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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

TUESDAY, 31 JULY 2001 


Today:  How Much Money Do You Really Need?

*** "What are you worried about?" asks the Great 
O'Neill...while the markets take a summer snoozer...

*** A burst of "curiously psynchronized bearishness"... 
when WILL the recovery begin?... Real estate headed 
south in the West...

*** "Misery index" at a four year high... "When times 
are tough, the temps are first to go"...who wants a job 

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

The landing approach has begun. The flaps are down. A 
moderate slowdown has hit the U.S. economy. Investors 
are still optimistic. But corporate profits are way off.

Has Alan Greenspan has engineered a soft landing for the 
formerly high-flying tech bubble? Or is there a lot more 
pain to come? According to one of the world's leading 
economists, belief in the Fed's high-octane 'new 
paradigm' propaganda is worse than blind can 
ruin you.

Here's what you need to do - right now - to prepare 
yourself for: 

The Coming Economic Crisis
* * * * * * * * * * * * * * * * * * * * * * * * * 

*** "When you look at the US economy, what are you 
worried about?" The question was put forth by 
"avuncular" secretary of the Treasury O'Neill.

*** Apparently, according to the Financial Times, 
O'Neill has sifted through the data, read the reports, 
asked the pointed questions...and determined that "since 
1945, every severe economic downturn had been associated 
with a shakeout in the car-sector and falling demand for 

*** But cars and light trucks have "held up well"...and 
housing is O'Neill has "a lot of confidence" 
in the present economic situation. 

*** Really, what do we expect him to say? "Sorry 
folks... the 'crotte' is hitting the fan." No. That task 
is better left to less-than-avuncular newsletter 

*** For example, when we look at the US economy, we see 
corporate profits tanking - Intel down 94% this year, GM 
down 74% - over 1.1 million jobs eliminated since the 
beginning of the year and unemployment rising at it 
fastest pace since 1992. 

*** Do you suppose it too presumptuous of us to ask the 
Great O'Neill if these figures are cause for concern? 
Perhaps it is... 

Eric, what's new on Wall Street?


Eric Fry reports from New York:

- "Summertime and the livin' is easy"... means, among 
other things, it was a snoozer on Wall Street yesterday. 

- The Dow fell 15 points to finish at 10,402, while the 
Nasdaq dipped 11 to 2,018. The S&P 500 broke even on the 
day. Few individual stocks or sectors distinguished 
themselves. Motorola jumped almost 10% and semiconductor 
stocks bounced a little. (Hope springs eternal!)

- Still, there was a mite of activity that faintly 
resembled news: three of Wall Street's hot-shot 
investment strategists lowered their earnings estimates 
for the S&P 500.

- In a burst of curiously synchronized bearishness, 
Credit Suisse First Boston's Thomas Galvin, UBS 
Warburg's Edward Kerschner and J.P. Morgan's Doug 
Cliggott each decided yesterday that their prior 
estimates were too high.

- Maybe these guys played in the same golf foursome over 
the weekend. Or maybe these bearish seers think so much 
alike that they can't help but exactly the 
same time.

- Yet, not all three gentlemen are in complete agreement 
about what the lower earnings might mean for the stock 

- Cliggott, who cut his 2001 operating earnings per 
share for the index from $50 to $44, warned clients, "A 
very cautious approach to the U.S. equity market makes a 
lot of sense until there are unambiguous signs of a real 
earnings recovery."

- By contrast, the slightly more upbeat Galvin expects 
stocks to begin moving higher well in advance of a bona 
fide earnings recovery. Wisely, Mr. Galvin declined to 
mention exactly when the stock market rally might occur.

- $38 billion worth of tax rebate checks from Uncle Sam 
are starting to arrive in mailboxes across America. Wal-
Mart, ever the opportunist, has offered to cash the 
checks at no charge. Helpfully, consumers can also 
convert checks into pre-paid Wal-Mart shopping cards.

- Thanks to Wal-Mart, therefore, consumers can instantly 
invest their tax money in family size packages of 
Pringles...super-sized squirt guns for the kids...and 
Armor All.

- I spent the better part of the last two weeks in 
California - ground zero of the disaster - and I 
can report seeing very few signs of toxic economic 
fallout. Indeed this morning's San Franciso Chronicle 
headline proclaimed, "Tax Revenue Leaps with Home 

- Of course, most of this "good news" is rear-looking. 
The Chronicle writes, "Last year's red-hot real estate 
market pushed the Bay Area's overall property values to 
record heights - and now county tax collectors are 
raking in the riches...[A]ssessed values on property 
rolls jumped more than $75 billion in the nine Bay Area 

- Unfortunately, property taxes for the newly-assessed 
homeowners will now rise just as their property values 
are starting to fall.

- The local Marin Independent Journal reports that May's 
median home price in Marin County was 11.3% below the 
April median home price - "the largest single month-to-
month decline in several years." The median home price 
in the tiny Marin County hamlet of Mill Valley plunged 
35% in June from May levels. 

- Across the Golden Gate Bridge, the residential rental 
market in San Francisco is feeling the heat, too. The 
number of apartments available for rent has increased 
600% since Labor Day of 2000. As with the tech bubble, 
it looks like � the Valley � is already showing 
leadership with respect to real estate... in the wrong 

Back to you, Addison...


Addison reporting from Paris...

*** The "Misery Index" indicator, all-but forgotten 
between 1998-2000, is being trotted out once again. 
According to the Dismal Scientist, the index - which is 
the sum of the unemployment rate and the rate of 
inflation - reached a four-year high in May.

*** "Job Seekers Get Professional Help" reads a headline 
in MSNBC. "The job market, which had been slowing since 
December, has crumbled in the last few weeks," the 
article reads. One placement firm in Scranton, PA, 
reports a 20% increase in job seekers in the past month. 

*** Kelly Staffing Services reports their second-quarter 
earnings have dropped 70% from a year ago. "When 
companies go through down times," says a company 
representative, "the temps are the first to go." Kelly 
also revised fourth-quarter recovery estimates, saying 
they don't expect a turnaround until some time in 2002.

*** Jobs. Paychecks. Money. Who really wants a "job" 
anyway...and why? How much money do you really need? 
Bill posits just such a question - in a DR classique 

*** Misery could be measured on a different scale in 
Paris today: the centigrade scale. It's sweltering. And 
while the city takes on the kind of haze you might like 
to see in a post-card of the Seine...air conditioning is 

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


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who developed them and:

- Drop cholesterol up to 134 points
- Make years of arthritis pain and swelling vanish
- Restore lost vision
- Reverse "incurable" memory loss
- Cure and prevent deadly sex organ cancer

This maverick doctor even took on the FDA just to bring 
these cures to his patients. Learn first-hand about his 
breakthroughs for prostate disease, asthma, migraines 
and more...
* * * * * * * * * * * * * * * * * * * * * * * * * *

The Daily Reckoning Presents: a DR Classique originally 
broadcast on Friday, 20 August 1999.

By Bill Bonner

"Women," said my old friend, Mark Ford. That's the 
reason we earn money.

I misunderstood at first.

Yes, a woman can cost a lot to maintain. She will need 
food, clothing, transportation, shelter. Her children 
will need braces and tuition. But it is not need that 
underlies man's drive for is desire.

People do not buy chateaux because they need a place to 
live. Nor do they invest in stocks because they need 
pocket money. They seek wealth and its trappings for 
other purposes.

Dorothy Parker said, "You can't be too rich or too 
thin." But when Howard Hughes died, it looked like he 
was both. Hughes had the kind of wealth that meant he 
could do what he wanted. He didn't have to listen to 
anyone. He was so rich he could eat Campbell's chicken 
noodle soup every day if he wanted and wander around 
with Kleenex boxes on his feet.

In the end...Howard's wealth may not have helped him 
much. It cushioned him from reality...protecting him 
from the things that might have brought sanity to his 

He might as well have been on welfare. Those people, 
too, are cushioned from the reality of everyday they never have to learn how to earn a living 
and get along in the real world. That is also often true 
of the children of rich people. They don't have to learn 
how to hustle...and many never do. In this sense, wealth 
is not merely a burden like the Chateau de Bourg 
Archambault...but a threat.

At Ouzilly, deep in the French countryside, you can live 
well on very little money. On a beautiful day, you can 
sit out on the terrace of a stone can 
drink local can eat local can 
putter in your garden and take day trips to visit 
medieval towns. Life can be quite good - even with very 
little money.

But when you don't have money, you don't have the option 
of changing your lifestyle. As long as I am content to 
live in rural France, or rural Arkansas, for that 
matter, I can do so on little money. But what if I want 
to live in New York? Or Paris?

I'm going to find out how much it costs to live in Paris 
in a couple of weeks. We're moving to an apartment near 
the Trocadero. The modest, 4-bedroom apartment rents for 
17,000 francs per month-about $3,000. Not bad. Cheap by 
New York standards. Paris is actually one of the 
cheapest major cities in the world. Still, with school 
fees, meals, transportation, maintenance, furniture, 
utilities, professional fees...we estimate it will cost 
us about $100,000 a year to live there. But the tax rate 
in France is I will have to earn $250,000 just 
to keep my head above water.

Hmmm...this won't be cheap. How much capital would I 
need to earn $250,000 per year? Well, if I could get a 
reasonably safe return of would mean that I 
would need $4.3 million. This does not provide a 
luxurious lifestyle by any means. In fact, it barely 
pays the bills of a bourgeois American family...with six 
children in school. 

[Bill has since moved his family to a much larger place 
in the fashionable 16th arrondisement of Paris. Of 
course, I can tell you this while he's on vacation - he 
will scarcely notice... Addison]

Most people think you need at least $10 million before 
you can be considered rich. That amount would provide 
you with about $600,000 in income. Most people could 
live comfortably on that much.

But wealth is not always forthcoming when, and in the 
amounts, we want it. So, in practice, people don't 
really calculate how much they "need" to live the way 
they want. Instead, they try to earn as much as they can 
and adjust their sights accordingly. They do not need to 
live in in Omaha is good enough for 
Warren Buffett, after all. They do not need to go to the 
Tour d'Argent for dinner. The food at Madame Grammond's 
is just as nourishing. So why the pressure to earn ever 
more money? 

Bunker Hunt said that money was "just a way of keeping 
score in life." But to what end? What's the prize, in 
other words? Once you have a comfortable place to 
live...and decent food to eat...does additional wealth 
really add to your quality of life? Does it help your 
children...or does it hurt them? Does it make you 
happier? More secure? 

The major thing it does is expand your field of choice. 
You can decide for yourself whether you want to live in 
Omaha or New York, for example. More choice leads to 
more thought...about what living well really means. 
This, in turn, may have the effect of enriching your 
life in unforeseen ways. Or it may simply make life more 
complex and having to choose a long 
distance phone service or an insurance program. 

"Women," repeated Mark, "without women, money would mean 
nothing." At last I grasped his meaning. He was reaching 
for the deeper truth. For all the practical advantages 
of having wealth, men strive for it for impractical 
reasons. Money is status. There is some reproductive 
imperative that causes men to seek status and women to 
prefer men who attain it. To express it crudely, money 
is a way of scoring (metaphorically, of course)...not 
just keeping score. 

Bill Bonner 

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: July 31, 2001

Published By Tulips and Bears LLC