Message-ID: <20589433.1075845457303.JavaMail.evans@thyme> Date: Fri, 8 Dec 2000 00:58:00 -0800 (PST) From: alhamd.alkhayat@enron.com To: alkhayat@pdq.net Subject: what a year Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Alhamd Alkhayat X-To: alkhayat@pdq.net X-cc: X-bcc: X-Folder: \Greg_Whalley_Oct2001\Notes Folders\Discussion threads X-Origin: WHALLEY-G X-FileName: gwhalley.nsf An outstanding year! 2000, of course. It was extraordinary, by any measure. How many years can you name that start with a great hoax -- Y2K -- and end with a monumental hoot -- the world's greatest democracy can't get the hang of how to elect a President? We're not the only mad conspiratorialist to divine that the Y2K scare was the brilliant handiwork of a cabal of top computer makers intent on sparking sales -- and what a wildly successful scheme it was. Few, however, are privy to the knowledge that the massive snafu of election 2000 was no improbable statistical fluke but the Machiavellian contrivance of Ross Perot exacting revenge for being denied his usual place on the ballot. Besides, it finally occurred to Ross that he wasn't going to be President, and that made him as mad as a plucked rooster: If he wasn't going to be President, by gum, nobody was going to be President! Even though election 2000 demonstrated a small defect -- an inability to pick a winner (but remember, nothing's perfect) -- it did put to rest some nasty aspersions that have long been cast on the workings of this blessed republic. Most particularly, it buried once and for all the cynical notion that money can buy the Presidency. Both parties spent hundreds of millions of dollars trying to do just that -- and came up empty. So let's not hear any more nonsense about the Presidency being for sale. It's now quite clear that the Presidency can't be bought; conceivably, though, it can be stolen. What remains to be determined is which of the pretenders can pull off the theft. Mr. Bush would seem to enjoy a congenital advantage, since the governor of the state whose votes ultimately will prove decisive is his baby brother. On the other hand, Al Gore has the overwhelming support and counsel of the trial lawyers. Trial lawyers, after all, make a profession of knowing how to get away with murder. So they should find figuring out how to snatch the Presidency mere child's play. Not the least remarkable thing about this most remarkable year is that the Supreme Court seemingly has abandoned its long tradition of following the election returns in favor of helping to shape them. The good part is that there are nine of them-seven mostly old men and two women of a certain age-assuring a majority ruling, unless one recuses himself because he simply can't stand Florida. Only in America in the year 2000. -- As you're undoubtedly and possibly painfully aware, 2000 is already memorable in Wall Street as the year the air began to whoosh out of the monster stock-market bubble and, after many a frustrating try, the year the bears finally ate Goldilocks. In fact, unless such portents as mounting claims for unemployment insurance and the latest downbeat readings on business from the purchasing managers are completely misleading, 2000 will go down as the beginning of the end of the most salutary and long-lived economic boom to grace this nation (and probably any other). These are, admittedly, negative distinctions. But if you're a year and want to be famous, you can't be picky: No one harks back to 1929 because it was a great year for butterflies. Nasdaq unarguably has turned in a once-in-a-lifetime performance this year. Never before has a stock-market index caused as much pain in so short a time as did Nasdaq in its breathtaking (and wealth-evaporating) 50% drop from its March high to its close last Thursday. What's more, it has a full month to better (worsen?) that fantastic feat. Nor does the plunge in the index -- formidable as it is -- do full justice to the awesome decline. A much more graphic picture is painted by the slides in individual issues. Here, we're indebted to a sometime correspondent named Howard Boyet, who sent us a list of 90 of the most gruesome casualties. Alas, space -- and solicitude for those readers of an especially delicate disposition -- prevent us from listing the entire wretched roster. But a sampling will give you the flavor. For instance, Foundry Networks, which peaked at 212, was last seen at around 41. Harmonic has fallen from 158 to 7-plus. Internet Capital from 212 to 6. FreeMarkets, from 370 to 29.50 (not quite free yet, but it's getting there). VA Linux, from 320 to 8. Red Hat, 151 to 6. Inktomi, 241 to 24. DoubleClick, 135 to 13. Akamai, 346 to 27. Next Level, 202 to 11 (we dread to contemplate the stock's next level). MicroStrategy, 333 to 12 (might be something wrong with the strategy). Ask Jeeves, 144 to 10 (if it's all the same, we'd rather not ask him). And on and drearily on. So if you own stocks like Dell Computer (60 to 18) or Gateway (81 to 19) or Texas Instruments (100 to 37) or Oracle (46 to 26), you can take some comfort in the knowledge that you could have owned any of the above or the likes of Razorfish (57 to 3), Novell (44 to 6) or Covad (67 to 2). These exercises are now commonplace, and journalistically, we suppose, they're the equivalent of a circus freak show. But they do, as Mr. Boyet suggests, provide a more vivid and even more accurate description of the damage wrought. What we've found most intriguing is that, until now, all this blood in the Street has evoked very little public outcry. We've experienced a kind of cruel and vast but silent mugging. Magazines like Time and Newsweek haven't done their usual heavy-breathing treatments, nor have most newspapers, including the New York Times, made a front-page fuss about the decline and fall of Nasdaq. Nor are the networks running their usual inane specials. Moreover, until quite recently, mutual-fund shareholders have placidly watched their wealth withering. No crowds gathering in front of fund headquarters and, more tellingly, no rush to redeem their holdings. There are several possible explanations for this rather astonishing diffidence on the part of the financially wounded and the absence of hysteria in the press, both the electronic version and the genuine item. The distraction of the election that never ends. The fact that most everyone who wants one still has a job and a relatively high comfort level. Whatever the cause or combination of causes, that we're in a bear market, and a vicious one, doesn't seem to have sunk in yet. Until it does and until fear stalks the Street and an ugly grizzly makes the cover of Time, if you run into anyone claiming to espy a bottom, take him firmly by the hand and guide him to the nearest ophthalmologist. -- That chart adorning this page depicts another reason why there's lots of room still on the downside. (See accompanying illustration -- Barron's Dec. 4, 2000) It comes to us courtesy of George Gilman, the savvy and talented producer of the Business Picture, a wonderful quarterly compilation of charts and info on the economy and the markets. The last official number for the Nasdaq P/E, he reports, was 139.1 for October, but he reckons the figure fell to somewhere around 107 by the end of November. As George comments: "Even after the 48.5% decline from the March 10 peak of 5048.62 to Thursday's close of 2597.93, the P/E on Nasdaq is incredibly high." And that's the point. The multiple wouldn't be cheap at half its current level. Nor would it shock us if, eventually, Nasdaq and its P/E fell another 50%. -- While we're convinced we're in the early stages of a secular bear market, we know there'll be blips in this descent just as there were dips in the late great bull market. In truth, we're surprised we haven't had a halfway decent rebound yet. Certainly, we're overdue for one. Consider this a heads-up on what might trigger a bounce (apart from a miraculous resolution to the election snarl). Next Tuesday, Alan Greenspan is slated to deliver the keynote address to a gathering of commmunity bankers in New York City (which is not overrun by community banks but is a great place to visit). We haven't a clue as to what he intends to say, and it might well be nothing intelligible. But should Mr. G make a sly reference to the economy and monetary policy and hint that maybe the Fed is poised to shift from tight to neutralthat just could rouse spirits in Wall Street enough to ignite a fairly brisk -- if relatively brief -- move up. -- John Liscio died last week. John was our colleague at Barron's for roughly a half-dozen years in the late 'Eighties and early 'Nineties, and not a day went by that he didn't light up the place. He was vibrant and funny, outrageous and irreverent, extraordinarily intelligent. He was brash and tough and had an insatiable appetite for mischief. Yet he was also warmly affectionate, shirt-off-his-back generous and, oddly, possessed of a touching ingenuousness. John had an expansive mind that ranged restlessly and relentlessly over just about every subject known to literate and inquiring man and a few that only his special imagination provided entry to. He was a baseball nut, a cantankerous pitcher for and captain of Barron's softball team and a demon participant in the Fantasy League, where grown men play at being owner-managers of major-league teams. In fact, he was the commissioner of his league (in which role, we can only surmise, he visited great anguish on his fellow Fantasy Leaguers). As a writer, John was exceptional. He brought to economics and markets a knowledge not only of those murky subjects but also of the wide world; a gifted and fluent pen and a sense of humor that could be -- inevitably was -- deliciously wicked. He would leap with positive glee on some unfortunate with a tempting name. There was a chap named LaWare at the Fed, for example, whom John inevitably and with some purpose called UnaWare. Morgan Stanley economist Stephen Roach was rarely mentioned by John but as the proprietor of the Roach Motel, where the facts check in but don't check out. He was a brilliant journalist, both at Barron's and at U.S. News, and, against all advice and odds, launched an economic newsletter, the Liscio Report, which became a roaring success. The reason was simply that John had more wit in one pinky and more insight in the other than any dozen economists. John, who was spunk personified, showed unbelievable courage as he battled his last illness. When we visited him in his hospital room and told him joshingly he looked like hell, he grinned that indomitable grin of his and launched into a couple of hours of dissertation on the state of the world, excitedly detailing his plans for the future. He was the most indomitable person we've ever met. All of us here at Barron's and, for that matter, anyone lucky enough to have known him, will miss him terribly.