- In The Grip Of Fear / The Daily Reckoning - - Elli -, 15.04.2003, 21:05
- Re: Erst protestieren - dann kassieren? - Wolfhart Willimczik - Inventor, 15.04.2003, 21:23
- Kann man deinen Motor mal in Aktion bewundern? (owT) - Der Husky, 15.04.2003, 21:29
- Re: Kann man deinen Motor mal in Aktion bewundern? (owT) - Inventor, 15.04.2003, 21:53
- Re: Kann man deinen Motor mal in Aktion bewundern? (owT) - Nepomuk, 15.04.2003, 23:44
- Re: Kann man deinen Motor mal in Aktion bewundern? nimmer mehr - Inventor, 16.04.2003, 00:15
- Re: Kann man deinen Motor mal in Aktion bewundern? (owT) - Nepomuk, 15.04.2003, 23:44
- Re: Kann man deinen Motor mal in Aktion bewundern? (owT) - Inventor, 15.04.2003, 21:53
- Re: Erst protestieren - dann kassieren? - Tempranillo, 15.04.2003, 21:42
- Re: [[smile]] - André, 15.04.2003, 22:34
- Re: Erst protestieren - dann kassieren? - Wolfhart Willimczik - Inventor, 15.04.2003, 23:22
- @ Tempranillo - Turon, 16.04.2003, 02:00
- Re: @ Einladung für Turon an den Golf von Mexiko - Inventor, 16.04.2003, 16:27
- Re: @ Einladung für Turon an den Golf von Mexiko - Turon, 16.04.2003, 18:39
- Re: @ Einladung für Turon an den Golf von Mexiko - Inventor, 16.04.2003, 20:24
- Schön!!!!!! Dankend angenommen! - Turon, 16.04.2003, 21:55
- Re: der ordnung halber - und für den Staatsanwalt - Wolfhart Willimczik - Inventor, 16.04.2003, 22:17
- 'Das reicht nicht!' ;-) - silvereagle, 16.04.2003, 22:38
- Re: @ Einladung für Turon an den Golf von Mexiko - Inventor, 16.04.2003, 20:24
- Re: @ Einladung für Turon an den Golf von Mexiko - Turon, 16.04.2003, 18:39
- Re: @ Einladung für Turon an den Golf von Mexiko - Inventor, 16.04.2003, 16:27
- Kann man deinen Motor mal in Aktion bewundern? (owT) - Der Husky, 15.04.2003, 21:29
- Re: Erst protestieren - dann kassieren? - Wolfhart Willimczik - Inventor, 15.04.2003, 21:23
In The Grip Of Fear / The Daily Reckoning
-->In The Grip Of Fear
The Daily Reckoning
Rome, Italy
Tuesday, 15 April 2003
---------------------
*** Stocks rise, but wars are usually disappointing...
modern and ancient...
*** Global investors shun the dollar...gold drops, but euro
rises...does a bull market in government mean a bear market
in stocks?
*** Zulu wars...attack on Ctesiphon...the appeal of
empire...Maria's poster...and more!
Everybody expects the end of the war to bring the
beginnings of a boom. My old friend, Mark Hulbert, reports
that he has never seen such a huge shift of sentiment as
happened between March 10 and April 10...when his index of
50 leading market timers went from an average equity
exposure of minus 19% - indicating extreme bearishness - to
plus 46%, an indication of remarkable bullishness.
But last month's bearishness didn't pay off. Neither might
this month's bullishness.
Paul Samuelson writing in Newsweek:"Wars usually bring
surprises and disappointments in their wake. A harsh
depression - one of the nation's worst, says historian John
McCusker of Trinity University in San Antonio, Texas -
followed the Revolution. Trade with Britain had shriveled;
hard money (meaning silver and gold coin) was scarce. The
government, operating under the Articles of Confederation,
couldn't cure the country's commercial problems. The
Constitutional Convention was one consequence.
"The war left the country in a condition that people
couldn't deal with and hadn't planned for," says McCusker.
"This was no fluke; wars often do that. Gradual deflation
followed the Civil War; World War I fostered inflation,
which led to a deep recession (1920-21); Vietnam helped
cause rising inflation. Only after World War II has the
economy escaped the curse."
So far, the war has been a boon - but not for America.
"Global investors appear to like U.S. assets less and
less," says a headline on CNN/Money.com. Foreign stock
markets have risen more than Wall Street, the article
explains. And major foreign debt markets have become more
attractive. An investor can get a 4.2% yield on German 10-
year notes...4.5% on the U.K. variety...and only 3.9% on
the American brand.
While American consumers worry about having too few
dollars, foreign investors worry about having too many. If
anything were to get a boost from the quick and easy
victory of American forces in Iraq, it should have been the
dollar. Some people even believed the war was nothing more
than an attempt to preserve the value of the imperial
currency. But, the buck did something ominous yesterday.
Gold futures dropped $3.60 to $324.90. The dollar should
have gone up. Instead, it fell against the euro.
Every little ebb of the greenback increases foreign
investors' fear of the dollar, while also increasing the
return from overseas investments. Another 10%-20% decline
in the dollar - such as happened in the last 12 months -
would give investors in euro bonds a 25%-plus return. Who
would want to hold dollar-based assets with the dollar so
vulnerable?
Here's Eric Fry with more news and clever commentary from
Wall Street:
------------
Eric Fry in New York...
- Question: If a bomb falls on Baghdad and the stock market
price level does not change, did the bomb make any
sound?...Judging from the resurgent stock market, it almost
seems as if the little skirmish over there in the Middle
East never actually happened. After yesterday's gains, the
stock market sits almost exactly where it was on March 19,
the date that the initial salvo of cruise missiles landed
on Baghdad. Yesterday, the Dow Jones Industrial Average
nosed into positive territory for the year by gaining 147
points to 8,351. The Nasdaq jumped 1.9%, bringing its
advance for 2003 to 2.6%.
- It would seem that the Iraqi conflict was a non-event for
the stock market. However, an alternate interpretation is
that the stock market would be much lower, were it not for
the pleasant diversion of one-sided U.S. military success
in Iraq. That's because the news on the home front is just
as bad as it was four weeks ago, when the bombs first
started falling, and stocks are just as pricey as they were
four weeks ago, too.
- The economy and the stock market both continue to muddle
along. But at least the stock market has been muddling
mostly to the upside. The same cannot be said of the
economy. Stockpiles at U.S. businesses jumped a larger-
than-expected 0.6 percent in February to the highest level
since September 2001. Meanwhile, February's business sales
fell the most in over a year, down 1%.
- Curiously, despite these downbeat numbers from the
Commerce Department, the trading action of the bond market
seems to reflect an economy on the mend. The benchmark 10-
year Treasury note fell 10/32, pushing its yield to 4.02%
from 3.97% Friday. Is the bond market signaling renewed
economic vitality? Or might the bond market's recent
weakness be signaling a brand new bull market...in
government!
-"In New York this reluctant spring, the government is
more visible than the forsythia," writes Jim Grant."At the
corner of Broad and Wall, police officers pack machine
guns. Just across the East River, at the Clark Street
subway station in Brooklyn, cops sometimes outnumber
straphangers..."
-"Is Big Government Back?" asked Tom Gallagher in a talk
he delivered on March 24 before the National Association of
Business Economics."For the better part of the last 20
years," writes Gallagher, Washington analyst for the ISI
Group,"the prevailing approach to solving problems was to
reduce the role of government. Now I think we are on a
trend in which the predominant approach to solving problems
will involve an expanded role for government..."
- PIMCO's Paul McCulley seconds the notion that a bull
market in government is underway. As McCulley points out in
a recent interview with Welling@Weeden,"There are a number
of things that capitalism really can't do very well. The
top two on the list, I think, are dealing with deflation
risk and providing national security. The upshot is that
we've had a profound one-two punch for a bull market in
government...
-"A bull market in capitalism was good for a tripling of
the P/E multiple during the 1980s and '90s - the tripling
of the P/E ratio was what the whole bull market in stocks
was about. It certainly wasn't about real earnings growth,
merely a revaluation of earnings...[But] if you start with
the premise that capitalism is in retreat and that we have
started a new bull market in government in which markets
don't necessarily dominate, but sovereign nations enforce
their wills, that doesn't at first blush tell you that P/E
multiples on stocks are likely to go up. But it does tell
you that the equity risk premium is too damn skinny....What
it tells you is that the starting point valuation is a
residual of the bull market in capitalism - and is not
necessarily what you would ideally sketch out at the
beginning point for a bull market in government.
-"The most pleasant thing that could happen," McCulley
winds up,"would be for stocks to meander around where they
are for a long, long time."
------------
Bill Bonner, back in Rome...
*** We have been trying to find an appropriate historical
precedent for Operation Iraqi Freedom. Britain's Zulu wars
or its war with Turkey for Greek Independence came to mind
last week. Here in Rome, Trajan's campaign against the
Parthians comes to mind. He attacked from the side opposite
to the approach American forces took. Beginning on the
Mediterranean coast at Antioch, he marched East in the year
114. By 116 he was in Ctesiphon, now Baghdad, where he
installed a puppet king. From there, he continued to the
Persian Gulf and on to Baasra.
Trajan died the following year, having brought the Roman
Empire to its very peak of expansion. After 8 centuries of
a bull market in Roman power, under Trajan, the empire
reached its bubble top. Even before Trajan's death the
following year, the Parthians revolted and, once again,
lower Mesopotamia slipped out of Roman control.
*** Wandering among the ruins...gawking at the
Coliseum...the baths...the temples...the immense columns of
marble...we are as awe-struck as other tourists. 'How did
they get that up there,' we wonder, craning our necks at a
huge block of marble balanced on top of an enormous column.
Where did they get the labor...the money...the energy...for
all this monumental construction? (More on Friday...)
*** But we are beginning to like the idea of empire. Not
that we think it is good or bad - for who are we to judge
the currents of history? - but that it is such a spectacle.
Where else might the lumpen mobs get free bread...and then
watch mock naval battles...or Christian martyrs getting
torn apart by lions...or gladiators fight to the death? And
where else could the average citizen look out at such
architectural splendor - Caracalla's baths...Titus'
arch...Trajan's column? Only emperors could build on such a
scale...and only citizens of a great empire could enjoy
such extravagance. And only because of such bubbles in
world history can tourists today tromp over Rome's ruins
and feel as though they were learning something.
*** What your editor has learned is that the Italians make
good wine. While he wallows in history, he studies the
Michelin restaurant guide as though it were the Rosetta
Stone and explores the local wines as though he were
Champollion entering the Great Pyramid. What has he
discovered? That a few hours on the Palatine hill is enough
to give him a good appetite...and that a good Chianti
Classico or Lambrusco or Barolo is a good as a Bordeaux.
*** We were walking along the Via del Corso and saw a
familiar face. There, in a wedding dress shop, was a poster
with a photograph of our own daughter, larger than life.
Maria had done some modeling for wedding dresses a few
months ago, she recalled, but had never seen the photos.
But here they were...in a shop in Rome. Entering the store,
Maria was treated like a celebrity...the owner got a photo
of her in front of the poster...and told her to come back
when she was ready to get married!
---------------------
The Daily Reckoning PRESENTS: Obviously, the war is winding
down. Forming an expectation of what comes next, says James
Davidson, calls for delicate judgment.
IN THE GRIP OF FEAR
By James Davidson
Many commentators have noted that the war in Iraq set new
standards in battlefield reporting. For the first time
ever, television viewers at home are able to watch battles
unfold live, in real time. Reporters"embedded" with
coalition military units have transmitted mesmerizing
images of war as it is actually being experienced on the
ground.
This has had two notable consequences: (1) It has
distracted millions of Americans from their normal habits,
including shopping. People who are watching MSNBC or CNN 17
hours a day don't have time to go to the mall. (2) Markets
have displaced retired generals and military historians as
the principal commentators on the war's progress.
The stock market was so keen to get the war behind us that
it staged a tremendous relief rally immediately after the
fighting commenced. At the close on Friday of the first
week of the war, the market was"priced for perfection" on
the battlefield. When the following weekend brought
evidence that progress towards Baghdad might be impeded by
wrong turns, snipers, suicide bombers and sandstorms, the
market immediately discounted the new images from the
battlefield. Stocks sold off. The dollar plunged. So it has
unfolded. Day after day, Secretary of Defense Donald
Rumsfeld's IQ rises and falls with the S&P 500 Index, which
in turn reflects battlefield images transmitted from Iraq.
What conclusions can be drawn? The decimation of some
Republican Guard units and the collapse and surrender of
others underline the fact that even Iraq's best soldiers
are no match for coalition forces in a set piece battle.
[At this point the military strategy in the region with
respect to countries like Syria is essentially
unpredictable]. But, like most of the Middle East, Iraq is
full of fanatics who are prone to extravagant behavior.
There could be continued suicide attacks. With strong
evidence that the broad stock market, as well as bond and
currency markets, are hitched to a battlefield barometer,
you can expect extraordinary volatility for some time to
come.
A feature of the market volatility to be expected is the
prospect of at least a temporary upside breakout of the
current trading range. As I write, the stock market has
broken beyond the S&P 500 880 resistance level. This has
held a long time, so the overhead resistance was strong.
But it gave way with growing evidence from Baghdad of the
impending collapse of the Saddam Hussein regime. I rather
expect the whole show to be over soon, probably by the end
of April. The market should then rally. If so, I expect the
market's gains to be contained by the S&P 500 965
resistance level. As master technician, Philip Erlanger
observes,"It is resistance on a major scale, as it
represents the 'neckline' of the head & shoulders top
pattern that spans 5 years." This suggests that the victory
rally will be short-lived, followed by a retreat for all
the indexes.
In fact, a close look at the market action of last week may
provide a key to future developments. The first two Mondays
of the war were down days, as weekend news discouraged
bulls. But the weekend of April 4-6 brought TV images of
American tanks rolling through Baghdad. By Monday morning,
the bulls were in full control. The markets sprang open to
the upside. With the day's highs established early, the
market then began to give back its gains.
Rates on benchmark 10-year notes rose to their highest mark
in two weeks, indicating that investors were discounting
more rapid growth of the economy following the end of the
war. On the other hand, short-term yields lagged,
reflecting the contradictory fact that investors on the
short end of the curve expect yet another Fed interest rate
cut to stimulate economic growth. The yield gap between 2-
and 10-year notes got as wide as 240 basis points [2.4%] on
Monday. That was the biggest yield gap since 1992, as
longer-term interest rates rose while short-term rates held
on the expectation of the Federal Reserve rate cutting kept
short rates low. A Fed rate cut, which could come at any
time, would presumably fuel the victory rally we have been
expecting.
Note that movements in interest rates, currencies and the
stock market reflect the fact that, as CBS MarketWatch
said,"Many economists consider the conflict the biggest
obstacle to a U.S. economic recovery." Obviously, the war
is winding down. Forming an expectation of what comes next
calls for delicate judgment.
There are two major camps of thought about what happens in
the wake of a convincing victory in Iraq. Bulls hope that a
quick end to the war will lift animal spirits and unleash
consumer and business spending that has been curtailed by
uncertainty. Bears expect spending to fall short of
igniting sustainable growth. The market has been giving the
benefit of the doubt to the bulls, as the robust gains in
the first week of April attests.
Now we are poised to learn the answer to the most important
question that you have to face this year as an investor.
How much of an expectation of better times ahead should be
priced into the market?
This is partly a question of current specifics. It is
partly a question of attitude. As far as the current
circumstances are concerned, I have been of the view that
the war would clear away some obstacles to growth. In
particular, I expect the end of the fighting to lead to a
period of steadily declining oil prices. As we have
detailed in the past, lower oil prices stimulate consumer
spending. They are the equivalent of a tax cut worth
hundreds of billions of dollars over the coming years.
Also, the end of the war gives hope for reconciliation
between the United States and its trading partners, most
prominently Germany and France. This could be crucial to
the continued expansion of world markets, from which the
United States stands to gain more than any other economy.
By halting the deterioration of relations, the end of the
war may bring a generally unpleasant phase of international
relations and domestic preoccupation with terrorism to a
close.
This could be particularly important in an area to which
most Americans have given less thought - North American
trade. The end of the war may bring an occasion for the
United States to relent in its drive to constipate cross-
border travel between the United States and Canada. Trade
between the two countries is more active, at a higher
dollar volume, than between any other nations. A million
dollars' worth of trade takes place between the United
States and Canada each minute.
Much of this trade is in components for just-in-time
production. As the North American economy has become more
integrated, it is also more crucial for U.S. prosperity to
keep cross-border flows fluent. But beginning on Sept. 12,
2001, the border along the 49th parallel has become ever
less user-friendly. In the immediate aftermath of the
terrorist attacks, border traffic jams began to stretch as
long as 12 miles, with crossing delays lasting the better
part of a day.
As if this were not bad enough, the U.S. government has
moved to institutionalize these delays by requiring more
paperwork, especially in creating a registry to record who
is leaving the United States to go to Canada."I am
terribly worried. There is definitely some damage that has
been done," says Thomas D'Aquino, head of the Canadian
Council of Chief Executives, a group of more than 100 of
Canada's leading companies. D'Aquino laments strains in
U.S.-Canadian relations."A lot of people have said they
are worried and are concerned about what may lay down the
road," he said."There are hundreds of millions of micro
transactions that go across the border each day." The fewer
obstacles imposed to block these transactions, the more
prosperous Americans will be.
Perhaps the end of the war will lead to some relaxation in
the manic drive to close the U.S. economy in the name of
security. Of course, even as I write, I am aware that this
may be wishful thinking on my part.
At this point, there is no conclusive reason to hope that
even a violent catharsis could free Americans from our
fixation on terrorism and the grip of fear that surrounds
it.
Regards,
James Davidson,
for The Daily Reckoning
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