Looking Ahead

LOOKING AHEAD by Wally Dobelis

If you want to predict when to start buying stocks again, here are some criteria for you. You will have to apply them yourself. The whole thing hinges on buyer confidence, particularly that of the small investor, notoriously always wrong. But not in this case.
When will the bad news stop? After Enron, Global Crossing, Tyco, Adelphi, Kmart and WorldCom we thought we had it, then the names of the blue chip Xerox, solid Merck and sleazy Vivendi started surfacing. Louis Navellier, a good sniffer out of phoney income declarations, predicts that a couple of dozen more companies will show up as having overstated their incomes or hidden their losses. More of the big five accounting firms are suspect of creative accounting. It isn't just Andersen. The slipping of the dollar below parity to the Euro and some Asian currencies is indicative of the departure of some fearful foreign investments, normally a strong boost to the US market.
The President's July 7 Stock Exchange speech did not inspire buyer confidence. He wants to challenge corporate lending to inside people, have the executives' pay packets explained in annual statements, and to enable the SEC to banish corporate leaders who abuse their powers. A SWAT team is to oversee the investigations and prosecutions of corporate officials. Harder measures will be needed. The unanimity of both political parties in developing legislature to stop accounting irregularities and calling for more actions, such as the elimination of stock options (seemingly the preferable course) is the proof..
Speaking of stock options, they were largely the result of the market's ingenuity, in circumventing President Clinton's disingenuous 1993 law, limiting executives' pay that can reported as tax-deductible expense to $1 million. Corporate brains, fast at work, instantly invented other compensation schemes. Stock options, and bonuses, are particularly invidious, since they put a premium on driving up stock share prices. The higher the market the better the comp. That is a good incentive for creative accounting.
The US Executive is also suspect. Secretary of the Army, retired Gen. Richard E. White, was an Enron division head and created $500 million of growth in the manipulations that destroyed the company, and took out $12 million in profits before the company went down Vice President Dick Cheney's Halliburton firm hid $400 million losses and deceived stockholders, and has been sued by a conservative watch group. SEC chairman Harvey Pitts has yet to interrogate the VP. He himself is known to have been the attorney for the accounting firms, notably Andersen, Deloitte, KPMG and the association, AICPA, during the effort to discredit former SEC chairman Arthur Levitts 1998 attempts at controlling the beast by divorcing the consulting from accounting. The newest appointee, Deputy AG Larry Thompson, who will head the SWAT effort to keep business firms straight, was, until May 2001, a member of the board of Providian Financial, a firm that paid some $400 million in fines and stockholder fraud damages. To his credit, he led the effort at recovery.
What of the concerns about the President himself?. Some years ago SEC chairman Richard Breeden, a Bush Senior appointee and now the courts' watchdog over WorldCom, cleared GWB's Harken transactions. What were they?
In 1986 GWB's oil exploration firm, Spectrum 7, was in bad shape, until Harken Energy, an oil firm deeply involved in the Mideast, absorbed it for 212,152 shares of the parent. GWB. sold the shares for $848,560 at $4, in June 22, 1990, six weeks before the Kuwait troubles and two months before a financial report of losses that eventually depressed the Harken price to $2.37. The sale was not reported until several months later. The proceeds were used to pay off a $600,000 loan that had bought him a major interest in the Texas Rangers, an investment that made GWB a multi-millionaire.
Additionally, on April 7, 1987 GWB bought 80,000 shares of Harken (dated back to 12/10/86) and on June 6, 1989 another 25,00 shares. The money, $180,000, was borrowed from Harken. The company played the insider lending game to the hilt, concealing losses by selling its Aloha subsidiary to International Marketing and Resolutions, financed by Harken, and resold to Advance Petroleum Marketing, a company owned by David Halbert. This is an entrepreneur who made a lot of money for GWB when he let him in to provide seed money for Home Pharmacy in 1986, now Advance Paradigm, a major marketer of medicines.
Is insider buying illegal? Is selling to insiders at bargain prices illegal? Is late reporting of sales illegal? Is lending money to insiders for stock purchasers illegal? The answer is no, yes and it depends. Timing is everything. Even the Bush critics at the DNC operatives' level, such as Paul Begala, speak mostly of the hypocrisy of the President's offered reforms, since he has been the beneficiary of the methods he now wants controlled, and the words used are unethical rather than illegal. After all, the Democrats are in the same predicament. Think of Mrs Clinton's fortunate investment of a few bucks that turned into $100,000 when that was real money. DNC chair and chief fundraiser Terry McAuliffe's bank turned a $100,000 financing of Global Crossing into $16 million, with a timely sale. Sen. Gephardt had one of these insider loans too, and so it goes..
One always knew that the Greens' "pox on both of your houses" attitude has credible cause and considerable merit, regardless of how repugnant Ralph Nader's actions and how unrealistic the party's program. Now the threat of the electorate's revenge under the leadership of the Greens may work as the fulcrum for some real party finance reforms and legislation that would put teeth in strong rules and ethics of corporate behavior.
The good news is that the economy is recovering, despite the high rate of corporate and personal bankruptcies. Nevertheless, it may be a long time before the shareholders of the US and international corporations will return to an optimistic view. Do not expect the exuberance we experienced in the 1990s and are paying for in the 2000s. Some successes in the war on terror and the tension in Israel might help, though our threats to Iraq are worrisome. Holding on to value stocks is the consensus opinion. Those who have converted speculative stocks to cash and it is burning holes in their pockets, look at rent-producing real estate.

LOOKING AHEAD by Wally Dobelis
This is good news for theatergoers and Union Square afficionados. The 1928 building at 100 East 17th Street, corner Park Avenue South, built to be Tammany Hall headquarters and sold to the powerful International Ladie Garment Workers Union in 1943, is expected to be designated a NYC landmark, a memorial to the city's history.
Tammany Hall, founded 1788 as the Society of St. Tammany or Columbian Order, was the major power in NYC's Democratic politics for over 170 years . Despite the Indian names and ceremonial headdresses, the leaders were populist progressives. The club soon became riddled with graft and scandals, much of it associated with Mayor Fernando Wood, Boss William M. Tweed, Richard Croker, Charles F. Murphy and Carmine DeSapio, the milestones in its history (the latter, born in 1908, a leader who attempted to run the organization more openly, still lives in the area, on 5th Avenue near Washington Square).
After 1868 Tammany's headquarters building had been on East 14th Street, on the site of the present Con Ed tower. In 1928, at the height of the sachems' power, with Jimmy Walker as Mayor, the sachems built the new structure, a Colonial Revival of beautiful Harvard brick and limestone trim, as a low-rise attuned to the brownstones to the East of it (now the East 17th Street/Irving Place Historic District). The building, designed by Thompson, Holmes & Converse and Charles B. Meyers, has a meeting hall with a stage and a balcony to the left of the columnated entrance, and three stories to the right, built to house the Democratic County Committee and its ground floor commercial tenants. A classic balustrade runs along the roof edge, and plaques of relief images depicting the patron saints, the imaginary Chief Tammany and Christopher Columbus, flank the center window, to greet the party's braves and sachems as they gathered for meetings. The design is similar to the original Federal Hall, where in 1788 George Washington swore to uphold the Constitution, possibly an attempt of the political machine fixers to cloak themselves in the garments of democracy (it took a Democratic Reform movement led by Eleanor Roosevelt, Herbert H. Lehman and Robert Wagner to clean up the machine, from 1961 onwards).
When Gentleman Jimmy was forced to resign in 1932, following the findings of corruption by the Seabury Commission, and the Fusion candidate Fiorello LaGuardia was elected Mayor in 1933, Tammany's influence waned. Unable to meet the mortgage payments, in 1943 County Committee sold the building to David Dubinsky's powerful International Ladies Garment Workers Union, who renamed the meeting hall as Roosevelt Auditorium. For years, East 17th Street periodically was the scene of union meetings and elections, since ILGWU let other organizations rent the great hall. The street action ranged from moderate to raucuous, the latter prticularly so when the newspaper deliverers' unions met. Candidates for office brought in house trailers, and their henchmen trolled the street, bringing voters into the wagons for drinks and an encouraging word, sometimes a minor donation for the voter's favorite charities. These were obviously popular offices, and one cannot help but admire the public-spiritedness of the candidates. Look, I'm for unions, but in those days you had to be singularly naive not to catch thedrift.
Around 1986 things had changed, garment capital New York had ceded its place to the South and 3rd World countries. The building was rented to cultural organizations. The popular revival theatre, Roundabout, had the hall, with the upstairs going to the Film Academy, another fine cultural institution. Eventually, with growing public acclaim, Roundabout expanded to the Times Square area, and is currently housed in the American Airlines Theater building on 42nd Street, as well as in the Gramercy Theater on 23rd Street. As for 17th Street, enter Union Square Theater.
As Margaret Cotter, President of Liberty Theaters, explains it, the mission of her house is to provide the setting for independent productions. With 499 seats, is is one of the largest off-Broadway venues (Liberty also owns Minetta Lane and Orpheum, popular sites for smaller productions.) This is a for-profit environment, and the plays have to make it on their merits. Currentlyxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx...
These are hard times, and ILGWU has recently seen fit to sell out. Reading International, a real estate firm affiliated with Liberty, has bought the huilding, which should assure us of continued theatre presence in our traditionally culturally rich neighbourhood.. Further, they are sympathetic to to the preservationist efforts to save the building as part of N York City's rich architectural and historic heritage.
The Union Square Community Coalition people, in conjunction with the Gramercy Park Associates, have been working to secure the building's status as a landmark for some time. Now the Historical Districts Council has joined in. With the good will of the landlord, it is expected that the the Landmarks Preservation Commission will have no problem in seeing their way to a well deserved designation.
Wally Dobelis also thanks Jack Taylor and Andrew Scott Dolkart.

Former Tammany Hall building slated to be landmarked
^This is good news for theatergoers and Union Square afficionados. The 1926 building on 100 East 17th Street, built to be Tammany Hall headquarters in 1926 and sold to the powerful International Ladie Garment Workers Union in 1943, will be designated a NYC landmark, to be forever retained as a memorial to the city’s history.
When TH, founded 1786, was a power in NYC’s democratic politics , its headquarters was on East 14th Street, around the present ConEd building. In 1926 tehy built the new structure.
As Reform Democrats took power, defeating Frank DeSapio’s org, the building was sold to the ILGWU in 1943, and became union hall. Forr years, E 17th Street periodically was the scene of union meetings and elections, since ILGWU let other organizations ret the great hall . The street action ranged from moderate to raucuous, the latter prticularly when the newspaper deliverers’ unions met. Candidates for office brought in house trailers, and their henchmen trolled the street, bringing voters in the wagon for drinks and an encouraging word, sometimes a minor donation for the voter’s favorite charities. These were obviously popular offices, and one cannot help but admire the public-spiritedness of the candidates. Look, I’m for unions, but in those days you had to be singularly naive not to batch the drift.
Around 1990 things changed, and the hall was rented to the great revival theatre, Roundabout, with the upstairs going to the Film Academy, another great cultural institution. The theatre remained a resident of 17th Street for seven years. With public acclaim, Roundabout expanded to the Times Square area, and currently is housed in the American Airlines Theater building on 42nd Street, as well as in the Gramercy therater on 23rd Street. As for 17th Street, enter Union Square Theater.
As Margaret Cotter, President of Liberty Treaters, explains it, the mission of her house is to provide the setting for independent productions. With 499 seats, is is one of the largest off-Broadway venues (liberty also owns Minetta Lane and Orpheum, popular sites for smaller productions.) This is a for-profit environment, and the plays have to make it. Currently...
These are hard times for American textiles, with the entire 3rd World competing, and ILGWU has seen fit to move out. Reading International. A real estate firm affiliated with Liberty, has bought the huilding, which should assure us of continued theatre presence in our traditionally rich in culture neighbourhood.. Further, they are sympathetic to preserving the building as part of Nys rich architectural heritage.
The Union Square Community Coalition, in conjunction with the Gramercy Park Associates, have been hoping to secure the designation for some time. Now the Historical districts Council has joined in. With the good will of the landlord, the Landmarks Preservation people have no problem in seeing their way to a well deserved designation.

LOOKING AHEAD by Wally Dobelis
Bermuda is a laboratory in government, a test case that provides practical lessons in survival not only for all the other island-nations but also for big entities, such as New York, in economics, education and unity despite diversity. Some cynic recently announced the downfall of integration (also assimilation) because there is no money in it. Surprise, Bermuda thrives on it.
A British colony that persistently rejects independence, with a two party system, it was colonized when Lord Somers' relief expedition to Virginia foundered on its rocky shores, in 1611. The event was the source for Shakespeare's Tempest. Bermuda's reefs remained a death-trap for Atlantic shipping through the centuries. Its 1620 Parliament is the world's third oldest, after Iceland and England. Self-rule came a lot later, in 196x. The African slave-based agricultural economy shifted during the American Civil War, when the Dockyards at the West End of the islands became the blockade runners' port of call for gun smuggling and illegal cotton shipments to Europe.
When this source of trade petered out, post-Civil-War Bermuda, with its year-round flourishing agriculture, became the source of New York's winter vegetables. Bermudians proudly call themselves "onions," after the tasty local product (it is white, not red), still a staple in the islands' diet. After that trade flattened down at the end of 19th Century, with the development of Florida's agriculture, tourism became the emphasis. Mark Twain waxed enthusiastic about the lush greenness and the clean white buildings (Bermudians seem to be born with a paintbrush in hand, to keep the very essential ridged white roofs clean, protecting their rain-based water supply), and fast steamships brought tourists with funds.
To save the Bermudian population from the onslaught of the world citizens who would love nothing better than to settle down and enjoy the treasures of the tropics, acquisition of property by foreigners was made difficult. Only about 270 houses, with a minimum value of about $2.5 million each, and condos priced well over $500K can be bought by foreigners, with a hefty 22% surtax. Work permits are granted to foreigners only if they are requisitioned by an employer, as possessors of special skills, and foreigners' jobs are posted annually, for bidding by the natives. Bermuda citizenship is nearly impossible to acquire. It becomes available if you marry a native and remain married for 10 years to the same person, meanwhile maintaining residence. There are legal limits for citizenship granted to kids born of such marriages.
Despite the protection, the cost of living for the natives is immense. The GDP per capita is $30K, a touch below that of the US, but a one-bedroom apartment rents for $1,500 a month, food costs appear about time and a half those of the US. Most local people in the hospitality line (hotel employees, cabbies) hold two or three jobs, with the spouse also working. Tourism has slipped to the 3rd most important industry.
What is first? Well, the Bermudan ingenuity has created an alternative, international finance, due to the absence of taxation. . Decades ago Bermuda became a tax-free financial haven. Banking and insurance, particularly reinsurance, are the main areas. Bermudians stay out of the hospitality trade, and send their sons to New York to study at St. John's and other schools that teach insurance. ("If my son wanted to follow me in the hotel trade, I'd rather take him out in the back yard and trash him," is an oft-quoted line.) Consequently, hotels are run by neat clean-cut European and US college-bred youngsters, in Bermuda for a short while, working at cheap rates and taking the joys of the ocean, the scenery and fraternizing with the tourists as part of the compensation, before going back home to settle down, with fond memories. Those working in our hotel survive by sharing quarters in a group condo owned by the hotel.
The accountants and insurance people are paid well (comparable government jobs, the only ones advertised with salary ranges, are in the $80K to $100K range) but they work hard, riding to their offices on motor scooters, a transportation staple. Native Bermudians seem born in the saddle, and groups of bike people, gathered to chat, head to head, are a common sight. Car-bike accidents are common, the 100cc bikes can really hurt the tinny cars. Tourists ride less powerful rentals, 50cc, a big lure for the venturesome.
Manual trades are also well-paid. The large-type job advertisements in the Royal Gazette (no classifieds) are equally big for CEOs, financial and insurance executives, gardeners and hotel people, and qualifications are exacting. Landscaping is dominated by the Portuguese settlers from the Azores, on the other side of the Atlantic Ocean, who settled in Bermuda to garden and work in the fields of the farm owners, excellent laborers who would work without taking a siesta. Their descendants are still attached to horticulture. "If you want to know the name of that tree, ask a Portuguese," I was told in downtown Hamilton, in the store area where Reed Street joins Queens Street, when no one was able to identify the beauteous orange-blossomed scarlet cordia.
What about the ethics of a tax haven? Well, the US is the biggest, with protective laws that have brought in $5 Trillion of foreign investments (Switzerland is second with $2 Tr, and Cayman Islands are third, just under $1 Tr.). Should tax havens be eliminated? We objected strenuously when EU tried to pass a Savings Tax Directive, to have US collect their taxes. After all, the US 1990s boomtown prosperity was heavily due to these foreign funds. But, how about drug funds and other illegal gains, and terrorist support? Well, most legitimate tax havens, like Bermuda, have treaties with the US. The Organization for Economic Cooperation and Development (OECD) tracks the money launderers. The G7 have a Financial Activities Tax Force (FATF) that had identified 19 overt launderers (now down to 15), and tries to cure them, by the level of compliance with its 40 points of cooperation.. In the Caribbean there are the bad boys Nevis and Domenica ( the Caymans and Barbados have complied). In Western Europe there's only Liechtenstein, and in the Pacific the obstreperous Nauru (the land of 10,000 people who had mined thin island down, from a phosphate mountain to a hole in the ground, then put its poor gains into banking and became a Russian Mafiya satellite, laundering $70Billion worth of rubles.) Some other launderers are Cook Islands (New Zealand's funds escape route), Marshalls, the Nine, and the Baltics, in the former USSR zone.
We will talk about the marvelous pink beaches of Bermuda next time.

LOOKING AHEAD by Wally Dobelis

Asking profound questions about the purpose of life has never been my bent. I have been more concerned with resolving the purposes behind civil wars, terrorism, the melting of the icebergs and trading land for peace.
One question has continued to bother me, over a period of years, as I mow our upstate slope, a couple of hours' investment every two weeks. What was my purpose of taking an acre and a half of a raw pasture and trimming it, a piece at a time, over two decades, into a rough lawn? It was not as though we were living in Brazil, turning jungle into arable land and creating a family's livelihood. I. eventually resolved it as man's need for order out of chaos, the satisfaction of accomplishment and an opportunity for me to become a Luke Short hero, driving my pony (a 16-horse lawn tractor) through Rattlesnake Gulch, Mosquito Haven, Pine Barrens and the Widowmaker country (my six low-branched dwarf apple tree orchard), holding on to my cap and glasses while taking Dale Earnhardt turns. It earns me scratches from the wild rosebush thorns and bruises from low branches, and I come in bloodied, to my dearest's consternation. Hey, it's an affirmation that it is, still, a man's world. Yeah! By the way, if you don't know Luke (Frederick D. Glidden, 1908-75), he was the quintessential cowboy writer of the mid-century, Hollywood's style, and would tell of percentage girls, hostlers and local justice, with nary a curse in his vocabulary.
Over this worrisome Fourth of July vacation week, while anxiously waiting for the shoe to drop. I have finally discovered the purpose of the lawn. Driving balls at the Bermuda golf course range was the clue. We have over 200 feet of slope. Why not hit some light-weight hollow plastic practice balls up and down, regaining old skills, on one's own time and property?
This is not a sudden love affair. Golf was my passion for some 15 of my early working years. We the office devotees would leave Union Square at 4:30 (late work was unheard of, then) during the spring and summer, riding the Woodlawn #4 train to the Mosholu public golf course and playing 18 holes, then resting at the 19th Hole bar for a few beers before the trip home. The course is now nine holes, don't ask ne why. NYC needed the space.
The Old Curmudgeon, premier corporate counsel and an occasional contributor of wisdom to this column, then a rookie lawyer, was my frequent partner. A psychologically domineering player, once he established his first ball priority, he would be impatiently waiting for the rest of us to hit, sometimes tapping a club, engaging in a set of intimidating body language procedures which he justified by claiming the late hour (he was also a heavy elbows man in basketball). We were dedicated people. My vacations consisted of golf in the morning, followed by Central Park tennis in the afternoon. Public golf and tennis were available, by buying annual permits and paying a ridiculously low fee per round. There were fine courses at Pelham, Split Rock and Van Cortlandt Park in my beautiful Bronx of leafy concourses and avenues, where seniors would sit on benches well past midnight of a hot summer's day, talking of the old country until it was cool enough to go to sleep (no air conditioning and few TV sets in those years). The LaTourette course on Staten Island was the dream course for public golfers. Fortunately, most of the facilities still exist, though circumstances have changed. This year public golf has acquired some glamor, with the 2002 Open being held at the Bethpage Black Course.
You may be interested in knowing that we the public golf course players of the 1960's had our own Tiger Woods. It was Chi-Chi Rodriguez, the diminutive Puerto Rican-born golfer with the straw hat, who sometimes came to the course. While his best earnings year brought in $800,000, he has raised over $5 million for his kids' foundation in Clearwater, FL. Today the hero worship, so I gather, is between Tiger and John Daly, the 5 ft 11in 225 lb beerbelly natural, who outdrives Tiger, 311 yards to 297. Tiger is kind of hard to idolize, the perfect athlete, almost superhuman, and John Daly is a necessary balancing factor, without whom the average guy would be feeling disenfranchised. In my upstate country where laboring men are the course regulars, the tee shot is the ultimate ego statement.
I'm not there, yet, future golf retread that I plan to be, with my dearest, but let's get back to basics. Decades ago I gave up golf, a game, for a marriage, a family and a life. We are coming back to golf for health and fun. As for combining the game and life, I have some semi-serious reservations. Trusting a dedicated golfer to lead a major corporation, a company, a country or any other important entity may be dicey. Serious golf is demanding, it causes you to question your personal judgment (you know to keep your head down, your right elbow tucked, your weight shifted, and yet the shot gets flubbed), possibly affecting your faith in the righteousness of other decisions. It requires long hours of fairway activity, too long for today's demanding business environment. One has to be a profoundly proficient compartmentalizer, of a Clintonesque stature, and even then it may not work.
To close with some advice for other lawn slaves, think of utilizing your labors for a purposeful result. Do not watch too much CNN or listen to radio news, play some music, cook some barbecued chickens or salmon steaks and enjoy the summer. Happy post-Fourth of July!