William Hueb, here is Barrons Abelson's editorial: Hope it helps.
IMHO we are in for a drop next week. Oil goes building into everything including the core. Abelson predicted 8 months ago that increase in oil prices would do the market in in terms of a significant correction
at least. This is a classic picture: Bull markets are toppled by a) An unforeseen event :in this case few thought oil price increases would be a fator, now; b) higher interest rates.
TA
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enjoy good Saturday reading, <g>,
May 17, 1999
Loud Sings the Cuckoo
By Alan Abelson
Summer is icumen in
Lhude sing cuccu!
Obviously, the anonymous 13th-century bard who penned that familiar
fragment was not only a master versifier but also a peerless prophet. For
Summers is a-comin' in, and the cuckoos are singing loudly.
What the cuckoos are singing are paeans of praise but not for Summers.
Rather, they're for Robert Rubin, the departing Treasury Secretary, whose
designated successor is Lawrence Summers.
President Clinton, sensible as always of everyone's paean, rushed to the head
of the praise line by calling Mr. Rubin the best Secretary of the Treasury this
country has had since Alexander Hamilton. Alexander Hamilton, to refresh
your memory, was George Washington's Robert Rubin.
High praise, indeed, since the 67 gents who held down the job between Al
and Bob were dynamite types whose deeds are inscribed indelibly in the
national psyche -- giants like John Dix (brother of the even more famous
Fort); Charlie Folger and Bill Windom, the only two-fer in the bunch (he was
No. 33 and No. 39). More recently, the office has been distinguished by such
people of quality as Jawn Connally, G. William Miller and Don Regan.
Mr. Clinton's placing of Mr. Rubin as head and shoulders above these
paragons is eloquent testimony to the esteem in which he holds Mr. Rubin.
And well he might. For Mr. Rubin, on more than one occasion, helped save
the world from financial catastrophe. And, at least as important, he helped
save any number of big American investors from the consequences of their
feckless investing in Mexico.
But Mr. Clinton is also deeply indebted to Mr. Rubin for his re-election and
for providing the only sure shock absorber for Monicaquake -- the plush
economy. While Mr. Rubin was tending the economy, inflation disappeared
and so, incredibly, did unemployment. The expansion expanded and
expanded and expanded and is expanding still. And miraculously, a budget
hemorrhaging $250 billion a year became awash in black ink.
One can quibble as to the exact size of Mr. Rubin's role in any of these
desiderata. Or how big a part was played by serendipity. Or by Alan
Greenspan, who certainly deserves considerable credit, if only because he
provided so much of it.
But no quarrel that, a Wall Streeter bred in the bone, Mr. Rubin was the
eminence grise of the great bull market that in so many ways has been the
agent of our extraordinary prosperity. Again, we're loath to take anything
away from Mr. Greenspan, who by doing nothing did so much to make the
last 5,000 Dow points possible. (And remember, had it not been for Mr.
Rubin's stout advocacy, Mr. Greenspan likely would not have been
reappointed, and in his stead would have come the furtive Felix Rohatyn.)
Mr. Rubin's passion for markets, his knowledge of and arguably exaggerated
confidence in them, and his ease and patience with them even when they're on
their worst behavior, provided investors with a trusty security blanket. No
other Administration in recent memory, including Ronald Reagan's, embodied
a figure even as remotely reassuring.
The comfort afforded by Mr. Rubin's presence was never articulated by
investors; for that matter, even the conscious ones weren't consciously aware
of it. But somewhere in the interstices of their beings, investors knew with
certainty that they had an Uncle Bob they could count on.
There could be no greater evidence of the Street's enormous regard and
reverence for Mr. Rubin than the market's reaction to the news of his leaving:
Stocks went down like a stone -- for a whole half hour! After such a touching
and extravagant show of sentiment, it was back to business as usual, and for
the rest of the session, shares resumed their journey on the path to heaven.
Why is Mr. Rubin leaving? The glib answer is that he wants to leave while he's
still ahead. The real answer is that he wants to leave while he's still ahead. No
one ever sold a stock because he thought it would go up. Same principle
applies to jobs.
The last 18 months of any Administration are like the last 18 minutes of a
one-sided basketball game-boring for a spectator, excruciating for a player.
And given Mr. Clinton's proclivity to make messes, this Administration is not
likely to go gentle into the night. For an old trader like Mr. Rubin, there's only
one choice when the upside's so limited and the downside's so open:
Liquidate the position.
Mr. Rubin's shrewdly embossed reputation may be further enhanced by his
successor. For the nonce, we're willing to give Lawrence Summers the benefit
of the doubt. And in fairness, we should note Mr. Summers has his admirers,
led by himself.
We're a mite bemused by the fact that Mr. Summers is invariably described
as "brilliant" and as "the star of the Harvard economics faculty." Which is it?
Mr. Summers' most conspicuous contribution as Mr. Rubin's deputy has been
to proffer bad advice to the Japanese on how to cure their ailing economy,
but to cleverly do so in such an offensive manner that they couldn't possibly
accept it.
Besides his triumphant conquest of academia, Mr. Summers' professional vita
includes a stint at the World Bank. While at that august institution, he won
considerable acclaim for economic acuity and political sensitivity by publishing
a paper asserting that "the economic logic of dumping a load of toxic waste in
the lowest-wage countries is impeccable."
Welcome aboard, Larry.
Mr. Rubin's timing was, as usual, perfect. Another day and he would have
been upstaged by an index -- and not even a real important one like the Dow
or the S&P but the consumer price index, whose pulse has been so weak
lately as to occasion concern for its viability. Makes you wonder, what did he
know and when did he know it?
Clearly, as the break in bonds and the plunge by stocks so painfully
demonstrated, the markets didn't know a thing. Powered by the rise in
gasoline and other petro prices, the CPI took its biggest leap upward in close
to nine years in April, climbing 0.7%. The "core" CPI, which is favored by
Washington and Wall Street economists because it's designed to exclude
anything whose price might go up, rose 0.4%.
While caught by surprise on Friday, bonds actually have been nervously
smelling trouble for a spell now. Frankly, it kind of puzzled us why the stock
market seemed so unconcerned as bond yields began to flirt with 6%. Maybe
day traders don't know from interest rates; ah, well, they're learning.
We kind of doubt that the Fed will do anything mean on Tuesday. But Mr.
Greenspan at least has a wonderful excuse to look solemn again.
For a variety of reasons -- the undiminished buoyancy of our economy and
the spores of recovery and revival shooting up around the world -- we've
increasingly been taken by the notion that this most unusual bull market would
end in the same old way, done in by rising rates. Last week did nothing to
disabuse us of that notion. |
