In Today's Daily Reckoning:
*** Whoo whooo... Stocks manage a weak rally on Fed news
*** Competition heats up
*** JDS Uniphase - 2000 light years from home...'children
are like vegetables'... and more
*** We had 'No Expectations' of a rate rise...and
'Surprise, Surprise' - got none. "Ruby Tuesday' came and
went, and though the Fed fretted and worried ...there is
little likelihood of a rate hike for a 'Long Long While.'
*** Because an election is coming up. Greenspan is not
about to 'Play with Fire.' The Fed is 'Out of Time' for
raising rates.
*** The stock market celebrated - lamely, as I thought it
might. The Dow was up 59 points. The Nasdaq could only
make it forward a measly 5 points.
*** Defense stocks rose - also as I thought they might...
in the wake of George W. Bush's suggestion that the
government might be willing to send some money their way
if he wins the November popularity contest.
*** And Yahoo fell almost $3 after Henry Blodget said it
faced a "challenging" 3rd quarter. Why anyone would care
what Blodget thinks is a mystery. But this is a mystery
market in a lot of ways..
*** Why, for example, should investors be willing to pay
51 times earnings for Intel? What do they think is going
to happen? Intel's earning forecast was just raised 4
cents a share. Big deal. Will the company face no
competition? Does it have some kind of magic that allows
it to grow bigger and bigger forever?
*** And what about JDS Uniphase - another Big Tech. It
has earnings per share of minus $1.26. But investors seem
to think it is worth $97 billion - or about 60 times
sales. Good luck to them.
*** "The only reason why New Economy stocks are selling
for 100 to 200 times earnings," wrote Gary North
recently, "is that investors figure that the New Economy
is governed by Old Economy competition: [that is,] slow.
It isn't. The New Economy companies are far more
vulnerable, for the barriers to entry are minimal. New
Economy firm's streams of income will disappear faster
than Old Economy firms' stream of income." Should you pay
more for a dollar's worth of earnings from a New Economy
company - or less?
*** Competition is a fact of life. Even in the New
Economy. Digital Man believes he lives in a different
world - where things just get better and better, as
knowledge steadily stacks up like blocks of a pyramid.
But it doesn't work that way... competition, painful
lessons learned over and over, sturm und drang, the
business cycle, and messy, confusing, mysterious things
always happen: 'You can't always get what you want.'
*** We see at this Internet Conference that I'm hosting
here in Ouzilly - the Europeans are moving fast. They
have the Second - or Third-mover advantage. That is, they
have the wind of someone else's expensive mistakes at
their backs. They can avoid the costly blunders made by
Internet pioneers in the U.S. and move directly to
profitable models.
*** Doug Casey referred to Europe as a "living museum" in
a recent letter. But I don't see it that way: Europe is
booming. The Paris-based International Herald Tribune
reports, for example, that the number of on-line trading
accounts has doubled in the last 6 months. And
entrepreneurs who had left Europe for America are coming
back.
*** Speaking of entrepreneurs, our gardener, Mr. DesHais,
has a son who is 21 years old and who wants to start a
dot.com. So, I invited him to sit in on the conference.
He's very bright and seems determined to get something
going on the Internet.
*** "Your son is very impressive," I said to Mr. DesHais
as he was wheeling in a load of potatoes and stacking
them in a huge pile in the stables. "Well," he replied,
"children are like vegetables. You plant them; you water
them; you make sure they have enough nutrients - and then
you let nature take its course."
*** Gold fell $1.70. Platinum lost 3 bucks. And oil slid
$1.25. There was a rumor that Clinton had written a
letter to the Saudi Crown Prince asking for help in
keeping oil prices down. High oil prices are bad for
Gore's campaign. But the Clinton letter was just a rumor
until it was confirmed in the current issue of the
reputable Middle Eastern Economic Review.
*** Following a disastrous quarter, dr.koop.com got an
additional $20 million in financing yesterday. This
extends the company's life expectancy by a few months.
Koop's shares came out at $9 last June (1999)... and rose
to $46 a month later. But now you can buy all you want
for just about $1 each. To make matters worse, the SEC is
investigating the company. And rumor has it that Dr. Koop
has taken up smoking to settle his nerves.
*** Another mystery: The NYSE composite index is at an
all-time high. The S&P Financial Index is also at an all
time him. But the number of new highs - which hit 631
when the market hit a new high in 1997 - is only 90. What
gives? Is this the beginning of a new bull phase? Or,
just more confusing signals sent out by Mr. Bear - still
enjoying himself at the beach? We will see.
*** But I wouldn't want to hold a portfolio of JDS
Uniphase, Cisco and Intel shares while I was waiting for
the answer. These stocks are '2000 Light Years from
Home.' The market is entertaining. But you want to make
sure it is a comedy - not a tragedy. And the best way to
make sure of that is to invest in things of real value,
when they're cheap. So what if they don't go up right
away? If they're good investments, you don't mind holding
them anyway...
*** Japan's Nikkei index rose 3% overnight. And the
dollar rose against the euro - again. The euro fell
through the 90 cent barrier... but still remains above
its low of May. This happened despite a small rate
increase by the European Central Bank.
*** Our Ouzilly band, led by Thom "Bomb" Hickling, gave a
decent performance to a small crowd of conference
attendees last night. Our best number - Sympathy for the
Devil. Whoo whooo! Of course, our only neighbor,
Francois, had already moved out - following our practice
sessions.
Commodities are booming...while stocks languish. Oil is
at a decade high. Water recently set a record high.
What's next? You can make a fortune in Mining Stocks...
if you understand the industry and the money flow. We
recommended a mining stock last week. It's up 6% already.
Don't miss out. This is your opportunity. Learn the Seven
Secrets to Unlock Hidden Mining Profits. Click here www.dailyreckoning.com/specialreports
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
You can't always get what you want
You can't always get what you want
You can't always get what you want
But if you try sometime
You just might find
You get what you need
The Rolling Stones
Copywriters are hyper-sensitized to the difference
between want and need. You can't sell people what they
need. A man buys what he needs reluctantly and at the
lowest possible price - with no margin for an advertising
budget.
Imagine walking into a restaurant. On the chalkboard at
the entry you find this message:
"Today's special:
Nothing special, just a piece of dead cow, mistreated
terribly before it was cut up...and some cooked
plants...with enough calories and nutrients to keep you
alive until tomorrow. $25. What more do you need anyway?
Sound appetizing?
After I completed Friday's Daily Reckoning, I wandered
down the street to my favorite luncheon spot - the Caf,
St. Andre.
The owner and waiters greeted me as a regular.
"What's the 'plat du jour?'" I asked.
"Ah," said the waiter, almost confidentially, "we have a
delicious blanquette de vaux with carrots a huile
d'olives."
Even if you don't know exactly what you're eating, it
sounds more appealing than the dead cow.
"Du vin?" the waiter inquired, nodding his head and
pursing his lips as if to prompt the proper response.
"Bien sur, un bordeau..."
As I was saying this, sitting against the plate glass
window of the caf,, a woman walked by outside. 'Walk'
does not do justice to the way she passed. She moved with
such fulminating grace and such pullullating charm that
the whole sidewalk seemed to undulate in time with her
steps. The cold glass of the Caf, St. Andre caressed her
as she went by.
All of a sudden the rest of the world was out of focus,
only she could be seen clearly - a vision of such beauty
that it remained imprinted on my retina, like a flash of
light you see even after you close your eyes.
"Monsieur," said the waiter, bringing me back to my
senses "that is not on the menu."
Oh the agonies I suffer on your behalf, dear reader. I
had gone to the Caf, St. Andre for a relaxing lunch, with
a copy of Gary North's latest epistle, intending to find
a few nuggets of insight and information I could pass
along to you. But I had not reckoned on summer...
Summer seems to have struck Paris suddenly. It was like a
woman who had suddenly looked in the mirror and
discovered, for the first time in her life, that she was
beautiful.
And then...her whole look changed. Her face. Her clothes.
The way she walked. The way she talked. Even the way she
smelled. Thus did the whole city seem to change the way
she presented herself.
It was bad enough in the winter months. Every drug store
window displayed ads for an anti-cellulite cream...making
its point with the most perfect derriere you ever saw.
This was neither the derriere you needed, nor were ever
likely to have, but it was certainly the one you wanted.
And Celio I don't know what they are selling but their
ads seem to celebrate the virtues of breast augmentation.
And then...there are the Aubade underwear ads...so bad,
so bad.
It was hard enough, even in midwinter to focus on the GDP
growth rate, banking reserves, and hedonic measures. But
on Friday, hedonic measures seem to have gotten out of
hand altogether.
As you can see, today's letter is about more than just
the stock market. Maybe a parental warning is in order.
Today's, letter is about sex. No not the kind of tawdry,
vulgar sex you see on TV. This is about something
else...something much dirtier. Any connection to
investing or economics is purely coincidental.
I am probing the living heart muscle - like a nurse
searching for a collapsed vein...or maybe a doctor
looking at an EKG...what do those little peaks and
valleys mean?
A redhead in long white pants, and a pink tank top
sauntered down the street. She was absolutely gorgeous,
too. A model maybe. She walked fast, as if she were late
for an assignment. Then, there was a woman who looked
like Greta Garbo. And another one - a young Deneuve.
Following her was a Brigitte Bardot-like woman with a
waifish face and a figure that reminded me of someone. In
fact, each one seemed to remind me of something - but I
didn't know quite what it was. It was like Proust's lemon
cakes - triggering a recollection so rich and inviting I
could barely resist. But a recollection of what? I was
like an aging writer, trying to recall love affairs I
never had, and lovers I only imagined.
A woman in an extremely small, extremely tight blue skirt
walked towards the caf,. As she approached, the feeling -
whatever it was - increased, like the sound of an on-
coming freight train. And then, there she was - right
outside the window - all motion...voluptuous...irresistible.
I cannot describe her in detail. She was everything a woman should be. And as
she passed, the wave washed over me, leaving me crumpled
up, broken, collapsed on the beach.
Francis Galton, Darwin's cousin, was so fascinated by
some of the women he saw in Africa, he could scarcely
believe they were real. He got out his calipers and other
measuring devices and went to work, moved no doubt by the
spirit of scientific curiosity.
But it was not science that moved me on Friday.
Just as one wave subsided another wave built up - a woman
in a yellow dress, a stunning woman with hair nearly the
same color as her dress...riding a bicycle. Could a woman
in a dress that short be really be riding a bicycle, I
asked myself as she drew alongside the caf, window. And
then, she passed, and I felt as though my surf board had
slipped out from under me and I crashed down onto the
beach. Oh my...the rocks!
It is summer. Not technically yet. But it sure looks like
summer. The streets of Paris are full of attractions and
distractions. Enticing, enchanting, absolutely
intoxicating...
Of course, not all the people passing the Caf, St. Andre
on Friday were beautiful young women. There were also a
few handsome young men. (Do women feel the same way way
when a handsome man passes? I don't know...)
Then, too, there were quite a few tourists - many of the
recognizably American. One couple was typical. The woman
looked bright and chipper, like she had invested in
Microsoft back in 1987 and gotten a good night's sleep on
the plane from New York. The man was a different story.
He looked as though he had waited until December of '99
to buy Microsoft and hadn't slept a wink. His jaw was
slack and looked as though he could use a good drink.
"Back in 1897," Gary North tells us, "economist-
sociologist Vilfredo Pareto's study of income
distribution appeared. He surveyed the larger countries
of Europe and found that there was a strange income
distribution curve in all nations that he studied.
Something in the range of 20% of the population received
about 70% to 80% of the income."
The 80/20 rule became known as Pareto's Law. As recently
as 1998, it was tested in a study of the U.S. and Canada.
Again, it was discovered that little had changed. In
1997, the top 20% of the population owned 84.3% of the
wealth.
Gary concludes that "Getting rich is simply not possible
for 80% of the population. Anything that offers the hope
of riches to the middle-class majority is a delusion."
It may be a delusion, but it is certainly a popular one.
People want to get rich. They do not need to get rich.
I remind myself that beauty is only skin deep. And like
money, it is superficial. But superficial seems plenty
deep enough. Money can't buy love. But it can buy those
Russian women in the Bois de Boulogne. And what would be
nicer - a 30 minutes of cheap, imitation love with the
woman on the bicycle...or a lifetime of the real thing
with Janet Reno?
Hmmm...maybe I'm thinking too small. Or too American. Why
settle for 30 minutes? French men often have mistresses
they keep for decades. President Mitterand's mistress
shocked society in France by showing up, with his
illegitimate daughter, at his funeral. It was not the
revelation that he had a mistress that was shocking.
Everyone knew that. But that she would attend the funeral
- - that just wasn't done.
Radical feminists, bless their hearts, (if they have
hearts), say that there's no difference between
traditional marriage and prostitution anyway. In both
cases, the woman is kept (at great expense, I might add)
in order to give the man what he wants.
But the radicals don't understand the difference between
want and need. What you want is what you don't have -
even if what you have is better.
Finishing my blanquette de vaux, the waiter returned.
"Dessert" he asked, "can I recommend a cherry tart?"
"Oh yes..."
Your correspondent, hard at work...
Bill Bonner
P.S. I am glad I am happily married. Otherwise, I might
be tempted. I might buy a tech stock at 200 times sales.
Or try to meet a redhead. Either way, I'm sure I would
regret it.
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Last modified: April 01, 2001
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