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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

PARIS, FRANCE 
TUESDAY, 15 MAY 2001 

 

Today:  Money Can't Buy Happiness-But So What?

*** Waiting for the Fed...but why?

*** "Consumers still on spending spree..."

*** A collapse of real estate?...long term rates up,
but so is long term lending...the cosmology of Alan
Greenspan...and more

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*** 'Waiting for the Fed' was yesterday's theme on
Wall Street. What will Greenspan and the Federal Open
Market Committee do when they meet today? How far
will they lower interest rates?

*** Marking time, the Dow rose 56 points. The Nasdaq
fell 25 - its fourth straight losing session. When
the waiting is over, then what? Short-term interest
rates will be lower after the FOMC meeting, or not.

*** So what? Is Mr. Market hesitating because he
doesn't know what the Fed will do? Or because he
doesn't know if it will make any difference? If 4.5%
was not the magic fed funds rate...who's to say what
is?

*** "If one steps back a bit and thinks about this
objectively," says honorary DR Blue Team member Doug
Noland, "isn't it just silly and at the same time
absolutely frightening that so many have put so much
faith in the capabilities of Federal Reserve?"

*** Nevertheless, Greenspan's success to date has
silenced most critics - both the inanimate ones like
the gold price and those flesh-and-blood ones
inclined to offer a contrary view.

*** "Gold competes with the cosmology of Alan
Greenspan," says James Grant. Faith in the yellow
metal as "money" competes directly with the notion
that Greenspan's all-knowing Federal Reserve is
capable of manipulating short-term interest rates to
achieve optimal economic performance. Were gold to
mount an honest-to-goodness rally of some magnitude
and duration in response to rising inflationary
pressures, what would become of the economic cosmos
as we know it?

*** The price of gold inched up to $268 yesterday.

*** Mr. Bond, meanwhile, seems to know exactly what
he's doing. He's seen this movie before and knows how
it will end. By lowering short-term rates
aggressively, the Fed cultivates the rising
inflationary expectations (if not inflation itself)
that drive long-term interest rates higher. Corporate
borrowers, well aware of this age-old phenomenon, are
rushing into the market to secure long-term financing
at attractive rates. During the first three months of
this year bond issuance soared 172% over the same
period last year.

*** Consumers are rushing in to borrow as well.
Mortgage lender, Countrywide Credit, reported making a
record $10.2 billion of new loans in April, an
astounding increase of 130% over the prior year. The
pipeline of mortgages in the process of funding ended
the month at a record $18.6 billion - double what it
was one year ago.

*** But consumers are not just borrowing...
"Consumers boost spending despite fears," says the SF
Gate. "Downturn has not hit restaurants," observes
the Long Beach Press. "American Consumers Still on
Spending Spree," proclaims the Financial Times.
Clearly, both the consumer and the corporate borrower
are happy to avail themselves of easy credit, just
like a child will jump at the offer of a free ice
cream cone. But heaven on earth has still not
arrived: "Market setbacks stagger families saving for
school," notes the Dallas paper. "Power Prices
Surge," remarks the N.Y. Times. "...Mortgage Rates
Aren't Falling," declares Newsweek.

*** While all eyes are on the Fed, Weldon's Money
Monitor observes: "Global trade is already in a
recession. Taiwan, Philippines, Singapore, Chile,
Hong Kong, Costa Rica, Malaysia, India - all have
reported a double-digit drop in exports year-over-
year."

*** Yet, MZM (cash) in the US rose 26.5% over the
last 3 mo. Home prices are rising at the rate of 1%
per month in many areas. And bonds are falling. While
inflation is the odds-on favorite among most bettors
- deflation has yet to surrender.

*** I don't have time to write a letter today, so I
pulled out one of our "Biggest Hits" from last year.
I'm rushing to catch a plane to Chicago - for a
meeting of The Supper Club. Then, I'm off to Santa Fe
for my son's graduation. Will has finished 4 years at
St. John's College...details to follow...

Your humble scribbler,

Bill Bonner

* * * * * * * * * Advertisement * * * * * * * * * * *

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* * * * * * * * * * * * * * * * * * * * * * * * * * *


[The following episode of The Daily Reckoning
occurred May 17th, 2000]

MONEY CAN'T BUY HAPPINESS - But So What?


"Where do you think you are?" the old woman
challenged me.

She had opened her shutters and stuck out her gray
head across the road as I stood next to my little car
in the driveway of one of Mr. DesHais's friends. I
had driven Mr. Deshais to the small village to pick
up his roto-tiller.

I tell you that because the question I had just been
posed requires context. The same interrogative in a
Paris cafe might be an invitation to discuss
existentialism. Or, driving along with Elizabeth, it
might be an invitation to an argument. (Elizabeth
knows I am reluctant to ask directions or even look
at a map.)

But here, on the proletarian side of the little
village of Azat-le-Riz, it was a rather rude way of
greeting a stranger.

I didn't know how to answer.

"Why...where am I?... Is this Planet Earth?"

She made no response.

"Ah..." I continued, "yes, it must be. Well, I guess
I've come to the right place..."

At about that moment, Mr. DesHais emerged from the
garage.

"Bonjour Madame," he called to the woman who, with a
sort of grunt of recognition, withdrew her head from
the window.

Mr. DesHais is not concerned with money or his
neighbors. He has more important things to think
about - like drinking. And asparagus. Both need
careful attention, leaving no time to worry about
money. Mr. DesHais, as near as I can tell, is a happy
man.

I followed him into the garage, ducking down through
the low door, but hitting my head anyway. On the left
were a group of very smelly rabbit cages with enough
animals for about a dozen meals.

We passed through the garage and emerged at a
vegetable garden. Like all of Mr. DesHais' garden
work, this one was impeccable. Everything was in
perfect order. No weeds. Nothing was left untouched.
Every square meter had been worked and tended. All of
his sense of order and rectitude seems to be focused
within garden walls. Outside of them, his life is a
mess.

The gardener pulled out some salad plants and gave
them to me to carry. Then we made our way back to the
car and drove around a series of very tiny roads to
another of his hangouts.

The place was dilapidated. You could barely tell that
someone lived in the stone building. Smoke was coming
from the chimney and there was a dented car in the
driveway. Had it not been for those signs, the place
might have been mistaken for a sheep barn. There were
sheep around. And chickens. And a dog, which barked
as we drove up.

I was backing up towards the rototiller when a
hulking figure slowly drifted out of the door, like a
rusty freighter passing under a bridge. The man was
dressed in workclothes. He looked about 50 - except
that he had the most remarkable hair. It was black
and shiny - like the hair on a newborn baby. It was
thick, too.

While I was admiring his hair, I noticed that he
leaned to the left. If he was a freighter, he had
been loaded improperly and was listing to starboard.
His starboard eye barely opened, too.
"That's Andre," explained Mr. DesHais. "He's a little
strange."

If Mr. DesHais thought he was strange, the man must
be a certifiable lunatic. Our gardener lives in a
world peopled by colorful drunks and half-wits. As I
have told you, his driver's license was taken
away...in the interest of the safety of the rest of
commune. So I chauffeur him around on errands.

Elizabeth and I visited the chateau in Azat-le-Riz
just a little over a week ago. We had coffee in those
polite, but unsatisfying, demi-tasse cups amid the
ancestral portraits and peeling wallpaper. Now Mr.
DesHais was showing me the other side of the village.
I write like I drive. In today's letter I have a
rough idea of where I am going, but I'm open to
surprises. Every road takes you somewhere - though
not necessarily where you intended to go.
Wealth is, of course, relative. I exhibit my own
relatives as proof. My daughter, Maria, says she is
embarrassed to bring her friends over to our
apartment. We live in a modest flat on the ground
floor. I would not have chosen a street-level
apartment, but we were in a hurry to rent
something...and it wasn't easy to find an apartment
big enough for our large family. Besides, the place
was a bargain.

But ground floor apartments in Paris are very
unstylish. They are often lived in by the
"concierge," who looks after the apartment building.
To make matters worse, the children are all going to
schools in a rich part of the city - the 16th
arrondissement. Maria reported that one of her
friends had invited her to lunch. The two girls
lunched with her friend's mother in their apartment,
where they were attended by a maid in uniform.
Jules, meanwhile, went to a party at a friend's
apartment and reported that the child lived in an
apartment that resembled the palace of Versailles.
The apartment was on two floors and had a reception
room big enough for 32 12- year-olds to run around.
My mother, meanwhile, who lives with us, affects an
"innocents abroad" attitude. "From shirtsleeves to
shirtsleeves in three generations," is the French
expression. Money comes and goes. My mother has seen
all three of the generations in a single lifetime.
She has been rich and poor. She can recall, fondly (I
believe she recalls everything fondly), living in a
house without indoor plumbing or central heating. A
contrarian like her son, she was rich during the
Depression, but flat broke during the boom of the
`50s.

I recall being broke in the `50s. And the `60s. And
the `70s, for that matter. But not fondly.
On the other hand, were it not for the family, I
would have a much different attitude towards money.
Left to my own devices, I am as happy hobnobbing with
Mr. DesHais's alcoholic n'er-do-wells as I am with
Elizabeth's more upmarket friends.

Which brings me to the point of this little letter (I
imagine you are relieved to discover that it has a
point).

I find that I am happiest when I am working outside.
As a hobby, Churchill laid up brick walls during
WWII. Masonry attracts me, too. Imagine what fun it
would have been to work on a wall with Winston!
Ah...but the pursuit of pleasure is one thing. Making
money is another. If money could make people happy,
there should be a lot more happy people in America
today than there were 40 years ago.

"According to a Federal Reserve report," writes
Shlomo Maital in a recent issue of "Barron's,"
"between 1992 and 1998 net household wealth rose to
$70,000 from $55,000." Are people nearly 30% happier?
Mr. Maital answers the question: "Despite this," he
says, "the percentage of Americans who state they are
`very happy' has actually declined slightly since the
mid-1960s from 40% to just over 30%. Studies show
only a weak link, or no link at all, between
happiness and wealth."

But so what? If money is not worth pursuing...
happiness is an even less worthy goal. At
least the pursuit of money is much less selfish.
"Greed is good," said Gordon Gekko, who went on to
explain why. People make money, not for themselves,
but for others. In making money, people render a
service to others and are rewarded for doing so. The
more service they give - whether it is by making a
software program available to the world or by making
capital available to the businesses that need it -
the more money they get in return.

At least, that is how it is supposed to work. But
this is Planet Earth...where nothing is ever as
simple or as straightforward as it seems. And none of
life's roads leads exactly where you expect.

Bill Bonner

For investment ideas and insights consistent with those
you read in The Daily Reckoning, please enroll in our
all new DR Blue Service:
http://www.agora-inc.com/reports/STRT/BigProfits

 
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: May 16, 2001

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