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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

OUZILLY, FRANCE 
WEDNESDAY, 23 AUGUST 2000 

 

Today:  Getting What You Need

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.


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GETTING WHAT YOU NEED 


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. 
 
 
 
 
About The Daily Reckoning:
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Bill Bonner, recognized internationally as a brilliant writer, entrepreneur
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Bonner writes his email letter from Paris, France, each morning --
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Last modified: April 01, 2001

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