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August 21, 2002


1. Bush Team Decides Not To Attack Iraq

2. The Economy - Some Good News

3. Stocks - Will The July Lows Hold?

4. Bill Clinton May Host TV Talk Show

5. Will Hillary Run For President In 2004?


For months now, the media has debated daily about whether or not we are going to war with Iraq and, if so, when. In recent weeks, the debate has intensified even more. You have no doubt seen the back-and-forth in the press. Yes, we should. No, we shouldn't. The risks, the foreign policy fallout and all that. Whatever, whatever. . . Well, guess what?

STRATFOR.COM, one of my best sources for geopolitical analysis believes that the Bush administration has decided to POSTPONE INDEFINITELY a military attack on Iraq and Saddam Hussein. If so, many conservatives will be disappointed. The reason for the apparent reversal of policy, after months of chest beating, is that opposition to such an attack is growing on many fronts including Europe, the Middle East and, more recently, Russia. Here at home, the ranks of those opposed to the war are growing, even among some in the Republican party. As a result, Stratfor believes the administration has decided that a unilateral attack on Iraq would dangerously erode the coalition in the War On Terror and al Qaeda, which is looking increasingly likely.

If this is the administration's decision, the retreat is a strategic psychological defeat for the administration, particularly in the Middle East. The Bush team may have stumbled into exactly the trap al Qaeda hoped to set for it.

As Stratfor points out, opposition to the war on Saddam Hussein has been intensifying in recent weeks. On August 7, Saudi Arabia announced it would not allow the United States to launch an attack on Iraq from Saudi territory. Egypt, Syria, Jordan and Oman have all stated their opposition to an attack on Iraq as well. More recently, Bahrain - where the U.S. Navy's 5th Fleet is based - said it would oppose unilateral US military action against Iraq, as did Yemen. So, most of our supposed allies in the Middle East are now opposed to it.

Not surprisingly, Europe, with the possible exception of Britain, is very much opposed to the war on Iraq. This includes Germany which has our bases and forces needed for staging a major campaign. Even British Prime Minister Tony Blair, one of the few supporters of an attack, is facing major opposition from within his own party over the plan.

At home, congressional Republicans have begun breaking ranks - Dick Armey of Texas among them - arguing that the administration has failed to prove that an attack is needed at this time, and that they have failed to even provide a coherent plan. Brent Scowcroft, national security adviser to former President George Bush during Operation Desert Storm, recently warned in the Wall Street Journal that an attack on Iraq could destroy the global anti-terrorism coalition.

Even within the Bush administration, Secretary of State Colin Powell felt confident enough to go against the administration openly and met with Henry Kissinger to discuss options other than war for dealing with Iraq. What support there was for an attack on Iraq, in Washington and internationally, is evaporating fast, although we should not forget that the American people stand solidly behind it as discussed below.

Some argue that the US should just go it alone, that we could successfully oust Saddam Hussein without assistance from anyone. While that may be technically correct, were we to go it alone, the operation would require a much greater commitment of forces and weapons, and would involve much higher risks.

So, while there are those in the Bush administration who seriously want to move ahead with an attack on Iraq, and while there is widespread public support for same (65%), Stratfor believes the decision has been made to delay any such offensive, PERHAPS INDEFINITELY. According to Stratfor, if we are to continue the War On Terror and al Qaeda, the US needs support and intelligence from its allies abroad. Attacking Iraq unilaterally could jeopardize this support.

I suspect that many of you reading this will not be happy if the Bush administration has decided to back off on plans to topple Saddam Hussein. Let me stress that I don't know for certain that such a decision has been made - this is only Stratfor's view, and they could be wrong on this one. While I'm in the camp that favors taking Hussein out, sooner rather than later, maybe Stratfor is right that the US should keep its eyes and forces focused on protecting against another terrorist attack. With the anniversary of 911 just around the corner, and the elections shortly after that, the next few weeks and months would be an opportune time for the terrorists to strike us again.

While I suppose the argument to indefinitely defer an attack on Iraq has merit, there is a greater question as I see it. Saddam Hussein is a major league bad guy. There is no doubt that he has been working on weapons of mass destruction. He has been doing so for the last several years in the absence of UN weapons inspectors (and even when they were in Iraq).

This poses the ultimate question. Does the US dethrone Hussein now, or do we wait until he unleashes a weapon which kills tens of thousands of innocent people (presumably Israelis, but what if Americans)? What if today's politically-correct mentality had prevailed prior to World War II? Would the liberal elite and the mass media have reacted the same back then? Would the US have backed off and waited until Hitler unleashed even more diabolical plans?

And finally, if President Bush has made a decision not to go after Iraq, why is Defense Secretary Rumsfeld still talking like we're going to take Saddam Hussein out? I don't think we know the whole story yet, but I did want to share Stratfor's latest thinking on this subject.


Economic reports so far this month have been mostly negative, although there were some bright spots. The negative reports mainly confirmed what we already knew, that growth slowed significantly in the 2Q and so far in the 3Q. However, the reports were not so negative as to assure that a second "double-dip" recession is in the cards.

As discussed in the August issue of my Forecasts & Trends newsletter, the latest downward revisions in the government's GDP figures for the 2Q and last year increase the odds that we could dip back into another recession before the end of the year. As a result of those revisions, most economists have sharply downgraded their forecasts.

Yet despite all the negative predictions, consumer spending just continues to RISE. The latest data from the US Bureau of Economic Analysis shows that consumer spending has increased EVERY QUARTER BUT ONE since the beginning of 1999. Only in the 3Q of 2001 - mostly before 911 - did consumer spending fall in any quarterly reporting period. Even in the 4Q of 2001, just after 911, consumer spending increased. In fact, it has accelerated sharply higher ever since 911.

What. . . you didn't hear about this in the media? Not from the talking head shows? Neither did I. I found this data buried in the Wall Street Journal on August 12.

We know that consumer spending accounts for at least two-thirds of GDP. So, if consumer spending continues to rise, the economy is NOT going into a serious recession. While this is very good news, it may run contrary to what you might have been thinking up to now. It also runs contrary to the many theories that consumer spending would take a dive due to the recent plunge in the stock markets.

What the data show, however, is that consumer spending is tied directly to PERSONAL INCOME, not the latest dips and curves in the stock markets. As the WSJ admitted:

"By far the biggest driver of consumer spending is personal income, the $9 trillion a year flowing to U.S. households in the form of wages, salaries, interest, dividends and government payments. This is what really determines how much the U.S. consumer will spend in the months ahead."

For many years economists estimated that personal income accounted for 75% of consumer spending, while the so-called "wealth effect" (from stock market and other investment gains) contributed only 25% to overall consumer spending. But now, in light of the latest figures, the government's Conference Board estimates that personal income accounts for 90% of consumer spending.

Bolstering consumers' willingness to spend more, in addition to rising incomes, is the continued rise in home values. The latest report from the National Association of realtors showed that home prices nationwide rose 7.4% in the 12 months ended June. Many major markets saw double-digit gains in home values, and several of the hottest markets saw gains of 20% or more in the last year.

There is no doubt that the recent plunge in equity values has had a negative effect on consumer confidence. Yet that has been more than offset by the continued rise in incomes and the appreciation in home values. This could change, of course, but these figures suggest the economy is in much better shape than the gloom-and-doom crowd would have you believe.


Everyone is still wondering whether the stock market lows reached on July 23 were "the bottom" or if the markets will move even lower. Barring any more very negative surprises, such as another major terrorist attack or more serious scandals on Wall Street, I think those lows WILL HOLD.

Obviously, there is no way to know if we will see more serious terrorist attacks. However, the worst may be over in terms of corporate scandals. Despite what the media and the talking heads are saying, my sources tell me that the August financial filings by major corporations are going much better than expected.

The Wall Street Journal reported on August 16 that at least 675 major corporations filed financial statements certified (signed) by their executive officers by the August 15 deadline. 695 major corporations were subject to the August 15 deadline, while others operating on a different fiscal calendar will be required to certify their financial statements later in the year. Actually, some of these corporations that were not required to file certified financials on August 15 did so anyway.

The point is, the SEC is literally covered up with certified financial statements. This suggests that the worst may be over in terms of scandals, and this is a big reason why I feel the July lows in the major equity markets will likely hold - again barring any major new surprises.

If you are on the sidelines, or if you pulled some of your money out of the market earlier this year, I would be looking to get back in on dips just ahead. I continue to advise "MARKET TIMING" strategies for most of your money in equities. It's still a dangerous world out there, and you want to be able to move to the safety of cash if need be.

I continue to recommend that you take a serious look at our new BOND TIMING program offered by Capital Growth Management (CGM). CGM has an excellent 10-year performance record with very low drawdowns using bond mutual funds. Their program is an excellent addition to an equity portfolio. Call us at 800-348-3601 for more information.


I'm sure you have heard that Bill Clinton is in negotiations with CBS to become the host of an afternoon talk show. I can't help but comment on this developing story. Several months ago, you may recall that Clinton was negotiating with NBC to host a talk show. Those negotiations reportedly broke down when Clinton demanded a whopping $100 MILLION guaranteed over two years!

Clinton reportedly was negotiating with Dennis Swanson, a big-wig at NBC who met one-on-one with the former president in late May and became the champion for the show inside NBC. But in July Swanson quit NBC to join CBS as the head of the network's stations, and is now once again pushing to make a deal with Clinton.

I wondered initially if Clinton was really interested in doing a daily talk show, but NBC executives said they were repeatedly assured by Clinton's associates earlier this year that he was enthusiastic about hosting a talk show, and that he was tired of relying on speaking engagements for income. So, it sounds like Clinton is indeed interested.

NBC execs said Clinton wants a "public affairs" format. Imagine that! The perfect format for BASHING REPUBLICANS and advancing Clinton's liberal agenda.

Obviously, I hope neither NBC nor CBS (or any other network) puts Clinton on the air with a talk show (or any show). It sounds like NBC walked away as it recognized a Clinton talk show would be a huge, expensive gamble. Apparently, the idea didn't play well among the network's local stations, especially those in the South. But as of this week, negotiations are reportedly still going on with CBS.

Why would Bill Clinton do this? I can't imagine he needs the money. Most of his legal bills have been forgiven. (You didn't hear about that? Read the link below.) While he's not super popular on the US speaking circuit, he reportedly has plenty of standing offers to speak internationally for big bucks.

The bottom line is, Bill Clinton just cannot stand being out of the spotlight. He is a terribly insecure person, a former president with no legacy, and he just won't go away. Should he get a talk show, I offer the following predictions. 1) It won't be successful among the viewers; 2) they will have trouble getting advertisers; and 3) I don't think Clinton's partying lifestyle will allow him to physically stand up to the long hours and pressures of doing a daily talk show.

I could be wrong, of course. The show probably would get very high ratings initially because many people would want to see Clinton in this new role. Even I probably couldn't stop myself from tuning in at least once. But I don't think it would last. Let's hope we don't have to find out!


The "official" word from the Hillary camp, Bill Clinton and even from the Senator herself is that she will NOT run for president in 2004. As a result, it is highly anticipated that she will run in 2008. At a speaking engagement in Australia recently, Bill Clinton reportedly said, when asked if Hillary would run for president, "NOT IN 2004." This was clearly a signal that she is considering a run in 2008.

But there are some very compelling reasons why she may yet decide to run in 2004. In Democrat polls she consistently ranks second only to Al Gore. She has a huge, national political machine in place from her husband, and she has tons of money. If she waits until 2008, she will have to run for re-election as Senator from New York, and could find a tough battle against either George Pataki or Rudy Guliani, which she could lose. That would effectively end her political career.

There is another angle on this that I find even more interesting. Some Republicans say they would love the chance to campaign against Hillary as they would be able to dredge-up all the Clinton scandals and dirty laundry once again. However, as David Bossie suggested in a recent Washington Post column, Hillary might decide to run in 2004 -- knowing she might lose -- just to get all the scandals behind her this time around, so they don't come up again in 2008.

Despite what they may say in public, I think Hillary will run in 2004, if and only if, she and Bill and Terry McAuliffe believe SHE CAN WIN. If they are convinced she can win, I believe there is no doubt she would go for it. Actually, it's a scary thought! Be sure to read the links below, especially the Bossie article in the Washington Times.

That's all for this week. I hope you've had a great summer. I took a little time off this month, but I'll be writing Special Updates more often in the future.

Best regards,

Gary D. Halbert


No time to be weak on Iraq -- maybe there's still hope.

Bush scorns Iraq frenzy.

Poll shows Americans don't want Clinton on TV talk show.

Clinton's legal bills forgiven.

Why Hillary may run for president in 2004.

More on a Hillary run in 2004.

An interesting take on the upcoming election season.

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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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