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  • Lim_Tung Lim_Tung Feb 13, 2001 9:51 AM Flag

    Subj: Not the right time

    eds16054>I always invest in stocks that are down seriously. It's like being controversary... not doing what the mms want you to do; buy high sell low.

    Please show us your wisdom about DVD, is it a buy or sell?

    Lim Tung

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    • Thanks, the DVD gang knew this last week.


    • reported Auerbach, Pollak & Richardson views on DVD.

    • All of which is unquestionably wretched for those concerned, but is it instructive? The Sunbeam saga is atypical on its face -- a protracted example, as presented, of a singularly ruthless and unsuccessful corporate restructuring.

      Nevertheless, toward the end of her book, Ms. Garson attempts to apply the Sunbeam story to the global economy. She devotes several pages to the 1997-98 Asian currency meltdown -- which brings in the International Monetary Fund, the World Bank, George Soros and all the usual suspects. The book more or less concludes with an appeal for the regulation of international capital flows.

      Ms. Garson's point seems to be that as mature economies offer fewer restructuring candidates, and as Western capital hunts for a home, financiers will look to emerging markets for their takeover targets. The liberalization that IMF bailouts impose on otherwise statist economies, she believes, will act as a Trojan horse for such private capital flows. The result will be a deluge of failed takeovers and restructurings -- like the Sunbeam deal, which seems to serve as her template.

      But this is hyperbole. Most restructurings do not blow up as Sunbeam's did. The idea behind them -- more often realized than not, one could easily argue -- is to free up unneeded capital for productive use elsewhere, including the Third World, thereby creating more opportunity, more jobs, higher wages and more wealth overall. The efficiencies created through this sort of "creative destruction" are precisely what allow for steadier rates of growth -- an assertion that the consistently hardy U.S. economy of the past 18 years would seem to confirm.

      In any case, Ms. Garson's final chapters seem tacked on, as if someone felt that "Money Makes the World Go Around" should include something or other on the IMF, what with all the controversy about its role in Third World debt. In the end even Ms. Garson can't get her mind off the things that capital generates. In an odd -- and oddly welcome -- appendix, she offers us a recipe for dehydrated jellyfish.


      Mr. Lilly is a featured writer at, the Fortune Small Business Web site.

    • A Small Investment Makes a Grand Tour of the Global Economy
      Wall Street Journal; New York, N.Y.; Feb 20, 2001; By John Lilly;


      (Viking, 342 pages, $24.95) By Barbara Garson

      CASH FLOWS. It does: It flows like water, in unpredictable and untraceable ways. Thus the consumer's age-old question might just as easily occur to the investor: Where does all the money go? But the question has no precise answer.

      Barbara Garson admits up front that the fluidity and confluence of money erode her very premise, but she plunges ahead anyway in "Money Makes the World Go Around," as she follows the course of a couple of her own investments through the global economy. Or rather, as she tracks her money through certain carefully selected areas of the global economy, ticking off the benefits and hardships it seems to generate along the way.

      And where does her money flow? The first chunk of it ($29,500, or half her book advance minus the agent's fee) moves from a tiny bank in Millbrook, N.Y., through the federal funds desk at Chase Bank in Manhattan, to a Brooklyn fish distributor and off to booming east Asia. Or so Ms. Garson imagines, reporting along the way.

      We are there as her advance underwrites everything from Bahamian Eurodollar deposits and letters of credit for prawn shipments to bribes and bridge loans for an oil refinery in Thailand. "I have to travel a lot. I follow my jellyfish," a Mr. P'ng tells Ms. Garson in explaining his coelenterate processing business, presumably one of the recipients of her capital. The statement could serve as a metaphor for Ms. Garson's own work in this first section of her book.

      For someone who more than once refers to herself as a "socialist," and who admits a certain initial financial ignorance, Ms. Garson recounts her travels with a disarmingly balanced combination of amazement and social concern. Her astonishment that actual people actually do concrete things with capital seems genuine and can be contagious.

      When, for example, a Thai pipefitter working on one of "her" projects explains his preference for bending pipe at 45 degrees rather than the more mundane 90, both his enthusiasm for the quotidian and the quiet pride he takes in his work rub off on the author and her audience. Readers may well find themselves sympathizing with Ms. Garson's wish to see her acquaintance protected from the vagaries of free-flowing capital, even as she recognizes the importance of capital to the existence of his job.

      Less engaging by far is Ms. Garson's second storyline, later in the book, which focuses on her $5,000 investment in a mutual fund run by the legendary investor Michael Price. She devotes perhaps 100 pages to the botched late-1990s restructuring of Sunbeam Corp., carried out by the now thoroughly disgraced "turnaround artist" Al Dunlap at Mr. Price's behest.

      Ms. Garson claims that she had wanted "to explore the norm" with her mutual-fund investment, but she proceeds to do the opposite. Of the "more than 7,000 mutual funds" available to her at the time, she picks one run by Mr. Price, whom she describes at one point as "the thug who nearly knocked me over at the Chase meeting" and at another as a man "atypically aggressive" in his investing style. The phrase atypically aggressive, of course, can also describe "Chainsaw" Al Dunlap.

      The chronicle that follows is by turns tragic and pathetic, as Mr. Dunlap hacks Sunbeam down to size in seemingly haphazard fashion. In particular Ms. Garson offers a wrenching account of a Tennessee plant closure, with its bullying and enmity. After a share-price meltdown and Mr. Dunlap's own firing by Sunbeam's board, the carnage is complete.

    • A Questionable Crutch for a Limping Economy � ByVolume

      Market Watch: A Questionable Crutch for a Limping Economy
      AVE investors lost faith in Alan Greenspan's magic?

      February 18, 2001

      In early January, when Mr. Greenspan cut interest rates by one-half of a percentage point, stocks roared as investors exuded confidence that the market could indeed be saved. And when the Federal Reserve Board cut rates once more at the end of last month, strategists said again that the market was poised for recovery.

      Now, however, investors aren't so sure. The Nasdaq, which has taken the brunt of the beating from fearful investors, lost 5 percent of its value on Friday and is down 1.8 percent for the year. The Dow Jones industrial average is flat so far in 2001.

      A month or so ago, investors seemed certain that any economic slowdown would be quick and relatively painless. They argued that earnings weakness would pass and that share prices would rebound.

      No longer. A steady drumbeat of dreary earnings reports from technology stocks � Dell Computer and Nortel Networks most recently � have investors concerned that the hangover from the bull-market party may last much longer than they previously thought.

      That is a reasonable view, said James Paulsen, chief investment officer at Wells Capital Management in Minneapolis. He compared the economy today to that of 1990, the last time the United States endured a recession. That downturn ended quickly, in 1991. But while the Federal Reserve chopped the federal funds rate from 9 percent in 1990 to 3 percent by 1993, it wasn't until 1994 that the economy got out of a sluggish growth mood.

      What worries Mr. Paulsen today is the possibility that the Fed's rate cuts may not be able to rouse technology spending. "If the tech sector is driven more by new-product introductions, whether the Fed lowers or raises interest rates may have no impact," he said. "That was O.K. when tech was contributing 5 percent or less to economic growth. Now it's one-third of the growth rate and it becomes critically important."

      Indeed, Mr. Paulsen thinks that the United States has avoided two recessions in recent years solely because of the economic growth provided by new technologies that won the hearts of corporations and consumers. One near miss occurred in 1995 after the Mexican peso devaluation; then, sales of personal computers bailed out the country. Later, in 1998, when the rest of the world was in turmoil, buying into the Internet boom helped the nation avert the crisis.

      "Even though we think the Asian crisis ended in 1999," Mr. Paulsen said, "signs that we hadn't really exited the crisis remained." Among them are excessive stock market volatility; depressed commodity prices, other than those that are energy-related; continued corporate layoffs; and persistently wide corporate bond spreads. "Maybe all those things indicated that most of the world didn't get out of economic crisis, but it was masked by the boom in technology," Mr. Paulsen said.

      This picture has troubling implications for corporate earnings in 2001. "Normally, we go into a recession after a period where pricing power has been strong," Mr. Paulsen said. Not this time. On Friday, the report on producer prices showed that raw goods, excluding food and energy, actually fell in price by 7.4 percent, year over year. While energy prices have spiked, companies cannot pass along the price increases. "This will put a unique pressure on profits," Mr. Paulsen said. "It's a tough place to be."



    • I believe my pardon decision was in the best interests of justice. If the two men were wrongly indicted in the first place, justice has been done. On the other hand, if they do personally owe money for Energy Department penalties, unpaid taxes or civil fines, they can now be sued civilly, as others in their position apparently were, a result that might not have been possible without the waiver, because civil statutes of limitations may have run while they were out of the United States.

      While I was aware of and took into account the fact that the United States attorney for the Southern District of New York did not support these pardons, in retrospect, the process would have been better served had I sought her views directly. Further, I regret that Mr. Holder did not have more time to review the case. However, I believed the essential facts were before me, and I felt the foreign policy considerations and the legal arguments justified moving forward.

      The suggestion that I granted the pardons because Mr. Rich's former wife, Denise, made political contributions and contributed to the Clinton library foundation is utterly false. There was absolutely no quid pro quo. Indeed, other friends and financial supporters sought pardons in cases which, after careful consideration based on the information available to me, I determined I could not grant.

      In the last few months of my term, many, many people called, wrote or came up to me asking that I grant or at least consider granting clemency in various cases. These people included friends, family members, former spouses of applicants, supporters, acquaintances, Republican and Democratic members of Congress, journalists and total strangers. I believe that the president can and should listen to such requests, although they cannot determine his decision on the merits. There is only one prohibition: there can be no quid pro quo. And there certainly was not in this or any of the other pardons and commutations I granted.

      I am accustomed to the rough and tumble of politics, but the accusations made against me in this case have been particularly painful because for eight years I worked hard to make good decisions for the American people. I want every American to know that, while you may disagree with this decision, I made it on the merits as I saw them, and I take full responsibility for it.

      William Jefferson Clinton was the 42nd president of the United States.



    • The pardons that have attracted the most criticism have been the pardons of Marc Rich and Pincus Green, who were indicted in 1983 on charges of racketeering and mail and wire fraud, arising out of their oil business.

      Ordinarily, I would have denied pardons in this case simply because these men did not return to the United States to face the charges against them. However, I decided to grant the pardons in this unusual case for the following legal and foreign policy reasons: (1) I understood that the other oil companies that had structured transactions like those on which Mr. Rich and Mr. Green were indicted were instead sued civilly by the government; (2) I was informed that, in 1985, in a related case against a trading partner of Mr. Rich and Mr. Green, the Energy Department, which was responsible for enforcing the governing law, found that the manner in which the Rich/Green companies had accounted for these transactions was proper; (3) two highly regarded tax experts, Bernard Wolfman of Harvard Law School and Martin Ginsburg of Georgetown University Law Center, reviewed the transactions in question and concluded that the companies "were correct in their U.S. income tax treatment of all the items in question, and [that] there was no unreported federal income or additional tax liability attributable to any of the [challenged] transactions"; (4) in order to settle the government's case against them, the two men's companies had paid approximately $200 million in fines, penalties and taxes, most of which might not even have been warranted under the Wolfman/Ginsburg analysis that the companies had followed the law and correctly reported their income; (5) the Justice Department in 1989 rejected the use of racketeering statutes in tax cases like this one, a position that The Wall Street Journal editorial page, among others, agreed with at the time; (6) it was my understanding that Deputy Attorney General Eric Holder's position on the pardon application was "neutral, leaning for"; (7) the case for the pardons was reviewed and advocated not only by my former White House counsel Jack Quinn but also by three distinguished Republican attorneys: Leonard Garment, a former Nixon White House official; William Bradford Reynolds, a former high-ranking official in the Reagan Justice Department; and Lewis Libby, now Vice President Cheney's chief of staff; (8) finally, and importantly, many present and former high-ranking Israeli officials of both major political parties and leaders of Jewish communities in America and Europe urged the pardon of Mr. Rich because of his contributions and services to Israeli charitable causes, to the Mossad's efforts to rescue and evacuate Jews from hostile countries, and to the peace process through sponsorship of education and health programs in Gaza and the West Bank.

      While I was troubled by the criminalization of the charges against Mr. Rich and Mr. Green, I also wanted to assure the government's ability to pursue any Energy Department, civil tax or other charges that might be available and warranted. I knew the men's companies had settled their disputes with the government, but I did not know what personal liability the individuals might still have for Energy Department or other violations.

      Therefore, I required them to waive any and all defenses, including their statute of limitations defenses, to any civil charge the government might bring against them. Before I granted the pardons, I received from their lawyer a letter confirming that they "waive any and all defenses which could be raised to the lawful imposition of civil fines or penalties in connection with the actions and transactions alleged in the indictment against them pending in the Southern District of New York."

    • My Reasons for the Pardons � ByVolume

      February 18, 2001
      My Reasons for the Pardons

      CHAPPAQUA, N.Y. � Because of the intense scrutiny and criticism of the pardons of Marc Rich and his partner Pincus Green and because legitimate concerns have been raised, I want to explain what I did and why.

      First, I want to make some general comments about pardons and commutations of sentences. Article II of the Constitution gives the president broad and unreviewable power to grant "Reprieves and Pardons" for all offenses against the United States. The Supreme Court has ruled that the pardon power is granted "[t]o the [president] . . ., and it is granted without limit" (United States v. Klein). Justice Oliver Wendell Holmes declared that "[a] pardon . . . is . . . the determination of the ultimate authority that the public welfare will be better served by [the pardon] . . ." (Biddle v. Perovich). A president may conclude a pardon or commutation is warranted for several reasons: the desire to restore full citizenship rights, including voting, to people who have served their sentences and lived within the law since; a belief that a sentence was excessive or unjust; personal circumstances that warrant compassion; or other unique circumstances.

      The exercise of executive clemency is inherently controversial. The reason the framers of our Constitution vested this broad power in the Executive Branch was to assure that the president would have the freedom to do what he deemed to be the right thing, regardless of how unpopular a decision might be. Some of the uses of the power have been extremely controversial, such as President Washington's pardons of leaders of the Whiskey Rebellion, President Harding's commutation of the sentence of Eugene Debs, President Nixon's commutation of the sentence of James Hoffa, President Ford's pardon of former President Nixon, President Carter's pardon of Vietnam War draft resisters, and President Bush's 1992 pardon of six Iran-contra defendants, including former Defense Secretary Weinberger, which assured the end of that investigation.

      On Jan. 20, 2001, I granted 140 pardons and issued 36 commutations. During my presidency, I issued a total of approximately 450 pardons and commutations, compared to 406 issued by President Reagan during his two terms. During his four years, President Carter issued 566 pardons and commutations, while in the same length of time President Bush granted 77. President Ford issued 409 during the slightly more than two years he was president.

      The vast majority of my Jan. 20 pardons and reprieves went to people who are not well known. Some had been sentenced pursuant to mandatory-sentencing drug laws, and I felt that they had served long enough, given the particular circumstances of the individual cases. Many of these were first-time nonviolent offenders with no previous criminal records; in some cases, codefendants had received significantly shorter sentences. At the attorney general's request, I commuted one death sentence because the defendant's principal accuser later changed his testimony, casting doubt on the defendant's guilt. In some cases, I granted pardons because I felt the individuals had been unfairly treated and punished pursuant to the Independent Counsel statute then in existence. The remainder of the pardons and commutations were granted for a wide variety of fact-based reasons, but the common denominator was that the cases, like that of Patricia Hearst, seemed to me deserving of executive clemency. Overwhelmingly, the pardons went to people who had been convicted and served their time, so the impact of the pardon was principally to restore the person's civil rights. Many of these, including some of the more controversial, had vigorous bipartisan sup

    • But, if you think analysts and investors will now have something positive to work with in regard to the economy, think again. The Producer Price Index was also released Friday morning, and it showed inflation at the producer level spiked up a stunning 1.1% in January. That shocked the market since recent numbers, including the CRB index of commodity prices, had shown inflation to be in retreat.

      The higher than expected PPI inflation raises the odds still further that the Fed will not be anxious to lower interest rates again any time soon. But stay tuned! There�s no reason to expect the pattern of conflicting economic data every few days has ended yet.

      Meanwhile, seasonal timing, one of our favorite ways of handling the market, is helping only marginally, mostly by avoiding the volatility. Historically the Dow and S&P 500 have a strong tendency to make most of their gains each year between November and April, and to suffer most of their losses between May and October. The Dow is currently 8% higher than it was at its October low of 9975, while the S&P 500 is down 2%. The Nasdaq, which does not follow the seasonal pattern, is 20% below its October low.

      We still believe that economic conditions are improving and will yet create a rally in this year�s favorable season. But time is getting short as April and the market�s usually less favorable season approach.



    • BEING STREET Sy Harding

      THE U-TURNS ARE DIZZYING! February 16, 2001
      When the powerful bull market of the 1990s was underway it wasn�t much of a problem for most investors to know what to do. Information and advice wasn�t that confusing. Outside of a few perma-bears who had been negative on the market since the 1987 crash, most advisors and analysts only argued about what were the best sectors or stocks to own.

      But since the decline in the majority of stocks over the last two years, and the actual crash in the Nasdaq last year, investors have been treated almost exclusively to conflicting information and opinions.

      Even Federal Reserve Chairman, Alan Greenspan, the man with more inside information and expert analysis at his disposal than anyone in the world, and who will probably be the force that ultimately determines which way the economy and the markets will go, seems confused by it all.

      Appearing to be almost in a panic about the slowing economy, the Fed cut interest rates a full percentage point in January. And just two weeks ago, in a speech before Congress explaining the rate cuts, Greenspan said the economy had already slowed further than was the Fed�s intention. In fact he said the economy was probably at zero growth, and perhaps slipping into recession.

      But this week, again testifying before Congress, Greenspan said the economy instead seems to have bounced back in January and the U.S. will likely avoid recession.

      Meanwhile, analysts� opinions and investor confidence u-turn with each conflicting piece of information or earnings news.

      The result is a market that can�t get a foothold. For a few days it seems leadership will come from defensive stocks that might perform better in a weak economy. No sooner is that thought factored into stock prices than another piece of information comes out indicating the economy is stronger than was thought so more aggressive holdings are the place to be.

      Meanwhile, by responding in a knee-jerk reaction to each earnings report as it�s released, the market is obviously awarding each report far more significance than it deserves, since it immediately forgets the previous report and reverses on a dime with the next company�s report.

      This week the market rallied strongly on Thursday in response to network equipment-maker Ciena Corp.�s better than expected earnings. That was after the previous week�s sharp decline in response to disappointing earnings from Cisco Systems.

      Ciena�s strength on Thursday pulled the tech sector, and the entire market, up in a broad-based rally. Analysts expected Ciena�s good news, coupled with the market�s short-term oversold condition, and signs the economy was not weakening as much as was thought, to provide the catalyst for a more sustained rally.

      But that expected rally was at least delayed when after the close on Thursday, telecom giant Nortel Networks reported disappointing earnings, warning that its sales will not recover until the 4th quarter, saying the economic slowdown is �faster and more severe� than it or anyone else expected.

      Perhaps. But Friday morning came news that certainly conflicted with that assessment. Home construction starts rose a huge 5.2% in January, and building permits for future starts soared 12.6%. That�s on top of Tuesday�s news that retail sales bounced back significantly in January, and Thursday�s report that unemployment claims fell by 11,000 the previous week.

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