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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Reversion to the Mean

*** Rally hat trick on Wall Street

*** Is the age of irony over? 

*** Profits collapse...stocks go down...CMGI a penny 
share..."Buy Gold!"...and more...

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We've been following the great "river of no 
returns" stock, the way down. 
Yesterday, it lost another 10% - closing at $6.35. CMGI, 
which once traded at $162, became a penny stock, trading 
as low as 98 cents yesterday.

These stocks once represented the golden future of 
American capitalism and modern information technology. 
They were supposed to go up, not down. Meanwhile, gold 
shares - which were supposed to go nowhere - are up 73% 
so far this year. 

("Buy the gold shares," said Harry Schultz, as we 
enjoyed the sun at the Paradis Caf� a couple of days 
ago. "They've already gone up a lot, but they have a lot 
farther to go.") 

But irony is underappreciated these days. "The Age 
of Irony Comes to an End," declares Roger Rosenblatt 
sourly in Time magazine. 

To save you some time, I read his piece. Now I 
have doubts that he even knows what irony is. "The 
ironicists, seeing through everything, made it difficult 
for anyone to see anything." Rosenblatt goes on to 
complain that Ironicists even made fun of such heartfelt 
expressions as "I feel your pain". 

To Rosenblatt, irony suggests that "nothing is 
real." Now he says that irony is dead because the nation 
knows that some things ARE real: real pain, real 
anger...and, of course, the real greatness of the 

Okay, Roger, let me ask you: was the productivity 
miracle real? The "new era", the social security "lock 
box", the never-ending economic expansion? What about 
the ever-rising stock market or the federal surplus? 

Ironically, life is still full of lies, myths, 
hypocrisies, wishful thinking and twists. About which, 
more below... 

Eric...what's happening over your way?


Eric Fry in New York:

- A stock market "hat-trick" was not to be. Stocks could 
muster no better than two consecutive days in the plus 
column before fading yesterday. The Dow dropped 92 
points to 8,567, while the Nasdaq lost 2.5%, to 1,464.

- Adam Lass and Bryan Botterelli, our colleagues at the 
Options Underground, nailed this one on the head 
(again!). Tuesday morning, they urged their subscribers 
to buy puts on the Nasdaq 100 Index (betting that the 
market would fall). One day into the trade, things look 
pretty darn good. The Nasdaq 100 has dropped about 3% 
since midday Tuesday. (see:

Options Underground

- Last week, Wall Street analysts made 3,390 changes to 
their revenue or profit forecasts for specific stocks, 
according to Thomson Financial/First Call. An unsettling 
84% of those forecasts were revised down. Brokerage 
stocks typify the trend: Goldman Sachs, Bear Stearns and 
Lehman Brothers all posted quarterly declines in net 
income yesterday...Goldman's profits fell 43%, Bear 
Stearns' slid 26%, and Lehman Brothers' dropped 32%.

- Bad news for the stock market was good news for gold. 
The monetary relic mounted another of its stealth 
rallies - rising $3.50 to over $393 per ounce. 

- Immediately after the World Trade Center attack, gold 
rallied about $15. But the advance quickly reversed as 
many dispirited, would-be gold bulls threw in the towel. 
Since then, gold has been tiptoeing higher. And now, 
more than two weeks after the attack, spot gold has 
managed to climb to its highest closing price in more 
than one year.

- Ironically, investment demand for gold coins appears 
to be the driving force behind the move. Greg Weldon of 
Weldon's Money Monitor reports that retail demand for 
gold coins is "through the roof." Mike Tordella, a 
wholesaler of precious metals, bars, and coins tells 
Weldon that his sales volumes are up 500% over last 

- "We are getting calls from financial planners who are 
looking for half-a-million or even one million dollars 
worth of gold for their clients," says Tordella. "That 
represents a small portion of an individual portfolio, 
but it is a lot more than what people had been 
considering previously."

- "The Mint was caught unprepared for the run on coins, 
having maintained minimal inventories due to lack of 
demand," says Frank McGhee, a coin dealer at Alliance 
Financial in Chicago. This new demand "has created 
problems with getting enough planchets (blanks) for the 
making of bullion coins."

- Something less extreme than impending Armageddon may 
be whetting the appetites of all these gold buyers. Like 
plain vanilla inflation, for example. The recent sell 
off in the 30-year Treasury bond seems to suggest as 

- "Fed easings have been unusually aggressive 
(inflationary?)," observes the ISI Group. "The attack 
has opened the door to wartime government spending 
(inflationary?). The dollar could decline persistently 
as foreign investors unwind unprecedentedly [large] long 
positions in U.S. stocks and bonds." These trends may 
all add up to rising least, as ISI sees 

- Still, the price of oil dropped again yesterday. 
"Crude prices have declined 25% in the past week," 
writes John Myers of Outstanding Investments, "and is 
now hovering around two year lows. One reason? Demand 
for jet fuel is dropping dramatically as airlines cut 
back on their traffic by as much as 25%. The industry 
accounts for as much as 1.8 million barrels a day of jet 
fuel - almost 10% of the U.S. oil consumption. War, of 
course, could make the price turn around in a hurry."

- John, by the way, is having his own string of luck 
with The Resource Trader Alert. He recently added 145% 
to his readers' portfolios with this interesting twist 
on the surge in demand for gold: a "call" on the Swiss 
franc (betting the market would go up). This currency, 
seen by many as a safety play in times of strife, is 
largely backed by gold reserves. {see: Resource Trader Alert)

- Life in lower Manhattan, while far from normal, is at 
least moving in that direction. Yesterday's spectacular 
fall weather seemed to put a shine on everything.


Back in Paris...

*** I stopped in at the famous auction house Drouot 
yesterday. If you want to buy antiques, this is a good 
place to go - it's the wholesale market, where Paris 
antique dealers get their inventory.

*** At an auction of modern art...I felt as though I was 
glimpsing the future.

*** Two men in suits held up a large tableau covered in 
brown paint with purple figures. It looked as though it 
might have been done by a 5th grade art class in a bad 

*** "We will begin the bidding at 5,000 francs," said 
the auctioneer.


*** "Well, let us reduce the opening bid to 4,000 


*** "Two thousand francs. Do I hear 2,000 francs...?"

No one spoke.

*** "Okay...1,000...?"

*** "500 francs...? Does anyone in this room want to bid 
on this painting?"

Dead silence.

* * * * * * * * * Advertisement * * * * * * * * 

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by Bill Bonner

" the last refuge of scoundrels. It also 
occasionally can be the first resort of shills, not 
excluding those peddling stocks." 

Alan Abelson

Widely reported is the idea that Islam abhors violence 
and the Koran specifically forbids suicide missions.

But great religions all have one thing in common. They 
lay on such a light yoke that their adherents can run 
off in almost any fool direction they want to.

How else can you explain so many mullahs and Muslim 
clerics throughout the Middle East who seem to support 
bin Laden and other terrorists?

And is it not at least ironic that in a nation of more 
than 200 million Christians, hardly a single voice 
suggests turning the other cheek to terrorists? There it 
is, about as unambiguously stated as anything Jesus ever 

"Ye have heard that it hath been said, An eye for an 
eye, and a tooth for a tooth...But I say unto you, That 
ye resist not evil: but whosoever shall smite thee on 
thy rich cheek, turn to him the other also."

As I have explained, the Daily Reckoning is a free 
service. But if I had the same views as Time magazine, 
what would be the point of reading? (Not that I am 
advocating turning the other cheek to murderers. It is 
just that an unnoticed irony is a dangerous irony.) 

The entire American press agrees: the nation has been 
rocked by a tragic and catastrophic attack, but it seems 
to have brought out the best in America. Americans are 
united as never before and prouder than ever...of 

But here at the Daily Reckoning, we are a bit 
disappointed in our fellow Americans. Just when they 
seemed to be coming to their senses, after a long spell 
of overconfidence...they seem to have slipped into even 
greater fantasy.

The ordinary man seems to have suddenly taken up a vast 
and unhealthy interest in military affairs and politics, 
just as he was beginning to recover from his interest in 
stocks. And now he can scarcely tell the difference. 

"If you believe in our great country - that we will 
survive and prosper - then spend a little money," urges 
Louis Navellier. "Buy that new sofa. Go out to dinner. 
Take a weekend getaway. It'll do your psyche good and 
help grease the wheels of recovery, as well. AND ONCE 
YOU'VE spent a little cash on yourself and your family, 
invest a little in America, too. The stock market 
represents our future - a bright future, I believe. 
But don't invest just to be patriotic. Invest the right 
way now - with great companies selling at flea market 

History will some day record that following the 
terrorists' strike in September of 2001, God, Mammon, 
and the State curled up so tightly together in 
Americans' minds that separating them was like trying to 
pull apart mating snakes. The nation's blood is up. Now 
is the time to act. To speak out. We will have plenty of 
time for regrets later.

"Wake Up, America!" comes the clarion call from Ben 
Stein in Barron's. The terrorists' attack gave us a 
wake-up call just like Pearl Harbor, Stein believes. 
How did America's Greatest Generation react? "We didn't 
worry a lot about hurting anyone's feelings. We bombed 
their cities from the air...we won and saved the whole 
future of mankind."

Bombing cities is a popular theme. "Bomb them all," said 
one New Yorker, as I reported yesterday, "Let God sort 
them out." 

"Strike hard and fast," adds Stein.

This sentiment has already triggered streams of refugees 
pouring out of Kabul. Residents of Delray Beach, Florida 
are said to be packing up too.

If Simon de Montfort had had bombers, he would have used 
them to crush the Cathar heresy in 1208. Cathars lived 
in towns in the southwest of France...where they 
practiced their form of "pure" Christianity. They 
believed that work was good but that all matter was 
evil. Why were they considered such a threat? Eight 
hundred years later, it is hard to imagine. Perhaps it 
was because they did not eat meat; vegetarianism has 
always been regarded with alarm in France.

Blessed by the Pope, and joined by men in search of 
paradise in heaven or confiscated lands on earth, Simon 
de Montfort led a campaign against the heretics. 

St. Dominic despaired of trying to talk sense into them. 
"I have preached, I have entreated, I have wept...the 
rod must now do the work of benediction." 

In the ensuring campaign whole towns were wiped out - 
with every man, woman, and child put to the sword...many 
tortured before finally being put to death. A favorite 
means of killing heretics was to burn them alive at the 
stake..."with a small, slow fire", the chroniclers 
report. Those who escaped ran and hid in the forests. 
There, they starved...other towns were forbidden to give 
them food or shelter, under penalty of death.

How could de Montfort tell the difference between 
heretics and the honest Catholics who lived in the same 
towns? He was as ignorant of an individual's guilt or 
innocence as a smart bomb. So he killed them all. "Slay 
them all," was his instruction (attributed to Papal 
Legate Arnaud Amaury). "God will recognize his own."

The ruthlessness paid off. Scarcely a hundred years 
later, the last known Cathar, Guillaume Belibaste, was 
burnt alive, and - in the eyes of the church - the 
future of mankind was saved.

For Stein too, the time for modesty and cautious 
thinking is over. "Back to reality..." he says. 
"Reversion to the mean is a law, not a choice."

Long suffering Daily Reckoning readers will recall too 
that "reversion to the mean" is a law that rarely goes 
unenforced for long. A bear market had already begun on 
Wall Street before the terrorists finished flight 
school. Stocks were already reverting to the mean and so 
was the U.S. economy. Those trends still have a long way 
to go.

But your editor wonders whether there isn't an even 
bigger bubble waiting for deflation...and whether, in 
some ironic way, a bear market in confidence might cost 
the nation even more than its bear market in stocks.

More tomorrow...

Bill Bonner

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: October 01, 2001

Published By Tulips and Bears LLC