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The prophet of profit: Seth Glickenhaus. One of my pet themes is that, contrary to their traditional image, Republicans are actually quite bad for business. In the past I called attention to nonagenarian Seth Glickenhaus, the esteemed multibillion dollar money manager whose firm has consistently delivered superior returns, and whose opinion on the present direction of the economy was not complimentary to the current administration.

Last week the 91-year-old was revisited by Sandra Ward in Barron's. His answers to her first two questions set the tone right away:

What about the economy and the stock market?

Let me list the negatives for the economy and the stock market, and then I'll address the pluses. The first negative is the huge military spending, both for peace purposes and war. Under a $400 billion-plus budget for a peacetime army, they are building a new fighter plane that is totally redundant and unnecessary and will cost us eventually hundreds of billions.

We don't get goods and services that are really important in our defense. That's true of the new submarines we are building in Connecticut and elsewhere, as well as the new aircraft carriers.

What would be more necessary?

A portion of it could be spent in better defense. Training young people in foreign languages is an area in which we are sorely lacking. That could make us much stronger by improving our intelligence and ability to infiltrate terrorist groups. The war itself is a war that occurred without any planning. The public is becoming increasingly disaffected with it, because we don't see any purpose in keeping our soldiers there. We are obviously unable to train the local people. We are spending huge sums every day to maintain the war, and we don't get any worthwhile goods or services or other offsetting asset.

Roughly 41 million people lack health care in this country. Some of the money spent on defense could be spent for that.

Then there is our school system, which is well below average, relative to the rest of the world. Any country that has a mediocre or worse school system is not going to be successful economically in the future. We should be paying teachers vastly more. We should only hire people to teach who are in the first third of their class, who not only know their subject matter, but also can inspire children to want to learn. Those people are not going into education today. They are going in to the law. They are going into engineering. They are going to Wall Street.

There is a dearth of public housing, and it takes eight to nine years between the time you apply for an apartment and you get it.

By inundating us with paperwork from the SEC, the government is failing to help businesses.

Then there's the greenhouse effect and global warming. Neglecting global warming is going to have the most incredible economic consequences -- mostly bad. Our farm areas will eventually be too warm to produce wheat and corn. The South will be even hotter.

Seth, you have raised many of these concerns in our past interviews.

I certainly have. But I do it because we as a country are very proud that our gross national product is up 4% or whatever on an annual basis. This is a great misstatement of the well-being of our economy. It doesn't take into consideration our depletion of capital, or the depletion of minerals, the depletion of fish, the depletion of raw materials or businesses that no longer exist. It gives a false picture. All it reflects is the amount of sales. If they sell oil at a higher price, why, that goes into the gross national product. The fact that you are using up an asset isn't accounted for. The disparity of income that has grown between the very wealthy and the poor is creating a bad situation.

It shocked me to see the July savings rate went into negative ground in the United States. That implies people are digging into their savings to maintain their spending. In other words, they are not only going into greater debt, but there is no offsetting savings. This is a great negative and eventually will catch up with us.

It's puzzling that so few Wall Street gurus think as holistically about the economy as Seth Glickenhaus. Training young people in foreign languages as a technique of national defense would be infinitely more effective (not to mention cost-effective) than what passes for "war on terror" defense policy now. Housing, healthcare, the educational system — all of these contribute to the labor/capital infrastructure which is where both jobs and wealth are created.

Seth Glickenhaus phophetically and unambiguously said in June 2003, just weeks after Bush's flight-suit "Mission Accomplished": "The public thinks we won the Iraq war and that it is over. They don't realize we are going to keep more troops in Iraq than we thought. The deficit will grow. We are not going to win the peace. Iraq is so divided internally it makes Afghanistan look like one unified group. Do you think soldiers know how to straighten out a country? They know how to make war. Do you think the State Department has the people and the training to help the country rebuild? Do you think we have anything like that? No, of course not. "

The best investment managers have both feet firmly planted in the reality-based community. Long live Seth Glickenhaus!

{ 10:12 AM }

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