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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?


To: Jim Willie CB who wrote (2470)7/17/2002 4:57:40 PM
From: stockman_scott  Respond to of 89467
 
Some interesting dot-connecting from David Warren:

July 13, 2002

Secret war?

I wrote here Tuesday about the debate that has been going on within the Bush administration, not about whether to invade Iraq, nor really about when, either, but only about how to pull it off -- with the least "collateral damage" to U.S. interests in the region and the world. I said this debate came down in the end to essentially two schools, or sides:

1. The "big-endians", let us call them. Gen. Tommy Franks, the Joint Chiefs of Staff, and the vast majority of Pentagon brass, George Tenet and the CIA leadership, the White House national security council, and every "expert" but one (I think) in the State Department, agreed that the safest course was a massive, probably three-pronged invasion (from Turkey, Jordan, Kuwait?), after the usual devastating air campaign and special forces nip-and-tuck on some ground targets needing particular attention.

The bureaucracy feels in its bones that bigger is better, and has huge logistic and co-ordinating capacities that need periodic justification. Gen. Franks is widely believed to have settled upon the clinching estimate of 250,000-plus troops, most of which will be standing by in places like Turkey and Oman, in case they happen to be needed. Given a (meaningless) best estimate that Saddam Hussein would not be ready to greet these invaders with, say, a deployable nuclear weapon for at least two years, their assumption has been that the mission could wait until as early as December or as late as March next year, giving plenty of time to get the incredibly elaborate logistical and diplomatic ducks in order.

2. In response to which, there was a strong minority of "little-endians", arguing for a smaller, "smarter", quicker operation, one that could have been performed with forces that were already in place a month ago, or at more leisure in August. I named only Gen. Wayne Downing, who recently quit the administration, apparently in frustration (a man as legendary for his impatience as for his genius as a special forces officer); but it appears to me that these "hawks" or "hotheads" consisted largely of the brass with battlefield experience -- the people who instead feel in their bones the danger of hestitation or delay, once you have decided on a course of action.

I know what they say about "armchair generals", about how amateurs like to discuss strategy but professionals only talk about the three "L"s (logistics, logistics, logistics). I also know that the U.S. is walking into a battle it can't practically lose -- that there are hard and massive facts buttressing anything that resembles U.S. arrogance.

Notwithstanding, the reader will sense my regret that no military imagination would be employed in the "mother of all walkovers", for I feel reasonably certain the "big-endians" have won the debate with the people who count: George W. Bush and Donald Rumsfeld. They won it by cheating, however: not merely a stacked gallery, but the President has his hands too full of everything from Worldcom to Europe, to be in a position to resist the bureaucracy on this one.

I do believe, however, that he and Mr. Rumsfeld are end-running that bureaucracy in another way. For while it outwardly appears from leaks to the media that the "big-endian" plan is moving remorselessly forward, the real decision was a "both/and" rather than an "either/or". The only public hint of this was the publication some weeks ago of a Presidential "finding" authorizing CIA and other covert forces to conduct the equivalent of a secret war: to see if they can't bring down Saddam's regime before the regular troops even get there.

The evidence that this secret war is actually underway comes from many small clues one has to put together. Alas, the clues themselves are frequently hearsay, but they add up.

For example, a steady stream of air traffic westward from the quickly-expanding U.S. air base at al-Udeid in Qatar. Very rapid rotations of ground troops in Kuwait. More frequent acknowledgements of incidents over the no-fly zones in Iraq itself. Rumours of special forces movements coming not only from the Kurds in northern Iraq, but more interestingly from the Turkomans who are distributed across a diagonal slice of the country from north-west to south-east. The informally-acknowledged loss of a Predator reconnaissance flight in the north. An Iraqi claim to have shot down or damaged two U.S. aircraft north of Baghdad. (Helicopters participating in a mission near Saddam's "home town" of Tikrit?) Complaints within the Jordanian government about U.S. special forces activity in the eastern desert of that country. Unconfirmable reports of accidents within Iraq, which might instead have been hits.

It is quite impossible to get accurate information out of Iraq. The Saddam regime holds most of the country in a Stalinist clamp. And the student of current events in Iraq must be aware that opposition forces complicate the issue by telling the most extraordinary self-serving lies. (I am thinking especially of the two principal Kurdish factions.)

Indeed, information overload, and the paralysis it can lead to, would appear to be an increasing problem for the Bush administration -- and another reason why it must feel compelled to put special forces on the ground in Iraq, even at substantial risk, simply to confirm or eliminate factual speculations. But the size of the budget the administration seems to have appropriated for covert activities in the region argues further for the prosecution of a fairly ambitious secret war.

Another indication is what we can see of the state of combat readiness. It is as if the "little-endian" plan had been going forward simultaneously with the big one. For since early June, the U.S. has had forces in place for a reasonably large sudden strike, as a necessary back-up.

There are presently about 15,000 U.S. troops in Kuwait on normal rotation, with enough mobile equipment on hand to surround Basra. A further 40,000 are on standby in the Gulf area, ready for rapid deployment. As well the U.S. Navy could deliver a large inventory of tanks and other battlefield equipment to Kuwait's harbour, with only about a day's warning (from the time the fleet in the Arabian Sea converged on the Strait of Hormuz). And with the Fifth Fleet fully deployed from Bahrain, and a spare aircraft carrier group, the U.S. can respond to any major development in Iraq almost instantaneously.

I think we have three stages here. The first is the probing point of a secret war, already underway. The second is the quick-strike force that provides a chisel shaft behind it. And the third is the great hammer that will come down on top of this chisel if and only if there is a need.

The invasion may be waiting, but I don't think "regime change" is.

David Warren

davidwarrenonline.com



To: Jim Willie CB who wrote (2470)7/17/2002 5:11:04 PM
From: Sully-  Read Replies (1) | Respond to of 89467
 
17:08 ET IBM (IBM) 70.69 +1.68: -- Update -- On conference call, company lowers second half forecast for its Global Services division to "modest revenue growth" from its earlier forecast of double digit growth... Stock at 71.10.

17:06 ET Advanced Micro misses earnings estimates (AMD) 9.33 -0.07: Company reports Q2 net loss of $0.54 per share, $0.09 worse than the Multex consensus; Q2 revs came in at $600 mln vs the consensus of $600 mln; note that the earnings miss comes despite two earnings warnings issued during the quarter; expects sequential flash growth which fits with the strength in SNDK's results; AMD sees Q3 sales up modestly vs the current consensus estimate for sales of $670 mln.



To: Jim Willie CB who wrote (2470)7/17/2002 5:49:08 PM
From: stockman_scott  Read Replies (2) | Respond to of 89467
 
Recovery looks more and more like a jobless one

careers.usatoday.com



To: Jim Willie CB who wrote (2470)7/17/2002 6:12:10 PM
From: stockman_scott  Read Replies (1) | Respond to of 89467
 
Buyback Guru Says Stocks Near Bottom

David Fried, The Buyback Letter, 07.17.02, 3:00 PM ET

The S&P 500 has lost 13.8% for the first half of the year. This is the worst decline for the index since it dropped 21% for the first half of 1970.

The performance is not surprising given the recent slew of scandals that have rocked Wall Street. Starting with Enron (otc: ENRNQ - news - people ) last year, the trend has continued recently with Tyco (nyse: TYC - news - people ), WorldCom (nasdaq: WCOME - news - people ), Xerox (nyse: XRX - news - people ) and Rite Aid (nyse: RAD - news - people ) all making headlines for embarrassing reasons. Not long ago, those five companies could have formed the backbone of a strong portfolio. Added to this is the constant gnawing worry about the war against terrorism and the uncertainty as to when another attack will strike in our country. All this makes for an unsettling investment climate.

When times are uncertain, it helps to periodically review the overall economic picture. The Big Trends presented below will help you keep a clear head in what always feels like a crazy market. Underneath the market noise are, as always, solid realities that ultimately rule the day no matter what investors' near-term hopes or fears may be.

Big Trend No. 1: The Inflation Trend
Since 1920, the S&P index has gone up an average of 15.5% when inflation was in the 2%-5% range. When inflation topped 5%, the S&P average rose just 1.3% per year. Currently, inflation is running well below 5%. The inflation trend remains very positive.
Inflation indicator: positive

Big Trend No. 2: Long-Term Bond Yield Vs. S&P Yield
Peter Lynch, the famed fund manager of Fidelity's Magellan Fund during its glory days, uses the following rule of thumb: When yields on long-term government bonds exceed the yield on the S&P 500 by 6% or more, sell stocks and buy bonds. As of June 30, the yield on the S&P 500 was 1.50% while the yield on 30-year government bonds was approximately 5.47%. The difference between the two yields is 4.07%.
Yield indicator: positive

Big Trend No. 3: Action Of The Federal Reserve Bank
The Fed lowered interest rates 11 times last year. The Fed has changed its bias to neutral. For a while we have felt that the next move by the Fed would be to raise rather than lower interest rates. However, that is no longer a certainty.
Fed indicator: neutral

Big Trend No. 4: The Yield Curve
Currently the yield curve is positive. As of June 30, the spread between a one-year Treasury bill and the 10-year bond was 2.70% and the 30-year bond currently yields 5.47%, 3.34% more than the 2.13% yield on the one-year Treasury bill. Economists generally feel that an inverted yield curve indicates that an economic slowdown is imminent. The yield curve is in order.
Yield curve indicator: positive

Big Trend No. 5: Valuation
Recent market declines continue to take the froth out of the high-flying big-cap stocks. The S&P 500 is down about 35% from its peak. However, the S&P 500 still trades at almost 36 times earnings, a historically high number, as earnings have declined faster than prices. Interest rates will have to remain low and earnings must rise to support current prices for the popular large-cap stocks. Buying value in this market remains extremely important.
Valuation indicator: negative

Big Trend No. 6: Investor Sentiment
We add the total bullish percentage readings of Investors Intelligence, Consensus Index, AAII Index and Market Vane, as reported in Barron's every Sunday, and average this figure for the month. We consider an average reading of over 200 to be negative, while readings of under 150 are positive. The average total reading for the five weeks ending June 30 was 127. This reading is the same level as it was for last September, the month of the World Trade Center attacks. We have not had a monthly reading of over 200 since December 2001. Readings over 240 have marked market highs over the past few years, while readings of about 130 have marked market bottoms.
Sentiment indicator: positive

Big Trend No. 7: Earnings Sentiment
We track the quarterly positive and negative earnings surprises as reported in Barron's every week. We feel that positive surprises and revisions are bullish for the market, as they indicate that professional analysts have been too negative, while negative revisions indicate that analysts have been too optimistic. During the just-concluded quarter, positive quarterly earnings surprises beat negative surprises 88-37, a ratio of just over 2-to-1. Fiscal year earnings revisions surprises were essentially equal. This indicates that analysts' current estimates for 2002 earnings are probably about right, meaning there will be an absence of upside surprises to drive the overall market.
Earnings sentiment indicator: neutral

Summation Commentary
Four of our seven indicators are positive (inflation, yield, yield curve and sentiment), while two indicators are neutral (the Fed and earnings sentiment). Valuation is the only negative indicator. Our indicators are telling us that the investment climate is mildly positive at this time.

While the market may have more downside risk, particularly if there is another terrorist attack or if we slip back into recession, we are still significantly off market highs. We estimate downside risk to be less than average right now. This is a change from the mid- and late '90s, when risk was at extreme levels due to an extremely overvalued market. It is impossible to pick a bottom in the market. However, our indicators are telling us that a bottom is near. The market looks and feels grim right now, as it is reeling from the exposure of corporate wrongdoing.

However, we believe that the sensational headlines about today's wrongdoers represent a tiny fraction of the publicly traded companies. The overwhelming majority of managements are honest and trustworthy even when "nobody is looking." We should continue to invest accordingly.
_________________________________-
Excerpted from the July 2002 issue of The Buyback Letter

forbes.com



To: Jim Willie CB who wrote (2470)7/17/2002 7:02:18 PM
From: stockman_scott  Respond to of 89467
 
The meltdown of corporate America

Editorial
i-street.com
July 17, 2002

i-street.com

The dot-com and telecom implosions are going to look like a tiny blip on the radar screen compared to what's happening in corporate America. Turns out Enron wasn't a fluke but rather an oracle to the mudslide of greed and corporate duplicity consuming our country. More powerful than a terrorist attack, company after company-many of which we believed were the pillars of American capitalism-have fallen prey to their own criminal acts.

Creative accounting, insider trading, obstruction of justice and fraud scream in the headlines of companies like Enron, Global Crossing, Andersen, ImClone, WorldCom, Vivendi... and now it seems EDS. Wall Street and the world are watching jobs and billions of dollars evaporate overnight, and in many cases, life savings and pension plans.

Can we stop corporate crime before it happens? Isn't that supposed to be one of the major roles of the Securities and Exchange Commission?

Steven Spielberg introduces the world to the Department of Pre-Crime in the current blockbuster movie, "The Minority Report." In addition to the chilling picture of biometrics and security gone amok in a world where technology in the hands of the government is used to strip society of its right to privacy, viewers are asked to consider the philosophical issues of stopping crime that is destined to happen, but before it does happen.

Is crime destined to happen in corporate America?

Patrick Murphy, Director of the Institute for Ethical Business Worldwide at Notre Dame and a teacher for a Chicago Executive MBA program, describes a roller coaster that some companies can't quite get off of.

"These companies get on this stock price growth and they are willing to virtually do anything to keep that going. That's where unethical behavior leads to illegal behavior and we end up with the scandals that we've had in the last few months. And frankly, I think the accounting firms have to take their jobs more seriously," said Murphy, adding "And in the technology sector, I think the competition is one of the things to blame."

Maybe we need the SEC to develop a department of pre-crime. It shouldn't be that difficult to build a psychological profile of a future corporate criminal because we have so many distinguished role models. He is probably white, 40-54, grew up in a poor neighborhood and went to a third-tier college but surrounds himself with Harvard graduates, his "wife has expensive tastes justifying a $55 million annual salary" even though his company is hemorrhaging cash and market share, his company has huge losses in its equity portfolio that are disguised with derivatives, he takes company loans, he has an enormous sense of entitlement and refers to most of his staff as plebes, he simply loves being filthy rich at anyone's expense and loves to be considered a 'thought leader.' Hey, we can already think of 10 CEOs who are on the path of pre-crime.

In the Minority Report, the undoing of the Department of Pre-Crime was the awareness that people have a choice. Corporate America has a choice too and we have a choice. The SEC needs to wakeup---they never should have allowed Andersen to operate as a criminal firm for at least eight years prior to Enron. Many community members criticized Crain's, the Chicago Sun-Times and the Chicago Tribune for their coverage of Andersen; we think they deserve the gold badge of honor.

We need stronger laws giving shareholders detailed access to "immaterial" accounting information. In the meantime, get on every conference call, attend every public shareholder meeting, contact investor relations and ask the tough questions. Our future may depend on it.



To: Jim Willie CB who wrote (2470)7/17/2002 7:30:15 PM
From: stockman_scott  Read Replies (1) | Respond to of 89467
 
Talent, Inc.

The New Yorker
Issue of 2002-07-22
Posted 2002-07-15

This week in the magazine and here online (see Fact), in "The Talent Myth," Malcolm Gladwell examines the "talent economy"—the recent movement in corporate culture in which star performers from top-ranked business schools are favored. This trend, while intended to produce the best companies, in fact has been associated with one of the most notorious cases of mismanagement in recent history: Enron. Here Gladwell discusses his article with The New Yorker's Ben Greenman.

BEN GREENMAN: What does "talent" mean, exactly, in a business context? Or, in other words, what are companies hoping to see when they hire a "talented" person?

MALCOLM GLADWELL: What companies want, obviously, is someone who will perform well, and the idea of "talent" is that it's what most of us would think most accurately predicts performance. But it's that notion that I think is suspect. This doesn't mean that there aren't people who are better at their jobs than others. Of course, there are. But writing this story convinced me that there really isn't a good way to predict that kind of success.

In your piece, you raise the athletic metaphor, in which top business-school grads are analogous to great natural athletes. Do companies actually think in these sports terms?

I do think that companies think in terms of sports metaphors. But the problem with sports metaphors is that the meaning you extract from a sports metaphor is entirely dependent on the sport you pick. I think, for instance, that you can build a winning baseball team just by snapping up individually brilliant players. That's essentially what the Yankees are, and they win the World Series all the time. Starting pitchers and slugging first basemen don't even have to get along with their teammates to make a huge difference. But basketball, or football, is a different story. I tend to think of corporations as more like basketball teams than baseball teams, but clearly the folks at Enron and their consultants at McKinsey, a company that has been a great proponent of the talent principle, think otherwise.

Do other business cultures share the obsession with stars? What about Japan, for example, where promotions are traditionally earned over long periods of time?

Yes, Japan is quite different, as, I think, are European countries. And remember, for a long time America was also a place where the organization was king. The grand old companies of the American economy—Procter & Gamble and I.B.M. and General Motors—were built that way, as are many of the newer stars, like Southwest Airlines or Wal-Mart. This whole "talent" movement is really a recent phenomenon: it's another of the innovations we owe to the "new economy."

Much of the problem with promoting talent seems to come down to the fact that schooling rewards individual and not group achievement. Why does the burden rest upon companies? Why don't schools, who are producing the prospective employees, emphasize teamwork more?

That is a good question, and the answer is that I have no idea. I have always thought it odd, for instance, that the one thing that otherwise impoverished inner-city schools are good at doing is producing great sports teams. In other words, it is clearly possible to teach highly successful teamwork on the playing field under the most adverse of circumstances. So why don't we try the same strategy in the classroom?

In your article, you raise the possibility that Enron, by rewarding "talent," was running its business for its managers, rather than for its customers or stockholders. How much did this have to do with its failure? Is all the talk of talent just an excuse for overpaying executives?

I don't think that the talent mind-set at Enron was a cover story. I think that they honestly believed in the idea. Enron was not a cynical place: it was a place for true believers, and it was this true belief that led directly to their fall. They chose their business not according to what made sense for the company, but according to what the "stars" wanted to do. That may be why some people there had to cook the books—because, as it turns out, what makes business sense and what makes personal sense don't always overlap.

newyorker.com