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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Thatched Roofs

In Today's Daily Reckoning:
*** Is the dollar in a new bull market...or a bear market 
*** Cheap high-flyers? Not nearly cheap enough...
*** Capitalism drifts down the river of no returns

*** The excitement yesterday was in the Big Techs - 
especially Cisco. CSCO was $81 in March - but fell as low 
as 58 � in early trading. The whole Nasdaq was down 137 

*** But both CSCO and the Nasdaq bounced. CSCO ended the 
day at 64 3/8 and the Nasdaq ended up 101 point.

*** "There are a whole lot of people out there who want 
to use this sell-off as an opportunity to pick up these 
high-flyers on the cheap," said Charles Payne, head 
analyst at Wall Street Strategies. On the cheap? Cheap, 
of course, is relative. Cisco is cheap at $58 compared to 
what it was in March. Amazon is very cheap at $40 
compared to what it was in December. But by more 
fundamental measures - say, price compared to earnings, 
sales, or book value - both companies are very expensive. 
Cheap lies ahead.

*** The Dow rose 19 points. This brings the Dow to a loss 
of about 7% for the year. The Nasdaq's loss is 7.6%.

*** But the big news - which no one seemed to notice - 
was that the dollar also rose. You can buy a euro for 
just a little more than 90 cents. And if the dollar keeps 
going up - it will soon break its record high against the 
euro and call into question my whole outlook.

*** Every major index has topped out. The dollar is not 
only the most recent but also the most important. A high 
dollar is what supports the whole bubble. Imagine the US 
economy as a stock. It loses money every day - 
about a billion dollars of net current account losses. 
But foreign investors keep buying its stocks and bonds. 
So, the money is still coming in. A rising dollar means 
that more money is coming in than is needed to cover the 

*** But someday soon - as I have been saying for long 
enough to prove that my timing is bad - investors will 
tire buying U.S. paper...the dollar will fall...and the 
bubble will be over. It looked as though the end had come 
on May 17 - when the dollar hit a peak against the euro 
and began to slide. Now, the dollar is either in a bear 
market rally...or in a new bull market move. We shall 

*** Bank Credit Analyst reports that money supply growth 
is slowing. MZM, M2 and M3 - for those who like such 
things - are all in declining growth patterns. New home 
sales were also in a decline in June.

*** And Japan's Nikkei Dow swooned again. It fell 2 1/2
percent last night.

*** Another minor point I have made is that capitalism, 
as we have known it, is doomed. It is drifting down a 
river of no returns. Stock options are supposed to be a 
way of rewarding key employees for superior performance. 
When the employees' efforts increase profits and build 
shareholder value, the owners share a little of the 
upside with them. But Amazon's employees have not made a 
penny in profit. And thanks to their exertions, 
shareholders have watched their stocks fall 72% since the 
beginning of the year.

*** Since the stock price had fallen so much, the options 
held by Amazon's employees were worthless - as they 
should have been. So Jeff Bezos simply issued a new batch 
of options to senior employees - priced at $30. Amazon, 
lest you had any doubt, is not run for the benefit of 
capitalists - but for the benefit of customers [Bezos 
calls it a 'customer-centered' company] and, more 
importantly, employees. The workers are exploiting the 

*** Gold fell yesterday - it is back to $279/oz. And 
platinum melted down - losing $40.70. Is it true that 
gold is merely a relic of the past? Is it no longer 
needed as a store of value? Maybe - more about this next 

*** The wind was strong across the British Isles last 
night. Minutes after the Normandy left Rosslare, Ireland, 
she began to pitch and moan. Jules turned a little green 
at dinner and suddenly started to throw up. I rushed him 
back to the cabin and then felt a little queasy myself. 
Soon, the whole family was racked out - except for the 
two youngest, Henry and Edward, who enjoyed a Pokemon 
movie before retiring for the night.

*** Overnight, the seas calmed a bit. Still, we were all 
happy to back on dry land. We drove off the ferry at 
Rosscoff, Britany - and headed south. I have come to 
appreciate the sturdy diesel engine in our Renault van. 
But after a while, I noticed it was losing power. Then, I 
saw what appeared to be diesel fuel on the rear window. 
Closer inspection revealed that the whole undercarriage 
was soaked in fuel. Hmmm... A Frenchman, smoking a 
cigarette, came over to offer advice. Maybe that is not 
such a good idea, I explained.

*** But we were able to limp to a garage and get the 
broken fuel line fixed for about $20. Finally, we arrived 
back in Ouzilly about 8 PM, wondering why we ever left.

*** Back to work - I notice that the papers are full of 
commentary on the Republican Convention, the upcoming 
election, and the two major candidates. I pity the poor 
writers, who have nothing to say...and the readers, who 
have nothing better to do. Maureen Dowd worries that 
George W. is an elitist. The NY Times quibbles with the 
Republican commitment to "inclusion." The Washington Post 
frets that Bush and Cheney are oil men. I feel I need to 
read this stuff to keep up with what people are thinking. 
Then I realize - they are not thinking at all.

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in history. Did today's Fed do the same thing? Dr. Kurt 
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I will arise and go now, 
And go to Innisfree,
And a small cabin build there, 
Of clay and wattles made;
Nine bean-rows will I have there, 
A hive for the honey-bee, 
And live alone in the bee-loud glade."

The Lake Isle of Innisfree
W.B. Yeats

I saw no house in the Innisfree area built of wattles and 
clay. People do not build of clay and wattles anymore. 
Nor even of stone. They build with cement blocks. These 
are stuccoed in various ways - often so as to leave an 
exposed surface of pebbles. Sometimes the stuccoed 
surface is white. Often - especially on the older houses 
- it is the color of gray cement. 

There are many houses under construction in Ireland. 
A typical house is a rectangle of cement blocks with a 
slate roof. The more up-market houses include dormer 
windows, skylights, and sun-rooms. They are solidly-
built, comfortable and unattractive.

Man doesn't need much to live. A few bits of food and 
shelter are all it takes to sustain life. Beyond that, 
the only things that really matter are work, love, and 
beauty. With the advent of the Internet, knowledge 
workers can ply their trade almost anywhere. So, they 
will go - ceteris paribus - where love or beauty take 

Some will choose to relocate from the suburbs of London 
or Newark to the rolling hills and small towns of 
Donegal, Ireland's northernmost and most beautiful 

But all Ireland is a beautiful place. The fields and 
pastures are separated with stone walls. There are green 
forests, glens, cool rivers, shining loughs and lakes - 
the whole place sparkles. 

You don't think of Ireland as a beach destination - but 
the beaches of Donegal are extraordinary. I told you 
about one of the beaches we visited. We had to hike for 
half an hour through sheep pastures to get to it...but 
once there, we had it all to ourselves. The boys ran 
along the beach as though in a painting by Winslow Homer. 
But instead of breeches and straw hats, our boys were 
naked. Their bathing suits were still wet from a swim in 
the hotel pool. They played among the rocks and splashed 
in the Atlantic waves while Elizabeth and I hiked up to 
the top of the adjacent hill - from which we could see 
for many miles out into the ocean...or back over Ireland. 
Wherever we looked, the view was stunning.

From our perch, we could see four or five farmhouses. 
They were simple rectangles, stuccoed in cement with 
slate roofs. One was painted a light green. The others 
were white. Also visible were the remains of another 
cottage - with stone walls still standing, but little 
else to show for the labors of generations.

Occasionally, you will see the traditional two-room Irish 
cottage - with whitewashed stone and thatched roof. Or, 
here and there, you will spot a Georgian house with an 
elegant portico or an ivy-covered front. Take a long look 
- because most of the domestic architecture of Ireland is 

You may wonder what qualifies me to criticize 
architectural design. My answer is that I know at least 
as little about it as I know about investing. And in a 
curious way - the two intersect. 

Everything happens at the margin. Including beauty. In 
France, it is rare to see a really ugly house. In 
Ireland, it is rare to see a really pretty one. And yet, 
they are constructed in roughly the same way, at the same 
cost per square foot, and following the same basic 
pattern. But for his money, the Frenchman gets a 
beautiful house - the Irishman gets one that is only 

For the same investment, a Frenchman gets a better return 
on his money. And, as a consequence, a Frenchman is 
richer - whether he owns a house or not. Driving along on 
the road from Niort to Limoges - you are repeatedly 
delighted by the houses you pass along the way. Even run-
down farmhouses have a certain style and charm. I almost 
run off the road at every turn - so intently do I study 
the houses I pass.

I am speaking of the domestic, vernacular architecture - 
not tract housing or commercial buildings, which are 
abominable almost everywhere. Most regions of the world 
evolve their own distinctive housing styles - which are 
suited to the climate and flattering to the surrounding 
countryside. The Swiss chalet, the white towns of the 
Spanish mediterranean, the Pueblo style of the American 
southwest - each style provides a distinctive 
architectural dressing that is not only functional, but 

In Ireland, the house that evolved over the centuries - 
the thatched cottage - was a pretty building. The white-
washed stones had pleasing shapes and textures...and the 
thatched roof softened the chilly, white surface of the 
stones. The overall effect was harmonious and inviting. 
But when the thatch was replaced with slate or tile, the 
house looked small, boring and harsh. 

Owners have tried to overcome these problems in a number 
of ways. Some have put up decorative stone here and there 
- including some phony stone, like the form stone you 
still find on Baltimore row houses. Others tried bright 
colors - either on the trim...or on the house itself. 
Still others added doodads and geegaws - vestibules, 
columns, picture windows...whatever they could think of 
to tart up the front of the house.

None of these solutions work. Instead, they make the 
houses look like freaks - like so many of the houses in 
North America - with strange and unnatural collections of 
shapes and colors.

The French, meanwhile, took the same basic structure but 
instead of the gray-cement stucco, they use an earth-
colored material called "chaud." Or, they leave the stone 
exposed. In either case, windows and doors are framed 
with stone or stucco - to set them off from the 
surrounding walls. Also, they add shutters. Houses in 
Ireland do not have shutters. The cement walls are blank 
and cold. These marginal differences make a big 
difference in the way the houses look.

The solution for Irish domestic architecture is simple: 
put back the thatch...or expose the stone. Or cover the 
whole thing in ivy.

Your correspondent back in France, where every house is 
above average.

Bill Bonner

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...

"My small portfolio has followed true to my wife's description of my
investment philosophy, "buy high and sell low." However, that has changed since I started religiously reading DR... I credit this reversal of fortune directly to The Daily Reckoning"

" Your Daily Reckoning is the best in business commentary... mixing
serious warnings and the state of the market with gentle humor"

"It is actually better than some of the newsletters that I pay to

"Your statements and philosophy have kept me from storming into the market and in fact [I'm] making some money in put options" (Frank)

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Last modified: April 01, 2001

Published By Tulips and Bears LLC