*Please note…the next review will be posted by 7:00 AM ET, Sunday,
not Saturday…it could be sooner, but it all depends on a few long
flights I”m taking, including one through Manila.
[Posted, Saturday…Hobart, Tasmania…still onboard the QE2 and
16 hours ahead of the Eastern Time Zone.]
Case Closed
“The only thing necessary for the triumph of evil is for good men
to do nothing.”
–Edmund Burke
Queen Elizabeth II used the above in addressing the British
people November 2001, and I saw it at the Auckland Museum
the other day as well, in a display concerning the Holocaust.
Following Colin Powell’s brilliant presentation to the UN
Security Council, I printed out a transcript and retired to the deck
to read it. While doing so, I was approached by Jan and Margaret,
a German couple that was part of my group for a small dinner in
Auckland, hosted by some locals. The evening was delightful and
a terrific way to learn more about the country. Jan and I also
briefly discussed what I do, but we didn’t talk politics that night.
Now we had something to discuss, however, and he mentioned
he had seen some of Powell’s comments on television (after 10
days our in-room satellite connection was finally re-established).
Then Jan unleashed this on me.
“Americans, and the British, are good at saying things without
any substance.”
I have been biting my tongue quite a bit on this little voyage
across the Pacific and I opted to do the same this time. “Let’s
just agree to disagree and still be friends, Jan,” I smiled.
Meanwhile, Margaret, a real sweetheart, looked horrified.
Folks, with each passing day I’m continually amazed at the
attitudes of those on board, including from a majority of the
Americans I have met. I did see, at least, that following Powell’s
oration, maybe the American public is snapping out of its stupor
of the past few months, a period that had seen support for war
with Iraq slip considerably. I also caught President Bush’s sober
statement Thursday afternoon. If you still harbored any doubts
where we were headed, he should have dispelled them.
It’s really a shame so many in the world seem to have learned
nothing in their history classes, or that they don’t understand the
threats of today. It’s a shame the French and Germans don’t get
it, let alone a majority of the people even in those nations who
are supporting the U.S. It doesn’t bode well for the future. But
thank God the world has leaders like Bush, Blair, Aznar, Havel
and Howard who understand the Big Picture. Without them at
this moment in time, we would be doomed.
I do need to digress a bit, however, and address those who have
sons, daughters or relatives in the military. I take your notes to
heart, and your children are in my prayers. I understand why
some of you are skeptical, at best, about the coming war and I
just want you to know that I don’t take my own position and role
in the debate lightly.
I have had the opportunity the past few evenings to have dinner
with a woman who lost her husband in the plane that hit the
Pentagon, this being her first trip out since. Anna’s son is now
stationed in the Gulf and she has doubts about our President and
his motives. We’ve had some frank discussions, to say the least,
and she has been very open with other aspects, post-9/11. For
my part I’m doing my best to convince her that her son is about
to fulfill a noble cause, as are all of your sons and daughters who
may soon meet the call.
North Korea
Significantly, in remarks to a Senate committee, Secretary of
State Powell said the U.S. retains its military options when it
comes to North Korea. Previously, the Administration had failed
to state this publicly. Pyongyang continues to take advantage of
our focus on Iraq and this week reopened its nuclear facility.
Within months, Kim Jong-il could have an additional 4-6 nukes.
There is no easy solution, especially when the Chinese leadership
refuses to step up and supply strong pressure on Kim to, in
essence, cut the crap. This was China’s moment to show the
world it could play the responsible role it has long sought. China
is failing miserably, and the U.S. and the entire region may pay a
heavy price. The U.S. has put long-range bombers on alert for
good reason, while I, for one, continue to wake each morning
with one thought…did North Korea cross the line as I was
asleep.
Wall Street
Once there is some resolution to the Iraqi and North Korean
crises, increasingly the real Big Picture discussion will center
around ‘debt,’ as in “Holy cow! I didn’t realize we had that
much debt, honey.”
In his latest missive for pimco.com, Bill Gross sums it up best.
“Guns and butter will soon extend our global credit card to its
limit.” Costs of all kinds, particularly for the war on terror, are
exploding, and I’ve argued in this space this is the sacrifice that
Americans will be asked to ‘repay,’ along with the human costs.
The Bush Administration unveiled its latest budget and it reflects
record deficits for the foreseeable future. In addition, the
national debt is about to hit its congressionally mandated limit of
$6.4 trillion, meaning the total figure is now about 60% of GDP.
Not so long ago it was around 40%. This doesn’t mean disaster
is imminent, but the trend is more than a bit disturbing, as Gross
and others would say. It’s also a major reason why some feel a
total collapse in the U.S. dollar is just around the corner, even
after a significant 20% decline in just the past year. On this I
differ, because I stick to my thesis that a successful campaign in
Iraq could supply a big boost to the greenback, barring a conflict
in North Korea or a major terror attack on U.S. soil. Admittedly,
that’s asking for a lot.
On the more micro level, in the here and now, manufacturing is
showing some signs of life, productivity actually declined in the
fourth quarter (which doesn’t augur well for future corporate
profits), auto sales are slipping, and inventories surged. Even
Friday”s labor report, which saw unemployment decline to 5.7%,
was tempered by the realization that the job loss in December was
even higher than first reported.
And when it comes to technology, while Cisco Systems reported
record net income, it was achieved on declining revenue, with more
declines to come. CEO John Chambers said customers were
increasingly cautious in their capital spending, a comment confirmed
by the likes of Ericsson, Alcatel and Dell.
Then you had the case of insurance giant AIG spooking the
whole industry when it announced a huge increase in reserves,
none of it asbestos related. So the Street was left to wonder if the
insurance group as a whole is vastly under-reserved for items
like directors liability.
For the week, stocks extended their losing streak to four, with
the Dow Jones, S&P 500 and Nasdaq all now trading at October
levels. [The indices reside at 7864, 829 and 1282, respectively.]
Street Bytes
–U.S. Treasury Yields
6-mo. 1.17% 2-yr. 1.62% 10-yr. 3.93% 30-yr. 4.80%
The consensus forecast, both private and government, is for
inflation of 2% or less for the period 2003-2008. That just may
turn out to be the correct average, but there will be some wild
swings, with deflation and 4%+ inflation in between, at least
that”s my guess.
It should also be noted that with the burgeoning federal deficits,
most traders in Treasury securities should be able to relax some
when it comes to job security. Increasing debt means an
increasing supply of bonds. Party down, boys. But just don’t
blow it with the derivative positions, O.K.?
–The Bank of England unexpectedly reduced interest rates to
the lowest levels since 1955. Concerns over global and domestic
demand spurred the move.
–CSFB investment banking kingpin Frank Quattrone was
suspended following the filing of civil charges by the NASD.
Quattrone allegedly advised his underlings to destroy e-mail
evidence, even after obtaining knowledge his group was under
investigation for various IPOs. A major no-no, if true.
–Goldman Sachs CEO Henry Paulson was speaking at an
industry conference when he said most of his employees were
unproductive and expendable. Well, you can imagine that the
employees themselves weren’t too pleased with this lack of
support from up top, so Paulson apologized. Leadership…thy
name isn’t Henry Paulson.
–Speaking of the above, personally, I learned a lesson from a
wise mentor who used to say, “I wouldn’t have hired you if I
didn’t think you could do the job. Now do the job.” It worked.
–Energy: The opposition in Venezuela announced the strike is
over, a victory for President Chavez, so production of crude will
slowly return to more normal levels. OPEC may then rein in
production overall to avoid a collapse, though the Iraqi situation
is obviously calling the tune right now, with oil soaring to
above $35 on the week.
–President Bush’s plan to expand IRAs to the point where
withdrawals go untaxed is a terrific idea. I have long advocated
in this space that expanding IRAs (401 Ks) is the best way to
encourage savings…not individual retirement accounts for Social
Security, which remains an idiotic idea, as well as not necessary.
But while it appears the Bush plan will not be enacted in total,
at least IRA/401 K contribution limits will be expanded further.
–A leading UK fund manager got in a bit of hot water the other
day for the following public statement.
“People make stupid decisions. People only see the virtues of
diversification once something has fallen. So they went haring
into technology stocks three years ago, and now they want to
leave them and go buy a larger house at the top of the property
market.” [Source: Financial Times]
Not a good thing to say from a marketing standpoint, but there is
more than a kernel of truth there.
–My portfolio: Some of my energy issues rallied a bit, so I’m
now about 25% oil, 6% Mystery Telecom Inc., and the rest cash.
But while I always hesitate to reveal individual positions, I now
feel a bit obligated to divulge that Mystery Telecom is really
New Zealand Telecom, which I purchased about 4 weeks ago. It
has a respectable dividend, the Kiwi economy is doing fine and,
believe it or not, it’s also a play on the America’s Cup. Each
time New Zealand retains it adds about $650 million to the
economy there, a large amount for a country this size. So we are
major Team New Zealand supporters at StocksandNews. Kick
Alinghi’s butt. The action begins next weekend.
International
Turkey: The parliament voted 308-193 to allow the U.S. to
refurbish and expand bases in this nation for use against Iraq,
though Turkey still won’t allow a significant U.S. presence
without UN approval of a second resolution. And after traveling
to this country each of the past two years, I have to repeat
something I’ve said before. Unfortunately, Istanbul and Ankara
make for prime targets if Saddam has any capacity left once the
war starts.
Saudi Arabia: What an amazing bunch. Word came out this
week that the Kingdom had helped the wife of a terror suspect
and her family flee the U.S., even though she had been
subpoenaed in the inquiry into her husband’s activities. The FBI
was furious. The Saudis said the case had no merit. Now they
supposedly will allow the FBI to interview her in their country.
Europe: In one of his best pieces in ages, the New York Times’
Thomas Friedman noted that when it comes to the issue of Iraq,
“Europe’s cynicism and insecurity, masquerading as moral
superiority, is insufferable.” Tell me about it. Friedman also
quoted Josef Joffe, a German editor, who recently wrote:
“We are now living through the most critical watershed of the
postwar period, with enormous moral and strategic issues at
stake, and the only answer many Europeans offer is to constrain
American power. So by default they end up on the side of
Saddam, in an intellectually corrupt position.”
Separately, I do want to once again take time to note the huge
contribution many European nations are making in the war on
terror. In the past ten days, Spain and Italy have cracked two
massive cells that could have caused immense damage, while
Germany has been working on another.
Thailand: Follow-up…Thailand accepted Cambodia’s apology
for the serious incident at the Thai embassy in Phnom Penh.
Random Musings
–The moment we were able to get off the ship in Auckland, I
made a beeline for a taxi and the Auckland Museum, which
houses some great exhibits on New Zealand’s military history.
In case you did’t know, this remote nation has made many
sacrifices over the past century, most notably in World Wars I
and II. Imagine, back at the start of the first conflict, the total
population in New Zealand was one million, with 240,000 being
of fighting age. Of those, 100,000 served in Europe, with 18,000
killed and about 40,000 wounded, both staggering totals. Many
of the casualties were at the famous battle of Gallipoli.
Gallipoli is where Turkish General Mustafa Kemal (Ataturk)
made his name. At the exhibit for it there is an inscription from
him.
“I don’t order you to attack. I order you to die. In the time it
takes us to die, other troops and commanders can come and take
our places.”
Harsh, but Ataturk saved Turkey.
–I turned on a New Zealand rock station for a spell and within
minutes heard an anti-Bush skit, a la Imus (a syndicated disc
jockey in America). The anti-Americanism is distressing, and I
expect to get an earful in Australia next week, as the people there
are bitter about Prime Minister Howard’s staunch support for the
U.S.
–So I see my New Jersey doctors went on strike, part of the
growing protest in America over malpractice insurance
premiums. Finally, though, it would appear that momentum for
broad-based tort reform is growing, and this would be a huge
positive.
–Czech President Vaclav Havel stepped down on Sunday. What
a great man. I pray he stays healthy for years to come, because
in case you haven’t noticed, Havel has been a stalwart in the
post-9/11 era. He also would make for a superb UN Secretary
General.
–Here’s another example of the state of the music industry. I’m
in a restaurant in Auckland, enjoying the harbor and listening to
some good music. “What CD is this?” I asked the waitress. “I
don’t know. The owner just downloaded it all.”
–Very briefly, our satellite television suddenly had the BBC’s
great “Top of the Pops” rock and roll show. Out comes “Tatu,”
with the 16- and 17-year-old Russian girls as the lead singers.
Right now they have a top hit with “All The Things She Said.”
Why mention this? Because these two have a disgusting lesbian
thing as part of their act. If your impressionable teenage
daughters are buying the CD, you may want to have a little chat
with them. Of course this week the BBC also aired an exclusive
documentary of Michael Jackson, wherein he openly discusses
sleeping with a 12-year-old boy. It’s a sick society we live in.
Cruise Bits
–The best part of the cruise on the QE2, aside from days in port,
is the time spent talking to the crew. These kids working the
restaurants and bars are great, and since they are from all over the
world, you also learn a lot.
–Outside of Jack Jones, the onboard entertainment has been
lousy.
–Since Honolulu, the true international flavor of the passengers
has been really apparent. I’d roughly categorize it as 25%
American, 25% British, 20% Germans, 15% Aussies, 15%
French, Canadian, and Japanese. Speaking of the Japanese, I met
a delightful fellow, Tommy Minagi, who just loves life to the
fullest. And there was Tommy singing Elvis at karaoke night.
Yes, you had to be there, but let’s just say Elvis was frantically
trying to get out of his grave. As for me, I did Waylon Jennings’
“Luckenbach, Texas” and didn’t embarrass myself, or so I was
told.
–So here’s the deal with the “gentlemen hosts.” There are 10 of
them for about 70 widows. The hosts can”t dance with a woman
more than a song at a time, so you can imagine the competition.
Yours truly hasn’t been doing much dancing myself, however, so
my chances of getting written into a will are dwindling with each
passing day. [Just kidding!]
–Day 20 and I still haven’t seen one sea robin, let alone a killer
whale. I’m writing Cunard and demanding a refund.
–Note to Mark R.: I think I have ‘bow’ and ‘stern’ down. It took
me a while, though.
–So far, so good. No real gastro attacks onboard. And despite a
New York Post story that I read the day I left for the cruise, one
which spoke of a few cleanliness issues on this ship, it seems
spotless to me. But the worst part is having to share these
computer keyboards with others, if you catch (sniff) my drift
(sniff sniff).
–I got a haircut the other day, which is an experience because of
the movement of the ship. But Nadine didn’t hit any arteries in
the process, so she received a healthy tip for her performance.
–There are two ship’s doctors and one night one of them was
having an adult beverage or two near where I was sitting. A
crewman came up and said, “So and so wants your references.”
“References?” gasped the doctor. I’m thinking, bad time to need
an operation.
–When we were in Moorea, I was out on deck and went over to
talk to a gentleman in a wheelchair, Jim B. from north of
Minneapolis. He looked to be in his 80s and had his American
Legion cap on. As I suspected he was a veteran and also sharp of
mind. Jim had served in the South Pacific, though he didn’t want
to discuss his own experiences it seemed. After a while, the two
of us were just staring at the beautiful harbor, saying nothing,
when he spoke up again. “My friend was up on that hill and he
once told me how he watched an ammunition ship just blow up.
Poof. An accident, many died.” We both resumed our silence,
lost in thought.
–When I purchased my ticket for the cruise back in April, I
certainly had terror threats on my mind. I also specifically
chose this L.A. to Sydney segment because I thought the threat
was lessened, as opposed to other ones. Recently, however, the
Australian government has been issuing stern warnings to its
citizens to be on alert. The U.S. / British makeup of the QE2
makes it a natural target in port, so I”m going to exercise a
bit of caution while in Sydney later in the week. Yup, time to
pull out my ”Slovenija” t-shirt!
[I also just saw the increased terror assessment in the U.S. A
bit discomforting.]
Columbia
Last Saturday our ship was about 6 hours behind the eastern time
zone in the U.S. so when I went to the computer room at 6:00
AM that morning, there was just one other person in there. She
first saw the news of Columbia and conveyed it to me before my
site opened up. Yet for the rest of Saturday and in the days that
followed, we were all so out of touch, not having any CNN or
BBC available, that we couldn’t get swept up in it all. In this
case, we needed pictures. I ended up spending a good deal of
Saturday and Sunday just staring into the ocean. As I noted in a
previous column, if nothing else cruising the gigantic Pacific,
even if it is on a luxury liner, does give you a sense of the great
explorers of the 15th and 16th century. We need to have more of
the same feeling in the future when we stare into space.
There hasn’t been any secret about my own dreams when it
comes to the space program in America. And post-9/11, you’re
nuts if you can’t see the need to explore, and colonize, unless
you just want the human race to wither away in the aftermath of
a series of chemical, biological and nuclear attacks.
In fact, while I have often said in this space there is no next big
thing, referring to some computer-related invention, I also wrote
back on 12/8/01, “The real Next Big Thing is space. When the
heck are we going to recognize this?”
I noted just 3 weeks ago that the L.A Times was reporting
President Bush may make a bold announcement in his State of
the Union address. I added that Karl Rove may not deem it
politically expedient, however. Nothing was said, as Rove
undoubtedly won out and some would say it prevented Bush
from being embarrassed just a few days later. I say, that’s not
what leadership is all about. I’m going to watch this
Administration closely on this issue in the future and if I’m not
satisfied, you’ll know it.
As for the human tragedy that was Columbia, columnist Robert
Samuelson summed it up far more eloquently than I ever could in
an op-ed piece for the Washington Post.
“We take from these accidents a larger message that is
personalized in the lost astronauts. No doubt they had their
flaws, as all people do. But we see in them only their virtues.
They are the sons and daughters we all want. They are smart,
hardworking, dedicated, daring, idealistic, decent and heroic. In
them, we see ourselves as we want to see ourselves. When they
die, their deaths evoke more than personal sympathy for lives cut
short and families made incomplete. We lose some of ourselves
– and our illusions.”
—
God bless the men and women of our armed forces, particularly
those lost in a recent Blackhawk helicopter crash in Afghanistan.
Mark O’Steen
Thomas Gibbons
Gregory Frampton
Daniel Kisling Jr.
God bless America.
—
Gold closed at $370…after soaring above $380.
Oil, $35.12
Returns for the week, 2/3-2/7
Dow Jones -2.4% [7864]
S&P 500 -3.0% [829]
S&P MidCap -3.2%
Russell 2000 -3.6%
Nasdaq -2.9% [1282]
Returns for the period, 1/1/03-2/7/03
Dow Jones -5.7%
S&P 500 -5.7%
S&P MidCap -6.1%
Russell 2000 -6.4%
Nasdaq -4.0%
Bulls 47.2%
Bears 29.2% [Source: Investors Intelligence, or lack thereof.]
Have a great week. My next piece will be delayed by up to 12
hours due to travel. I hope to post from Guam, on my way home,
but I’ll alert you above as to an approximate time.
Brian Trumbore
**I have to add that I posted the above a few hours before we
actually docked in Hobart. Well, I just had the highlight of my
trip. As we approached the dock, a children”s chorus was there
and the first song they sang was “The Battle Hymn of the Republic.”
There wasn”t a dry eye among the Americans.
