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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Facing Extinction

In Today's Daily Reckoning:
*** Tech, tech and more tech...but the Big Techs are also 
the "mother of all crowded trades..."
*** Another Darned Cheap Stock...
*** Al Gore on the difference between the sexes...and 

*** It was tech, tech, tech yesterday. The big techs rose 
- and took the indexes with them. The Nasdaq ended the 
day up 79. The Dow, less sensitive to the big techs, rose 
only 47 points.

*** "People are less concerned about interest rates going 
up," said an analyst quoted by Reuters. 1552 stocks 
advanced; 1264 fell back. The number of new highs was 
once again impressive - 107, compared to just 32 new 

*** The idea, forgive me for sounding like a nag, is to 
buy low and sell high. It's hard to do precisely because 
people tend to do the opposite - getting excited about 
the latest technology or market trend...crowding into 
positions that seem like 'sure things'...and bidding up 
prices to the point where they are unsustainably high. 

*** Right now, Ray DeVoe refers to the Big Techs as the 
"mother of all crowded trades." Fred Hickey (High Tech 
Strategist), meanwhile, calls the Big Techs the "Nifty 
Techies." The 40 largest cap stocks on the Nasdaq, he 
figures, are valued at $3.24 trillion, roughly a quarter 
of the value of the entire U.S. stock market. 

*** These "Nifty Techies" have an average P/E of 230 - 
excluding the 8 companies for whom earnings represent 
merely a hope for the future. Also excluded is Juniper, 
priced at 1,354 times its earnings. 

*** Jim Stack (InvesTech Research) reports that "only 39 
stocks account for 50% of the Nasdaq index, with Cisco 
and Dell making up 12% alone...The other 4,319 stocks 
make up the other half of the index."

*** And back to Mr. Hickey: "On average, the 40 companies 
sell for 35 times book value and 50 times sales." Is that 
high or low? Well, it's about as high as the Japanese 
companies that peaked in 1989. The Nikkei Dow hit a high 
of more than 39,000 and fell by more than 2/3rds. It has 
yet to recover - stocks in Tokyo still trade for less 
than half their prices ten years ago. 

*** decided to delay its IPO. Instead, the 
Internet company - which is one of the firms backed by - laid off more than 30 employees and decided 
to "pursue profitability."

*** Another IPO, though, went ahead. People's PC filed to 
go public at $12 to $14. Instead, it came out at $10 on 
Wednesday and shares have been trading below $7.

*** Oil rose again - to just below $32. Gold rose too, by 
30 cents. Platinum, though, fell $5.40.

*** While the Big Techs sport price tags that scream 
"Sell," the world is not without its little voices 
whispering: "buy me." In the present case, the voice is 
probably saying it in Spanish. Grant's mentions the Banco 
Latinoamericano de Exportaciones, otherwise known as 
Bladex. It has an ROE of 15.2%. And fewer than 1% of its 
loans are nonperforming, while it has more than 5 times 
the necessary reserves to cover them. Bladex is selling 
for only 5.4 times trailing earnings, 0.76 times book 
value (which has been growing at a compound rate of 12.8% 
for the last 5 years), with a dividend yield of 4.8%. 

*** The Big Techs are the pampers of the marketplace - 
absorbing whatever liquidity is around. Meanwhile, stocks 
south of the border are as arid as the desert - and 
cheap. And so too are many small caps right here in the 
U.S.A. Merrill Lynch reports that about 25% of all small-
cap stocks can be purchased for less than 10 times 
trailing earnings.

*** Our digital presidential candidate, Al Gore, on the 
sexes: " and women are equal, if not more so."

*** But my friend, Michel, reports from his vacation in 
another sleepy corner of France: "For the last month, I 
haven't met a single person who ever heard of the 'New 
Economy.' Instead of dividing the world into those who 
are digital and those who are analog, a more appropriate 
division would be between those who know what the 
analog/digital discussion is all about...those who have 
no idea what you're talking about...and those who could 
care less."

*** Kathie Peddicord reports from her new home town in 
Ireland: "Two unarmed men robbed a bank in Waterford 
yesterday. They hopped over the AIB Bank counter in the 
city center at about 3 p.m. and snatched a bag containing 
"several thousand pounds," according to the Irish 
Independent. They fled on foot.

"Bank workers gave chase," she writes, "and caught one of 
the men. In the commotion, the robber dropped the bag and 
20-pound notes fluttered through the air. Nearby shoppers 
picked up what they could. Bank Superintendent Michael 
McGarry said most of the money was recovered at the 
scene, and more was handed back by passers-by."

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"It's the end of the world as we know it, and I feel 


My dreams were troubled last night. I was pursued by a 
Terminator-like creature, with the body of Arnold 
Schwarzenegger and the head of Al Gore. 

Surely our days are numbered. We are losing our niche. 
Digital Man is faster, stronger...and smarter. And now, 
with the Internet at his side, he gets smarter every 
day...the little Os and 1s of the digital information 
stream are pumped into his arteries as though he were 
wired to a Cray mainframe.

Can anything stop him? A mutant form - he is better 
adapted to the Information Age than we are. While 
information floods my e-mailbox...swamps my desk...and 
nearly extinguishes the pathetic little flicker of 
cerebral impulses that we analog folks call 'thinking,' - 
Mr. Digital Man seems to lap it up.

The chemical makeup of tootsie rolls, the train schedule 
for the Paris to Bordeaux line, the actual lyrics of the 
1966 hit song, "Louie, Louie" - he's got it all. 
Computing power doubles every 18 months, says Moore's 
Law, and Digital Man thrives on it. 

Mr. Digital Man is clearly superior. He can connect to 
the Internet from anywhere...and knows how to program his 
VCR so that he can watch his favorite programs - perhaps 
reruns of Star Trek and the Jetsons - whenever he wants. 
He can even hack into the White House computer system and 
get all the latest porno films without paying for them.

What's more, he never makes the mistake of getting out of 
the tech stocks. He knows that the 'New Economy' has made 
the business cycle, the credit cycle, and maybe even the 
wash and spin cycles obsolete. Unlike we Analog humans, 
Homo Digitalis, never panics...never backs away...and 
never sells and never gets his clothes dirty. So, he is 
able to enjoy stock prices that go up and up, with only 
the occasional setback caused by jittery analogs, 

But it was good while it lasted. I refer to our time in 
the sun, our run on the planet Earth. It's not every day 
that a new race of man comes along. In fact, the last 
time this happened was about 100,000 years ago. And the 
new race back then was us. We were not necessarily any 
smarter than the poor Neanderthals...but we must have had 
some edge, maybe the ability to speak. Whatever it was, 
it gave us a decisive advantage. Language made it 
possible for us to share information with one another - 
thus enabling us to collaborate at a higher level. While 
the Neanderthals were locked within their range of grunts 
and groans - rather like the programming on television on 
an average evening - Homo Sapiens were able to organize 
cooperative hunting parties...and pass along valuable 
information about where to find honey and how to fish.

Within a few thousand years, the Neanderthals were 
history. (Except that a few scientists now believe that 
the Neanderthals interbred with Homo Sapiens to create 
the species we all know and love so well.)

And now our time has come. Now a new race can communicate 
better than we can. Using optic fiber, wireless 
technology and Moore's law...Homo Digitalis has the high 

But do you think Neanderthals knew when there time was 
up? Did they sit around the fire, like a group of the 
hacks on Sunday morning talk shows, trying to figure out 
what went wrong...and why they were headed to extinction?

I don't know. But speaking for the race of Analog Humans 
I think a little soul-searching wouldn't hurt. In this, 
if nothing else, at least we have a small advantage over 
our Digital competitors...we have souls.

So what could we have done differently? How could we have 
avoided the fate of Neanderthals...Homo Robustus...the 
first hominids...and Ross Perot? 

The problem was, looking at the situation 
philosophically, that we were the products of millions of 
years of evolutionary development. From the tree-monkeys, 
to the big the Australopithecus...and all the 
homos that preceded us - homo erectus, homo habilus, homo 
neanderthalis and all the cousins and distant relations - 
I'm talking about the entire animal line, actually, going 
back to point where the first bits of bacteria got 
together and decided to collaborate - well...through this 
whole time we've been, how shall I put it, well - moody.

Change is a feature of the world we live in, and like a 
reflection, indeed a part, of that world - we products of 
nature are changeable too. One day we are feeling 
expansive, happy, optimistic and carefree. The next, we 
are kvetching, rioting, and selling our stocks.

Yardeni is right - "fluctuations are wired into our 
brains and collective behavior." It is feast or 
famine...boom or or sell...sin or 
virtue...Saturday night or Sunday morning.

Give us a good investment opportunity - like the Nasdaq 
in the early 90s...and we'll buy it until it is a bad 
one. Give us a bad the Nifty Fifty in 
the early 70s... and we'll sell it until it is a good 
one. Always over-reacting, never satisfied, that's us. 

Just look at what happened to Southern California. It was 
a paradise 100 years ago. Even 50 years ago, it was a 
veritable Eden compared to today. But we can't leave a 
good thing alone. The place now is so crowded that you 
can barely burn trash in your backyard without someone 
complaining and almost every meteorite that falls kills 
at least one vegetarian.

We probably could have learned to use the Internet, but 
our instinct to over-do it, whatever 'it' is, has been 
our fatal flaw. Like an unopened bottle of Jim Beam in 
front of a dipsomaniac - it has been our undoing. And now 
it has caught up with us. 

Perhaps that is the big promise of the biotech sector. A 
little adjustment of our DNA and, presto, we could all be 
Digital Humans. We could all talk like Al Gore, invest 
like Henry Blodgett and dress like Larry Ellison. We 
could be Digital men...the new men of tomorrow. 

Instead, we are done for. Has-beens. Relics. Soon, we 
will be locked in glass cabinets in some dusty museum 
funded by a bequest from Larry Ellison or some other 
Digital type with a sense of humor. The cabinet will bear 
an inscription:

Homo Analogiens, believed to have appeared 100,000 B.C. 
Last survivor died bankrupt: 2032. 

Surely this will be worth a cover of TIME magazine...and 
maybe a farewell party with a chorus of Auld Lang Syne.

Speaking for the whole race of Homo Analogiens, I just 
want to say - goodbye. I have no regrets. It was good 
while it lasted. We did the best we could. Que sera sera.
Analog, and loving it,

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