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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

MONDAY, 16 APRIL 2001 


Today:  A Blue World

*** 1,000 companies report first quarterly earnings this 
week. Will they 'zip up?'

*** Get even? Or get out? That is the question...if the big 
rally continues.

*** Consumers feeling and the French...and 

*** There is not much new financial news today...the 
markets were closed on Good Friday. But the financial press 
seems to be looking for a resurrection of prices this week. 
"A record number of earnings warnings have cleared the 
way," says the Reuters report from Sunday evening, "for 
stocks to gain this week as investors look past the bad 
news toward sunnier days ahead."

*** "Buyers are swooping in" continues the article. Then, 
quoting Louis Navellier, "I feel confident that the market 
is putting in a bottom and most stocks are oversold."

*** The Nasdaq rose 14% last week - its second best week 
ever. But it is still down 21% for the year. Investors are 
hoping that this rally is big enough to push the stone 
aside and allow their stocks to come back to life.

*** The crash of '29 was followed by such an impressive 6-
month rally that investors were lulled into believing that 
"the worst was over." But stocks soon began falling again 
and continued falling until 1931. 

*** Stocks approached the 1,000 mark in 1966...fell, and 
then rallied until '68...fell again...rallied again and 
actually moved above the 1,000 mark in 1971...and then - in 
1973 - began their worst slide since '29. Throughout the 
entire 20-year period, from 1966 to 1986, adjusted for 
inflation, investors got nothing but dividends.

*** A big rally, it is hoped, will give investors another 
chance to "get even." But if they're smart, they'll take it 
as an opportunity to get out. It is too late for investors 
who bought tech and Internet shares near their peaks. 
Amazon, for example, would have to rally about 700% to get 
back to its high. A Reuters report explains that if you had 
bought JDS Uniphase on March 6, 2000, when it was trading 
for $146 you'd have to wait 21 years to make up the 87% 
loss you've suffered - if the S&P grows at its average rate 
since '26, that is, about 11% annually.

*** The waiting period for many stocks would be even longer 
- 40 years for Inktomi...41 years for CMGI, a stock that 
once traded for $163, but you can buy today for about two 
and a half bucks.

*** Of course, these companies will probably go out of 
business long before the share prices recover. Most likely, 
they've had their 15 minutes of fame. Now they can be 

*** "Analysts are expecting earnings growth to zip up" in 
the 2nd half, said one item on the Reuters line. 

*** But "astute corporate insiders have been selling their 
companies' stock at a very high rate," writes Ned Davis. 
"With the market down so much, this is very unusual and I 
take it to mean that profits are even worse than the hard 
landing that I had expected." Why? Davis explains: "The 
long up-trend...of productivity growth since around 1980 
has been broken to the downside. Sales, income and 
production per employee have plummeted."

*** Sales figures for March suggest that consumers are 
feeling a little pinched. "March," says Kurt Barnard, who 
tracks retail spending, "turned out to be one of the 
weakest months in 25 years of tracking this. It really was 
a very, very poor performance on the part of most 

*** And this from the WSJ: "The U.S. economy appears to be 
worsening, according to several reports. Jobless claims hit 
a 5-year high last week and consumer confidence fell to its 
lowest level since 1993."

*** A second half recovery? Probably not. The U.S. may be 
doomed to endure a particularly long and frustrating slump 
simply because it has avoided a slowdown for so long. 
"Recessions have a parallel with earthquakes," suggests 
Andrew Smithers. "Frequent small ones may be essential to 
avoid truly damaging large ones."

*** Smithers notes that Alan Greenspan has very 
successfully avoided recessions - until now, perhaps. But 
he is not the first to enjoy a long period of expansion. 
Andrew Mellon was re-appointed by Herbert Hoover in 1929 - 
after presiding over the boom of the '20s. At the time he 
was hailed as "the greatest secretary of the Treasury since 
Alexander Hamilton." Two years later, he resigned - widely 
regarded as a failure.

*** Addison reports from Paris that the city is dead. 
Easter Monday is an important holiday in France. Only we 
Americans are at work. Are we smart, or what?

*** I'm becoming a connoisseur of French attitudes towards 
illicit sex. Not by intention, of course. It is just that 
it is such prominent feature of the culture I can't avoid 
it. On Friday, for example, I took a bus down from Poitiers 
(the train was not running for some reason). On the radio 
was a remarkable program wherein the host would ask a woman 
to phone her husband and tell him that she was having an 
affair. The host would then come on the phone and pretend 
to be the lover. The cuckolded husbands threatened and 
insulted while their wives' pretend lovers parried with 
jokes and ribald humor. Then, when the ruse was announced, 
everyone had a good laugh.

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"You just never know," said Mr. Deshais. "It usually 
doesn't get this cold. You see what it did."

The gardener pointed to the blackened potatoes leaves, 
newly sprouted from the ground. 

"It killed some of them. But I think they'll be all right."

"Why do you plant them so early," I asked. "If you waited a 
few weeks you'd probably avoid these late frosts."

Mr. Deshais looked mortified.

"Ahhh, but if you did that, you would never get good 
potatoes. You have to plant them early. And if you miss the 
full moon, you have to wait a month - and then, it's too 
late. You have to stick to the moon. Don't worry. They'll 
be all right."

The potatoes don't look good. But Mr. Deshais knows what 
he's doing. And even if he is completely wrong, there is no 
hope of getting him to change his ways. 

Besides, since his approach to gardening agrees with my new 
theory of Essentialism, who am I to criticize? Mr. Deshais 
thinks he knows what is important to a good garden - and he 
sticks with it. What's more, he has the cabbages to prove 

While Mr. Deshais has spent decades studying the ways of 
nature, I spent my time studying the nature of markets. In 
either case, probably the best lessons are learned in the 
old-fashioned way - by error.

Years ago, I teamed up with Mark Hulbert to try to figure 
out who made money by investing - and how. The idea was 
simple enough - just study various investment newsletters, 
track their advice over time and see who comes out ahead.

If only it were that easy! 

We began in the late-70s. At the time, the financial future 
seemed clear: the dollar was going the way of Italian lire 
and Polish zloty, inflation was getting worse and worse, 
and gold was becoming ever-more valuable. This was not 
merely a trend - it was an unstoppable, irreversible fact 
of life...since government could be counted on to inflate 
the dollar away to nothing.

This led me to publish a number of financial services whose 
main advice was to buy gold and gold mining shares. Alas, 
the debut of these services coincided with the beginning of 
a bear market in gold that has lasted for 20 years already, 
and seems destined to last forever.

The more certain you are about a financial trend, the less 
likely it is to come to pass. And past performance - thank 
God - is no guarantee of future performance.

But surviving a quarter century bear market in your 
favorite commodity is bound to have an effect. I emerged 
poorer in investment cash but immensely richer in modesty. 

"Mr. Bonner," the gardener continued, "you wouldn't want to 
eat that stuff in the super-market, would you? Who knows 
what they put in it? It tastes like nothing natural. They 
can plant their potatoes whenever they want. But we have to 
stick to what we know works."

Pere Marchand seemed to have the same idea in mind for his 
sermon on Easter Sunday. "We have to recognize," he said, 
"that we cannot know why God does what he does. Why would 
he let his only son suffer upon the cross? Why would 
innocent little infants die? It seems incomprehensible to 
us. And yet, it happens. And it is hard for the parents to 
live with. But we stick with our faith. What else is 

"There is one characteristic," writes Mark Hulbert, 
summarizing the conclusions of two decades of work, "that I 
have discovered that does distinguish the top performers: 
discipline. They were willing to stick to their strategies 
during the discouraging interludes in which they were 
lagging the market or even losing money. In fact, I think 
the importance of discipline may be the most important 
lesson to emerge from my 20 years of tracking investment 
newsletters. It is what keeps us from dumping a good long-
term strategy because of short-term underperformance." 

The good long-term strategy is to find good investments at 
low prices and stick with them until they are no longer at 
low prices. Then sell them.

Another way to look at it: find the fool in the market and 
do the opposite. When fools are buying tech stocks; sell 
them. When fools are no longer interested in stocks: buy 

I like to think that this approach is easier for me and 
other former gold-bulls than it is for other investors. We 
can spot the fool in the market, since we have been on such 
close terms with him.

Today's fools believe they can buy stocks at 23 times 
earnings and then simply hold them 'for the long term' and 
get rich.

But as Hulbert puts it (in a NY TIMES article):

"Latter-day converts to the buy-and-hold strategy assure me 
that they won't be foolish and throw in the towel in a bear 
market. But I don't believe them. The only investors who 
could persuade me otherwise are those who were fully 
invested in late 1974, at the bottom of the last severe 
bear market. And there are precious few of them. All the 
other buy-and-holders either aren't telling the truth or 
are too young to have anything more than hope about how 
they will behave in the next bear market."

"At the top of every bull market, everybody talks about 
buy-and-hold," Hulbert writes. "At the bottom of a bear 
market, you can't find anybody talking about buy-and-hold." 
At investment conferences in 1980, some people seriously 
thought the price of gold (then flirting with its all-time 
highs of over $800 an ounce) was on its way to $4,000. 
(Gold subsequently sank to less than $300.) And at those 
1980 investment conferences, nobody was talking about 
buying and holding stocks. Back then, that was regarded as 
a fools game."

What else is there, dear reader, but to look for the 
essentials, find the principles that are really important, 
and stick with them? 

Even when we recognize that we can't predict the 
future...nor even understand the present...we still have to 
do something. We have to get up in the morning...and get to 

We still have to make decisions about what to do and what 
not to do.

And now, dear reader, I confess an ulterior motive to 
today's letter. We have put together a new investment 
service...which we call the "blue" site. Its goal is 
simple. And modest. To provide you with a systematic, clear 
way to invest in the kind of insights you find here in the 
Daily Reckoning. 

I've already sent you some information about it. And 
Addison has provided more details. Will it make you rich? 
Who knows. Will it beat the market averages? I don't know 
that either. 

As in life itself, there are no sure things. And no one can 
tell what will happen.

But I don't ask much of you. The Daily Reckoning is free. 
And since it is free I feel I have the right to pass along 
my little reflections on things that have nothing to do 
with investing. This new "blue" service is not free. Maybe 
that is reason enough to subscribe: you won't have to read 
my views on the arts, on history or philosophy. The blue 
site is all investments. 

And, if it helps you improve your investment performance - 
even just a little - it should be worth far more to you 
than it costs.

So all I ask is this: just take a look at it. If it is not 
useful to you, your money will be refunded. So don't worry 
about that part of it. And with a little luck, it will 
actually help you make some money...or help you keep the 
money you've already made. Please follow this link

The Daily Reckoning "Blue Service"

And thank you.

Your humble, grateful editor,

Bill Bonner

The Daily Reckoning Blue Service

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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 16, 2001

Published By Tulips and Bears LLC