GENERAL COMMENTS ON THE CAPITAL MARKETS - Dennis Gartman

Eastern Europe is where economic progress and reform are taking place. It is
where economic experimentation is the norm; it is where taxes are being cut; where capitalism is most alive.

GENERAL COMMENTS

ON THE CAPITAL MARKETS

Horace Greeley, a

one time successful and important newspaperman in the

19th century, supposedly called upon the young men and

women of the then young United States to "Go West, and

grow up with the country." If Greeley were alive today and

writing, he would be telling the young men and women of

Europe to "Go East." By that he would mean to Eastern

Europe, for it is there that the future lies. Eastern Europe is

where economic progress and reform are taking place. It is

where economic experimentation is the norm; it is where

taxes are being cut; where capitalism is most alive.

According to the EBRD (The European Bank for

Reconstruction and Development) '04 will be the fourth year

in a row that the former Soviet Eastern European nations will

outpace the economic growth of the West... and the

difference in the growth rates is increasing! In '03, the former

Eastern Europe grew its GDP by 5.6%; in '04 it is expected

to grow by 6.1%. Eastern Europe is green and vibrant;

Western Europe, by comparison, is brown and sclerotic.

Interestingly, the fastest most vibrant growth is in the former

CIS itself. We can "excuse" or discount the growth in

Kazakhstan and Azerbaijian, which lead the region with

growth rates averaging a stunning 7.4%, as an accident of

high oil income. And we can perhaps "excuse" the growth in

Russia itself, of 6.9% this year, as also oil induced. But we

cannot excuse the growth of Bulgaria, Croatia, Romania, The

Czech Republic, Slovakia, Hungary, Poland, Estonia, Latvia,

Lithuania and Slovenia at or near 5.0% as oil related, for they

are oil importers, not oil exporters. Rather, we have to

believe that something very real is taking place in these

formerly Communist countries, who are now quite willing to

adopt freer market policies than those of the West.

Like reformed smokers who are most willing to shun their

habits of the past and who are most willing to see the error of

their past ways, the former Communist nations see the

silliness of collectivist thinking and are willing to embrace the

wisdom of capitalism. Two cheers then for the former East;

two louder cheers for the young people of Western Europe

who are moving to the East to embrace the future. Horace

Greely was almost right: Go East, Young Man... Go east.