Introduction
Outlook for the U.S. stock markets and interest rates
1999 Stock Outlook: Review and Update
Outlook for Ex-Soviet Equities
Outlook for Small- and Microcap Sectors
Outlook for Initial Public Offerings
Outlook for Global Stock Markets
Introduction
"The Time Warp"
What could possibly top 1998?
Let's reminisce for a moment: There was Monica, of course. Cal "The Streak" Ripken Jr. sat out a game. Monica. Newt Gingrich called it quits. Russia went down the tubes. The U.S. markets tripped half-way through the year, wiping out untold billion of investors' money -- and rallying back to break new all-time records. Germany ditched Helmut Kohl and elected a Zinfandel socialist. And Daimler-Benz bought all-American Chrysler, with Deutsche Bank following suit and gobbling up Banker's Trust...
And then, there was Monica.
At Taipan, we are indomitable optimists. We try to see opportunity in crisis...the irony in tragedy...and the humor in relentless stupidity. And this year was full of it. Literally...
Look at it this way: What could possibly top watching a self-declared libertine and "progressive" Democrat denouncing sexual references in official documents as "smut" -- using words that up to now were the realm of Jesse Helms and Strom Thurmond?
Or observing East Germany's unemployed beating a tax-and-spend "conservative" like Helmut Kohl into the dirt, only to replace him with a salon socialist whose first official announcements include the promise of retirement benefits for prostitutes?
Or how about that mild-mannered Man of God from Arkansas...who predicts the coming of the Fifth Horseman of the Apocalypse in the shape of the Y2K bug...and turns into a vicious junkyard dog as he asks his readers to threaten "moochers" with blowing their heads off...
Ship of fools
In the United States, the advance of idiocy did not remain restricted to the electorate during the November elections.
Municipalities are now suing gun manufacturers for reimbursements of gun violence-related costs -- while making sure the perpetrators of that violence are out of jail on good behavior before the holidays. And the professional leisure class of academia is now training its big PR guns on Ronald McDonald.
In case you needed further proof that the human race is doomed, here are some actual label instructions on consumer goods that I received in my e-mail:
- On some Swann frozen dinners: Serving suggestion: Defrost.
- On a hotel-provided shower cap in a box: Fits one head.
- On Tesco's Tiramisu dessert: Do not turn upside down. (Printed on the bottom of the box.)
- On packaging for a Rowenta Iron: Do not iron clothes on body.
- On Boot's Children's Cough Medicine: Do not drive car or operate machinery.
- On Sainsbury's Peanuts: Warning: contains nuts.
- On a Swedish chainsaw: Do not attempt to stop chain with your hands.
Stating the obvious
The thing about product labels is not that manufacturers think that people are stupid. (Okay, I grant that some are: I personally know people who have ironed clothes while wearing them...)
But manufacturers are forced to assume that everyone using their products is a complete and utter fool: Assuming a minimal level of common sense in a customer will open up a company to frivolous litigation...
It is not only predatory lawsuits -- for anything ranging from spilled hot coffee to chipped nails -- that call for standardized degradation of the general public.
It is part of the Millennial way of looking at people.
After all, the vying for and exploitation of victim status in Western societies are indicators of a troubling trend.
Jack Wheeler, contributing editor to Taipan's sister publication Strategic Investment and editor of Jack Wheeler's Strategic Intelligence, put it best in his November 5, 1998, bulletin:
"An irresistible compulsion to treat adults as children is something all those on the Left, from the welfare liberal to the Marxist-Leninist, have in common. Liberals reduce adults to children through their phony compassion. French author Pascal Bruckner, in The Tears of the White Man, notes that in order to look at people as innocent, they must be infantilized. By transforming real people into idealized innocent infants, liberal compassion becomes contempt."1
It is this special brand of contempt that is the true motivator of regulation and centralization.
Bureaucracies start out benignly enough, as "service agencies." They promise greater efficiency, quality control, and cost savings. And for a time, some of them may actually deliver.
But we all know what happens next. They ossify. They become inefficient, shoddy, and expensive...yet eager to hold on to their power and expand it at any price!
Outside the bureaucracy, entrepreneurship and decentralized responsibility atrophy and soon enough die out almost entirely, as the increasingly powerless one by one accede to the more and more unassailable power of the centralized authorities.
I can feel the momentum toward centralization gathering speed and force. And I can feel the resistance diminishing to the point of imperceptibility. And as Jeff Jacoby, a writer at the Boston Globe, put it very eloquently:
"Societies do not usually lose their freedom at a blow. It happens bit by bit. As rules and regulations increase, their range of action is gradually compressed. Their options slowly lessen. Without noticing the change, they become wards of the state. They still imagine themselves free, but in a thousand and one ways, their choices are limited and guarded by the authorities. [Liberty] can be softened and dismantled by the very men and women from which it is being stolen."
Idle hands
It boils down to money. Those in charge of maintaining the power base of centralized bureaucracies need votes. To obtain them, they need political clout and influence. To buy influence, they need money.
And if being a victim entitles you to compensation, imagine what compensation is required for those championing the victim...
That means they need more money. Your money -- in the form of punitive taxes on realized income. And it means money extorted from businesses.
But to successfully target companies, you have to expand your sphere of power. In 1998, two of the most notable forays into new territory were conducted by the Food and Drug Administration (FDA) -- who clandestinely tried to usurp the First Amendment by strong-arming a publisher to destroy his inventory of cookbooks dealing with an herb that was not rubber stamped as a food additive. And the Commodities Futures Trading Commission (CFTC), who took another step to gain control of financial publishers...
Remember your first hesitation when you bought a new mattress...and did not know if you made yourself subject to criminal prosecution by removing that oversized label? It's exactly the kind of awe and uncertainty centralized bureaucracies are built on. Government regulators now dictate the exact wording on the labels of each bottle of wine you buy. A commission of bureaucrats has determined just how many pints of water your toilet is allowed to use per flush.
The results created by the constant uncertainty are damaging...even if the men in gray do not succeed at first. Taipan, for example, had attempted to place a space ad in a major financial magazine. That publisher's lawyers refused us the honor...asking to "see our license."
There are no licenses for publishing information. Yet.
Junk food taxes
Last year, Taipan researcher Anna Boozer gave you a detailed list of where the regulators and their parasitic entourage are going to strike in the post-tobacco settlement era: Alcohol. Fast food. And finally, automobiles.2
Back then, only a few months ago, a punitive backlash against the pushers of sugar, caffeine, and red meat seemed far-fetched. (And a few Taipan readers told me so in no uncertain terms.)
Since then, U.S. News & World Report has nominated a "Twinkie Tax" as one of its "16 Silver Bullets: Smart Ideas to Fix the World."
And The Center for Medicine in the Public Interest (who can argue with a name like this!) chimed in that a penalty tithe on Big Macs "makes eminent sense."
(When I watched their reports over the years, I couldn't help but wonder why that group's messianic benchmarks of caloric comparatives always were "Government-recommended"...Why would a government waste resources on determining on how many calories a free citizen should consume -- unless it was trying to prepare for issuing food stamps!)
On the surface, all these are matters of very little concern. But they quickly add up: If they can regulate the food you eat, it may be a matter of time how long you can conduct your own affairs...plan your own financial future...and make your own investment decisions.
Because any kind of financial decision-making requires that you independently weigh your options and calculate your risk and reward scenarios. That capacity, to calculate and embrace risk to achieve your targets, is what sets the free spirit apart from the passive, emasculated shadows a centralized bureaucracy prefers to deal with.
Building wealth by taking risks
I frequently receive calls from our German, British, and French offices...sometimes frazzled editors tell me about subscribers who took out large loans with the single objective of investing the borrowed money in a Taipan recommendation and retiring fast and filthy rich before the expiration of the loan.
But we at Taipan do not consider ourselves part of a get-rich-quick scheme. We do not ask you to plow all your hard-earned cash or life savings into our recommended stocks...not even a large chunk of it. We do not claim to have come up with one powerful Truth that you can hitch your fortune to.
This is not hedging on our side. We simply are aware that our subscribers are individuals, with strong ideas and ideals as to how they plan to achieve their financial aims. We believe that there is no one-size-fits-all solution. And accordingly, we do not prescribe a solution, be it only in the form of an allocated portfolio.
At Taipan, we believe that our subscribers are responsible and intelligent investors, who pay as much attention to the maintenance and care of their investments as they do to their cars.
Investing is inherently risky...no matter if you hide a wad of greenbacks underneath your mattress or follow anti-cyclical value strategies in emerging markets.
In this issue, we want to show you what we think is ahead for you and your investments as the year 1999 unwinds toward the Great Turn of the Millennium.
As we do every year, we have called on all our sources and analysts around the globe to give us their prognosis...for the U.S. markets...cyberspace...emerging markets...microcaps... technologies...the works.
In the past, this has been one of the most anticipated benefits of your subscription to Taipan. And I believe you will agree with me that this year's issue lives up to its decade-long tradition.
In the name of all my team members, I wish you Happy Holidays...and a prosperous and successful New Year 1999.
J. Christoph Amberger
Baltimore, Dec. 1, 1998
1: Wheeler, Jack. "De-Emasculation," Jack Wheeler's Strategic Intelligence, Nov. 5, 1998; p. 1.
2: "The New Machiavelli: How to pick the next targets of government regulators," Taipan, Aug. 1998; p. 13.