Contributed by Bill
Publisher of: The
Fleet Street Letter
FRIDAY, 6 APRIL 2001
A Wonderful World
*** Second biggest rally ever - Dow up 402!
*** Rally could be big - or not. But Nasdaq 100
still at 14,708 times earnings.
*** It's not about relativism - it's about
absolutism...overpaid execs...and more!
|*** I flew from Miami to Paris last night...and my|
plane was late - so today's message will be short.
*** But it's good to be back in Paris. The rainy,
gray weather is a relief from all that sun.
*** Rally! Yes, rally. The Dow staged its 2nd biggest
rally ever yesterday - with the index moving up 402
points. 29 out of 30 Dow stocks rose. The Nasdaq
also shot up - nearly 150 points.
*** It's about time. The rally should surprise no
one. Investors have been watching, waiting, hoping
for a chance to get even. Yesterday, they thought
they saw an opportunity.
*** "The stock market, we're now told, behaves more
like an encounter group than a primal financial
nerve center," writes Eric Fry. "It celebrates our
joys and shares our sorrows. And so it was when
consumer confidence numbers bounced a bit early this
week. And - we're all in this together, aren't we? -
so did the stock market. Finally, joy triumphed over
sorrow." So what if Nasdaq 100 still sells for
14,708 times earnings... (see: How Lucky We Are!)
*** What's surprising is that it took Mr. Bear so
long to back off. Markets do not go straight down or
straight up. They need to take a breather from time
to time...give people a chance to adjust their
portfolios and their thinking. But Mr. Bear has been
*** "Every time I look at my portfolio," says a 24-
year-old Chicago investor, "it's worth less. I keep
thinking, this has to be the end. It can't go any
lower. Each time it drops, I keep hoping that this
is finally the bottom."
*** "We're afraid to look," says 33-year-old Dawn
Pieczko to reporters from U.S. News & World Report.
Asked what she would do with a $20,000 severance
check, Ms. Pieczcko replied: "It's definitely not
going into the market."
*** "The recovery we were promised in the second
half is not coming," said the chief investment
officer at First Albany Corp.
*** Mr. Bear does not like to hear such gloom and
doom. He'd rather have investors feel more bullish -
and pump more money into the market. He probably
should have backed off earlier - but he couldn't
help himself; there were too many targets of
*** But at last - he's giving investors a break. For
how long? We will see.
*** The rally could be impressive, but don't count
on a new bull market. Investors are still too
bullish. "Whether it's your first bear market or
your last," comments U.S. News& World Report, "many
veteran observers say this one is nearing an end."
*** Only 32% of investment advisors are bearish. The
figure typically rises to near 50% before a new bull
market can begin.
*** S&P 500 P/Es are down from 34 to 23 - but still
3 times what they are at a major bottom.
*** "With P/E's, it's not about relativism, it's
absolutism," says Jack Brennan, "They're down from
400 to 150 [on the Nasdaq]. But 150 is still high
compared with 50 over the long term."
*** Big Bottom? Probably not yet.
*** "Yesterday's rally proves the fear of missing a
turn is still greater than losing money," writes
Bill King. "We've already had many such rallies over
the past year, with the same result. No one knows
the extent of economic damage that lurks. The
financial and economic nadir for companies and
consumers cannot yet be discerned. Time and math
must inexorably erode balance sheets and the
economy. Major companies will follow minor ones into
bankruptcy, or be resurrected via system-necessary
bailout." Time wounds all heels, more below.
*** "Given all the negative news about the economy,"
said Robert Parry, president of the San Fran Fed, "I
may need to remind you that the data so far seems to
indicate that the U.S. economy is still expanding,
if only very slowly."
*** Does it really matter if we're heading into a
recession? Well, yes, says Kevin Klombies. He
writes: "overheated markets can collapse back to
trend during an economic cycle, but MAJOR trend
changes usually come out of recessions. In other
words, if the economy simply slows, then
accelerates, then the old themes should still prove
to be the areas to invest. If, however, this dives
into a recession...we should exit with a whole new
brand of leadership."
*** "The consumer is truly amazing," adds Stephen
Roach of Morgan Stanley Dean Witter. But,
"employment is the last thing to go and we are very
close to that now."
*** The Boston Globe reports the results of an
interesting study. In 1993, had you invested $10,000
in the 10 companies with the top executive pay
levels, today you'd have only $3,585. If, instead,
you'd just bought the S&P 500, you'd now have
$32,301. The top earning CEOs back then were people
such as Charles Wang of Computer Associates and
Henry Schacht of Lucent. They laid off workers,
ruined investors, but treated themselves very well.
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A WONDERFUL WORLD
Time is on my side, yes it is.
Jagger and Richards
What a wonderful world!
It's amazing how easy it is to feel superior to
other people - especially here in Florida. At the
Marriott in Delray Beach all you have to do is keep
your clothes on.
Sitting beside the pool earlier today I found it
difficult to keep my mind on my work. So many people
wandered by in various degrees of deshabille. Not
that my head was turned by pulchritude or prurience.
Not at all. Instead, the allure was the same as you
have looking at a dog with a broken leg or a house
whose roof was blown off in a hurricane.
These people had sustained a lot of damage.
Your editor may not look much better au naturel. But
at least he kept his head and remained fully
Many of the people beside the pool were so grotesque
they shouldn't even have gone out in public, much
less removed their clothes. If they desired to make
a public spectacle of themselves - they should have
It was not always so, dear reader. There was a time,
believe it or not, when people were more careful -
about the way they appeared in public, the words
they used, the way they used their knives and forks,
the paintings they hung on their walls, the houses
they lived in, the music they listened to and the
stocks they bought.
Over the last century, the modernists have had their
way in art and literature, the Descriptivists have
triumphed in the grammar wars, Positivism,
Relativism and Existentialism have walloped
Fundamentalism and Essentialism in the world's
philosophy departments, and Democratic socialism has
replaced 19th century Liberalism (now known as
laissez faire conservatism or
libertarianism)in the capitals.
In a world where nothing really matters, people
worry about everything - no matter how shallow or
excrementitious. In a world where no one stands for
anything, is it a surprise that people fall for
Words can mean anything you want - unless you want
to communicate with them. You can pay any price you
want for a stock, too, unless you hope to make a
profit. And you can take off your clothes in public
- unless you want to maintain your dignity.
But, just wait. Time corrects everybody and
everything. If you wait long enough, the stains on
silence, the blemishes on the good taste, the
graffiti on canvas, the absurd vanities and bad
judgments, the hubris and pride, television, the
Nixon Administration, the Wall Street bubble, the
New Deal and the New Era, the Information Age - all
The stock market is already correcting. Could
America's 'anything goes' culture be at the
beginning of a correction too?
Am I really just a hopeless optimist, dear reader?
Is it too much to expect...that, in time, people
will once again reach down into their own hearts to
rediscover the few, essential principles that really
matter? Howard Stern is already ridiculing Jackson
Pollack on TV. Harpers is attacking Descriptivism.
Is it vain to hope that Andy Warhol, rap music,
Hillary Clinton, Relativism, and New Dealism will be
Time sends us to our graves. But we can go with
smiles on our faces - like a man on Death Row for
shooting a tort lawyer or poisoning a psychologist.
The penalty is death. But maybe it's worth it.
Your essentialist correspondent, always looking on
the bright side.
P.S. I am sitting in the waiting lounge for Air
France in Miami. A young couple - probably newlyweds
- sit across from me. The woman could be a model.
She is certainly a model newlywed - her head against
her husband's shoulder, kissing his neck from time
to time as he watches the television in the corner.
Go ahead, kiss him. Kisses are like fresh
strawberries - you gain nothing by holding them in
And so, the week ends as it began - with a happy
couple setting off in life. I wish them well.
P.P.S. This poem from my friend, Francois:
"Le temps d'apprendre
vivre, il est dj
Que pleurent dans la nuit, nos coeurs
Ce qu'il faut de regrets pour la moindre chanson,
Ce qu'il faut de sanglots pour un air de guitare.
"It's all been said before," he notes.
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The Daily Reckoning:|
author Bill Bonner
Bill Bonner is,
in spite of himself, a natural born contrarian. Early each morning, Bill
writes The Daily
Reckoninghis take on the financial markets and whats going
on in the worldand 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 upnot 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 90sopening offices in Florida, London, Paris, Ireland, and
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.