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| Prices as of: July 23, 2001
Gold: $269 Silver: $4.26 Oil: $26.16 DJIA: 10479 30-yr Bond: 5.53% Nikkei: 11609 Yen: US$0.0081 123.07/$ Canadian $: US$0.64 1.53$
| This MonthApologies for the hiatus between Issue 6 and this one. I was in Turkey for three weeks. I'm making up for it with a new photo this month. But, seriously, especially after spending 10 days in Malaysia the month before, it seemed logical to crystallize a few thoughts on Islam, and what that means to us in the West, not least as investors. Some might protest that a discussion of religion has no place in an investment letter, but I hold it's just as relevant as discussions of politics, science, technology, history, or any other area of human endeavor. Investments don't exist in a vacuum. Not considering such basics is a fundamental error, whether it's politically correct or not. And what happens to your investments is certainly subject to the prospect for war. I know the conventional wisdom (after Fukuyama's End of History, and naive, albeit interesting, observations like those in The Lexus and the Olive Tree that no countries that have McDonald's franchises have yet gone to war) is that there won't be any more serious wars. But I don't buy it. I've got a few thoughts on Turkey, as well. They're somewhat abbreviated here, but only because I'll be heading back there in the fall, with stops in Beirut, Tehran, and perhaps Baghdad, to boot. They all have stock exchanges, you'll be pleased to know. But very, very few people have a clue whether they might make sense for a small bit of your speculative capital. Stay tuned. n Waiting for WW IIIWhat are the greatest problems facing us today? Domestically, I'd say the continual and accelerating loss of freedom, compounded by the prospect of what I suspect could be the biggest financial/economic crisis of modern times. What might that crisis be like? That's unpredictable, although the odds are it will be unlike any others that are still fresh in people's memories, simply because people tend to be most prepared for |
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the things that have most recently scared them. The big problems usually come from an unexpected quarter, and/or at an unexpected time. Like the monetary crisis of 1998 that materialized in Thailand. That said, the question remains of where to look. My guess (although it sounds so unprofessional to use a word like "guess"a government briefing would substitute a phrase, like "our research shows" or "expert opinion indicates") is that it will come from outside American borders, in the form of war. War is perhaps the worst thing that can happen, not only for the destruction it will cause in itself, but because it will immensely exacerbate America's domestic problems. As Stirner famously said, "War is the health of the State." But neither a declared war, nor a war in the conventional sense, is likely in the cards. US troops have been in combat in a dozen countries since our last "official" war ended in 1945; the US troops stationed in over 100 countries are an accident waiting to happen. Besides the Balkans and Iraq, Colombia is probably highest on the dance card, but almost anyplace could erupt unpredictably. Who, after all, could have predicted that the US would invade Somalia in 1991, a country few people other than stamp collectors even knew existed. No place is safe from being attacked in The National Interest of the world's self-appointed policeman. Anything is possible within this context, but I discount the possibility of another Vietnam, again because of the "recent collective memory" phenomenon. Vietnam is possibly the major reason why the Iraq attack ended so quickly; quick withdrawal obviated any danger that ground troops might get stuck in a major tar baby. But when you're sticking your nose absolutely everywhere it doesn't belong, there are lots of ways to get it bloodied. My guess is that something resembling a Crusade is developing against those who live in the Koran Belt. It won't be overtly religious like the crusades of the Middle Ages, but it will have
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| major cultural undertones. And there's every prospect it will be highly unconventional in nature. This is why all the talk about a strategic missile defense system (ABM) for the US is so totally ridiculous. Why would an enemy of the US spend a fortune building ICBMsa clunky, inaccurate, 1950s era technology when a plethora of ABC (atomic, biological, chemical) weapons can be sent by Fed Ex? They'll arrive exactly where you want them, and precisely on time. You may think I'm joking, but the most effective delivery system is one that's cheap, reliable, unexpected, redundant, untraceable and hard to detect until it's too late. If you have an especially large device to deliver, it can be shipped as cargo in a conventional boat or plane. Indeed, as good as a car bomb is for taking out a building, an equally innocuous boat or plane can take out an entire city When the attack comes on the US, that's the form it will take. Ballistic missiles may have some terror/propaganda value for countries like North Korea or Iraq, for use against regional enemies. But these people aren't stupid; they know that if they launched a strike on the US with a missile, there'd be no question about its source. And no question about the response. No government or group would dream of attacking the US in that manner, since it would literally amount to signing their own national death warrant. It's simply not going to happen that way. If they want to take out some US cities, it won't be with a missile. Why, then, does the US government want to spend scores of billions on a missile defense system that's worth less than a Maginot Line? In fact, they should nickname the ABM (in the manner that's long been the case for US weapons) the "Maginot." Are they really that stupid? Or is the money flowing to defense contractors really that important? Or is it a PR stunt to convince Boobus Americanus that he's safe? Or all of the above? I don't know. But to me it's absolute proof that the generals and their masters are just as intent on fighting the last war as has been the case every time in the past. This isn't unexpected. The US has (depending on who's doing the accounting, and how many are built) spent $2 billion on each B-2 "Sitting Duck" bomber, and will spend $250 million on each F-22 "White Elephant" fighter, aircraft superbly suited to fight a non-existent hi-tech enemy. Even if building these hi-tech showboats was a good idea, I question whether these devices aren't overpriced by an order of magnitude. You'll recall that the P-51, the best fighter of WWII, went from the drawing board to production in seven months, and was cranked out at $50,000 a copy. OK, say that's $500,000 in today's money, and the F-22 is vastly more complex and capable. But the real prices of raw materials has plummeted, and the advances in technology have done the same for both design and manufacturing costs. If nothing else it's a testimony to the inefficiency and corruption
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inherent in the procurement system. Entirely apart from that, any (serious) potential enemy will make sure they're taken out on the ground with saboteurs, special operations units, or ABC weapons. When you're dealing in aircraft that cost a few million, and you've got thousands of them widely dispersed, these things are manageable. But when you've got the very limited numbers you can buy at hundreds of millions a copy, it's a different story. The US will hardly dare deploy these weapons because the loss of only one in combat would be a catastrophe. But these are strictly tangential points. Weapons like these are as useless as the ABM against what's coming in the next war. It's a truism that the best defense is a good offense. But it's only true once you're in an active war, and are trying to win it. Regrettably, the US is confusing a good offense with running around the world giving offense, and it will only result in starting a war. The only defense against the kind of attack that will open the next conflict is, frankly, to give the attacker no reason to attack. Does Argentina, or Canada, or Italy, or Thailand or, really, any country in the world besides the US, have reason to fear a massive ABC attack? The answer is no. Sure, the Indians and the Pakistanis, the Chinese and the Taiwanese, the North and South Koreans could attack each other. But the source of the threat is discrete. Only the US is running around the world, whacking a hundred different hornets nests. A major power could get away with this in the past. The most the natives could do in retaliation was assassinate the odd dignitary, or ambush the odd patrol. But the world has changed. Now if you antagonize a group badly enough, they're entirely capable of bringing the war to your home ground. The World Trade Center bombing, which should have, by all rights, been a success, and the USS Cole bombing, which was a stunning success, are only the most trivial examples of what's in store. Almost anyone can build a nuclear device today. Various designs are published, and the methods of enriching uranium are not complex. It's not rocket science any longer. Moreover, why bother, when a million dollars passed to a Russian general (or maybe just a sergeant, since he actually handles the things) can buy you state of the art equipment? That's even more true of biological and chemical weaponry. The question isn't whether it will be used. That's a certainty. Anything that can be imagined can probably be done; and anything that can be done, probably will be done. It's simply a question of when. And by whom. The most likely attackers are members of the Muslim community. Although there's no innate reason for a conflict between the US and the Islamic world, the odds are high
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there will be. Boobus Americanus has been programmed for a generation to see Muslims as The Enemy. Most recent wars and terrorist activities center around places like Iran, Iraq, Somalia, Lebanon, Bosnia, Sudan and Afghanistan; and people and organizations with names like Khadaffi, Hamas, Black September, and Osama bin Laden. The US government consistently supports Israel, which the Muslims view as an outlaw, terrorist state. Show me a single movie, since "Lawrence of Arabia" in which Muslims are portrayed sympathetically. There would be lots of support for a crusade against these folks. Not surprisingly, the Muslims see their lands and culture as having been under constant attack since the Crusades of the Middle Ages. The romantic image of knights in armor battling to free the Holy Land from the infidel is reversed in their eyes. They see hordes of unwashed European barbarians having invaded their homeland on a pretext, intent on rape, pillage, murder and wholesale looting. And, being as objective as possible about it, one has to credit their view. And that was just the start of the Crusades, which continue to this day in the eyes of Muslims. Over the last two centuries, European armies have run roughshod over every Muslim country, now replaced by American armies. The "ragheads" and "kaffirs" in question don't like it any more than Americans would if the Iraqis were bombing New York every day, and had a "no fly" zone set up over the Deep South to protect a Black separatist movement in the area. We see Saddam Hussein as the devil incarnate (as do many Iraqis). But, his personal foibles aside, he's viewed as a hero by most Muslims for having fought against enormous odds from the Crusaders, and remained standing. I think it's worth a look at the Muslims, and what they believe. You may be asking yourself what relevance that has to us. In a perfect world, where people minded their own business, the answer would be very little. But that's not the world we live in. What should you be doing in the market now? I can tell you what I'm doing. I believe the excellent rally of the past few months is coming to a close, and it's time to get short. My preferred method is the sale of naked calls against overpriced stocks reviewed here in the past, like Amazon (AMZN, $16) and Cisco (CSCO, $18), in particular. But be advised this is not without a lot of risk. More conservative is the sale of naked puts against gold stocks; Newmont (NEM, $18) and Placer (PDG, $10) are my favorites here. If you're puzzled by the use of options, forget I said that. Simply buy Harmony Gold (HGMCY, US$5.45) and Franco Nevada (FN.T, C$20.53) and sit tight. IslamIslam may be the world's largest religion, at least if you consider the number of real, as opposed to just nominal, believers. It's certainly the world's fastest growing, dominating the lives of about a billion people who live in what a wag might call the Koran Belt, extending from |
| northern Africa, through all of the Mideast and Central Asia, right through western China and down to Indonesia. It's a part of the world with lots of poor people, and little capital. Many repressive governments, and little freedom. To what degree, if any, is that the fault of Islam? We are told the Prophet (Peace Be Upon Hima phrase the faithful usually appended to a mention of his name, often abbreviated to p.b.u.h.) was a merchant until, at age 40, he was visited by the angel Gabriel. Gabriel related the wishes of Allah (The Compassionate, The Merciful perhaps the most common of the many benefactions used by the faithful) to him, which Muhammed transcribed as the Koran. Islam attracts people for the same reason all religions do: It offers a neat package explaining the meaning of life, while promising eternal bliss after death. But it has some characteristics, and makes some promises, rendering it especially attractive to the poor and downtrodden. And that means its potential market is about 75% of the world's people. Islam has a number of sects and variations, but only a tiny fraction as many as Christianity. It won't serve a useful purpose to go into them now, except to observe that the reason for the relatively small number of variations is that it's necessarily a much more cohesive faith than Christianity, being based on one rather short book, promulgated by one man, whose status is clear; the religion leaves relatively little open to interpretation. The basic pillars of Islam tend to unify believers, whatever other differences they may have; internecine warfare between Muslims over religion has been the exception. It's unclear to me what actually constitutes an observant, or perhaps a "saved" Christian; opinions differ widely among the religion's many sects. There's no question, however, about who is an observant Muslim: One must only adhere to its Five Pillars. 1) The Shahadah, or Profession of FaithThis is the essence of Islam. One must say aloud, sincerely and purposefully, "There is no God but Allah, and Mohammed is his prophet." 2) PrayerOne must pray, in a ritualized manner, five times a day, in congregation if possible. 3) Zakat, or tithingOne must give a certain percentage of one's assets to the poor each year. 4) FastingOne cannot eat, drink, or smoke from dawn to dusk during Ramadan, the ninth month of the lunar calendar. 5) Hadj, or pilgrimageOne must journey to Mecca at least once, if it's possible to do so. There you have it. And it certainly seems like a small price to pay to gain paradise, where one engages in pleasures of the flesh for eternity, surrounded by doe-eyed houris. Infidels and apostates, meanwhile, may expect to burn in sulfur for eternity. |
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Islam offers benefits in the here-and-now, as well. It cultivates a brotherhood of believers cutting across racial, ethnic, and linguistic barriers not just in theory, but in practice. It allows the believer to communicate directly with Allah, dispensing with an intermediary priesthood. It's a very fraternal and democratic religion. The word Islam means "submission." Since Allah is all-powerful and all knowing, as well as merciful and compassionate, it means that whatever happens is the will of Allah, and the faithful do well to accept it. This leads on the one hand to a mellow, destressifying view of life, which is a good thing. On the other hand, it can lead to an overly fatalistic view of life, wherein hard work and striving can be pointless. This may be one reason for the relative backwardness of the Muslim world. If you want to convince others of something, the most important thing to remember is: "Keep it simple!" And Islam does that extremely well. The key to salvation is observance of the Five Pillars, and they're quite specific and well defined. There's no room, or need, for complex theological wrangling to confuse the issue. In addition, Islam cultivates a great deal of certainty, and that certainty is mightily abetted by its simplicity. If you want someone to believe what you do, certaintytotal, unwavering confidence in the correctness of your positionis 100 times more effective than any amount of intellectualism. Simplicity and certainty are the two indispensable elements of a successful mass religion. With this solid foundation laid by Allah, through the Prophet, enthusiastic early adherents were able to take the show on the road. The question often arises how Islamic civilization, which conquered much of the known world in the 150 years after the Hegira (Muhammed's flight from Mecca to Medinah in 622 A.D), preserved much of ancient civilization, and made innovations in mathematics, architecture, science, and literature, could have regressed to its present sorry state. Was it because Allah smiled on Muslims in their early years but, for some reason, has frowned upon them in more recent centuries? Or could there be some other force at work? My theory is that Islam's flowering had relatively little to do with religion, per se, and a lot to do with a military organization, which was enabled by religious fervor. Great conquests usually begin with a unifying ideology, most often some form of nationalism or religion, and the simpler and more certain the better. That's exactly what Islam gave the Arabs. I suspect any number of ideologies could have done as wellbut it's tough to argue with success. The conquests led to wealth, and wealth to civilization and progress It's worthwhile examining the relationship between war and wealth. After all, most wars seem to have eco
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| nomic roots. At least until very recent times, conquest was the key to wealth and success. Losing a war was a step to poverty (simply because the enemy stole everything you owned), and probably slavery. Largely because of the unity and fervor generated by their religion, the Arabs were extraordinarily militarily successful. I would hold, therefore, that the wealth Islam displayed early on, during its Golden Age, wasn't so much a direct product of Allah's Will, smiling on the piety of his believers, as the result of conquest. Conquest is what you call simple theft when it's perpetrated by a large, well-organized group. So the Arabs became wealthy just like every other successful pre-industrial empire. In pre-industrial, pre-technological times conquest was a formula for success. Nobody had qualms about it. The thought of war crimes tribunals, had it even existed, would have been laughable in times when the standard recompense for soldiers of a conquering army was three days of unrestricted looting, raping, and general mayhem in a fallen city. Historically, when you conquer an enemy, and confiscate (another nice word for "steal") his possessions, you became wealthier. This was, however, much, much more true in pre-industrial times, when wealth was static (land, gold, livestock, etc.). As the Soviets found, it's less true in industrial economies, because they are based on continuing massive production, and because the means of production depreciate and obsolesce. In today's hi-tech economy, simple theft is much, much less productive than used to be the case. In the old days, if you were able to steal some land or gold successfully, you were ahead of the game; land and gold defined wealth. Today, if you steal a computer, you have nothing but a depreciating asset. You can't effectively steal know-how; because it's a process, not a concrete object. The higher the technological level of a society, the less sense theft makes. The whole story of civilization is one of the replacement of theft by production as a means to live. It's why, for instance, I never believed the Soviets would ever attack Western Europe; the very fact of conquering it would have destroyed the wealth they wanted. In a hi-tech world, theft is actually counterproductive, much like stealing the answers to a test really gains one nothing. That's not the way it was in the ancient world, however. But if thefterconquestallowed the Muslims, tent dwellers riding out of the desert, to become wealthy, then hypocrisy allowed them to stay wealthyat least for a while. A good Muslim, even more than a good Christian, makes his religion not just the centerpiece of his life, he makes it his life. If the Koran is the exact and indisputable word of Allah, then it's almost a blasphemy to read anything else, or learn about anything else, or do anything that doesn't relate directly to what Allah expressly tells you to do, unmistakably, in black and white. Unfortunately, this presents a conflict with about a thousand other things a human may need or want. So compromises are inevitably made, rationalized, and justified. Hypocrisy is necessary, even admirable, if you believe and say things that make no sense to do.
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Don't get me wrong. Islam does not endorse either theft or hypocrisy; and these faults are in no way unique to it. The Roman Empire, whatever its numerous other virtues, gained most of its wealth by stealing it from the peoples it conquered and taxed. When it stopped expanding (with the reign of Hadrian) it almost necessarily went into decline. The same was true of the Spanish, Portuguese, British, and French Empires, among others. I attribute their glories not to their righteousness, but to their temporary military prowess. The same is true of Islam. It's just that the unifying aspects of the religion aided mightily in their conquests. Muslims are no more hypocritical than followers of any other faith. And theft (unless it's called conquest) is much rarer in Muslim than Christian societies. Just as stock investors often confuse a bull market with genius, religionists often confuse happy accidents of history with the fruits of righteousness. What really concerns people in the West, however, aren't the economic, but the political ramifications of Islam. While many other religions, from Voodoo to Hinduism to Mormonism, may be viewed as quaint, nonsensical, or bizarrebut at least well intentionedIslam is seen as threatening. That's because of Islam's political ramifications, including what was once the 6th Pillar, known as Jihad, or Holy War to defend, or spread Islam. That, understandably, scares Christians (and others). But no more, I suspect, than hearing a congregation sing "Onward Christian soldiers, marching as to war" on a Sunday scares Muslims (and others), while the US Air Force is plastering various Muslim countries. Some say that Islam is fine in itself and, as with Christianity, the problem is fundamentalism. Fundamentalism is basically living your life exactly according to the dictates of The Book, as least as you understand it. And this gets us back to the problem of hypocrisy. If Allah, via the Prophet, says it is wrong to charge interest on a loan, under any circumstances, how can you rationalize that with modern banking practices and economic theory, in which interest is the time value of money? If Jesus, who many Christians believe is God, says that it's easier for a camel to go through the eye of a needle than for a rich man to get into heaven, how can you rationalize being rich? Well, Muslim banks have at least 18 ways of getting a return on loans without calling it interest (fees, return gifts, commissions, tokens of appreciation, percentage of profit, etc.). As for how Christians solve the wealth conundrum, I'm sure we've all heard the answers in Sunday school. Query: Is this why Jews are famously richer than either Christians or Muslims? Actually, despite all the problems fundamentalists of all religions cause (and have), you've got to respect them, if only because they're not hypocrites. They don't just talk the talk; they walk the walk. The real question is whether the talk itself should be relegated to the scrap heap of history. There may be cause for optimism. After
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| all, Marxism was nothing but a secular religion, and today nobody but acknowledged morons, and some college professors, ever admit to having been believers. Having far too briefly and inadequately (but this is a newsletter, not a book) looked at why Islam arose, and what it is, let's explore where it's going. Should Islam be considered a threat to Civilization As We Know It? That question requires two, equally valid, answers. One answer is a definite yes, Islam is a huge threat. That's because there's every reason to believe any number of groups in the Islamic world will attempt to defend themselves from the medieval Crusaders disguised as modern Americans. They'll fight back not with planes, missile cruisers, and tanks, but with weapons they can afford which are, ironically, not just vastly cheaper, but vastly more effective. We won't call their warriors "soldiers", but "terrorists"while forgetting that "I'm a Freedom Fighter, you're a Rebel, he's a Terrorist." Some, especially those in National Security circles, discreetly ask what should be done about the Muslim threat. My answer is: Absolutely nothing. I don't see the Muslims as any more of a threat than the Christians, the Jews, the Hindus, or any other religious group. The ones I know are every bit as nice and decent as anyone else. Once, however, you start looking for an answer to the "Muslim question," you're looking for trouble of the worst kind, as did the Germans when they sought an answer to the "Juden frage." Unfortunately, that's the direction America is moving. I don't doubt that, before this decade is out, those of us with Muslim friends may be watched as potential terrorists for that reason. A second answer is a categorical no. Islam is not a threat at all. Paradoxically, one of Islam's greatest strengths is also one of it's greatest weaknesses: namely, the fact it's more than just another religion; it's a complete world view. It doesn't just prescribe how one deals with the supernatural, or even just morality, but dictates ones approach to finance, science, art, politics, and life in general. This has a certain utility in uniting primitive people for the purpose of military conquest, using simple technology. If you can get a horde to think alike in most ways, even convincing them they're going to go to Paradise if they die on a Jihad against the enemy, you've got a formidable low-tech military force. In warfare, as Napoleon said, the psychological is to the physical as two is to one. But groupthink doesn't much help in any other area of civilization. To the degree Muslims take their religion seriously, they will necessarily fall behind in every other area of human endeavor. That's because their religion takes absolute precedence over everything else, and regulates everything they do. The consequences of that are poor, at least if you value things like capitalism, freedom, science, and technology. And their consequence, prosperity. With no disrespect intended, slavish belief in a book that came to an illiterate Arab merchant in his dreams in
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the 7th century is less likely to lead to success in a wealthy high tech world than one where people lived in tents, and counted their wealth in terms of camels. For that reason, I've got to say the economic future of countries with Islamic traditions is not going to be what it could, or should, be. And that's a pity. But, as most people will acknowledge, there are more important things in life than money. Everyone has to make their choice. As for me, it means that, everything else being equal, stocks traded in these countries have to be cheap indeed before I'd consider buying them. But more on that in the near future. TurkeyI first visited Turkey in 1967. It was an exotic place, overrun with hippies coming from and going to India. Riding into Istanbul on the Orient Express, I was first impressed with the incredibly dismal shanty towns on its outskirts, made of scavenged tin and cardboard, that seemed to stretch for miles. Picturesque as they were, the shantytowns are gone today, as are the hippies. I spent days wandering around the Grand Bazaar which, you'll be pleased to know, has hardly changed at all. It's still innocent, for instance, of a McDonalds or KFC within its walls, which enclose an estimated 6,500 permanent shops, and 500 moveable stalls. In terms of pure vastness and exoticism, there's nothing that can compare to it, with the possible exception of Chatuchak in Bangkok on the weekends. I ran across almost no other Americans on this trip, something I can only attribute to fear and ignorance. The fact is that Turkey is everything Spain, Italy, and Greece are supposed to be, but aren't: it's friendly, cheap, clean, exotic, and not awash with tourists. And its vast Mediterranean coast isn't chock-a-block with high-rise condos, like most of southern Europe. But, except for those considerable advantages, the place is otherwise nearly indistinguishable from Spain or Greece. One reason for that is that today's Turkey was once the heart of the later Roman Empire. The second thing I wanted to be as a kid was an archaeologist although, admittedly, I was perhaps more drawn to the Tomb Raider than the toothbrush-and-sifting screen-in-the-hot-sun model of that science. Turkey may have more, and better preserved, ruins than any other part of the Empire. The language of the Eastern Empire was Greek, and the population (certainly of Anatolia) was ethnically Greek. The ethnic Turks only arrived on the scene in the middle ages. But it's in some ways pointless to talk of ethnicity here, since Anatolia has been a melting ground of cultures since prehistoric times. Hittites, Gauls, Greeks, Macedonians, Parthians, Romans, Arabs and Mongols are all part of the gene pool. The Turks are just the most recent interlopers, who demographically overwhelmed earlier inhabitants. There's a lesson here for America, relating to the immigration of Hispanic peoples, although I don't know what's to be done with it. Personally, I'm for completely
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| open borders, to enable opportunity seekers from anyplace to move anyplace else. But that's another story. One thing's for sure: The Hittites wouldn't recognize the people living in their old homeland today. One reason why there were no Americans, and a lot fewer tourists in general, in Turkey is that the place has always suffered from very bad public relations. Under the Ottomans it was famous as the utterly corrupt and dissipated "Sick Man of Europe." The fact the Ottomans fought on the German side in World War I certainly didn't help. Everybody, it seems, has a problem with the Turks. Some of it's real. But a lot of it is simply exaggeration and negative PR. The Armenians, who have a large (and very successful) emigrant community in the US, have beaten a drum for decades about the Armenian Holocaust when over 500,000 were supposed to have been slain or starved at the hands of the Turks, aided by the Kurds, during World War I. The Turks claim that scores of thousands of their own nationals were killed as well in what amounted to a civil war. Nobody cares because they don't have an overseas community to tell their story. The Greeks beef about the 1.4 million of their countrymen who, though their families had lived there literally forever, were forcibly uprooted and removed to Greece by Ataturk in 1924. I visited a ghost town of several thousand buildings, now 90% deserted, that was occupied by Greeks before the forced migration. There's less sympathy, however, for the several hundred thousand Turks who were living in Greece, and also forced out. Few people realize, as well, that the Greek Army occupied Turkey and was within 50km of Ankara in 1922, when they were defeated and driven out. It's not as if the Greeks are blameless. I'm not sure how far back anti-Turk/pro-Greek propaganda has ruled the west, but it got a major boost with Lord Byron, whose service to the Greeks in gaining independence from the Ottoman Turks added to his fame in the early 1800s. The Kurds, who actually do have a legitimate beef against the Turks, don't get much of a hearing. Most people think it's only Iraq that beats them up, when the Turks may be the worst offenders. In fact, the Turks, Iraqis, Syrians and Iranians conduct something of a tag team against them. Most often, it's perception, not reality, that rules the world. That, in turn, is a powerful argument showing that the average person's opinion on anything outside of his immediate purview is probably completely worthless. And that, in turn, is an excellent argument against a belief in political democracy, which vies with Greenism to replace Marxism as today's prevailing secular religion. But that's another subject. Even in movies, the Turks are invariably the heavies. They fought against Peter O'Toole in Lawrence of Arabia, they wounded Anthony Quinn in Zorba the Greek, and they killed Mel Gibson in Gallipoli. And anyone who's seen Midnight Express automatically has
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serious second thoughts about visiting. And, of course, neither does the fact almost all Turks are Muslims (albeit of a mild flavor) endear the country to a crusading West. That leads us to the most important person in Turkish history, and actually one of the most important of the 20th century, Mustafa Kemal Ataturk. Ataturk rose through the military by dint of competence, including his victory at Gallipoli. By main force, he transformed Turkey from part of the Middle East bordering on Europe, to part of Europe bordering on the Middle East. He took a country that had been ruled as an oriental despotism since the collapse of Byzantium in 1453, and transformed it. Education, which had been religious, was secularized. Sharia (religious) law was replaced with civil law. Official discrimination against women was abolished. Roman characters replaced the Arabic alphabet. And much more. Not all of it was positive (e.g., he nationalized all foreign businesses, and made it illegal for Turks to wear clothing, like the fez, that had religious significance); Ataturk was no libertarian, but the net effect was still positive, in view of the fact he was in charge of a backward, even medieval, country. It was a breathtaking accomplishment. The Shah of Iran tried to emulate Ataturk, and was rewarded with a reactionary counter-revolution led by the Ayatollah Khomeini. Even today, though, the Ataturk revolution affects the upper classes much more than the peasants, which was pretty much the case under the Shah. Could Turkey revert to fundamentalism? Guesstimates are that only 10% of the population would like to see that happen, and they tend to be the poorest and most ignorant 10%. On the other hand, it seems the average Turk sees himself first as a Muslim, and secondarily as a Turk. That means perhaps 90% of the country's 85 million citizens may have serious reservations about the country's purely secular government. The Army, Ataturk's original power base, has a firm secular tradition, and is a major bulwark against any movement towards theocracy. Insofar as it's helped to keep Turkey secular, the influence of the Army is a good thingmaybe. They conducted a coup in 1960, and another in 1980, when they didn't like the direction the civilian government was taking. Like any military, the huge 600,000 man force is a hammer in search of a nail. And, for years, the army has been hammering the Kurds. It's ironic that, at the same time as the US imposes a no-fly zone over northern Iraq, ostensibly to protect the Kurds, the Turks send in daily missions by F-15s and F-16s to destroy Kurd villages on their side of the border. This is undoubtedly one advantage to NATO membership and alliance with the US: nobody says anything untoward about it. It was only in June that a huge joint exercise between Turkey, the US and Israel was held here, with the obvious intent of intimidating neighbors Syria, Iran and Iraq. It seems to me the Turks would be
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| better off remembering their experience in WW I, and staying out of entangling alliances. Especially with the US and Israel, the two countries that everyone in their part of the world would most like to destroy. But the Turkish Army doesn't care; the country is pockmarked with US military bases. These military adventures against other Muslims, perpetrated by the country's elite and its military, who lay like a patina on the masses, may not wash in the long run. Especially with the recent total collapse of the longsuffering Turkish lira, an event which, inevitably, hurt the masses much more than the elite, there may be a reaction. The question arises how a society can survive in the face of inflation of several thousand percent. This is a subject I plan on exploring in detail later this year. The poorly managed currency, the large foreign debt burden, the millions of poor people who might want to emigrate for higher wagesand the religion issueall militate against Turkey joining the EU any time soon. As much as the army and the upper classes would love to see that happen. The Islamic world is full of stock exchanges, and they're all volatile. The Istanbul Stock Exchange has a fully electronic virtual trading floor, ensconced in a new high rise business district on the outskirts of old Istanbul, several miles from the rug merchants, coffee houses, and mosques. Let me give you a flavor of its volatility by citing 1986, a year when 80 companies were listed, with a total market cap of US$938 million (although the stocks trade in lira, it's pointless referencing the lira for purposes of comparison), an average P/E of 5-1, and an average dividend yield of 9.15%. In 1987, which was a worldwide boom year, the market cap had grown to US$3.125 billion, and the yield had shrunk to 2.8%, strictly because the P/E had expanded to 16-1. By 1988, after the worldwide bust in October of 87, the market cap shrank back to US$1.128 billion, the dividend yield expanded to 10.5%, and the P/E collapsed to 5-1. A complete round trip. In the years since then, almost all the world's markets have soared, including the ISE. By 1999 there were 285 companies listed, with a market cap of US$112 billion (a 100-1 increase), the P/E was at 34-1, and the yield an all-time low of .72%. As of this June, the market cap has fallen by 2/3 to $42 billion. But the P/E has risen to 36-1, and the yield is still only 1.21%. A bargain relative to a recent manic top, but not relative to 1988which is not so long ago. My conclusion is that there's no hurry to buy Turkish stocks for several reasons. One is that world stock markets, and economies, have lots of room on the downside, and little near-term upside. Another is, as fond as I am of the country, I'm interested in seeing if it actually hangs together. And, thirdly, with close to 100 countries with stock exchanges, why buy when there's neither a
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clear uptrend, nor stocks in bargain areas? Warren Buffet is quite right when he says investing is like a game of baseball with no called strikes: The key is to wait for the perfect pitch. When it comes in Turkey, the most convenient vehicle to play it will be Turkish Fund (TKF, US$4.75). Trading just off its low, and 2/3 below its 52 week high of $16.50, it gets my attention. But what's the hurry? Notwithstanding the state of Turkish stocks, there are two Canadian listed mining exploration companies I'm prepared to recommend at the momentwith the caveat that I haven't visited their properties, or studied them adequately. Anatolia Minerals (YMCU.CDNX, C$.40) and Eldorado Gold (ELD.T, C$.30). I'd hoped to spend time with both companies on this trip, but it just wasn't possible. That will happen when I go back in the fall. With that caveat, I'm favorably inclined towards both, in that both have very large (multimillion ounce) gold properties being drilled out in Turkey, and both have very low market caps. I don't think you can get hurt buying them at this stage of the cycle, if you put in a bid, and wait for tired sellers to come to you. That's what I'm doing. NotesIf the subject of World War III interests you, I suggest you check out my friend Rick Maybury's letter, Early Warning Report (www.chaostan.com, $149). Rick and I agree on almost everything, and he specializes in this topic.
What's the difference between religion and philosophy? It's well illustrated in the old joke about a theologian and a philosopher arguing. The theologian said the philosopher resembled a blind man, in a dark room, looking for a black catwhich wasn't there. "That may be," said the philosopher: "but a theologian would have found it."' Speaking EngagementsLiberty Magazine Conference
Calgary Investment Conference September 29-30, Calgary, Alberta 877-363-3356, 604-687-4151 info@cambridgeconferences.com
New Orleans 2001 Investment Conference November 28-December 2, New Orleans, LA 800-648-8411
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EndquotesGibbon interpreted the Crusades, as indeed he did almost every human idiocy, with rare intelligence. History, as he famously said, is indeed little more than a register of the crimes, follies, and misfortunes of mankind.
"[Pope Urban II] proclaimed a plenary indulgence to those who should enlist under the banner of the cross; the absolution of all their sins, and a full receipt for all that might be due to canonical penance. The cold philosophy of modern times is incapable of feeling the impression that was made on a sinful and fanatic world. At the voice of their pastor, the robber, the incendiary, the homicide, arose by thousands to redeem their souls by repeating on the infidels the same deeds which they had exercised against their Christian brethren; and the terms of atonement were eagerly embraced by offenders of every rank and denomination." Edward Gibbon, Decline and Fall of the Roman Empire,
Book 3, pg. 426 Mencken held every organized religion in low regard. If he were alive today, some mullah would undoubtedly place a fatwah upon him.
"I am one of the few Goyim who have ever actually tackled the Talmud. I suppose you now expect me to add that it is a profound and noble work, worthy of hard study by all other Goyim. Unhappily, my report must differ from this expectation. It seems to me, save for a few bright spots, to be quite indistinguishable from rubbish. If, at its highest, it is genuinely worth reading, then at its lowest it is on all fours with the Koran, Science and Health, and the Book of Mormon." HL Mencken, Minority Report, pg. 205 Douglas
R. Casey's International Speculator is published monthly by Douglas Casey.
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