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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

TRENTON, NEW JERSEY 
TUESDAY, 11 JULY 2000 

 

Today:  The Wedding Party

In Today's Daily Reckoning:

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*** Yesterday was a typical summer day... The bear spent the 
day at the beach...letting stock market investors shuffle and 
bob without interference.


*** The Dow ended the day up 11 points. The Nasdaq fell 42 
points.


*** What is there to say about such a middlin day? Nothing 
much happened in the gold market...or in bonds...or in 
stocks. 


*** A report from the Labor Dept. says that wages rose 5 
cents/hr. in May. As tight as the labor market appears to be, 
it's surprising employers got away with just a nickle. But 
one month's worth of statistics don't mean anything. 


*** When p/e ratios rise above 22, according to a study cited 
by Richard Russell (http://www.dowtheoryletters.com), you can 
expect returns of only 5% per annum for the next 10 years.


*** Russell also worries that this bear market could be like 
the long, confusing period following the peak in '66. If that 
is the case, the 5% sounds pretty good. Because if you adjust 
for inflation, stock investors went nowhere for approximately 
20 years following the '66 peak. And yet, during that period, 
there were several major rallies that carried the Dow up to 
and beyond the '66 high. (see: Irrational Exuberance 
http://www.dailyreckoning.com/body_headline.cfm?id=225)


*** Another interesting little note: the average 
price/dividend ratio going back a century has been 25.50. The 
ratio hit a record high (meaning stocks were paying the 
lowest dividends in history) of 88.29 on June 27, 2000.


*** This also from Richard Russell:


"In 1948 Don Bradley published a booklet which explained how 
the stars and planets and heavenly events, when analyzed 
correctly, exert a force on the human psyche and thus on the 
stock market. Sounds daffy? Sounds ridiculous? Don't laugh. 
The Bradley Model has made some amazingly accurate forecasts. 
The brilliant Paul Marcrae Montgomery of Legg Mason and the 
equally bright Arch Crawford of Crawford Perspectives (520 
577 1158) follow the Bradley Model. They've followed it for 
years with many outstanding successes.


At any rate and for your interest, the Bradley Model traces 
an irregular uptrend in the stock market, starting from last 
December and ending in a high for the year to take place this 
month - on July 21. Then a decline, and then a secondary 
(lower) peak on September 14. After Sept. 14, the Bradley 
Model says "down and dirty" for the stock market for five 
months to February of 2001."


*** Despite Bradley's work, I believe the fault lies not in 
our stars, but in ourselves. Polls show that as the bear suns 
himself at the beach, investors are becoming more bullish. 
Advancing stocks beat out declining ones yesterday, as 
they've done for 8 out of the last 10 days, 1594 to 1242. New 
highs hit 99; new lows numbered only 21.


*** October platinum continues to rise - up $6.90 yesterday 
in an otherwise unexciting metals market.


*** Meanwhile, on the River of No Returns, from Alan Newman 
at Crosscurrents (http://www.cross-current.net):


"Clearly, time is running out for Bezos and company to turn a 
buck or three profit. Will they ever? In the company's first 
year, expenses were 40.9% more than revenues. Improvement was 
clearly visible in 1997 when expenses exceeded revenue by 
only 22.1% and again in 1998, when the vigorish was a mere 
17.9% over total revenues. But last year, expense exceeded 
revenue by 36.9%, a staggering amount when you consider that 
the company was running revenues at more than 104 times the 
pace of 1997. As a consequence, expenses were 101 times what 
they were in that first fateful year.


Amazon may be the first company in the history of the planet 
with $72 in debt for each of its customers. The trick in 
maintaining 17 million customers, of course, is to offer 
everything at a loss, a deal consumers cannot refuse. To 
compete with traditional and other Internet booksellers, 
Amazon offered to FedEx the new Harry Potter book upon
publication at no extra cost above the regular shipping 
rates. Pre-orders went to a 40% discount from retail, and we 
can only suppose that the 256,310 consumers who pre-ordered 
cost Amazon a buck or two on every copy Fed Ex'd at lower 
rates than otherwise available. That's how the company
is able to secure 17 million customers and keep them - by 
giving away the store. The pattern we sense is one of 
inevitable doom for Amazon's shareholders and we must admit 
not one scintilla of surprise at the recent drop in share 
price from which no dead-cat bounce will mollify those who 
bought at much higher prices. We are beginning to see 
Amazon's survival in jeopardy."


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THE WEDDING PARTY

After the 'I do's were said, the wedding party made its way 
to the church hall for the reception.


A long table had been prepared at which we served ourselves, 
buffet style. There were little biscuits with ham, large 
bowls of shrimp, several different plates of vegetables, and 
assorted condiments and crudites - prepared by the ladies of 
the church. Half the table, though, seemed to be set aside 
for desserts.


I don't know what doctrinal point is the cause, but for some 
reason Baptists prepare the best desserts. Episcopalians 
usually have good decorations, but they are no match for the 
Southern Baptists in the food department. Like the religion 
itself, Episcopal weddings look good but can leave you 
unsatisfied.


The best church food I have ever had was at an A.M.E. church 
in rural Maryland. A.M.E., for those unfamiliar with it, 
means African Methodist Episcopal. This was many years ago, 
but on that occasion a woman as big as a houseboat, named 
Hattie, stood beside me as I ate fried chicken and said in a 
deep, throaty voice that sounded like an Ella Fitzgerald 
song: "I likes to see a man eat!" {It is considered 
politically incorrect to report the black dialect as it 
is...or was... actually spoken - but that is what Hattie 
said.)


But French Catholics can put on a good wedding feast too. And 
it will have one major advantage over a Baptist one: liquor.


This aversion to alcohol created a small problem for my 
brother in law, Rev. Campbell, at the Sunday service. The 
wedding still fresh in his mind, he recalled the story of the 
wedding feast at Cana in Gallilee. Jesus arrived at about the 
time the hosts ran short of wine. The Nazarene asked that 
jugs be filled with water. This done, he performed his first 
miracle - he changed them into wine.


"Jesus can perform miracles in your life too," said the 
Baptist preacher, ignoring the contradiction and continuing 
in his very southern accent, "He can change ordinary things - 
like water - into sparkling things."


I wished someone had performed Jesus's first miracle on 
Saturday night. But instead of wine, or champagne, Jesus 
seems to have entered these people's lives and turned the 
wine into fruit punch.


Sunday morning I awoke with a bit of a headache. It must have 
been a result of too much temperance... after spending a 
couple of days in the buckle of the Bible Belt. 


"All you have to do is to remember your ABCs from Bible 
School. Do y'all remember your ABCs," Rev. Campbell asked the 
Sunday crowd. I had little doubt that every one of them 
remembered. But he spelled it out for us anyway.


"First you have to Admit that you're a sinner. Then, you have 
to Believe that Jesus Christ is the son of God. And you have 
to Commit yourself to follow Jesus all your life."


"It's as easy as ABC. And if we all remember our ABCs, God 
can perform great miracles in our lives."


Ghandi once said he was more free in his prison cell than 
most of the people walking the streets. In this reflection, 
Ghandi was vain. He could see the shackles others wore, but 
not his own.


Southern Baptists do not bind themselves only with the 
fetters of holy matrimony. They ask adherents to commit 
themselves to a code of conduct and a whole set of beliefs. 
Baptists (and I am only speaking of Baptists as an example; 
this is, of course, true of many different groups) give up 
the freedom to choose. Even a Chateau Rothschild 1986 
Bordeaux is off limits. 


Despite the lack of alcohol, Baptists are growing in number. 
The churches are packed with vigorous, robust congregations. 
But you will search in vain to find Southern Baptists in the 
New York Review of Books. American intelligentsia are 
contemptuous of Southern Baptists. For nearly the entire 20th 
century, intellectuals have scorned the ABCs of religious 
faith. Filmakers have mocked them. Writers have sought to 
reveal dirty linen in every Bible thumping household. Even 
the mainstream churches have turned their backs on them. 


Episcopal ministers have more faith in taxes than in 
miracles. They urge their parishioners to support government 
programs to care for the sick and feed the poor. The 
chattering classes sneer at the shackles of religion, but 
cannot see the prison of contemporary ideology that confines 
them. 


None of us are free. We are all prisoners of our own ideas, 
customs and beliefs - as well as the natural laws of the 
physical universe. Marriage, religion, Democracy, anti-
nomianism, the boiling point of water, the Designated Hitter 
rule - these are just a few of the millions of ties that 
bind. Some think the world is ruled by a God, whose bidding 
must be done. Others put their faith in secular authorities. 
Still others think themselves the crown of creation and 
believe they can figure things out for themselves. 


But none are free. 


All people bow down before some public God, whether the God 
of Jehovah, the God of the State, custom, habits, or their 
own private demons...and all of us wrinkle a bit as we grow 
older. 


At one comic low in the history of democratic government a 
state legislature decided that the value of Pi - which 
expresses the relationship of the circumference of a circle 
to its diameter - should be rounded off to 3 to make it 
easier to work with. Despite an official Act of the 
legislature, however, the actual value of Pi remained 
unchanged. We are stuck with it...just as my soul is stuck, 
as Yeats put it, fastened to this "dying animal."


But there is another meaning to the word "free." Ghandi was 
wrong. He was not free in his cell. He was free when he got 
out of it. He walked out still shackled to all his bad ideas 
- but he was free from the prison. 


For my part, a private confession that I make reluctantly...I 
am willing to stand before God when the time comes - if that 
is what happens. But, to paraphrase Faulkner when he got 
fired from his job at the Post Office, I'll be damned if I 
want to answer to every son-of-a-bitch with a gun or ballot 
in his hand.


Your correspondent, back in Baltimore...


Bill Bonner


My daughter Maria blurted out to her aunt that she "had Daddy 
wrapped around her little finger." This was true, of course, 
but I was shocked to realize that Maria was aware of it. I am 
a prisoner...and a happy one.


P.P.S This poem, sent by DR reader R.B. seems appropriate:


"Why Should Not Old Men Be Mad?"


W. B. Yeats 1939


Why should not old men be mad?
Some have known a likely lad
That had a sound fly-fisher's wrist
Turn to a drunken journalist;
A girl that knew Dante once
Lived to bear children to a dunce;
A Helen of social welfare dream,
Climb on a wagonette to scream.


Some think it a matter of course that chance
Should starve good men and bad advance,
That if their neighbors figured plain,
As though upon a lighted screen,
No single story would they find
Of an unbroken happy mind,
A finish worthy of the start.


Young men know nothing of this sort,
Observant old men know it well;
And when they know what old books tell,
And that no better can be had,
Know why an old man should be mad.

 
 
 
 
About The Daily Reckoning:
The Daily Reckoning... "more sense in one e-mail than a month of CNBC."  That's what readers are saying about The Daily Reckoning.

Bill Bonner, recognized internationally as a brilliant writer, entrepreneur
and publisher of The Fleet Street Letter, offers you his daily market
commentary absolutely FREE. For the first time, outsiders are getting a peek into his powerful and profitable investment insights. Bill's practical contrarian advice empowers even average investors to protect their hard-earned wealth and achieve amazing gains.

Bonner writes his email letter from Paris, France, each morning --
describing the wacky, wonderful world of investment, politics and everything remotely related. Irreverent. Sharp. Honest. Thoroughly, unabashedly contrarian. It's also among the fastest growing e-letter on the Internet.  It's a brand new service... but it has a distinguished history..

For nearly 62 year, The Fleet Street Letter, the oldest investment
advisory letter in the English language has consistently delivered
invaluable economic and political foresights to savvy investors. Current readers regularly enjoy impressive investment gains even as the market falters. Here's more from his online readers...

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