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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

PARIS, FRANCE 
MONDAY, 11 SEPTEMBER 2000 

 

Today:  Sensation Mongers

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 
fell $1.76.


*** 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 
up 76%. 


*** 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 
week.


*** 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 
that amount.


*** 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 
market. 


*** 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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who are creating them. Space is very limited for this 
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


SENSATION MONGERS


"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 
up. 


Lester Brown is a professional fear-monger, and a darling 
of the media. He helps focus attention on the crisis-du-
jour. 


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 
and emotions. 


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 
reach maturity.


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 
wagon.


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 
say..."


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 
great:


"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 
anything different?


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 
important. 


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 
interests."


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...
 
 
 
 
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
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(Timothy)

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get"
(Joe)

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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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