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. in any event, 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. George Bush Jr. of Texas represents the future for the Republicans in the national forum but he will have to get past the hard-core conservative loonies to get his chance and it is known that Bush let fellow republicans know he wanted gingrich and his loud mouth put to the side. Al Gore fundraised for 224 candidates in the past election and is owed lots of favors. He will represent the Democrats unless he fails in the interim just as Mondale and Dole cashed in their chips with the party. Bush is a better candidate against Gore and will pick up some of those minority votes; he speaks fluent spanish. I watched Gore on cable television make a speech in front of a very friendly audience and i had to fight off sleep. will americans want to watch him on tv every night for 4 years? Gore is also feared to be weak and pacifist on foreign policy and never met a tax he didn’t like. Anyone I’ve ever met who knows him personally has nothing good to say about him except that he is intelligent. They say he has crazy ideas and knows a little bit about things but that with him a little knowledge is a dangerous thing. Gore is the man who last year suggested we put a tv camera in space to look at the planet Earth and just show the picture on cable tv 24 hours a day. Really.
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. the new house speaker has been in congress 21 years and works well within the washington establishment; gingrich learned as has clinton and his wife, that if you exercise too much hostility in taking on the washington establishment you can get your moment in the sun but you will eventually get pushed to the side. washington is bigger than any one man and works best with bipartisan effort toward incremental change. 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. notice that small cap stocks have started to rally in this 4th quarter right on schedule (my schedule that is).
a note about the Christian Right which was seemingly set back this election — although i expect less noise about abortion and other hot-button issues in the next 2 years, the Right is on track with a long range plan. they now control 36 governorships and are making tremendous headway in controlling town, county and state-level legislatures. one of these days they will be lucky and control congress. when they do, they will push constitutional amendments on all sorts of christian issues and these will only be as good as the 38 states that ratify them. the catholic church wants latin refugees to come here since latinos are good catholics. the saudis pay moslems to come to the usa and have kids. in fact, islam is the fastest growing religion in the usa. so if you want to know where the real battle is going to be fought in the next 20-30 years, it will be a secular-religious battle over the separation of church and state. in the long term, the religious are on track to win and the real domestic terrorist threat is from assorted right-wing loonies and yes, some islamic religionists.
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. though the us won’t put up the money needed to equalize the higher costs of going through turkey, it feels the turks have plenty of pork in their NATO military budget to draw from. moreover, even though iran is a cheaper route, oil companies will be best off to develop alternatives to the persian/arab gulf region. Till now I have only given this option a 20% probability and I am still of the gut feeling that there is wishful thinking by this person who is intimately involved in the negotiations. keep your eye on what BP does. but if he is right, i suppose 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 which would destabilize the balance of regional power. 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. a better course would be for the generals to allow for mainstream islamic behavior within a secular state. (2) israel’s strong reliance on its military partnership with turkey’s generals is a house of cards that could fall tomorrow. i really wish the EEC would stop making excuses (at its heart, it’s anti-moslem) and bring turkey into its market. that’s the best way to ensure Turkey stays in the fold.
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. as expected, he is allowing all kinds of theatrics in east jerusalem, hebron and assorted hilltops. 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 and even the Left is cutting him slack in appreciation for the real political tightrope he must walk. he only called his cabinet meeting today after clinton got on the phone and pressured him. arafat also 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 and not rationalize this as some sort of brilliant strategy. it is a sacrilege and it will cost both israel and jews in the long run.
P.S. on this subject: I earlier said that the oslo accords called for extradition but it was never enforced. Correction: The Oslo and the Wye accords did not call for extradition by either side. Both agreements only called for each side to prosecute, bring to trial and to jail its criminals. Israel doesn’t send to the PA those that kill arabs and the PA doesn’t send Israel anyone either. The extradition issue is a false one. [See below for latest intelligence report on this region.]
in iraq, i expect more feel-good bombings — meaning they make americans feel good thinking they put saddam back in his box but in reality nothing really changes unless the us is wiling to go in with ground troops. iraq just had a well- attended trade fair with representatives from 30 countries including iran although no short-term business will come out of it due to UN sanctions. the us believes that saddam has stomach cancer and hopes that if it will shake things up a bit his army buddies will rise up and throw him out.
east asia — regional stock markets are up 30-40% since early august and there are indications that things will pick up in the second half of 1999 which is right on schedule. japan and brazil both show incremental reform which is not enough to really fix the problems but good enough to pacify scare-mongerers in the marketplace for the short term. brazil’s president has a mandate to move forward after the recent elections there and his first term was impressive in terms of economics except for the fact that he ran up a large budget deficit so people expect him to deliver the rest now. china is a yellow flag according to the Economist with inflated growth statistics and debt problems (although its debt overall is manageable) and an investment arm of one of the provinces defaulted lately and this was a bad omen. however, china has more to lose than gain by devaluing its currency (ie: it would raise unemployment which is the government’s number one domestic concern as severe unemployment could bring instability to the streets), and china has indicated that it is going to shut down and let fail some of the more speculative and unauthorized ventures that have been using borrowed capital to do their business. china seems to have gotten the message that it must take some short term actions to prevent real red flags from going up — red flags over china would scare the market even more than red flags over japan. ——————————
Following is information received last night from a friend who monitors the middle east region closely and has many good friends. It is not my opinion but is based on generally reliable reporting and time will tell if it is correct. If it is so, it is very interesting:
the israeli knesset will soon ratify the wye deal and it will be implemented because israel has no choice but to do so. arafat will do his part at least until he gets the territory. Israeli and US intelligence continue to agree that King Hussein is not responding well to his cancer treatment and may soon give it up and return to Jordan to die in his land. Crown Prince Hassan has already taken over even though it was the king who showed his face at wye at clinton’s invitation (not showing up helps Hassan in the arab world). The PA and Jordan will announce a confederation sometime between now and 4 May 1999. Hassan has also been actively involved in Israeli-Syria negotiation taking place via the offices of Ronald Lauder who is working hard on this and has gotten Assad to accept him as a mediator. Bibi will soon announce the opening of negotiations with Syria and call snap elections somewhere between january- march 1999 as ehud barak is well behind and ron milo’s party is not yet well organized. the deal with the syrians is already known and it will be the golan for peace. arafat is aware of this and it explains his several references at the wye ceremony to syria. opposition within israel to such a deal will be less than expected. the PA will have some kind of vote on 14 December to revoke the covenant with clinton present. the third redeployment by israel will be substantially more than 1%. this source gives high credence to the movie “siege” and says that this is what is really happening.
