Contributed by Bill
Publisher of: The
Fleet Street Letter
FRIDAY, 4 MAY 2001
Opposed To Something Or Other
*** "First-day Pop"...IPOs are back...Fraud, too...
*** The public will to speculate...and the classic
*** Inflation concerns? nahhh...
|*** "First-day pop" makes a triumphant return to the|
Wall Street lexicon, thanks to yesterday's IPO of
Simplex Solutions Inc. Shares of the software and
consulting services company "popped" 77% on their
first day of trading - to $21.20 from the offer
price of $12.00. It sure feels nice to know that the
bear market is over for good.
*** Stocks took an overdue breather yesterday. The
Nasdaq lost 74 points, and the Dow ended the day
down 80 points.
*** Notwithstanding yesterday's modest setback,
stocks have been on a tear. The Nasdaq has tacked on
more than 35% percent in less than one month.
*** Barron's: "The public preference for stock is
not only as marked as ever, but also the will to
speculate is still a speculative factor not to be
overlooked. The prompt return of huge speculation
and the liberal manner in which earnings are again
being discounted indicate that it will be difficult
to quench the fires of stock market enthusiasm for
*** Wait...dear reader, I'm misleading
you...Barron's did, in fact, write the preceding
quote - but it did so on March 24, 1930, in response
to the dramatic rally that ensued shortly after the
1929 crash. But that classic "sucker's rally" ended
just weeks after this quote appeared in Barron's.
And it was from that point that the long,
devastating bear market in stocks actually began.
*** So now the question before us, as always, is
whether yesterday's modest retrenchment is merely
the pause that refreshes - or the beginning of a
*** Certainly the stock market did not lack for
reasons to sell off. First-time unemployment claims
climbed to 421,000 in the week ended April 28 - the
highest level in five years. And the National
Association of Purchasing Management index fell to
47.1 in April, down from 50.3 in March - its first
decline since being created in 1997.
*** "While businesses have been promptly responding
to the earnings implosion," writes Kurt Richebacher
in his May report, "so far the consumer remains in
*** "The US consumer has not slowed any," notes the
Prudent Bear's Chad Hudson. "Consumer spending rose
0.3% in March, and increased at an annualized rate
of 3.1% for the first quarter, up from 2.8% in the
fourth quarter. At least during March incomes rose
0.5% so the savings rate increased to -0.8%."
*** Dr. Richebacher: "A resilient consumer is the
great hope of those who are still venturing that a
U.S. recession may be avoided. Don't bet on it. Due
to the inordinate availability of consumer credit
since the 1920s, the American consumer plays a major
role in the U.S. business cycle. He essentially
makes booms bigger and longer, but also makes busts
deeper and more pervasive. In the aftermath of the
1929 crash, debt-laden consumers sharply pulled back
on spending. Far from offsetting any drop-off in
business investment, the steep declines of both
cumulated. We have no doubt that today's consumer,
who has negative savings and is far more debt-laden
than his ancestor in the 1930s, has no choice
financially but to follow suit in due time."
*** Gold barely moved yesterday. The dollar hardly
budged... and the euro held steady.
*** The Financial Times reports, "the Euro-zone's
manufacturing sector shrank in April for the first
time in two years...but the ECB remained reluctant
to make an early cut in interest rates."
*** The Prudent Bear: A "lack of concern about
inflation clearly separates the Federal Reserve and
the ECB. Most of the world is siding with the
Federal Reserve, including the majority of the
members at the G7 Meeting. Just a day after the
official statement said the world economic outlook
was sound, Canada, France & Japan ganged up and
called for a 'timely monetary measure if necessary'
and that 'waiting too long to ease could prove
costly.' The G7 also called for the US and Japan to
utilize monetary policy to stimulate growth.
*** "The ECB has left rates at 4.75% for two years,
while the rest of the world has cut rates, and some
quite aggressively. The comparison between the ECB
and the Fed has already begun. But, actually the two
banks have very different economic conditions to
manage. [Europe] has money supply growth of 5% and
inflation running around 2.6%. The [US] has money
supply growing at 11% and inflation of 3.5%."
*** "I think you could make a case that inflation
has accelerated," says Fed Governor Robert Perry.
But "is [it] a major concern for the future? I don't
*** "Gold is the ancient store value," Jim Grant
told the Grant's Spring Conference in Manhattan,
again by way of Eric Fry. "But for the last 20
years, it's been a wretched store of value. I remain
an optimist nonetheless." While stopping short of
pronouncing "the bottom" in the gold market, Mr.
Grant reportedly had a few kind words for mining
company Franco Nevada.
*** Picking up the theme, Wayne Murdy, CEO of
Newmont Mining, informed shareholders this week that
his company remains an unabashed gold company -
i.e., that he has no intention of increasing
Newmont's forward gold sales.
*** Fraud charges are making a comeback. A federal
grand jury in New York indicted former Sotheby's
Holdings chairman, Alfred Taubman, for
"international conspiracy." Allegedly, Mr. Taubman's
auction house was in cahoots with Christie's to fix
auction prices. On Wall Street this practice is
known as launching an IPO - alas, there it is legal.
*** Today is the 115-year anniversary of the
Haymarket Square riots in Chicago. The riots began
as a "labor demonstration" for the 8-hour workday
- until someone exploded a bomb. Then, as now,
'culture jamming' has its methods, more below...
*** I'm in Madrid today, back in Paris this evening
and the country over the weekend. Until Monday.
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COMPLETELY OPPOSED TO SOMETHING OR OTHER
Stupidity, like poverty, is relative.
The sentiments expressed by London's May Day
protesters ranged from the pathetic to the sublime.
"I've spent a lot of time in India," said one. "A
lot of people are living a good life in the West and
don't need these luxuries."
"Capitalism commits atrocities and illegal acts and
hides behind a corporate whitewash," noted Adam, 30,
who described himself to Daily Telegraph reporters
as an 'anarchist.'
"Women do most of the world's unwaged work," said
Liz, a member of the Global Women's Strike. "We want
wages for all caring work to establish women's
entitlement to the wealth and resources we have
produced. We want wages for housework."
"We are sick of big companies making money just for
greed," added another woman.
Another protester, describing the people around her:
"This is the cream of society with intelligent
people who have a passion for life." Cream rises to
the top of a fluid society. But so does scum.
Sometimes, it is hard to tell the difference between
None of these comments made much sense. So, I
listened carefully to a talk show, on which the
guests represented various factions of the anti-
capitalist crusade. Would they have a new critique
of modern society...a new crackpot theory...? Would
there be a new Marx or Engels among them?
Alas, not a sentence...not a word...not even a half-
formed syllable that might be mistaken for an
"Everything is being privatized," an environmental
activist observed. "Big corporations are taking
over. We are losing control over our own lives.
That's the real problem with globalization. The
companies have become more powerful than government.
We vote, but it doesn't make any difference. We
still get the same products shoved down our
throats...while corporations make obscene profits
for the benefit of their shareholders, not the
I was hoping he would name names. Daily Reckoning
readers would be delighted to invest in a company
making obscene profits for the benefit of
shareholders. Even mildly titillating profits would
be nice. But as soon as a company makes enough money
to get investors excited, competition and share
prices increase and the big profits quickly
disappear. In a matter of months, profits are merely
Also in the Telegraph was an article about author
Naomi Klein. The daughter of Vietnam War protesters
who fled to Canada, she spent her early years, she
says, wanting to play with Barbies, eat at McDonalds
and hang around shopping malls. But as she grew
older her radical genes seem to have asserted
themselves. In fact, her book, "No Logo," published
by the capitalist enterprise, Harper Collins, owned
by Rupert Murdoch, provided both inspiration and
rationale for the rioters. The Financial Times,
which ought to know better, called it "a manifesto
and call to arms that sometimes reads like an
I picked up the book at Heathrow Airport on my way
to Madrid last night. I thought I would save you the
trouble of reading it.
Ms. Klein's kvetch is that corporate branding is
taking over her "space." Her space is radical
Have you noticed that corporate advertising seems to
celebrate vulgar, depressing, corrupt, stupid or
perverted culture? Ghetto life, AIDS, Che, identity
politics - the causes that Ms. Klein and other
activists labored over for so long have been taken
up into corporate advertising themes.
Tommy Hilfiger, for example, used to be a brand of
"Young Republican clothing." But Hilfiger found he
could sell more pants by "selling white youth on
their fetishization of black style, and black youth
on their fetishization of white wealth." So powerful
was the allure of the ghetto and the process of
borrowing the trash styles of urban black youth that
Nike had a word for it: 'bro-ing.'
Ghetto cool... then gay cool... AIDS cool...
revolutionary cool... Diesel had an ad showing two
sailors kissing. A soda company uses a photo of Che
to sell its "Revolution" brand drink. How could the
real radicals keep up?
"Let's face it," said an AIDS activist, "when you're
a story line on Friends, it's hard to keep thinking
But Ms. Klein has a suggestion fighting back against
the brands. She calls it 'culture jamming.' Like
painting mustaches on billboard figures, culture
jamming - with ironical comment, ridicule and parody
- gives radicals a way to take back the initiative.
"This generation wants their brains back," is how
one activist put it.
But culture jamming works in both directions. One
man in London's crowd of revolutionaries wore a T-
shirt with the following statement: "Completely
Opposed to Something or Other."
Your correspondent, in Madrid...
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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.