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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Can the Center Hold?

*** The relief column! We're saved! Or are we?

*** "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 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 

*** "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 

*** 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 

*** 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 
: 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 

*** 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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Dear Reader,

I sat down to write a letter this morning loosely based on 
the movie American History X, which I watched over the 
weekend. I have been laboring on it for several hours, but 
I find that I have reached my deadline and what I have 
written is not worth your time.

I bet your pardon...

Until tomorrow...

Bill Bonner

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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