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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Intellectual's Capital

*** Big Bottom Spotted At the End of the Tech Tunnel - 
Nasdaq up 116 points...

*** Could the correction have been so 
painless...? Could nearly $9 trillion in new debt and 
credit have done so little lasting damage? Maybe not...

*** Whispers...rumors...malicious lies...and more!

* * * * * * * * * Advertisement * * * * * * * * * * * * * * 

"I started with only $10,000, and it has gone on to make as 
much as $5 million in a single year. This gave me a taste 
for the wealth that venture capital investing could 

- Jim Davidson, Strategic Opportunities

That same $10,000 invested at 9% would only be worth 
$114,000. But because the company started with that "seed 
money" has prospered - it's now worth many millions. Last 
year's profit alone was more than 50 times $114,000. You 
simply can't make that kind of money by pinching pennies. 

And that's what Strategic Opportunities is all about; 
catapulting your wealth with strategically placed 
investments in high growth companies - at the venture 
capital level. For more on...

Your Next Strategic Opportunity - click here now: 
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*** Well, it's almost just like old times on Wall Street. 
Companies report that their sales are falling and profits 
are squeezed - and investors hardly care.

*** So it was yesterday when Yahoo! gave investors little 
to cheer about...and Hewlett-Packard also admitted that 
things were not going as well as expected. The two 
companies were taken down... Yahoo! got whacked for a 15% 
loss. Otherwise the good times continued to roll. 

*** The Nasdaq gained 116 points. It is up 7% for the year. 
The Dow ended the day up 5, fighting the suction of Old 
Economy moneymakers such as Philip Morris, which was down 

*** The Industry Standard believes it has spotted the 
"Light at the end of the tech tunnel," as investors appear 
to be rotating funds from the Old Economy back to the new 
one. "We are trying to find a bottom," said one analyst 
quoted by Reuters. Cisco rose almost $3 to close above $39. 
TheStreet's Internet index bubbled up nearly 5%. And many, 
many other Big Tech...and Internet companies registered 
strong gains. 

*** Sentiment seems to have turned more bullish - at least 
for now. Investor's Intelligence reports that the 
percentage of bulls is at its highest level since early 
November. Ed Hyman at ISI Group also reports rising 

*** Still, perhaps in the middle of the night, investors 
must wonder: Could it have been as easy as that, to correct 
a bull market nearly two decades that took the 
Dow from under 1,000 to more than 11,000? The boom created 
a whole new class of 'dude billionaires' and changed the 
financial habits of an entire generation of Americans... 
adding nearly $9 trillion to the nations debt and credit 
within the last 5 years alone; could its excesses be so 
painlessly forgotten? Maybe not, dear reader, maybe not.

*** "One might have expected folks to learn something from 
the damage that's already been done," says Bill 
Fleckenstein, but "these really aren't markets - it's just 
a casino." Still, "...for those folks who are overextended, 
you are getting a once-in-a-lifetime opportunity, for 
however long this rally lasts, to get your financial house 
in order. Regardless of whatever prestidigitation happens 
in the short run, we are headed for an economic and 
financial market calamity of epic proportions. All we have 
succeeded in doing thus far is delaying the day of 
reckoning, thereby ensuring that it will be worse than it 
had been." (see: Makes You Miss The Old Days...

*** This is whisper season...when analysts and brokers 
speculate about what earnings companies will report. But 
the whisperers have recently changed their tune. Forbes 
reports that "whisper estimates flowered in the bull 
market. Usually higher than the official Wall Street 
consensus, they justified pushing stock prices ever higher. 
Now that's begun to work in reverse, moving into uncharted 
territory." Psst... It is rumored that eBay won't report 7 
cents a share of earnings on Monday, as forecast, but only 
5 cents. And on Tuesday, Intel, it is whispered, will not 
announce earnings of 38 cents a share, but only 36 cents.

*** Another rumor has it that "work/life employee retention 
provider" laid off 50% of its workforce 
Wednesday - about 35 employees. 

*** And here's something interesting: Forbes also reports 
that the Internet company with a name one dare not speak in 
polite society, F*, has decided to auction 
itself off - on ebay. Bids have reached as high as $9.3 
million - proving either that Internet investors are half 
wits, or they still have a sense of humor.

*** But while a new tech boomlet seems to be underway in 
the U.S., Japan's boom of the late '80s is still deflating. 
Prices of real estate in Japan's 4 major cities fell last 
year - for the 10th year in a row.

*** Yesterday, the yen slipped to a new 18-month low 
against the dollar. And the Nikkei stock index is barely 
above its post-bubble low of October '98. At 13,000, 
Japanese stocks have lost 67% of their value over the past 
decade. But that's the dumb Japanese for you. They must not 
have had any 'intellectual capital'. That sort of thing 
could never happen here, could it? Nah, no way. 

*** Trend-setter Titan Motorcycle, maker of custom-made 
machines, went 'chapter' yesterday...seeking the protection 
from its creditors offered by the 11th chapter of the U.S. 
bankruptcy code. Shares traded at 3.5 cents on Wednesday. 

*** Gold dropped 80 cents. The mining index fell 2%. But 
the pure gold mining index, HUI, rose 2%. 

*** Oil rose $1.84 a barrel as OPEC continues to promise 
output cuts.

*** "America has seriously depleted both its capital stock 
and its manufacturing capacity," writes Dan Denning, 
recently assuming the helm of Strategic Investment, "We no 
longer make the things that create wealth, produce new jobs 
and income, and lead to greater productivity. In short, 
America no longer manufactures the way it used to. 
Hard industries like textiles and electronics have been 
replaced by software and services. And the net effect has 
been bad for the economy." (see: In Praise of Hard Assets

*** And here's a remarkable quote from a remarkable source:

"Human nature never changes, and that fact is reflected in 
the mirror of all economic activity, the stock market. 
All lasting change is incremented, based on unfolding 
traditions and developing institutions. Revolutionary 
upheavals may change how the world looks but seldom changes 
the way the world works. Lasting historical change comes 
not through tidal waves but through the irresistible 
creeping tide."

- Richard Nixon

*** My son Will goes back to college today. I'll miss him - 
especially since the container of furniture we shipped from 
the U.S. finally arrived. I was counting on Will to help me 
move it. A strong back, as they say, is a terrible thing to 

*** Ending this portion of The Daily Reckoning on a high 
note... last year, almost to the day, I noted that was "in trouble" and suggested you avoid it like 
you would a Baltimore emergency room late on a Friday 
night. On January 13th, 2000 it was selling for $11.56... 
today you can back up the hearse and buy as much dr.koop as 
you want for just 44 cents a share.

* * * * * * * * * * Advertisement * * * * * * * * * * * * * 

"It Feels Good To Be Right!" 
- Craig Smith, CEO Swiss America

A quiet bull market in U.S gold coins launched in March of 
'99, and my clients were the first to get in on it. Imagine 
the delight - watching your portfolio of U.S. Gold 
Commemorative coins appreciate as much as 90% in 90 weeks! 
But, this is only the beginning! In 2001, I expect this 
market niche to skyrocket (regardless of what gold bullion 
does). Why? 

Read my confidential U.S. Gold Commemorative Research 
Report to find out. Click here ... or call 1-800-BUY-COIN 


* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


Information and knowledge are greatly over-rated. 

I once knew a man who, for some un-diagnosed reason, was 
able to remember every hour of every day of his life. 

"Do you remember when we went to Georgetown..." I asked him 
in the summer of 1969.

"Oh yes," he replied after a moment of reflection, "it was 
on July 13, a Thursday...we left at 9:28PM"

His memory was comprehensive; his knowledge encyclopedic. 
And yet, as near as I could tell, this idiot savant talent 
had no known market value - either to him or others. All 
his life, he remained a man of great potential...a man of 
the future.

That was the state of things in the early '70s when a group 
of free-market conservatives in the Maryland suburbs of 
Washington needed a candidate to run for Congress - on 
short notice. The man short-listed for the job had been 
caught in some peccadillo the only resolution of which 
seemed to be early retirement - leaving the field open to 
anyone who could not find honest work elsewhere.

Desperate for a last-minute candidate, the local hacks 
noticed that my acquaintance, John, was without gainful 
employment. They asked him to run.

I have devoted several of these letters to the concept of 
intellectual capital, for which I offer no apology. 
Instead, I will give you a promise: this will be my last.

The idea of intellectual capital - when applied to justify 
outrageous stock prices - is a bezzle, dear reader, a 
swindle, not unlike the many other 'new metrics' which were 
used to pick investors' pockets. 

Not that cleverness, knowledge and wisdom cannot be used to 
make money. A man with a good head on his shoulders, 
especially one that is packed with useful information and 
experience, can get up to all sorts of mischief - including 
many things that are profitable.

But he also might do nothing at all. Or worse, write 
pretentious drivel such as:

"Information, after all, represents the treasure of the 
modern age, as valuable as all the doubloons and bangles of 
the previous eras."

Steven Levy, Crypto

Information can come in handy. But its usefulness depends 
entirely upon the context. You might have gotten an 
audience with Julius Caesar just after he crossed the 
Rubicon in 49 BC and revealed to him the secret of making 
an atomic bomb. Yet, he would much rather that you could 
tell him the disposition of the troops facing him. 

In the abstract, knowledge of the atomic bomb formula must 
have far more intellectual capital behind it. But, out of 
context, it is useless.

Worse, information and knowledge are like tourists on a 
crowded sidewalk. They get in your way - distracting you 
with their inappropriate get-ups and retarding your 
progress with their sluggish pace. They are only valuable 
to merchants who entice them into a buying some gee-gaws at 
absurd prices.

And yet, it is widely accepted that information is roughly 
the same as gold bars ...and that knowledge is not much 
different from real capital. 

"In the past," wrote economist Lester Thurow, a man who can 
be counted on to come to the wrong conclusion on just about 
every issue, "when capitalists talked about their wealth 
they were talking about ownership of plant and equipment 
and natural resources. In the future when capitalists talk 
about their wealth, they will be talking about their 
control of knowledge."

At least when you put a stack of gold coins on a table, you 
can fairly easily judge its authenticity and value. But 
knowledge? It might just as easily be a pile of slugs as 
kruggerands. Knowledge, unlike metal, is difficult to 

You can dig into a plate of choucroute jambon or roti de 
porc at any almost any restaurant in Paris. You can judge 
the knowledge capital of the chef for yourself. Or, you can 
hire a painter, or plumber, buy a book or a software 
program - in every case, the intellectual capital behind 
the scenes is evident in the thing itself. 

But 'intellectual capital', in the abstract, like 
'knowledge', is simply a cloak for rascality. Most of it is 
as empty and worthless as a's coffer.

But back to my story...

At first, it looked as though he might have a chance. John 
carried himself well. He seemed to be able to offer the 
proper expressions of concern at the appropriate moments. 
And his formidable archives of personal experience and book 
learning seemed to provide an infinite library of anecdote 
and information upon which he could draw. 

"What about rising oil prices," the press asked him.

"Oh yes," he replied, "as the Wall Street Journal said on 
page 23 of the June 13 edition, down at the bottom of the 
page..." and then would he would quote the section as 
though he were reading it.

But gradually, it became apparent that this walking 
database had an impediment that even a vast archive of 
quotidian recollections and abstract knowledge could not 
overcome - one that made him entirely unsuitable to a life 
in politics: His internal word processor had no 'edit' 
function. He answered questions honestly and directly.

A free-market man, before it became fashionable, he was at 
the height of popularity when asked, on television, if his 
views were not a little 'extreme'. 

"Yes, they are," he replied, making a gesture with his 
right hand for emphasis, and then awakening to the obvious 
conclusion, "I am an extremist!" he announced.

From there on, the campaign was doomed. Even prodigious 
acts of gratuitous knowledge could not save his candidacy. 
In the end, John got few votes...and returned to a life of 
intellectual eccentricity.

Your correspondent...careful not to let too much knowledge 
get in his way...

Bill Bonner

PS. "For a while, at least, anyone holding stock in 
Yahoo!..." writes Christopher Byron, "might have thought 
his or her money to be safe. After all, Yahoo! was and is 
one of the largest and best-known Internet companies, and 
it was - and is - one of the most profitable, with $61 
million of net income in 1999 and $169 million in earnings 
for the first three quarters of this year." Analysts 
expected Yahoo! to earn $268 million for the full year.

If any company had intellectual capital that did not show 
up on its balance sheet - it was Yahoo! The stock traded at 
$250 a year ago. And it has $1.7 billion in cash even 

But yesterday was not a good one for the world's leading 
Internet pure play. The company announced that growth has 
declined from a spectacular 88% last year to an expected 
rate of 18% now. Investors, for a moment, seemed to forget 
about the intellectual capital, the knowledge, and all the 
information in Yahoo!'s data banks. The stock fell as much 
as 21% following the announcement...and now trades at a 
price nearly 90% lower than last January. 

Even at $25, few value investors would see much value in 
Yahoo!. Multiplying the share price by the number of shares 
outstanding gives us a market price for the whole company 
of $14.4 billion - or 66 times earnings. Why would you pay 
66 times earnings for a company growing at 18 percent per 

Well, maybe it has a lot of intellectual capital.

About The Daily Reckoning:

Daily Reckoning author Bill Bonner

Bill Bonner is, in spite of himself, a natural born contrarian. Early each morning, Bill writes The Daily Reckoning—his take on the financial markets and what’s going on in the world—and sends it off by e-mail before most Americans’ alarm clocks have buzzed. Many readers say it's the first thing they want to read when they get up—not only because it's informative and thought provoking, but also it's inspiring, in its own quirky and provocative way.

Of course, there's much more to Bill than his daily market commentary. He's also the founder and president of Agora Publishing, one of the world's most successful consumer newsletter publishing companies. Bill's passion for international travel and big ideas are reflected in the company he's successfully built. In 1979, he began publishing International Living and Hulbert's Financial Digest . Since then, the company has grown to include dozens of newsletters focusing on health, travel, and finance. Bill has vigorously expanded from Agora's home base in Baltimore, Maryland since the early ’90s—opening offices in Florida, London, Paris, Ireland, and Germany.

Agora's publication subsidiaries include Pickering & Chatto, a prestigious academic press in London and Les Belles Lettres in Paris, best known as a publisher of classical literature in bilingual editions.


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Last modified: April 01, 2001

Published By Tulips and Bears LLC