So you’re wondering what’s going on over here, right? clinton is up; gingrich is out and the markets are exuberant again. a bit of a surprise to us too.
I was in jerusalem and it was the rosh hashana holiday when cnn was showing the video tapes of clinton’s grand jury appearance. i never saw the tape but gathered from the people who watched it that the republicans had overreached and that public opinion was turning against them. i am hesitant to draw mandates from congressional elections which essentially are votes for personalities and geographic representatives rather than national parties but it is safe to say that while the voters did not vote to send a message that clinton is ok and should not be impeached, they did send the message that the clinton scandal was not going to affect their vote and cause them to vote republican to send clinton a message of disapproval. polls of voters exiting the polling stations found that roughly two-thirds of them want this scandal to disappear. interestingly, the number of christian-right voters was down 3% over the last midterm election 4 years ago. the number of black voters was up 6% in contrast. clearly, the republicans have gotten a message: (1) they can’t win if they continue to marginalize themselves by aiming their rhetoric solely at the religious-right; (2) they have to become FOR something and not just AGAINST.
So i would expect to see a more conciliatory and constructive republican party moving more bipartisan legislation with clinton through the next 2 years of congress and for the scandal to disappear. This kind of stability is what the markets like and it has helped bring forth optimism and rising share prices. Also, there is likelihood of a further cut in interest rates because there are liquidity problems to third world countries that cannot get people to buy their bonds since investors have become extremely averse to risk. Therefore, they are turning to banks and cannot afford the present interest rates. If the banks pay interest rates that are too high and ultimately can’t pay the loans, everyone loses money in the end so it is best if the interest rates charged to the banks by the Federal Reserve Bank in the first place come down. Low oil prices and mortgage rates are also helping the country. So has better than expected third quarter earning reports from american companies. For instance, Oracle reports their earnings in Asia were up 50% this year’s quarter over last year’s. Their stock has gone up considerably over the past 2 weeks.
I am given to understand through a good source in the State department that the multinational oil companies are likely to announce within the next 2 weeks that they agree to run the oil pipeline from the Caspian via Turkey as the US wants. Till now I have only given this option a 20% probability. This will boost shares of infrastructure companies that will build this. All in all, I expect Turkey to continue to be one of the world’s top performers with high growth rates for the next few years. My two concerns long term are that (1) crackdowns against islamicists will ultimately backfire and lead to islamic takeover. the history of fundamentalism is that marginalizing religious practice leads to extremists going underground and becoming violent. i expect incremental gains by islamic parties in the upcoming elections this winter and continuing in future elections. (2) israel’s strong reliance on its military partnership with turkey’s generals is a house of cards that could fall tomorrow.
in the middle east arena, i am increasingly concerned that netanyahu is looking for excuses not to implement the deal he made at wye. having criticized oslo for being full of holes, for the past 2 weeks he has discovered all kinds of ambiguities and created conditions for the palestinians to fulfill that washington says did not exist. it almost seems that he was stalling waiting for some kind of terrorist attack to be able to point fingers and hold things up. apparently he came in for more opposition than expected upon his return to the country. however, arafat does not want elections now; he remembers it stopped everything for a year when israel went to elections and so he wants a turnover of territory as soon as possible. he even pushed arab knesset members to support bibi on his budget when he would have otherwise lost his government. bibi promptly turned around after the vote and declared he would never again rely on an anti-zionist party for a vote. consider that he will allow consistent blackmail by anti-zionist ultra-orthodox parties who will take money but not pay taxes or do army service but is quick to essentially disenfranchise 20% of the country’s citizens — i know some of these people and i will easily say that the israeli arabs i’ve met tend to be more zionist (and even some of them pro-likud) than some of the ultra-orthodox. any jew, whether or not they like the deal or bibi, should think twice before endorsing the idea of a jewish head of state of israel making a deal and appearing to welch on it. it is a sacrilege and it will cost both israel and jews in the long run.
