Contributed by Bill
Publisher of: The
Fleet Street Letter
THURSDAY, 14 JUNE 2001
Man, and Alan Greenspan, Part II
*** The rally has become confused...so have a lot of other
*** CD earnings lower than the inflation rate - savers
*** Techs, wrecks, God, Man...free land...what else could
|*** "Jeez Bill," writes my friend Francois, "wonder what's |
on your mind...talking abut true love in an investment
newsletter! This conjures up a warning from the Old Bard
(I quote from memory):
The course of true love never did run smooth ...
... momentary as sound, swift as a shadow, short as any dream,
Brief as the lightning that in the collied night,
Unfolds both heaven and earth,
And ere a man has power to say: behold!
The jaws of darkness do devour it up.
So quick bright things come to confusion!"
(Shakespeare, A Midsummer Night's Dream)
*** The quick, bright rally in the stock market has come to
confusion already. As Eric reports, below, both Dow and
Nasdaq fell yesterday.
*** And with the second half nearly two weeks away - there
is still no sign of the 'second half recovery.' The Fed's
'Beige book' of regional figures reports 'decelerating' or
'little changed' economic conditions.
*** Confusion everywhere! After hitting the worst 30-day
delinquency rate ever last year, home mortgage payments
improved in the first quarter. But the Houston Chronicle
managed to find the cloud within this silver lining: the
foreclosure rate increased!
*** "Inflation outpaces savings," says a confusing headline
from USA Today. What the paper means is that the yield on
3-mo T-bills, 3.5%, has fallen below the inflation rate of
3.7%. Savers, putting their money in CDs or money market
funds, are likely to earn less interest than the inflation
rate...and thus lose money.
*** Oh la la...if stocks provide little or no dividend
yields, (and may suffer capital losses)...and money market
funds produce negative yield...how are baby boomers to save
for their retirements?
Well, let's turn to Eric's report from Wall Street:
- It's starting to look a lot like a bear market again on
Wall Street. The Nasdaq lost 48 points on Wednesday, its
fifth losing session out of six. The Dow fell 77 points and
now sits 129 points below the magical 11,000 level.
- Even the IPO launch parties on Broad Street are starting
to reflect a bear market attitude. Gone is that delightful
irrational exuberance. 'Tis a pity; they were fun.
- Kraft Foods launched an IPO yesterday. Despite being the
NYSE's second largest IPO ever, did Kraft sponsor a gala,
over-the-top launch party? Not even close. The company hung
a few banners out on the street. It's probably just as
well. Would you want a festive Velveeta cheese on a Ritz
cracker at 8:00 AM... even if it were free?
- The life expectancy of a Russian infantryman fighting in
the Battle of Stalingrad was less than 24 hours. Likewise,
every 24 hours another "soldier" in the tech stock ranks
buckles to its knees. Tuesday, the Finnish cell-phone
company, Nokia, took a mortar round to the chest after
announcing that its earnings in the current quarter would
be "less than expected."
- Lynn Carpenter tells me she was perfectly placed for the
Nokia announcement in her publication The Contrarian
Speculator. "Today we made 271% on June Nokia puts and
138% on July Nokia puts... in 10 days," Lynn wrote
yesterday. Not bad... and just goes to show there is money
to be made when the bear strikes.
- Also yesterday, telecom companies, Avaya and Lucent found
bullets with their names on them. Former Lucent subsidiary,
Avaya, announced that its earnings would fall short of
expectations. Avaya's shares promptly tanked 11%.
- Proud papa, Lucent, had some troubles of its own. Standard &
Poor's cut its credit rating to junk status.
- Troubles abound in the technology sector. Dell Computer
co-president, Kevin Rollins, gripes, "We're not seeing any
change in the behavior of our corporate customers. We
haven't yet seen a signal that they're ready to buy."
- "Dell is now the leading PC seller to the world. If Dell
is not seeing a pickup, then no one is," wrote Fred Hickey
last week. Hickey's comments proved prescient as Ingram
Micro, the world's largest wholesale distributor of computer
products, warned after the close of trading yesterday that its
earnings would suffer from "the most severe slump in our
- "Just because the mighty Wall Street Journal thinks the
bottom may be in - doesn't make it so," writes
grantsinvetor.com's Andrew Kashdan. "In fact, having
recently chronicled the current state of the tech sector,
the history of bear market rallies and the conditions
facing the overburdened consumer, we think investors should
prepare for a different scenario. Nevertheless, a look at a
few sentiment indicators appears to confirm the resurgence
of what the Journal called 'a baby bull rather than
a roaring one'." (see: The Bulls Are Back In
- Gasoline inventories posted their eighth straight weekly
increase, according to yesterday's American Petroleum
Institute report. The stockpiles are rising because
gasoline demand is falling. Oh yeah? We'll see what happens
once Budweiser-laden Winnebagos start to pull out of
driveways across America.
*** "We are not in a tech slump, or a business-cycle slump,
but a policy slump," writes George Gilder. He does not
reveal how he knows these things. But he is sure that the
policy slump will be overcome by the power of new
technology. The tech companies, he opines, "are
reinvigorating the still incalculable riches of the
computer era with the infinite potential of electro-
magnetic communications, transforming the world economy and
every existing political and cultural arrangement as
*** It is hard not to love Gilder. His writing is so
deliciously loony. More on The Gildered Age...soon.
*** What else? How about some free land? International
Living's Mike Palmer reports: "The government in the
Dominican Republic decided they own too much land in the
western half of the country...so they're giving some of it
away to aspiring entrepreneurs. And what's better - if they
like your idea, they'll throw in a 20-year tax holiday."
(see: Free Land - And No Taxes For 20 Years)
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GOD, MAN, AND ALAN GREENSPAN, Part II
Life is full of paradoxes and ironies, dear reader. If it
were not so, simple-minded bureaucrats might be able to
plan the economy; Alan Greenspan, perhaps the best known
public servant since Pontius Pilate, might be able to do as
good a job of setting interest rates as the market.
But life is not simple. It's most important features -
love, faith, beauty, and stock prices - defy a thinking
man's efforts and resist his theories; just as a man's wife
frustrates his efforts at logical persuasion. Truth - such
as it is - must be coaxed out by poetry...or by suffering.
There is no other way.
Today's letter examines one smallish question and raises a
biggish one, in the following order. Why do Americans
profess a greater admiration for the free market then, say,
the French? Could it be that by submitting to God, they
free themselves from the yoke of other men?
A Daily Reckoning reader from Seattle sets the stage for
"In historically Catholic countries, such as France, the
'communion of saints' - the idea that we are all in it
together, spiritually (see 1 John 5:16-21 and Col 1:24) and
materially (private property ownership was delegated from
God and to be used for the common good) led to what you
describe. 'Solidarity' is a Catholic virtue which has been
adopted by the Commies."
Meanwhile, "in historically Protestant countries, such as
the US and UK," he writes, "spiritual radical individualism
was introduced by the reformation... That understanding of
property is deeply Pagan in origin, but taken as Revealed
Truth by most conservative protestants.
"By and large, Fundamentalists and Evangelicals have a deep
faith in the infallibility of the market which Catholics
"You have to have faith," I recall my friend Mark Skousen
telling his French audience in May. "Faith in the invisible
hand of God...faith that the market will work things out to
the benefit of all." It is either faith in the market's
invisible hand... or faith in the iron fist of government.
What else is there, dear reader?
A similar question was put to literary critic Harold Bloom
by that well-known journal of theology, the Harvard
"American society is characterized by its devotion both to
capitalism and to religion," observed HBR.
"As an acute observer of the human condition," the
theological journal continued its puff-ball pitch, "you are
more interested in religion that in business. Why?"
"I believe the ultimate concern of America, for better and
for worse, is religion," Bloom replied. "I believe that it
is religion in this country that refutes Marx. As I've said
so often, religion is not the opiate of the American
people; it is their poetry."
That was the trouble with the play I saw in London, of
course. The playwrite had the poetic talents of a tow
truck. The central character of the play had discovered a
letter from the 1st century, reporting that the resurrection
of Christ had been staged by the Romans. (Those wily
But what is really shocking about the story of the
resurrection of Christ is not that it might have been faked
- but that it might not. Any clown can buy a dot.com stock
or pretend to be a dead man. But rising from the dead -
defying the laws of nature herself - that is a real trick.
"The startling thing about the United States," Bloom
continues, "is not that 93% of us say that we believe in
God, which is, in fact, except for the Republic of Ireland,
the highest percentage in the world. The really shocking
thing is that 89% of us...say that God loves him or her on
a personal basis...
"All Americans are poets and mystics," Ralph Waldo Emerson
once wrote. "I presume that includes capitalists, too,"
Continuing his magical mystery tour of contemporary
Tomorrow: "A Snowball.com's Chance In Hell" and other
darned cheap stocks...
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The Daily Reckoning:|
author Bill Bonner
Bill Bonner is,
in spite of himself, a natural born contrarian. Early each morning, Bill
writes The Daily
Reckoninghis take on the financial markets and whats going
on in the worldand 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 upnot 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 90sopening offices in Florida, London, Paris, Ireland, and
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.