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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Winged Ecstasy

In Today's Daily Reckoning:
*** More come the Big Techs are doing 
well? Why do they pay people to be unemployed?
*** Biggest drop in durable goods sales ever...higher 
unemployment...bad news, but investors seem to like it
*** Border guards block progress...Mr. DesHais gets 
stewed...and more...

*** Another mystery: how come the Big Techs are getting 
bigger when the economy seems to be slowing? Techs, as 
Barton Biggs pointed out yesterday, are cyclical. They 
grow in a booming economy - and typically go down when 
things slack off.

*** Yesterday came word that sales of durable goods fell 
at the highest rate ever recorded - down 12.4%. Requests 
for unemployment payments increased too, for the 4th week 
in a row - another sign of that the red-hot economy is 
cooling off.

*** Which suggests another mystery: Why do they give 
people money when they lose their jobs, anyway? If public 
officials really wanted to keep people employed - they'd 
impose a a speeding ticket...on jobless 

*** The Dow rose 38 points. The Nasdaq climbed 42 points. 
It is still vacation season. Everything is quiet. In 
fact, volatility is at a 2-year low.

*** The only excitement yesterday was in the biotech area 
- where stocks rose about 5%. 

*** But the bear managed to grab a couple of companies 
for a little afternoon snack. The Financial Times reports 
that Rolls Royce shares fell 22%. Elsewhere I learned 
that Bausch and Lomb fell nearly 40% yesterday. More 
about Rolls below.

*** There were 1431 Advancing shares on the NYSE; 1381 
shares fell back.

*** "Any time there is a sign that those stocks [the big 
techs] are going to start moving," said an analyst quoted 
by Reuters yesterday, "everybody jumps into them." But 
it's already standing room only in the Big Tech area. And 
competition is heating up. Bill Gates announced he would 
go head to head with Intel by producing Internet chips 
himself. And Amazon will soon be selling automobiles. 
Mercedes announced a price cut of nearly 20%. 

*** Gold rose $1.80 after losing $2.60 on Wednesday. 
Platinum rose $2.50.

*** Oil and the dollar both fell slightly.

*** Not all prices are falling. Electricity increases are 
in the news everywhere. Oil is twice as high as it was a 
year ago. Natural gas is hitting records. Labor costs - 
from the anecdotal evidence, at least - are soaring.

*** Mr. Market is a man of mystery, paradox, 
contradiction... he's not making it easy for us to figure 
out his next move.

*** Since 1982, the Dow has never fallen below the low of 
the previous year. The low for 1999 was 9120. So, far 
this year, the Dow has not even come close. 

*** But, "given the rapid and unforeseen changes that are 
not taking place in the world," writes Marc Faber, "any 
forecast that is based on the simple extrapolation of 
past trends into the distant future is likely to be very 
wide of the mark."

*** What's ahead? There are some things you can 
extrapolate into the future: Technological progress will 
continue to be made - in fits and starts, by trial and 
error, luck and flashes of insight. Analog Man, though 
facing extinction, will continue to crowd into hopeless 
investment positions. And the future will reveal itself 
in its own good time.

*** "He writes books called 'Earth in the Balance' and 
lashes out at 'Big Oil'," writes Steve Sjuggerud of the 
Ultimate Digital Man, Al Gore. "Yet he owns a quarter of 
million dollars of Occidental Petroleum stock." Over the 
last 100 years, the Dow has performed significantly 
better under Democrat Presidents - 7.0% a year over 48 
years - than under Republican Presidents - 4.0% a year 
over 52 years. But past performance is not necessarily 
indicative of future results... 
(see: Will Al Gore Kill Your Nest Egg?)

*** And so, a very busy week is coming to a close. A few 
friends remained after the Internet Conference, but they 
are leaving today.

*** Game Boy has grown up and become a dad. Nintendo 
announced a new 'Son of Game Boy' - to make its debut 
next year. Jules will be excited about this. He's 
visiting friends in Carcasonne in the south of France. 
Henry, meanwhile, is staying with a friend on the 
Atlantic coast.

*** And the Border Patrol announced it has broken up an 
improbable smuggling scheme in which Mexicans were given 
bikes and biking gear and sent speeding through border 
crossings as if they were part of an international race 
(Laredo, Texas).

*** One of the biggest impediments to the division of 
labor (and material progress) has been the border guards 
- who stop the free flow of labor, capital and goods. 
Each economy has been imprisoned within its own 
frontiers. But now the Internet gives people wings. You 
can fly over borders via the Internet - work, trade, 
exchange ideas and information - without ever getting 
your passport stamped or having your underwear inspected. 
More below.

*** Mr. Deshais seemed to have lost a skirmish, 
yesterday, in his battle with demon rum. He had the high 
ground in the morning. But by the afternoon, he was 
dreamily stirring his pots of tomatoes - which he is 
canning - and singing to himself. Like the rest of us 
Analog folks, Mr. Deshais's progress in life is episodic.

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On the drive from Ouzilly to Mortemart, a distance of 
about 25 miles, we encountered dozens of cows, hundreds 
of sheep and only about six cars. There was little noise. 
Except for the lowing of cattle and the calling of birds, 
few sounds are heard in this part of the world.

Mortemart is an ancient town with a convent and a chateau 
that once belonged to a friend of de la Rochefoucauld's. 
It is a cute place, with exposed-stone houses, tiled 
roofs, a covered market that looks at though it might 
have sheltered Caesar's legions and a menacing swan in 
the moat around the chateau. But it is tiny - with only 
about 200 inhabitants.

Still, it has a restaurant that makes the pleasant drive 
even more worthwhile. 

We had been sitting at the restaurant - accompanied by my 
friend Michel and his wife, Agnes - for only a few 
minutes when something very unusual happened. It was a 
warm night, so we chose to sit outside where we could 
watch the stars and the occasional passing automobile. 

What caught out attention was the arrival of a Rolls 
Royce bearing license tags from Monaco. Hmmm... you are 
almost as likely to take a vacation on a Russian 
submarine in the Baring Sea as see a Rolls Royce in 
Mortemart. The French tax wealth - so people hide it. And 
this area is, after all, a long way from Paris. 

But here was not merely a Rolls, but a fairly new one. It 
parked alongside the restaurant and four people emerged, 
an older couple and a younger one. The younger couple 
were in their early 40s I would guess. The only thing I 
noticed was that the younger man was in a wheelchair and 
the younger woman looked very trashy - with a pair of 
platform shoes, shiny pants and a face that would not 
have been out of place on the Rue St. Denis. 

I have been thinking about how the Internet changes the 

"You are schizophrenic about the Internet," complained 
Michel, philosopher and auto buff, "on the one hand you 
say it is nothing at all and that the dot.coms will 
crash...and on the other, you say it is completely 
changing the world. It cannot be both."

But it does seem to be both. Like life itself, each day 
is completely new...and much like the day before.

A new Rolls can be bought for about $200,000. But it will 
not get you to Mortemart any quicker or more comfortably, 
nor more safely than my $30,000 Renault. Why do people 
buy them? What information - available on the Internet - 
would lead a person to buy a Rolls? 

As you may remember, Nietszche made the distinction 
between the knowledge you have that is direct, personal, 
and immediate - the things you know indirectly, 
abstractly and remotely. 

Michel gave me an example, "My neighbor's swan was eaten 
by a fox. From the fox's point of view, the event had 
real meaning - he was hungry. He ate. But from our 
perspective, it is only has meaning in a literary sense."

The Internet extends the division of labor - by allowing 
further and further specialization. This little hamlet 
where we had dinner, for example, used to be almost 
completely self-sufficient. The farmers grew wheat which 
was milled nearby and cooked into bread in ovens right on 
the property. Chickens, cows, pigs, vegetables - almost 
everything on the menu came from the farm. Even clothes 
were made here - the sheep were sheared, and the wool 
spun into fabric and then made into clothes. There is 
still a woodworking shop and a forge/machine shop on my 
farm - both of which are still in use.

But now, even the local farmers buy their lamb from New 
Zealand, their clothes come from Malaysia, and their roof 
tiles come from Spain or Italy.

Not only are they dependent on the division of labor - 
they have also lost the knowledge of isolation. Hardly 
anyone recalls how to make raw wool into a sweater... And 
when we wanted to fire up our bread ovens - just to see 
how they worked - we had to get an 80-year-old man from 
the nearby town to show us how. Younger people just don't 

As the division of labor expands, knowledge also expands 
- but it also gets spliced and diced into ever finer 
pieces and spread all over the world. Our lives depend on 
the food we eat - but we usually have no idea how the 
food is produced or what is in it. We also depend on 
water...and heat - and yet, we don't really know how or 
where they come from. Who understands how a refrigerator 
works? Who can write a software program? If you studied 
electrical engineering in college, will you understand 
genetic engineering? And how do we know that the Russians 
are not preparing a nuclear strike against the U.S. at 
this very moment?

The Digital Men believe that somehow with all the 1's and 
0's pilling up - we will all gain access to the 
information we want and need. There will no longer be any 
trade secrets or rip-off auto repair shops. 

But while information is cheap...knowledge is dear. It 
takes time to learn how to do anything. It can take a 
lifetime to master a trade - even a trade that is as 
rudimentary and analog as woodworking or gardening.

And the Internet has done nothing to expand the supply of 
time. In fact, au contraire, it has made time more dear. 
A 1978 book by Herbert Simon, cited by Marc Faber in his 
July newsletter, explains why: "In a world where 
attention is a major scarce resource, information may be 
an expensive luxury, for it may turn our attention from 
what is important to what is unimportant."

Much of the expertise you find on the Internet - and 
elsewhere - turns out to be fraudulent. Apart from the 
obvious mountebanks in psychology, feminology, political 
science, sociology, ethnic studies and other academic 
sinecures, there are also the quacks in the financial 

You may remember Henry Blodget, whose pronouncements on 
Internet and tech stocks are still taken seriously. Marc 
Faber reminds us of others: "Consider a company like 
Qualcomm, a pioneer of wireless data technology. In 
March, an analyst forecast that its stock would rise to 
$500.. But now, barely three months later, the stock is 
down to $56..." 

Or, "take an [another] example, Computer Associates. Just 
before Independence Day, the company announced that it 
would miss analysts' estimates for its fiscal quarter 
ended June 30...instead of earning 55 cents as analysts 
had been expecting, it would report quarterly earnings of 
just 11 to 16 cents (about 80% lower than expected.) How 
is it possible that none of Wall Street's highly paid 
analysts knew of the earnings shortfall before the 
company made its announcement?" 

The Internet is full of unimportant information - 
distractions, time wasters, and urgent messages that mean 
nothing. How do we know where - among the dirty pictures 
and stock touts - to find what we really need?

And as the division of labor and knowledge fragments, 
people become further and further removed from real 
knowledge of anything. Most of what we think we know is 
second hand, inferred, abstract, remote guesswork.

Information is no longer what we want. We can get as much 
as we could ever want - for free. But it is an expensive 

Instead, what we really want is to know what is important 
and what is not. This is not information. Nor even 
knowledge. It is not digital. It is analog. It is 
judgment. Wisdom. Style. Grace. 

A Rolls Royce is a not so much a means of transportation 
as it is a fashion statement. It is a declaration of what 
is important to the owner, an inside-joke maybe, or like 
a Louis Patek watch...a tool for a scam artist. 

The distinctive radiator, Michel pointed out to me, is 
modeled after a Greek temple - rational, classical... 
digital. But on top of the radiator (significantly) sits 
a statue of winged ecstasy, Dionysian, irrational, 
kitschy and completely analog. 

Michel, it turns out, owns a Rolls Royce himself. "Why 
don't you drive it?" I asked him.

"The air conditioning doesn't work."

Your humble, Renault-driving, scribbler,

Bill Bonner

P.S. Enjoy the weekend.
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...

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Last modified: April 01, 2001

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