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*** "Rate cut...rate cut...rate cut..." Investors chanted
as they bought aggressively yesterday, driving the Dow up
200 points.
*** Advancing shares beat out declining ones by a more than
2 to 1 margin.
*** The Nasdaq rose too - up 47 points.
*** Former Fed governor Wayne Angell appeared late in the
day with a guess that there was an 80% chance of another
surprise rate cut from the Fed.
*** GE gained 4%. MSFT shot up 6%. Cisco and Intel went the
other direction.
*** The rate cut rumor helped observers make sense of what
was happening on Wall Street...but it was not necessarily
the cause.
*** "Markets are living things," says Richard Russell on
occasion, "they have to breathe in and out." Russell adds
that anytime the breadth in the Dow or S&P goes down in 12
or more of 15 sessions, it is time for rally.
*** "The market isn't likely to keep going straight down,"
adds John Crudele in the NY POST. "Markets never do."
*** The St. Louis Fed reports that Greenspan & Co. are
doing their bit to make sure it doesn't go straight down.
They are inflating the currency. MZM (money of zero
maturity, or what economists call 'cash') has been growing
since Dec. 11th at a 21.3% annualized rate. Over the last 6
months, the growth of cash has been running at about 4
times the growth of the economy itself.
*** Where is the cash going? Well, as much as $140 billion
net went into mutual funds in January. Even so, stocks
refused to rise.
*** How can you have huge inflows of cash into a market
without prices going up, asks Crudele. Someone else must be
selling. Crudele guesses that large investors are selling
their stocks to the mutual funds, which are owned by small
investors. "The smart money wants no part of this market,"
he concludes.
*** "Students Swept up in Stock Market Mania" reports a SF
Chronicle headline, illustrating Crudele's point. "Everyone
just sees the money like floating around and wants to get a
piece of the pie," says one metaphor-mixing member of the
class of 2002.
*** Gretchen Morgenson reports that a Watson Wyatt study of
the use of stock options found that companies making heavy
use of options were likely to perform less well than those
who made less use of options. Options "motivated executives
to pursue riskier business strategies, like adding debt and
making high-priced stock buybacks," writes Morgenson in the
NY Times. Among the tech stocks in the study, an average of
23% of the shares outstanding had been used in stock option
grants. (see: Stock
Options: Hypothetical Costs Are
Becoming Real)
*** The big winners yesterday were, would you believe it,
the gold miners - which rose about 8%. The price of gold
itself rose $4.70 on April contracts, to $266.50. People
are beginning to make money in Newmont, Homestake and a few
other companies.
*** "The gold mining stocks should rally sharply before the
equity markets bottom," says Kevin Klombies. A chartist,
Klombies notes: "Franco Nevada broke up through the top of
the trading 'flag' on Friday to $18, another serious
resistance point... with a successful break at this level,
the stock should go to $25."
*** Dan Ferris reports that lease rates for gold have
jumped from 0.7% to more than 2.4%. "The market is full of
rumors," he says. Are some major players in the gold market
'overhedged' and calling in their gold loans? More on gold,
the dollar, racism ...and life in the 3rd millennium...
below.
*** A reader, who works for Mitsubishi, comments on his
bosses and why they've been unable to get out of their
funk: "Typically they (the Japanese) are unimaginative,
paranoid, and inflexible. Once they have a plan, the plan
is more important than the results until the results hit
them like a Tsunami. The bad economy in their country
serves to make them even more paranoid. As such, it could
be an interesting analysis to see what will happen to Japan
and the resulting global economy if they are unable to
shift gears. It certainly does look ugly."
*** I also got an interesting note from Rick Ackerman
explaining how America's trade deficit contributes to the
illusion of a healthy economy: "The importer enjoys a
greater gross margin on the imported product than the
exporter may realize in export. Thus the $2 comb set
leaving the Chinese factory is a $3 part of a shipment
arriving at San Diego. By the time your daughter buys it
for $10, your economy registers in GDP, +$10 in final
sales, -$3 in imports for a +$7 in GDP. The GDP improvement
to import ratio is greater than two, in this case 2.3. The
numbers for other products vary greatly, but the pattern is
similar. The $1.2-1.3 trillion of imports this year are
probably directly responsible for some $2 to 2.5 trillion
of GDP. Perhaps more." The more we buy...the richer we get.
*** "You won't believe you can get property this nice...
this cheap... so close to the US," says Jennifer Stevens,
who recently spent some time searching for real estate
bargains in the Bahamas. "...talcum-powder-fine and
deserted, the beaches on Long, Cat, and San Salvador are
some of the most spectacular in the islands - and still
affordable. You can own a quarter acre of beachfront for
less than US$46,000 or a hillside lot with an ocean view
for as little as US$15,000. And until June 2002, special
building incentives allow you to import all your
construction goods duty-free - which can save you 35% on
building costs." (see: Tranquil
Powder-Fine Beaches... and
Surprising Property Values)
*** By the way, The Sovereign Society's 16th Annual Premier
Offshore Advantage Seminar, will be held May 16-20, 2001 at
the Sheraton Grand Resort, Paradise Island, Bahamas. I'm
told the conference will feature international bankers,
attorneys and tax experts who can provide you with personal
consultation if you're interested in banking offshore. (For
more information e-mail: sovereignsociety@compuserve.com.
See also: http://www.sovereignsociety.com/bahamas.html)
*** And if you're interested in the property in the
Bahamas, Kathie Peddicord, editor of International Living,
will be speaking at the Sovereign Society seminar, then
leading an expedition afterwards to Long, Cat, and San
Salvador Islands.
It cost very little to discover precisely how you can
choose and implement a safe, legal, and effective asset
protection trust, specially tailored to your needs, in an
advantageous offshore locale. You'll learn how to protect
your assets from economic turmoil by diversifying among a
variety of foreign investments and currencies.
"Remember, there are only two important rules in
Christianity. Love God...and Love thy Neighbor. Sometimes
it seems hard to love your neighbor. It is hard to follow
God's rules."
- Pere Marchand,
From Sunday's service
Indonesia is like an ad for Bennetton. There are 10,000
islands... 1,000 different languages and dialects... many
different races, colors and religions.
If one wanted to celebrate diversity, Indonesia would be a
good place hang the streamers and throw the confetti. But
instead of appreciating their neighbors, the Dayaks
decapitate them.
Thus, even in the 3rd millennium after the birth of
Christ...there are still savages upon whom the veneer of
civilization has never been applied. These noble savages
are still as rough-hewn as fence posts.
Why do people do evil things?
"What stays the same in the financial markets," I quote
myself from Friday's letter, "is the cycles of greed and
fear, boom and bust, expansion and contraction...love and
hate...which accompany all human activity."
Sometimes, in markets as in the rest of human life, things
get out of hand. Principles - such as the Golden Rule...or,
dare I say, the gold standard - are ignored. Instead,
people rely on "group feel" to guide them.
We are supposed to love our neighbors - but who could love
the Dayaks? (Perhaps there is some other benighted tribe on
Borneo who still love them despite their murderous faults.
They invite them for dinner...and have them, with
vegetables.)
I began to write about this yesterday - after having seen
the film, American History X, on Saturday night. But the
subject is so touchy - it needs to be approached as if it
were a live hand grenade or a rich, nearly-dead aunt. Watch
out...it is easy to make a mistake.
The subject of the film was racism. Hate. Murder. Familiar
themes of American history.
To the question, "why do people do evil things?" it might
be answered, "because there is nothing to stop them."
To which, it might be rejoined: "Why doesn't the government
stop them, isn't that what it is supposed to do?"
Unfortunately, in the century just passed, government was
the main perpetrator of evil. In fact, when it comes to the
prize for killing people, the illiterate savages of Borneo
are not even in the running. Instead, the literate savages
of Europe and Asia are way ahead. It was they who built the
concentration camps...and the gulag...and who masterminded
the purges, the famines, the leaps forward and the de-
urbanization campaigns.
But if government cannot be counted upon to prevent evil,
what can? Alas, there are still questions for which the Age
of Information has no ready answers.
When slaves were first imported to America, they were
regarded as indentured servants. For a while at least,
Christian principles stood in the way of race slavery. Once
a slave became a Christian, he could no longer be held in
bondage. Many blacks in the 17th century gained their
freedom in this way - and some went on to become landowners
and slaveholders themselves. In fact, it was one of these
black slaveholders who challenged the law in the Virginia
Commonwealth that required christianized slaves - and their
children - to be released. He won. The principles had been
pushed aside. Virginia fell into the abyss...
Later, in Pennsylvania, even the Quakers began owning
slaves. This appalled the Quaker leadership, however, who
pointed out that you could not hold people in perpetual
servitude and still do unto them as you would have them do
unto you. Slavery was abolished in Pennsylvania partly on
this matter of principle...and partly because Pennsylvania
and all Northern states generally are less well suited to
the type of farming - such as growing tobacco and cotton -
where slave labor is most useful. Maryland Quakers, for
example, found slave labor so useful for their tobacco
plantations that they decided to become Episcopalians.
Then, as now, Episcopalianism was ready to adapt itself to
the convenience of the time.
American History X was a minor success in America and a
bigger one in France. In Europe, it broke a kind of taboo,
explained my friend Michel, because it allowed someone to
argue the neo-nazi cause...and showed the kind of images
that nurture racist feelings: such as a scene where a gang
of black kids beats up a white boy in a school bathroom.
"The ending was ambiguous," Michel continued. A person who
didn't like blacks might have come out of the theatre
liking them even less than when he went in. Of course, he'd
probably not care for the neo-nazis either, and certainly
wouldn't want to shower with them.
Your reporter...back on his beat tomorrow...
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
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