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 bit...gold 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
houses...college 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
concert.
*** 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
follows:
1. Always de-vein your shrimp
2. Leave the tail of the shell on for ease of
handling
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.
The World's Best Investment - By Far. It's earned 32.4%
average annual profits in a good market-even exploded
with 252% profits in the 1987 stock market crash. So why
haven't you heard about it? Find out what it is and how
to use it right now - just click here. http://www.oxfordclub.com/provi/drfutures1.html
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * More DAILY RECKONING Greatest Hits
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
Baltimore.
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
battle."
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 runners...to
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.
Regards,
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" (Timothy)
" Your Daily Reckoning is the best in business commentary... mixing
serious warnings and the state of the market with gentle humor" (Makram)
"It is actually better than some of the newsletters that I pay to
get" (Joe)
"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.
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
