07 Feb 2003 “The Best of Times, the Worst of Times”
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair.” Charles Dickens’ Introduction to A Tale of Two Cities – 1859, comparingLondon andParis at the time of the French Revolution (1789-1799)
This week we mourn the deaths of seven national and international heroes while celebrating their high achievements with those of the space program. We laud the program’s proud history of excellence during the cold war competition later adapting to the new world order to become a model of international cooperation.
But as NASA and the astronauts’ families grieve, the world argues at the United Nations and throughout the global media over how best to resolveIraq’s noncompliance with resolutions to disarm it. Americans feel more isolated than at any time in recent memory. We remain divided even at home, although our differences have diminished (according to polls) after Secretary Powell’s compelling speech to the U.N. on Wednesday.
Our flags fly at half mast and we mourn, but as we reflect we become more aware of the uniqueness and wonder of this proud country. As we learn more of Iraq and North Korea we are reminded just how dear are the treasures we all too often take for granted. Americans who protest in the streets against our leaders’ policies do so without fear of reprisals. But those who even whisper words of dissention in Iraq or North Korea find themselves prisoners of the state – or worse.
We enjoy the best of times because our forbearers had the courage to stand up to oppression and fascism of their day. Americans, and citizens of numerous countries throughout the world, owe their freedom to Americans who gave their lives to that cause. They now enjoy the freedom to express themselves, to innovate, to create, and to compete in free and open markets with the potential to better themselves, their families, and their communities. Much of the world lives in the “season of light.” Citizens ofI raqa ndNorth Korea suffer the worst of times as theirs is truly “a season of darkness.”
During last night’s evening news I witnessed one of the most graphic demonstrations of the power of freedom, and particularly the power of free markets. The amazing image on the following page is included in the standard US Department of Defense briefings onNorth Korea. It was mentioned in a news briefing on December 23, 2002 by Defense Secretary Rumsfeld, who stated that “If you look at a picture from the sky of the Korean Peninsula at night, South Korea is filled with lights and energy and vitality and a booming economy; North Korea is dark.”
Traditionally based on agriculture, the South Korean economy has undergone an extraordinarily rapid industrialization since the 1960’s. With the country’s gross domestic product (GDP) expanding by more than 9% annually between the mid-1960s and the mid-1990s the country has transformed itself from a poor, war-torn agrarian society to one of the world’s most highly industrialized nations. And the extraordinary growth continues. GDP has grown almost 40% in the past five years to $130 billion, according to Bloomberg data.
Many Americans gave their lives so that South Korea might enjoy precious freedoms. Billions of dollars of U.S.aid have gone to build and sustain its rapidly growing economy since the 1960’s. The South Korean people tell us that our investment has paid off.
As each day passes it appears more apparent that Saddam Hussein will not submit to U.N. Resolution 1441 and rid his country of weapons of mass destruction. It appears equally evident that theUnited Statesis not about to bring home two hundred plus thousand troops without accomplishing that goal along with the replacement of Hussein. That being the case, the market continues to fret the timing and outcome of such a war.
Earnings for two thirds of the S&P and 26 of the Dow Jones Industrials have been published. The earnings themselves have not been so bad. It’s the dour outlook managers have for the first and second quarters of this year that sends stocks down. According to First Call, since January the 1st, analysts have taken 2.9 percentage points off the expected year-over-year earnings growth for the S&P 500 for 1Q03 and 2.6 points off the 2Q03 expectations. Last week alone, the drops were 1.2 and 1.1 points, respectively. As a result, the expectations for the first quarter of ‘03 now stand at 8.8%, about half of the 17.4% expected for the period in October of ‘02. The ratio of negative to positive pre-announcements has risen to 2.3 well above the 1.7 for 4Q02 at the equivalent time.
These are guesses (granted, informed guesses) by management of what their businesses will look like in the coming months. Most say that the potential war withIraq, the uncertainty of its duration, and the threat of terrorist reprisals have kept a lid on their expansion plans. In fact the world is understandably preoccupied with it.
But the economic releases for the week were surprisingly positive. On Monday it was announced thatU.S.manufacturing expanded for a third straight month in January and construction spending surged in December, indicating the economy may be starting to strengthen. The Institute for Supply Management’s factory index last month was 53.9, staying above the reading of 50 that signals improving business conditions since November. A gauge of production held above its six-month average. Spending on new homes and other construction projects jumped 1.2%, the largest rise since February 2002, the Commerce Department said.
On Tuesday we learned that the Institute for Supply Management’s index for retail, financial services, construction and other non-manufacturing businesses rose to 54.5 last month from 54.2 in December. The expansion in services, which account for 85% of the economy, reinforced economists’ expectations of faster growth in 2003.
More big news comes today. The U.S.economy added 143,000 jobs in January, the most adds in 26 months. The unemployment rate fell to 5.7% from an eight-year high of 6% in December with the majority of the gains coming in the retail and construction sectors.
The best of times are ahead of us.