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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Solomon's Porch

In Today's Daily Reckoning:
*** Big Techs - tapping on the hull - they're still alive
*** Oil is alive too...and still greatly undervalued 
relative to the Dow
*** Could we be returning to early 70s?... where you can 
still exploit the workers...and, of course...more!

*** The Big Techs, I suggested yesterday, are entombed in 
a Kursk of sinking prices. They're well below their 
highs... and, in my humble opinion, there is no way they 
will ever make it back to the surface.

*** But yesterday, we heard a little tapping on the hull. 
They're still alive! There was a "flight to more 
expensive stocks on the Nasdaq," reported Reuters. This 
took the index up 44 points, reversing - for the present 
- the trend of the last week.

*** JNPR rose almost $9. Cisco and Oracle gained about 
$2.50 each. Intel is holding a bit above $60. Cisco is 
still a little below the $60 mark. And Microsoft, at 
$67.50, is still down more than 40% below its high of 

*** But the action on the Dow was less uplifting. The 
index fell 51 points - with no particular theme or 

*** J.P. Morgan is being purchased by Chase for $35 
billion (in stock). This sent JMP shares to an all-time 
high of $182. Chase shares declined $5.40. 

*** "A Return to the 70s" announces a headline in Le 
Figaro. The paper refers to the rising price of oil. In 
1972 a barrel of oil cost about $12. Two years later, it 
was nearly twice that amount.

*** Already, oil has tripled in the last 2 years. But 
there could be other similarities with the early 70s. 
Arthur Burns presided over the Federal Reserve. He asked 
his economists to figure out what inflation would be if 
they took out 'volatile' oil prices. And guess what - 
inflation was lower. This lulled them into complacency, 
from which they failed to detect the even greater 
inflation ahead.

*** Several regional Fed bank officials warned of rising 
inflation pressures yesterday. A 200% increase in the 
price of oil, coming at a time of full employment, could 
result, they said, in higher consumer prices. 

*** Not to mention a continued surge in the money supply. 
Cash is increasing nearly twice as fast as the GDP. More 
money, relatively fewer goods and services...hmmm...

*** DR reader AG writes: "If the dollar and oil continue 
to trade at new highs, will this cause the US stock 
markets to fall? Crude oil is priced and paid for in US 
Dollars. My thought is that the higher energy prices will 
compete for the US Dollars that are now being reinvested 
in the US markets from foreigners. The foreigners will 
need more US Dollars to pay off their energy costs. 
Therefore there will be less US Dollars available for 
investment in the US stock markets..."

*** The relationship between oil, stocks and the dollar 
is worth exploring. In the fall of 1972, oil was about 
$12 a barrel, and the Dow was about 950. So, it took 
almost 80 barrels of oil to buy one unit of the Dow. But, 
as I pointed out yesterday, you will need 312 barrels of 
oil to buy a unit of the Dow today.

*** By 1974, the Dow had lost a third of its value...and 
the price of oil had doubled. Let's see...the price of 
oil has already more than doubled. But it is still very 
cheap relative to the Dow. Let's say it doubles again - 
to around $70. And if the Dow fell by a third, it would 
be around 6700. Even this would leave the oil/Dow ratio a 
little rich. You'd still need more than 95 barrels of oil 
for each unit of the Dow. 

*** Of course, the world's industries have become more 
efficient too. A unit of output now only takes half the 
oil it took in 1970. So, let's say the proper ratio is 
about 150 barrels of oil to every unit of the Dow. Either 
the Dow has to be cut in half...or the price of oil has 
to rise substantially... to reestablish the relationship. 

*** Will history repeat itself? Marx said it did - first 
as a tragedy...then as a farce. But Marx had no sense of 
humor. The 70s was a farce. Since then it has been the 
theatre of the absurd. What's next? 

*** "Regardless of what pledges have been made in Vienna, 
new OPEC production is not going to hit the market 
anytime soon," says John Myers of Outstanding 
Investments. "The reason? Oil tanker traffic is running 
close to full capacity. According to the Center for 
Global Energy Studies, 'There aren't any spare tankers to 
move the stuff around.' In total the world has 3,100 
tankers. But... the world consumes 76 mb/d today, up from 
40 mb/d in 1968. Moreover, two-thirds of the world's 
crude supplies must be shipped from the Persian Gulf." 
(see: The Oil Tide Turns Towards Profits

*** On the other hand, "Oil is setting up a lot of trend 
prices," says Pirate Investor Porter Stansberry "... the 
bus is getting very crowded on the long side. A reversal 
is imminent. I bet you'll see oil prices near $20 a 
barrel by March next year, half the $40 that the oil 
bulls predict."

*** Porter, by the way, a digital man, has invited some 
of the leading thinkers in the high-tech world, the 
people he says are "literally changing the face of 
history," for a conference in Jamaica on November 5-9th. 
If you're interested in joining him send an e-mail to 
Andrea Shaw (

*** A report in the Financial Times says that fraud on 
the Internet is increasing. And "the total level of fraud 
is growing so fast that it is eating into any price 
advantage established retailers get from selling over the 
web. Unchecked, it will affect their ability to make 

*** "I think I speak for everyone out there (the entire 
planet)," wrote a dull-witted hacker who placed his 
message on the opening page of OPEC's website, "when I 
say to you guys to get your collective asses in gear with 
the crude price. We really need to focus on the poverty-
stricken countries..." he went on, in the usual way of 
feeble-minded do-gooders. Like a member of the Children's 
crusade of 1218, the hacker seemed to think that he could 
conquer the Moorish oil producers with good intentions.

*** The dollar index rose 21 points. The euro barely 

*** Gold rose 10 cents. Platinum, Oct. contract, fell 

*** "...the stock market boom has not reached middle-
income families in any important way," says an economist 
with the Economic Policy Institute by way of the New York 
Times. "While median family income is up [to $46,737 a 
year from just over $44,000 in 1989], so is family debt 
and hours spent at work." According to the article, from 
1995 to 1998 'middle' income workers "added 70 hours a 
year of work on average... nearly 1.8 additional weeks. 
And from 1989 to 1998 the increase in work time was 3.4 

*** Kathie Peddicord, International Living publisher with 
whom I dined last night, reported that labor has gotten 
tight in Ireland. After centuries of exporting its 
surplus labor, Ireland is becoming a labor importer.

*** But thank God you can still exploit labor in some 
parts of the globe. Kathie recently returned from Ecuador 
where, she told me, the "cloud forest properties 
(mountain land near Quito) are unbelievably beautiful and 
unbelievably cheap." Labor is $1 per day.

*** And the Thom Bomb sent me this note from the NY 
TIMES... evidence of the effects of global warming in 
Noah's day: "Scientists said today that they had 
discovered remnants of human habitation under the Black 
Sea that they believe is the first proof that people 
thrived along an ancient shoreline before it was
inundated by a great flood thousands of years ago."

"The expedition, sponsored by the National Geographic 
Society and others, is part of a project to survey the 
coastal waters of northern Turkey for signs life at the 
time of the Biblical flood."

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Today, sick people rarely gather in public places. St. 
Peter has been dead for almost 2 millennia. His shadow no 
longer offers the hope of healing.

Today, people look for their miracle cures on the 

The Internet is a curious thing. It extends Solomon's 
Porch - the open market of ideas and popular sensations, 
as well as goods and services - to billions of people. 
And yet, it is not exactly a mass media.

Before the invention of the printing press, mass 
movements were difficult. Thinking was too personal and 

But the innovation of moveable type, cheap paper, and 
easy distribution... not to mention public schools... 
gave rise to mob thinking on a much greater scale. 

People changed the way they thought of themselves - 
corresponding to the reach of the media. Instead of being 
villagers in Poitou or Perche, for example, the 
newspapers, railroads, and telegraphic communications of 
the early 19th century gave people a new identity. 

The media introduced a new set of ideas and beliefs, 
which the new French took up. They became citizens: 
French citizens, with adversaries on two sides - across 
the channel in Britain and on the other side of the Rhine 
river in Germany.

The national identity was an abstraction created by mass 
media and politics. The farmer in Poitou was no 
different. He had the same struggle with nature. The same 
sheep. The same wheat. The same neighbors and the same 

But the newspapers spoke of the "challenge posed by the 
Germans"...or a blockade by the British fleet. Thanks to 
the media, he was able to live his life on a wider stage 
- with props and stock characters provided for him: The 
barbarian Hun - ready to storm into France at any 
opportunity... and perfidious Albion, the conniving Brit 
- ready to stab him in the back as soon as he turned 

And there were other characters too - anthropomorphic 
abstractions of national powers, much like the figures of 
the Worldwide Wrestling Federation today. 

Even at the end of the 19th century, a farmer in rural 
Poitou might be expected to have an opinion about what 
the Russian Bear might do if the Huns attacked sweet 
little Marianne (the woman who represents France.) 

More than a hundred years later, in Baltimore, a lively 
debate occurred whose topic was the government of South 
Africa. People who knew perfectly well that they had no 
hope of understanding, let alone influencing, the way the 
garbage was picked up in their own city, nevertheless 
felt obliged to have an opinion about government policies 
in a country in which they had never so much as set foot. 
They had no idea what languages were spoken there...what 
people ate...nor even who these people were. They had 
never met a person from South Africa, had never read a 
history of the country and could probably not have found 
it on the map. But a good deal of their mental energy 
nevertheless was taken up providing advice to people they 
had never met. Bumper stickers defaced automobiles, 
editorial comment and letters to the editor filled the 
pages of the Baltimore Sun. Even political rallies on the 
subject were staged in downtown Baltimore. 

Mass, political thinking had reduced a very complex 
situation in South Africa to a simple idiotic slogan 7 
times zones away: Africa for the Africans!

The idea was, of course, absurd. Which Africans? The 
Hottentots - which had intermarried with immigrants from 
Portugal, Spain, France and the Indian Subcontinent - and 
were then classified a "coloured"...or the 'white tribe' 
of Afrikaaners who arrived in 18th century...or the black 
tribe of Zulus who arrived a few years later? 

The 'debate' was thus a farce - like a professional 
wrestling match. But that is the tribal scar of crowd 
thinking. Or, to put it digitally, the larger the 
numerator of those taking part - the lower the common 
denominator of content. 

Mob thinking permits a Baltimore parole officer and a Los 
Angeles computer hacker to participate in the same farce 
- in which neither of them has any real idea of what he 
is talking about. It is like a form of sign language for 

I have already explained how the media depicted the 
German invasion of Belgium in early WWI. The Hun was 
shown ravaging poor, innocent little Marianne. The 
Poitevin peasant was incensed. He made his way to 
recruitment centers and thence to the front lines. All 
over France, you can find monuments to these poor souls - 
with the names of the dead chiseled in cold granite.

Throughout most of the 20th century, people responded to 
the seduction of crowd thinking. They enlisted in the 
cause of making the world safe for democracy...or giving 
power to the workers...or fighting the red tide. For a 
hundred years they responded to the jingoes and code 
phrases - as if on cue, happily applauding whatever 
preposterous jimcrackery mob thinking came up with.

After the Berlin Wall came down, however, the media 
subtly shifted its attention from political concerns to 
financial ones. The public has become a little callous to 
the farcical election campaigns. Voting is down. "Isms" 
have lost much of their appeal. People are skeptical of 
mass thinking in politics.

David Ignatius, executive editor of the Washington Post, 
explained recently that people were no longer worried 
about the Russian Bear or Marianne. They're worried about 
economics. TV shows, for example, such as "Who Wants to 
Be a Millionaire" reflect the new popular sensation - 
getting rich.

And the Internet, the Solomon's Porch of the 21 century, 
seems to make it possible. All the world can now 
participate in the biggest market ever - like having the 
whole world gathered in a coffee-house in Amsterdam, 
where tulips were traded...or under the buttonwood tree 
in lower Manhattan. Gossip, rumors... get rich quick 
tips... it all flies around at the speed of light.

Stock analysis has been replaced by jingoes. The New 
Economy...the digital era...greater productivity... 
abstractions are piled onto abstractions. And the 
specific component ideas - when carefully examined - turn 
out to be every bit as wobbly as those that supported the 
20th century's silly political slogans.

But...of course...things still blow up from time to time. 
As we will see...


Your demolitions expert-in-training, working on Solomon's 

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
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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
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Last modified: April 01, 2001

Published By Tulips and Bears LLC