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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Unfogging The Future

In Today's Daily Reckoning:
*** A battle of the titans in the currency 
far, the dollar is ahead on points...
*** 'Complacency' in the stock market as the summer nears 
its end
*** Insider selling - fast and furious...why federal 
judges are so bad...our gardener in the tizzy...and more

*** There's a three-way battle going on in the currency 
markets. I've been watching the dollar against the euro - 
but the action, the last couple of days, has been between 
the yen and the euro. The dollar index fell 7 points 

*** The euro hit a new low against the yen yesterday, and 
still rests near a new low against the dollar. European 
Central Bank officials are meeting today - and promise a 
rate hike. It should be on the news this morning.

*** The English pound has sustained some 'collateral 
damage' in the war of the titan currencies. The pound has 
been knocked down to its lowest level (against the 
dollar) in 6 � years. $1.45 will buy you a pound today. 
Of course, if your memory goes back more than 6 � years 
you may recall that you could buy a pound for just a 
little over $1 in 1985.

*** Meanwhile, in the stock market, "there's a little bit 
of complacency," says one analyst, speaking of the 
highest levels of confidence, optimism and self-esteem in 
100 years. 

*** The Dow fell 112 points yesterday. Nothing special... 
a few weak earnings announcements. Mostly, investors 
expect stronger earnings, which prompted this quip from a 
Federal Reserve member: "Isn't it odd that there is such 
confidence in strong earnings numbers coming along in the 
second half, while there is a comfortable acceptance of 
'slowdown' as benign...." Another mystery.

*** The Nasdaq rose - 21 points. It was led by none other 
than - which shot up almost 10%, following a 
reaffirmation by Goldman Sachs that the world's biggest 
e-tailer is a "trading buy" with a "positive" outlook. 
I'm sure Bezos has a positive outlook, but what's 
positive about the outlook for Amazon shareholders? The 
company just opened its French branch - accompanied by 
some fanfare in Paris. And it announced it is going to 
sell digital books. More below, as we 'unfog the future.'

*** Amazon wasn't the only Internet to rise. The whole 
sector did well yesterday. Linux was up 15%.

*** Oil rose 58 cents - to a new high of $33.32.

*** Gold rose too - up 70 cents. Platinum, however, fell 

*** And Treasury bonds bounced after a 3-day decline. I 
wondered, in yesterday's letter, whether we may have seen 
a top in bonds for this cycle. We'll have to wait and 

*** "Insider selling of large blocks of stock, that is $1 
million worth or 100,000 shares or more, through July was 
$43.1 billion, which is twice as much sold in the 
comparable spans of 1998-99. In fact, sales for the first 
six months of $39 billion tops all of last year." This 
item illustrates the way things get around on the 
Internet. It is from Bob Chapman, via Bill Murphy's Le 
Metropole Caf‚, via Harry Schultz. (Incidentally, I got 
Harry's web site wrong yesterday - as you may have 
noticed. The correct address is

*** Like information on the Internet, "many things in 
society, life and business are clear examples of 
contagious behavior," says Ray Devoe. "'Ideas and 
products and messages and behaviors spread just like 
viruses do.'" Ray is quoting from a book by Malcolm 
Gladwell, which describes the process leading up to "one 
dramatic moment when everything can change all at once." 
Little changes can have big effects. Finally, when these 
changes occur, they happen in a hurry." (see: The Tipping 
Point: A Strategic Alternative History

*** And here's some depressing news. Class-action jackals 
have launched a suit against Microsoft for "overcharging" 
its customers. MSFT, the suit claims, "harmed consumers" 
with its monopolistic business practices.

*** Of course, in a free country, Microsoft would be 
allowed to charge as much as it wants. So, why don't 
federal judges throw these low-life ambulance chasers out 
of court? The answer comes from Paul Craig Roberts on an 
Internet forum: "This is because White House nominations 
and Senate confirmations of federal judges defer to 
career bureaucrats in the Department of Justice (sic). 
The bureaucrats choose the judges according to the 
department's litigation interests." Roberts went on to 
say that he got a letter from a federal judge who 
explained this to him...and remarked in his letter "that 
he has never seen a judge who has reined in the 
government be elevated to a higher bench."

*** My last few days in the bucolic tranquility of 

*** But what's this? Mr. DesHais is in a tizzy. He talks 
to himself all the time anyway...but now he is having a 
heated exchange. A bulldozer arrived yesterday to clean a 
century's worth of muck and mud out of the pond. Mr. 
DesHais is a purist...a retrograde rustic...a romantic 
soul who detests all forms of mechanization. Though I 
have never heard him mention computers...I'm sure he 
regards them as the devils' own work.

"They're going to ruin the banks of the pond," he argues 
forcefully (to no one in particular...I am eavesdropping 
from my office window). "They're going to make a big 

Finally... after 45 minutes or so...

"Mr. Bonner," he calls to me, agitated. For a moment I 
think he's been drinking. But then, he seems steady - 
just upset. "I need to talk to you."

"Okay...come on up..." I reply, leaning out the window.

"Mr. Bonner...I don't like to bother you." (He is always 
very courteous and deferential. He treats me as though I 
were the aristocrat he wishes I were.)..."But do you know 
what they are doing down there?" 

Yes, of course I do...I hired the guy with the bulldozer 
and have been waiting more than a year for him to show 

"Well, I'm just afraid they are going to make a big mess. 
And I was planning to put that whole area in order this 
winter. But if they tear up the banks of the 
pond...they're going to kill the trees...what a 
mess...what a mess...what a mess..."

I felt I must intervene at this point...this lament could 
go on as long as a Grateful Dead song...

"Well, what else could we do?" I ask.

"I'll dig it out myself..."

"But the pond must be at least 2 acres..." I protest. "It 
would take 10 years to dig it out by hand" (a slight 
exaggeration, but you have to use hyperbole to get your 
point across sometimes).

" have to do things right..."

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have bet a whole lot less than the ranch - and still made 
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I found the photo in the attic of the chateau. Rummaging 
through old books and ledgers left by the previous owner, 
a photo of five men in uniform fell out.

The surprising thing was that these men were not wearing 
the familiar French uniforms. Instead, they wore outfits 
like the one in the photo of my grandfather from 1918.

These men were American soldiers in France in WWI. On the 
back of the photo are their names:

C.A. Leland from Atcheson, Kan.
H.V. Hayes from Waco, Tx.
R.R. Reinert from Chicago
H.R. Schultz from the Sanford Ranch in Montana
And D.R. Arnold, also of Chicago

How the photo came to be in a French chateau on the other 
side of France, I do not know. 

I wondered what happened to them. If they survived the 
war - they must have lived through one of the most 
spectacularly unpredictable series of events in human 
history... war... revolution... depression... Stalin... 
Hitler... Jackson Pollack... the dust bowl... 
television... air-conditioning... freeways... 
Communism... cubism... Republicanism... anti-smoking 
campaigns... Lee Greenburg... class action suits... maybe 
even Bill Clinton and Michael Jackson.

Few, if any, of these 'jerks' of history could have been 
foreseen by the handsome young men in the photo. And who, 
when the guns of August opened up in 1914 and the 'fog of 
war' fell over Europe, could have anticipated the series 
of lethal explosions that these guns were to trigger: the 
destabilization of Russia and the rise of the 
Bolsheviks... the weakening of Liberal institutions in 
Germany and the advent of Nazism... the reign of terror, 
initiated by Lenin and then pursued with such vigor by 
Stalin...the holocaust...the demise of Liberalism in the 
West, replaced by a different sort of liberalism - with 
government growing from 13% of GDP in 1913 Britain to 
over 50% after WWII...and similar expansion of state 
power in America...and the nearly-complete repudiation of 
the bourgeois culture that had evolved over 2,000 years - 
in art, architecture, and literature. (Only music escaped 
- it could not be intellectualized.)

As Harry Potter discovered in his latest adventures, 
'unfogging the future' is tough.

"Don't forget," Jules reminded me on my last trip to the 
U.S., "buy a copy of "Harry Potter and the Goblet of 
Fire." Among other things, the book tells of Harry's 
visit to Professor Trelawny's School of Divination, where 
students learn how to 'unfog the future." But Harry finds 
that the professor is a bit of a fraud. She has had only 
two predictions come true in 15 years - a record that 
might only be envied by a hard money financial guru.

Buying the book proved difficult. So great was demand for 
the book that the few bookstores I visited were sold out. 
I came home empty handed - and ordered the book from

Harry Potter was such a sensation that Amazon was able to 
use it to secure 63,550 customers, not including your 
correspondent. Yet, the company's real achievement was to 
do so at a net loss of at least $5 million. It is not 
hard to lose money on books. But losing a lot of money on 
one of the biggest short-term sellers in history deserves 
a word or two.

Amazon appears to have paid about $78.68 for each of its 
new Harry Potter customers. The idea must be to begin 
making money on them in order to recover the investment. 
But, as I explained yesterday, Amazon does not enjoy the 
Internet's famous economies of scale. A book, unlike an 
e-mail message, costs money to produce. The 100,000th book 
is not much cheaper to produce than the 10,000th. And 
other people are selling the book too - so Amazon cannot 
control its own margins.

But let's assume that Bezos and company can somehow get a 
5% profit margin on future sales to these people. To 
recover the original investment, each customer would have 
to spend an average of $1560... plus interest. And that's 
just to get back to breakeven. 

We cannot presume to unfog Amazon's future. We have no 
idea what the jerks of history will do with the firm. 
Amazon may turn out to be a decent company yet.

But without the inducement of super-low prices...that is 
to say, those that give the company no margin of is unlikely that customers will spend $1560 
dollars with Amazon. I buy books from Amazon...but I know 
that the lowest price is only a couple clicks away. And I 
have no reason to be loyal to Bezos.

Amazon is, of course, not alone. The Internet rain forest 
is crowded with companies on the edge of extinction. 

The B2C sites have mostly gotten their e-tails beaten. 
Now, the content sites are suffering too. In July, Feed 
Magazine joined forces with It was either that 
or death; Feed faced capital starvation. The WSJ - with 
one of the few successful pay-for content sites - reports 
that APBNews has closed up shop. CBS's Internet group has 
laid off a quarter of its staff. " and Salon 
are swooning," says the WSJ.

Internet content sites - such our own dearly beloved - do have some economies of scale. 
Once prepared, the cost of replicating readership is 
extremely low. But as the Industry Standard, and our own 
experience, suggests: "One thing is becoming clear; the 
Internet is no bargain.", for example, 
employs nearly a third of its staff to work in technical 
support capacity. 

Which experiments will succeed? Which will fail? We don't 

In Divination School, Harry Potter studies crystal ball 
gazing, palm reading, and tea leaves. There is a special 
pattern - a large, black dog - which is especially 
ominous. It is called the 'black grim' - and it means 

By now, the 'black grim' has almost surely visited all 
five of the young soldiers in the photograph. By this 
time next year, unless some new magic is found, many 
internet companies will be paying no more interest...and 
selling no more shares. 

Beyond that, the future is still fogged.

Your writer in residence, enjoying the last foggy-dew 
days of summer...

Bill Bonner

P.S. It is impossible to unfog the future. So good 
investments are made on the basis not of what we know 
about what will happen, but what we don't know. 
Ignorance, in other words, is the key to good investing. 

In the course of your work, it often happens that you 
will work all day...but only in one hour will you do 
something that is really productive. Maybe a good idea 
will come to you. Maybe you'll make a good move of some 
sort. Maybe you'll just get lucky. 

You might as well only work that one hour, and play golf 
the rest of the day. But the problem is, you don't know 
which of the hours you work will turn out to be the good 
one. As someone once remarked, "when I work 14 hours a 
day, it's amazing how lucky I get."
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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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"

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serious warnings and the state of the market with gentle humor"

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Last modified: April 01, 2001

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