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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  In Praise of Group Thinking

In Today's Daily Reckoning:
*** Clinton, Duisenberg decided to 'do something' about 
*** Euro rises, oil falls... techs bounce...
*** Analysts are out to lunch...record IPOs...voters 
ignore politics

*** Clinton must have felt the pain of ordinary American 
voters. He decided that it was time to release the 
strategic oil reserves - the supplies stocked to protect 
the nation in time of war - so that people can drive 
their SUVs without paying Friday's market price for oil.

*** Wim Duisenberg and the other graybeards at the 
European Central Bank must have felt someone's pain too. 
Maybe their own. They're tired of people making fun of 
the zero, I mean the euro. So, they got together with 
Larry Summers of the U.S. and bought euros to drive up 
the price.

*** There were, as you will recall, 4 things plaguing the 
U.S. stock market last week - the 4 E', 
earnings, the economy and the euro. Urged by people like 
Ms. Wu in South Korea, the bureaucrats and demagogues 
decided to "do something" about 2 out of 4 of them. 

*** So, the fix was in on Friday. The euro popped back up 
to 90 cents, briefly, before re-descending towards 88 
cents. The Dollar Index fell to 113. And oil fell after 
Clinton's announcement and was trading at $31.44 at 6AM 
this morning.

*** Lower oil prices and a higher euro provide a gap in 
the cloud cover over Wall Street. The sun can shine. 
"Wall Street Expected to Rise this Week," declares 
today's Reuters headline. Maybe. But there are still the 
other 2 E's - earnings and the economy.

*** Earnings could be helped by a stronger euro. But 
there are big risks. ECB intervention might not work. 
"When Europeans speak, people should listen," said the 
French finance minister. Europeans have been reluctant to 
intervene on behalf of the euro. If the intervention 
fails to stop the euro's decline - Wim Dusenberg and the 
euro itself will lose even more credibility. People will 
stop listening all together.

*** On the other hand, the bigger risk is that 
intervention will succeed in turning the euro around. The 
euro has an inherent structural weakness. It is the 
Esperanto Currency, backed by neither hard assets nor a 
single country. 

*** The U.S. dollar, on the other hand, has been the 
biggest sensation in the currency world since the roman 
denarius. It is backed by the world's only remaining 
super-power. But like so many things in the U.S. 
financial markets - the dollar has over-reached itself. 

*** According to the IMF foreign investors already hold 
about $6.5 trillion in US assets - 7% of the US stock 
market, 31.5% of US treasury debt, 18.5% of US corporate 
debt and an additional $650 billion in cash. With a 
current account deficit approaching $450 billion - it 
takes $450 billion of inflow just to keep the dollar 
FLAT. Kevin Klombies: "...a VERY sharp rally in the euro 
has the potential to clear $.96 ... and extend all the 
way up to $1.05." 

*** The Dow was flat last week. So was the Nasdaq, after 
a 25-point fall on Friday. 

*** Gold rose $1.60 on Friday. The Dollar Index fell to 

*** Maybe this will be a good week for stocks. Analysts 
think so. But analysts are always bullish. Whether they 
sell investments directly or not, Wall Street 
congenitally favors stocks and bonds just as the media 
favors politics. Out of a recent sample of 28,000 
recommendations made by analysts, 36.5% were "strong 
buys." 37,5% were "buys." 25.3% were "holds." And only 
0.6% were sells.

*** "The tendency to be overwhelmingly bullish has turned 
into an epidemic," said one observer. It was obvious that 
the lower euro and higher oil prices would hurt multi-
national corporate earnings. But until Gillett, Alcoa, 
Goodyear and others announced their earnings results, 
scarcely a single analyst noticed. 

*** But now that the world's monetary and political 
leaders have decided to "do something" we can stop 
worrying. Uh...well...maybe.

*** This week, 20 companies will launch IPOs, which will 
take this year's IPO total beyond 1999's record of $68.7 
billion. Tech Corp, a recent IPO, rose 189% after hitting 
the markets. So hopes are high. 

*** "Americans are spending an additional $115 billion, 
nearly 1 percent of GDP, on energy this year," says the 
NY Times "... more than half of [that money] is going 
abroad to pay for imported oil, shrinking spending at 
home and... acting as a drag on the economy." Still the 
article goes on to report there are "structural reasons" 
the rising energy costs will not bring on a recession as 
it did in '73, '79, and '90. Among them? "... computer 
technology plays a bigger role in the economy, shrinking 
the role of oil and natural gas." 

*** From a NY Times editorial on Jonathan Lebed, the 15-
year old boy from Jersey sued by the SEC for stock 
manipulation: "The teenager's coming of age occurred in a 
period of stock market mania, when hyping stocks was de 
rigueur and when ridicule was showered on those who 
pointed out the warts on a company's operations... 
Jonathan is simply too young to remember the days when 
investor disbelief was not in a state of permanent 

*** There was record low turnout in French elections this 
weekend. All over the world, people are turning away from 
politics. More below.

*** Not much to report from Ouzilly. It was a beautiful 
weekend. "A season of mists and mellow fruitfulness," as 
Keats put it. A friend of my mother's is visiting. The 
two women served in the WACs in WWII and spend their days 
walking around slowly and reminiscing.

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"Those who, standing their ground and closing ranks 
together endure the onset at close quarters and fight in 
the front, they lose fewer men. They also protect the 
army behind them. Once they flinch, the spirit of the 
whole army falls apart. And no man could count over and 
tell all the number of evils, all that can come to a man, 
once he gives way to disgrace." 

From "The Western Way of War"

The Greeks fought often. In two out of three summers the 
property owners, called hoplites, would be called out to 
do battle. 

These were not professional soldiers - but farmers, 
artisans, philosophers and traders. Nor were they just 
young men of draft age. Men were expected to fight until 
they were 60 years old. Of course, with so much warfare, 
many did not survive to retirement age. 

The fighting was not high-tech. In today's battles, 
soldiers may never even see the enemy. Bombs are dropped, 
missiles launched, cannons fired - at targets well over 
the horizon. And whole wars are fought for reasons that 
are even more remote.

But the Greeks formed up their phalanxes and marched 
straight at the enemy. Spears were used to jab. They were 
scarcely ever thrown. The idea was to press against the 
enemy...strike him down...march over him...and break up 
his formation.

In this, as in so many things, the Greeks were extremely 

"If crowd-thinking is so bad," you might want to ask me, 
"how come people do it?" Here is the answer.

The progress of man has been made by extending the 
division of labor. Instead of doing everything for myself 
- I can now go to the store and buy my bread, clothes, 
fuel and everything else I need to live - and make my own 
very small, very specialized contribution to the 
commonweal of humankind in these daily letters. 

As the division of labor extends, more and more people do 
more and more specialized tasks.

I know what you're thinking - not another essay on the 
division of labor! But please hang on...I am just warming 
up what could be an interesting point.

The division of labor requires trust and cooperation. I 
have no way of forcing the baker to bake bread or the 
roughneck to bring oil up out of the ground. Still, I can 
be reasonably confident that the bread will be better and 
cheaper than if I made it myself...and that the diesel 
fuel I put in my car's tank will be serviceable.

Progress, then, is a function of greater cooperation. 

But force has played a big role in human affairs too. 
When material welfare, and even survival, depended on 
controlling good hunting ground...or good farming 
ground...a group of people could benefit enormously from 
using force. If they could expel or exterminate a rival 
tribe - they might flourish.

The Greek city-states were tribal. Each tribe - had its 
regional differences. They made war on each other...and 
came together to fight the Persians and others. 

Throughout the ancient world, the Greeks were feared. 
They had no special technological or numerical edge. 
Their big advantage was the one thing I have been ranting 
against: group-thinking.

When the call to arms was sent out, the hoplites, young 
and old, notable and common, friends and relatives, 
grabbed their armor and formed up. They stood shoulder-
to-shoulder, row upon row. Their polished helmets gleamed 
in the sun. The front row of soldiers held their spears 
straight ahead. The back rows held them straight up. 

There was no skirmishing. No surprise. No tactics, other 
than the steady closing with the enemy until, toe to toe, 
they battled it out. The key to victory was solidarity.

Their enemies feared them. Because they knew they would 
not give way. The Spartans, especially, had a reputation 
for being willing to die where they stood rather than 

"It was a sight at once awesome and terrifying," Plutarch 
described the slow, dreadful advance "as the Spartans 
marched in step to the pipe, leaving no gap in their line 
of battle and with no confusion in their hearts, but 
calmly and cheerfully advancing into danger."

Greek generals were usually on the front lines. When an 
army was beaten, its generals were almost without 
exception killed in the fighting. 

Alcibiades, telling the story of Socrates' combat, 
comments: "Indeed, in war the enemy will not dare to 
press home their attack against men such as this; 
instead, they go after the ones who are fleeing away in 
complete disorder."

From the generals to the newest recruit, all the soldiers 
suffered the same fate. If they fought together and stuck 
together, their enemies might break and run. But if any 
one of them failed to do his duty...the whole formation 
was likely to disintegrate. Then... Tyrtaios:

"For once a man reverses and runs in the terror of 
battle, he offers his back, a tempting mark to spear from 
behind, and it is a shameful sight when a dead man lies 
in the dust there, driven through from behind by the 
stroke of an enemy spear."

Group cohesion was paramount. The whole phalanx had to 
think and act as one. Defecting was dangerous and 

More to come...

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...

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Last modified: April 01, 2001

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