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Special Update #7


Last Thursday was the one-month anniversary of the 911 tragedy. Still, it seems like it was just a few days ago. Perhaps that's because the cable networks continue to run virtually non-stop coverage on NYC, terrorism, the war in Afghanistan, etc. The major networks continue to focus on these issues as well. I have a TV at my desk. Normally, I have it tuned to CNBC, but since the disaster, it has been on Fox News most of the time.

One month later, the news is not getting better - at least not most of it. Last Thursday, the FBI issued a new warning of more terrorist attacks. A retired gentleman who lives here in Austin was formerly the FBI's head of anti-terrorism. He was on the radio last Friday. He said that the FBI, CIA, NSA, law enforcement and the military were already on the highest state of alert prior to the latest warning by the FBI last Thursday. He said this latest warning was a "call to all individuals" to be on heightened alert, and to report anything unusual that they might see or hear. Basically, the government, the military and law enforcement are doing everything they can, and now they need the help of a vigilant American people.


Monday afternoon a letter addressed to Senator Tom Daschle was found to be laced with anthrax. The letter was mailed from the same NJ post office as the anthrax letter mailed to Tom Brokaw at NBC News. Dozens (maybe hundreds) of Senate staffers and Washington post office workers have been tested, and this morning it was revealed that at least 20 of Daschle's staffers have anthrax. There was also the 7-month old child of an ABC News producer who tested positive for anthrax; the child had been taken to the newsroom on September 28th. This morning anthrax is reported to have been found in the NY Governor's office. No longer is anyone saying this is random! No one knows where this will end.

Congress decided this morning, after the announcement that 20 of Daschle's staffers have anthrax, that it will CLOSE ITS DOORS tonight until at least next Monday. Talk shows are buzzing with callers who are outraged that Congress would close up shop, versus those who believe they are doing the prudent thing. Those who are outraged feel it is cowardly for Congress to shut down at the same time our leaders are urging all Americans to go back to living their normal lives and not be afraid. I might be inclined to jump on that bandwagon, but in this case, I do not want to judge too quickly.


The very predictable first round of the war on Afghanistan has seemingly been quite successful and remains ongoing as this is written. However, the second round - the ground campaign - will be far more difficult. Whether it is the Northern Alliance or US ground troops or a combination of both that move to occupy Kabul, they will need tactical air support. Because of the location of Afghanistan, it is impossible for our aircraft carriers alone to provide the necessary tactical air support for the ground war.

The US needs to be able to base tactical aircraft bombers in Uzbekistan or Tajikistan. If this is not possible, the US might have to ask for Russian air support. While the Russians might agree to it, I would be very surprised if President Bush and his advisors would commit US troops to the ground war if they were dependent on the Russians for air support. [See the latest analysis on this from in the Special Articles below.]

Ideally, Bush and his team would like the Northern Alliance to take over Kabul, with limited use of US ground forces. Yet there is no assurance that this will be successful. In addition, there are elements of the Northern Alliance that are reportedly just as radical as Al Qaeda, so the Bush administration would prefer that the Afghan people install some other freely elected government. It will be very difficult, if not impossible, to pull this off without occupying Afghanistan with US ground forces.

The bottom line is that while the air war has seen success, the second phase will be far more complicated, difficult and dangerous. Plus, winter is on the way. The Bush administration desperately wants to see the Taliban fall before winter sets in, but we should not be surprised if the ground war doesn't begin until next spring. Currently, US public support for the war in Afghanistan is extremely high, but will it remain high if there is a 4-5 month hiatus?


The New York Post reports today that some of the hijackers credit cards were used for several weeks after the 911 attacks. Unless these cards were stolen, not likely, this means that associates of the hijackers are still in the country. That's not a surprise, of course, because we've heard reports that there could still be hundreds of potential terrorists in the US. It is surprising that these goons may have used the hijackers' credit cards, but hopefully this will help lead to their capture.


I don't think anyone has a clear handle on the economy. Sure, we all know we are in for a recession, but for how long and how severe? There have been few economic reports released in the last 2 weeks, and those are for September. Unemployment jumped to 4.9% and business inventories fell again in September. Both of those were widely expected. Many believe, and I agree, that the economic reports for September may be of limited use. The reports for October will be much more telling.

In my October newsletter, I reported that The Bank Credit Analyst is expecting a couple of negative quarters in GDP, with the economy stabilizing by mid-next year. However, in BCA's daily e-mail updates which I receive, their tone seems to have become a bit more negative, although they don't come out and specifically say so. It will be interesting to see if they adjust their view to a more negative position when I get the November issue at the end of this month. I expect they will, but that remains to be seen.

My point is, it's still too early and confusing, in my opinion, to draw any specific conclusions about the recession. Take auto sales, for example. They have jumped way up in October, but this is due to the automakers offering zero interest financing. The car companies make most of their money not by selling cars, but by financing them. While zero interest is great for consumers, it is bad news for the automakers.

What I think we can conclude at this point is the longer the terrorist threat lingers, and if more cases of anthrax continue to occur, the longer and deeper the recession will be. Consumer spending makes up two-thirds of the economy, and scared people do not spend as much.

As always the gloom-and-doom crowd is predicting a severe recession, followed by a worldwide depression and the complete collapse of the stock markets. And they are continuing to scare people with grisly predictions designed to line their pockets. This week I got a direct-mail promotion touting a $129 book entitled "Bio-Terrorism: Secrets For Surviving The Coming Terrorist Germ Warfare Attacks On U.S. Cities." In the promotion, they all but guarantee that most US cities will be attacked with germ warfare. My advice is the same: IGNORE THEM!


The Dow, the S&P 500 and the Nasdaq indexes have actually risen above the levels they were at on Sept. 10, albeit briefly. As this is written, they are still a little below pre-911 levels. I find this truly impressive, especially given that individual investors generally have not returned to the markets since the initial selloff, given that the threat of additional terrorist attacks is still very high, and given that the anthrax scare is growing by the day.

Most analysts believe the markets will experience some kind of retest of the September lows. Unless we have another terrorist attack that is in similar magnitude to the 911attack, I don't see the markets falling below the recent lows. If we see a retest of the lows, I think you should consider that a BUYING OPPORTUNITY if you are not fully invested.

I do not expect the stock markets to come roaring back. I think it will be slow, with fits and starts along the way. As Peter Lynch of Fidelity has been arguing on their TV ads, there have been 9 major downturns in the economy and the markets, and every time they have come back and gone on to new highs. You have to get started somewhere.


Being from Texas, we've seen George W. for many years. I have friends who know him very well. While I have always respected Bush, I have rejoiced in seeing how he has literally transformed into a different, stronger and more deliberate leader. He has united the country as never before in my lifetime. We all knew that partisan politics was not dead; it was just silenced for a few weeks; and it has now begun to raise its head again. Yet President Bush is not playing that game - at least not yet. Good for him!

Bush has received praise from some very unlikely sources. I'll let you read for yourself in the Special Articles below.

On Monday afternoon, Zogby International released a new poll showing that, in a crisis, Americans prefer Bush over Clinton by a staggering margin: 72 to 20! Meanwhile, Clinton is quoted as saying he wishes he were still the president. The Zogby poll and the story are in the Special Articles below.

I'd like you to take a moment and think back to the first Clinton administration and his advisors. Think about Hillary, Webster Hubble, Les Aspen (Defense), Warren Christopher (State), Janet Reno (Attorney General), Donna Shalala (Health), Jocelyn Elders (Surgeon General), George Stephanopolous (Communications) - all extremely liberal and for the most part anti-military. How would you feel if these people were in charge today?

The second Clinton administration was somewhat better, but you still had Reno, Shalala and Madeline Albright at State. Imagine Madeline Albright dealing with all these Muslims, Arabs and Islamists! Many would not even speak to her. Again, how would the public feel today if these people were in charge?

Or, if you really want to think how bad it could be, imagine if Gore was the president!

But instead we have Dick Cheney, Don Rumsfeld, Colin Powell, John Ascroft, Tommy Thompson and other notables who all have deep experience. And we have a president who knows his limitations and does not have an ego that prevents him from appointing advisors that actually know more than he does. That's leadership, folks!


Some of you may not believe me, but I would really like to IGNORE the Clintons. I would prefer NOT to spend time writing about them. But the fact is, they make it impossible. Take the latest story. Barbara Olson was one of those brave Americans that died on the American flight that crashed into the Pentagon. From the plane, she had phoned her husband, Ted Olson, who is the Solicitor General of the United States, to tell him that the aircraft had been hijacked.

Barbara Olson was a pretty remarkable woman. She served as an attorney for the Dept. of Justice, as a congressional investigator, and as general counsel for the Senate. In the last several years, Ms. Olson became a popular legal and political commentator on the talk shows. In 1999, Olson wrote a book about Hillary Clinton entitled "HELL TO PAY - The Unfolding Story of Hillary Rodham Clinton." I did not read the book, but I am told it is excellent, and it was a NY Times bestseller.

Well, Barbara Olson had just finished a new book on Bill and Hillary Clinton entitled "THE FINAL DAYS" which is expected to chronicle all of the questionable activities of the Clintons during Bill's last year in office.

The publisher of Olson's new book has stated that within one week of the 911 attacks, the Clintons tried feverishly to stop the book from being printed. "Within a week of the dreadful attack on Sept. 11, powerful friends of Hillary Rodham Clinton tried to stop the publication of this book," said Tom Winter, speaking for the publisher.

So, while the rest of the country was mourning the deaths of thousands of Americans, including Barbara Olson, the Clinton's were busy trying to spike her new book! What, you didn't hear about this? Of course not - unless you track the Internet news services. [See the story in Special Articles below.]

FYI, Olson's new book just came out today and has already hit NUMBER ONE on's bestseller list.


In case you missed it, on Monday, October 8th, Rush told his 22 million listeners on 600+ stations that he has gone completely deaf in one ear, and only has apprx. 30% of his hearing left in the other ear. He said he began to lose his hearing several months ago, and it progressed very rapidly to the point where he is now almost deaf.

Listeners all across the nation wondered the same questions. How can Rush continue his show without being able to hear the callers? Will he have to retire? Who could possibly replace him?

As noted above, Rush has some 22 million listeners. Not all of them agree with him, of course, but I think it's safe to say that most of them do. And most of those who do are probably voters. Yet despite Rush's enormous following, George W. Bush received fewer popular votes than Al Gore in the last election. So I ask, where would we be without him?

Fortunately, there has been some hope that doctors may be able to restore at least some of Rush's hearing. I am only occasionally able to listen to Rush, so I don't know if he has said anything more about this in the last week or so.

The transcript of his initial announcement can be found in the Special Articles below.


Peggy Noonan is a contributing editor to The Wall Street Journal and other publications. Her WSJ columns appear on Fridays. She is also a frequent guest on the talk shows. Ms. Noonan was Ronald Reagan's favorite speechwriter. Maybe that's why I loved listening to Reagan. Ms. Noonan's new book, "When Character Was King: A Story of Ronald Reagan," will be published by Viking Penguin shortly.

I have included Noonan's latest column under Special Articles below. In it she has some very interesting insights in the wake of the 911 tragedy.


There are several theories about why the Twin Towers collapsed. Most analysts have simply assumed that the shear weight of the airliners, combined with the intense heat from the fires, made them eventually collapse. But if so, why did the South Tower, the second building to be hit, collapse first? What follows is a possible explanation from a mechanical engineer. If true, this is more evidence of how well planned and sinister these acts were!

"I'm a mechanical engineer. My specialty is HVAC, not fire suppression systems, but because I work in existing buildings, I do have a strong working familiarity with fire suppression and fire codes in general. What I saw in those [Twin Tower] videos involved no internal bombs. The only person claiming that is a Vice President of a firm, looking for a government grant to prove what is obvious.

The first plane hit, bringing on the sprinklers in the first building. They kept dumping in water to cool the steel. All worked per design. Then the second plane hit the second building. The sprinklers let go in it. Now we run into a problem. There are giant pumps in skyscrapers to feed water up to the sprinklers. They are fed from the city water mains. Now we have two giant pumps on-line. And the city mains aren't big enough to feed both.

The design assumption never countenanced simultaneous fires in both buildings. Result:

neither sprinkler system gets enough water. The building first hit had been dumping water on the fire for quite a while. That water had been absorbed into the carpet, the furniture, the walls, the file cabinets (paper) so when the sprinkler flow dropped away,

there was still water in the building, acting to cool the beams. However, the second building hit never had that occur. Thus, the second hit building fell first, when the steel hit a plastic

temperature. No bombs, just simple science.

What really struck me was how outrageously smart the guy was who planned this attack. He knew that if just one building were hit, the fire suppression system would handle the fire - and the building would remain standing. But if both buildings were hit, both would fall. Same thing would have happened at the Pentagon if the second plane had made it that far. A second pump would have come on-line and sucked the city mains dry. The Penatgon would have burned to the ground.

So, rather than being distracted with "bombs in the building" nonsense, we really ought to be thinking about who on earth came up with this plan. There's an implicit bit of 'insider knowledge' required for the plan to have worked as conceived. Did Osama have that knowledge? How did he obtain it? Or did somebody else have this knowledge and Osama is just another distraction?"

While I cannot confirm this story, it makes a lot of sense. If true, and if the terrorists planned on it, that is truly ominous.

I hope you are enjoying the fall weather!

All the best,


Stratfor: Difficulties of Afghan strategy.

Stratfor: Expanding war beyond Afghanistan.

Hijackers' credit cards still in use.

The incredible growing president.

President rises to the occasion.

NYT editorial...Bush has!

Clinton say he wishes he were still the Prez, but

in a crisis, Zogby Poll says it's Bush over Clinton - bigtime!

Bill and Hill hit new lows!

Barbara Olson still hammering Hillary.

Rush Limbaugh announces he is deaf.

Peggy Noonan looks back.


Politics is back in DC.ed wa

Americans favor Iraq attack.

Merrill Linch may layoff 10,000.

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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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