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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Profiting From Cellulite

*** "Involuntary vacations" on the rise...but a sleepy 
'sideways' summer day on Wall Street...

*** Economy's got you down? - live it up! After all, 
there's always credit...

*** 'Mall Rats' to the rescue...the new fad among 
Prudential analysts - 'sell'... and The Second Coming of 
Jim, a little bit more.

*** Let's think of it as an "involuntary vacation"... 
yeah, that's better.

*** Initial jobless claims rose to an unexpected 385,000 
last week, says the BLS. "Layoffs are still taking place 
at a fairly brisk pace," reports Bloomberg. The week of 
July 7th saw the highest number of jobless claims since 
October, 1992.

*** But why use such downer language? "Jobless" and 
"Layoff" - they sound so much like 'negative drivel', 
don't they? 

*** "With The Economy Down, Many Still Live It Up!" 
reads a headline in the San Jose Mercury News. A firm 
called Trade Winds Aviation is reportedly doing brisk 
business teaching tech workers taking "involuntary 
vacations" how to fly airplanes.

*** "Most of the local 1,500 workers Cisco laid off in 
April, for instance," says the article, "came away with 
six months' worth of compensation, including biweekly 
paychecks that kept coming for months..." What do you 
suppose happens when the sun sets, summer fades and it's 
time to go 'au boulot' (French term meaning roughly 'get 
your butt back to work')?

*** Well, I guess there's always credit. "The once-
Puritan work ethic that emphasized saving over 
consumption has given way to widespread credit use," 
says economic sociologist Richard Manning. US consumer 
debt is now pegged at $6.5 trillion...leaving each 
household in America, on average, $12,000 in debt. Au 
boulot, folks, au boulot.

Eric, what's happening on Wall Street?


Eric Fry reporting from New York:

- My advice to Mr. Market: seek therapy. He's becoming 
just a little bit too manic-depressive these days. He's 
happy. He's sad. He's happy. He's sad. Yesterday, he 
spent all morning singing the blues. But by the end of 
the day, life didn't seem so bad after all.

- The Dow Jones Industrial Average managed a 5-point 
gain to 10,298, while the Nasdaq Composite shed a mere 3 
points to 1,963. 

- Even though the stock market finished the day boringly 
close to break-even, there was plenty of action 
elsewhere. The foreign exchange market slapped the 
dollar around and gold surged higher. The greenback 
dropped 1.6% yesterday, its biggest loss since July 18.

- Gold, which always seems to delight in a struggling 
dollar, soared $5.50 per ounce to $276.20. Why the 
sudden dollar weakness and gold strength? Why not? The 
weakening U.S. economy provides no shortage of reasons 
to sell the dollar and to buy alternative stores of 

- Alas, yesterday when retail stores reported their 
mostly dismal same-store sales, it came to light that 
one of the last-enduring the pillars of our economy may 
be crumbling - the consumer just isn't spending as 
freely as he was before. Although consumer spending is 
not drying up completely, it is certainly not gushing as 
freely as it did last year.

- "With only slight poetic license," writes Christopher 
Byron, "it apparently comes down to this: after six 
interest rate cuts and more sell-side cheerleading from 
Wall Street than anyone has seen in a generation, the 
best hope for growth in the economy now looks to rest 
with America's 40 million mall rats between 10 and 19 
years of age...

- "$42 billion worth of federal income tax rebate checks 
will be going into the mail, and so far as I can make 
out, the Bush administration's entire economic program 
now boils down to whether America's teen-agers can get 
their hands on the money and blow it at the mall before 
their parents put it in the bank."

- Will it work? Byron continues: "Will an economic pump-
priming to the tune of a mere 0.4 percent of the 
nation's GDP over the next two and a half months somehow 
offset the impact of a loss of more than $6 trillion in 
stock market value since the tech bubble popped in March 
of 2000?"

- On the other hand, hedge fund manager Michael Lewitt: 
"If Americans started saving 1.6% of their monthly 
income, it would lead to a 1.1% decline in real GDP 
growth...In other words, if consumers stop spending, 
this economy will fall off a cliff."

- Maybe what this economy needs is more Pentagon-issued 
credit cards. AP reports, "Here's what a Pentagon 
infamous for buying overpriced toilets and hammers 
produced when it handed out credit cards to its 
employees: 10 million purchases, $9 billion in debt and 
plenty of examples of fraud. The fraud ranged from a 
soldier who spent $3,100 at a nightclub to an Army 
reservist's wife who went on a $13,000 shopping spree in 
Puerto Rico...So far, 1.8 million cards have been issued 
to defense workers, according to the GAO."

- The good news is that not each and every one of the 
1.8 million cardholders has committed fraud. But think 
how our GDP would grow if they did!

- "The Federal Reserve chairman [was] no impartial 
observer of the boom," James Grant observes. "He seeded 
it, accommodated it, celebrated it and defended it from 
those who believed they saw it turn into a bubble. He 
was as uncritically and besottedly bullish as the 
luckless brokerage-house analysts who have fallen under 
the gaze of the Washington inquisitor, Rep. Richard H. 

- Grant continues: "Fearful of a Y2K calamity, the Fed 
stuffed tens of billions of dollars of credit into the 
banking system late in 1999. Not for the first time in 
monetary history, excess credit raised speculative 
spirits, inducing a sense of optimism bordering on 

- Intriguingly, ever since Prudential Securities 
divested most of its investment banking operation 
earlier this year, a growing number of the firm's 
analysts have learned to write: S-E-L-L. "The firm's 
analysts rate 28 of the nearly 450 companies they cover, 
or 6%, a 'sell,'" Crain's reports. "That is up from just 
one - not even 1% - a year ago, according to First Call 

- "That makes Prudential analysts four times more likely 
to say "sell" than their peers at other firms, where on 
average, only 1.5% of companies get slapped with 'sell' 

- When Prudential analysts rate all but 6% of all stocks 
they cover a "sell," we will know that the bottom is in.


To Addison, in Paris...

***'s some more "negative drivel" to spruce 
up your Friday afternoon. "Historically, all busted 
bubbles result in regression to mean value of the busted 
bubble assets," writes Bill King. According to Barron's, 
of 28 bubbles in various assets, all resulted in return 
to, or below, mean valuations. That's a 14.5 P/E for 

*** As we reported yesterday, P/Es on the S$P are 
currently sitting at 26. A drop to 14.5 would mean S$P - 
636...a stunning 547 point drop from today's opening.

*** What if the market doesn't revert? Well, when P/E 
ratios are about 21 or so, reports the Leuthold Group, 
the average return on stocks in the subsequent ten years 
is only about 4.9%.

*** Still, it's summertime and the livin' is easy. And 
as's Bethany Mclean reports " the summer 
season segues into August, a good deal of the developed 
world's equity players are headed for the beach." You 
might as well enjoy what are likely to be lower volumes 
and less volatility in the markets until the earnings 
season heats up again in September. 

*** Lastly, I'd like to bid adieu to our exceptional 
intern, Jennifer Westerfield, today. She spent the 
summer with us here in Paris... alas, duty calls and she 
must return to Texas, where she'll resume classes for 
her final year in college. We see bright days ahead for 
Jennifer; she will be missed. Bon voyage!

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The Daily Reckoning Presents: The Second Coming of Jim 
Davidson... in which the author - having made himself 
famous among DR readers for experiencing a New Era 
epiphany on the eve of the Nasdaq meltdown - takes a 
look at the profitable applications of technology in 
today's economy. 

By Jim Davidson

"Plagiarize, Plagiarize, why not use your eyes?" 

- Tom Lehrer 

If you've looked at Americans parading at the beach 
lately, you might be licking your chops at the prospect 
of any idea for capitalizing on cellulite. There has 
never been more of a bull market in cellulite in the 
history of the world. 

I notice it all the time, mainly when limbering up in my 
local gym, where the floor mats are directly behind the 
Precor elliptical trainers, creating a perspective known 
as the "Cellulite Gallery." 

Some of the women gamely exercising have so much 
cellulite dangling from their hips and legs that you can 
see it jiggle through their tights. It is an unsightly 
reminder of a major opportunity ignored. 

Let me explain. The identification of cellulite, along 
with the multi-billion market for remediating it, are 
epiphenomena of technology. 

The first thing that should be understood about 
cellulite is that it is nothing new in evolution. 
Indeed, "cellulite" is not even a medical term. It is 
simply another word for "fat." Americans may be the 
fattest people in history, but fat has been around 
almost as long as life itself. 

That said, you would find it impossible to track a 
history of cellulite or cellulite remedies beyond a 
horizon that extends back for more than a quarter of 
century. The word "cellulite" was only invented by 
French dietitian, Nicole Ronsard, about 20 years ago. By 
contrast, there have been fat women through the ages. 
Rubens' paintings; even those of Renoir, suggest that 
portly women were considered the epitome of beauty in 
times past. 

Be that as it may, no one seems to have noticed the 
unsightly globs and wrinkles of fat tissue jiggling just 
beneath the surface of so many women's hips and legs in 
Ruben's time, nor that of Renoir. Little attention was 
paid to women's legs because they were never seen in 
public. Even in private, the lighting was not very good, 
and few women paraded around exposing their bodies to 
scrutiny. Through most of history until recent 
generations, legs were covered. Sometimes even women's 
arms and faces were veiled behind layers of clothing. 

Technology has helped make heavy clothing to hide 
women's bodies anachronistic. The Information Revolution 
in the last half of the 20th century made it much more 
acceptable for women to go around half naked. For one 
thing, technology has steadily diminished the importance 
of physical strength in combat and making a living. A 
woman can launch a guided missile as well as a man. And 
the muscularity required for most jobs has steadily 

Of course, an argument can prove too much as well as too 

In principle, a woman might as well have pulled the 
trigger on a machine gun, or ignited a blast from a 
cannon as a man for many years past. But this did not 
happen for good reason. So long as there were rising 
returns to violence in an economic sense - meaning that 
larger forces generally defeated smaller ones - it would 
have been destabilizing for women to have entered 

It was only during the last decades of the 20th century 
that the Information Revolution created diseconomies of 
scale in the deployment of violence, opening the door to 
organizational challenges to the nation-state system. 
This was a solvent that helped dissolve many traditional 

Information Technology has raised the returns to the 
most intellectually talented individuals, many of whom 
are women. In the process, it has both reduced the 
incomes of uneducated males and increased those of 
educated females. This has made women more economically 
independent of men. 

So-called "women's liberation" was just the sociological 
soundtrack that arose to keep these technological 
developments company. Add to this already potent mix, 
the birth control pill, which made recreational sex more 
feasible in reproductive terms, and it is little wonder 
that cellulite went undiscovered until recent years. 

In traditional societies that emerged when physical 
force was predominant in defense and muscularity was 
crucial for securing a livelihood, women were far more 
likely to remain in subservient positions. You can still 
see this for yourself in many parts of the globe. 

Not long ago, I was in a remote village in central 
Turkey, reviewing the site of an amazing gold discovery 
by Anatolia Minerals Development Corp. All the women I 
saw wore baggy pants and long-sleeved blouses and 
sweaters, not to mention, veils and scarves over their 
faces. Without doubt, some of these women were hiding 
cellulite behind their ample costumes. But they were 
under no public pressure to trim and tone their bodies. 
Any man who chanced to see their cellulite would be 
taking his life in his hands. 

Technological developments, now well established in 
Western economies, have allowed women to drop the veil - 
and more - to compete for the attention of men. A 
logical, indeed, an almost inevitable consequence of 
this competition under conditions of "full disclosure," 
has been pressure on women to "shape up." 

All the billions spent on running shoes, health clubs, 
spas, diets and other remedies for "cellulite" are but 
the logical consequence of dynamic of human 
relationships tilted in a new direction by technological 

As I view the future, the probability is high that 
entrepreneurs marketing remedies for cellulite will find 
themselves selling into even more avid markets in the 
future. Advances in biotechnology that extend life and 
mitigate the deleterious effects of aging will prove 
ever more profitable. 

That technology is a major part of this trend should 
inform your investments without making you into a geek. 
The hidden logic of technological change permeates 
almost every feature of society. 

If you wish to succeed, in your business, your 
investment and your livelihood, it would be a rash 
mistake to dismiss the importance of technology. 

James Davidson,
for The Daily Reckoning

p.s. I have a prejudice to reveal, in that I am a 
director of Anatolia. I would not have been in Turkey 
otherwise. But that aside, Anatolia has something 
extraordinary to report.

One of its drill holes at Cukurdere, Turkey, has brought 
evidence to the surface of the richest gold find from 
any drill hole in approximately 30 years. 

The drill intersected a gold zone to a depth of 93 
meters, with 26 meters at 27 grams per tonne, including 
17 meters averaging 1.2 ounces of gold per tonne. To put 
this in perspective, these results alone establish a 
deposit worth approximately $2 billion. Yet the stock 
rose on the announcement, to give Anatolia Minerals a 
market cap of just $14,040,000 - a massive discount to 
the value of the deposit, which is still being extended 
by additional drilling. 

If your interested, keep an eye out for my new 
newsletter, Vantage Point.

James Dale Davidson is the author of several best-
selling investment books, including The Sovereign 
Individual. In September of this year, Jim will launch 
"Vantage Point": a new exploration of profitable 
opportunities in the application of technology to 
existing Old Economy businesses.

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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: August 13, 2001

Published By Tulips and Bears LLC