*Please note: The following was written Friday morning due to
my travel schedule. I will add a thought or two on Wall Street by
Monday morning, as well as the final market returns. I”m also
ignoring the George W. Bush DUI revelation. Coupled with
Ross Perot”s endorsement, I believe it”s a non-event. Of course
we”ll all see if anything else comes out this weekend.
[Update: Sunday, p.m. End of week market figures have been added.
I also noticed that I had inadvertently placed two paragraphs in
the wrong spot…yes, your editor is no whiz with a laptop…
and this has now been corrected. It”s tough doing a column at one”s
20th college reunion!]
—
The Election
The Washington Post”s David Broder, who has covered the
political scene for eons, said the “choice comes down to a desire
to change Washington – but not fundamental social or economic
policy…and this is why the race is so close.”
And yes, this will be a real cliffhanger. My gut tells me Gore
will win…with Bush taking the popular vote.
George W. gets my vote, but with deep reservations. The next
president will face some stark challenges, most of which will be
in the international arena. It comes down to my feeling safer
knowing that Colin Powell, Dick Cheney, Norman Schwarzkopf,
and Papa Bush will be lending advice, as opposed to the
alternative, which is Tipper and Karenna. It is also true that
when advisers differ on opinion, as is often the case, then it”s up
to the president to make the hard choices. I have doubts Bush is
ready in this regard.
At the same time, any observer of the last 8 years knows that the
full story on the Clinton administration is yet to be written. Al
Gore likes to tell us he was a partner in it all; his surrogates say
he was the “most effective vice president in history.” In the light
of history, this latter statement will prove to be devastatingly
false.
But Professor Robert Dunn points out that you have to be 40
years old to have been adults during the last real recession. The
good times are taken for granted and this obviously plays into
Gore”s hands.
Two other thoughts: First, I respect Ralph Nader, not for his
ideas, but for his conviction, and I hope his supporters follow
through. Nader needs 5% nationally to legitimize the Green
Party (by qualifying for matching funds in 2004). While he will
create lots of mischief in states like Oregon, I think he”ll fall
short of his goal. Second, this would have been the third time in
my life I voted for an independent if John McCain were in the
race.
In other races, the Republicans” tenuous hold on Congress is in
jeopardy. They have a 54-46 edge in the Senate with up to 17
races identified as tossups, while in the House, there are
21 tossups with the Republicans going into it maintaining a 222-211
edge (with 2 independents, err, communists).
Here in my home state of New Jersey, I pray that Bob Franks defeats
the $60 million dollar man. As for Hillary, I hope she becomes a
lobbyist.
Bill Clinton
Columnist Tucker Carlson had the best line of the campaign,
“Win one for the groper.”
Bill Clinton is more out of control than ever, if that”s possible,
and we”re stuck with him for the next 25 years. Yes, he”ll just
keep popping up, when we least want him to.
Last night the president was in Los Angeles, speaking to a black
audience. Reporter David Sanger of the New York Times relates
that Mr. Clinton “devoted much of his talk to a description of the
successes of his own administration, arguing that he had made
”people in Watts feel they have as much say in the White House
as my friends in Beverly Hills.” From there, Mr. Clinton went to
visit those wealthy friends at a series of fund-raisers.”
Clinton is giving interviews to anyone who will listen as he
attempts to shape history. And in one such gabfest, he said his
enemies needed “a vehicle to try to find some last, desperate way
to undermine the results of two elections and what I was trying to
do for the American people and the fact that I tried to be a
president for people who had been left out, left behind, ignored
and kicked.” [Source: Washington Post]
At a press conference this week, blasting the budget process, the
president said, “I”ve done everything I know to do to turn this
country around.”
In an editorial this week the Washington Post stated:
“Now an emboldened Mr. Clinton talks about his role in
positively heroic terms. The president was impeached, it turns
out, not because he disgraced his office but because of his fight
for the underdog…
“This isn”t quite the story as we recall it. Mr. Clinton”s instinct
to recast his impeachment into little more than an asterisk on his
presidency – a response to its underlying courage and greatness –
is understandable enough….Yet the impeachment was not a mere
footnote on the Clinton presidency, nor can it simply be made to
vanish – much less morph into the good fight – by an act of will.
The fact that Mr. Clinton lied under oath and at least tacitly
encouraged others to do the same and that he attacked federal
law enforcement and dragged the country through months of
crisis rather than acknowledge his misconduct will play no small
role in any honest assessment of his presidency. At the very
least, the knowledge of his dishonor – and the message it sent to
the public – must temper the enthusiasm other aspects of his term
in office might generate. Mr. Clinton escaped removal from
office. Now he is campaigning to rewrite history and so escape
its judgment.”
Wall Street
The Dow Jones continued its winning ways, running its streak to 3
consecutive weeks, as the average closed at 10817, up 227 points,
or 2.2%. The Nasdaq had its third straight up or down 5% week,
this time registering a 5.3% gain to finish at 3451.
It was all about the economy…and the conclusion of tax-loss
selling.
The readings on the economy were mixed, although the soft
landing camp should be pleased and, yes, your editor wants a soft
landing as much as the other guy (though I don”t know if the
other guy wants it because of an exposure to the energy sector
like I do).
The down arrows were in the form of consumer confidence,
which hit its lowest level since last October; manufacturing,
which fell in October to a two-year low; as well as slowing retail
and auto sales.
These were offset to a slight degree by rising construction
spending and strong new home sales.
Bottom line, the overall slowdown continues with its much-
discussed impact on corporate profits. The earnings outlook for
2001 continues to deteriorate, particularly versus the frothy
expectations established by Wall Street.
As inflation indicators are still tame, however, if the slowdown
can be contained, then the damage to the equity markets from
decelerating earnings will be minimal. If the slowdown
accelerates, due to one of my wild cards or a pickup in inflation
thanks to rising wage demands, then we have a problem.
[*This morning”s release of the employment report and its high
wage component is a negative sign.]
Street Bytes
–The slide in consumer confidence for the month of October,
albeit it”s still at historically high levels, is attributed in part to
the problems in the Middle East. Yes, this is why I discuss
foreign affairs as much as I do. Unfortunately, the current crisis
in this region is nowhere near as bad as it can get. Thus draw
your own conclusions regarding the possible impact on consumer
confidence…and spending…of a pickup in the intensity of the
conflict.
–OPEC proceeded as planned with its fourth increase in output
for the year. The impact on the price of crude was minimal.
U.S. oil inventories continued to fall, surprisingly, however
heating oil inventories did rise.
–The market is waiting for Cisco”s earnings on Monday. They
are critical. While they are expected to meet 3rd quarter
estimates, any negative guidance for the future will be greeted
with massive sell orders. Since this is such a well-known fact,
one would expect Cisco to be extremely cautious in the wording
of their statements. One thing is clear. Capital spending in the
telecommunications sector is declining and Lehman Brothers, for
one, is forecasting flat spending for 2001, after back-to-back
30% increases. That doesn”t bode well for all technology stocks
trading at absurd multiples.
–Regarding slowing auto sales, my friend M.R. has his own
contrarian guide. It”s called the “salesman reaction time
indicator.” As sales slow, the salesmen are quicker to jump all
over you; often before you are even in the parking lot.
–The major Net stocks rallied after the pressures of tax-loss
selling abated. The positive spin for the e-tailers will be thick
and heavy as we enter the Christmas season. But I keep going
back to one issue, Amazon. Barron”s Mark Veverka had another
telling piece in the 10/30 issue. Bottom line, I trust Veverka a
helluva lot more than I do Jeff Bezos when it comes to the
financial position of this company.
–WorldCom, the #2 long-distance carrier, saw its shares body-
slammed as the company announced that future prospects would
not be as strong as expected. They also unveiled a restructuring
plan; the likes of which hadn”t been seen since…uh…AT&T!
–A sign of the times. Primedia announced that it would acquire
About.com. Great news for About shareholders, right? The day
of the news, About shares finished at $24, just slightly off their
high set this spring of $105. This will all be part of the history of
the Great Bubble.
–The euro rallied on European Central Bank intervention, for
about an hour on Friday, and then it fell back, though it still
managed to close about 3 pennies higher than the previous week.
Some money was finally finding its way to the euro over the U.S.
dollar due to our slowing economy. But investors know we”re still
the best game in town…for now.
–If you haven”t already done so, talk to your financial adviser, or
the mutual fund company directly, to check on your fund”s
capital gains estimates. There have already been some very
unpleasant surprises, particularly from those funds which have
large distributions while the actual fund performance is down.
The Middle East
I”m sure a few of you raised an eyebrow or two at my comment
of a few weeks ago wherein I declared that the recent Arab
summit may prove to be the most significant event of the decade.
I stand by that even more forcefully in the light of recent events.
The significance of the Arab summit was two-fold. It proved
how utterly worthless Arab leaders are in the face of the
burgeoning swarms of their own disaffected who demand
nothing less than not only Jewish blood, but will also demand the
heads of their own national leaders.
Secondly, the summit legitimized Iraq and I said that should
scare the hell out of every decent human being. So much for the
Gulf War coalition, long live Saddam.
At least 6 Arab nations this week flouted the U.N. sanctions
against Iraq by flying to Baghdad. And Jordan”s prime minister
became the highest-ranking official to visit the nation, a very
worrisome development.
So what did the U.S. say about all of this? Nothing. Why? Hey,
haven”t you heard? We have an election! And the Clinton
administration knew that if they said anything, Saddam would
use oil as a political weapon (more so than he was already
doing). It should sicken every American, though admittedly,
outside of you readers and, oh, maybe another 200 or so,
Americans don”t have a clue.
Our idiotic policy of the last 8 years where the U.S. and the
British took out an air defense system here, or some shepherds
there, has been a total disaster. All it did was leave Arabs with a
sense of sympathy for Iraq and disdain for our imperial power.
Now, can any sane person not believe that Saddam has been a
busy little beaver, creating more and more weapons of mass
destruction? And with the renewal of flights and the inevitable
lifting of sanctions, it will be all the easier for our happy
bombmaker.
All of this, of course, doesn”t make things any easier for Israel.
Tuesday”s violence, when 9 died, certainly looked like all-out
war to me. As of this writing, another ceasefire may be
implemented but you know the deal. When the leader of Hamas
says he doesn”t pay attention to ceasefires, you can be sure his
followers won”t.
The economic damage to both the Palestinian and Israeli
economies has been great…over $260 million combined thus far.
In my 11/2 edition of “Hott Spotts,” I quote Rabbi Micky
Boyden from the scene in Israel. You may want to read it for
more details but here”s an excerpt.
“Israel is deserted. Few tourists, except the most courageous (or,
some would say, foolhardy) are coming here these days. Hotels
have reduced staffing levels and the tourist industry is suffering
terribly. The unrest of two weeks ago between Arabs and Jews
within Israel proper has also left its scars…There is a general
feeling of disappointment with how many Arab citizens have
misbehaved over the past few weeks…It will take a long time to
heal the wounds and reduce the level of Israeli animosity that has
been created.”
North Korea: George Melloan of the Wall Street Journal echoed
my feelings of last week when he had this advice for President
Clinton.
“He would be well advised to think of Kim Jong Il as Yasser
Arafat, treacherous behind the false charm. Successful
blackmailers seldom get tired of the game.”
Separately, North Korea met with Japan this week. Japan holds
the purse strings on massive amounts of aid but the two nations
have vast historical issues. North Korea wants to be
compensated for Japan”s 35-year occupation (1910-45) to the
tune of $7 billion. Japan accuses the North of kidnapping 10
Japanese citizens in 1977, an act which North Korea has never
acknowledged.
A German physician, who has been on the scene in Pyongyang
for over a year, had the following account in U.S. News on life in
the capital.
“North Koreans suffer from mass depression. They have no
future, no ideas, and nothing to live for. All day, they are just
waiting…It”s like they are waiting for Godot.”
Latin America: The region is increasingly tied together, and
that”s not a good thing. Venezuela”s President Chavez hosted
Fidel Castro for a 5-day lovefest as both leaders toured the nation
dressed in identical combat fatigues. Chavez promised to
finance up to a quarter of Cuba”s annual oil import bill while
Castro called Chavez “irreplaceable,” a remark which didn”t go
over well with opposition leaders.
Chavez is a dictator, a benevolent one for now. But it”s clear he
has grand designs which are at odds with U.S. interests.
Venezuela has the largest oil reserves in the world outside the
Middle East and is a major exporter to this country. His anti-
American rhetoric is worrisome, particularly with regards to the
civil war in Colombia where, in the long-held opinion of this
editor, Chavez can cause major damage, if not lost American
lives, through his support of the rebels.
The Colombian conflict is spreading. Peru, Venezuela and
Brazil now have major troop deployments on the border in an
attempt to keep the conflict from reaching their lands. Slowly
but surely it is.
There was one bit of good news, however. Colombian and U.S.
officials arrested 45 leaders of a new Colombian drug ring,
which has been responsible for a quarter of all cocaine coming
into America from Colombia.
Finally, in Peru, President Fujimori appears to have quashed a
military rebellion in the hinterland, but still no capture of ex-
security chief Montesinos.
Japan and Iran: The two inked a deal in which Japan will help
Iran with the world”s largest undeveloped oil field, a big event
since Japan has to import all of its crude. At the same time, the
Japanese government said it would work with Iran on limiting
weapons proliferation. This week President Khatami paid a visit
to Japan.
What”s wrong with this picture? A lot. This is one of those
deals where 10 years from now you go, “We should have
known.”
China: President Jiang Zemin severely lectured Hong Kong”s
free press. Not a great sign.
Indonesia: Relations with the world”s largest Muslim nation
continue to deteriorate and this could be a real flashpoint. Not
only have Muslim militants threatened Jewish interests but now
they are targeting U.S. interests as well. Our ambassador is
under heavy guard and Muslim gangs have been going through
hotels warning American tourists and businessmen that they
must leave. It”s only a matter of time before this gets ugly.
Spain: Basque separatists continue to wreak havoc. A car bomb
in the heart of Madrid killed 3 this week, including a Supreme
Court judge. 16 have died in the Basques” recent terror
campaign.
Russia: Over 30 Russian soldiers died this week at the hands of
Chechen rebels. Moscow had ruled that this war was over. Not
quite. 2,500 Russians have been killed since last year.
The Balkans: Good news…Yugoslavia was readmitted to the
U.N. And in Kosovo, local elections were dominated by
moderate ethnic-Albanians, not the hardliners as feared. But the
Serbs in Kosovo boycotted the vote.
Space
This week, two Russians and one American became the first full-
time residents of the international space station. And the earth
yawned. Of course our presidential candidates yawned as well.
Big mistake.
We must explore space, send a man to Mars and, most
importantly, begin to address the growing possibility that we will
one day be pulverized by one of the thousands of large objects
that are in Earth”s orbit. [And I”m not talking Mir.]
Former White House aide (under Reagan and Bush) James
Pinkerton quoted Carl Sagan.
“In the long term, even if we were not the descendants of
professional wanderers, even if we were not inspired by
exploratory passions, some of us would still have to leave the
Earth – simply to ensure the survival of all of us.”
Pinkerton adds, “Pioneers are still needed, in other words, and
visionaries must point the way.” So while today”s politicians
straddle the political middle, “content with the shortest possible
time horizon…the high court of history, foreseeing potential
annihilation, offers an enormous reward to the leader with the
longest and broadest vision of the future. It”s such a leader who
will save the human race.”
Random Musings
–A story in the journal Nature describes an awful situation
where the ballast water that is released into our harbors by
international tankers contains billions of viruses…in a single
gallon! All of this of course washes up on our shores and finds
its way into our water systems.
–My friend Gene in Oklahoma, the farmer, told me this week
that they”ve had 7 inches of rain in the 3 weeks since I was there.
They had had about one inch in the previous 3 months. See, I
really do bring clouds wherever I go!
–Kim Jong Il and Madeleine Albright really do make an
attractive couple. And Kim”s outfit…isn”t that early Jack
LaLanne?
–So I”m watching an update on the Publishers Clearing House
trial, where they have fraudulently been misleading the elderly,
and I was startled by something I didn”t know before. Robert H.
Treller, the guy who signed all those letters as publisher, doesn”t
exist! Now I”m mad. Give the prize patrol the chair! [The laws
are on the books…it”s time to start enforcing them.]
–Spell check: Yasser, Yasir, Yassir…I wish the press would
settle on one.
–Secretary of State Albright told the North Koreans at her recent
visit that, “American people care about humanitarian issues.” So
why doesn”t Black America take that statement and run with it?
What has this administration really done to begin to stem the
disaster that is AIDS in Africa? And what have they done to stop
the slaughter in Sudan? Nothing. But 90% of blacks will vote
Democrat.
–Overheard at the gate to my plane yesterday, another sign that
the apocalypse is near.
Wife: “Do I dare take the motion sickness pills this early?”
Husband: “Well, do you take them before or after the flight?”
Gold closed at $265
Oil, $32.71
U.S. Treasury Yields
1-yr. 6.16% 2-yr. 5.92% 10-yr. 5.82% 30-yr. 5.86%
Returns for the week, 10/30-11/3
Dow Jones +2.2%
S&P 500 +3.4%
S&P MidCap +5.0%
Russell 2000 +5.8%
Nasdaq +5.3%
Returns for the period, 1/1/00-11/3/00
Dow Jones -5.9%
S&P 500 -2.9%
S&P MidCap +19.0%
Russell 2000 +0.6%
Nasdaq -15.2%
Bulls 48.6%
Bears 30.3% [Source: Investors Intelligence]
Brian Trumbore
