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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Getting Smarter

*** Immigrants on the 'fast' track... more 'bull' from 

*** September - the cruelest month of all... What's on 
your "do without" list? 

*** Please, if you do nothing else, use your cell phone 
and upgrade...and for heaven's sake - get a room!

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Today's most popular stocks will be tomorrow's most 
dangerous death traps.

Wall Street's "gurus" are pushing defensive stocks. They 
are the same guys who were pushing dot-coms last year. 
Don't pay attention to Wall Street. The Dow is a Death 

Here's a strategy that will really work for you to 
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I'm taking the train up to London this morning. As 
I write, the train is halted at the entrance to the 
channel tunnel. A half dozen men are walking around 
outside the train. Dressed in bright yellow safety vests 
and carrying walky-talkies, they appear to be inspecting 
the undercarriage of the train - looking for illegal 
immigrants to Britain.

The operation took about 15 minutes - a waste of 
time, in my opinion. Anyone who's so eager to get to 
London that they're willing to hang from the bottom of a 
high-speed train to get it would be an asset to the gene 


Well, Ol' Ferdinand has done it again. He was in 
the North section of the field yesterday morning....and 
stock prices went north. The Dow ended up 36 points.

Even so, Cisco closed below $15. Yahoo is now 
under $11. And Amazon! You can buy all you want for less 
than $8 a share.

Little by little, day by day, investors seem to be 
catching on to what a debacle the technology sector 
really is. And not just the dot.coms. Let's check in 
with Eric. Eric, ca va?


Eric Fry reporting from the Paris office:

- I'm in Paris today, fresh from visiting Bill in 
Ouzilly. His chateau rests in story-book picturesque 
French countryside - a spot that one would not easily 
confuse with Manhattan. There are some similarities, 

- For example, Mr. Deshais, Bill's gardener at Ouzilly, 
plucks the ducks clean. Wall Street investment bankers 
pluck investors clean. 

- At Ouzilly, the ducks live well, if not for very long. 
(The Canard a L'orange was excellent!) But on average 
investors in America live longer. That may be good thing 
from an investment standpoint. If Bill's right, the 
folks who purchased Nasdaq stocks last year might need 
another 17 years to see a positive return. (One down - 
only 16 to go!)

- Microsoft's exhilarating pronouncement that its 
business outlook is no worse than previously forecast, 
rescued the stock market yesterday. The Dow, which had 
ventured far into negative territory early on, finished 
the day up 36 points to 10,033.

- The Nasdaq did not quite make it to the plus side - 
finishing down 12 points. The tech-heavy index now sits 
less than 120 points above its April lows. 

- A few months back, when consumers were buying almost 
everything in sight, the "do without" list included just 
a few select items: routers, servers and venture capital 

- But today, the list has grown rapidly to include Dow 
stocks, Nasdaq stocks, cars, cell phones, and hotel 

- During the month of August new cars languished on 
dealer lots from Los Angeles to New York. Industry-wide, 
sales fell about 5%.

- Cell phones aren't selling any better. It seems that 
even though most of us have two ears, we only need one 
cellphone, and we've got it already. Ericsson, Motorola 
and Nokia keep taking turns telling everyone how awful 
business has become. 

- Kurt Hellstrom, Ericsson's CEO confessed to the 
Financial Times: "We would like to say we saw positive 
signs, but we don't. No one can tell when we will see 
the end of the downturn."

- Hotel room demand is collapsing, as well. Falling 
business travel budgets are weighing on room rates, 
which have dropped to their lowest levels in over 10 

- The soft demand for everything from cellphones to 
Cisco shares seems to begin and end with the sliding 
consumer confidence. The year over year change in the 
Conference Board's Consumer Confidence Index turned 
negative in November of 2000 and hasn't looked back 

- Add it all up and its no wonder investors are having 
such a tough time finding companies with rising profits. 
Without profits the stock market forecast is stormy, 

- September is typically a beautiful month almost 
everywhere in the World. A few years back I started to 
notice that no matter where I traveled and no matter how 
awful the weather might actually be in that location, a 
local resident would be quick to note, "But you should 
see it here in September. It's beautiful."

- Wall Street denizens can make no such claim. October 
is infamous for its crashes, but September is the 
cruelest month of all for stocks. According to Ned Davis 
research, since 1900 stocks on average fall about 1% 
during the month. By comparison, stocks break even in 

- "No two markets will ever repeat in exact symmetry," observes, "but equating the Nasdaq 
top to the top in the Nikkei reveals that the Nasdaq has 
already plummeted to the equivalent of the first post 
crash bottom of the Nikkei." 

- Problem is, the first post-crash bottom was not the 
last. If the Nasdaq continues its eerily similar 
trajectory, it has much farther to fall.


Bill in London:

*** An article in the Financial Times tells us how 
business is picking up in East London at a company 
called Shields Environmental. The company dismantles, 
recycles and destroys unwanted technological garbage. 

*** Lately, it's been cleaning up the unsold inventories 
of telecoms - as one telecom operator has gone bust, on 
average, every six days throughout the last six months. 
So far, nearly $4 trillion of capital value has been 
wiped out in the telecom sector worldwide....and more 
than $1 trillion of bank loans and junk bonds are in 

*** This must be what has caused Dallas Fed government 
Robert McTeer to change his tune. Early this year, 
McTeer urged consumers to "buy an SUV" to keep the 
economy humming. Now he urges people to "use their cell 
phones more and upgrade."

*** More below...

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This maverick doctor even took on the FDA just to bring 
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by Bill Bonner

"Ja, we Europeans have it rough," Kurt Richebacher said 
to me on Saturday, with a slight smile on his face. "We 
have to work 35 hours per week, with only 6 weeks off."

Americans may not work harder than other people, but 
they undoubtedly work longer. The latest numbers from 
the Labor Department show that Americans put in more 
hours than any other group. Since the beginning of the 
last great bull market, U.S. workers added an entire 
workweek to their annual total. They now work 499 more 
hours per year -- or about 12 additional weeks - more 
than Germans.

Compared to America, Dr. Richebacher might have added, 
the Old World enjoys lower crime rates, often better 
roads, better schools, more extensive public 
transportation, far higher savings, a positive balance 
of trade, little debt, and GDP and productivity growth 
rates equal to or better than the current rates in the 

Despite the comparison, American economists cannot seem 
to resist criticizing Europeans and giving them bad 
advice. The European Central Bank, for example, has been 
chastised for being too cautious. Unlike our rapid rate 
cutter, Alan Greenspan, for example, Wim Duisenberg, 
head of the ECB, seems hesitant - as if he was actually 
concerned with protecting the value of the euro rather 
than destroying it. The poor Europeans have gotten only 
one, small � of a percent of interest rate cut, while 
Americans have gotten 7. 

Seven rate cuts are not necessarily better than one, of 
course. (Here at the Daily Reckoning we have no idea 
what interest rates should be and would be perfectly 
happy to let Mr. Market find out for itself.) But we 
have a hunch that Americans have benefited nor more from 
rate cuts than they have from longer hours and greater 

Readers with short attention spans may want to reduce 
today's letter to a simple question: Who's dumber... 
Americans or Europeans? In response to that question, we 
offer both an answer and another guess about the future.

"Ja, the Europeans are stupid," Dr. Richebacher 
explained. "They are so stupid they actually believe the 
American economic myths more than the Americans 

Dr. Richebacher's evidence is the U.S. current account 
balance...or, lack of balance. Europeans' faith in the 
U.S. dollar and the U.S. economy is so strong that they 
are willing to finance them both - with no guarantees. 
Not even a 'thank you.' 

Instead, Republican economic advisor Lawrence Kudlow 
appeared on TV and called the European currency a 
'europeso" and suggested that the European Union should 
be disbanded.

"These foreign fools seed us $155 billion in the 
preceding quarter and we not only have no gratitude," 
writes Edmund McCarthy of Financial Risk Management 
Advisors, "(and outside certain arcane circles, no idea) 
and we take then to task for thinking that they have 
rights on what our biggest borrowers should be able to 
do in their alleged countries!"

Thanks to the foreigners, Americans can spend money they 
don't have. 

"They [Americans] have been doing something that's 
probably irrational from the point of view of the 
individual consumer," commented Dallas Fed governor, 
Robert McTeer, over the weekend, speaking of the trend 
he and other Fed governors helped put in motion, 
"because they all need to be saving more: saving for 
retirement, saving for college and all that. But we'd be 
in bad trouble if they started doing that rational thing 
all of a sudden. We're happy they're spending. We wish 
that they didn't run up a lot of debt to do it."

While Americans spend money, Europeans save it. Big U.S. 
borrowers - notably Fannie Mae and Freddie Mac who, 
along with the other government-backed debt monger, the 
Federal Home Loan Agency - sell bonds to gullible 
Europeans and then use the money to buy American 
mortgages. Doing so, they have run up debt equal to one-
third of America's GDP. 

"We barely even know what credit cards are here in 
Europe," continued Dr. Richebacher. "Everyone has 
plastic bank cards, but there are no lines of credit. 
They take the money out of your bank account as soon as 
you spend it."

American economists consider this lack of credit an 
economic handicap. Dr. Richebacher considers it a 
blessing. "This emphasis that Americans place on 
consumer confidence and consumer spending is a big 
mistake," he commented. 

Big mistakes have bad consequences. The American economy 
rests on levels of consumer spending that could only be 
achieved by increasing levels of debt...enabled by 
European investors. Any hesitation on either side is bad 
news for the economy, foretelling collapsing share 
prices, a falling dollar, further drops in corporate 
profits, layoffs, and recession.

And thus we come to our forecast:

"At some point in the second half of the year, it is 
going to become clear that the American consumer is 
cutting back," predicted Barton Biggs in June. Perhaps 
it is becoming clear already. The latest numbers show 
the growth of consumer spending declining rapidly 
(though still positive....barely). Savings rates just 
hit a two-year high...and are rising.

Meanwhile, Europeans seem to have begun hedging against 
the dollar. The euro has gained more than 10% against 
the dollar. 

Americans and Europeans may both be dumbbells. But they 
are getting smarter. 

Bill Bonner, 
on the scene and on the Europe...

"The man who predicted the Asian crisis," says the 
respectable French magazine, Le Figaro, of Austrian 
economist Dr. Kurt Richebacher. To learn more about, and 
profit from, the good Doctor's views, please see:

The Inevitable Crash Landing Of The US Economy

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 06, 2001

Published By Tulips and Bears LLC