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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

OUZILLY, FRANCE 
MONDAY, 4 SEPTEMBER 2000 

 

Today:  Sin and Wickedness In The Marketplace

In Today's Daily Reckoning:
*** A respite from the Labor of Daily Reckoning...
*** What a dollar will buy in Europe...
*** Who asks for a raise in the summer? A day devoted to 
no man, sect, race, or nation... and more.

*** Ahh, Labor Day... burgers, beer and baseball. What 
better way to enjoy this, the unofficial final weekend of 
the 'summer of love'?


*** France enjoys no such holiday. Having just finished 
the month of August in which all the fine citizens of 
Paris leave the city - and work - behind for fully 
compensated late-summer vacations. Only the newly hired, 
or chronically under-employed, fail to partake of Les 
Vacances. Today marks the beginning of La Rentree...the 
return. The metro is back to its crammed, stuffy self, 
and the patisseries are once again full of freshly baked 
‚clairs and tartes normandes.


*** Still, Bill thought he'd give you a little Labor Day 
respite himself - in the form of a truncated Daily 
Reckoning. These market notes have been brought to you by 
Addison, followed by another Daily Reckoning greatest 
hit... first aired Labor Day 1999. Read on, read on...


*** Friday saw the Dow close up 23 points at 11,238. The 
Big Tech Nasdaq shimmied up 27 points to finish the week 
at 4,234. And the S&P 500 inched its way 3 points higher 
to 1,520... all very modest gains, but consistent with a 
late summer Friday - when all the traders appear to be 
taking their early leave in an attempt to avoid traffic 
on the way to the Hamptons.


*** The S&P now stands just shy of its March 24 record 
close - 1,527.


*** "Wall Street Bulls See Reasons To Smile," states a 
Reuters headline boldly. "Recent economic data has showed 
the economy slowing enough for the U.S. Federal Reserve 
to most likely stay put on interest rates," says the 
article "but not so deep as to hurt corporate America's 
profits." 


*** Still, "You wonder why people are happy that the 
economy is slowing," an analyst in the article asks... 
"Companies are not making more money...[yet] the stock 
market is being priced for profit growth and we're not 
getting the kind of growth needed and eventually it is 
going to catch up."


*** This morning in Europe... US$.90 will buy you a Euro, 
US$.94 will buy you 100 Yen and One Crisp US Dollar will 
buy you 7.36 French Francs. By way of illustration: the 
litre of Vins de Pays L'Aude I shared with my wife on our 
modest dinner table last night cost a little over 8 
Francs. 


*** "Traditionally, whoever leads on Labor Day - the end-
of-summer holiday in the United States - wins the White 
House," Reuters warns us. Homo Digitalien Gore has lead 
the fickle-public opinion polls since the end of the 
Democratic National Convention on August 18. The election 
is Nov. 7.


*** What's really at stake? Who knows. Gore has promised 
to spend your money on increased compliance with Kyoto 
environmental controls, Internet access in every 
classroom and health care for five million children who - 
for whatever reason - are not covered. Bush has promised 
to spend a ton of money, too... to get elected.


*** "...so much money is changing hands - upwards of $2 
billion in a presidential election year - the cloud never 
lifts," says a website run by the non-profit group Public 
Agenda. In a poll they conducted 59% percent of Americans 
reportedly believe the election is 'for sale' to the 
candidate who can raise the most money. 


*** But chances are, this time, barring an immediate 
collapse of the dollar, Gore will spend the early morning 
hours of November 8 enjoying the fruits of this Fed-
inspired economy... that is, this vast illusion of 
prosperity, whereby the average American consumer has 
been willing to borrow and spend his way into negative 
savings territory and dump his future happiness in the 
laps of many a 20-something mutual fund manager. 


*** "I'm going home for the long Labor Day weekend," 
wrote Lynn Carpenter last Friday, "wondering what it 
means when CEO pay rises 535% over the past 10 years 
while everyone else's pay rose just 32%. 


"Shouldn't there be some more wage pressure than that? 
This is full employment, isn't it? Is it possible that 
we're just so darn happy that we don't need to bug the 
boss for another raise? Do we have enough color TV's, 
Lexus's and four-bedroom houses to satisfy the majority? 
If so, we would be the first people in the history of the 
world to know we had it good enough... on the other hand 
I suspect those rising gas, food and insurance prices the 
Fed has been ignoring is going to turn into wage pressure 
yet. After all... who asks for a raise in the summer?" 


*** In a pompously titled directive titled: "Labor Day: 
How It Came About; What It Means," the Department of 
Labor tells us Matthew Maguire, a machinist, and 
secretary of Local 344 of the International Association 
of Machinists in Paterson, N.J., proposed the Labor Day 
holiday in 1882. "Labor Day differs in every essential 
from the other holidays of the year in any country," said 
Samuel Gompers, founder and longtime president of the 
American Federation of Labor. "All other holidays are in 
a more or less degree connected with conflicts and 
battles of man's prowess over man, of strife and discord 
for greed and power, of glories achieved by one nation 
over another. Labor Day...is devoted to no man, living or 
dead, to no sect, race, or nation." 


* * * * * * * * * Advertisement * * * * * * * * * * * * *

A Perfect Financial Storm is gathering. Will the Nasdaq 
and S&P 500 decline by half? Will the dollar fall, and 
take the Dow with it? One expert in inter-market 
relationships says yes. Find out how global stock, bond,
commodity and currency markets are brewing up the biggest 
financial disaster in a generation--and what prudent 
investors can do to prepare today. Please click here:
http://www.dailyreckoning.com/imra4
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *


THE DAILY RECKONING GREATEST HITS: First aired LABOR DAY 
1999.


SIN AND WICKEDNESS IN THE MARKETPLACE



Most people imagine that the market is like an ATM 
machine that just dispenses cash without debiting your 
account. You just have to stand at the machine long 
enough... and you get rich. No brains required. 


Yes, of course, the machine sometimes goes on the 
blink...but it is soon repaired. Best to stay in line 
even when it's not working well...so you'll be ready to 
collect your money when it starts up again. 


This view is the one held by most people today. It is the 
view that informs the investment decisions of millions of 
people...and that under girds most of the financial 
industry. It is a view reinforced by experience... the 
last two decades of market history provides no serious 
counter-evidence. Stock prices (almost) always go up. 


Keynes once commented that "practical men, who believe 
themselves to be quite exempt from any intellectual 
influences, are usually slaves to some defunct 
economist." Keynes was, himself, the defunct economist to 
whom two generations of economist were enslaved. He 
viewed the economy as a vast machine that could be 
adjusted by turning a few knobs and pulling a few levers. 
Thus were his successors chained to their posts at 
central banks and councils of economic advisors, fiddling 
with the instruments of their respective economies...and 
generally making a mess of them... 


Now, most economists understand that an economy is much 
more complex than Keynes imagined. Economies are 
unbounded systems...they cannot be successfully commanded 
and controlled, nor even predicted...but merely modeled, 
based on probabilities. A stock market is the same sort 
of thing. It is an equally unbounded system. It is not a 
mechanistic, automatic, wealth-distributing machine. It 
is more like a living thing. Real investors know that 
this is so... they give pet names to the different 
"moods" of the market... anthropomorphically describing 
it as a "bull" or a "bear." They know from experience 
that it can be many things. But it is definitely not a 
machine. 


Richard Russell says that "whatever your weakness...the 
market will find it." He often describes a bear market as 
"vicious" or "cunning" and "out to take as many people 
down with him as possible." What machine would do that? 
Is this just hyperbolic writing...or does the market 
actually have a mind...a will...and even malicious 
desires? 


The answer is yes. And no. And maybe. 


There...I hope that's settled. 


A market reflects and influences the economy that 
supports it. Not surprisingly, the qualities that make 
for success in the economy...or perhaps I should say, in 
real life...are generally those that serve investors 
well. What works in an economy? Effort, discipline, 
patience, and humility. 


Perhaps no one illustrates these qualities more than the 
greatest investor of our time - Warren Buffett. Buffett 
(still) works extremely hard getting to know every detail 
of the businesses in which he invests. He does not invest 
on hunches. He does not guess about which technology is 
likely to succeed. He does not check out the buzz on 
Internet chat rooms. He applies a discipline and training 
that he has worked on for many years. 


When he decides to invest in a company, he does so 
recognizing that it could take many, many years before 
his investment really "pays off." He's very patient. And 
he's smart enough to be humble. He does not invest in 
things he doesn't understand. He has never bought stock 
in Microsoft, for example, even though he plays bridge 
with Bill Gates. When stock prices generally do not make 
sense to him... he attempts to get clear of the market... 
as he did in the late 60s. 


By contrast, what hurts you as an investor is what hurts 
you in the rest of life. Vanity: such as when you think 
you are smarter than other investors. Sloth: such as when 
you can't be bothered to study an investment before 
buying it. Pride: when you won't admit that you've made a 
mistake...and don't cut your losses. Greed: when you 
think you can get a 20% return every year...without 
working...or when you think you'll make a killing on a 
[Big Tech] stock...even though you have no idea what it's 
all about. Timidity: waiting too long to make your 
move... needing the reinforcement of others before making 
an investment decision. 


Porter Stansberry sent me this quote from Reminiscences 
of a Stock Operator, in which Edwin Lefevre described the 
investment consequences of greed: 


"The sucker has always tried to get something for 
nothing... people who look for easy money invariably pay 
for the privilege by proving conclusively that it cannot 
be found on this sordid earth." 


Sin and wickedness rarely goes unpunished. Investing 
merely quantifies it.


Your correspondent,


Bill Bonner
 
 
 
 
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...

"My small portfolio has followed true to my wife's description of my
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"
(Timothy)

" Your Daily Reckoning is the best in business commentary... mixing
serious warnings and the state of the market with gentle humor"
(Makram)

"It is actually better than some of the newsletters that I pay to
get"
(Joe)

"Your statements and philosophy have kept me from storming into the market and in fact [I'm] making some money in put options" (Frank)

Open your mind with the most stimulating e-mail newsletter that you'll ever read, The Daily Reckoning. To receive this free daily email newsletter click here now.

 
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Last modified: April 01, 2001

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