In Today's Daily Reckoning:
*** Dow above 50 day moving average... but down 7% for
the year
*** Leading economic indicators holding steady...
*** Argentine Bond update... and Dr. Koop embroiled in
scandal...
*** Be warned... Bill is returning to France by slow
ferry today. The following has been scripted by Addison,
who's holding down the fort in Paris.
*** The Dow climbed 80 points to 10,687, coming to rest
firmly higher than its 50-day moving average of 10,599.
*** Still the index is down 7% for the year... remains
below its 200-day moving average of 10,769... and has yet
to reach Richard Russell's 50% retracement level - the
magical half-way point between January's high and
subsequent March low.
*** Russell: "One fact stands out. It's now very hard to
make money in the stock market. One reason is the sudden
costly collapse of so many stocks. I check hundreds of
stocks every day. And each day there are surprises. Today
I see (surprise) DELL suddenly below 40 - gad, the stock
was as high as 54 last month. And here's Fannie Mae below
50, why the stock was 65 last April. Here's GM at 57
today - but only four months ago, in May, GM was 93.
"These are all characteristics of grinding, toppy action.
But the amazing phenomenon is that the public, the stock-
buying public, remains so bullish on equities."
*** Par example... 1587 stocks advanced; 1269 declined on
the NYSE... 88 stocks claimed new high ground and only 38
staked out a new low. Despite difficulties with investor
profits, it wasn't a bad 'summer of love' Wednesday on
the Dow.
*** However, the picture wasn't so creamy for big techs.
The Nasdaq 100 - bastion of routers, switches and
hardware - closed 30 points lower to 3049... down over
551 points since its July 14th high of 4041. Dell Computer
and CSCO fell 2 and 2 1/4 respectively.
*** The broader Nasdaq index dropped 27 points to
3,658.46.
*** Year to date, the Nasdaq is down just over 10
percent. A quick look at this year's chart reveals,
despite "the amazing phenomenon" noted above... the
Nasdaq, pregnant with downward momentum, is poised to
challenge May's lows. Bill King: "Now, even Wall St.
brokers with big corporate chits among tech firms are
calling for a retest [of the May lows]. Investors must
now contemplate the possibility that the summer rally is
over, and after one more tepid rally attempt in August,
the fall classic - stock liquidation - will commence."
*** A non-rally on the S&P 500 held that broader market
index in check... it remained steady at 1,438.
*** Also holding steady - the Index of Leading Economic
Indicators. "If the forecast is accurate," says Reuter's
"the numbers would mean a break from rapid economic
growth for the rest of 2000." If the forecast is
accurate.
*** "C. Everett Koop sold off $915,000 of his stock a
week and a half after [auditors filed a] warning with the
SEC," reports Fleet Street Letter's Ned Harper. A lawsuit
filed by shareholders alleges officers of the corporation
cashed in on the IPO, but failed to alert owners of the
stock. " In fact, between February 15th and 18th, other
officers and directors sold shares for a profit of over
$7 million. Five other board members, including Nancy
Snyderman (the ABC News health reporter) sold off shares
- after the warning, of course - for a total haul of over
$11 million." (see: The Great Dr Koop Swindle)
*** While Internet stocks have proven themselves worthy
of little more than these kind of shenanigans - and
certainly worth a lot less to investors - the Internet
itself is here to stay. But can we agree that it has made
our lives better? More below...
*** Meanwhile, Bill King has also been following the
growing electrical power shortage, which appears to be,
in part, caused by massive demand created by Internet
users and chip makers. King: "After days of record power
demand in the West... due to scorching heat, five states
and the feds have commenced an investigation into price
gouging by electrical companies. Perhaps the electrical
companies should cite BLS data that shows electrical cost
declines..." Silicon Valley is so alarmed; they've begun
to install their own power plants. (See: Is the US Running Out of Electricity?)
*** Also, regarding an opportunity to make 183% on
Argentine bonds mentioned here last week, Steve Sjuggerud
writes from Ecuador: "I'm in Ecuador, I haven't had a
chance to answer e-mails yet. I apologize to those of you
who've tried to contact me." In the meantime, he
suggested if you're interested in buying the recommended
bond "the CUSIP number to give your broker is P0450KAB9C.
Otherwise, call Howard Goldstein at International Assets
800-432-0000 or 407-629-1400."
*** As I write beneath the mid-morning shadows of the
medieval cathedral Saint Merry which sits across the
square from our office, I'm struck by what a
spectacularly beautiful day it is in Paris today...
You could've made 91% in one day! On a mere $0.62 move in
a boring financial stock. With Lynn Carpenter's F-O-X
system, her readers got the early alert that there was
more price volatility in American Express that the market
guessed. Her readers bought bargain call options when the
stock was $54.38 ... and sold them the next day for 91%
gains.... As the stock reached $55 and options soared. Click here to get in on her next trade
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
"I reckon I'll be at the beck and call of people with
money all my life," said Oxford, Mississippi's most
famous drunk, "but thank God I won't be at the beck and
call of every son of a bitch with 2 cents to buy a
postage stamp."
William Faulkner worked for the post office in the days
when communications still were put on paper, stuffed into
envelopes and carried to your door. And the days when
postmen could still be fired for failing to deliver the
mail.
That is, in the days before e-mail. The comment above was
his remark after he was fired for failing in his duty.
But it was not necessarily rain, nor sleet, nor dark of
night that kept him from his appointed rounds.
Today, I get more than 100 electronic messages every day.
One Hundred is a key number, because if more than 100
pile up in my online mailbox, Compuserve sends them
back...undeliverable. E-mail is a lot faster and more
convenient. It is better. E-mail is so widely used that I
rarely get a real letter anymore. And when I do...it is
usually a disappointment...a form letter...or sometimes
just a written confirmation of something that I had
already received electronically.
There are those who say that the Internet will
revolutionize life on earth and anyone who fails to
invest in Internet companies is a fool. There are others,
fewer in number, lesser in social standing and poorer,
who say that it is just a lot of hoopla about nothing.
It's just a fad, like CB radio, they say. Except by a few
cranky dinner companions, I had not seen this latter view
expressed until I read "Silicon Snake Oil," by Clifford
Stoll.
Stoll is a user...but a non- believer.
I will not hedge or wiggle...but will state my own
prediction without so much as a soupcon of equivocation:
Both views will turn out to be correct.
From an investment point of view, the Internet is now a
bubble waiting to pop. My faith in this view was
confirmed yesterday in a very curious phone call. Someone
called to ask me to take out a big contract to place
advertising on his website. Would the ads work? Would
they be cost-effective? The discussion never reached this
point. Like almost every other entrepreneur in
Christendom, this fellow was preparing to take his
website public. He was getting in line for an IPO. And
what he needed was traffic...eyeballs...faces...and ad
contracts. And if I would enter an ad contract, it didn't
matter if the ads worked or not...because he'd give me
stock options. Investors would see the ad sales contract
and believe that it was a business deal rather than a
stock speculation. And we'd all make a killing. I
declined.
Investors have much better odds in Las Vegas than in
Internet shares. And they get free drinks. And a show.
Even Barbara Streisand performs. If you have lost all
your money...and are feeling suicidal...what better way
to finish off an evening?
The Internet is an innovation that has captured the fancy
of millions of people. But that doesn't mean that it will
have a direct, profound or beneficial effect. Maybe it
really is similar to the invention of the printing press.
Or maybe it is more like the invention of television.
Probably it is a little of both.
The printing press did not change people's lives quickly
nor in a predictable way. Presses were first used for
printing Bibles. The Bibles put the word of God into the
hands of clergy and laymen who came up with their own
interpretations of what it meant. It was not long before
Europe was fighting religious wars...which lasted for
three centuries.
Much later, moveable type, cheap paper and industrial
processes made it possible to sell newspapers to the
masses - at a profit. For the first time, people came to
share a common language...a common view of events and
trends...and a common narrative that defined them as a
nation. The printing press thus enabled the creation of
the nation state.
Also, it was the printing press that allowed explorers to
share the information and excitement of their discoveries
in the post-Columbus era. Other expeditions were mounted
to the New World - which might have otherwise been
ignored - resulting in the settlement of two new
continents...as well as the importation of vast
quantities of gold into Europe.
The price of gold plummeted.
The Internet definitely speeds up communications. E-mail
is always urgent. But it is not necessarily important.
And that which is done urgently is not necessarily worth
doing. Or done well.
An interesting new study shows the effects of online
investing. A pair of California-Davis economists watched
a group of 1,607 investors. They found they outperformed
the market by 2.4% per year, which is quite good, before
they went online. Then when they went online to do their
investing, they under-performed by 3.5% annually. A
little bit of reflection might be a good idea.
TV was a big improvement. It proved so popular that the
habits of the entire world have been altered. People now
watch several hours of TV, on average, per day all over
the globe.
Formerly, they spent that time in a number of ways. Who
knows what they were doing. But they now prefer to watch
television. The world has changed. But so what? You'd be
hard pressed to show how it had changed for the better.
At its debut, it was claimed that TV would revolutionize
education...and that it would raise the level of popular
culture. Analysts in `49 imagined viewers glued to their
sets as the Royal Shakespeare Company presented
"Coriolanus." They thought the TV would replace teachers,
too...and make learning fun.
Actually, in 1922 Thomas Edison predicted that movies
would make teachers obsolete. And now Al Gore predicts
that connecting kids to the information highway will
enable them to delve into the mysteries of the Library of
Congress.
Of course, in the classroom, TVs became a minor
distraction. At home they became a major one. Kids
learned about new toys...and became current with popular
gags and prejudices. But there were no literacy
improvements attributed to TV or movies. And the number
of teachers increased.
And the effect of TV and movies on popular culture may
have been best described in the movie "Barton Fink," in
which a character who is meant to represent William
Faulkner during his Hollywood years is shown kneeling on
a hankerchief in a seersucker suit, throwing up in a
toilet. He rises, cleans himself up a bit and offers
Barton a drink:
"No thanks," says Barton, "I never drink before noon."
"I do require a bit of the social lubricant from time to
time," says the Faulkner character...taking a drink.
Barton recognizes him as [Faulkner] and asks what he is
working on in Hollywood.
"I'm writing a screenplay of the wrasslin' genre,"
replies the great writer.
Bill Bonner
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Last modified: April 01, 2001
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