…not that
there is anything wrong with that).
So this summer, New York is spraying every square inch of
ground. No one has died.
Now is this all really necessary? Yes, mosquitoes are a pain in the
butt. But, as Ropeik writes, from a risk-reward standpoint, the
money would be better spent on a public education program on
the values of washing your hands frequently. “This simple
procedure eliminates far more disease transmission than killing
every mosquito in America.” [Nurse Vicki, my mother, should be
happy to read this.]
–A British tabloid has been printing names and pictures of
suspected pedophiles. Only one problem, the vast majority of
these folks are innocent. Nonetheless, their lives are now ruined.
And this is the same tabloid that prints pictures of nude girls,
including a recent spread of a 16-year-old. There”s something
very wrong here.
–Recently, I commented on an American history quiz which was
administered to college students, expressing my dismay at the
lack of knowledge of some basic facts. So this week, Ted Gup, a
noted professor and journalist, wrote a piece taking the other
side.
Gup said Americans don”t need to be walking almanacs and that if
we keep putting ourselves down, it will contribute to a national
inferiority complex. “Life is an essay, not multiple
choice…problem solving is more important than encyclopedia
knowledge.”
Well, professor, basically you”re full of it. No one is expected to
be a walking almanac but without some rudimentary knowledge
of the past and, to expand on the point, without a basic
knowledge of the world outside our borders, we will suffer as a
people.
Gup tried to also claim that Asian and European students are no
better off in their knowledge of their own history. My travel
experience says otherwise. And they know a heck of a lot more
about us than we do about them.
But, writes Gup, if that were the case, then why is the American
economy superior to the others? Bingo, professor. You just
stumbled on the real issue. The world can catch up to us in the
blink of an eye now that the very tools we used to our advantage
(high-tech) are increasingly available to the rest.
And it is this arrogance, exhibited by Gup and his ilk, that needs
to be corrected. In this inter-connected world, at times events
will start spinning as in a whirlpool. We want to avoid getting
sucked down.
–The New York Times Anthony Lewis has been a long-time
thorn in the sides of conservatives. This week, however, he
caught my attention with an acknowledgment concerning Gerald
Ford.
“One of my greatest regrets as a newspaper columnist is how I
underrated Gerald Ford when he was in the White House.”
Lewis went on to praise Ford”s stewardship and integrity. I,
myself, have thought and read about Ford quite a bit recently.
There is no doubt history will give him high marks for the crucial
role he played in bringing our nation back from the brink.
–This is op-ed week at ”Random Musings.” William Sloane
Coffin, the chaplain at Yale from 1958-1976, wrote a piece in The
Times on how involved Joseph Lieberman was in social causes
while at Yale. Of course, George W. Bush and Dick Cheney
were also at Yale during this time (Cheney, only briefly). Coffin
said he knew only Lieberman; didn”t meet Bush or Cheney. The
clear inference being that the latter two couldn”t possibly be
caring, responsible citizens, because they failed to protest against
poverty while they were 19 or 20 years of age. What total
garbage, Reverend.
–I saw where Burger King is experimenting in the Charlotte area
with serving burgers at breakfast. Brilliant idea. Bring it on up to
New Jersey!
–There is an advantage to running a web site. I”m not stuck in
air traffic this summer. Boy, having played that game for years,
the rest of you have my sympathy.
In 1990, 465 million passengers boarded U.S. airlines. In 2000, it
will be 670 million. By 2010, 1 billion. There”s your problem.
Or, as I saw Joel Conarrone quote Sartre this week on an
unrelated topic, “Hell is other people.”
–President Clinton”s “confession” on Thursday was truly
extraordinary. The President of the United States, talking about
how he is rebuilding his life. Oh brother.
–But I did see this week where the President is the proud owner
of a Big Mouth Billy Bass. Yes, I mentioned a few weeks ago
that this was the last thing I wanted for Christmas. Turns out
sales are booming. So I”ve had second thoughts. If it sings
“Everybody Loves Somebody,” I”ll reconsider.
Gold closed at $275
Nymex Crude Oil, #31.02
Returns for the week, 8/7-8/11
Dow Jones +2.4%
S&P 500 +0.6%
S&P MidCap +1.5%
Russell 2000 +1.3%
Nasdaq +0.1%
Returns for the period, 1/1/00-8/11/00
Dow Jones -4.1%
S&P 500 +0.2%
S&P Midcap +15.3%
Russell 2000 +1.1%
Nasdaq -6.9%
Bulls 48.6
Bears 33.6 [Investors Intelligence…remember, about a 10-day lag.]
Brian Trumbore
