Global Thoughts….Troubling Signs Ahead 29 October 2000

Historically, bad news comes to light after elections. There are few stories and events waiting to surface that could have a material effect on world markets and the general mood.

1. Banks are heavily lent to telecom companies, whose shares are being hit hard and whose debt is being downgraded. This will make it even harder for the telecoms to pay up and the banks will have to deal with a portfolio of loans that is overrated. This is one example of how banks, which have not really reformed themselves, are an accident waiting to happen all over again since the last banking crisis. This will affect the biggest names, such as Chase Bank and Bank of America, as well as all the telecom companies you know.  Lots of telecom companies who are not powerful or profitable (hard to be when today they are all investing in infrastructure for the future) will not survive.

2. There are lots of problems in Asia. Currencies and markets are already taking a hit from New York but New York has not to take a hit from anxiety over Asia. All it takes is a moodswing to get people to put 2+2 together. Economic growth will be down this year because of worldwide inflation growth, high oil prices and a depressed technology market.

3. Yasser Arafat is trying to get the Israelis to do something really violent so that he can get the world to take his side and consider doing things such as sending in U N troops and realize the necessity of his declaring a Palestinian state within a state of emergency. He is playing with fire and has brought Hamas onto his team and the two entities are now virtually cooperating. Shooting at Israeli suburbs of Jerusalem is a case in point. (Gilo, by the way, is quite Jerusalem – not some fringe settlement.) So far, the Israelis are biting their nails and resisting the trap but how long will they do so? The Arabs have let Arafat know they don’t want to be manipulated by his whims and don’t enjoy having him whip up their citizens into a frenzy which ultimately turns against their own domestic governments.  Under Arafat’s scenario, he would like an excuse to declare a state by November 15 and call in the UN to protect it while Israel goes ballistic; the Hizbullah would use it as an excuse to stir up the Lebanese border and indirectly take potshots at Syria’s Assad. The Israelis would probably annex areas and then settle into a mode where each side ultimately gets most of what it would have eventually gotten under Barak’s Camp David proposal (except that Jerusalem stays an open issue) but the conflict remains at a low boil for the next few years while no one makes any real decisions. Everybody just waits for Arafat’s successor. This is a bad scenario; the region will be perpetually at risk and it will not be friendly for business. Everyone, from the Israelis to the surrounding Arab states, has an interest in creating a climate of stability. Arafat is the cancer. I will personally become more apathetic about all this as it becomes apparent that no solution is in sight and there are no leaders capable of moving their people toward one.

4.  Whoever the next president of the US is, Gore or Bush, will not be able to convince Americans that he is particularly competent at dealing with any of these problems. If Bush pushes his tax cut, Greenspan will raise interest rates and the markets will go down even further. I had expected that the fourth quarter would eventually bring a rally to companies which are somewhat undervalued. Now, I fear a general deterioration into gloom and doom and a possible further market downswing of 20-30%. It is a time in which one should seriously consider whether or not he should pocket losses in anticipation of further losses, or hold out for what could be a recovery period of 2-3 years. For further reading on the market conditions, I recommend this week’s Economist. They have been terribly accurate forecasting downswings.

Share:

Share This Post

Most Recent Posts

Archives
Get The Latest Updates

Subscribe To Our Newsletter

No spam, notifications only about new posts.

Read More

Related Posts

Global Thoughts — 20 December 2023

Karen and I shared a salad for our 20th anniversary lunch out. 20 years ago it would have been lots of food and desert. In 30 years will we be sharing our dentures for lunch? I would like to dare

Act II for the Jewish State — 19 December 2023

After 75 years, Israel as an enterprise is not succeeding as it should. Jews should cut their losses in the Middle East and reboot the Jewish State elsewhere, focusing on building excellence instead of simply trying to survive. Thomas Friedman’s

Scroll to Top