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Co-brand
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Contributed by Bill
Bonner
Publisher of: The
Fleet Street Letter |
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OUZILLY, FRANCE
MONDAY, 3 SEPTEMBER 2001 |
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Today:
Labor Day
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*** The "wheel of fortune" keeps on a turnin'...
*** Layoffs going global...Wall Street feeling the
pinch...
*** A wacky plan to save Maryland tobacco...are all
politicians crazy?
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"The wheels of fortune turn against Japan," a
Financial Times headline tells us.
How do you like that FT? Are they on top of the
story, or what?
The wheels of fortune began turning against Japan in
January of 1990 - 11 years ago. They've been turning
against Japan for so long that they might be getting
close to the end of the track...
But fortune's wheels are just beginning to turn
against the U.S.
"U.S. personal savings rate rises to 2-year high,"
says another FT headline.
Meanwhile, last Thursday's figures showed consumer
spending slowing down...rising only 1/5 as fast as
income.
"Well, Kurt," I posed the question to Dr.
Richebacher, who was visiting me this weekend, "what
will happen when Americans cut back on spending and
begin saving again?"
"The end," came the response.
Kurt Richebacher is not like most economists. English
is not his mother tongue...but he speaks it much more
clearly and unequivocally than most economists. He
believes he knows what is going on...and he knows
what can be done about it: nothing. But more about
Dr. Richebacher tomorrow.
For now, let's turn to Eric's report from Wall
Street.
******
Eric Fry:
- Is this a bear market or what? Stocks are trading
so poorly they remind me of the gold market - or of
how the gold market used to be.
- The Nasdaq coughed up almost 6% last week, while
the Dow and the S&P 500 shed more than 4% each. For
the month of August, the Nasdaq dropped nearly 11%.
- Even while ordinary stocks falter, gold and other
resource stocks remain among the year's best
performers. Is Mr. Market just teasing us? Or should
we keep selling tech stocks and buying gold stocks?
- One noteworthy vote in favor of gold and other
resource investments is the surprisingly robust
performance of the Australian economy. Like a house
miraculously spared when a fire consumes everything
surrounding it, Australia's resource-heavy economy
stands tall amidst the scorched global economic
landscape.
- "Almost every sector [in Australia] is looking up,"
The Wall Street Journal reports. "Home building is on
the rise; consumer spending is strong; corporate
profitability is improving. Exports are booming."
What's its secret?
- "A timely application of fiscal and monetary
stimulus and the good fortune to have a weak currency
at a useful moment," guesses the Journal.
- Or maybe, we guess, Australia's strong performance
represents a triumph of the old economy over the new.
Australia has always been known as, and still
remains, a "resource economy." In other words, it
produces real stuff, not simply "intellectual
property."
- The world always needs "stuff" like oil and
aluminum, and yes, Foster's beer, even if it
sometimes loses its appetite for "Web consulting" and
"Internet incubating services."
- Meanwhile, Australia's Asian neighbors might be on
the verge of becoming attractive investment
destinations once again. The reason: Wall Street
firms are exiting the markets.
- Bloomberg reports that many institutional brokerage
firms are closing down or greatly reducing their
emerging market equities operations. Could this be a
contrary indicator, suggesting that investors should
begin tiptoeing into emerging markets stocks?
- "Societe Generale SA closed its emerging market
equities business, firing 30 people," Bloomberg
reports. "Credit Suisse First Boston is dismissing as
many as 15 traders...BNP Paribas SA is shutting its
equities business in Eastern Europe, Middle East and
Africa. Credit Agricole is firing 25 people as the
bank closes its Brazil brokerage. ABN AMRO Holdings
NV and Merrill Lynch are also scaling back."
- The cut-backs are hardly surprising, given the poor
performance of emerging market stocks over the past
few years. Since the end of 1996, The IFC Global
Regional Composite Index has dropped 21 percent,
compared with a 66 percent rise in the S&P 500 Index
and 50 percent for the Bloomberg European 500 Index.
- As contrary indicators go, they don't get much
better than this. When brokerage firms - known for
hiring at the top and firing at the bottom - exit an
entire sector en masse, it's usually a good idea to
take a look.
- Back home in the States, economic silver linings
are getting hard to find. "After years of fantastic
growth, New York's housing market is poised for a
drop of up to 20%," Crain's reports.
- "The first cracks in the market are showing up as
sales volume drops, prices plateau and homes take
longer to sell...If history is a guide, prices will
fall because Wall Street is shedding jobs and
income...After the market crashed [in 1987], Wall
Street gave up 35,000 positions and the bottom fell
out of the real estate market."
- Predicts John Lonski, chief economist with Moody's
Investors Service in Manhattan, "By the first half of
2002, the real estate market could really begin to
feel the effects of layoffs and slower job creation."
******
Back to Mr. Bonner:
*** Beautiful day here in Ouzilly. The sun is just
peeking in one window of my little office while the
moon says farewell from a window on the opposite
side.
*** I'm here with colleagues and business associates.
Elizabeth and the children went back to Paris - today
is the first day of school. The children dreaded it
all summer long. Now it is here. Good luck, kids. Bon
courage, as they say in France.
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LABOR DAY
By Bill Bonner
Cigarettes and whiskey and wild, wild women
They'll drive a man crazy, they'll drive him insane
Traditional song
>From the great state of Maryland comes more evidence
that cigarettes will make you insane. In fact,
tobacco seems to have driven Governor Parris
Glendening and the Maryland state legislature stark,
raving mad.
I say this after reading a news item sent by a
friend.
Gov. Glendening launched a program in the state to
encourage idleness among the state's tobacco farmers.
Instead of planting tobacco, hoeing it, fertilizing
it, cutting it, spearing it, hanging it, wrapping it,
packing it and taking it to market, where they sell
it for an average price of about $1 a pound, farmers
will now merely get a check from the state of
Maryland - for an amount equal to what they would
have gotten if they had actually done the work.
Henceforth, they will toil not...neither will they
spin. Their work is over.
The farmers, faced with the choice of working year-
round or not working a single day, for the same
amount of money, chose the latter. "Of the 990
farmers eligible for the program," we learn, "674
have either taken a buyout or applied to receive one
next year."
What about the others? What kind of a numbskull would
rather earn his porridge by honest labor - when he
could so easily participate in the state's pilfer
program?
The only group with the moral fortitude or
stubbornness to keep working has been the Amish. By
habit or lunkheadedness, the Amish stay away from
government giveaways and modern technology. In
August, with both the heat and humidity in Southern
Maryland often near the 100 degree mark, the Amish
work out in the hot sun - in their dark, traditional
clothes. With teams of horses and teams of men, they
do the hard work of bringing in the tobacco - just as
it has always been done.
For 350 years, Maryland farmers have grown tobacco.
The plant has resisted mechanization, so it is grown
today in almost the same way it was 350 years ago.
The only difference is that tractors pull planters
and wagons, instead of horses. But so marginal an
improvement is this that the Amish farmers - who
eschew the internal combustion engine - are about as
productive as the farmers with computer terminals and
the latest technology...In fact, since the Amish have
no debt, they may be more profitable than other
farmers in the area.
Your editor recalls the hard work of growing tobacco.
The economy of southern Maryland changed in mid-
century just as it did in France. The blacks who
worked as field hands disappeared to easier, better
paying jobs in the cities. What was left was friends
and relatives - called out to help cut tobacco and
hang it in the barns.
The mornings were pleasant. For an hour or two, the
work seemed easy, when we were still fresh and the
sun was barely up. Using something that looks a bit
like a machete, we would work our way down a row,
cutting down the plants one by one...and laying them
down in a row. The plant would "lay" in the sun for a
few hours, softening up a bit until we could go down
those same rows with a metal spearhead. The spearhead
was mounted on the top of a tobacco stick, about 5
feet long, held upright. Then, one by one, the
tobacco plants were raised up with our right arms, as
we placed the thick end of the stalk on the point of
the spear. Using both hands, the stalk was driven
down upon the spear onto the stick. The trick, of
course, was to avoid spearing your own hand as you
forced the stalk down.
After you had five or six tobacco plants on the
stick, you would lay the stick down in a pile and
move on to the next stick, the next pile, and so on.
By this time, the sun was blazing hot. Everything we
had on was drenched with sweat - which ran down our
arms and legs, soaking our work boots too.
My cousins, my brother, and I would make a
competition of it. We each lined up at the beginning
of a row and tried to be the first one to the other
end. The game made the work go a little faster and
broke the tedium of it. Usually, my brother was the
winner. He worked as a blacksmith in those days and
had forearms the size of Greek columns.
By 5 or 6 in the evening, we were worn out. If we had
planned it right, we would then be loading the
tobacco on wagons - hoisting it up, stick by stick.
But the work was far from over. The tobacco still had
to be hung in the barn - in neat rows, all the way up
to the roof.
We would place ourselves on the rafters - each about
6 feet above the next. Then, taking up the tobacco,
we passed it from the floor of the barn up, from man
to man, to the peak of the roof. By now, the sun was
no longer heating up the tin of the roof, so it was
not much hotter inside than out. Still, it was the
kind of work that made us think of government jobs in
air-conditioned buildings.
But I guess it's all over now.
"So many Maryland tobacco farmers have agreed to a
state buyout," reports a Baltimore Sun article, "that
81 percent of the crop will be gone by next year..."
Maryland officials are hardly alarmed by the
disappearance of an entire industry from the state.
"We are ending tobacco growing," said the governor,
proudly.
Ending tobacco growing has some popular appeal.
People all over the nation seem convinced that the
plant is as dangerous as a bureaucrat and as
obnoxious as a tort lawyer.
But for hundreds of years people have enjoyed
tobacco. Thousands of people die in the state of
Maryland every year from tobacco related illnesses,
we are told. But no one has ever shown that a
cigarette every once in while does any harm. Besides,
a few thousand deaths seem a small price to pay for
tobacco's many benefits.
Tobacco has been shown to reduce the incidence of
alzheimer's disease. Smokers are less likely to fall
asleep at the wheel of a car. And one report I saw
said smokers were more productive on the job. In
fact, a colleague told me yesterday that the biggest
burden on employers was neither the smokers nor the
drinkers, but the eaters. Fat people, in other words,
are more of a problem in the workplace than smokers.
And imagine a war without cigarettes. Your buddy
might be lying on the ground - shot through by a
machine gun round...or his leg torn off by a grenade.
With only minutes to live...what do you think he asks
for? A granola bar?
Heck no...he wants a smoke.
So what do you tell him?
"Sorry, pal, but this is a smoke-free war."
But there's no point in arguing with an extraordinary
popular delusion.
And why be a sour-puss about it? Maryland's tobacco
farmers have toiled long enough. Let them sit
around...and get fat.
Bill Bonnerh
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| About
The Daily Reckoning: |
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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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