Wednesday Night #945

Harry Mayerovitch (90 in April) will have an exhibition in our new Vic Hall Gallery April 12 to May 24. Described by Mayor Peter F. Trent as a true Renaissance man, Harry is an accomplished architect, town planner, author, painter, photo expert, book illustrator, poster creator (WW II), sculptor and cartoonist.

The Report
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A surprising evening as the hosts had expected (rightly) that most of Wednesday Night would be attending Harry Mayerovitch’s 90th Birthday vernissage and (wrongly) that therefore there would be limited attendance at 33, and not much interest in matters more serious than Harry’s coat of many colours and superb show. A second suprise was the welcome arrival of Misha Crnobrnja after a long absence imposed by his frequent travels and mandatory trips to Ottawa.

Yugoslavia
Will NATO’s involvement in Yugoslavia turn into another Korea for the United States? At this point, this seems highly probable, thanks to poor timing, poor decisions, and the impermeability of American politicians to the available competent advice. In Bosnia , there were indications that the population was ready to elect a pro-western government, but the arrest of Karadic a week before the election fuelled the fortunes of the nationalists, putting off indefinitely, the prospect of peace in that area. In Albania, much of the population was prepared to come to terms with the Serbs, but the American dominated NATO forces unfortunately aligned themselves with the intransigent radically nationalist Kosovo Liberation Army. The KLA will settle for nothing less than independence. When its patience has worn thin, it is likely to start shooting at and killing Americans to the dismay of NATO and the United States. At this point, the conflict will spread to Bosnia and Serbia. Croatia is moving to a cooperative western style government. Until/unless Serbia does likewise, this will not happen in Kosovo. There is far more likelihood of civil war in Serbia before that the necessary changes come about.

The stock markets
Chil Heward‘s recent newsletter says it all:
It has been a wild, extraordinary time for the stock markets. There has been a total disregard for the fundamentals. NASDAC will continue its corrective action. The original insider owners of IPO shares are now trying to dump in a falling market with fewer buyers. Margin calls are becoming more frequent. The leaders of the stock markets are in fundamentals; manufacturing, transportation and utilities. This is especially true in Canada. There is renewed interest in the cyclicals. Whatever happens to NASDAQ does not change the Federal Reserve’s plan to raise interest by ½%, followed by another ½% at some point. The key is productivity. If there is an increase in productivity, then the increase in interest rates can be absorbed. Money is being moved from the technology sector to the safe havens of the Euro and the Bond Market.
The Old Economy has some solid growth in it and offers opportunities in this period of uncertainty. It is now time to lay low for the next few months and check the quarterly reports as they come out.
“Old economy” stocks like drugs, foods and financials made a substantial turnaround at the expense of excessively valued “new economy” stocks. This trend has continued into April. We were very well prepared for this rotation, as we had reduced our exposure to high flying stocks. The profits generated by these sales were used to introduce some new names in undervalued segments of the market.
Expect the Unexpected! We have come through the first quarter, and as we wrote in our Winter Strategy, investors should “Expect the Unexpected”. As we move into the second and third quarters of 2000, we continue to expect a great deal of volatility in financial markets worldwide. Yes, we will see some brilliant earnings reports and undoubtedly some disappointments. It would be wise to remember the lessons of the past. Those who are willing to be patient and have an open mind, may very well reap handsome rewards.

The International Financial Institutions

The future of the International Monetary Fund and the World Bank has become a major issue which will be in the spotlight in the coming days as growing discontent with their guiding principles will focus on the Washington meeting. At a meeting of seventy-seven nations in Havana, chaired by Nigeria, the common view was expressed that the IMF should write off some loans to emerging countries, based on spotty results of those loans. The IMF appears to be so obsessed with Communism that it rejects all state intervention. Post-communist countries have been denied government intervention. IMF guidelines are outdated, not socially minded and not country-specific.
A very important task for the IMF in its forthcoming meeting in Washington will be to keep the U.S. dollar strong. If it fails, the entire world is in trouble. There will be difficulty for the delegates to keep their minds on what is important, demonstrators from across the country, committed to the views of the 77, are mobilized to interfere just as they did in the WTO talks in Seattle. The problem, as in Seattle, is that there are the genuinely concerned individuals and groups who feel shut out from the talks, and there are the “rent-a-crowds”.
U.S. Treasury Secretary Lawrence Summers said the biggest problem he sees is that the global economy has become far too dependent on the rapid growth of the American economy.
For the G-7 ministers and bankers this was not really the best time for a meeting. Wounded by stock market routs and worried about the prospect of rising inflation and interest rates, global financial markets will be hypersensitive to the outcome of their talks.
Summers said the key in the short term is for the rest of the industrial world to start matching the solid growth rates of the U.S. economy.

McGill University Health Sciences Centre
The M.U.C. may have knocked the wind out of the sails of one group of vocal opponents to the location of the proposed McGill University Health Sciences Centre in Glen Yards, by deciding that the entrance will be on Decarie Boulevard, bypassing the principal objection of Westmounters in the south-west sector. Meanwhile, debate continues on the wisdom and necessity of closing the existing hospitals and building ONE to replace them. It appears that it is not only the general public that is concerned that service will be reduced proportionately to the reduction in beds. There are serious questions from professionals about whether the plants are really beyond repair – and whether that repair might not be less onerous and costly than an entirely new structure. Wednesday Night will continue to follow this issue with great interest and will keep abreast of developments.

Yugoslavia
Will NATO’s involvement in Yugoslavia turn into another Korea for the United States? At this point, this seems highly probable, thanks to poor timing, poor decisions, and the impermeability of American politicians to the available competent advice. In Bosnia , there were indications that the population was ready to elect a pro-western government, but the arrest of Karadic a week before the election fuelled the fortunes of the nationalists, putting off indefinitely, the prospect of peace in that area. In Albania, much of the population was prepared to come to terms with the Serbs, but the American dominated NATO forces unfortunately aligned themselves with the intransigent radically nationalist Kosovo [Misha] Liberation Army. The KLA will settle for nothing less than independence. When its patience has worn thin, it is likely to start shooting at and killing Americans to the dismay of NATO and the United States. At this point, the conflict will spread to Bosnia and Serbia. Croatia is moving to a cooperative western style government. Until/unless Serbia does likewise, this will not happen in Kosovo. There is far more likelihood of civil war in Serbia before that the necessary changes come about.

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