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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Getting and Spending

*** Markets closed...

*** Struggle to stay out of recession grows harder...

*** Markets to reopen Friday...or Monday. Prices to go 
up...or down.

The stock market is closed again today. Never in 
the last 50 years has the market been closed for two 
days in a row. Nor in the last half century has America 
faced a similar financial situation. 

But what will come of it? Boom or bust?

"Horror struck investors seek havens of gold and 
bonds," reports the Financial Times.

"Struggle to stay out of recession grows 
tougher," says the Houston Chronicle. "Shock waves 
rattle the economy," says another paper.

"I feel like there is so much human tragedy, you 
do not want to be thinking analytically or rationally 
about this," the NY Times quoted James Glassman, chief 
domestic economist for J.P. Morgan Chase. "But we know 
that soon we are going to have to think about the 

Composing himself, Mr. Glassman ventured a guess: 
"This is going to make America, and the civilized world, 
be defiant...People are going to see this as a threat to 
the civilized world, and good things are going to come 
out of it."

Perhaps he guessed wrong. More below. Over to 
you, Eric:


Eric Fry writing from New York:

- "We are not only going to rebuild," said New York 
mayor Rudolph Giuliani, "we're going to come out of this 
crisis stronger than ever before - emotionally stronger, 
politically stronger and in particular, economically 

- The Mayor may well be right, but the price of this 
future strength is steep indeed.

- Many people that I know had relatives, friends, or 
friends of friends who worked in the World Trade Center 
and remain unaccounted for.

- The brother of a friend of mine placed a call Tuesday 
morning from one of the uppermost floors of the World 
Trade Center to say that he was trapped. No one has 
heard from him since.

- Another friend of mine said that his son-in-law of 
only two months called shortly after the initial 
explosions to report that there was smoke everywhere and 
that he was lying on the floor to avoid it. No one has 
heard from him since.

- Each account of a life prematurely snuffed out is gut-
wrenchingly tragic.

- Suddenly, $80,000 Porsches and $1,000 Vuitton purses 
seem embarrassingly frivolous. Even buying Starbucks 
cappuccinos seems an almost perverse extravagance.

- A decade of uninterrupted prosperity may have made us 
a little too fat and happy. Conspicuous consumption may 
well take a breather while we focus on more pressing 
national priorities, like making sure our citizens never 
again find themselves having to chose between jumping 
from a 100-story building or burning to death.

- Addison Wiggin e-mailed me Tuesday to say, "This 
[attack] couldn't have come at a worse time for the 
economy, for the market or for America as the remaining 
global power."

- Addison may be correct, at least for the near term. 
But this tragedy may have occurred at exactly the right 
time...if there is such a thing.

- "Crisis mobilizes the commitment of human energy," 
writes's Donald Luskin. "If America's 
leadership and the American people respond 
constructively - as they always have the past - than 
from this crisis could emerge significant opportunities 
that could propel the economy and the markets into an 
important new growth phase."

- Luskin continues: "Forgive me if this seems mercenary 
and light of Tuesday's loss of lives, but history shows 
that cataclysmic events like this had always been 
reflected in powerful stock market moves."

- The powerful move Luskin expects is up. He cites as 
historical precedent the stock market rallies that 
followed close on the heels of the Cuban missile crisis 
in 1962, the Kennedy assassination in 1963, and the Gulf 
War in 1991.

- Near term, anything could happen in the world's 
financial markets. Indeed, everything could happen. In 
other words, volatility will increase throughout world 

- On Wednesday, for example, many Asian stock markets 
dropped precipitously. Hong Kong's Hang Seng index fell 
more than 8%, while Japan's Nikkei Index fell more than 
6% to an 18-year low.

- But over in Europe, most markets rebounded from early 
morning losses to post modest gains. The German DAX 
Index rose nearly 1% and the U.K.'s FTSE 100 Index 
climbed 2.3%.

- Conversely, gold yielded much of the large gains it 
achieved on Tuesday. Somewhat surprisingly, most gold 
stocks closed below the price levels they held prior to 
Tuesday's disaster.

- The lesson in all this is that volatile markets are a 
lousy place to try to make a dollar. Most investors 
would do well to stand aside for a couple of days.
Yesterday, I telephoned Bill in Paris to exchange 
thoughts about what might happen next in the U.S. 
markets. After about twenty minutes, we concluded beyond 
a shadow of a doubt that when the U.S. market reopens it 
will either go up or down.

- But we also concluded that the near-term trading 
action probably matters very little. Rather, investors 
ought to focus on the financial market trends that 
already were unfolding prior to Tuesday's attack. U.S. 
stocks, for example, have been floundering for more than 
a year. They will likely continue to flounder. The U.S. 
dollar has been falling since July. It will likely 
continue to fall.

- Conversely, bullish trends remain in place for oil, 
natural gas, the euro, gold, and selective foreign 
stocks like Gazprom.

- America will rebound, but not in one day. In the 
meantime, most of the best investment opportunities may 
not trade on the Nasdaq. DR Blue Investment Advisory has 
identified many such opportunities in the last few 
weeks. Stay tuned!


Back to Bill...

*** Christoph Amberger called me yesterday. He heads up 
Agora's Taipan Group. He told me he's organizing a drive 
to help those who are putting their lives on the line to 
save the victims of the Manhattan disaster. "Apart from 
our team members' individual contributions," says 
Christoph, "the Taipan Group is kicking in US$5,000 to 
get the ball rolling." If you want to contribute, click 

Taipan Red Cross Drive

*** There is a chance of panic selling on Wall Street 
when markets finally reopen. There is also a chance of 
panicky non-selling.

*** "If investors choose panic selling [when markets 
reopen]...[it] plays into the hands of terrorists and is 
exactly what they hope we'll do..." writes Hokanson 
Capital Management, resisting a return to rational, 
analytic thought. 

*** Besides, "savvy investors will recognize the 
opportunity created by such a panic, and great future 
wealth will be created - at the expense of today's 
sellers. There is no greater message of strength, 
solidarity and resolve that we can send both terrorists 
and the world than to reflect those values in stable or 
higher financial markets when they reopen." 

*** What kind of investor would make his most important 
financial decisions this an effort to send a 
message to unknown people in unknown places? It is 
madness, of course, but madness is what makes markets - 
at least for a while.

*** There is madness beyond the financial markets, too. 
The plate glass window of Baltimore's only Afghan 
restaurant has been smashed. And there is surely more 
madness to come.

*** In markets people get what the deserve...not 
necessarily what the expect... 

In politics people may get neither.

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by Bill Bonner

"The World is too much with us; late and soon,
Getting and spending, we lay waste our powers;
Little we see in Nature that is ours; 
We have given our hearts away, a sordid boon!"

William Wordsworth

"The attack IS a great blow to an already vulnerable 
economy," writes my friend Martin Weiss. "As I have been 
telling you for many months, the world economy was 
ALREADY teetering on the brink even BEFORE yesterday's 

On Tuesday, it got a shove. 

Everything changed. But everything remained as it 
already was. Martin explains:

"Even as the hijacked airlines flew mercilessly toward 
their targets, a flood of red ink had wiped out over six 
years of TOTAL accumulated profits of ALL companies 
listed on the Nasdaq exchange (see last issue of Safe 

"Even as the upper floors of the World Trade Center 
burst into flames, America's largest money center banks 
had the greatest exposure ever to derivatives - high 
risk bets that are notoriously vulnerable to unexpected 
events (according to the latest reports by U.S. General 
Accounting Office). 

"Even as the 110-story twin towers imploded into a great 
cloud of dust and debris, the world's stock markets had 
already been tumbling for 18 months or more. The Nasdaq 
had lost about two-thirds of its peak value, with over 
$5 trillion in wealth destroyed. The German Neuer Markt, 
the equivalent of our Nasdaq, had lost roughly NINE 
TENTHS of its value. The German DAX, the counterpart of 
our Dow Jones Industrials, was down about 45%, the 
Nikkei down close to 75%."

But now, for the first time, the fragility and 
vulnerability of the U.S. has been exposed to the entire 

People will say all sorts of mad things...that stocks 
will go up because it is their patriotic duty...or that 
they'll go up because wars always make stocks go up...or 
that the economy was ready to turnaround anyway. And who 
knows...maybe they will be right.

But is it not likely. For the economic picture remains 
nearly the same as it was before, with one important 
exception: consumers have suddenly grown cautious. 

Americans may proclaim their faith in the system. They 
will stand with moist eyes, waving the flag and reciting 
their newfound sense of national unity. They will affirm 
their belief in American capitalism and their commitment 
to buy-and-hold investing.

But they will not buy new cars. Nor take luxury 
vacations. Amid the images of the dead and dying...of 
bodies falling 100 stories...and mass destruction at the 
very heart of American capitalism...

...getting and spending, at the margin, suddenly seems 
less important. 

Consumers will wonder if all their frantic efforts to 
build wealth during the boom years was worth it. They 
may recall an article in last week's U.S. News & World 
Report. The article said that people are ten times more 
likely to be depressed today than people born two 
generations ago. "Though the quality of life is much 
improved since WWII," the authors elaborated, "the 
number of people who consider themselves happy remains 

What makes people happy? "Strong marriages, family ties, 
and friendships..." say the authors.

Rather than spend an extra 15 minutes working at the 
office...people may decide to spend the time with their 
families. Rather than upgrade their home computers...
they may make do with the one they have until they are 
feeling more confident.

Consumers are becoming hesitant. Not because they 
believe the economy is sinking...but just because 
spending money has suddenly gone out of fashion. 
Something big has happened that is beyond reason... 
striking at the deep, dark "rag and bone shop" of the 
human heart.

Alan Greenspan blamed the economic downturn on what he 
called a "breach of confidence." For him and many 
economists, the challenge in America was merely to 
maintain consumer spending. As long as consumers 
continued to spend, they reasoned, the economy would 
continue to grow.

The real problem was not a lack of consumer confidence, 
but a surfeit of it. Consumers developed, as Dr. 
Richebacher put it, "an unrealistic and unsustainable 
excess of expectations in future prosperity...built up 
in the past boom years." 

The more the economy boomed, the more confident they 
became, and the more money they borrowed and spent. But 
even as they felt more and more confident, debt loads 
piled up like skyscrapers, leaving them more and more 
vulnerable to shocks. Now that they've felt the earth 
shake...can there be any doubt that they will turn more 

"This is NOT the end of the world," writes Martin Weiss. 
But it feels like the end of an era.

Bill Bonner

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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 24, 2001

Published By Tulips and Bears LLC