*** Thank God it was Friday...the market rebounded,
suspiciously and unconvincingly...
*** Abby Cohen is very bullish...as are most investors.
*** Asian markets up...gold down...oil down...dollar
up...Free speech...heads rolling...and the dangers of
dihydrogen monoxide.
*** The Bear respected Jehovah's commandment. For six
consecutive days he labored - dragging down stock after
stock and mauling them. But on the 7th day, he rested.
*** Abby Joseph Cohen appeared on Friday morning with the
usual rah-rah act for the New Economy. The S&P will end
the year 20% higher, she said.
*** Maybe it will, and maybe it won't. But it ended
Friday higher. The Dow rose 157 points. The Nasdaq shot
up 241 points, to close almost 8% higher than on
Thursday. Even so, both the Dow and the Nasdaq ended the
week lower. The Nasdaq finished off 1.32%. The Dow
suffered a 3.82% loss.
*** A number of cynical commentators thought they saw
something underhanded in Friday's market action. John
Crudele, writing in the NY Post, said on Thursday that
the Fed would intervene on Friday to prevent panic
selling. Bill King noted what looked to him like "impact
trading" on Friday morning - in which large players
intentionally try to run up prices by buying highly
leveraged derivatives. He reported strangely "aggressive
buying...serious buyers do not act this way," he said.
*** Meanwhile, Abby says the market is still 15% under-
valued. And the lumpeninvestoriat seems to agree with
her. "Individual investors," says the report from the New
York Times this morning, citing information from AMG
Data, "continue to pour money into mutual funds at a pace
even higher than last year's...especially those buying
aggressive growth companies." More below...
*** Asian markets seemed relieved this morning. Tokyo
rose 2%. Hong Kong was up 5%. And Ms. Wu, in South Korea,
must be feeling a bit better; stocks in Seoul rose 7%.
*** The big question, of course, is whether Friday's
rebound marks a major turnaround...or just another bear
market bounce. That is the story this week's market will
tell. But I wouldn't get too excited about a new bull
phase. Declining stocks have outpaced advancing ones in
17 of the last 21 sessions. Friday's figures showed a
little recovery in the A/D ratio...with 1625 stocks
advancing against 1254 declining...but the numbers are
hardly overwhelming. And even on Friday the number of new
highs, 21 - was dwarfed by the number of issues hitting
new lows, 161.
*** And remember, markets float on a sea of human
emotion. A great swell of optimism, confidence and
complacency,... must be followed by a trough of trouble
and despair. My guess is that we are slipping down into
the gully now - a trip that could take months, or even
years, to complete.
*** It is dark, rainy and windy in Paris this morning.
Throughout the Northern Hemisphere the weather, and
perhaps the public mood, seems to be darkening. Stock
markets are falling. Oil is rising. Central banks are
tightening. Technology is disappointing. And the weather
is turning cold.
*** Oil fell back by a little more than $1 on Friday...
closing a penny short of $35/bl.
*** Gold gave back $4 - coming to rest at $274.80.
*** And the dollar went up. The dollar index rose 115.71
points. Dec. contracts had the euro at 85.64 cents.
*** 15 IPOs were scheduled for last week. But only 5 came
out. So far this year, 180 IPOs have been postponed or
cancelled.
*** "The Utilities Average is up 42% since last
December," Dan Ferris reminds us. "{But] some Dow Utility
components are still excellent values," he continues.
"Unicom is trading at a p/e of 14 and yielding 9%. TXU is
yielding 6.4% at a p/e of less than 10 as of yesterday's
close."
*** "...the market is going a lot lower," says our own
contributing editor David Tice, quoted in the NY TIMES.
"We could see a bump, but I don't think that will last
more than two or three days. The Nasdaq 100 could fall by
another two-thirds. Cisco is still selling at 19 times
sales and 97 times earnings. We are focusing [our short
selling] on four areas in technology: PC's, the Internet,
telecom handsets and telecom infrastructure. Stocks in
those industries cannot justify their current
valuations." (see: Build It And They Will Come? Get Real.)
*** "When these stocks fall," Gretchen Motgensen points
out in her column in the NY TIMES, speaking of tech
stocks, "the throngs that bought them simply because they
were going up have no idea what they're worth."
*** What are they worth? Ed Yardeni: "The successful and
profitable [tech companies] are innovators. They sell
innovations with high profit margins. But they have to
sell them fast, before they too become commodities and
are destroyed by the next round of innovation. The risk
is that this process of creative destruction moves so
fast that even innovators can't make any money because
they can't recoup the cost of development quickly enough
to achieve a positive return on their investment. This
may already be a serious problem for the
telecommunications industry."
*** A professor at Bowling Green University is retiring
in protest after 25 years in the sociology department.
His beef?The department wouldn't let him teach a course
on political correctness. Kathleen Dixon, the director of
the women's studies department, told a local newspaper
"We forbid any course that says we restrict free speech."
*** On this day in 1793, Marie Antoinette lost her head.
Well, she didn't actually lose it; the problem wasn't
that she was forgetful. Her problem was that she was out
of style. Democratic, majority rule had come into fashion
in France. Poor Marie was guillotined.
*** DR reader JRH sends the following item:
"A freshman at Eagle Rock Junior High Won first prize at
the Greater Idaho Falls Science Fair, April 26, 2000. He
was attempting to show how conditioned we have become to
the alarmists practicing junk science and spreading fear
of everything in our environment.
"In his project, he urged people to sign a petition
demanding strict control, or total elimination of the
chemical "DIHYDROGEN MONOXIDE". And, for plenty of good
reasons, since...
1. It can cause excessive sweating and vomiting;
2. It is a major component of acid rain;
3. It can cause severe burns in its gaseous state;
4. Accidental inhalation can kill you;
5. It contributes to erosion;
6. It decreases the effectiveness of automobile brakes;
7. It has been found in tumors of terminal cancer
patients.
"The student asked 50 people if they supported a ban of
the chemical? 43 said, "YES"; 6 were undecided; and, only
one knew that the chemical was H2O.....water!
"The title of his prize-winning project was: "HOW
GULLIBLE ARE WE?" The conclusion is pretty obvious!"
- or as one fellow investor put it: "Lynn, I wanted to
thank you for [your] efforts... in the last couple of
weeks the information [you supplied] has produced a
realized total of $23,210."
- with Lynn Carpenter's F-O-X system, you'll be alerted
to early price volatility in stocks like American
Express. Her readers bought bargain call options when the
stock was at $54.38... and sold them the next day for 91%
gains...
Follow this link - get in on her next trade:
http://www.agora-inc.com/reports/AGTD/TicTacDough
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
I've been lovin' you...
A way too long...
Can't stop now.
Otis Reading
"Francois is having trouble turning the page," said
Pierre. "His retirement is not going well."
Francois Debenest retired last month. He had come to the
farm with his father in 1943. Francois was just 3 years
old at the time. Except for a brief period in the Army,
he spent his entire life working at Ouzilly, beginning at
age 14. He even met his wife on the farm, Louisette, who
worked as a maid in the chateau. And his son died there
too - in an accident with a tractor.
Francois looks young for his age. He is in very good
shape. He could probably continue to work for another 10
years. But a feud with Pierre, dating back at least 20
years, together with the French employment rules, made
retirement seem like the best option.
Still, turning the page is hard. Last week, Francois came
back, got out his scythe and began cutting down the weeds
near the chicken house. He wasn't asked to do it. Nor was
he paid for it. Or even thanked for it. The new farmhand
actually seemed to resent the intrusion.
But Francois must have needed to feel the tool in his
hand. For forty-five years, he worked the land, full time
- with scarcely an interruption. How could he suddenly
stop now?
A cold wind blew through Ouzilly on Saturday. After
months of warm, sunny weather...everything seemed to be
taken by surprise. I had barely finished painting the
windows of the woodworking shop when the trees shivered
and the rain began. Sophia and I retreated to the
interior and began ripping the old, stained fabric from
the living rooms walls. That, too, needed to be changed.
Mr. DesHais continues his gardening, in good weather or
bad.
"It's time to get the cold frames ready," he said,
reminding me of a job I promised to do.
"Your wife wants to have salad in the winter..." he
continued, spreading the blame, "and you can't grow it
out in the open. There will be frost in a few weeks. You
never know this time of year. We could have a frost
almost anytime."
Mr. DesHais hates change - except for the regular change
of seasons and weather, which he welcomes like the visit
of a kissing cousin. He is on intimate terms with nature.
He understands it. And he despises people who ignore it.
"People in the city," he said, turning away from the jars
of celery he was canning and cocking his head from side
to side with an air of superiority, "don't even know
where salad comes from. They buy it all year round as if
it were a newspaper."
"But that salad, Mr. Bonner," his eyes narrowing
confidentially and raising his index finger to make his
point, "is not good salad!"
I cannot tell the difference between Mr. DesHais's salads
and those you buy in the grocery store, but I didn't want
to contradict the gardener. I had neither the time nor
the vocabulary. So, I returned to my own work.
No one wants to turn the page. Francois won't go gently
into the good night of retirement. Mr. DesHais refuses to
advance into the last century. And investors have been
loving 17% per year stock gains for too long to give them
up now.
The NY TIMES piece mentioned above tells of an investment
club trying to decide whether to turn the page or not.
The biggest position the club held was in Lucent - on
which they had lost almost a third of their money. One
member thought it was time to sell.
"But despite their losses," reports the NY TIMES, "the
club's member quickly decided not to sell Lucent - or any
of the other stocks in their $67,000 portfolio." Instead,
they decided to buy. Among the stocks purchased was
Intel, because "it's a leader in its field."
You have heard the expression "a fool and his money are
soon parted." What puzzles me, as Doug Casey once asked,
is how these people got together with their money in the
first place. But having made good money on the Big Techs,
at least they are loyal to them.
The TIMES: "If the Nasdaq's plunge has eased last
winter's fever, it has hardly eroded the underlying
confidence in stocks that two decades of rising share
prices and a decade of strong economic growth have
instilled in America."
Investors believe in stocks, in general, and tech stocks
in particular. The Nasdaq is down 18.5% so far this year.
And many stocks have lost more than 90% of their value.
Still, most investors remember the good times.
The TIMES piece features comments that are typical of the
early stages of a bear market, from a man who bought
Yahoo in 1996. "My whole portfolio has 2,000 something
percent return over the past five years," he said. "This
was a down year rather than an up year, but I think if
you're a long-term investor, you've got to take the downs
with the ups."
"I'm a big believer in tech," he continued. "I don't have
any of those old-economy stocks..." and "I hope to keep
pumping money into the market."
Investors have seen what happens when the market falls
dramatically. The big dips of 1987 and 1998 were major
buying opportunities. They think this one is too.
"Everybody, including myself," said Charles Geisst, a
professor of finance at Manhattan College and author of
'Wall Street: A History,' views this as a short-term
blip."
I don't know what will happen in the stock market, but
the cold weather is not just a blip. There will be some
warm days before winter. But it will get much colder
before we have another summer. Francois' retirement is
not a blip either. He will find other things to do, but
his regular work at Ouzilly is over. Forever.
And so is, I would bet, the Great Bull Market of 1982-
2000.
Watching the weather, hoping for sunny skies...
Your servant,
Bill Bonner
P.S. I felt sorry for Francois, and miss having him
around. I'm going to ask him to come back a couple of
hours a day to cut up the dead trees along the driveway.
About
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Last modified: April 01, 2001
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