In Today's Daily Reckoning:
*** OPEC announced a boost in production...oil falls
*** More bad news for Big Techs...
*** A 'grand finale' for the stock market? Mr.
Bear...where are you?
*** The big news today is oil. Clinton went to the Saudis
and asked for help getting his man, Gore, elected...I
mean...er...easing the burden on American consumers. The
Saudis, who depend on the U.S. for their weapons of mass
destruction, said: 'whatever you want.'
*** Following the Saudi lead, OPEC announced it would
increase production 3% - by 800,000 bls/day. The Saudis
say they want oil between $22 and $28 dollars. So oil
*** But don't look for an immediate drop in gas or
heating oil prices. Inventories of heating oil, for
example, are 40% below those of last year. And oil has to
be refined and shipped.
*** Plus, the world is catching on to the fact that the
New Economy uses a lot more energy than people thought.
Our own Dan Ferris, an analog, Old Economy kinda guy, was
way ahead on this story. "The Internet's Dirty Little
Secret" he called it. (see: The Internet Begins With Coal)
*** The Dow has lost 2.4% so far this year. The Nasdaq
has lost almost the same amount. But global energy stocks
have returned 11%. Coal stocks, such as the one Dan
recommended, are up 37%. And oil-drilling companies are
*** Counter-intuitively, utilities - which are energy
consumers - are also up about 36%. But the utilities pay
decent dividends. And the smart money is moving towards
the fixed returns of bonds and utilities.
*** Friday was another bad day for the Big Techs. The
Nasdaq dropped 119 points. (The Dow was down too, but
only 38). One out of every three Nasdaq stocks fell by at
least 5%. Cisco dropped about $2.40. JNPR was down
$17.25. That brought the Nasdaq to a 6% loss for the
*** The Nasdaq, by the way, had a good month in August.
It rose 12%. The S&P 500 and the Dow each rose about half
*** But even this gain still left the Nasdaq 750 points
below its March top. And, with last week's action, it
looks as though the index has just completed another bear
market rally. Now that the summer is over, Mr. Bear might
be ready to get to work.
*** Yet, investors are taking few precautions. "The
numbers just keep getting better," says a remarkable
piece in Reuters today, illustrating how bullish,
complacent and confident the market has become. Citing
recent productivity numbers, the author proclaims that
computers "turned US companies into the world's most
efficient machines in history."
(see: The Cult of Productivity)
*** As Dr. Richebacher has demonstrated, however, what
the numbers really show is that the manufacture of
computer power is taking place at the most efficient pace
in history. How that helps burger flippers, pest
exterminators and the rest of the real economy become
more efficient is another question.
(see: An Extremely Vulnerable Economy)
*** Bullish sentiment is as murky as the Amazon...but it
is deep and wide too. The Fed is thought to be out of the
picture at least until after the election. A poll by the
American Association of Individual Investors reveals that
63% are bullish...and only 8% are bearish.
*** The Reuters piece suggests that investors should get
ready for "a grand finale" to the year. Says Martin
Pring: "The next important market move is likely to be
up, rather than down." But Mr. Bear loves disappointing
people...and may be planning a 'grand finale' of his own.
*** For example, "there was a whopping backlog of 416
IPOs as of August 27th," reports news.excite.com. "That's
about double the number of deals in the pipe as of the
same time for the past two years - in 1999, there was a
backlog of 225, and in 1998, the backlog was 222." Ye t,
before the end of the year 287 of the backlogged -
"networking, telecom and anything wireless" - are
expected by underwriters to draw $36 billion from the
*** Tokyo stocks fell 2% this morning. Computers must not
work among raw fish eaters. How else can you explain it?
Why aren't Japanese companies becoming 'the most
efficient machines in history'?
*** Jorg Haider is getting his revenge. You may recall
that Haider's remarks about Hitler were judged
politically incorrect. France led Europe in sanctimonious
rhetoric and reaction - imposing sanctions on Austria.
But now, a report by Euroland's 'wise men' came out this
weekend and said the obvious - Haider is no worse than
any other politician in Europe.
*** What made this entertaining was the Everest of
hypocrisy involved. French governments are run by
collections of socialists and communists - whose creeds
and deeds were every bit as nasty as the Nazis with whom
Haider never had any association. Haider, in a gesture
roughly equivalent to the one Mr. DesHais presented to
the local gendarmes, described the "wise men" report as a
'Waterloo' for the French.
*** And what's this? Professional racist Al Sharpton is
threatening a boycott of Burger King. Al is, of course,
the original, 'home of the whopper.'
*** If I am not mistaken...today is Harry Schultz's
birthday. Harry is one of the Grand Old Men of the guru
trade, whose letter, "for thinking humanoids," has been
published since 1964. (http://www.HSLetter.com)
*** The French franc has fallen to 7.6 to the dollar.
Addison reports that he can buy a bottle of decent table
wine for one buck. It's almost as cheap as water.
*** And the truckers' strike ended yesterday. I had
filled up the tank before driving back to the city last
night...but the stations once again have fuel. Things are
returning to normal.
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"As the Earth's Ice Cover Melts" warns the headline in
Friday's International Herald Tribune, "It Brings Floods
and Famine." Lester Brown, a man who never met a crisis
he didn't like (assuming he could use it as a pretext to
tell people what to do) goes on to explain all the bad
things that might happen if the earth continues to warm
Lester Brown is a professional fear-monger, and a darling
of the media. He helps focus attention on the crisis-du-
I have been mercifully free from the IHT for the last few
weeks. It seems to arrive sporadically out in the
country. Here in Paris, on the other hand, it is as
inescapable as dog poop.
It is also 'sticky.'
Stickiness, as Malcolm Gladwell, explains in his book on
"The Tipping Point" is one of the things that creates a
popular sensation. Reading a copy of the IHT, for
example, one might get the idea that Lester Brown's
thoughts on global warming are important. One might
discuss the subject at a cocktail party. Or even write
about it oneself. TV stations might find it suitable for
news stories. Soon - one might begin to care.
Thus does the major media take possession of your mind
From your personal experience - that is, the things you
know from direct, immediate, first-hand contact - would
it make any different if temperatures were a couple of
degrees warmer? It might actually be a nice thing. And
what if it rained more? Well, it might be a good thing or
it might not. A little global warming might help my figs
ripen. As it is, in central France, they almost never
No one really knows if the earth is warming. Or, if it
is...no one knows why. Nor can anyone tell you if it
would be a good thing or not. If you live in a high, cold
area - a little global warming might be great. But if you
live only a couple of feet above sea level - where it is
already too hot - well, move.
But when the chattering classes get hold of a subject -
about which they know absolutely nothing - it threatens
to turn into a popular sensation, barging into your
attention like a wet Labrador in the family station
Cheek by jowl with Lester Brown on page 7 of the IHT is
an article by Washington Post columnist Richard Cohen.
Cohen takes on the almost impossible task of trying to be
more moronic than the presidential candidates themselves
- and succeeds.
Speaking of Senator Lieberman, he writes, "I still admire
the man, but fidelity to my own values compels me to
Does editorial writing get any worse than this? What
pompous drivel! He then crosses swords with Lieberman
over the following statement by the Senator: "Our nation
is chosen by God and commissioned by history to be a
model to the world."
"Mr. Lieberman's statement is preposterously false," says
Cohen, who must have interviewed The Almighty himself to
get the story straight. "The United States is a fortunate
and exceptional nation which I love dearly, but it is no
more divine than any other."
Of course, neither man has the slightest idea where God
stands on the issue. But Cohen's 'values' insist that he
let us know that he doesn't think America is all that
"Did God choose slavery," he asks, not expecting an
answer. "And what about crime?" Why would America have
such a high crime rate, he wonders, while Sweden (where
only 4% attend church regularly) has a much lower rate?
It is simply unfathomable that God could work in ways
that Richard Cohen could not immediately grasp. Yet, if
God imposed such a restraint on himself, he would be a
strange and pathetic deity.
Cohen comes to the amazing conclusion that Lieberman's
views are 'repugnant.' The English language gives Mr.
Cohen thousands of adjectives from which to choose, yet
the wordsmith seemed to get one of the very worse ones.
Lieberman's fatuous claim to know the mind of God may be
ill advised...stupid, ridiculous, impolitic, inane,
silly, and many other things. But, 'repugnant'?
And even if it is repugnant, how could Cohen's complaint
- based on his claim to know God's mind even better - be
Ah...once again, more brain time taken up with puerile
malarkey. And yet, this is the way herd thinking works.
If you pay attention to the popular media, you begin to
think that these issues are important. Then, they become
Meanwhile, on the facing page, there is something more
interesting. Richard Halloran notes that the Chinese
military believes the U.S. "has become casualty shy."
There is "a perception that Americans are no longer
willing to spill blood to defend their national
interests," he writes. Yet, he continues, "a careful
reading of American history in the 20th century show,
however, that Americans will fight in causes which they
understand to be vital to their principles or national
Halloran must have been reading different history from
ones I've read. What vital cause was involved in WWI? Or
Korea? How was the Vietnam War related to America's
national interest? What history shows is that war - like
tech stocks - can become a popular sensation. The
chattering classes can turn a remote, obscure and absurd
war into a fashion statement. Soon, everyone wants a
piece of it...and will go to the other side of the world
and risk getting killed for it.
Slogans such as "make the world safe for democracy," or
"freedom," or the "Domino Effect," help to rationalize
their actions. But what drives them forward is a kind of
mass psychology - the same kind of herd thinking (but
enforced by much stronger taboo against defection) that
creates market bubbles and Pokemon fads.
More on this...maybe tomorrow.
Bill Bonner, back on the job in Paris...
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Last modified: April 01, 2001
Published By Tulips and Bears