An Advertisement for Ourselves Jude Wanniski September 20, 1996

Memo To: Prospective Clients & Our Website Fans
From: Jude Wanniski
Re: Advertisement for Ourselves

Our business these last 18 years has been to keep our financial and industrial clients informed on the most likely course of the U.S. and world economy. We do this by interpreting the impact that political decisions and events will have on the financial markets, which are forerunners of real economic activity. In the past year, which has been typical of our forecasting record over the years, we clearly kept our clients ahead of the curve. Here are a few we think were especially prescient:

1. Bonds. We alerted our clients to risk in the bond market as early as January 25. While the majority of market prognosticates were looking at increasing signs of economic weakness as reason for continued bond market strength, we outlined, in a piece entitled, "Higher Gold, Higher Risk", that.... "to the extent that the credit markets have been supported by expectations of a near-term Fed move, the prospect of FOMC inaction (due to the quick rise in the gold price) exposes the vulnerability of current prices." We also pointed out, though, that the forces at work in the stock market could overcome the weakness in bonds, that "the equity market can discount favorably beyond a crisis in fixed income securities." We followed this by noting on February 27 that, "with the 30-year Treasury bond rising to more than 6.4%, the bond is being buffeted by a confluence of factors which are increasing risk in dollar based assets...casting strong doubt on the past year's bond market rally."

2. The Fed. While the bears kept up a steady drumbeat predicting interest-rate increases by the Fed, we held to our view that Fed Chairman Alan Greenspan would not be rushed in that direction as long as he saw commodity prices, especially gold, behaving themselves. On June 6, when the conventional wisdom was heavily leaning toward a shift in course by the fed, to raise rates, we note that, "our confidence remains with Greenspan, who is certainly smart enough to know that he has inflation under control....as the gold price edges downward amidst a steady pickup in the demand for dollar liquidity, Greenspan knows the only way to arrest its decline is by cutting short term rates."

3. The DJIA: As early as February 22 with the DJIA at 5520 we noted that because Steve Forbes had been successful in moving the political debate in the GOP primaries toward growth and away from austerity, his mere entrance into the race would lift the DJIA above 6000 this year and shift the debate at general election time in a positive pro-growth direction: "...Steve (Forbes) entry alone would get the DJIA above 6000 this year."

4. NASDAQ: The NASDAQ faded in late spring as Forbes could not sustain his early success and the growth banner seemed to fall by the wayside. On July 22, one of the last of the bulls, Elaine Garzarelli, threw in the towel and predicted a major selloff. Three days later, on July 25, with the NASDAQ trading at 1050, we note that the July 23 GOP summit on taxes and growth resolved doubts on how Bob Dole would proceed, thereby reviving the national debate over the economy's potential. In that July 25 client letter, "The Tax Issue," we wrote: "the darkest days on the NASDAQ may now be behind us...[the Dole tax plan] even if Bill Clinton wins re-election, would lead to a voter turnout that would produce a Republican Congress clearly committed to putting the economic horse ahead of the downsizing cart."

5. Kemp as Veep: On March 29, when conventional wisdom insisted that the last man on earth that Bob Dole would pick as his running mate was Jack Kemp, who he supposedly disliked intensely, we informed our clients: "As Dole gets closer to San Diego, he will find the consensus forming around Kemp, the logical choice to unite the party and help the GOP win the blue-collar and black votes it would need to gain the White House and retain the Congress."

6. Bank of Japan: We are especially pleased with our tracking of the dollar/yen rate over the past year and a half. When the yen hit 82 to the dollar, its high point, we alerted clients that we believed it in fact would not go higher, based on a debate within the Bank of Japan that we saw being resolved. On May 11, 1995, we confidently had the Bank of Japan shift to liquidity creation pegged. We noted with dollar/yen trading below 90 that, "the BoJ since mid-April has reversed about half of the drain of 10 trillion yen that it effected over the previous month. Thus does the dollar trek back toward 90 yen, perhaps 100." August 2, 1995, we follow up with: "the dollar's surge above 90 yen, pulling rallies in the Tokyo stock market and US bond market in it's wake, amounts to confirmation of a shift in Japan's stance on liquidity creation...further near-term dollar appreciation appears likely."

7. Our running analysis of political developments in the important emerging economies of Asia and Latin America has not been excelled. We have had many significant "calls" based on readings that have not occurred to other analysts. Our tracking of the Argentina, Mexico and Brazilian markets has been far better than all consensus calls. Our bullish report on Taiwan in what appeared to be its darkest political moment of the year was among our most timely.
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