Strategic Investment 9/21/94 Agora Inc, Publishers 824 E. Baltimore St. Baltimore, MD 21202-4799 "Few stories could be juicier than the Whitewater saga. It has everything- -dead bodies and death threats, allegations of drug smuggling, crooked speculation, looting of a federally guaranteed depository institution, sweet-heart land deals, abuse of municipal bond issuance and, of course, sex." --Christopher Wood, The Wall Street Journal, September 2, 1994 Chris Wood was New York bureau chief of The Economist when he wrote the passage quoted above from "No Juicy Clinton Stories Please, We're American." His topic was "the genteel distance" that the American press has kept from "much of this Arkansas material." Chris is a first-rate reporter and financial analyst, with whom I have spent many hours in lively conversation. He is now off to London to begin a new career evaluating emerging markets for a leading investment bank. The half-told story He leaves behind one of the great half-told stories of the century. Nonetheless, he believes, as I do, that too much is already known about the strange goings on in Arkansas for their unhappy implications to remain covered up for long. The President of the United States and his wife came too close to some unsavory activities over the past 15 years-- activities that would be in no way unthinkable in Italy but which somehow seem unthinkable in the United States. "It can't happen here" Indeed, it is this very fact that has delayed the full public disclosure I believe is coming. Most of the American media have assumed that the more serious charges raised against the Clintons could not possibly be true. Therefore, they have been slow to investigate stories that have been picked up by British publications like The Economist, The Telegraph, and The Times of London. Witnesses are talking The responsible British press has been so far ahead of the establishment media in America in reporting the darkside of Clinton's Arkansas, that their head start on the story has begun to feed on itself. We've been told that a number of witnesses from Arkansas have sought out British reporters and revealed startling details of criminal activity involving some of the best-known people in Arkansas. It is only a matter of weeks or months until some large American news organization undertakes a concerted effort to tie together the bits and pieces that have already been exposed, and are soon be amplified in London. I am not hallucinating when I say this. Although major American news outlets have yet to figure out how to handle accusations of illegal behavior by the President, they are aware of them--starting with the apparently well-documented charges reported in London that Bill Clinton was a heavy user of cocaine. It is an illusion to suppose that editorial restraint by the leading news organizations will keep these stories from becoming common knowledge. They are on the Internet now. You can hear details almost any time you tune into talk radio. Millions of Americans already understand that the Clintons ran Arkansas in the 1980s the same way that Marion Barry ran the city government of Washington, D.C. Lord Rees-Mogg, a fascinated observer from afar, has been keeping his own list of the charges raised against the Clintons. He counts only those he feels are supported by sufficient evidence to merit serious investigation. His tally had swollen to 16 separate categories of offense, including many charges never leveled at any previous president. "Relentless Clinton Bashers will stop at nothing." -headline of special report Washington Times, September 1, 1994 The fact that some of the stories now swirling around the Clintons are unprecedented gives rise to what is known in pyscho-babble as "cognitive dissonance." Another way of saying the same thing is that it is hard for some people to think clearly. Any evidence that conflicts with their core assumptions causes a short circuit in their reasoning and then full-blown denial. Hence the tendency to label all who treat the allegations of misdeeds in Arkansas seriously as "relentless Clinton bashers," rather than merely observers responding to the evidence. As Christopher Wood wrote upon his departure from the U.S., many in the press are "quick to attack the motives of those trying to delve more deeply into the story. Accusations fly of using 'biased sources' or of being in bed with the 'Christian Right.' This is bizarre.... The issue that should count is whether the information is accurate." "Through a glass, darkly" Sadly, I have come to believe that some of what is alleged by "the relentless Clinton bashers" is true. I did not set out to believe this. To the contrary, as longtime subscribers know, I was unreasonably optimistic about Bill Clinton before he actually took office. In the settings in which I had known him, he was unfailingly gregarious and attentive to ideas. I was impressed with his intellect and his formidable political talents. I dared to hope that he would double-cross the grasping constituency groups that have come to comprise so much of the Democratic Party today. Hoping for something better This hope proved to be misplaced. But it was not as stupid as it now seems. It is easier for a political party of the underprivileged" to cut entitlements than a party known to "favor the rich." Sir Roger Douglas, who engineered the early stages of the dynamic reform in New Zealand, was a Finance Minister in the Labour Party. Carlos Menem, certainly the best president of Argentina since before World War I, began his political career, like Clinton, as a big spending governor of a backward province. To repeat and update my account of Menem's successes, he was elected President of Argentina on a platform of doing more of all the wrong things. He lied. As soon as he took office, Menem double-crossed his supporters and began to do the right things. Privatizing social security... He became a success beyond anyone's imaginings. I could only dream of a President of the United States willing to try let alone succeed in what Menem has accomplished. It would be quite enough if he had merely stopped printing money and balanced the budget. No American president has done that for a quarter of a century. But fiscal restraint amounts to little compared to some of Menem's other accomplishments, such as privatizing social security. Ronald Reagan was unwilling to touch even a hair on social security's white head. Menem lopped it off. And the post office Reagan was considered a pillar of strength for firing a few air traffic controllers. But he didn't privatize the air traffic system or sell National Airport. All of Argentina's airports will be privatized by the end of next year. Menem even changed the Argentine constitution to privatize the post office and the federal mint. Both are to be sold within 15 months. We give you honest judgment My early hope that Clinton would be a politician of the future like Menem was overtaken by the evidence. It should be clear, however, that the fact that Clinton is just another disappointing politician with a dated platform is not the reason that we are warning you of scandals about to engulf his administration. We are warning you because that is our job. You and other subscribers paid us to give you our best judgment about coming developments that could affect your business and investments. The coming collapse of the Clinton presidency is certainly high on that list. That would be true even if Clinton had turned out to be another Menem, the greatest American president of the century. We try to tell you the truth as we understand it. Not that we are always right. But are forthright. We have worked hard to develop some of the best intelligence sources in the investment business. Lord Rees-Mogg and I regularly review what they tell us, and update our views accordingly. Sometimes this points us to conclusions we are sorry to reach. This is the case now. But we are not afraid to think the unthinkable if that is where the evidence and plain logic point us. Many thought we were crazy in the mid-80s when we began to warn our subscribers of the coming fall of Communism and the collapse of the Soviet Union. Just a few short years ago, that message was unthinkable. But it happened. Now we are warning you of another shocking development. This time it will happen not in Moscow but in Washington. The twisted trail of scandal from Arkansas leads to the White House door. When the prosecutors finally come knocking, it will reverberate on Wall Street. Indeed, we have already seen a benign effect in the stock market of the growing perception that Clinton's troubles will drag large numbers of Democrats to defeat in November. The stock market rallied robustly in August, led by the medical stocks as money managers concluded that Clinton's health plan will not pass this Congress, and therefore certainly will not pass the next one. The November elections could bring the first Republican majority in the House of Representatives in more than 40 years. What if? This raises possibilities that you should begin to think about now. If Republicans sweep the November elections, or Clinton's legal troubles deepen to the extent that he is ousted from office, would the stock market rally? Should you buy on that news? Or in anticipation of it? Several shrewd investors to whom I have spoken do see the prospect of Clinton's ouster as bullish. They may be right, temporarily, especially if the market sells off sharply as the story unfolds. But I would rather be a seller than a buyer of any rally precipitated by a deepening of the President's legal troubles. I doubt that America will be in a party mood when the Clinton Capers displace the O.J. Simpson trial as the staple of discussion on Larry King Live. Many people will see it as a betrayal of trust as they gradually and grudgingly recognize that the President of the United States, like major league baseball has let them down. What the silence says There is more than a trivial prospect, in fact, that disillusionment with the Clintons will precipitate a crisis of confidence in the welfare state. This could lead to an institutional trauma for the Democratic Party. Much as long-ruling, scandal-ridden Christian Democrats in Italy and Liberal Democrats in Japan were swept from office, so the Democratic Party in the United States could be repudiated. The fact that the major media have not delved more deeply into ADFA and the Clintons' connections to the "Redneck Mafia" implies that the arbiters of opinion are uneasy. They may sense the historic change of mood that is already evident in increasing disillusionment among middle class voters with rampant crime, and in the defeat of the Clinton health plan. They may feel that disillusioning revelations about the President would undermine support for the system. They may be right, but that is not a reason to turn the other way. There is a notion in Western civilization that dates back to the Greeks, that the true man must pursue justice, wherever it leads, even into his own house. We don't pretend to live up to that high standard. In fact, we are not pursuing justice at all, we merely observe that those who should, aren't. If you still have your copy of last month's issue, save it. "The Dog That Didn't Bark," has not gone unnoticed. Strategic Investment and I have been sued for $2 million for questioning the official story of Vincent Foster's death. A park policeman claims that we somehow libeled him in the course of telling you about Christopher Ruddy's analysis of the shortcomings of the Fiske Report. The same man has also sued the Western Journalism Center, which placed a full page ad in the Sunday New York Times on August 28 questioning the suicide verdict on the Foster death. Intimidation I may be wrong, but my impression is that the lawsuit is a gesture of intimidation, orchestrated in the hope that it will discourage further or investigation of the Foster death. In a "sound-byte" world, the mere fact that someone has filed such a lawsuit may convey an impression of credibility to the official story, whatever the facts of the matter. The timing of this suit could be important because it is widely believed in Washington that the new independent counsel, Kenneth W. Starr, is cur- rently reviewing whether or not to re-open the Foster investigation. Not incidentally, there has been a barrage of attacks on Starr, as well as a lawsuit filed by a Democratic Party activist challenging Starr's ap- pointment. A concerted effort is being made to intimidate Starr. Stranger and stranger Obviously, I have a prejudice in commenting on any lawsuit against Strategic Investment or against me personally. So take that into account. Nonetheless, it strikes me that there is a bit that is odd in this particular case. 1) Strategic Investment is a private newsletter. It is not obvious how the park policeman now claiming to have been libeled came to have a copy of the August 17 issue. He would not have received it as a subscriber. And it is even less likely that a discarded copy just happened to blow into his yard, where he picked it up and took offense. More likely than not, he was contacted by someone who is monitoring what we publish, whose purposes extend beyond the officer who filed suit. 2) The typical park policeman does not have a battery of attorneys in several states who are ready to almost instantly file multimillion dollar lawsuits The suit was filed on September 1, only two weeks after the issue appeared. 3) News reports quote the plaintiff's attorneys, who took the unusual step of issuing a press release, as stating that we "intended to injure and destroy plaintiff's good name and reputation." If so, we did a lousy job. We never even mentioned his name. 4) Another factor that contributes to my suspicion that the suit is part of a public relations ploy is the fact that we first learned about it not from the plaintiff or his lawyer, but the Associated Press. 5) In his full report, Ruddy raises questions about the placement of Foster's body in Fort Marcy Park. These questions are based upon good faith efforts to reconstruct the death scene. None of these questions would have even arisen had it not been for contradictory statements by key witnesses, and the fact that all the photographs that could establish the whereabouts of Foster's body within Fort Marcy Park were mysteriously destroyed during processing. If, as Ruddy implies, a high-ranking government official has been murdered, this is obviously a matter of paramount public importance. Under the circumstances, it would seem unlikely that the plaintiff could demonstrate malicious intent in discussion of such a public issue. 6) Furthermore, there is a well-established principle of libel law, backed by Supreme Court decisions, which holds that you cannot libel a public official without mentioning him. Combine that with the fact that each issue we publish is reviewed by lawyers before we go to print. Perhaps not surprisingly, therefore, our lawyers tell us that the current suit appears to be frivolous. It was probably never intended to go to trial. The intent may have been merely to raise a public relations point, then withdraw the suit. I believe everything I wrote in "The Dog That Didn't Bark." It is obvious that the investigation of Foster's death did not follow standard operating procedures and was hampered at many points by White House interference. Park Police officials practically admitted as much during recent congressional testimony. U.S. Park Police Capt. Charles Hume suggested that White House involvement in the investigation was so pervasive that, "It became a joke." It is only one of many jokes. The biggest is the utterly craven coverage of the Foster death cover-up, and the broader story of the Clintons' connections to the whole range of sinister enterprises, including drug dealing and money laundering, that flourished during their tenure in Arkansas. As Chris Wood said," The failure of the American press to understand this... let alone point it out, is simply extraordinary." Sincerely, James Davidson P.S. Be sure to read Chris Wood's dynamite new book, The End of Japan, Inc. (Simon and Schuster).