[For the record, posted at 7:15 a.m., Saturday.]
“People, can”t we all just get along?”
–Rodney King
Sorry, Rodney. Not today. And demagogues like Jesse Jackson
better tone down their rhetoric real quick before we have another
Reginald Denny on our hands.
I apologize ahead of time for what you”re about to read as I”m
sure to offend nearly everyone.
Here I spend much of my time focusing on international
“wildcards,” not knowing that the biggest one would be right in
our own backyard. But since I”m the one who has dreams where
Kim Jong Il toasts Madeleine Albright with his left hand, while
pushing a button with the right, it”s pretty easy to come up with a
nightmare scenario after the events of this past week.
So down to Florida. All you”ve heard from the folks in Palm
Beach County, or from their blathering surrogates, is that they
feel “disenfranchised.” Hell, over 40% of Americans, including
yours truly, have been disenfranchised ever since Bill Clinton was
allowed to stay in office! Where was our recourse? But you
know what? We accepted the outcome and moved on.
And you can start with Clinton when it comes to the problems
we”re having today. Al Gore would have rolled, if only Clinton
had told the truth.
But then it was Gore who decided to launch class warfare during
the campaign. And if we”re not careful these next few weeks and
months, it could evolve into hand-to-hand combat. Because
folks, even if Bush or Gore were to gracefully concede next
week, the stench from this election, and the administration we bid
adieu to in January, will linger for some time. Like many of you,
I”m sick of it all.
And then there are the idiots.
Far too many Americans mosey along, not pulling their share of
the load, or ruining it for others, when wham! Someone plants a
bug in their ear and suddenly, “I”m disenfranchised!”
Enough has already been said of the butterfly ballot and double-
punching. America, as a nation, can not be held responsible for
every citizen, rich or poor, young or old, black or white, urban or
rural. “Leave no child behind” was a dumb campaign slogan. I
am as compassionate as the next guy. But the person on the
receiving end has to do their share.
As for the election itself, I don”t blame Al Gore for demanding a
recount and the Democrats can”t blame Bush if he is forced to
request 3 or 4 of his own. This is an election that takes place
every 100+ years. It will never happen again in our lifetime.
But what”s frustrating is that our system is increasingly bereft of
role models and statesmen. Undoubtedly, one or two will emerge
from the turmoil of today but looking down the road you can”t be
too encouraged.
The real crises we face in the future will be potentially
cataclysmic. And the last things we will need in these coming
firestorms are an irresponsible media and jackasses like Jesse
Jackson, who rile up the dumb so that they can get a little TV
time.
CNN commentator Jeff Greenfield has been foaming at the mouth
when defending the networks handling of the projections,
particularly where they virtually called an election long before
the West Coast polls closed. It”s the arrogance of his ilk that
I find disconcerting. We didn”t elect you for anything,
Mr. Greenfield. Stop trying to control our votes.
When I was in Oklahoma City the other week, I reflected at a
memorial which can be summed up in the following…We have
met the enemy…and it is us.
Wall Street
It”s really very simple to explain the ugly action the latter part of
the week. While the election obviously played a significant role,
particularly when Secretary of Propaganda Bill Daley uttered his
garbage on Thursday afternoon, the real reason for the broad
stock market decline is the same issue I have raised continually
for months now. The economy is slowing, earnings are
decelerating, and investor / analyst expectations for future
corporate profit growth are still too high.
So just how quickly is the economy losing steam? Will the malls
still be jammed come December? Will more and more auto
workers receive extended vacations? Will your editor receive a
Bose Wave Radio for the garage to complement his other 5
stereos?
Right now, the consensus continues to hold the view that what
we are seeing is nothing more than a soft landing. But that can
change quickly, as it was beginning to do at week”s end, and
consumer sentiment is critical. That”s where a drawn-out election
process, and / or a pickup in Middle East tensions, could be the
deciding factor when one guesses just how low we can go.
As for hard facts, the news from retailers this week was poor.
But on the inflation front, the core producer price index was
tame. One of the questions for this coming week is will the
Federal Reserve lighten up on the inflation rhetoric when they
gather on Wednesday? While no one is expecting an actual change
in interest rates, it is time for the Fed to adopt a “neutral” bias as
it relates to their outlook for the coming months. That would
send a positive message to the markets and it may be just what is
needed to at least stabilize matters around current levels. If the
markets continue to swoon, however, the Fed will have to act
quickly to lower rates. Some argue they should do that now. I
don”t disagree. I”m just trying to guess what they will do.
For the week the Dow Jones lost 215 points, 2.2%, to close at
10602. But the Nasdaq plunged 12.2%, its 3rd worst week ever,
with the index finishing at 3029, 40% from its all-time high set
just last March (5048) and its lowest close in a year. That”s right.
When all is said and done, you would have earned over 5% in
cash the past 12 months and slept like a baby. I bet that there are
more than a few who wished they had done that.
So how many times does the average tech investor have to be hit
over the head before they totally give up? [Which is what the rest
of us want, by the way.] After all, since the spring they”ve bought
every dip, only to get slammed to the deck again. Stagger
up….Pow!… Stagger up…Pow!…
We were supposed to have had 3 or 4 classic washout days
already. I certainly thought we had them. But when the trends
are all down as far as earnings and the economy, you have to be
extra cautious. It”s like the cog railway that goes up Mount
Washington in New Hampshire. For 5 years the Nasdaq was
chug chug chug chug…then, hey, conductor, we”re going
backwards! Aaghh!
Per the previous discussion on earnings, Cisco started the week
with a lukewarm quarterly report. Sure, they once again beat
earnings estimates by a penny, but it wasn”t a blowout and the
Street has zero tolerance these days.
Then Dell stated that the existing forecast for next year was
overly optimistic. PC sales are slowing. So Dell lost almost 20%
on Friday alone, dragging every other related issue with it.
One of the many negatives of seeing a Nasdaq at 3030 is that in a
blink it could be below 3000. The psychological damage has
already been severe. If the economy truly lands softly, and on the
right runway, techs could stabilize and eventually rally in earnest.
But if the economy continues to grind to a halt, or worse, there
would be more pain to follow. Lastly, consider this. In 5 of the
past 6 weeks, the Nasdaq has been up or down 5% or more. That”s
amazing volatility.
Street Bytes
–I”m going to hold off on a long dissertation about congressional
gridlock, and its impact on the financial markets, until I see how
Congress ultimately shakes out. Obviously, whoever wins the
presidency has an impact on the Senate. And many House races are
still up for grabs as the recount process drones on.
–The Internet: The blue chip, using the term loosely, Net issues
like Yahoo, eBay, and Amazon, fell back to earth after a sharp
rally the previous two weeks. For the e-tailers, obviously a lousy
Christmas season, versus expectations, wouldn”t be good.
But many Net issues won”t even make it to the holiday season
and little boys and girls across the nation will wake up Christmas
morning without that toy or book they so longed for.
[Pause…while you get a Kleenex.]
Of course, they didn”t receive the present last year either, but that
was because of shipping delays. No, this time it will be because
many of the e-tailers are going out of business.
For example, if you were looking to give Fido a beautifully
wrapped 40-pound bag of dog chow, why you”ll simply have to
pick it up at the store. Yes, Pets.com is no longer.
Geezuz, was there any more stupid business plan than this?
Maybe it was thought up in Palm Beach County by one of those
double-punchers. Here”s all you need to know. In the recent
quarter, Pets.com (in case you”re unfamiliar, you could order pet
supplies on the site) had revenue of $9.4 million, while their cost
of goods sold were $9.6 million. That”s not overall business
expenses, folks. Just the cost of the goods!
And in a move that epitomizes many segments of the Net today,
Merrill Lynch was hired by the sock puppet to look for a buyer.
50 companies / individuals were contacted and only 8 even
wanted to visit with the good folks running this now worthless
biscuit. Rrruff…ruff.
And the ongoing saga of Priceline.com continued as the head of
their auto division, a longtime expert on all things Detroit, quit,
announcing that selling cars online doesn”t work. She could have
just as easily said, “Selling cars online will work the day that dogs
can place their food order.”
CNNfn had a great report from Birinyi Associates on the CNN
site this Friday titled, “The $1.7 trillion dot.com lesson.” [Click
on my “Finance” link above and you may be able to find it
through their archives.] The bottom line is that the market value
of 280 stocks in the Bloomberg U.S. Internet Index has decreased
by a staggering $1.75 trillion, most of which evaporated since last
March. Plus, 150 are down 80% or more from their 52-week
highs.
–By the way, advertising on the Net is totally worthless, as
shareholders of companies like 24/7 Media understand. Of
course I”ve mentioned this before. Plus, a recent study of Net
usage shows that it”s actually declining. Also this week, shares in
Disney took a hit over future concerns about “offline” advertising
as well.
–I feel obligated from time to time to fill you in on my latest
personal portfolio changes. I sold one of my oil stocks, not
because I”m bearish on energy, but simply to raise more cash,
which now stands at 50%.
–If you were stranded on a desert island and could obtain just
one indicator to gauge how the economy was performing, it”s
steel. Production continues to slow, especially versus the year
ago period.
–Regarding the new Fox program, “The Street,” geezuz, where
was I during my time in the business? Wall Street was never that
exciting for me!
–Delaware”s Republican Senator William Roth was properly
defeated on Tuesday. From a health standpoint, it was simply
time to move on. But when you admire the balance in your IRA
account, think of Roth because he was your champion.
–Oil: OPEC meets on Sunday and they obviously won”t be
increasing production any further. With the exception of Saudi
Arabia, they”re at full capacity as it is. But this meeting is going
to be more about 2001 than today”s environment. OPEC”s
leaders are increasingly worried about a price collapse next
spring, once we get through the high demand winter season. And
this is further reinforced when one looks at the potential for a
global slowdown.
The dichotomy is that current inventories, worldwide, are still
very tight, even after 4 OPEC boosts in production this year
alone. And thus oil remained in the $32-$34 range for a 4th
straight week. Should it be? Probably not. But you still have a
Saddam premium on the price and as the Arab world opens back
up to the bastard (see following story) it”s probably warranted.
[FYI…I was looking at my local forecast on The Weather
Channel link and hey, neighbors, it”s not getting out of the 30s by
next weekend! Bring in the firewood, boy!]
–Euro: The European Central Bank intervened continually this
week in an effort to show it”s serious about defending the battered
currency. It had zero impact…and this in a week when, because
of our own political turmoil, you would have expected better
performance.
But in all honesty, our long run with the U.S. dollar must be near
an end. And if the decline is significant, that”s just another
negative Christmas Yule Log.
International
Robert Kagan, a leading global strategist, wrote an op-ed piece
for the Washington Post that is must reading. In a nutshell, he
focuses on the foreign policy legacy that President Clinton is
leaving behind. As Kagan puts it, “Some presidents have a
sneaky way of leaving serious unresolved foreign policy problems
and some hidden disasters that conveniently erupt after they leave
the scene,” i.e., Eisenhower left Kennedy with Vietnam, Bush left
Clinton with Iraq.
Clinton, Kagan writes, “has left ticking time bombs all over the
place, any or all of which are likely to go off within the next four
years.”
First off, Iraq. With the sanctions regime having totally collapsed,
Kagan says, “During the next administration, Iraq will get a
missile and mount something deadly on it, which will have a
cataclysmic effect on an already unstable Middle East.” And as
I”ve discussed repeatedly, the Clinton folks have successfully kept
Iraq off the front pages until after the election. That”s about to
change.
Two developments which have occurred since Kagan wrote his
piece are also significant. Saudi Arabia opened up their border
with Iraq for the first time since the Gulf War and Egypt re-
established diplomatic relations, cut off since 1991 as well. So I
guess you could say, officially, that Iraq is now open, 24/7, and
you know those little bombmakers are having a great time.
As for the Middle East peace process, you saw with Yassir
Arafat”s failed meeting with President Clinton that peace is
nowhere in sight. And the fact that Israel assassinated a leading
Fatah militia figure (as was their right) only stokes the flames of
hatred.
This week Israel also hinted that they may release details on
Palestinian Authority corruption, including personal use of
international aid money. I have written often of this practice. But
it”s quite another matter if the Israeli government begins to
hammer away at the issue. My reading of it would be that it
makes it far easier for one of the radical clerics to move in on the
Arafat regime. And you know what the results of that would be.
Finally, you also saw how increasingly irrelevant Arafat is if you
watched his performance on “60 Minutes” last week. He”s out of
the picture, one way or another, in a year.
North Korea: Missile talks between the U.S. and the North broke
off with no agreement. An editorial in Defense News voiced
concern over the Clinton administration”s posture that helping
North Korea launch commercial satellites is a good tradeoff for
the North discontinuing its long-range missile program. As the
publication points out, in launching the North”s satellites, we
would be handing them upper-stage rocket technology. And
anyway, look at the brouhaha over the potential pilfering of our
missile technology by China a few years back.
The North Koreans can”t even feed their own people. Why the
heck would they waste precious resources that should be used for
agricultural and infrastructure programs, not spy photos? Other
countries in the region can supply them with satellite services.
And I”m sure The Weather Channel, in the name of diplomacy,
would be happy to provide them with their own feed.
Europe: Thursday night over 200,000 marched in Berlin in
memory of 1938”s Kristallnacht, the “Night of Broken Glass,”
when the Nazis Joseph Goebbels organized “spontaneous”
demonstrations which destroyed 7,500 Jewish businesses. The
huge rally was staged to protest a recent surge in Neo-Nazi
attacks.
But a broader issue is at stake here and it involves Tuesday”s
vote. Europe”s chief leaders are all up for re-election during the
next 22 months. What the American election proves is that even
a booming economy may not have been enough to save the
incumbent left-center government. Similar administrations now
occupy Britain, France and Germany.
While the Green Party in the U.S. did not receive a lot of support,
it was a major step forward in the process and in Europe, the
Green Party is already a coalition partner in some governments.
So here”s your editor”s dilemma. European governments have
been taking the needed steps to reform their respective economies
after decades of fruitless, socialist policies. If the Green”s start to
gain more power in local and parliamentary elections, you can be
sure they will tilt Europe”s current rulers to the left…and away
from reform, just at the worst possible time. It could be enough
to tank their economies (if they haven”t already due to a global
slowdown).
Under this scenario, as the economies suffer, you will see a
continuing surge in the far right as well. Ergo, conflict.
And let me say this to my European friends who are mocking our
election; for instance, in the words of the Daily Mail, “What a
Mickey Mouse Way to Run a Country.” If this process drags into
December, you have every right to say that. In the meantime,
cool your jets, and for two reasons. First, those of you on the
continent would be eating Jackboot cheese if it wasn”t for
America. Second, to the British, you”re the same people who
idiotically booted Winston Churchill out of office just months
after WW II. And he was only history”s greatest leader.
Russia: You probably have a sense I try to rank the countries
discussed in this section in some relative order of importance. So
you also must have noticed how Russia has been nowhere near
the top recently. Normally, that”s a good thing.
The financial condition of this nation is vastly improved thanks to
the high price of crude, Russia”s key export. But confidence in
the economy has not returned due in no small part to the ongoing
issue of how President Putin is handling basic property rights and
the rules for corporate governance.
More importantly, however, is a potential bombshell on the
horizon. Former FSB (Russian secret police) official, Alexander
Litvinov, may implicate the FSB in the Moscow apartment
bombings of 1999 which killed 300 and were used as a pretext for
the Second Chechen War. Your editor was the first to write last
year what others must have wanted to. The government blew up
their own people. And Vladimir Putin was heading the FSB at
the time the orders would have gone out.
Iran: The government”s ongoing involvement in terrorism appears
to be overwhelming and the West can take no comfort in the fact
that the most popular female politician in the country has gone on
trial in a Revolutionary Court for participating in a German
conference on Iran”s reform movement. The prosecution may
seek the death penalty.
Taiwan: This could eventually be one of the more important
stories over the coming months as the opposition is attempting to
recall President Chen Shui-bian, elected to a 4-year term just last
spring, over his decision to scuttle a partially constructed nuclear
plant. Chen”s slender coalition has splintered. There are three
steps that need to be followed for a recall. First, two-thirds of the
Parliament has to vote to oust Chen. Second, it then goes to a
public referendum on whether he should be booted. Third, a new
general election. This could equate to months of turmoil…
turmoil that China can exploit.
[Don”t worry. Listing the recall process was done more for my
benefit. So I don”t lose it!]
Venezuela: President Chavez was granted sweeping new powers
which effectively mean he can rule by decree. In other words,
calling him a dictator is now about 95% accurate. When folks
start disappearing, it jumps to 100%.
Southeast Asia: As a follow-up to last week”s comments on
Indonesia and rising tensions because of a surge in Islamic
Fundamentalism, there is increasing evidence that this is spreading
across the region. The radical Middle Eastern groups see Asia as
a region ripe for promoting their extremist agenda. Said one
diplomat on the scene:
“The growth of radical Islamic movements…is very alarming.
It”s already a major destabilizing force and it has the potential
to become much worse.”
The Fundamentalists are ready to do battle against “evil Western
influences;” things like alcohol and sexual permissiveness. On the
other hand, most Westerners don”t like to use car bombs, so I
guess the Fundamentalists are miffed about that as well.
Indonesia is 85% Muslim, Malaysia 40%. Historically, this was a
region of religious tolerance. That”s no longer the case. And,
of course, it”s the poor who will suffer, not only from bullets and
bombs, but also when the Asian economies sink into a muck from
which it will take decades to climb out of.
Balkans: Not for nothing, but I keep telling you, it ain”t over ”till
the fat Serb sings “democracy,” and we are far from the
realization of this lofty goal. There were prison riots all over the
country this past week and some of the inmates have a real case.
President Kostunica has proposed that Kosovar Albanians be freed
as a gesture of reconciliation since it was the Milosevic regime
that put them in jail in the first place.
But what of Serbs who may just be political prisoners? Add to
this the fact that Kosovo”s newly-elected parliament leader,
Rugova (he of the ascot), is requesting independence for
Kosovo…though he will go about it in a diplomatic fashion.
Kostunica has said no way. So as winter draws a bead on the
Balkans and there are growing hardships, NATO better act fast to
shore up the situation or we could quickly be right back into the
slop that is this historically tragic region.
Election Tidbits
–Hillary: I”ll never, ever, understand this. Granted, Rudy
Giuliani, in the words of New York Governor Pataki”s wife
Libby, “jerked everyone around” in not getting out of the race
earlier, while Rick Lazio did not run a great race. But I guess
55% of the electorate saw nothing wrong with voting for the Ice
Queen. Oh well, she”s all yours, New York…but there”s one
problem. You were being very inconsiderate of the rest of us.
–Jon Corzine: Here in New Jersey, this guy who never involved
himself in the process before the Democrats tapped him because
of his personal war chest, outspent his opponent, Bob Franks, by
at least 11 to 1 and yet won by only 51-48 percent. If Mitch
McConnell and his Republican Senatorial Committee had given
Franks just a little support earlier in the campaign, Franks would
have prevailed.
For those of you not in my state, understand that Bob Franks is
the best man I have ever met (and supported financially) for
political office. There are countless New Jerseyans still bummed
by this outcome.
Franks is a truly decent, compassionate, highly competent,
dedicated, moderate politician who has served this state with
distinction.
And it”s also true that this classiest of men gave one of the great
concession speeches, as many figures across the nation have begun
to recognize. In part…
“We are so blessed to live in the greatest country on this planet.
All of us have an obligation to make it even better.”
Meanwhile, Corzine now has his toy. Handle it with care, Jon.
–Missouri: You have to feel sorry for Senator John Ashcroft.
What the heck was he supposed to do? And what were the
people of Missouri thinking?
Now look at the above three cases in New York, New Jersey, and
Missouri. A majority voted for a woman who was almost
indicted, a politician who flat out bought an election, and a dead
man. Maybe the next election we”ll select a farm animal.
–Ralph Nader: I never thought I would be such a staunch
defender of Nader. Geezuz, folks. Stop whining. Nader has
been on the public scene for over 35 years. And some of the
charges being leveled at him are outlandish. For example,
Nader”s personal assets are around $4 million, including about a
quarter of that in Cisco stock. Good for him. But some pundits
feel this disqualifies him from spouting off against Big Business
and the corruption of our political system. What the hell is he
supposed to do; live off Chex Mix and wear sandals?
No one has been truer to his cause than Ralph Nader. Far more
than Al Gore, for instance. Nader has every right to run for
President, just as much as Gore, Bush or Libertarian Harry
Browne do. He is sincere in his effort to launch the Green Party
as a legitimate force. Personally, I can”t ever envision a scenario
whereby they gain my vote, but they are allowed to try and earn
it.
–Voter turnout, despite the cries on Election Day that it was
“heavy,” still only hit 50.7% nationwide, or a whopping one
percent more than 1996. But, of course, it was too high in Palm
Beach County where many thought they were allowed to vote for
two people for president.
So I”d like to see the following test administered to the folks of
this region before an individual can vote.
Question: Marge and Homer Simpson”s boy is named______?
If you can”t answer this, and you”re over 70, no ballot.
–I was doing some research for my latest Wall Street History
piece (market junkies may want to check it out) and I was
reminded that prior to 1984, Election Day was a national holiday.
A Chinese girl in Beijing was asked what she thought of
Tuesday”s vote.
“The more I know about America the stranger it becomes. Why
do you vote on a Tuesday, anyway?”
Good question. Of course it should be Saturday or Sunday but,
barring that, we could solve a ton of problems by going back to
making Election Day a holiday which could accomplish one big
thing…it would get more competent individuals involved at the
voting booth.
Random Musings, Part Deux
–I”m in a bind, like many Americans. For over 15 years I have
taken Alka-Seltzer Plus Cold Medicine at the first sign of a cold
or scratchy throat. During this time I haven”t missed one day of
work. Now the Feds are banning the ingredient PPA
(Phenylpropanolamine…you really don”t know if I spelled that
correctly, do you?) found in Alka-Seltzer and other cold
medicines because it can, in rare instances, cause a stroke. I”m in
need of an alternative and you”re welcome to send me
suggestions. [Over the counter medicines only, please.]
–An encouraging sign. I have noticed an increasing amount of
op-ed pieces written by blacks decrying their own hip-hop
culture. It”s all pretty simple. Black mothers recognize the
destructive impact the music and its surrounding culture have on
their kids.
–I think I”m coming down with a cold.
–96 died in an auto accident in Nigeria when an oil tanker plowed
into a bunch of cars that were stopped, setting off an inferno.
–Whenever we select one, the new U.S. president will earn a
salary of $400,000. In case you were thinking of running for
president in Estonia, think again. Your salary for that title would
only be $1,451.
–Everyone is piling on Dennis Miller and his performance on
Monday Night Football. I think he”s great. Carry on.
–Gosh, I miss my new adopted state of Oklahoma. And they
voted 60-38 for Bush. I was thinking of moving to New Zealand
after this election but maybe I”ll just move here…right into J.C.
Watts”s district. And it”s easier to purchase Shiner Bock Beer
here as well.
–I”m crossing all old people in Florida off my Christmas list,
except our dear family friend Mrs. Vickers, who wants to move
anyway.
–In case you missed it, my 11/3 Bar Chat (see the archives)
covered the 1960 presidential election better than anything you”ve
seen on TV.
–From Comedy Central”s “The Daily Show.” “This just in…the
Civil War is too close to call!”
–When will the networks acknowledge that a Bush administration
would have two blacks who would be terrific role models, Colin
Powell and Condoleeza Rice? The Democrats counter with Jesse
Jackson.
—
–I lost a good friend this week and I hope you”ll indulge me for a
moment. A few years ago I traveled to the South Pacific island of
Yap to help out with a project I”m working on for the Society of
Jesuits. When I was on Yap I met Louis who was my escort and
driver. He was a quiet, dignified man with a heart of gold. He
was also crucial to my project and I learned this week he had died
at the age of 52 from a brain hemorrhage. When the final “Book
of Good People” is published at the end of time, Louis Rugin will
be at the top of the list. I was looking forward to seeing him
when I go back this coming May. At least I have the memories.
To my friends on Yap and Rumung, you have my prayers.
—
Gold closed at $265
Oil, $34.02
Believe it or not, interest rates barely budged this week.
U.S. Treasury Yields
1-yr. 6.15% 2-yr. 5.89% 10-yr. 5.79% 30-yr. 5.87%
Returns for the week, 11/6-11/10
Dow Jones -2.0%
S&P 500 -4.3%
S&P MidCap -5.1%
Russell 2000 -5.3%
Nasdaq -12.2%
Returns for the period, 1/1/00-11/10/00
Dow Jones -7.8%
S&P 500 -7.0%
S&P MidCap +12.9%
Russell 2000 -4.7%
Nasdaq -25.6%
Bulls 48.2%
Bears 29.6% [Source: Investors Intelligence]
Brian Trumbore
And to the veterans of this great country, God Bless You! You
are never far from my thoughts.
