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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Digital Man

In Today's Daily Reckoning:

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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, 
"booting up."

*** 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 
at $34.

*** "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. was removed last Wednesday. 
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 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,

Bill Bonner

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. 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 
absorb sugar. 

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, 
analog model.

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 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. 
About The Daily Reckoning:
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Last modified: April 01, 2001

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