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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Think Global, Act Local

In Today's Daily Reckoning:
*** Strikes, chaos...and oil crisis hits Euroland...
*** But will a high oil price mean the end of prosperity 
in the Western world?
*** The Big Techs are headed down...caught in a crippled 
sub from which they will never escape

*** "Euro...Oil: Europe Trapped" proclaimed yesterday's 
headline in Le Figaro. "Britain Nearly Dry" says the 
headline in today's IHT. 

*** All over Euroland, the top story is the same: 
strikes, chaos - caused by high oil prices. "This is the 
worst crisis by far in 25 years," said a spokesman for 
the Royal Automobile Club. "The government has to step in 
immediately," he urged. Tony Blair, Britain's Prime 
Minister lost no time raising his right foot. Fuel 
supplies will be back to normal in 24 hours, he promises. 

*** Wow, what a difference a year makes. Last year on 
this date, I reported a rise in the price of oil to $24. 
But the press reports of the time dismissed it. The 
economy was much less dependent on oil, said the papers, 
than it had been in the 1970s; there would be no crisis. 
After all, the New Economy ran on electrons, not fossil 
fuel. Didn't it?

*** I hope you will forgive me, dear reader, for quoting 
myself. But it is not often I get to reprise my own words 
without embarrassment: "People entertain [an] illusion," 
I wrote on September 14, 1999, "that oil will never be in 
short supply. They think it will be cheap forever. But 
what, really, are the odds that the dollar will stay 
strong and the price of oil will stay weak over, say, a 
10-year period?"

*** We are now near 1 year and counting. Oil has risen 
against the dollar by about 40%. Truckers, taxi drivers 
and others who depend on stable oil prices are up in 
arms. Parts of Europe are nearly paralyzed. The American 
Petroleum Institute says crude inventories are at 24-year 
lows. President Clinton has pledged to take action - 
though he did not say what. And the nattering nabobs are 
revving up their laptop computers to turn oil into a 
popular sensation once more.

*** "An extraordinary windfall in the form of cheap oil 
fueled unprecedented prosperity in the United States," 
writes William Drozniak for the Washington Post, in a 
piece labeled, the "Reckoning." But now, "the good times 
may be lurching toward a demise that could profoundly 
reshape the nature and contours of the global economy." 

*** But oil lacks the intangibility necessary for a real 
runaway popular sensation. Too many people are too close 
to it. Unlike a, a Big Tech, or a tulip bulb - 
oil gets bought at market every day by millions of actual 
consumers. Like bread, it can sell at high prices - but 
not fantastic ones.

*** Still, as I wrote a year ago, "this trend has the 
potential to be extremely the price of 
oil rises, more capital will be put to the service of the 
oil industry. But it will take years before it delivers 
more oil. In the meantime, the markets will anticipate a 
shortage and bid up oil prices in a dramatic way." Since 
then, oil-drilling stocks have risen more than 76%.

*** How much of that trend has already run its course, I 
do not know. But I do know that the amount of dollars in 
circulation is still rising at a reckless pace. M2 rose 
at an 8% annual rate since July. M3 and MZM, measures of 
cash, are rising at 10% year to year. This liquidity has 
to go somewhere. 

*** And it does not seem to be going into Wall Street. 
The Dow rose just 37 points yesterday - largely on the 
strength of J.P. Morgan's potential buyout by Chase. JPM 
rose $16.

*** The Nasdaq, meanwhile, attempted a rally...but ended 
the day 46 points lower. Mr. Bear, still maintaining a 
low profile, has nevertheless brought the Nasdaq down 
almost 10% so far in September.

*** The Big Techs are probably caught in a crippled sub 
from which they will never escape. Cisco, the stock that 
was supposed to grow forever, shrank yesterday. It fell 
to $58 and change. Oracle dropped more than $4. And PRI 
Automation fell more than a third following its 
confession of lower earnings to come.

*** Perhaps as the ultimate bull market signal for the 
gold market, Homestake announced that its miners hit 
bottom at the old mine in Lead, Montana. They've been 
digging for 124 years. But at today's gold price, it just 
doesn't make sense to keep chipping away at the hard 

*** The euro managed to hold its own against the dollar - 
rising 41 mills. Perhaps it too has bottomed. You can buy 
a euro today for 86.68 cents. A dollar will also get you 
7.60 French francs.

*** "The Trouble with Europe" begins the headline on the 
editorial page of today's IHT. This is a popular topic 
among analysts, strategists and American triumphalists. 
It is also an illusion...but more on that in the days to 

*** "Is buying the euro a smart contrarian play?" asks 
the Fleet Street Letter's Brian Durrant. "...the answer 
is not yet." Durrant explains: 

"Throughout the euro's decline 'currency experts' have 
been trying to pick the bottom in the euro. It was once 
$1.06, then parity, then 90 cents etc. So the big problem 
is now that global investors are long. Some are Japanese 
investors who bought into the hype and are now sitting on 
catastrophic losses - and too scared to cut them. What's 
more, the ECB have been reacting to euro weakness by 
raising rates, deflating the economy and making a less 
attractive investment target. As is so often the case 
raising interest rates to defend a currency only makes 
matters worse."

*** Durrant also points out the Merrill Lynch survey of 
market sentiment has an excellent record of being a 
contrary indicator of currency movements. When the 
investors net exposure index to euros is above 50 it 
tends to foreshadow further euro weakness. The only time 
this figure has been below 50 was in May '99 and it 
foreshadowed a summer bounce in the euro. The latest 
reading in August 2000 was 60 which points to the further 
weakness we have been seeing. There will be a time when 
the euro is a raging buy against the dollar but not yet, 
dear reader, not yet.

*** Besides, "...if the European Central Bank has a 
mandate to keep inflation below 2%," asks our own Kevin 
Klombies "...and inflation is closing in on 3% AND the 
euro is acting like the Thai baht AND crude oil prices 
continue to rise... how long do you think it will be 
until the ECB either intervenes through direct purchase 
of euros, raises interest rates dramatically, or both? 
Our guess is - within the next 5 trading sessions."

*** Naughty, naughty. German competition regulators 
accused Wal-Mart Stores of being too competitive last 
Friday. They ordered the giant retailer to raise its 
prices for household staples like milk, flour, butter, 
rice and cooking oil.

*** The Internet's global population is approaching 300 
million people. This according to a Neilsen/Net Ratings 
report. The US has, by far, the highest number of at-home 
computers users with 136 million. Japan, interestingly 
enough, is a distant second with 26 million... ahead of 
Germany, Great Britain, Italy and France. So the question 
remains... why haven't the Japanese benefited from the 
New Era? More on that, too, please stay tuned.

*** I'm getting back in the swing of life in Paris. 
Elizabeth is back in the U.S., at another Baptist 
wedding. So, I'm a single parent, with five children at 
home and a full-time job. It's not easy. But I brought 
Nadiege, our part-time housekeeper out in Ouzilly, with 
me back to Paris. She takes care of the kids, the 
cooking, the cleaning... I just read the bedtime stories. 
And guess what, I've noticed that a lot of these stories 
don't make sense. Still, Henry and Edward don't seem to 

*** Little routines, like reading bed-time stories, seem 
to bring order, balance and harmony to your life. I've 
been enjoying getting to the office early and having a 
cup of coffee at the Caf‚ St. Merry next door, while 
catching up on my reading. "Genius is habit," said 

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Thom 'Bomb' Hickling is staying out at Ouzilly. He's a 
writer who is helping me with a couple of projects. 

As I've told you, he's also a musician whom we exploit 
mercilessly. Jules, Sophia and I get out our guitars at 
every opportunity and ask his assistance. (Getting in 
tune with the high-tech times, we've pasted a picture of 
the Thom Bomb here: If you 
know him, you'll noticed he's lost the beard.)

But Thom has another feature - he comes from the 
Christian fundamentalist subculture that seems to have 
its roots in the American southwest. So, rather than go 
to church on Sunday, we gathered together in His name for 
our own little celebration on the veranda. 

Thom's bible reading described how one of the world's 
first, and still very popular, sensations got started. On 
the site of the ruined Temple of Solomon, described as 
'Solomon's Porch,' people gathered to exchange ideas and 
information. This was the media of the day. It was slow. 
Sensations took longer to develop. And they tended to be 
very localized.

Still, a few years after Jesus had been crucified, he was 
already on his way to becoming a major cult figure. 
Thom's reading from Acts of the Apostles described how 
sick people gathered on Solomon's Porch hoping the shadow 
of Peter would fall upon them and they would be cured. 
No mention is made of FDA control panel or double blind 
studies. In those days, being blind just once was enough.

Christianity gathered supporters very slowly at first. It 
spread like a virus. From person to person, group to 
group. Finally, in about the year 321 it reached a kind 
of 'tipping point,' when Emperor Constantine converted. 
Soon after, almost everyone wanted to be a Christian.

I have been puzzling over the role of the media in 
propagating investment bubbles. Before the invention of 
the printing press, popular sensations were rare and 

People went about their business, relying on direct, 
immediate and personal knowledge. Nietzsche refers to 
this as one of two types of knowledge. The other is 
indirect, abstract knowledge - the sort you might get 
from a newspaper, where you don't really know anything 
first-hand, and what you think you 'know' may have no 
meaning to it.

"Globablization, Yes," affirms a headline in today's IHT, 
"but Be Sure to Focus on People." The article begins with 
this statement: "Either the 21st century will continue to 
produce increasingly divided societies or we can make 
concerted decisions to ensure that economies serve 

Your guess is as good as mine as to what the sentence 
means. What's a 'society?' What's a divided one? Who's 
'we?' What's an 'economy?' How does it serve a 
'community?' What is a 'community'? How is it different 
from a 'society?'

The problem is not just bad writing. The problem is that 
the sentence rests on a whole wobbly structure of 
abstract ideas. The reader is supposed to know what a 
divided society is. He's also supposed to have an 
attitude towards the divided societies: they are bad. 

Yet, if you look carefully at the component ideas you 
find that each of them turns out to be wobbly...remote 
from anything you could prove or disprove, or even have 
an intelligent opinion about. All societies are divided. 
They are collections of individuals and organizations 
with different interests. If a society were not divided, 
it wouldn't be a society; it would be a unity.

And if you look at the news carefully, you discover that 
it represents a whole alternative universe of abstract, 
obscure, wobbly ideas.

"The UN Should Not Forget Its Original Peace Mission" 
says another sensation monger in the IHT. In this article 
I am asked to have an opinion not about my own local 
politicians - whom I know to be corrupt half-wits - nor 
even about state-level mountebanks...nor even about the 
chiefs of chicanery in Washington...but about the hacks 
gathered in the Olympus of globalism, the UN. 

The purpose of the article seems to be convince me that I 
should support UN intervention in war. Hmmm...but if you 
dismantle the argument, you find that it rests on an 
accumulation of abstractions so thick and so slippery 
that it would take a patient Eskimo with a blubber knife 
to get through it. 

And once you get beyond the greasy jingos...there is 
usually nothing there.

The mass media invites you to join in mass thinking. It 
increases the scope and speed of crowd thinking. In this 
sense, all media is state media. For it encourages 
collective, political thinking and focuses your attention 
and emotions on 'problems' which the state offers to 

Left alone, people develop their own ideas about how 
things work. But with the help of a mass media, thinking 
is standardized, like the products of an assembly line. 
Political 'solutions' to problems you might not otherwise 
know existed are popularized...and sensations are born.

This was hard to do before the mass media existed. Lunacy 
was more isolated, more quirky and less infectious. 

The crusades, for example, took hundreds of years to get 
underway...and then hundreds of years to work themselves 
out. People who had never been South of the Loire 
river...and had no idea of how anyone's life would be 
improved by waging war against the Muslims...nevertheless 
signed up for a fool's errand - to conquer the Holy 

The whole series of 8 crusades floated over the rough 
waters of compound the unforgiving 
terror of 13th century combat. Hundreds of thousands of 
people died - many from disease and hunger.

Perhaps the most lunatic of the crusades were the 
children's crusades. As many as 20,000 children from the 
Rhineland made their way into Italy. Like na‹ve investors 
buying up the Big Techs at preposterous prices...they 
believed a fantasy: that they would take the Holy Lands 
from the Muslims by love instead of force. Instead, the 
children were dispersed among the Lombard towns...or sold 
into slavery to Muslims.

Your crusader,

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"

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serious warnings and the state of the market with gentle humor"

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Last modified: April 01, 2001

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