"Kevin Klombies' analysis has been spot on. It's a good
time for people to check his service out if they haven't
done so already."
Dan Denning,
Editor, Strategic Investment
Yo-yoing markets. An ever-weakening dollar. A dire
manufacturing sector... and rock bottom consumer
confidence. Add falling bonds and rising commodities to the
mix and you've got a once-in-a-generation "market top".
But what these easy-to-see chart trends reveal... no one
expects. Clear Profits from The Surprise Market of 2001.
Click below for a free look at:
*** Mr. Bear just couldn't restrain himself. After backing
off for a day, he couldn't resist going back into the
market and having some fun.
*** The Dow got mauled, ending the day below the 10,000
market - down 318 points. And the Nasdaq was scratched for
a 42-point loss.
*** The 'two most dangerous stocks' - IBM and GE - both
suffered losses. IBM fell $3.54. GE dropped $1.30 (3%).
*** There were only 766 stocks making progress on the NYSE,
against 2316 that declined.
*** Still, it could have been worse. The popular view is
that while the tech sector was overvalued - everyone says
they knew it all along...even the analysts! - the 'Old
Economy' companies were still healthy and benefiting from
new technology. In the last three days, that benign view
has been blown away. The Dow is going down too.
*** "The Nasdaq will be down 75%" when the bear market is
over, according to John McGinley of Technical Trends. "And
the Dow will be down 50%." How will you know when the
indexes finally hit bottom? "Call up five friends,"
suggests McGinley, "and ask them if they're still checking
stocks. If they say 'no' - it's over."
**** The Leuthold Group figures that the average length for
a bear market is just a little shy of 3 years. Most people
would mark the beginning of the bear market at last March -
when the Nasdaq topped out. If so, and this is an average
bear market, you can expect to wait another two years
before the big bottom makes its appearance.
*** Looking on the bright side: "We are definitely in a
bottoming process," says Byron Wein, Morgan Stanley's
investment strategist.
*** And investors, though worried and frustrated, are not
yet panicking. "I'm in it for the long haul," said Jeffrey
Hutchins, interviewed by the Detroit Free Press. Mr.
Hutchins goes on to say that he hopes his fund managers are
"buying like crazy."
*** If you are going to buy over-priced stocks in a bear
market - 'buying like crazy' is probably the only way to do
it. "I'm holding Cisco, Intel, Palm. Everybody has a Palm,"
said another clueless investor.
*** Yet, the Dow is down 7.5% this year. This week alone,
investors have lost $680 billion - or about $7,500 for
every family in the nation.
*** The 'reverse wealth effect' is bound to start pinching
consumers soon. USA TODAY reports that household's net
worth declined 2% last year - for the first time since
1945.
*** "The bursting of the stock market bubble has eroded
household balance sheets and undermined the willingness and
ability of Americans to spend as aggressively as they had
been spending," said economist Mark Zandi. Associated Press
reports that "Retails Sales fell unexpectedly in February."
*** The Fed's rate cuts will probably turn the situation
around, explains Paul Krugman, but "there is the small but
scary possibility of a Japanese-style trap, in which even
cutting rates all the way to zero turns out not to be
enough." How great are the chances of a Japanese-style
trap? More below...
*** The dollar rose yesterday. And gold fell $4.60. So far,
gold and the dollar have resisted nearly all my analysis,
recommendations, and tedious harping. Alas, dear reader,
there is no point in my telling Mr. Market what he SHOULD
do. He will do what he wants.
*** In 1999, Americans consumed about 96.1 quadrillion
British thermal units of energy. The Energy Dept. projects
U.S. energy consumption will grow about 32% by 2020. Dan
Ferris has been following what he calls 'The Internet's
Dirty Secret' since early July 2000. The company he
recommended, CONSOL Energy is up 103% in the last year.
"At 19.3% and 20.4%," says Ferris, "coal producer CONSOL
Energy's 5-year and 12-month returns on capital are the
highest in the energy business."
*** Elizabeth tells me that it is now illegal for her to
ride her horse outside of our own farm. Horses do not
usually get hoof and mouth disease. But they have both
hooves and mouths and may carry the malady.
*** Jules, Maria and I went to see the movie, Stalingrad,
last night. This is the second film I have seen about the
great battle. The first one was made by a German. This one
was made by an American company but with a French director
using mostly British actors.
*** In the German version, the poor German soldiers are
starved and shot down by the Soviet Army. In this version,
it's the poor Russian soldiers who are beaten, shot in the
back, herded onto locked cattle cars, and mowed down by
machine guns - also by the Soviet Army. And if they
survived - they still had to face the Germans! More
below...
*** Meanwhile, "Dublin is hopping," notes Addison, who
recently passed through there on his way back to Paris.
"For the first time in about 1000 years of history Ireland,
rather than exporting labor, is experiencing net
immigration. More people of non-Irish decent are moving
into the country seeking work, than Irish are leaving to
seek work elsewhere. And more than 50% of the population of
Dublin is aged 30... or younger. Never before have the
young had a reason to stay."
The landing approach has begun. The flaps are down. A
moderate slowdown has hit the U.S. economy. Investors are
still optimistic. But consumer spending is way off.
Still...it seems that everyone believes that Alan Greenspan
has engineered a soft landing for the formerly high-flying
tech bubble. But according to one of the world's leading
economists, it's worse than blind faith. It's high-octane
'new paradigm' propaganda.
Here's what you need to do - right now - to prepare
yourself for:
Fates, we will know your pleasures:
That we shall die, we know; 'tis but the time
And drawing days out, that men stand upon.
Shakespeare's Julius Caesar
I arose from my bed this morning, thinking about it. I took
a bath brushed my teeth thinking about it. It was on my
mind as I sat at the kitchen table - eating a bowl of bran
flakes with a sliced banana. It dominated my thoughts as I
put on my clothes...and walked along the street to the
subway station...and mounted the train for central Paris.
Even as I read the newspaper on the subway...and then made
my way to the office - passing cars, stores full of
appliances and furniture...billboard ads...and people on
their way to work - and still, as I sat down at my desk and
turned on my computer - I cogitated, like a computer doing
a calculation in the background, on the idea.
All of the time I was surrounded by things - nourished by
them, warmed and protected by them, transported by them,
annoyed by them...admiring their shapes and forms...and
using them as tools for various tasks. All of these things
are wealth. Materially, they are all that separates me from
the rangiest savage in the most godforsaken backwater on
Earth. He must think too...he must have his emotions...his
tastes and his beliefs. But I have more things.
It is in things that we measure wealth. Dollars, yen and
euros only have value to the extent that they can be traded
for things. And it is these things that allow us to make
more wealth. Put me at the controls of a backhoe, fill the
tank with fuel, and I will dig a bigger hole, faster, than
even ten primitives with wooden hoes!
These things do not just appear. They are designed, built,
distributed, and sold by teams of people - all of whom have
their own ideas, expertise, capital, management style,
resources and limitations.
Information is everywhere throughout the system - guiding,
misguiding, confusing, informing. Like the latest
management fads, sometimes it is useful, and sometimes it
is as useless as an analyst. But until the thing appears -
the tangible item that we can use, consume, enjoy or
despise - the information, management, skill and capital
behind it is only a potential value, not a real one.
But America's 'Cult of Information' has performed its
purpose. It has inspired and sustained an immense bubble.
Stock prices have reached levels not seen since the late
'20s. Companies with no profits and no proven business
plans have been given billion-dollar market caps.
To the question, 'how could such values be justified?',
comes the answer: 'They have information capital that
doesn't appear on the balance sheet.'
The 'information' illusion has persuaded people all over
the planet to accept U.S. dollars - as though they were
valuable. It has seduced foreigners not only to provide
goods and services in exchange for dollars - but to invest
those dollars in the U.S. economy, because it is the U.S.
economy that leads the world into the "Information Age."
Grand bubbles need grand illusions to sustain them...and,
often, grand mistakes to deflate them.
Caesar's military campaigns were waged well and
successfully - especially against the Gauls in France.
Ordered back to Rome, where he was to be stripped of his
command, Caesar instead took a bold gamble. He 'crossed the
Rubicon' with his army - which was forbidden - and
eventually won a civil war.
But just as nothing sets up a man for huge losses better
than easy profits -- nothing prepares a man for disaster
better than success. Caesar then made a monumental blunder
- one which Napoleon imitated 18 centuries later. He had
himself declared 'dictator for life.' This act cheesed off
the Senate to such an extent that a group of them - led by
Caius Cassius and Marcus Brutus, who delivered the
'unkindest cut of all' - put a dagger into Ceasar's
remarkable bubble of ambition on today's date in 44 B.C.
The last time the U.S. faced a major bear market was in the
late 60s. Then, the sustaining illusion was that American
business management and the size of the domestic market
made U.S. businesses unstoppable. American go-go marketing,
branding, quality manufacturing and financing were the envy
of the entire world. The dollar was also the currency of
choice for anyone who could get his hands on it.
But the '60s were followed by the '70s, in which the
illusion was destroyed completely - thanks to inflation, a
bear market, Richard Nixon, Jimmy Carter... and others.
In the 1980s a new illusion arose - that the Japanese
economic system was unstoppable. A popular book of time
reflected American's admiration for the Japanese: "Theory
Z: How the U.S. Can Meet the Japanese Challenge."
It was less than twenty years ago, but the Japanese boom
seems to have fallen into a black hole of memory. In the
1980s, Japan's GDP growth followed almost exactly the
pattern of the U.S. in the 90s, beginning the decade with a
growth rate of about 2% and ending it growing at 6.3%
The Nikkei index, meanwhile, performed even more
spectacularly: it was only 6,500 at the beginning of decade
and nearly 39,000 at its close.
For reference - or amusement - the Nikkei is now below
12,000 and the economy's growth rate is about zero.
Nor did the Japanese sit idly eating their raw fish as the
Japan, Inc. went belly up. They "did everything imaginable"
says Christopher Byron in a recent article. Interest rates
were reduced to zero and public spending (a.k.a. fiscal
stimulus) went wild.
Is there anything else they could do?
"If I were the head of the Bank of Japan, I'd charter every
helicopter I could get my hands on," said a "top global
market analyst" quoted by Byron, "fill them with money and
dump the cash over downtown Tokyo starting tonight. That
economy has simply got to be reflated somehow. We are at a
critical juncture."
We are at a critical juncture, dear reader. But destroying
the yen would probably not solve the problems the world
economy faces.
Money is only valuable because it's supply is limited.
Dropping it from helicopters may encourage the Japanese to
spend it quickly, but who will want it? American economists
have been advising Japan to destroy the yen for the last
ten years. But this would not solve Japan's economic
problem...it would merely add a new dimension to it - a
monetary problem.
Could it be, dear reader, that Japan's economic problem -
and America's - is not something than can be solved? A
collapse may not be avoidable. Instead, perhaps it must be
endured. Like death, it is merely a question of when and
how - not if.
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
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