Co-brand Partnerships

award-5.gif (6517 bytes)

topsite.gif (1668 bytes)

webfifty.gif (6027 bytes)

drop_center.gif (2753 bytes)

wpe1.jpg (2095 bytes)

Email Login
New Users Sign Up!
Sign up for our weekly e-mail newsletter!
Tell Me More!

Enter your e-mail address
search by:

Current Weather
Enter Your City, State, or Zipcode:





Enter Symbol


Enter Symbol:


Enter Symbol:


Enter Symbol:


Enter Symbol


Search For:

Company Name
Ticker Symbol

Exclusive Broker

Enter Ticker




Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Analog Men

In Today's Daily Reckoning:
*** CPI increasing at twice the expected rate � but it's 
nonsense anyway...
*** Retailers getting hit � the 'wealth effect' has 
really lost its mojo.
*** A 'digital man' for President...offensive 
language...and other absurdities

*** Yesterday's Consumer Price Index report showed 
inflation rising at twice the expected level � that is at 
0.2% rather than 0.1%. Small numbers. Who cares?

*** But this measure only applies to the 'core' rate of 
inflation � a sweet confection of the Bureau of Labored 
Statistics which excludes the bitter, but essential to 
life, ingredients: energy and food.

*** Na�ve readers might ask � how can you have a cost of 
living index that doesn't include the cost of calories � 
the fuel that runs man's body, heats (and cools his 
buildings) and powers his machines? What kind of hocus-
pocus is this?

*** Stephen S. Roach, now with Morgan Stanley Dean 
Witter, but formerly with Federal Reserve Board, recalled 
recently how the core rate came to be (Grant's 
7/21/2000...[]). Jim Grant sets 
the stage: "After the quadrupling of oil prices in 1973, 
the redoubtable Arthur Burns, Fed chairman and renowned 
business-cycle scholar, called his staff together and 
demanded that they present him with a CPI stripped of 
energy costs. After all, if there ever was an exogenous 
event � one over which the Fed had no control � the Yom 
Kippur War was it."

*** "Little did we know at the time," confessed Roach, 
"that we were creating the first gauge of core 
inflation... A few months later, Burns called us back 
together and noted an alarming pick-up in the rate of 
food inflation... So he instructed us to take food out of 
the CPI as well."

*** Readers old enough to remember the mid-'70s may 
recall that this 'core' measure of inflation had a 
serious flaw � it completely failed to detect the huge 
wave of inflation that was about to wash over the U.S. 

*** Likewise undetected by July's core inflation figure, 
oil rose yesterday to $31.80 a barrel. It is at a 10-year 
high. And shipping rates are at a 30-year high. There is, 
of course, plenty of oil in the ground. But there are not 
as many oil tankers as there are stars in the sky. Both 
oil and shipping rates may increase further. 
(see: Oil in Crisis

*** The Dow shrugged off the CPI report, closing down 
only 58 points for the day. Most seriously damaged were 
the retailers. A Financial Times headline announces that 
"Nordstrom profits fall as expected." Walmart � the 
nation's most important retailer � closed below $50. Home 
Depot is not far behind. And Heilig Meyers, a furnishings 
wholesaler, went bankrupt.

*** Also on the consumer front, housing starts dropped 
3.3% in July.

*** Why is retail slipping? Because the 'wealth effect' 
has lost its mojo. People look at their portfolio 
statements and figure they should wait for a pick up 
before spending money. This trend � away from spending 
towards saving � threatens to throw the 'good times' 
economy into reverse, Japanese style. 
(See: The Real Meaning of 'Savings Collapse'

*** 1,594 stocks rose yesterday. 1,243 fell. There were 
103 new highs on the NYSE; 41 new lows. Most likely, 
there will be little movement in the Dow until after the 
Fed meeting on the 22nd.

*** The Nasdaq managed a very modest increase � up 9 
points. Amazon is doing well � it rose to more than $38.

*** Gold � perhaps spotting a weakness in the dollar � 
rose $2.70. 

*** The battle between the euro and the dollar raged 
overnight. But neither side gained much ground. 

*** Speaking of raging...Bill King tells us that the band 
"Rage Against the Machine" is entertaining protest groups 
gathered in Los Angeles. Reporters have begun referring 
to Al Gore "the machine." Could it be that Mr. Gore is 
one of the Digital People � heartless, soulless, with a 
brain like a Pentium chip? He IS the father of the 
Internet, isn't he? It's all starting to make sense.

*** The news was unusually rich in absurdities this 
morning: Argentina a top surgeon killed himself...and a 
government employee threatened to jump off a radio tower 
unless he got paid (no mention as to whether anyone 
intervened) � because of an economic slowdown.

...A Wisconsin man, who raped and murdered a 9 year old 
girl was just awarded a settlement from a trash 
collection company after the firm refused to hire him. 
Discrimination, he charged. He should have been treated 
differently. Much differently.

...In New Jersey, a 6-year-old and his two accomplices 
were kicked out of school after they "used their fingers 
as pretend guns and said they wanted to shoot each 

... From Access to Energy comes the story that at 
Stockport College in Greater Manchester, England, such 
phrases as "normal couple," "history" (sexist), "lady" 
and "gentlemen," "slaving over a hot stove" (minimizes 
horrors of slavery) - have been declared offensive
and banned...

*** And a friend reports from Boulder, Colorado: "I'm
not making this up...the city's ordinances have been 
rewritten and all references to animal or pet "ownership" 
have been changed to "caregiver" so as to strengthen the 
bond between the "caregiver" and the pet."

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

When the Fed raised the discount rate from 5% to 6% on 
Aug. 9, 1929, it launched the worst economic contraction 
in history. Did today's Fed do the same thing? Dr. Kurt 
Richebacher thinks so. Find out where the world's
preeminent Austrian economist thinks the stock market and 
the economy are headed and what you can do to protect 
your assets. Read Dr. Richebacher's latest report on the 
fate of the New Era.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


"The analog folks believe that booms inevitably lead to 

Ed Yardeni

Yesterday's email brought this promotional message from 
Motley Fool:

"Predictions are that by 2003, there will be more 
Internet-ready handsets than personal computers connected 
to the Web. When it comes to future trends, they don't 
get much closer to 'a sure thing' than wireless does."

The Fools proposed to sell me a report that would clarify 
the near 'sure thing' opportunities presented by 

But I am no stranger to wireless technology investments. 
Years ago I traded advertising space in one of our 
publications for a chance to win a cellular phone 
license. Winner that I am, I was notified not long after 
that my ship had come in. A motley crew of investors and 
publishers, myself included, won a cellular franchise for 
an area of western Nebraska.

But this ship proved to be a ship of fools. If we had 
been able to persuade cattle to use cellular phones, it 
might have been different. But as it turned out, there 
were too few people out on the high plains to make a 
cellular system profitable. And most of them, as I 
recall, were analog humans, not digital. They were still 
tied to land lines. Though perhaps it is different now. 

The cellular license carried the obligation of building a 
system � which proved more expensive than the actual 
business would justify. We sold it off � at a loss. In 
one of the great paradoxes of investing � 'sure things' 
almost always end in losses.

Yesterday's letter recalled how the sure thing of the 
late 19th and early 20th century � railroads - proved a 
disappointment to investors, too. Almost every 
technological innovation � from air-conditioning to 
airlines to the internal combustion engine � has gone 
through the same boom-bust cycle. 

Warren Buffett says, for example, that the airline 
industry has failed to make investors a single penny � 
net � since Orville and Wilbur Wright flew their first 
plane at Kitty Hawk. I don't know if that is true of 
automobiles, but nearly 500 auto manufacturers went 
broke, got bought out or merged since the industry began. 
Your odds of choosing the winners were less than 1 in 

But all of these innovations were developed by the soon-
to-be-extinct Analog Men. Maybe the Digital Man of Ed 
Yardeni's imagination will do better.

So far, the results are not encouraging. Internet 
companies - run by people who 'got it' long before 
Yardeni - are going bust. Nothing wrong with the business 
models, of course � the fault, again, lies in the lack of 
vision of analog investors., for example, 
which went belly up on Tuesday, did not run out of 
vision. It ran out of cash.

"Everyone thought that subsequent financing would not be 
a problem, and were shocked to find that the stock market 
would not support a secondary offering and that private 
investors had become skeptical," said Ken Cassar, analyst 
at Jupiter Communications, a research firm in New York. 

But maybe wireless will be the big breakthrough for 
Digital Man. Barely a discouraging word has been heard 
about wireless. Investors are still behind it. 

"In the next few years," Grant's quotes the chairman of 
Deutsche Telekom, "growth of mobile phones in the U.S. 
will be larger than the growth in Germany, Italy, France 
and the U.K. put together." 

But it is not as if there weren't some things that could 
go wrong. Building out cellular systems is expensive. And 
governments are using the license fees as a major source 
of finance. "Thus, one point of significance of the 
wireless phenomenon," Grant's reports, "is that, at the 
margin, leveraged telecom debt is replacing sovereign 
debt in the world's bond portfolios."

The questions for the giant telecoms turn out to be the 
same ones we face in our pathetic Nebraska franchise... 
and the same ones that every business must ask: What is 
the likely stream of income? How much is the investment 
really worth? How much debt can the enterprise support? 

So far, Mr. Market has been sympathetic and supportive. 
Like the railroads at the end of the last century, the 
wireless industry is drawing in huge amounts of capital � 
both debt and equity - and losing vast amounts of money. 
Nextel, to use the example described in Grant's, saw its 
stock price rise 337% in 1999, and was able to raise an 
additional $7 billion in "additional outside capital 
commitments" during the second half of 1999, a year in 
which it's net profits are listed as minus $1.462 
billion. Nextel's capitalization, meanwhile, surpassed 
that of Boeing, Merrill Lynch, Texaco and Dow Chemical.

As a group, the wireless companies in Grant's sample 
carried about $26 billion in debt by the end of 1999 and 
lost $4 billion on $27 billion in revenues. 

Will they be able to make a profit in the future? "The 
fact is," continues Grants, "that prices for monthly 
services have been declining as a result of 

Ah...competition. What kind of profit margin might a 
cellular phone company expect in a fiercely competitive 
market? And how does the industry manage to turn around a 
$4 billion pay the interest on $26 billion in 
debt...with only $27 billion in revenues?

Revenue growth? Already, 53% of the eligible subscribers 
are signed up. Cows, as far as I know, have still not 
learned to use the equipment. The math doesn't look good.

Nor does the math look good for the entire technology 
sector. Tech's contribution to GDP is only 8%. But it 
represents more than 30% of S&P 500 market 

Since 1993, the value of the tech portion of the S&P 500 
has jumped from $271 billion to more than $3.5 trillion.

"Naturally," as Grant's puts it, " Mr. Market can change 
his mind..." Which is exactly what Mr. Market is likely 
to do. Each technological innovation seems to be 
accompanied by a psychological wave that lifts investors 
up...and then dashes them to the ground. Extraordinary 
amounts of money are pumped in � based on extraordinary 
expectations of profit. The money � both debt and equity 
� reaches levels that the business model cannot possibly 
support. Eventually, Mr. Market discovers his mistake. 
But by then, it is too late. 

Each boom in technology leads to a bust, just as the 
analog folks say.

Your still-analog correspondent, unable to kick the 

Bill Bonner

P.S. Today is Francois's last day of work on the farm. 
After more than 50 years � he came a small boy and began 
work when he was 14 � Francois is retiring and moving to 
a nearby hamlet. The place won't be the same without him.
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)

Open your mind with the most stimulating e-mail newsletter that you'll ever read, The Daily Reckoning. To receive this free daily email newsletter click here now.

Search for it at the TulipSearch Open Directory
Investment Bookstore Investment Newsstand Market Mavens Report



Tulips and Bears
Internet Stock Talk
Traders Message Boards
Traders Press Bookstore

City Guides
Travel Center
Bargain Bloodhound

TulipHost...coming soon
TulipTools...coming soon
...coming soon

Questions or Comments? Contact Us

Copyright � 1998-2002 Tulips and Bears LLC.
All Rights Reserved.  Republication of this material,
including posting to message boards or news groups,
without the prior written consent of Tulips and Bears LLC
is strictly prohibited.  'Tulips and Bears' is a registered trademark of Tulips and Bears LLC

Last modified: April 01, 2001

Published By Tulips and Bears LLC