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Monday Morning Market Musings    12/14/98

Bill's Impeachy-keen Christmas

The Judiciary Committee of the US House of Representatives last week passed four Bills of Impeachment against President Bill Clinton. The full body of the House will hold hearings and a vote by week’s end. If they made book on it in Las Vegas, the odds would be about 75-25% that the full House would vote to impeach William Jefferson Clinton. From there the Articles of Impeachment would go to the US Senate for a full trial presided over by the Chief Justice of the Supreme Court.

Convention wisdom has it that the Senate will not vote to remove Clinton from office. The Republicans hold only a 55-45 margin there, and given the pure partisan nature of the rhetoric so far, the required 2/3rds vote just isn’t there. Unless Clinton and the legions of White House lawyers, pollsters, and advisors blow it, his presidency will survive.

Clinton has said he will not resign. The conspiracy theorists out there, and some of them are way out there, see Clinton holding on until late-January. Clinton will be persuaded by party loyalists that resigning is a "win-win-win" after all.

Under such a scenario, Clinton can:

• salvage his legacy by doing the dignified, honorable thing.

• save enormous personal embarrassment by not having his peccadilloes subject to examination in the Senate and into millions of American homes,

• turn the reigns over to Al Gore, who has a more liberal agenda than he, and the Democratic Party will roll on from there.

If Clinton were to resign after completing two years and one day of his term, VeeP Al Gore could then reign for two years and still qualify to win two full four-year terms on his own. If Gore were to assume the presidency before then, he could only serve one full term of his own. [See the 25^th Amendment to the US Constitution.]

As we said back on 09/14/98:

"Whatever comes to pass, none of this could possibly be the start of another massive wave up in the markets. Indeed, it is perfectly consistent with our view of the markets moving down dramatically to new lows, soon. The stage is set. The prospect of an Al Gore presidency is enough to scare the shit out of any bull."

Much attention is being given to the potential problems many computers will have when we roll over to the year 2000. We will discuss the Y2K problem in detail in upcoming reports. The more immediate problem, in Europe anyway, is the rollover to 1999.

The New Year will usher in a new era for Europe, in the name of a united currency called the Euro. The logistical and political "challenges" in integrating the disparate economies, languages, cultures, governments and even religions of Europe are enormous. Indeed, the task is unprecedented in monetary history. In light of the current optimism and cooperation, one must not forget the last thousand years of European history. Peace and cooperation have been but brief interludes between much longer periods of distrust, conflict and of course war. The Euro conversion may not lead to WW III, but the process will be fraught with all kinds of disputes, and delays. Here’s a link to a CNNFN story with much more information on the Euro conversion: http://www.cnnfn.com/worldbiz/europe/9812/08/step_by_step/

A quick spin around the globe last week:

• Boris Yeltsin got out of his hospital bed just long enough to fire his Chief of Staff and three deputies. Yeltsin has just about cleaned house of his former loyalists and yes-men.

• Rumors floated across the markets that Russia was having more problems with its debt-restructuring plan. Any sort of plan the IMF and the World Bank can conjure up is certain to fail. The underlying problems are virtually insolvable, especially by highly paid international bureaucrats with no personal stake in the outcome. Russia must resolve its economic situation from within, by re-establishing the rule of law and the rule of free markets. It will not be a peaceful and pleasant process, and all the international muddling will only exacerbate and prolong it.

• Japanese corporate profits were down 21% in the third quarter, marking the fourth consecutive down quarter. Japanese manufacturers were hit the hardest with pre-tax profits plunging by 35%. Japan is NOT in a recession; it’s in full-fledged depression.

• North Korea continued its "Mouse that Roared" $300 million blackmail of the US over the inspection of its nuclear sites.

• Iraq continues to play cat and mouse with the UN over its weapons inspection program. Look for Saddam Hussein to step up his defiance each step of the way as Clinton weakens in the face of impeachment or resignation.

• Three Britons and one New Zealander were accused of spying and then brutally slain in the breakaway Russian region of Chechnya. Their decapitated heads were broadcast on Russian television.

• A bloody military coup rocked the tiny Indian Ocean island nation of Comoros.

• The government of Sri Lanka reported that nearly 20,000 people have die in the last four years of civil war.

While not exactly front-page news, the last three events are symptomatic of the pervasive and persistent frustration and desperation around the world. In this time of growing economic, political, and social upheaval, look for such events to be more frequent and deadly.

The Great Bear is flexing its appetite again. The DJIA slipped to 8730 Friday morning before recovering a bit to close the week at 8821. Intraday, the DJIA has now fallen 650 points or 7% from the all-time peak market of 9380 two weeks ago.

We continue with our ongoing outlook that the market is in a massive bull trap rally that is merely setting the stage for an inevitable and historic market crash. See the back issues index for a refresher.

US stocks remain on FULL CRASH ALERT!

The markets are weak going into Monday morning trading on Wall Street. The Asian markets are mostly lower, with the Nikkei 225 slipping about 1.3% to 14,200. The March S&P 500 futures trading on Globex are off about 8 points, perhaps kicking off another down day and down week for the markets.

"Yes, the president should resign. He has lied to the American people, time and time again, and betrayed their trust. He is no longer an effective leader. Since he has admitted guilt, there is no reason to put the American people through an impeachment. He will serve absolutely no purpose in finishing out his term; the only possible solution is for the president to save some dignity and resign."

               -- William Jefferson Clinton, 1974, on President Nixon

 

 Grizzly
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