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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Dumb and Dumber

*** Confusion, contradiction, and outright nonsense - 
what's new? Jobs, recession....stocks... 

*** Refinancing applications are rolling in...and people 
are 'cashing out'...

*** Those poor dotcommers...with only $7.9 billion to spend 
in the last quarter...bad money after good...Fed to the 

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*** Last March, Cisco was selling for $81. It fell to an 
intra-day low below $32 on January 3rd. Then, the Greenspan 
Put came into play and the market rebounded. Here we are, 
already into February, and the stock is back up to 
$33.50... still, it's down almost 60% from its high.

*** Cisco fell 3% yesterday. Yahoo rose 6%.

*** The financial news is a knot of contradictions and 
paradoxes. The Dow rose 101 points. But the Nasdaq fell 17.

*** Consumer confidence is at a 4-year low...but the 
Cleveland Plain Dealer reports that mortgage activity rose 
between 100% and 150% from December to January. 

*** "The applications have been rolling in like crazy," 
said a spokesman for Third Federal Savings in Cleveland. 
Half of the applications are for refinancings and a third 
of those are "cashing out" - drawing down equity in their 

*** The "R" word is all over the world's financial press. 
Gene Epstein of Barrons' did a computer count of the word 
in the Wall Street Journal database. Turns out, more people 
are talking about recession now than before any recession 
in recent times. 

*** Does that mean we won't have a recession? Has it 
already been fully discounted by the markets? Is it already 
over? Hmmm... Isn't Mr. Market always full of surprises?

*** A humble guess: When the news media speak of 
'recession' they refer to a mild down turn which is 
expected in the first two quarters of this year. Almost 
every economist, analyst and investor expects this 'trough' 
to be short, shallow and relatively sweet. Some think the 
worst is already behind us. And almost all look across it 
to the good times on the other side. The big surprise is 
likely to be a deeper, longer, and less pleasant downturn 
than they can now imagine. 

*** "Where's the R?" asks John Crudele in the New York 
Post. Crudele notes that the U.S. economy created 268,000 
new jobs in January...a rate higher than that of the 
Clinton years. How can you add jobs at that pace in a 
recession? But the unemployment numbers are rising too. 
What gives?

*** In a narrow sense, the labor numbers are hard to figure 
and may not mean much...considering all the adjustments to 
which they may be subjected. In a larger sense, there are 
so many financial 'facts' available to us that the net 
effect is that we know absolutely nothing - more below.

*** And how about this: Internet companies sacked 43,000 
workers last year. "Dotcommers bear the brunt" weeps a 
headline from the Financial Times. Yet, another paper, the 
S.F. Gate, tells us that "Cash Cascades into Internet 
Firms' Coffers." Venture Capital investors dropped $7.9 
billion on the dotcommers in the last quarter. In the year 
as a whole, $47.8 billion was invested in Internets - 
nearly half the entire VC total.

*** Bad money after good was also the theme of a note from 
Dan Ferris: "I overheard a young man telling his wife," he 
writes, "that it's OK that their portfolio lost 40% last 
year because this is a great time to buy. Sure, they lost a 
lot of money, but they got through it. They're OK, and they 
have plenty of money left to buy more shares." 

*** Two headlines from the Financial Times capture the 
mixed up sentiments of the day: "Fed to the Rescue," says 
one. "Has the Fed stifled U.S. growth?" asks another.

*** GE rose 3% fell $2.

*** You may remember the collectivist delusion of Japanese 
investors at the peak of the mania: "If we all cross 
against the red light together," one commented, "we will 
all be okay."

*** Maybe Dallas Fed President Robert McTeer had a similar 
thought in mind last week, when he made this suggestion to 
the world's most indebted consumers: "If we all join hands 
together and buy a new SUV, everything will be OK." He 
ended his speech by urging his audience to "Go out and buy 
something" in order to keep the boom alive.

*** Economists Paul Kasriel and Asha Bangalore report that 
"Household non-mortgage interest payments as a percentage 
of disposable personal income are at the highest level 
since this series began in January 1959." But don't worry 
about that: mortgage, mortgage, mortgage...spend, spend, 

*** Americans are already living so far beyond their means 
that they rarely even see each other. 'Their means' tend to 
live in a more modest house in a rougher neighborhood. The 
private sector financial deficit now equals 6% of GDP...or 
about $2 billion per day. And the current account deficit, 
illustrated by a negative balance of trade of more than $1 
billion per day, has risen to more than 4% of GDP. Somehow, 
sometime...these out-of-whack figures will be corrected. If 
there is symmetry in the world, dear reader, these tides 
will ebb as well as flow.

*** "Tourism is now the number-one industry in Nicaragua," 
says Kathie Peddicord, "replacing fishing. Of course, the 
fishing is still good...but the cruise ships are depositing 
as many as 3,000 people per week at the dock in San Juan."

"In Managua, for example," Kathie continues "signs of the 
current economic growth are everywhere. The brand-new 
InterContinental hotel is first-class. Also new on the 
horizon in the past two years are a Princess Hotel and a 
Holiday Inn. There's a Subway (sandwich shop)...a TGI 
Friday's...a Radio Shack...and plans for a Hard Rock Cafe."

*** "Investing in Nicaragua is truly pioneering," writes 
Steve Sjuggerud, who recently opened what he calls a "high-
end" resort for surfers at our place on Rancho Santana. 
"There are unforeseen risks, and questions that can't be 
answered. But that's what allows you to be able to buy a 
few hundred acres on the beach - for less than a million 
dollars, which you can still do here." (see: A Little Piece 
Of Paradise 

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"What we call progress is the exchange of one nuisance for 
another nuisance."
Havelock Ellis

"Information," said my friend Jim Davidson, "should be seen 
as the recipe for progress. That is why the Information Age 
is truly revolutionary. Reducing the price of information 
to zero makes more and better recipes available. The effect 
will be to allow a major increase in economic growth 
rates...much like the increase that took place in the 
industrial revolution.

"Look, there's no law that says GDP growth and productivity 
have to grow at 3% per year. For most of mankind's history, 
they didn't grow at all - or grew at rates that were 
negligible. But the industrial revolution made possible a 
big improvement in economic growth rates. It really was 

"And now the information revolution does the same thing. 
For the first time in human history, the recipes are 
accessible to almost everyone...and can be improved by the 
world's brightest people, no matter where they are. 
Productivity and economic growth rates are going to ratchet 
up...this time, too, it really is different."

I spoke with Jim when I was back in Baltimore. We had 
dinner with a few friends in our corporate dining room - an 
elegant relic of a more prosperous city, once owned by an 
American ambassador and used to host presidents Taft and 
Wilson when they visited.

There were none of the fair sex present, so we were able to 
talk freely about the subjects that most interest American 
men in various stages of mid-life decomposition. We began 
by noting how hollow and pointless it was to try to make a 
lot of money... and spent the balance of the evening trying 
to figure out how to make more of it.

Jim, as you can see for yourself from the paraphrased and 
condensed comments above, is a believer in the enriching 
power of information. I pass along his comments, as you may 
have guessed, merely to take issue with them.

"The more information people have, the dumber they get," 
quipped my friend Michel about a year ago. At that time, we 
were even more ignorant than we are today of what the 
Information Age might mean. Michel's comment might have 
been taken as either an observation, or a prediction. 

Metaphorically, the quantity of available information - 
recipes or not - grows up like a dense underbrush, through 
which in has become difficult to see much of anything, 
including the forest. 

And theoretically, the Information revolution makes 
possible a further division of labor, which stretches out 
the division of knowledge. A person is able to earn a 
living, drawing on a remarkably narrow, if deep, body of 
knowledge. Thus, a computer programmer may know nothing 
about fluid mechanics, botany, horse-shoeing, haberdashery, 
electrolysis, Italian opera, the credit cycle, or chopping 
wood. Yet, he eats well, drives the latest product of the 
automobile industry and wears clothes designed by gay 

As the division of labor expands, more and more people know 
less and less about more and more. Or, put differently, 
they know more and more about less and less - as each 
narrowly-based activity requires more and more knowledge to 

Have you noticed that people seem dumber today than they 
did a few years ago? If you were searching for an 
explanation, perhaps this will do: "They have reached a 
limit of what they can store in their brains," opines Dr. 
David Cantor, director of the Psychological Services 
Institute in Atlanta. "These people forget things because 
they were too distracted to absorb them in the first 

People have neither the time nor the ability to hack 
through the ragged jungle of facts in which they are 
trapped, in other words. Instead, they burrow down, in some 
little niche of the New Economy, ignorant of the world 
around them...and hope to strike gold. 

A year ago, this was just tall guessing. Now there is 

"Young people today are becoming stupid," says Dr. 
Toshiyuki Sawaguchi, professor of neurobiology at 
Hokkaido's school of medicine. "They're losing the ability 
to remember new things, to pull out old data or to 
distinguish between important and unimportant information. 
It's a type of brain dysfunction."

"Growing numbers of people in their twenties and thirties," 
reports an article in the Sunday TIMES of London, "are 
suffering from severe memory loss because of increasing 
reliance on computer technology, 
electronic organizers and automatic car navigation systems. 
They claim these gadgets lead to diminished use of the 
brain to work out problems and inflation 'information 
overload' that makes it difficult to distinguish between 
important and unimportant facts."

The evidence is both clinical and anecdotal. "One high-
flying 28-year-old salesman..."reports the Sunday TIMES, 
"was forced to give up his job when he found himself 
forgetting where he was going, who he was supposed to be 
seeing, or when he finally got there, what he was selling."

"Errors may occur in the brain's software that have nothing 
to do with age, but are related to someone's lifestyle," 
said Dr. Takashi Tsukiyama, who runs a private clinic in 
Tokyo, "such as not using your brain enough."

Your correspondent...trapped by the facts like everyone 
else...trying to hack his way out...Oh for some napalm!

Bill Bonner
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