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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Backwards Walking

*** Stocks rally...but cold fear keeps creeping up...

*** Cheap sleeps on Fifth Avenue thanks to bust on 
Wall Street... 

*** Torture, basket cases, the dollar...and more!

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*** A WSJ headline: "A Year Into Slowdown, Economy's 
Last Pillars Show Signs of Stress. Car Sales and 
Construction Have Begun to Pull Back: Office Vacancies 
Pile Up."

"The Wilting Consumer," an article at, tells 
us that consumer spending - already growing at the 
slowest pace in 5 years - is heading lower. And the IMF 
warned over the weekend that the dollar will fall 

*** The next couple of months will tell the tale. 
Consumers should be running out of refinancing cash. 
Spending should go down. Stocks should follow. The GDP 
growth figure for the 3rd quarter should go negative. And 
the dollar should drop. 

*** "A feeling of cold fear creeping up the back of my 
neck..." That's how James K. Glassman describes the 
onset of what could turn out to be a very serious bear 

But Glassman is quick to dismiss his instincts in favor 
of his prejudices. Drops in stock prices are nothing to 
worry about, he says, because "short-term movements of 
stock prices are utterly unknown and unknowable." 

Nevertheless, Glassman seems pretty sure he knows what 
is going on: stocks are going to take off. "Recognize," 
he urges readers, "that the jet fuel for higher stock 
prices accumulates in times like these; all that is 
needed is something to touch it off."

Advice to Glassman: trust your instincts. 

Let's see what Eric reports...


Eric Fry writing this morning from Wall Street:

- Stocks rallied a bit Monday, which is something of a 
rarity lately. So maybe we should glorify the advance 
with a special name. How about, the "pre-FOMC" rally? Or 
maybe, the "Post-Friday-Shellacking" rally? Or how 
about, the "Finally-one-day-without-a-tech-stock-
earnings-disaster" rally?

- Whatever we call the happy event, stocks did not fall 
Monday. In what now passes for a rally on Wall Street, 
the Dow advanced a modest 79 points to 10,320 and the 
NASDAQ climbed 14 points to 1,881.

- The dollar, also an habitual loser of late, managed to 
regain a little lost ground yesterday against both the 
euro and the yen. The greenback fared even better 
against gold, as the yellow metal fell $3.40 to close at 
$278.60 an ounce on the December contract.(see also: 
Dollar Talk)

- But outside the stock exchange it is becoming bad 
business as usual in the Big Apple.

- "Sharp drops in occupancy this summer are forcing the 
city's top echelon of luxury hotels to take an ax to 
prices," Crain's reports. "[T]he elite players in the 
city's $5.5 billion hotel business have lowered rates 
significantly for the first time since the dark days of 
the Gulf War in the early 1990s."

- "I'm not going to airbrush it. Business is tough," 
Christopher Knable, general manager of the Regent Wall 
Street, tells Crain's. I do not doubt Mr. Knable. The 
hotel is only a block away from my office and the place 
looks about as active as an Iraqi Immigration and 
Naturalization office.

- Crain's continues: "Tongues are wagging about cuts at 
the city's most expensive hotel, the St. Regis at Fifth 
Avenue and West 55th Street. Rooms there are being 
touted for a mere $390 per night, almost half the 
hotel's record-setting average of $714 last year... The 
venerable Plaza, meanwhile, recently sent out e-mails 
offering rooms for $175, the Fifth Avenue hotel's lowest 
price in years.

- "This discounting comes as the entire New York hotel 
industry is taking a bath from the economic downturn and 
stunning cuts in corporate travel.

- "Occupancy plummeted to 57.4% for top-priced hotels 
last month, down 19.4% from the previous July, according 
to preliminary results from PKF Consulting."

- Also on the downswing: insider buying. Reuters reports 
that "Buying of shares by company executives in their 
own companies has dropped to the lowest level in almost 
eight years, according to Lancer Analytics. Insider 
buying, measured by the dollar value of shares bought, 
declined to $77.9 million in July, or 50 percent, from 
$154.7 million in June.

- "For the first half of the year, monthly volume of 
insider purchasing has ranged from $150 million to $180 
million, consistently well below its five-year monthly 
average of $322.1 million."

- But Lancer Analytics also notes heavy insider buying 
in selected oil and gas stocks like Rowan Cos. Inc., 
Baker Hughes Inc., Chiles Offshore Inc., Apache Corp., 
and Burlington Resources Inc.

- Insiders aren't the only ones buying oil and gas 
stocks these days. As Outstanding Investments editor 
John Myers points out, mergers and acquisitions activity 
in the oil patch so far this year is three times greater 
than last year and a staggering 10 times greater than in 

- It sure seems like the folks closest to the action see 
something they like. Maybe we ought to pay attention.
Meanwhile, as the stock market slides from bad to worse, 
so do employment trends on Wall Street. "J.P. Morgan 
Chase & Co. now expects to cut its total work force by 
up to 8%," says Dow Jones News, "or about 8,000 jobs, up 
from a previous forecast of 5,000, people within the 
company estimated Monday."

- In previous issues of the Daily Reckoning, I've 
mentioned a friend of mine who builds $2 million to $5 
million homes just outside of Manhattan. By his own 
account, his clients are "almost entirely from Wall 
Street." Last weekend, he offered up the latest anecdote 
of his clientele's changing fortunes.

- "Eric, something happened this week that's never 
happened to me before," he said. "One of my clients just 
called me up out of the blue and said that he could not 
afford to continue the renovation we had already 
started. I had just knocked down the old house a couple 
of days earlier!"

- "The guy's walking away from his $30,000 deposit 
because he can't afford to complete the project," my 
friend said. "Apparently, a couple of IPOs he had 
expected to go through were cancelled." 

- Obviously, lower interest rates alone will never get 
our economy back on track. We'll need more IPOs.


Back to Bill in Paris....

*** What else? 

*** Well, if Rothschild was right, that the secret to 
making money is to invest "where blood is running in the 
streets," investors should be looking at Zimbabwe. A 
series of e-mails reached me last week from white 
farmers describing how they were beaten and driven from 
their land by gangs of thugs. In one letter, a man 
described his torture at the hands of Mugabe's goons. 
Today's International Herald Tribune tells about a black 
farmer - a member of the opposition party - who was also 
evicted. The Mugabe government claims to be 
redistributing the land to the poor, but the IHT reports 
that the black farmer's land was given to a banker and 
several policemen, cronies of the ruling party. 

*** Nature rarely takes something away without giving 
something in return. Zimbabwe used to be the 
"breadbasket of Africa," but it has been going backwards 
since Robert Mugabe took over in the '70s. Now it is a 
basket case. Could this be a good time to invest in 

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by Bill Bonner

"...despite all that's wrong with the world, things 
are getting better all the time. Somehow, over time, the 
opportunities overwhelm the difficulties."

Porter Stansberry

With this phrase, in this space, Porter Stansberry took 
issue with the Daily Reckoning. Thus did Porter place 
himself among a large group of millennial optimists, 
technophiles, and free-market True Believers...including 
George Gilder, Paul O'Neill, James Glassman, Laurence 
Kudlow, Michael Murphy, and just about every other 
right-thinking Republican and Democrat in the Western 
World. All of them are sure that the forward march of 
Progress is inevitable and irreversible. 

Today, I return to Porter's comments if only to scoff at 

But first, I reminisce about my vacation in Nicaragua. 
Why not? I am back in my Paris office, surrounded by the 
noises of the city and young men and women diligently 
going about their business at desks next to mine. What 
harm is there in letting my mind wander back to those 
empty beaches and sunsets worthy of Frederic Church?

Our habit was to ride horses in the later afternoon, 
after the sun had lost its noon-time heat. One of our 
favorite rides took us up into the hills, far beyond the 
reach of electric poles and running water. 

After about 20 minutes, we often found a group of 
children - some mounted on a pathetic little scrub horse 
and some walking along behind. 


"Buena..." a little girl replied softly. 

The boys wore dirty shorts and nothing else. The girls 
wore dresses - ripped and badly used. They had reddish 
brown skin, the color of adobe mud, with large hooked 
noses, like Mayan statues. No trace of Spanish blood was 

A few minutes further along, we came to a farmstead, a 
rough country ramshackle of boards and tins, open to the 
air with a dirt floor and a mud oven from which smoke 
seeped out as though from a burning house. The ground 
around the cabin was beaten earth, worn and rutted by 
heavy rain and decades of bare feet. Chickens ran loose. 
The skin of an armadillo was draped over a fencepost to 
which a pig was tied by a piece of string. 

These people had neither electricity, telephone, nor 
running water. How much better were their lives than 
those of their ancestors 1,000 years ago? In an 
emergency, modernish health care was available an hour 
or so away. Otherwise, nothing much had changed. 
Probably the biggest lifestyle and technological 
improvement of the last millennium was the introduction 
of the horse by the Spaniards in the 16th century.

Most people are richer today than they were 100 years 
ago, says Porter. And they live longer. This seems to 
prove Porter's case. Surely people will be even richer 
and longer-lived in the future, won't they ?

Maybe yes, maybe no. God may share His plans with 
Porter... but he has not yet drawn me into His inner 
circle. I do not know what will happen in the very long 
run. Nor do I know what will happen next week, nor next 
year, nor 10 years from now. 

At the end of the last century, it seemed, as it does 
now, that progress was inevitable. People expected 
progress in every aspect of life. The world's economies 
were booming. The industrial revolution was in full 
flower and spreading its beneficent aroma throughout the 
world. A person could already hop on a train in Paris 
and ride in luxury all the way to Moscow. A man in 
London could order his spiced tea from the Orient and 
his carpets from Istanbul. Was there any reason to 
believe that this bounty - products of new technology, 
free markets, and enlightened political stewardship - 
would not continue?

Europe had enjoyed nearly a century without a major war. 
It was widely believed that war was a thing of the past, 
not of the future. It also seemed - at the height of the 
Belle Epoch - that manners, art, and personal security 
were improving, along with material and healthcare 

Yet, only a few years later, the entire world began the 
most costly and barbarous wars in history. With hardly a 
pause for breath, from 1914 to 1945, people shot, 
tortured, murdered, blew up, poisoned and starved each 
other on a scale the world had never seen. 

Torture had been officially banned as early as 1780 and 
had been gradually disappearing from use in the Western 
world since then. Slavery had completely disappeared 
from civilized countries by the end of the 19th century. 

Yet, in 1914, the world began walking backwards. By 
1919, France had already lost 20% of her young men of 
military age...and the wars had scarcely begun! 

It turned out to be a century of what Brzezinski called 
"megadeath," with an estimated 187 million victims. 

By 1945, all of the world's major economies - save one, 
the U.S. - were in ruins. Japan, the Soviet Union, and 
Germany were little more than heaps of ash and twisted 

France and Britain were mostly intact, but geared up for 
war, not for peacetime production. Worse, both were in 
the hands of socialists and syndicalists...which so 
inhibited their recovery that they were soon overtaken 
by their former enemies - Germany and Japan. 

Progress is never guaranteed. And, could it be, like so 
many other things in life, that it is least likely at 
the very moment it seems most promising? Just look back 
at the last two years. At the end of 1999, it seemed a 
cinch that investors would be richer today than they 
were then. 

Instead, investors began walking backward in early 2000. 
The Federal Reserve calculates that the total value of 
Americans' stocks has declined from $12.5 trillion at 
the end of '99 to only about $8.7 trillion today. 

Will the next 10 years bring peace and prosperity? Will 
people actually be richer 10 years from now...or poorer? 
Investors in U.S. stocks in 1939 were poorer than they 
were in 1929. Investors in Japanese stocks were poorer 
in 2001 than they were in 1991. The people of Nicaragua 
were poorer in 1990 than they were in 1980. 

Who knows. But it hardly matters anyway. What do you 
care how long the average person lives? What really 
matters is how long you live. The same can be said of 
wealth. It, too, is both relative and personal. What 
counts is how much wealth you have, not the aggregate 

Even if progress were a feature of the grand scheme of 
things, what really matters is how the little scheme of 
things affects you. In any period of time, some people 
gain and some people lose. Nature gives something and 
takes something back. Some people make progress and some 
people go backwards. 

Over the last two years, for example, people who sold made financial progress. Those who believed 
that AMZN would always go up "over the long run," on the 
other hand, have fallen back.

More on backwards walking...on Thursday.

Bill Bonner

About The Daily Reckoning:

Daily Reckoning author Bill Bonner

Bill Bonner is, in spite of himself, a natural born contrarian. Early each morning, Bill writes The Daily Reckoning—his take on the financial markets and what’s going on in the world—and sends it off by e-mail before most Americans’ alarm clocks have buzzed. Many readers say it's the first thing they want to read when they get up—not only because it's informative and thought provoking, but also it's inspiring, in its own quirky and provocative way.

Of course, there's much more to Bill than his daily market commentary. He's also the founder and president of Agora Publishing, one of the world's most successful consumer newsletter publishing companies. Bill's passion for international travel and big ideas are reflected in the company he's successfully built. In 1979, he began publishing International Living and Hulbert's Financial Digest . Since then, the company has grown to include dozens of newsletters focusing on health, travel, and finance. Bill has vigorously expanded from Agora's home base in Baltimore, Maryland since the early ’90s—opening offices in Florida, London, Paris, Ireland, and Germany.

Agora's publication subsidiaries include Pickering & Chatto, a prestigious academic press in London and Les Belles Lettres in Paris, best known as a publisher of classical literature in bilingual editions.


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Last modified: August 21, 2001

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