Personal Snapshots
FORECASTS & STRATEGIES
December 1999

WHO IS THE PERSON OF THE CENTURY?
by Mark Skousen

Time magazine will decide this month who is its “Person of the Century.” The issue was raised at the New Orleans Investment Conference last month. There I had a chance to meet Stephen Ambrose, author of best-selling books such as D-Day, Undaunted Courage and several presidential biographies. His choice is Dwight D. Eisenhower. According to Ambrose, Eisenhower was the right person to make the decisive decisions in World War II (such as D-Day), and fought to keep America out of war with the Soviet Union in the 1950s.

Ambrose, who was Eisenhower’s official biographer, says that on several occasions during his administration his advisors and members of Congress demanded that he act militarily against Russia. But he refused, saying it would have been a bloodbath and the end of Western civilization. Eisenhower told his advisors, “Soviet communism is a great evil, but it cannot survive our system of democratic capitalism. We must be patient and it will die on its own.” He was eventually proven right.

I certainly think Eisenhower is a better candidate than Franklin Delano Roosevelt, who got us into World War II as a way out of the Depression, and started us on the road to big government with Social Security and other New Deal programs. I think Winston Churchill is a much better candidate as a world leader, and far less divisive.

On the closing panel in New Orleans, newsletter editor Larry Abraham named C. S. Lewis as the Person of the Century for his classic works in defending liberty and moral faith (The Screwtape Letters, Mere Christianity, Chronicles of Narnia). I like Larry’s idea of choosing a person who was a great influence for good in the 20th century, rather than picking political leaders who did a great deal of harm, such as Lenin or Hitler. In this regard, I would definitely choose Winston Churchill over Franklin Delano Roosevelt, or in economics, Friedrich Hayek over John Maynard Keynes.

The Film of the Century

The highlight of this year’s New Orleans conference was spending time with the actor Charlton Heston. My wife, Jo Ann, and I had the chance to have lunch with this famous actor. In his 76 colorful years, he has made the same number of films! My favorite is Ben Hur, which in my judgment is the film of the century. It deservedly earned 11 Academy Awards, more than any other in history.

In his talk, Heston warned us that our liberties are at risk in this era of Big Government. “The government encourages irresponsibility,” he stated. “As citizens, you need to spend the same time and effort defending your freedoms as you do on your investments.” Good advice!

What a pleasant conversation we had when I had dinner with Dan Quayle earlier this year. Quayle didn’t dominate the conversation as my wife Jo Ann and I might expect from a former Vice-President; he was gracious and a good listener.

Dan talked about his support for some form of private Social Security accounts for younger workers, under the age of 40.

He also said he was planning to pursue the presidency in the year 2000, but didn’t want to announce that publicly yet. (Quayle quit his bid for the presidency in the 2000 election after the Iowa Strawpoll in 1999.)

Jo Ann and I had met Dan Quayle 10 years earlier at a Howard Ruff conference, and we talked about those days and what Howard was up to these days.

Jim Blanchard and I met privately with Steve Forbes at the 1997 New Orleans Investment Conference. Forbes is planning to make another bid of the presidency in 2000 (which came to pass though he dropped out after low showings in the first round of Republican primaries and caucuses), and we assured him the hard-money movement was behind him 100%.

Like me, he is bullish on US technology, and his formula for “hope, growth and opportunity” can only improve the prospects for America — a flat 17% tax with generous deductions, privatization of Social Security, and sound money.

Speaking of sound money, I presented Steve with a 1880 Morgan silver dollar and he was delighted to see that the date was the year his grandfather, B.C. Forbes, founder of the magazine, was born.

Since this first meeting, I have met with Steve Forbes several times, as he is a huge supporter of FreedomFest. He has attended all three days of the conference two years in a row, participating on panels, giving keynote addresses and listening in on other sessions.

“Showing off waist lines after Rush had dropped 40 pounds!“

I guess my dinner conversation with Rush Limbaugh early in 1998 had quite an impression on the radio talk host celebrity.

During dinner we discussed a variety of economic and political topics, including the Clinton legacy. I told Rush I thought Clinton’s biggest achievement would be the privatization of Social Security.

Needless to say, Rush thought I was crazy. Clinton? Known for privatizing anything?

On the following Monday, Rush talked about our conversation on his radio program, referring to me as “a financial guru from Orlando” and scoffing at my prediction.

But low and behold, I have been vindicated by Rush. In a recent broadcast, Rush again mentioned me (this time as a “financial planner from Orlando.”) It seems that some of the Clinton administration have suggested the privatization of Social Security (like it’s a brand-new concept) could solve the New Deal program’s woes.

Rush’s response? “I guess that guy from Orlando has something there.”

I was Clinton’s Running Mate…For Half an Hour!

In the world of investing, timing is everything. In October, 1996, on a San Diego beach, my timing was excellent — an opportunity to jog and speak with President Clinton.

I had gone out on the beach for a jog. Before I knew it, the President of the United States and his entourage came jogging in front of me.

“Hi! How are you?” Clinton asked with a smile. “I could be better,” I responded, a phrase that speaks volumes about the last four years under Clinton.

Before the opportunity could slip away, I seized the moment. While others watched in amazement, I ran up, shook his hand and asked, “Mind if I join you?” The Secret Service agents were closing in fast, but the president waved his hand. “Fine with me. Let him go.”

For the next half an hour, I had the president’s ear. Boy did I let him have it!

We discussed his 1993 tax hike, which I pointed out had a negative effect on business and charities. While wealthy people can afford to pay higher taxes, sending more money to Uncle Sam means there’s less money to be spent on business, on hiring or for charities.

He seemed to understand, but said he had to do something about the deficit, which ballooned under Reagan supply-side tax-cuts of the 1980s.

“Do you believe in supply-side economics?” I asked. He replied “Yes, tax cuts can increase revenues, as they did under Kennedy. But we must not go overboard.”

We also discussed a reduction or elimination of the capital gains tax. Surprisingly, Clinton said he favored a reduction in capital gains, but only if a “small” alternative minimum tax was included to ensure fairness. Basically, a capital gains tax cut in name only.

Next we discussed problems of Medicare, including the Medical Savings Accounts idea popularized by 1996 and 2000 GOP presidential candidate Steve Forbes, which Clinton said he also supported.

As we finally said good-bye (the Secret Service agents had been pointing at their watches for the last several minutes) I asked Clinton to sign a dollar bill I had in my pocket. “I think it’s illegal, but I’ll do it anyway,” he said.

I had an opportunity to interview famed management guru Peter Drucker in July, 1991 for a Forbes article.

When I asked him about the troubles of big corporations, like IBM and General Motors, Drucker replied that all large companies which emerge as a pioneer in a field eventually mature and face competition. They simply they must decide which size is best. “Elephants have a hard time adapting. Cockroaches outlive everything.”

Drucker alluded to the hidden growing troubles of Japan, due to the large amount of T-bills and real estate they’d invested in the United States and their high capital gains tax.

In the U.S., Drucker didn’t foresee a depression in the 1990s, but did predict a declining number of banks through mergers as the interest-generated revenues of the traditional structure of banking were replaced with service fee-generated revenues.

Finally, when I asked if Keynesianism was finally dead, Drucker replied that he was not anti-Keynesian, but rather non-Keynesian. He surprised me by stating that he felt Keynes was actually ultraconservative politically, believing in abolishing labor unions and maintaining the free-market. Keynes despised American Keynesians.

What did Drucker foresee for the world?
Transnational governments to deal with the environment.
Transnational money to coordinate currencies.
And economic regionalism, less focus on nation-states and more on ethnicity.

I Had Lunch with Milton Friedman

I have been meeting and corresponding with Milton Friedman, today’s most famous economist, for over ten years.

At one point, my contact with him really helped me keep from making a bad investment decision for my subscribers.Many in the investment newsletter business had been warning subscribers of an impending stock market crash due to the fact that M1, the money supply, was declining sharply in 1996.

“Should we sell?” asked my subscribers through letters and phone calls.

I met with Dr. Friedman. He said M1 was too narrow a definition of the money supply and therefore, now out of date. M2, which included money market funds, was much more accurate.

And M2 was rising! In short, there was no “tight-money” policy, and no chance of a serious bear market. I kept my subscribers in the market and they made over 20% or more on my recommended stocks and mutual funds.

On a personal note, several years ago Milton Friedman and I went to the same conference, and I invited him to lunch. After the meal, I grabbed the bill and paid for it. I turned to Milton and said, “So I guess it’s no longer true your refrain, that ‘there’s no such thing as a free lunch!’” To which he replied, “Oh, no, Mark, I had to listen to you for two hours!”

Louis Rukeyser Guest Panel and Celebrating The Retirement Letter’s 25th Anniversary

Lou and I share a laugh over Elaine Garzarelli’s “bullish indicators”

I was a guest panelist on the Louis Rukeyser panel celebrating the 20th anniversary of the InterShow Money Show at Walt Disney World, Florida. The event took place on Saturday evening, February 7, and the other panelists were George Roche, president of Hillsdale College, Charles T. Maxwell, investment manager at Loewenbaum & Co., and Don Rowe, investment newsletter adviser.

Before the panel began, Lou spoke and told a funny story about Elaine Garzarelli, the financial guru. Lou noted that Elaine was famous for being bullish about the stock market and would always being her interviews by saying, “Lou, my indicators have never been more bullish…” Once at a conference before a live audience, Lou said she showed up late on a panel and so, while waiting , Lou said to the audience he was sure she would begin, “Lou, my indicators have never been more bullish…” When she appeared, Lou asked her where she thought the market was headed. Sure enough, her reply began, “Lou, my indicators have never been more bullish…” She wondered why the audience laughed.

After his speech, Lou came over and began his panel. When he came to me, he asked, “So, Mark, where do you think this market is headed?” I replied, “Lou, my indicators have never been more bullish…”

Meeting with Willard Scott at The Retirement Letter 25th Anniversary Celebration

After the Rukeyser panel, I joined Tom Phillips and Pete Dickinson to celebrate 25 years of The Retirement Letter, Tom’s first financial newsletter that he published. (Forecasts & Strategies was second–we celebrated our 20th year in 1999.)

Poking fun of Willard’s “propensity to consume” at The Retirement Letter anniversary dinner

Willard Scott, the famous weatherman on the Today Show, appeared as the celebrity host and told jokes about his age and his financial escapades. I sat next to him at the dinner and we reminisced about living in Washington in the 1970s and 1980s.

I spoke at the Gold Show at the Mirage Hotel, where there were 2,000 people in attendance. My workshop was jammed, but the biggest thrill was appearing on “Larry King Live” as the guest interview.

At first I was told that CNN’s Larry King was going to interview three experts on the mining industry. I was relieved I would have some back-up, since I don’t consider myself a mining expert.

But when Larry arrived, I looked around and saw that there were no other guest interviews, only me. The pressure was on.

Larry warmed up the audience with a few stories, and introduced me, but mispronounced my name.

I went up to the stand and said, “Judging from your mispronounciating my name, you obviously don’t know anything about the mining industry!”

It threw him off guard but he responded with relish. “What’s the mining industry doing to minimize damage to the environment?”

I responded, “Frankly, Larry, nobody here in this audience cares about the environment!”

He said, “I can’t believe that.”

I then turned to the audience and asked, “How many of you think the environment is important?” They responded in unison, “NO!” Then I asked, “How many of you are just here to make a buck?” They yelled loudly, “YES!”

Though it sounded like we were all a bunch of right-wing crazies defending the unfettered free market, the interview was intense, funny and very interesting.

After, Larry said it was a great interview that he really enjoyed. Dozens of attendees came up and told me that my appearance was perfect. “You said everything I’ve always wanted to tell Larry King.”

Questions for Margaret Thatcher

In May 1996, I was able to meet former British Prime Minister Margaret Thatcher at the 50th Anniversary of the Foundation for Economic Education at the Waldorf-Astoria in New York.

We met with Lady Thatcher at a private reception before the main banquet. She did not seem very animated due to jet lag, but then I asked her about her recent visit to Brigham Young University, where she received an honorary degree.

I had read that the Mormon Tabernacle Choir had been there and sang a famous British hymn. However, they left out one verse. Lady Thatcher got up in her acceptance speech and recited the omitted verse from memory.

When I reminded her of the story, she repeated the verse, in front of all in the receiving line.

During the main banquet, where Thatcher was the keynote speaker, I was asked by FEE president Hans Sennholz to ask the first question.

In my question I noted that unemployment in Europe was in double digits and the region was struggling with strong labor unions, regulations and other forms of socialist legislation.

My question: Why have free-market think tanks failed in influencing Europe to move toward free market?

Her answer: She was highly optimistic that the free-market think tanks would still rule the day, and Europe was headed toward an open market as part of the European Union (one currency, single market for labor, capital and money).

Result: Her surprising optimism prompted me to be more bullish on European stocks, which have since then hit all time highs.

“My father’s decision to raise taxes was wrong. One of my first actions as President will be to cut marginal tax rates!”
-Gov. George W. Bush

Last month I met with the front-runner of the Republican Presidential nomination, George W. Bush, at the governor’s mansion in Austin, Texas. I spoke with him at length about his tax policies, and how they might affect investors. He told me that his first priority is to cut marginal tax rates on federal income taxes.

I asked him point blank what he thought of his dad’s decision, after making his famous “Read my lips, no new taxes” pledge, and then raising taxes in 1991. Many political commentators think this reversal cost Bush the election. “It was wrong,” his son said without hesitation. A few minutes later he came back to me and reemphasized the point; “It was the biggest mistake of his political career.”

In essence, Gov. Bush was saying that if he becomes President, he will atone for his father’s sin by reversing his tax policy.

CAPITAL GAINS TAXES, SOCIAL SECURITY

I then asked him about other taxes. He does not favor a further reduction of captal gains taxes. He thinks the 20% rate on long-term gains is already low enough (although he will undoubtedly sign a bill lowering the rate to 15%, which is what Republicans have already passed). His main focus will be to cut the high marginal rates on income taxes. He also told me he strongly favors “improving” Social Security by privatizing it, at least partially. He talked about placing at least two percentage points of each eligible worker’s salary into “personal savings accounts.”

I was delighted how candid he was about Social Security privatization. As you may recall, it took former House Speaker Newt Gingrich three years to admit publicly his support for privatization. The idea, long championed by free-market economists, is now becoming mainstream.

At the governor’s meeting was also Howard Phillips, the conservative gadfly running for president on the U. S. Constitution Party. (The group is even smaller than the Libertarian Party.) Howard walked up to Gov. Bush and brashly asked, “Will you let me in on the debates?” The governor didn’t hesitate: “No ! ” Will Gov. Bush get my vote? Currently I support Steve Forbes, who is more libertarian than Bush. But I think Bush would be far superior to Democrats Bradley or Gore, and is more libertarian than his father.

I had the privilege of meeting Friedrich von Hayek twice. He was a brilliant man.

In 1986, Gary North and I met with Hayek in his summer home in the Austrian Alps.

We discussed what made “Austrian” economists so different from the rest of the economics profession.

He noted that he and Ludwig von Mises, his mentor, had predicted the 1929 Crash and 1930s Depression, while eminent economists John Maynard Keynes and Irving Fisher had not. Keynes and Fisher had not thought there was any inflation in the 1920s — commodity and consumer prices were stable.

On the other hand, the Austrians (Hayek and Mises) always look beyond macro aggregate statistics and break the economy down into “micro” sectors. They noted that there was inflation in the stock market, real estate and industrial sectors.

I was able to use the Austrian model to predict the 1987 Crash and to get my subscribers out of the market six weeks before Black Monday, October 19, 1987 (my 40th birthday!).

The purpose of my two-hour, one-on-one interview with David Rockefeller, the former chairman of Chase Manhattan Bank and the youngest grandson of oil magnate, John D. Rockefeller, Jr., was to learn his assessment of the new global free market economy of the 1990s and beyond.

First, Rockefeller said that despite his top-level connections, he had not anticipated the fall of the Berlin Wall and the collapse of the Soviet Union.

He also expressed deep concern about the banking crisis, which he says is spreading worldwide. “The Japanese banks are not having an easy time as they once had.”

Finally, in his most surprising statement, he revealed he considers himself a follower of the Austrian school of economics. Friedrich Hayek had been his tutor at the London School of Economics in the 1930s.

A plaque at Rockefeller Plaza displays some of David Rockefeller’s grandfather’s beliefs:

“I believe that government is the servant of the people and not their master…that the world owes no man a living, but that it owes every man an opportunity to make a living…that thrift is essential to well-ordered living and that economy is a prime requisite of a sound financial structure, whether in government, business or personal affairs…that character — not wealth or power or position — is of supreme worth…that right can and will triumph over might.”

Amen!