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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  The Victorian Internet

In Today's Daily Reckoning:
*** Yawn...stretch...not much action on Wall Street
*** Low volume...are the bond traders asleep at the beach
*** Dollar gains a loses a bit...

*** Businesses all over the world are trying to figure 
out how to use the Internet. Even we analog folks have to 
take a stab at it. So, we called together a meeting of 
about 30 employees, partners and friends in the 
publishing business to exchange ideas. It's taking place 
this week here at Ouzilly.

*** Addison and I get up before the program begins in 
order to get you the Daily Reckoning. But it will be in 
abbreviated form for the next three days. Maybe America's 
GDP will get a tiny boost.

*** Yawn...stretch...even the chickens are still asleep.
Gee...what happened that is worth reporting...?

*** Last week was probably the peak of the summer holiday 
season. Volume was low. And investors were holding their 
fire until they could see what the Fed would do this 
week. Tomorrow is the big day. Either the FOMC will raise 
rates or not.

*** Almost no one believes the Fed will raise rates. The 
economy is doing okay. Inflation doesn't seem to be a big 
problem - even if prices are rising. Would you raise 
rates under these conditions? If a rate hike triggered a 
market sell-off, you'd be blamed for it. If Gore lost the 
election, you'd be blamed for that too. And if the rate 
hike did nothing...what would be the point? No one would 
come up to you and say: 'Great rate hike, Alan.'

*** No... raising rates now would be a lose/lose 
proposition for the Fed. Forget it. 

*** Remember it's the f****** bond traders (I'm quoting 
our president) who are supposed to 'discipline' the 
currency. If the bond traders think the Fed is letting 
inflation get out of control, they'll dump the dollar and 
bonds pronto. 

*** But either the bond traders are asleep on a beach 
towel somewhere out on Long Island, or inflation is not a 
problem. In fact, according to bond investors, the 
expected rate of inflation over the next 10 years is just 
1.7%. That's the difference in yield between a bond that 
is adjusted for inflation and one of the same term that 
is not. A strange figure... it is only half of the 
current rate of inflation, as measured by the Bureau of 
Labor Statistics.

*** Trade figures for June appeared on Friday. These too 
might have been cause for alarm among bond investors. The 
figures showed no sign of any let up in the growing 
difference between what America sells to foreigners and 
what it buys from them. Sooner or later, one would expect 
that the balance would shift in the other direction... 
and that the dollar and dollar-denominated bonds would be 
crushed. But bond investors show no sign of concern. At 
least, not yet.

*** The dollar actually gained ground on Friday, 
following the trade deficit news. The euro, it's main 
rival, closed down at 90.82 cents.

*** And it's other rival - gold - also fell back, giving 
up about 90 cents an ounce.

*** As you know, the Dow and the Nasdaq did almost 
nothing on Friday. Each index was off about 8 points. 
Advance/Decline... High/Low... figures were mixed. Oil 
barely budged. 

*** Looking at the whole week, the Nasdaq rose 141 points 
- or 3.7%. The Dow did nothing to speak of.

*** The Nasdaq 100 shot up from 1996 through to the last 
quarter of 1998. Then, the Asia currency and LTCM crisis 
caused central bankers to loosen up in a major way. The 
result: the Nasdaq zoomed at an even faster pace. Nasdaq 
stocks are now selling at an average of about 145 times 
earnings. But if the index just fell back to the 
trendline of '96 - '98, that is, still rising but not 
quite so sharply, the Nasdaq 100 would be only half what 
it is today.

*** "Tech is where it's at," says the Reuters headline. 
Thus, it's standing room only in what Ray DeVoe calls 
"the mother of all crowded trades." He's referring to the 
Big Techs - where so much money and so many dreams are 
concentrated. Dreams for vacations...dreams for new for the kids...retirement. Only 39 
stocks makes up half the entire capitalization of the 
Nasdaq. And Cisco and Dell alone account for 12%.

*** If we were all digital men, it would not be such a 
crowded trade... and you could buy a share of Cisco or 
Dell at a reasonable price. But the great herd of 
investors - dreaming, scheming, hoping - has decided to 
pick favorites. And as a consequence, these popular 
stocks are attracting more people than a free rock 

*** Speaking of free concerts, several of us at this 
meeting play guitar, so we've put together a little band. 
Practicing the other night, we drove everyone out of the 
room - and even Francois, who has lived across the road 
for more than half a century, moved out.

*** Bill Fleckenstein reports that the IMF has come up 
with its own Code of Conduct, which he summarizes as 

1. Always de-vein your shrimp
2. Leave the tail of the shell on for ease of 
3. Only cocktail or remoulade sauce are permitted
4. Grant every loan request

*** That's all for now...I'll let you know what we come 
up with in our Internet Conference.


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More DAILY RECKONING Greatest Hits

THE VICTORIAN INTERNET (First aired February 18th, 2000)

A book by Tom Standage reminds us how little there is 
that is really new. On May 24, 1844, Samuel F. B. Morse, 
a portrait painter and inventor, succeeded in sending the 
first message on the telegraph between Washington and 
Baltimore. "What hath God wrought," was the message -- 
sent from the Supreme Court chamber to Morse's partner in 

What God had wrought was a communications revolution. 
Forty miles separate Baltimore from the nation's capital. 
That was the extent of the telegraph system in America in 
1844. Six years later there were 12,000 miles of 
telegraph line in the United States alone. In October 
1861, the transcontinental telegraph was inaugurated, 
replacing the Pony Express. A few years later, a line was 
laid across the Atlantic. 

By this time, telegraph mania was in full swing. Cyrus 
Field had no trouble raising the money to run the cable. 
The first one was a disaster; it stopped working only 
hours after it was connected. But on the second try, it 
worked, and cheap, rapid transatlantic communications 
have been a feature of modern life ever since. 

The celebrations that accompanied the laying of the cable 
from Newfoundland to Ireland were far more exuberant than 
those that greeted the 10,000 Dow. 

"Our whole country," declared the "Scientific American," 
"has been electrified by the successful laying of the 
Atlantic Telegraph." President Buchanan said it was "a 
triumph more glorious, because far more useful to 
mankind, than was ever won by a conqueror on the field of 

It was also believed that the telegraph would "make 
muskets into candlesticks." That is, people thought wars 
were a consequence of bad communications. The telegraph 
had the power to change the world, by allowing people to 
talk to one another. "It is impossible," opined a popular 
book of the time, "that old prejudices and hostilities 
should longer exist, while such an instrument has been 
created for the exchange of thought between all the 
nations of the earth." 

Cyrus Field's brother, Henry, wrote that the telegraph 
cable was "a living, fleshy bond between severed portions 
of the human family, along which pulses of love and 
tenderness will run backward and forward forever." 
The telegraph had defeated space. It had made 
communications cheap. Morse was feted at Delmonico's in 
New York for having "annihilated both space and time in 
the transmission of intelligence. The breadth of the 
Atlantic, with all its waves, is as nothing." 

It was a New Era. 

A few years later, the telegraph was such a success that 
it was swamped by traffic. Delays increased with 
congestion. Eventually trading houses in New York and 
London began using pneumatic tubes...and 
send message across town. But more wire and technological 
improvements eventually reduced the problems. 

The telegraph did not eliminate war. The worst wars of 
human history were still in the future. In fact, the 
telegraphed message became the favored way to inform 
families when a soldier was killed. Mothers of young men 
in WWI and WWII dreaded more than anything the unexpected 
appearance of the Western Union delivery boy. 

But the telegraph was only 33 years old when Alexander 
Graham Bell was granted a patent on the telephone on 
March 7, 1876. The telephone soon replaced the telegraph 
for most routine correspondence. 

And the telephone, too, revolutionized communications. 
Because you didn't need to know Morse's code to use it. 
Soon, in the words of John Maynard Keynes: 

"The inhabitant of London could order, sipping his 
morning tea in bed, the various products of the whole 
earth and reasonably expect their early delivery upon his 
doorstep. He could at the same moment and by the same 
means adventure his wealth in the natural resources and 
new enterprises of any quarter in the world, and share, 
without exertion or even trouble, in their prospective 
profits and advantages." 

That passage was written in 1900. It is now a century 
later. The more things change, as they French say, the 
more they remain the same. 


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)

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.

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Last modified: April 01, 2001

Published By Tulips and Bears LLC