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By Gary D. Halbert
September 9, 2003


1.  Poll Says Economy More Troubling Than Terrorism.

2.  UN Troops In Iraq: Probably Not Such A Good Idea.

3.  Bush’s Approval Ratings Continue To Go Lower.

4.  Dick Morris On Whether Al and/or Hillary Will Run.

5.  Latest Outlook On The Economy & The Markets.


Writing an interesting E-Letter to 2,000,000+ readers week in and week out is a real challenge, but one that I enjoy.  Some weeks, there is an obvious topic to write about, often encompassing the entire E-Letter.  Other weeks, there is not.  Some weeks, I just decide to write about whatever I think is most interesting at the time.  This is one of those weeks.  So today, I will visit (and revisit) several different topics that I find interesting.

The Greater Worry: Terrorism Or The Economy?

This week marks the two-year anniversary of the 9/11 attacks on the World Trade Center and the Pentagon that took the lives of thousands of innocent Americans.  Yet the Pew Research Center for the People & the Press recently conducted a poll which showed that a majority of Americans now see the economy as a higher priority than the war on terrorism.  By a more than 2-to-1 margin (57% to 27%), those polled in late August thought President Bush should focus more on the economy than the war on terrorism.

For the record, I don’t happen to believe the latest Pew survey on the importance of the economy versus the War On Terror.  I believe that the vast majority of Americans still believe that our national security and the threat of terrorism is more important than the current state of the economy – which continues to improve, by the way (more on this later).

Let us all keep in mind that any of these public opinion polls can be skewed to produce the desired result.  It all depends on: 1) what questions are asked; 2) how the questions are asked; 3) what the possible answer choices are; and most importantly, 4) which audience is polled.  Not all polls are statistically valid, and the audiences polled are not always randomly selected.

For example, Pew recently surveyed two groups – those making more than $50,000 a year and those making less than $50,000 - asking whether they would re-elect President Bush.  Of those making more than $50,000 a year, 55% said they would re-elect Bush.  Of those making less than $50,000, only 34% said they would vote for Bush again.

Americans’ fears about the threat of terrorism have subsided somewhat over the last two years since 9/11.  And concerns about the state of the economy have increased.  However, I still believe that a large majority of Americans – if asked straight-up about the economy versus the ongoing War On Terror – would choose the latter.

Do We Want UN Troops In Iraq?

After stonewalling the United Nations for months, the US has finally requested that UN peacekeeping forces be sent to Iraq to help out our own troops.  On the face of it, I would say this is a bad idea.  But then, “on the face of it” is usually not where the truth lies.   So why has the Bush administration apparently changed its mind on UN troops in Iraq?

Here’s my take on it.  The Bush administration does NOT want UN troops in Iraq for a variety of reasons.  The administration does, however, want more troops from other countries in Iraq under US command.  But reportedly, other countries like Poland, Spain, Italy and others are reluctant to commit troops (more troops in the case of Poland) without some kind of mandate or resolution from the UN.

Knowing that the UN is not likely to send its own troops into Iraq, the Bush administration apparently felt there was no risk in asking.  What they hope for instead is a new UN resolution which will provide the comfort that certain foreign countries need before sending their troops to Iraq. 

There are a variety of reasons why sending UN troops to Iraq could go badly.   Rather than outline the reasons here, you can read a good article on this subject in the (British) Sunday Telegraph in the links to SPECIAL ARTICLES below.

Nations like France and Germany are not likely to send any troops to Iraq either.  Having opposed the war from the get-go, they are not likely to put their troops in what is clearly a bad situation.  I expect the Bush administration will have to put more US troops in Iraq soon.  Unfortunately, our greatly downsized military is already stretched too thin.

Bush Approval Rating Continues To Slide

The latest Zogby poll released over the weekend has President Bush’s approval rating down to 45% (from 52% two weeks ago), while his negative ratings increased to 54% (from 48% two weeks ago).  By comparison, the latest CNN/Gallop poll has Bush’s approval rating at 52%.  The latest Pew survey has Bush’s approval rating at 53%.  The latest (Sept. 4-7) ABC News/Washington Post poll still has Bush at 56% approval.

Most surprising, the latest Zogby poll says that only 40% of Americans would re-elect Bush if the election were held today, while 47% apparently said they would elect a Democrat.  This is a huge drop in Zogby’s numbers over a two week period, and some are wondering how accurate the numbers are.  

By comparison, the latest Pew poll found that 43% of Americans would vote to re-elect President Bush, while only 38% said they would vote for a Democrat.   Here are the latest (Sept. 3-4) Time/CNN polls of Bush against specific Democratic candidates:

Bush 50%…….Dean 42%
Bush 50%…….Kerry 45%
Bush 50%…….Lieberman 44%
Bush 53%…….Gephardt 42%

With that said, however, Bush’s popularity is falling.  His speech on Sunday night seemed straightforward enough to me, but the media and the Democratic presidential wannabes wasted no time in criticizing the president on numerous fronts, especially on the issue of Iraq.  The Democrats, led by Howard Dean, are finally getting some traction.

The question I have been asking for some weeks now is whether Bush’s sagging approval ratings will cause Democrat heavyweights such as Hillary, Al Gore and/or General Wesley Clark to throw their hats in the ring.  Hillary said recently that she has completely ruled out a run in 2004, but it will not surprise me if she gets in, especially in light of the latest Time/CNN poll which showed: Bush 50%…….Hillary 47%.

I’m Not The Only One Thinking This Way

Former Clinton political consultant Dick Morris agrees with me.  Like him or not, Morris is a very savvy political observer who knows the Clintons and Gore better than just about anyone.  Here’s what Morris says in a New York Post column today:

QUOTE: “Here’s what I see happening in the 2004 presidential race: Al Gore is watching President Bush. Hillary Clinton is watching Gore. Bush is watching Hillary and the Democrats are watching Dean….  Everything clear?

Bush's poll numbers continue to tank… The Fox News/Opinion Dynamic poll shows that Bush would get only 50 percent of the vote in a trial heat against Gore. It would be a rerun of 2000 - and we'd be waiting up all night to learn the count in Florida.

But the Democrats know that the president has an ace up his sleeve: Howard Dean. This ultra-liberal, who Bush could defeat with his eyes closed, is racing into the lead in the Democratic field…

So Bush can hope Dean's surge continues and presents a McGovernesque target for him in November. But Democrats are slowly waking up to the possibility that they may have the '04 election in their grasp, only to throw it away on the Dean candidacy. This is generating tremendous intra-party pressure on Gore and Hillary to run.

My guess is that Hillary would be just as happy to see Dean win the nomination and get slaughtered in November by Bush. [See, I’m not the only one!] That would make W a two-term president despite having no real base of popularity, and open the way for her to run in 2008. Since Dean has no chance of beating Bush, she needn't worry that an incumbent Democratic president would bar her way until 2012, when she'll be 65.

But Gore may suddenly see a real possibility of a straight run for the nomination and a general-election win. A review of the donor lists of the Democratic contenders shows that most of the former vice president's money people are still sitting out the race. Were he to run, Gore would force out most of the other Democrats and likely make quick work of Dean. In November, Gore would enter the election as the favorite against Bush.

But Hillary would be most unhappy to see Gore get the nod. Since Al would be a good bet to win, her nightmare scenario of a Bush defeat and no open field in 2008 would be coming to pass. So should Gore begin to make a move, Hillary will likely get into the race to pre-empt him.” END QUOTE.

It could happen.  Let’s hope not.  The War On Terror needs to continue. (See the second editorial in the SPECIAL ARTICLES section below.)

Unemployment Rate Falls In August – What, You Didn’t Hear That?

The Labor Dept. announced on Friday that unemployment fell from 6.2% to 6.1% in August, with an increase of 147,000 jobs.  The report also indicated that household employment is up 1.19 million jobs so far in 2003.  But you probably didn’t hear or see that figure quoted over the weekend or in the Monday papers, unless you read very carefully.  Instead we saw headlines like the following: “Firms Ax 93,000 Jobs, 2.8 Mil Since Feb. ’01; No Labor Rebound Yet” (Investors Business Daily).  

Separately, the Labor Dept. reported on Friday that non-farm payrolls declined by 93,000 workers in August and have fallen by 437,000 workers so far this year.  The media chose to jump on the non-farm payroll decline, rather than the broader household survey which showed unemployment declining to 6.1%.  What else is new?

The unemployment rate, as well as the non-farm payrolls, can be misleading at any given time.  The unemployment rate can be influenced in any given month by, among other things, the number of people who drop off the unemployment rolls.  The media and the Democrats assume that everyone who drops off the unemployment rolls is still unemployed.  The fact is, many of the people who drop off the rolls are those who have become employed by starting their own businesses or being employed by small firms or groups that are not reflected in the non-farm payrolls.

The unemployment rate is an estimate based on several variables, including those noted in the previous paragraph.  So, politicians and the media can find fodder to spin it either way – good or bad – in months when the official number changes only slightly as it did in the latest report.   The bottom line is that unemployment peaked at 6.4% in June, and the trend is in the right direction, albeit a slow one.

The Economy & The Markets

Economic news continues to look favorable.  The Institute For Supply Management Index (formerly the Purchasing Managers Index) showed that the manufacturing sector expanded for the second consecutive month in August.   The ISM Index rose from 51.8 in July to 54.7 in August.  The August index for new orders rose to 59.6 from 56.6 in July.

While employment continues to be weak in the manufacturing sector, most economists agree that this will turn around soon.  With inventories very low and demand clearly on the rise, the manufacturing sector should begin to add new jobs before year-end.  This is another reason to believe that unemployment has peaked, as discussed above.

Stocks continue to rally to new highs as I suggested last week.  The Dow is now up 15% for the year and even more since the pre-war low in March.   The S&P 500 is up 17% for the year.  And the Nasdaq rallied to an 18-month high and is up 41% for the year.  Boy, I wish I had been smart enough to recommend tech stocks when I advised going back to a fully invested position in stocks in March before the war.  (But if I had, I would recommend taking some profits now!)

The stock markets are probably due for a correction in the next week or two.   However, I continue to believe that the current uptrend, at least in the major index stocks (Dow, S&P, Russell, etc.), has further to go.  (I have no idea about the Nasdaq stocks.)  As long as the economy continues to improve and interest rates remain relatively low, we should see stocks gradually move higher.  Conceivably, that could be another year.   Remember, there is a mountain of cash still sitting in money market funds that has yet to come back into the market.

While I remain optimistic about the uptrend in equities, there are still a lot of negatives out there that could short-circuit my optimistic scenario.  As a result, I continue to recommend market timing strategies and professional Investment Advisors for a significant part of your portfolio.

The same goes for bonds, in my opinion.  As I have suggested for the last several weeks, bonds remain in a trading range and could stay that way for some time to come.  For those who may have bought bond funds (especially Treasury bond funds) earlier this year at much higher levels, I believe the odds are slim that the market will get you back to breakeven.  Put differently, I do not believe bond yields (especially T-bonds and notes) will go back to the extremely low levels we saw earlier this year.

My suggestion is that you consider a bond timing program that has the potential to do well even in a trading range environment.  At my company, we recommend such a program that has delivered outstanding results for over a decade, and which has done extremely well this year despite the recent debacle in the bond market.  (Past results are not necessarily indicative of future results.)

If you would like more information on this program, you can call us at 800-348-3601.  Or you can go to my website [ CLICK HERE] and read my Special Report entitled “How To Own Bonds Today” which is featured on our homepage.

Wishing you profits,

Gary D. Halbert

P.S.  I appreciate the many responses we get every week to this E-Letter.  Not everyone agrees with me, but that’s okay.  We try to answer every response we receive (positive or negative).  I also appreciate your suggestions.  Please keep them coming.


The UN in Iraq?  No thanks, say the Brits.

Good editorial on the two-year anniversary of 9/11.

One writer’s analysis of Bush’s latest speech to the nation.

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Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc. Gary D. Halbert is the president and CEO of Halbert Wealth Management, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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