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*** None of the standard metaphors seem appropriate.
"Revving up"..."Getting up a head of steam"..."getting
rolling"..."gaining momentum"..."getting some wind in its
sails"... All these expressions seem hopelessly pre-
Gildered Age. Analog...industrial...they don't do justice
to the Summer Rally that is finally, shall we say,
*** Lowry's gauge of selling pressure is at it lowest
register in 10 months. (Of course, many of the sellers
are at the beach...with Mr. Bear himself. Volume on the
NYSE yesterday was very low.)
*** "The Bubble is Back" Michael Belkin tells us in the
current issue of Strategic Investment. "The forecast of
our proprietary model...has switched from down to up for
those asset classes in the intermediate term (next 2-3
months)...There is a high probability of a summer rally
that lifts battered tech and TMT stocks until September."
But, Belkin warns, "we wouldn't classify this as a
sustainable bull market." (see: The Bubble Is Back
*** Meanwhile, Richard Russell's proprietary indicator,
the PTI, is also flashing a bull signal. Like Belkin,
Russell is suspicious of the rally's staying power.
*** The Dow rose 148 points yesterday - it has been up in
10 of the last 11 sessions. There were 1835 stocks
advancing, against only 1038 declining. More than 5 times
as many stocks hit new highs as new lows.
*** The Nasdaq also managed an increase - rising 60
points. Even Amazon bounced off the $30 mark...settling
*** "People are convinced," says a market strategist
quoted by Reuters, "that we're not going to have a rate
hike [next week]." This is probably correct. It is
getting a little close to the election and there appears
to be no need for a rate hike. It's the swinging '60s
again and everything is groovy. Greenspan is unlikely to
want to upset it.
*** My own model - to which I claim no property or
paternity rights - is flashing a giant "?" signal. This
helpful index has never been wrong, or right for that
matter. It doubts that the summer rally will last beyond
Labor Day...but readily admits that it is only guessing.
*** The CPI comes out tomorrow. Unless it is shockingly
high or low, the market is likely to rise on the rumor of
no further rate hike...and then drift off on the news
after the 22nd.
*** But Bill King reports that "Tuesday [today] is a
'strange attractor' (Chaos Theory jargon) after a few
days rally sequence. It's really that simple at times."
*** Nothing happened in the gold market that is worth
reporting. Nor was there much excitement among currency
traders - though it is from that quarter that I expect
the first screams of horror when and if the bubble
finally pops this autumn.
*** The WSJ reported yesterday that the nation's current
account balance has reached another record - a negative
*** It is hard to believe that it is summer in Japan too.
There, the sun never seems to shine and the digits of the
New Era never seem to add up. Bankruptcies hit another
record - a post-WWII high - in July. Collectively,
bankrupt firms owe more than 4 trillion yen.
*** Internet companies are being de-listed from the
Nasdaq. Efax.com was removed last Wednesday. Beyond.com
was given 90 days to meet Nasdaq minimum requirements.
Value America and MotherNature have been selling for less
than $1 for almost 30 days. "Their intention," said an
Efax.com official, referring to the Nasdaq, "is to
protect investors." What they are really doing, however,
is protecting themselves and contributing to the illusion
that stocks always go up. Nasdaq, like a bad heart
surgeon, is burying its mistakes.
*** Eventually, all stocks are de-listed. And an investor
- buying each issue at the IPO and selling when the stock
is de-listed - would be taking a long road to nowhere.
*** Tech stocks make up 5% of the nation's employment, 8%
of the GDP and 32% of the S&P 500 market cap. But they
account for 82% of the average monthly move in the S&P
*** "Dog Falls to Death, Hits Man." The Daily Parisien
reports that a Japanese man suffered major back injuries
when a dog fell from a 9th floor balcony in Paris and
landed on him.
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Don't go home as you were
Don't live again as you were
Open your heart
Make a new start
Live as a New Man!
Hymm sung in church a few weeks ago
"I believe that there are only two kinds of humans,"
writes Ed Yardeni. "(1) The forward-looking camp believes
that the digital technology revolution is transforming
our economy into the New Economy."
Realizing that I probably did not fit into this first
subset of our species, I kept reading:
"(2) The backward-looking crowd believes that the New
Economy is mostly hype and that the technology revolution
is mostly a bubble in the stock market."
"The first group," continues the chief economist at
Deutsche Banc Alex Brown, whose own position we are
beginning to anticipate, "gets it, the second group
doesn't."(see: Bridging the Great Divide
"Getting it," is an expression of fairly recent vintage.
It is typically used to describe a position that is
considered so hip and so correct that there is no need
(and little hope) of ever justifying it by appeals to
reason or experience.
Men who wondered at the extreme claims of radical
feminism, for example, were told that they just didn't
"get it." Likewise, any attempt by a white person to
disagree with black racists - such as those who claimed
that Cleopatra was an African-Egyptian - are still met
with a "you don't get it, do you" response.
But Yardeni doesn't stop there. He continues:
"The first group is composed of digital humans who
believe the New Economy's secular trends are overwhelming
the Old Economy's business cycles. The second group is
mostly analog type personalities who believe that
fluctuations are wired into our brains and collective
Yardeni is best known as the man who made Y2K hysteria
respectable. He predicted that the computer problems
associated with the year 2000 would cause a recession. Of
all the Y2K personalities, perhaps none was proven more
wrong than Yardeni. Not only were there no Y2K problems
of any economic significance - the effect of the whole
scare created a boom, not a recession. Huge spending on
Y2K prophylactics turned into a big bump up in
productivity, thanks to the miracle workers at the Bureau
of Labor Statistics.
Yardeni must have been impressed. Two little digits on
the Gregorian calendar - and BOOM! The world's biggest
economy takes off. And now, the economist has turned
taxonomist, or perhaps phrenologist. Whether by checking
the bumps on their heads, the activity in their e-mail
accounts or their voting habits, he has identified a
whole new subspecies of human - the digital man.
Readers of this space (I was going to say 'letter' but I
fear that may tag me forever as an analog, less-than-
digital man...doomed to a life of low financial
expectations) will remember a quotation I passed along a
few months ago:
"The New Economy" wrote David Denby in the New Yorker,
"seems to be producing a New Man who, in imitation of the
economy itself, is going through wrenching changes in the
way he lives, works, buys and interacts with other
The New Economy has certainly changed habits. Instead of
saving their money, people spend it. Instead of paying
off debts - they go deeper into debt, applying the funds
both to their standards of living and their equity
This is really perhaps the key difference between, say,
the Japanese economy and the American one... and, say,
the American economy of 2000 and the same economy ten
years earlier. In 1990, people saved 8% of their
earnings. Today, they save less than a quarter as much.
The difference is spent - much of it to buy imported
products. The cash leaves the U.S. economy - and then
comes back to the U.S. capital markets, boosting share
prices, bonds, and the dollar.
But is there a new race of human being walking among us?
If so, the only thing we know about these people is that
they "get it" and they are digital. And, oh yes, we know
something of their whereabouts - there are evidently many
digital humans on Wall Street and few in Japan.
Each revolution seems to demand a new man to go with
it...or go along with it. The French revolution produced
the "citizen" sans culotte - eager to crucify the priests
from whose hands he took formerly took the sacraments and
chop off the head of the aristocrat whose land he had
The Russian revolution produced a New Man too - the new
Soviet Man, who could not only do the work of 14 normal
men, but who was above the reach of normal emotions and
body functions. As Trotsky put it, he would be able to
"master even the semi-conscious and unconscious systems
of his own body: respiration, the circulatory system,
digestion and reproduction."
Nothing succeeds like an old plot. The New Man idea goes
back to the early days of Christianity, if not before. We
still celebrate Pentecost - in which Jesus transformed
his disciples. The hymm quoted above, sung often at our
nearby Catholic church, encourages Christians to follow
the disciples and become "New Men" themselves. Widespread
in the U.S. is the belief that a person can be "born
again" - and become a new, and better human being.
But none of these New Men has ever succeeded in
eliminating the weaknesses and sins to which we humans
are heir. And even if there were a "new man" for the New
Economy, he's not much different from the old one. David
Denby, in his New Yorker article, described the New Men
he saw around him - those who "got it" - as "greedy,
obsessed and ignorant."
Fear and greed still dominate the marketplace. The
business cycle and the credit cycle are, as far as we
know, still with us. These 'fluctuations,' as Yardeni
puts it, are indeed "wired in"...but perhaps not into our
brains, but our hearts.
A digital man would have to be a man without a heart. And
a man without a heart is no man at all.
Your very analog correspondent,
P.S. I imagined myself happily working this summer out
here in the country. I imagined all the work I would get
done - since I would be free from the interruptions of an
Ah...but there are interruptions everywhere.
Yesterday, Pierre invited us over to a wine tasting. "It
will only take 30 minutes," he said.
Okay...so we drove over to a big 18th century farmhouse.
There, his nephew, Damien, who has a vineyard north of
Poitiers, was demonstrating his wines. After formal
introductions, we tasted a dry white wine made from
chenin blanc grapes. Then, a semi-dry white wine, made by
leaving the grapes on the vine longer so they could
I was impatient and eager to get back to my work, but a
funny thing happens in these situations. After a few
glasses of wine, the familial conviviality of the place
seems to grow on you.
This is a custom among the French that I like quite a
bit. Extended families get together in August in the big
country houses that are left from generation to
Pierre's sister was widowed when she was still under 40.
She raised her sons and daughters with the help of the
rest of the family. Now, nearly 20 years later, they were
all re-united - with kids and grandkids, cousins and
aunts and uncles - at the family farmhouse.
I began to wonder if my office work was as important as I
thought it was. After trying 6 more wines - reds, whites,
roses...dry...fruity... with every flavor known to man
reported by the drinkers... we finally got back in the
car and drove home. Life goes on... in the old-fashioned,
P.P.S. Meanwhile, I had also planned to read a number of
books this summer. My reading pile has grown and grown.
The Pity of War, given to me by a cousin...Collaboration
(a history of French collaboration in WWII...given to me
by my friend Michel)...Voltaire's Bastards (suggested by
a DR reader)...From Dawn to Decadence (suggested by Gary
North)...Peter Kropotkin's "Memoires of a Revolutionary,"
(given me to my friend Francois)...and so on. But the
summer is passing so quickly...so many books, so little
P.P.P.S. There's also the work on the chateau which keeps
us busy. My daughter Maria and I put up wallpaper for the
first time on Sunday. It was pretty easy to do once we
got started. Red with little gold fleur de lis - the
wallpaper completely transformed the entryway.
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Last modified: April 01, 2001
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