[Posted 7:15 AM]
I was at Arlington National Cemetery last Sunday and took note
of the following excerpts from President John F. Kennedy’s
inaugural address, as engraved on a wall surrounding his
gravesite. I think you’ll agree with me that the words ring true
today.
“Let every nation know, whether it wishes us well or ill, that we
shall pay any price, bear any burden, meet any hardship, support
any friend, oppose any foe to assure the survival and the success
of liberty…
“And so my fellow Americans: ask not what your country can do
for you – ask what you can do for your country.
“My fellow citizens of the world: ask not what America will do
for you, but what together we can do for the freedom of man.”
As I noted from day one following the attacks, it’s really all
about Iraq. There are obviously other parties that need to be
destroyed, but in removing Saddam the civilized world takes a
giant step in its monumental mission of keeping weapons of
mass destruction out of the hands of terrorists as well as those
regimes that harbor them.
There has never been any doubt what Saddam is up to, nor as to
what he is capable of. It’s only a matter of time. As President
Bush noted in his speech commemorating the six-month
anniversary of 9/11:
“In preventing the spread of weapons of mass destruction, there
is no margin for error, and no chance to learn from mistakes.
Our coalition must act deliberately, but inaction is not an option.
Men with no respect for life must never be allowed to control the
ultimate instruments of death.”
President Bush has also said from the start, “You’re either with
us or against us.” In a different era, facing a different (but
similarly destructive threat), President Kennedy asked the
citizens of the world what together they could do “for the
freedom of man.”
So as you read this, Vice President Cheney is winging his way
around the Middle East, attempting to drum up support for the
big move on Baghdad. Of course the situation is different from
1990 and Saddam’s invasion of Kuwait. In that instance, it was
easy for moderate Arab leaders to fall in behind the U.S. as it
was a case of naked aggression.
This time, however, Arab leaders like Jordan’s Abdullah and
Egypt’s Mubarak are scared that their own regimes will be
toppled as the respective populaces and the extremist elements
therein point to the fact that no proven link between 9/11 and
Iraq has been produced.
That’s one issue. The other, however, is something the leaders
can’t deny, that being that Saddam’s weapons of mass
destruction pose a threat to the entire region.
But as J.F.K. said way back on January 20, 1961, “Let every
nation know, whether it wishes us well or ill…we shall pay any
price…to assure the survival and the success of liberty.”
Whether you’re with us or against us on the issue of Iraq, we are
going in. Our friends in the region, and others like Britain,
deserve the courtesy of being told beforehand, while the actual
timing should properly remain a mystery.
But there should also be no mistake that the U.S. certainly
prefers to have some allies along for the ride. I have said since
day one that even naval support from the likes of Germany and
Japan can be vital in securing the Persian Gulf or the Straits of
Malacca between Indonesia and Malaysia. I have also felt that in
many respects the coalition would hold and thus far it has. Just
the other day, for example, 500 Canadian troops stood shoulder-
to-shoulder with U.S. forces in the mountains of Afghanistan.
Yes, when the time comes the U.S. will receive enough support,
militarily or through knowing winks, as Saddam is obliterated.
Of course all of us wonder, however, just what he will do before
he’s cast into the fires of hell. It’s a reason why I close these
articles with “God bless the men and women of our armed
forces.”
—
Israel: Any discussion of Iraq obviously has much to do with
Israel. New York Times columnist Thomas Friedman made the
following observation.
“The notion is taking hold (that) the Arabs can actually destroy
Israel. Some radicals even fantasize that they can undermine
America.” In effect, the long feared civilizational war.
Friedman also quotes analyst Stephen Cohen, who notes that “we
are now on the cusp of the extremists’ realizing this destructive
power,” and the willingness to give up “thousands” of lives to
achieve their objectives.
Against this background, the U.S., the Arab world and the U.N.
are all now vying for the stage in various attempts to achieve at
least a viable ceasefire between the Palestinians and the Israelis.
U.N. Secretary General Kofi Annan condemned both sides in
rather stark language, while the U.N. Security Council (with U.S.
support) approved an historic resolution calling for an
independent Palestinian state.
Meanwhile, the Arab nations hold their big summit on March 27-
28, at which time the vaunted ‘peace’ proposal that Saudi Crown
Prince Abdullah gave (in an exclusive…the editor smirked) to
the Times’ Friedman. Of course Abdullah’s sham plan will be
further watered down at the upcoming gathering as nations like
Syria tack on provisions Israel simply won’t be able to accept.
Oh well, like I said, it’s really all about Iraq and Saddam’s
response when he is attacked. We can only hope some of his
generals act heroically and refuse to launch the Scuds that
undoubtedly are loaded with chemicals.
Wall Street
If you think all of the above had little to do with Wall Street,
you’re sadly mistaken. It has everything to do with it,
particularly in the realm of consumer and business sentiment.
Sometime in the not too distant future, Americans will once
again be glued to the tube and not exactly in the mood to shop or
invest in plant and equipment.
But for today, the past week saw trading volume slow and
volatility dry up some, as the blue chip industrial issues marked
time, while technology stocks slipped on renewed fears that
recovery in the sector won’t be as robust as some had hoped for.
The Dow Jones closed up for the 5th-straight week, +0.3%, to
10607. Nasdaq lost 3.2% to 1868.
On Wednesday both averages declined after the government’s
report on February retail sales rose a less than expected 0.2%.
This stoked fears of slower growth and a none too vibrant
rebound in corporate profits, important if you believe, as I do,
that many stocks remain grossly overvalued.
For technology, you had a number of items that proved to be a
downer; like an earnings estimate reduction for Intel by JP
Morgan and a quarterly release from Oracle that revealed
revenues to be even weaker than they had preannounced just two
weeks earlier. An Oracle executive said the outlook was still
“cloudy” for IT spending.
So it’s the same old / same old for tech. In many areas there is
still simply too much capacity when weighed against demand,
while from a balance sheet perspective, many companies,
particularly in the telecom sector, still have way too much debt
for businesses that are known for eating their young. Not real
attractive as an investment, at least in my way of thinking.
Street Bytes
–U.S. Treasury Yields
6-mo. 2.07% 2-yr. 3.58% 10-yr. 5.33% 30-yr. 5.75%
The Federal Reserve meets this coming week and most market
participants expect it to maintain the federal funds rate at existing
levels. It would be premature for Alan Greenspan to raise them,
as he himself, while increasingly bullish, is still concerned that
consumer spending will be unable to maintain its robust pace.
What’s most important, however, is the language applied to any
statement on rates and the feeling here is that they will change
the ‘bias’ to increasing them in the future, which doesn’t mean,
though, that they necessarily will at the following meeting in
May.
Bonds were unchanged on the week as the market played its
waiting game, plus the lower than expected numbers for retail
sales and a benign producer price report gave bond traders little
incentive to sell off.
[My friend M.R., one of those rare inflation hawks, warns that
because Penn State has just hiked tuition 10% (on top of a recent
7% increase), the inflation picture isn’t as sanguine as most
experts say it is. I’ll fall in this camp when my barber raises his
current price of $15.]
–Arthur Andersen: It is sad that 28,000 employees have to pay
the consequences for the corrupt actions of Andersen’s
leadership, but in the Justice Department’s indictment of the
accounting firm, clearly we’re talking about wrongdoing on a
massive scale and it cannot go unpunished. This is all part of the
needed cleansing process following the bubble.
–Related to the above story are the Enron-like congressional
investigations which will now focus on the shenanigans at Global
Crossing. The crap that went on here is just as bad as anything
Enron did.
–Waste Management is Andersen’s largest client, which means
there had to be a quid pro quo regarding the disposal of the
shredded documents. Haul ‘em in, too.
–The SEC is looking into the deal behind Worldcom CEO
Bernard Ebbers and the record $341 million loan the company
graciously handed him. Hey, the guy had to eat, I guess.
–For the 42nd time, Lucent announced its revenues would
disappoint and now its scheduled return to profitability has been
postponed another year. Something about a bubble in telecom.
–Trading volume on Thursday and Friday afternoon dried up
once the NCAA tournament action commenced. Both days
really should be national holidays, you know. Opening Day for
baseball season should be as well. Basically, what I’m saying is
between March 14 and April 1st, the nation should just go crazy.
We’d have to give back Labor Day, however.
–G.E. Capital sold $11 billion in bonds, the largest ever dollar-
denominated corporate bond offering in the history of the galaxy.
The corporate fixed-income market in general has been booming
for two reasons. Some companies are looking to shore up
financing in the face of a tight commercial paper market and,
second, with the prospect of higher interest rates in the cards,
eventually, it’s the only prudent thing to do.
–Energy: OPEC has opted to hold the line at current production
levels, but hinted it may loosen up some come June and the
“summer driving season” (of course most folks drive year
round). Last December I ridiculed those who blasted OPEC
when they cut production for the 4th time in a year, saying the
economy called the tune on the price of crude, not production
levels. That was correct then. But looking ahead, if the global
economy exhibits any kind of strength, eventually production
levels will play a role in the price. [On the growth front, the
World Bank’s latest estimate is for a pickup of only 1.3% in
global GDP this year, vs. 1.2% in ’01, while adding, “downside
risks (are still) significant.”]
Today’s oil price of $24 for West Texas is the highest in six
months and OPEC now sees a chance for the price to stabilize in
its long sought after $22-$28 band. But OPEC also correctly
states that you can’t blame them for all of the recent increase
because $3 of the hike is an Iraqi ‘war risk’ premium.
Meanwhile, those heroic senators of ours down in Washington
voted against establishing mandatory new fuel efficiency
standards, gasoline accounting for 8 of the 19 million barrels a
day that we consume in this country. It’s our fault, you know.
We stupidly keep sending these guys and gals back.
[To digress, you really should glance at my latest “Wall Street
History” piece, where I have an excerpt from perhaps the greatest
single speech in American history, Daniel Webster’s 1830
defense of the Union. Read it and think about today’s bumbling
idiots, like Ernest Hollings and Robert Byrd.]
–Goldman Sachs estimates that net government debt could reach
$5.8 trillion by 2006 (46% of GDP…it’s currently around 30%).
Of course foreigners have been financing a large chunk of this,
buying U.S. bonds, as well as stocks. So the issue has always
been if and when the capital flows reverse, how serious will the
impact be? But every time the subject comes up, market players
decide that, Enron-type issues aside, the U.S. is still the best
game in town.
Fed Chairman Greenspan, however, is clearly focused on this
topic, as he made specific note of foreign investment in our
economy this week, saying it accounted for 40% of growth in
U.S. capital stock over the past six years. So we continue to
monitor the situation, hoping that we can somehow find the exit
before everyone else feels the need to do the same.
International Affairs
Africa / Zimbabwe: I have long thought that the U.S. should be
more involved in sub-Saharan Africa, not just because of the
massive health issues confounding the population, but to
encourage trade and true democracy. On Thursday, for example,
President Bush announced the U.S. would increase its aid budget
to Africa by $5 billion (though not until the 2004 fiscal year), but
only for programs that work.
Of course the President is right, and if Robert Mugabe is still in
charge in Zimbabwe at the time the funds are distributed, you
can be sure he won’t be receiving a dime.
I venture to say that no one else in a column of this kind has
written more about Mugabe over the years than I have. Let’s be
frank, if ever an assassination was warranted, he is a worthy
candidate. Having “won” his 5th-term in a fraudulent vote,
Mugabe is now set to obliterate his opposition and soon the
civilized world will be crying for the victims.
In case you missed it, vast numbers of good people in Zimbabwe
stood in line for up to 20 hours (!), if they ever even got a chance
to cast a ballot, as Mugabe shut down polling booths in regions
where he would lose a legitimate vote.
[Digressing a bit, the thought just popped into my head that if
Mugabe can be eliminated, one of the brave citizens should be
sitting at the right arm of Laura Bush during next year’s State of
the Union address. That, my friends, would be a truly magical
moment for the world.]
The U.S. and the West have failed to recognize the election, but
what is most upsetting is that the Organization of African Unity,
comprised of the likes of Kenya, Tanzania and South Africa,
labeled the vote “transparent, credible, free and fair.”
Unbelievable. The leaders of southern Africa are nothing but a
bunch of corrupt cowards and it’s no wonder why many
Americans often just throw up their arms and say of the whole
continent, “the hell with them.” Today, I can’t disagree.
Lastly, the man who lost the election, Morgan Tsvangirai, has
thus far appealed for calm among his supporters. He is probably
acting prudently, as he fears that any demonstrations will be put
down violently by Mugabe’s thugs. But at some point he will
have to reemerge and the West needs to back him to the hilt.
China / Taiwan: China is furious that Taiwan’s defense minister
was in the U.S. at an arms show (such visits simply haven’t been
allowed for over 20 years, as they are seen to be threatening the
existing “one China” policy). Further, the official met with
Deputy Secretary of Defense Paul Wolfowitz. Of course your
editor loves this. Separately, China is allowing two Taiwanese
banks to open offices on the mainland, a small but positive step.
Russia: Defense Minister Sergei Ivanov met with Washington
officials this week and said all the right things. There seems to
be little doubt Bush and Putin will be signing an arms reduction
treaty in May during Bush’s visit to Russia.
Colombia: It would appear that President Bush is prepared to
ask Congress to expand aid to Colombia in its war with the
rebels. As noted before, this is the right thing to do. Colombia is
a democracy and staunch friend, now fighting a full-blown war
against terrorists who threaten to destabilize the entire region.
Random Musings
–The following is taken from New York City’s leading business
publication, Crain’s New York, and represents the thoughts of
Steven Bernstein, head of contingency planning for Citigroup.
“Before, people talked of a building going down because of a
fire. Now, many people are thinking nuclear.”
For those of you who live in, say, South Dakota, don’t believe
the talk that New York is back to normal. It isn’t.
–Speaking of nuclear, I see zero reason to go on at length about
the leaked “Nuclear Posture Review,” which highlights nuclear
contingency plans against the likes of North Korea, Iran, Iraq and
Libya. There is absolutely nothing new here and the document
simply represents prudent planning in a world that could forever
change in the blink of an eye. In addition, it’s a congressionally
mandated report. What needs to be said, however, is that
whoever leaked it (much of which is supposed to remain
“classified”) should be put to death.
–In my local area, the police blotter is now filled with cases of
identity theft. The least people should do is rip up anything they
are throwing in the trash. Or go to their local Arthur Andersen
dealer and buy a shredder.
–Speaking of security, in the ongoing debate over whether some
wireless technology applications will ever be truly profitable,
like for downloading movies to be viewed on a 2-inch screen,
Newsweek reports that something important is getting lost in the
debate, namely, wireless security is porous and business has a
right to be particularly concerned as corporate IT departments are
forced to integrate proprietary information into employees’
handheld devices. [And the corollary, do corporations really
want to do this?]
–A U.S. Army report from last fall (details of which have
recently been released) confirms others’ worst fears, that being
the estimate that 2.4 million could be killed or injured in a
terrorist attack against a toxic chemical plant in a densely
populated area.
–Mexican authorities have made tremendous strides in the war
on drugs in the past 10 days, arresting key figures from various
cartels.
–USA Today poll: President Bush is still at an 80% overall
approval rating, with 86% supporting his future war initiatives.
Meanwhile, 68% say they are still flying the flag, down from
82% immediately after 9/11. I regret to say that in my
neighborhood it seems as if only 30% are flying it. It’s not just
about showing patriotism for your country, it’s like having a
candle in your window as a reminder of our brave children
fighting this war. That’s why I fly mine at home.
–“60 Minutes” gets major kudos for airing its segment on the
INS last weekend, when just two days later we learn of the visa
extensions mailed out to Atta and Alshehhi.
–I regret that Senator Fred Thompson has elected not to run
again for the Senate, but Republicans are fortunate (in my
estimation, at least) to have a veteran like Lamar Alexander
ready to fill the breach. But Tipper Gore on the Democratic
side? Will she grow a beard?
–Last May 26, I blasted the Bush administration (particularly
Karl Rove) for failing to foresee the Jim Jeffords defection. At
the time I also couldn’t believe how some conservatives acted
like it was a good thing; not seeming to care that congressional
committees would be in the hands of the likes of Patrick Leahy.
So today I’m astounded that commentators aren’t bringing this
up when one looks at the abandonment of Charles Pickering and
his now dead nomination to the federal court. Leahy’s Judiciary
Committee did him in and many of us are a bit upset that
President Bush didn’t expend any of his political capital until the
eleventh hour. And so much for Bush’s “good friend,” Ted
Kennedy, who was part of the Gang of Ten.
–Among his “10 ways to save money for retirement,” humorist
Andy Borowitz suggests, “Choose a dentist with interesting
magazines, then cancel all your subscriptions.” [New York
Times]
–Miss Cleo is not a Jamaican shaman. There is also no truth to
the rumor that StocksandNews has been her biggest client.
–Guys, great news. Britney Spears is available! [Girls, great
news. Justin Timberlake is available!]
–Doug L., reader and fellow Wake Forest alum, suggested that
Jack Welch should be StocksandNews “Dirtball of the Year.”
Good point. But since Robert Mugabe has already locked up this
title (barring another big terrorist attack), clearly Welch is a
candidate for “Sleazeball(s) of the Year,” which for 2001 went to
the executive committee of Enron. Then again, Welch could also
be eligible for “Jerk(s) of the Year,” previously awarded to John
Walker’s parents. Bottom line, competition for some of these
categories is going to be fierce and I am also looking for my
pictures of Welch and his wife, Jane, that I took in Rome last
year when I met him at the Vatican.
–The Defense Department successfully tested another stage of
the national missile defense project on Friday night. We salute
our fine scientists spearheading this effort.
–Lastly, I went to the Holocaust Museum in Washington for the
first time and, if a museum’s purpose is to educate, I have never
been to one that did its job better. To say the least, it was also
powerful.
One of the notes that caught my eye was the tale of Eishishok,
Lithuania. On September 21, 1941, 4,000 Jews were arrested
and herded into the town’s synagogues. By September 26, all
4,000 had been killed. Today, no Jews live in Eishishok.
Reading this, I couldn’t help but think of my journey 3 years ago
to Treblinka, one of Hitler’s death camps in Poland. As I’ve
noted once or twice since, I’ll never forget seeing the old women
in the doorways of the farmhouses that were all of a mile or two
from where the death chambers once stood. There was no one
else around the day I was there and they gave me some mean
looks, like what are you doing here? You’re witnesses, I
thought. You’re complicit…and cowards.
The day before visiting the Holocaust Museum, I had been to
Arlington. Tie the two together as I did: one to honor heroes, the
other to cry for victims.
But to end on a hopeful note, during World War II you had the
example of the village of Le Chambon-sur-Lignon in South
France. Led by a true hero, Pastor Andre Trocme, 5,000 Jewish
refugees were led to safety in Switzerland. Years later the
villagers refused all praise.
“How can you call us ‘good’?” one said. “We did what had to be
done.”
God bless the men and women of our armed forces.
God bless America.
—
Gold closed at $290
Oil, $24.51
Returns for the week of 3/11-3/15
Dow Jones +0.3%
S&P 500 +0.2%
S&P MidCap -0.0%
Russell 2000 -0.2%
Nasdaq -3.2%
Returns for the period, 1/1/02-3/15/02
Dow Jones +5.8%
S&P 500 +1.6%
S&P MidCap +5.8%
Russell 2000 +2.2%
Nasdaq -4.2%
Bulls 52.1%
Bears 30.2% [Source: Investors Intelligence]
Have a great week. I appreciate your support.
Happy St. Patrick’s Day! Slainte.
Brian Trumbore
