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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Labor Day

*** The "wheel of fortune" keeps on a turnin'...

*** Layoffs going global...Wall Street feeling the 

*** A wacky plan to save Maryland tobacco...are all 
politicians crazy?

"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 

"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 


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 

- "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 

- 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 

*** 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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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 

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 

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, 

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:

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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Last modified: September 03, 2001

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