|
Co-brand
Partnerships
| |
|
|
|
|
| |
|
Contributed by Bill
Bonner
Publisher of: The
Fleet Street Letter |
|
PARIS, FRANCE
MONDAY, 18 JUNE 2001 |
|
|
Today:
Snowball.com's
Chance In Hell
|
*** Second half recovery...or second half collapse?
*** Consumers getting poorer...manufacturing fell for 8th
month in a row...Nortel's 'brutal experience'...
*** TheStreet editor takes a walk...confidence in the
dollar...are the rich 'rich' yet?
|
*** Will the recovery begin next week? Next month? Has
it already begun? Investors are not sure when it will
begin, but they are sure that better days are coming
soon.
*** This could be a dangerous week. People have been
expecting a 'second half recovery.' Yet, the second half
is almost here - with no sign of a recovery. In fact,
the news just seems to get worse. Consumers' net worth,
for example, fell 8% in the first quarter, from a year
earlier - the biggest drop ever. What a surprise it
would be if the second half produced worse conditions
instead of better ones. With a report from Wall Street,
here's Eric Fry:
- On Friday the Federal Reserve reported that industrial
production (among factories, minds and utilities)
slumped in May for the eighth month in a row. Also, the
capacity-utilization rate plummeted to 77.4%, its lowest
reading since August 1983.
- Nortel Networks, JDS Uniphase, McDonald's, Nokia and
Juniper Networks all announced shockingly poor earnings
trends for the current quarter.
- In a report headlined, "Nuclear Winter," Merrill Lynch
analyst Steve Fox predicted that earnings from Corning
Inc.'s fiber-optic operations will "be below even our
worst-case scenario."
- Mr. Market took the news at face value. The Nasdaq
registered its worst weekly performance of the year
falling 8.4% to 2,028.
- The earnings shortfall announcement out of the Nortel
Networks was particularly alarming, given its sheer
magnitude. As Reuters reported, "[Nortel] announced
plans to slash 10,000 jobs and predicted a huge $19.2
billion second-quarter loss as demand for its equipment
that moves Internet traffic slows to a trickle. The job
losses, on top of 20,000 cuts announced in April, mean
that the company.will have axed a third of its global
workforce."
- Chief Executive John Roth: "We have had better times.
Is this the end of it? We sure hope so, this is a brutal
experience."
- As part of its desperate, sweeping overhaul, Nortel
promised to shutter an astonishing 8.8 million square
feet of office and manufacturing space. With
announcements like this, is it any mystery that North
America's largest commercial REITs are reporting both an
unanticipated falloff in demand and fewer inquiries from
brokers looking to fill space?
- The Street.com, a bullish financial Web site catering
to day-traders, lost its editor-in-chief last week. The
affable Dave Kansas resigned to leave behind the not-
affable James Cramer and his beleaguered Web site.
During the dot.com mania, it was fun springing out of
bed each morning to write about tech stocks that go up
every day. But lately, Kansas must have felt like Casey
Stengel, manager of the 1962 Mets, considered the worst
professional sports team of all time. "The only thing
worse than a Mets game is a Mets double header," Stengel
once said. For Kansas, the only thing worse than
watching the tech bubble burst has been watching it
burst some more.
- "Listen up, all you bottom-believers," writes
grantsinvestor.com's Edward Moy, "tech-stock auguries
are dropping like canaries in a coal mine. In Taiwan,
where prosperity depends on the high-tech economy's
demand for semiconductors, global trade plunged 26%. On
the demand side, U.S. orders for computers and
semiconductors have collapsed, dropping 40%, according
to International Strategy & Investment (ISI). From our
perspective, it's way past time for investors to exit
the high-tech mines. All that's left is the shaft."
- Lynn Carpenter has pieced together a string of
winners, of late, in her trading service The Contrarian
Speculator. I mentioned her 271% 'put' on Nokia last
week. Now, in her regular letter, she's actually
recommending that you buy another telecom - but a very
unusual one. The company has an average return on equity
of better than 20% (34% last year) even as competition
has grown and the tech industry has melted down. "The
shares have been beaten down to $19 and change," says
Lynn. "In a normal market environment they're worth $50
at a minimum - and within two years, Wall Street will be
paying that much." (see: The Fleet Street Letter)
- John Lonski of Moody's observes, "Dollar exchange rate
appreciation in the face of the US' record-smashing
current account deficit underscores the strength of the
world's demand for dollar-denominated assets." In
particular, Lonski notes, "Foreigners hold a near-record
36.7% of all outstanding U.S. Treasuries, a record 13.3%
of federal agency bonds, and an unprecedented 22.7% of
U.S. corporate bonds." Lonski suspects that waning
foreign appetite for U.S. assets will begin to undermine
the dollar's strength.
*** "Confidence in the US$ is all that holds this
termite house together," asserts Harry Schultz. "Only
confidence keeps the US$ up, despite having printed too
many & removed its gold backing; the same with a stk mkt
that's still dangerously overvalued fundamentally. Only
confidence keeps people buying in shops. Greenspan must
lie hard to keep all those balls in the air, defying
gravity to do it. But doubters are starting to come out
of the adoration closet." (see: The Ultimate Con Game)
*** On what, one wonders, does confidence in the dollar
rest? "The average wealth of the poorest 40% of
Americans fell by 76% between 1983 and 1998," the Blue
Team's Dan Denning says, citing a Barron's article on
research by Edward Wolff... "and by 1998, median net
worth for the US had fallen to $1,100." The great bull
market of '82-'98 not only failed to lift all boats, but
"most Americans missed the boat altogether," Denning
concludes. (see: Crack's In The Dollar's Hide)
*** Are we rich yet? Cerulli Associates reports that the
rich doubled their assets in the last five years - from
$4.4 trillion to $9 trillion. Cerulli breaks the rich
into 3 classes. There are the lumpencapitalists, who
Cerulli call the 'mass affluent,' with $500,000 to $5
million in assets. Only 200,000 people have more than $5
million. The ordinary rich have from $5 million to $50
million. Beyond $50 million, there are a few 'ultra high
net worth' people.
*** If you are embarrassed by wealth, Wall Street has
professionals who can help. Four California professors
examined Wall Street's buy and sell recommendations for
the year 2000. They found that the most highly
recommended stocks under-performed the market by 31%.
The least favorably recommended stocks, meanwhile, beat
the market by 49%.
* * * * * * * * * * Advertisement * * * * * * * * * *
YOU COULD'VE MADE 91% IN ONE DAY! or as one fellow
investor put it:
- "Lynn, I wanted to thank you for [your]
efforts...in the last couple of weeks the
information [you supplied] has produced a realized
total of $23,210."
With Lynn Carpenter's F-O-X system, you'll be alerted to
early price volatility in stocks like American Express.
Lynn's readers bought bargain call options when the
stock was at $54.38...and sold them the next day for 91%
gains. Follow this link - and get in on her next trade:
The Contrarian Speculator
http://www.agora-inc.com/reports/AGTD/Values
* * * * * * * * * * * * * * * * * * * * * * * * * * *
THE GARDEN PARTY... AND MORE VERY CHEAP STOCKS
The wind blew. The rain came down in torrents.
We had been working at a furious pace - getting ready to
leave for the summer. But when 6PM came we packed into
two cars to drove about a half an hour to a tiny hamlet
called La Barre.
Even with the intermittent downpours, the place was
delightful. There were only about six stone houses, with
a tiny road threaded between them. Flowers were in bloom
everywhere - in window boxes, in the hedges, in the
backyards.
Our hosts were a charming English couple who moved to
France the same time we did - about 5 years ago. They
live in a common farmhouse, a long, stone building with
a red roman tile roof and a barn attached to the end.
But they have given it the Cotswold touch - dolled it up
with flowers stenciled on the walls, exposed beams, and
English-pine furniture.
There are many English people in the area. They come
because it is cheaper to live in France...and nicer too.
A farmer with 100 acres in the south of England can sell
his land for, say, $10,000 per acre. Here, near
Poitiers, he can buy land for only $1,000 per acre.
Without leaving the European farm system - with its
elaborate rules and subsidies - he can end up with twice
as much land, plus $800,000 in the bank. What's more, it
is less crowded, and prettier in France.
But among the people at the garden party was a new breed
of English immigrant.
"God told me to come," said a pretty young woman with
short hair. An older man, too, reported that he was on a
mission from God. He wasn't sure what the mission was,
but he accepted it.
"It could be that God doesn't want to attack the
Catholic church directly. Maybe he is sending us here to
renew the faith from the bottom up..." the young woman
explained.
"Do you have a personal relationship with Jesus?" she
asked...
"Well, I don't think of it like that," I replied.
"But it is not just a matter of style," she continued.
"The Bible tells us that you can only approach God
through Jesus. You have to get to know Jesus, or you
can't know God."
Maybe my ambitions are too modest, dear reader. But I
have never been on a first name basis with a divinity. I
do try to figure out how the 'invisible hand' works, but
it seems presumptuous to give it a shake.
Real truth, real beauty and real value are similar. You
can't just walk up and introduce yourself like a waiter
in a bad restaurant. The best you can do is to work as
hard as you can to discover them - thinking so hard
"your brain hurts," as Heisenberg put it - and hope to
meet them by accident.
Perhaps it is by modest expectations that great ones are
achieved.
Modest expectations are built into the price of Maxxam
stock. "Today..." wrote Jim Grant a few weeks ago, "the
company is valued at less than half its net cash." But
Maxxam has more than cash in its till. It also has
shares in a company called Kaiser, which alas, has been
dusted with the talc of financial disaster - asbestos.
Kaiser shares have, understandably, already been deeply
discounted. But even if the Kaiser shares disappeared,
Maxxam would still have two dollars of assets for every
one dollar of stock price.
The company does not have to shoot the moon in order for
investors to come out ahead. It just has to avoid
shooting itself.
Another deep value company is one whose condition I
reported many months ago - W.R. Grace. Unable to predict
how the invisible hand of the future might deal with the
company, I modestly noted that the stock seemed to be a
real value at the time.
The trouble was that while the company's assets could be
toted, its liabilities could not. Grace faced, then and
now, thousands of asbestos-related claims. Seeing no
other way out, management decided to put a bullet in its
own foot...using the bankruptcy courts to create a wound
of the sort soldiers dreamt about - bad enough to get
them sent home, but not bad enough to kill them.
Investors reacted unfavorably - W.R. Grace stock fell to
even lower lows.
But all is not lost. Bankruptcy is a way of defining and
limiting the extent of the asbestos claims. About 4
years from now, analysts believe the company will be
resurrected with shareholders ending up with about $9
worth of assets per share. At a current price of $1.24,
this would represent a modest, but healthy, return on
investment.
Your modest reporter,
Bill Bonner
P.S. As I was discussing religious doctrine with a
pretty young woman, a very big man was flirting with my
wife.
"He was shameless," she reported. "He began by telling
me he had been divorced for 20 years...and then he said
he had been having 'a relationship with a young woman of
the opposite sex'... God only knows what he meant; I
didn't want to ask - opposite to what? Finally, he asked
if I had come to the party with my husband. When I said
'yes' he looked terribly disappointed...
"I might have been flattered had he not been the size of
a hippopotamus and just as dim."
* * * * * * * * * * Advertisement * * * * * * * * * *
RETIRE OVERSEAS
Learn about the world's six best places to live or
retire.
Live like royalty on $14 a day. Own an exotic beachfront
getaway for $35,000. Or romantic pied-a-terre for under
$60,000. Enjoy fine restaurant dining for $7 per person.
Employ a maid or gardener for $2 a day. Buy
comprehensive health insurance for $20 per month.
Get the details in your FREE report now:
http://www.agora-inc.com/reports/il/wdr28
* * * * * * * * * * * * * * * * * * * * * * * * * * *
|
|
|
| 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.
|
|
|
|
