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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Fruits of the Earth

*** A New Mood in New York...and all America... 

*** Stocks fall worldwide last open in 
the U.S. today...

*** Industrial production falls for 11th month in a 
row...consumer sentiment heading down...airlines going 
bankrupt...what's next?

"After Brash Decade," says a headline in today's 
International Herald Tribune, "A New Mood in N.Y." Eric 
Fry, our Wall Street correspondent, describes it:

"Suddenly, religious faith and patriotism are in 
vogue. Chanel purses and Hummers are not," begins Eric's 
report for today. "Overt self-indulgence is 'out'. Faith 
is 'in'.

"I have never seen my church more crowded than it 
was yesterday. Flag-waving has made a stunning comeback 
as well. The stars and stripes are everywhere. It looks 
like most Americans used a chunk of their tax rebates to 
buy flags. After a lengthy search, my wife bought a 
large 5' by 10' flag that now hangs from the front of 
our house."

Eric's report continues:


Eric Fry in New York:

- "We are going to pursue a new kind of business model 
going forward," promised a teary-eyed Howard W. Lutnick, 
CEO of Cantor Fitzgerald. "We will have a much different 
business model...[sobs]...we have a new class of 
partners here - the families [of the firm's victims]. I 
have to take care of these families."

- This is but one face of the new America. It would be 
easy to be cynical and assume that Mr. Lutnick's 
altruism will not last more than a month or two. Greed 
is simply too powerful a temptation. But I believe 
Howard Lutnick, and I believe that America has 
changed...for the better. 

- "Adversity can have many positive effects. Enduring 
national character is shaped by shared trauma," observes 
Francis Fukuyama in a recent Financial Times story. 
"Peace and prosperity, by contrast, encourage 
preoccupation with one's own petty affairs and allow 
people to forget that they are parts of larger 
communities. The long economic boom of the Clinton years 
and America's easy dominance of world politics has 
allowed Americans to wallow in such self-indulgent 
behavior...This was nowhere more true than in the world 
of high-tech and finance..."

- Fukuyama continues: "Tuesday's attacks on Wall Street 
were in this respect a salutary lesson. The 
weightlessness of the new economy will not protect you 
from falling concrete; your only hope in this kind of 
crisis is the heroism of firefighters and policemen 
(several hundred of whom were killed during the attack). 
Microsoft or Goldman Sachs will not send aircraft 
carriers and F-16s to the Gulf to track down Osama bin 
Laden; only the military will...the United States is 
likely to emerge from the attacks a different country, 
more unified, less self-absorbed...And it may also 
become a more ordinary country in the sense of having 
concrete interests and real vulnerabilities..."

- Even assuming that our nation becomes less frivolous 
and that it rediscovers faith and patriotism, what will 
become of our economy and stock market? For months, the 
Daily Reckoning has predicted that sliding corporate 
profits and an over-leveraged consumer would weigh on 
the stock market. Profits are still sliding and the 
consumer is still burdened with debt. Last Tuesday's 
attack certainly will not improve either condition.

- A consumer spending slowdown seems all but certain. 
Even though many restaurants in and around Manhattan 
continue to do a brisk business, big-ticket purchases 
have ground to a halt.

- Given this situation, it is easy to remain bearish - 
too easy. The U.S. stock market may well be a tough 
place to make a dollar over the next several months, if 
not the next several years. But over the next few weeks, 
we'll see what's been termed a "Patriotism Rally".

- Consider the following factors - two of them fact, two 
of them rumor - that may contribute:

* Fact No. 1 - The SEC has lifted restrictions that 
prevent companies and company insiders from buying 
unlimited quantities of their own stock.

* Fact No. 2 - Cash has been piling up in money market 
accounts for several weeks as the stock market has been 
selling off. This cash could easily re-enter the stock 
market over the next several days.

* Rumor No. 1 - Many people I know are saying that they 
will be buying stock on Monday as an act of patriotism. 
As crazy as this might sound, one of my friends told me, 
"E-mails are flying back and forth across the country in 
which people are telling each other that they will be 
buying stock on Monday. It's a national grassroots 

* Rumor No. 2 - I have heard from a couple professional 
fund managers of a "gentleman's agreement" to neither 
sell stocks nor sell stocks short on Monday.

- Purists will scoff at the notion of "patriotic 
investing." But who knows, it just might happen and it 
just might stabilize the markets and restore confidence 
for a while. Longer-term, of course, things like 
earnings will matter more to the stock market than 
patriotism. Stocks pledge allegiance to nothing but 
their underlying values.


Back to Bill in Paris...

*** "Hope of a 'Patriot Rally'" excites investors, says 
the IHT. "Doing my part...I'm buying stocks on the 
open," CNBC quotes a flag-waver. 

*** Meanwhile, a chain e-mail message flies through the 
net, encouraging Americans to buy $200 to $1000 worth of 
stock when the market opens today as an expression of 
solidarity and patriotism. 

*** We do not scoff at the idea of "patriotic 
investing." We welcome it with the kind of mischievous 
curiosity we feel when a rich widow is introduced to a 
gigolo. Something unpleasant is bound to happen, but it 
gives us something to talk about.

*** We've been waiting on two things: a day of panic 
selling...and a strong rally. Both should occur before 
this 2nd stage of the bear market runs its course and 
either could begin today.

*** Wall Street was closed most of last week. But the 
Europeans were open for business. And stock prices fell 
in near-panic selling...before bouncing back. France's 
CAC 40 index ended the week down 11%, the German DAX 
ended down 12%.

*** In Japan, investors used the occasion of a closed-
down Wall Street to steal a march on the Americans. The 
Nikkei Dow, racing the U.S. Dow for the bottom, gained 
and surpassed the U.S. index...closing at 9520 this 
morning, a level it has not seen Ronald Reagan's first 

*** Industrial production fell for the 11th month in a 
row. Continental's chairman, Gordon Bethune, tells us 
that the airlines are all going bankrupt. And consumer 
confidence - already down to its lowest level since 
November 1993, before last week's attacks - seems sure 
to fall further. 

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"I believe that there are not two separate worlds, the 
spiritual and the material...and that it is useless to 
set them apart."
Andre Gide

"I love this time of year," said my daughter, Maria. 
"But, Dad, why are we doing this? We could just buy 
wine...and it would probably be better."

We were working on opposite sides of a row of grape 
vines in Mr. Deshais' vineyard. The gardener had invited 
us, like Tom Sawyer, to help with the grape harvest - 
the vendange. We had never picked grapes. And the day 
was so pretty that any excuse to be outside seemed like 
a good one. So Maria, Henry, and I joined him, picking 
off the bunches of dark purple grapes, laying them in 
plastic buckets.

Grape harvesting is easier than getting in tobacco. 
There is little heavy lifting. And the weather is not 
hot...on Saturday, it was almost perfect. 

The sky was bright blue for a few minutes...and then the 
sun was blocked by fast-moving clouds. A cool wind blew 
across the vineyard. So we wore sweaters and jackets, 
taking them off as we warmed ourselves up from the work.

"Isn't it amazing," Maria was eating grapes and looked 
like a cover girl on a health magazine, "Isn't it 
amazing how this stuff just comes out of the ground. I 
mean, how nature puts these things together...and makes 
such nice things..."

"Yes...but you have to work with the earth," our 
gardener corrected her. "You have to learn how to coax 
the good things out." 

"As ye sow, so shall ye reap," I added, having nothing 
original to say.

"But it's not even that easy," Mr. Deshais replied, from 
experience. "Look at this plant." He pointed to a vine 
in the next row with curled leaves and brown, dried up 
little grapes. "It has some disease. You never know, 
some years you get a good harvest; some years you 

"And this year's harvest is not very good...I didn't 
work on it as I should. You know, my life was a little 
messed up last year..."

Readers waiting for an insight - from either Mr. Deshais 
or your correspondent - will be disappointed. We have 
none to offer, other than the observation that you 
already know so well:

Investors, generally, get what they deserve...but not 
necessarily what they expect. As they plant, so do they 
reap. Matter and spirit cannot be completely separated.

For the last 10 years investors planted little - savings 
rates actually fell below zero. Rather than tilling the 
soil, they consumed harvests of previous years and 
depended upon the kindness of strangers to fill in the 

Though they labored little in the vineyard, investors 
nevertheless expected bumper crops - polls showed 
investors anticipated 18% annual capital 

Instead, harvests - as measured by business profits - 
collapsed. Since '98, as Dr. Richebacher reminds us, 
America's leading sector - technology - has produced 
zero profits. 

Take away profits, said Keynes, "and the whole process 

The whole process was in the process of stopping when 
terrorists attacked on Tuesday. Now, there is wild talk 
about a "patriot rally" and a new boom. Commentators 
compare the terrorists' attack to the Japanese attack of 

"Men, like dogs, are only too easily conditioned and 
always expect that, when the bell rings, they will have 
the same experience as last time."

If only the dogs who attacked the WTC had read more U.S. 
economic history. Surely, they had no desire to nudge 
American capitalism to even greater glory. Yet that is 
what the pundits say is coming.

"The Dow fell 2.9% on the first trading day following 
the Japanese attack on Pearl Harbor," writes James K. 
Glassman in the International Herald Tribune today. 
But, then, he points out, "as it became clear that the 
U.S. economy...would boom and the war would be won, the 
market began to climb powerfully."

Pearl Harbor gave the U.S. market a shove. Trading at 
about 20% of GDP, U.S. stocks were about as cheap as 
they had ever been. But not as cheap as they were about 
to become. Six months later, stocks hit an all-time low 
of 16% of U.S. GDP...before beginning a long, slow bull 
market that didn't end until 1972, with stocks reaching 
78.1% of GDP.

For reference, readers might want to know that stocks 
today are about 135% of GDP...nearly twice as high as 
ever previously recorded. (The previous record was hit 
in August 1929). Patriotic readers might wish to see the 
market rise today. Perhaps it will. But we doubt that a 
terrorist attack makes the fundamental picture so much 
brighter that it will turn nature on its head. Even - or 
perhaps especially - in times of war, investors are not 
likely to reap a harvest they never sowed.

When we had picked the two rows of grapes, we dumped the 
grapes into big plastic trash barrels in the back of a 
truck and headed back to the house. The grapes were 
dumped into tubs and Henry, 11, and Edward, 7, took off 
their shoes and socks, put on shorts and got ready for 

I made sure they washed their feet...and put them in the 
tubs, where they began mashing the grapes. The boys 
giggled and tromped about, turning the grapes into 
liquid without the benefit of technological advances of 
either the Information Age nor even the Industrial Age. 
They worked as boys have for thousands of years. After a 
while, they grew tired. Mashing grapes was no longer fun 
for them. Their legs were red and their feet were 

"Can we stop now?" asked Edward.

"Just a little more..." came the reply. 

Finally, Mr. Deshais drew off the juice. We tasted it 
and were not disappointed. Then, it was mixed with "eau 
de vie" alcohol...

"Homemade," said Mr. Deshais, "this is the real stuff, 
made the traditional way. This is the way you make 
pineau in the old fashioned way...the good pineau, not 
like the stuff you buy in the supermarket."

"I thought it was illegal to make eau de vie," I 


Bill Bonner, not keeping quiet.

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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