We have previously talked about the fear that is driving as much as 30% of the current price of oil. Here is a little tidbit I read in the times:
“According to U.S. intelligence reports, officials from at least two key Russian nuclear-research institutes are quietly negotiating to sell Iran a 40-megawatt heavy-water research reactor and a uranium-conversion facility. While the talks are in an early stage, the reports suggest Russian nuclear scientists are already secretly advising Iran on how to produce heavy water and nuclear-grade graphite. American officials believe the technology and information are building blocks for a long-range Iranian effort to manufacture plutonium or highly-enriched uranium for a nuclear bomb.”
Scary isn’t it? Fortunately this article is from 12/15/1998!
http://www.pulitzer.org/year/1999/international-reporting/works/fission_for_cash.html
Yes, everything old is indeed new again…
In 1998 we were dropping bombs in Afghanistan and sending troops into Iraq (but that wasn’t called a war), the Russian economy was in freefall and we heard that they were going to be selling bombs and nerve gas to the highest bidder. China was illegally getting its hands on our military technology, the Asian markets were collapsing and we had a major crisis in Iran over their harboring of terrorists.
The price of oil during all this? About $20 a barrel – far lower than in the 70s.
The markets? Up 50% from 1998 to 2000 (even with a looming Y2K!).
The difference? Leadership – pure and simple.
There is a great line from the movie “Men in Black” where Tommy Lee Jones tells Will Smith why he shouldn’t worry about the latest imminent world crisis: “There’s always an Arquillian Battle Cruiser, or a Korilian Death Ray, or an intergalactic plague that is about to wipe out all life on this miserable planet. The only way these people can get on with their happy lives is that they do not know about it!”
Quite unlike Mr. Jones’ happy charges, we are living in an environment of constant fear in a cycle where the government and the media both push the same message: Things are bad! Bad news sells papers, we know that.
Bad news also excuses poor leadership. Much like Whole Foods (you thought I forgot about them didn’t you?) used the excuse that the hurricane ate their earnings last quarter, the Bush administration excuses all sorts of things under “Terrorist threat” or “Social Security Crisis” or “Health Crisis” or “Energy Crisis.”
Leaders don’t have crises, they solve problems. Leaders eliminate threats, not “monitor” them!
How would you feel about Yahoo’s CEO if he got on TV and told you that to win the war in the market, they just needed permission to listen in to Google’s phone calls so they could figure out what they are up to?
I think we are just coming off a cycle of peak fear, which is why it feels like it is escalating at the moment. I give it no more than 45 days, perhaps a lot less, after which time anything less than an actual catastrophe will be shrugged off, much like things were in the later 80s.
The rest of the world got tired of worrying months ago and the world markets are hitting record highs while our Nasdaq is still down 60% from its peak. Even gold, although high from demand, is not in any kind of panic mode – and that has been the best indicator of world sentiment for a thousand years or so.
In fact, that is what has been bothering me lately, the pattern this month has been selling off gold in Asia and Europe followed by buying in the US. This unusual behavior is just another reflection of the heightened US worries vs. the rest of the world.
Bottom line: Bush’s woes will be the economy’s gains as the election begins to look ugly for Republican’s this year. People are as mad as hell and they are not going to take it anymore, a spirit that will begin to have a positive impact on the markets by March.
