February 1997 - Volume 16, Number 2


On February 4th, the President of the United States will address a joint session of Congress and in a carefully scripted televised speech suitably phrased for partisans from both sides of the aisle to interrupt many times with applause give the nation his version of the “State of the Union.” Oh, if it were only so!

There are many things which the President won’t point out during his appearance before Congress and a breathlessly waiting press corps eager to paraphrase his words.

Buoyed by an rising stock market and with the Federal Reserve only talking about keeping interest rates at the current levels, perhaps, we need to review the current state of the union without the rose colored glasses worn by the Inside the Beltway crowd and the press corps.


1. While the United States is not the predominant world economic power, it does remain the major military power. The danger of a major nuclear incident has increased as access to nuclear warheads has grown with the dissolution of the Soviet Union.

2. Today’s dollar is not worth a nickel in terms of the dollar from 1900. The total tax drag on the economy is nearing 50%. The serf’s in England revolted against the King and obtained the Magna Carta when the harvest tax was raised from 15% to 20%.

3. We have become the world’s largest importer of oil, the world’s largest debtor nation, and require a constant infusion of cash from other nations to continue to float our nation’s government bonds.

4. Our legal system does not work equitably. Civility in relationships between various groups is declining. Many groups of minorities have determined that the only way to achieve their goals is not through the ballot box but by sheer use of power and disruptive behavior.

5. “Our fair share” is heard over and over but when pressed, no one can or will define what it is. Perhaps, it just means, give me more and take it from those that have it.

6. Spin Control is more important than the truth. The President can be elected despite 60% of the population believing that he has lied to them. Clinton was only half-joking when he said that his best life-insurance policy was Al Gore.

7. Our students rank near the median. Many of our teachers can not pass the test required to graduate from high school in the state of Texas. We waste vast scholarship resources on athletes who don’t attend core classes and often end up not graduating.

8. Access to the President of the U.S. can be purchased through a contribution to the Democratic National Party. During the last election, over $250 million was raised by the Democrats and about the same amount by the Republicans. Politics remains the business of money.

9. Entitlement programs must be modified and curtailed or the federal budget can not be balanced. Many of those programs have created worse problems than they were supposed to solve including welfare, aid to dependent children, public housing, drug treatment programs, family & juvenile courts, & school busing.

10. The number of members in the various organized religious movements continues to decline.


During the next two years, the ability to finance our nation’s debt will become a critical component of international diplomacy. Japan and the Middle East have provided almost 70% of the off-shore investment in our government bond markets over the past 10 years. The Japan economy is facing increasing pressures at home and misguided investments in the US in the late 80's are now coming back with significant losses to those investors. Of the six largest banks in Japan, five are in serious financial trouble. If Japan enforced the same regulations on its banks as the Comptroller of the Currency did with US banks, those five Japanese banks would be closed and liquidated.

The President will likely talk about balancing the budget by the year 2002. He might point out that the federal debt of over $5 trillion amounts to about $22,000 for each man woman and child in the U.S. What he won’t say is that the unfunded liability of federal agencies and the unfunded liability of the current Social Security and Medicare programs boosts that debt on a real accounting basis to over $20 trillion, or about $90,000 for each man, woman and child in the U.S.

Yet, the real crisis is likely to be found in the next few months as interest rates must rise to continue to attract the funds necessary for the refinancing of Treasury debt. Secretary Rubin has failed to use the low interest rates found during the past months to refinance a large portion of the debt in the long bond market. The number of short term debt maturities in the next 24 months is likely to cause a situation where a federal government debt refinancing will fail. If it does, watch out!

The real amount of public debt in the US is not well understood here or overseas. It seems hardly possible that in less than 25 years, the US has gone from being the world’s largest creditor and holder of financial assets to the largest debtor. Today, more of our nation’s wealth is controlled by foreign countries and companies than ever before.


Many politicians and investors point to a stock market that continues to set all-time records as measured by the DJIA as evidence of a government policy that works. Yet, the bull market which has existed for the past several years looks exceedingly high on fundamental grounds to this old observer. Contrarians have pointed out for months that the market is long overdue for a major correction. Ms. Gazzarelli called for a down-turn in October 1996 and when the market continued on its upside decided that her computer model was wrong and went back and changed it. Well, isn’t that like shooting the messenger if you don’t like the message.

The grain commodity markets have fallen from their highs of last summer. At the moment, most U.S. grain farmers would take a loss on their crops for 1997 if these price levels prevail. Midwest land prices and rents are sure to fall from current levels if grain prices do not increase. However, most of the land purchased during the past two years in the Midwest was paid for with cash so that the pressure upon the new owners won’t affect the banking system like the early 1980's.

At the moment, we are reviewing our trading portfolios. We are currently increasing investments in cash, bond interest futures, and grain commodity areas. We have increased our dollar/yen position by 10% and remain convinced that the yen will see 140 before July 1st. We have recently shorted the Swiss franc against the dollar and expect to see the Swiss franc continue under pressure. Positions in cyclical and durable stocks, housing & autos and banks with credit card exposures remain suspect to us. In the technology arena, we only hold telecommunication stocks and Microsoft, Intel, Cisco, Motorola and Hewlett Packard.


I well remember the day that Kennedy was assassinated. The stock market began an immediate free-fall and the fund managers, specialists and floor traders panicked. Billions of dollars of value were wiped out in less than two hours. Yet, the nation survived and those who were smart or stupid enough to buy shares of stock that afternoon made a major profit within a week.

My wise old mentor thereupon remarked “that politicians and corporation presidents often get credit or blame for policies and profits over which they only think they have control. The economy sits upon a foundation that takes years to build and/or destroy”.

Sometimes I wonder what history will think of the US in five hundred years.


Rot takes years to destroy a wooden ship sitting in a harbor. Our ship of state has been sitting in that harbor since World War II. Successive regimes of governments, 40 years of Democratic control of Congress, and vote buying programs such as affirmative action, welfare, ADC, food stamps, Medicare and Medicaid, OSHA, EPA, among others have all served to create holes in that ship of state.

Whole sections of major metropolitan areas have little police protection as gangs have taken over the streets. Housing developments for the poor have replaced neighborhoods and in turn have become worse ghettos. Some of our HUD’s housing projects are worse than the slums seen in Calcutta, Mexico City, and other third world countries. Our welfare policies have created a climate where the father is forced to leave home. One result is that the number of single parent families is at an all-time high in the US. Children born out of wedlock are also at all-time highs despite, or maybe because of, our sex education classes for whites, blacks and Hispanics.

Forty years of failed drug policies have only brought more drugs into the country. Our culture has glorified movie, stage, and music celebrities who openly use drugs. Since the hippie generation, the young have grown more distant from the principles espoused by the generations before them. In Florida, the prison population is larger than that of Germany. And most of the prisoners are non-violent users of drugs!


One law that was supposed to assist law enforcement in solving the drug problem was the so-called RICO law. Today, that law is being used to take cash from any citizen that is unfortunate enough to have more than $500 in his pocket when traveling through many counties in the U.S. The Customs Department has a performance review system that heavily weighs the amount of cash seized by its agents as a determining factor in that agent’s evaluation. Much of the money seized through the RICO laws remains with the law enforcement community and is used for sending its members to seminars in Vail and Steamboat Springs, Colorado and Hawaii.

Citizens are no longer deemed “innocent until proven guilty.” They are guilty until they can prove they are innocent. The burden of proof has shifted from the accuser to the accused. The RICO laws have been used to extort money in the guise of fines from non-English speaking visitors to this country in case after case. Cars have been seized because the driver who did not own the vehicle committed a misdemeanor crime. The cost to recover the car was greater than the cost of the car. The RICO laws must be repealed if only to prevent the abuse of citizens and visitors to this country by the law enforcement agencies which are enriched by their use. The problem is particularly acute in local police & sheriff departments and with federal governmental agencies like Customs, DEA, and the Treasury Department.


We have a school system in which teachers have no disciplinary authority. But when teachers are assaulted, the students are rarely convicted. But if the teacher physically touches a student, the teacher can be convicted of sexual assault.

Our literacy rate is at the lowest level in the past seven decades. Our education establishment is so concerned with “self-image” and “student self-esteem” that the vast majority of jobs which just 40 years ago could be filled with high school graduates now require college degrees. So what, if our secondary and high school students rank below the median of all the worlds students in math and language. At least, they feel good. But what will happen to our nation when these students find out that they are being severely shortchanged.

Teachers spend almost as much time filling out lesson plans and other administrative chores as teaching students. Many good teachers have opted for early retirement as classes have become more unruly.

The problem is not just the students but the parents who refuse to believe that their child can be a problem. One athlete in the DFW area has been transferred to four different high schools by the single-parent mother because the coach was not sympathetic to the child’s desire for more playing time. Some lesson the child is learning.

When sports is more important than learning the ABC’s, doing math or learning English, something is wrong. Now some in the African-American community are urging the use of Ebonics in schools. We need to finally say . . . if you want to succeed, you had better forget sports, and learn English, math, and reading. McDonald’s made one of its few major blunders when they changed the cash registers from numbers to pictures. And that was 30 years ago.


We are supposedly a nation of laws. But the judicial system has required states to provide education for children of “illegal” immigrants. Why the judicial system has not required the proper governmental agency to round up both the “illegal” parents and their families and ship them back to their home country is a mystery to some of us. Sounds like a prescription to a disaster.


The rot is spreading and it has infected the current generation deeply. If that generation is our future, then I can truly understand what my father meant when he said, “Our generation was too complacent and failed to understand the consequences of our actions during the 1950's.” The ship of state will need a major overhaul before our nation is once again stable and sea-worthy.

My crystal ball is clouded but my gut tells me that a major correction is forthcoming. The pendulum is about at the apex and when it turns, will you be prepared to take advantage of the opportunities it presents.

But ‘Tis Only My Opinion!

Fred Richards
February 1997

This issue of 'Tis Only My Opinion was copyrighted by Adrich Corporation in February 1997.

It is intended to provoke thinking, then dialogue among its readers. Quotation with attribution is encouraged.

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