*** "Now it looks like a bear market"... an "unholy Trinity
of accounting deception"...
*** Layoffs in Japan...crisis in Turkey...savages in
Borneo...and more!
*** In Stalingrad, 1943, where 300,000 German soldiers were
trapped, freezing and starving, rumors of relief came
daily. The Wehrmacht was thought to be only a few miles
away...advancing towards the city against fierce Russian
resistance...soldiers often thought they heard the Panzers
in the distance...approaching...
*** But there was no relief effort. The entire Eastern
Front was on the verge of collapse. Hitler had already
written off the campaign and urged his officers to kill
themselves rather than be taken prisoner.
*** On Friday, investors thought they heard the rumble of
Panzer fire. Both the Dow and the Nasdaq were being whacked
for heavy losses, and then... Could it be? Yes, of
course...it was Field Marshal Greenspan...the Rommel of the
Federal Reserve...come to the rescue!
*** Former Fed governor Wayne Angell said he thought it
"highly likely that the Fed will lower fed funds rate by 50
basis points next week."
*** A chant went up on Wall Street, Rate Cut...Rate
Cut...Rate Cut... spirits rose and both the Dow and the
Nasdaq bounced back. The Nasdaq ended up in positive
territory - up 15 points. The Dow, though, could not
recover from early losses and ended down 86 points.
*** By week's end, the Dow was down 3.3%...and the Nasdaq
was down nearly 7%. Declining stocks beat out advancing
one...2240 to 1051.
*** The S&P 500 has fallen in 13 of the last 15 sessions.
It is due for another bear market rally.
*** Investor's Business Daily keeps track of the progress
of the average investor with its index of leading mutual
funds. That index is down nearly 10% for the year.
*** "This is gut wrenching," said Hugh Johnson of First
Albany. "At first it was denial, with us saying that this
is not a bear market. This is a correction. Now it looks
like a bear market."
*** Since 1982, reports Richard Russell, "the S&P 500 has
never closed below the low of a preceding year. The low
from 2000 was 1254.07. On Feb. 22, 2001, the S&P closed at
1245.32."
*** "Bear markets usually wipe out at least 50% of the
gains from the preceding bull market," says Russell. The
bull market began in 1982 with the S&P at 101.44. It rose
to a high of 1553.11 last year - for a total increase of
1452 points. If the bear market cuts that gain in half, it
will leave the S&P at 827 or lower before the bear market
is over."
*** The trade deficit rose 40% last year. "This can't go on
forever," writes Floyd Norris in the NYTimes, echoing a
sentiment that both of us expressed last year at this time,
"This is the year it will stop."
*** It will stop when foreigners begin to wonder what a
dollar is really worth. Alas... it is a question without a
ready answer... look out below...
*** The dollar fell and gold rose on Friday.
*** Investors and lenders wondered what a Turkish lira
might be worth last week. By the end of the week the
results of their speculations had knocked down the currency
by 30%. Turkey is about the same size economically as
Thailand. It was a run on the Thai baht that set off the
financial crisis of 1998. Then, as now, the Fed and other
central banks met the threat by destroying their own
currencies at a slightly faster pace. The trick seemed to
work - and now investors are desperately hoping for a
repeat performance. I will explain why they are likely to
be disappointed, tomorrow.
*** Mitsubishi announced it was laying off 14% of its
workforce.
*** S&P cut Japan's credit rating for the first time since
the 70s. Japan's economy contracted again in the 3rd quarter
of 2000, the latest reporting period available, by 0.6%.
Japan's GDP has slipped in one out of every three quarters
since 1990. It chose to fight the downturn with both fiscal
and monetary weapons - reducing key interest rates to zero
and undertaking a plethora of public works projects,
financed by debt - which have together helped Japan produce
the largest public debt in the world.
*** But any similarity between the Japanese economy and our
own is purely coincidental. Whatever problems the Japanese
have encountered, goes the popular line, is of their own
making. It couldn't happen here. I mean, these people eat
raw fish, for God's sake!
*** Here in France, the latest reports show the economy
grew at 3.2% last year. And that was without jimmying the
figures the way they do at the Bureau of Belabored
Statistics. This year, France will grow faster than the
U.S.
*** Lynn Carpenter: "Look at Cisco: 4.8 billion shares
outstanding in 1995, 7.2 billion today. A 50% increase.
Meanwhile, its profit margin has steadily dropped every
year; its return on equity is down by two-thirds from a
superb 30% in 1995 to a miserable 11% today. No wonder the
equity holders are getting a smaller return. The company
keeps letting employees buy shares for pennies on the
dollar and then split the pot with those who paid full
price on an even-steven basis. What a scam."
*** "Even if one adopted fairly conservative accounting
standards," says Marshall Auerback, "the failure to expense
[stock options as a cost of labor] potentially overstated
the tech sector's profitability. But [as is evident in the
earnings reports] the problem for profits did not end
there... [an] unholy trinity of accounting deception
enabled a number of companies to present a substantially
misleading picture of their true net worth." (see: Stock
Options: Hypothetical Costs Are Becoming Real)
*** "Markets are remarkably similar across time and space,"
notes Doug Casey, "You only have to go back to the junior
gold market in 1996 to recall the spate of frauds that were
perpetrated and/or uncovered at the peak (Bre-X, Cartaway,
Timbuktu, and Delgratia are just four that come quickly to
mind.) Will it happen among the New Era stocks? I'll remind
you that hi-tech lends it self to chicanery even more than
does mining, simply because the average guy doesn't have a
clue about what's involved in black boxes. Wait and see.
The bear market has just begun." (see: Well, It's Not Quite
BRE-X...)
*** As many as 1,000 people are dead in Borneo as Dayaks
went on a rampage - murdering other ethnic groups...cutting
off the heads of children with machetes... "I have eaten a
bit of a person's heart," said a Dayak named Fabian
Charles, quoted by AP, "It gave me strength and I took his
spirit." Savages.
*** We waited for snow out at Ouzilly this weekend. And
waited. But only a flake or two came down...which looked
for all the world like the blossoms on the plum tree
falling to earth. Then, the sun came out and Benoit and I
had a great time working on our stone wall.
*** On Sunday, I tried to round up the children to take
them to church. But I could not find Edward, 7, anywhere.
Finally, it was time to leave, so I left Sophia behind to
search for him while I went off with the others. All
through the service I worried. Did he fall in the pond? Did
he get kicked by one of the cows? Did he go into the woods
and get lost?
*** But returning home, there he was playing in the middle
of the road with about 5 other kids from the hamlet.
*** It turned out that the little scamp had been hiding in
the attic so that he could play with his friends rather
than go to church. As soon as we left he came downstairs
and asked Sophia: "Have they gone?"
*** Poor Elizabeth. My wife returned to Paris early in
order to get our new apartment in order. It appears to be a
beautiful place. But I can't say for sure. The electricity
was turned off when I arrived last night...
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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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