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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

PARIS, FRANCE 
THURSDAY, 28 SEPTEMBER 2000 

 

Today:  The "C" Spot

*** BLS expected to admit that the inflation numbers are 
wrong - announcement this morning!
*** Investors "uneasy"...but will anxiety give way to 
fear?
*** Oil, euro - steady. Big Day for the Danes...Al Gore 
offers 50-year weather forecast...and more...

*** The discussion of Bureau of Labor Statistics' numbers 
may not be "heating up" exactly. But it is at least 
responding to global warming. The icy silence is melting. 


*** John Berry, writing in the Washington Post, revealed 
yesterday that the BLS may have understated inflation a 
tad. BLS said that it had perhaps jacked up its hedonic 
adjustments by a factor of two. New numbers are expected 
this morning at 9:30 EST.


*** The thought of having to revisit the inflation 
figures seemed to chill Wall Street. "We're still in a 
mode where people feel uneasy," reported one analyst to 
Reuters. 


*** Will the Autumn of Anxiety soon give way to fear and 
panic? No one knows. But I don't expect it. Presidential 
elections usually boost stock prices - as people are 
encouraged to think collectively and expect to get 
something for nothing. And, if there are any problems - 
politicians all promise to "do something" about them. 


*** Oil barely moved yesterday. The Saudis alternately 
pledged to pump more to stabilize world prices and 
threatened to pump less if the Europeans followed 
Clinton's lead and began drawing down emergency reserves.


*** "...the 55 million Americans who heat their homes 
with gas will pay 25 to 40 percent more than they did 
last winter," an article in the NY Times tells me, "and 
with the Energy Department forecasting that demand for 
natural gas in the United States will rise 40 percent in 
the next two decades, prices may go higher still."


*** The euro held its ground and even rose slightly 
against the dollar. I have been looking for the bottom in 
the euro market...with the alert senses of a man waiting 
up for a teenaged daughter. Several times, I thought I 
heard the footsteps on the stairs. But have been 
disappointed each time. Is this it? What's that? Sounds 
like a key in the door. We'll see.


*** Today's the big day in Denmark. Will the Danes vote 
to join the euro - or avoid it? What effect will it have 
on the market? Again, we'll see.


*** The Dow fell very slightly yesterday - minus 2.96 
points. Nasdaq took a bigger fall - 32 points down.


*** The advance/decline ratio turned around, but not 
dramatically. There were 1496 advancing issues on the 
NYSE yesterday and only 1331 declining ones.


*** But the new high/new low ratio was still negative, 
with 82 of the former and 109 of the latter.


*** A couple of the Big Techs made big moves to the 
downside. Priceline.com fell 42% to $10.75. Yahoo lost 
10% of its value, falling $12 to $90. Yahoo was at $250 
earlier this year.


*** CMGI - the Internet incubus, I mean incubator, lost 
$3 yesterday. It is down 80% from its high of $163 in 
January.


*** Now that these stocks have come down so dramatically, 
are they finally reaching reasonable price levels? Yahoo 
is at least a good company. It earns good money - with 
income of $203 million, compared to sales of $855 
million. But the price! It is selling for 265 times 
earnings. 


*** Who would buy a business for 265 times earnings? Who 
would be willing to wait 265 years - at the current rate 
- to recover his investment? 


*** Well, you may be thinking, the company is growing 
fast. And yes, it has been growing fast. But, as 
Shakespeare put it, 'tis many a slip twixt the cup and 
the lip.' Prices need to be discounted for risk. 


*** Al Gore could be a Yahoo buyer. He thinks 
collectively and long term. "In 50 years there will be no 
North Pole in the summer time," said the candidate for 
America's highest office. Al is no weatherman, but he 
knows which way the wind is blowing. He cannot predict 
the weather in Washington for the next week - let alone 
for the North Pole 50 years from now. But he is tapping 
into a part of the brain where collective fantasies are 
stored and nourished. More below.


*** Yahoo may be worth its current price - by the time 
the polar ice cap melts. In the meantime, GM has earnings 
3000% higher than Yahoo, but it valued 30% lower. 
Curiously, Harley Davidson has a market cap of $14 
billion - nearly half that of GM. Harley is a popular 
sensation. It is cool to own Harley stock. A modest 
investment suggestion: buy GM, short HDI.


*** The Nasdaq is now down 9.3% for the year. The Dow is 
down 7.5%. Where is the wealth effect now?


*** Gold rose $4.30. The dollar index was down a little. 
Amazon lost $2.


*** Investors Business Daily reports that 65% of earnings 
pre-announcements are negative, suggesting lower than 
expected earnings across the board.


*** "In 1972, only very few stocks advanced," wrote Marc 
Faber recently. "More and more had disappointing 
earnings...and collapsed, but this led investors to pay 
premium prices for just a few companies that were 
perceived to have the ability to grow even during bad 
times." (see: Convergence, Shakeout and Realistic Value)


*** "The strong stocks, which had driven the indices up 
to their Jan. 1973 peak (the 'nifty fifty')," he goes on, 
describing what he calls 'Phase II of a Bear Market,' 
"held up well until October, and some even made new all-
time highs... But after that, it was down all the way, 
because oil prices and interest rates rose and the global 
economy sent into recession."


*** Today is Brigitte Bardot's birthday. It is also the 
anniversary of the Polish Partition of 1939, in which 
Germany and the Soviet Union took Poland without asking.


*** "On ira tous au Paradis," (we'll all go to 
paradise)...we hear this line (and only this line) from a 
popular French song every day. It is the chant of a 
'clochard,' - a drunken bum who hangs out in front of our 
office. Yesterday, he was sprawled on the sidewalk and 
lay so motionless that people thought he had finally gone 
to paradise. A small crowd of locals and tourists 
gathered...and seemed disappointed when he came back to 
life.


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THE "C" SPOT


As I left them on Sunday, my mother and her friend were 
walking around the garden. The two women were dressed in 
near-matching outfits...black walking shoes, black pants 
and white sweaters. Both have white hair...and both walk 
with a forward stoop, like Keat's apple trees in autumn, 
bent from years of mellow fruitfulness. They reminisced 
about the people they knew a half-century ago...and the 
many things that have happened since. They have been 
friends for more than half a century.


"I don't mind if they charge high prices for gasoline," 
said my mother's friend, Margaret, to me at lunch. "The 
higher the price, the better. People drive too much. And 
besides, I'm worried about global warming."


Margaret is worried about a lot of things. "I don't think 
they should allow these big outfits like Walmart to build 
these big outlets near small towns," she opined. "It 
practically destroyed our downtown area," she continued, 
switching from global issues to local ones. 


Later: "The problem with the schools is that they don't 
pay teachers enough, so they don't get the best talent."


Margaret is a sweet woman. But she reminds me of Ralph 
Nader. She has opinions on everything she knows nothing 
about. She is the Washington Post editorial page in 
wrinkled flesh.


Gail Collins, writing in the New York Times, reports that 
"Mr. Nader is furious about campaign finance, along with 
- and this is a very incomplete list - the World Trade 
Organization, the death penalty, genetically engineered 
food, child poverty, the military budget, the Taft-
Hartley Act, tuition at public universities, the evening 
news' obsession with the weather, the ban on industrial 
hemp and the fact that Mr. Gore did not show up for the 
Farm Aid concert."


Why is the old humbug opposed to the weather coverage? I 
have a hypothesis: because the weather is the one thing 
on the list that he and other collective thinkers cannot 
"do something" about...except, perhaps, in the very long 
run...if you accept the global warming argument.


Nader resents anything that won't yield to politics. In 
another era, maybe he would have sent his soldiers to do 
battle with the waves, like Xerxes. But in today's world, 
he and his minions spend their efforts trying to turn 
personal decisions into policy issues.


An independent thinker, for example, can decide for 
himself when the price of gas is too high. If he gets 
tired of buying gasoline, he could move to the city and 
do as I do - walk to work. He could switch his home 
heating system to wood - as I once did. He could even 
build a solar home - as I also once did. Or, he could 
just buy oil...and be miserly with the thermostat - as I 
now do.


Or, he could reach down into his "C" spot - that 
malignant little part of the brain where his collective 
thinking takes place, and come up with a solution, not 
for him alone, but for the entire human race.


"A New Energy Economy is Dawning," writes Lester R. 
Brown, another very public nuisance, in the International 
Herald Tribune. Brown has a solution for America - raise 
gasoline taxes. That is, he wants to force you to pay 
more for gasoline than the market price.


On the same page, J. Robinson West, a former assistant 
secretary of the interior, says that "In Future [a phrase 
that has a suspiciously British ring to it] Energy Goals 
and Foreign Policy Must Be Linked." He wants to force all 
kinds of policy changes, not only on Americans - but on 
foreign nations too.


And Flora Lewis, also editorializing in the IHT, wants to 
'do something' on a planetary scale. "Oil Prices Should 
be Stabilized by International Agreement." Ms. Lewis 
complains that "there has been no serious effort to 
organize oil supplies to meet common interests." 
Organizing oil supplies is exactly what the oil market 
does. But the oil market is persuaded in a million 
different directions by millions of different, 
independent producers, distributors, speculators and 
consumers - each of them making his own personal decision 
based upon his own personal situation.


But personal choices have no place in the "C" spot. The 
busybodies want to replace the cooperation of the oil 
market with the force of politics. Against all the 
evidence of decades of observable experience, Ms. Lewis 
seems to think the price of oil can be set and maintained 
by bureaucrats, to the advantage of all. 


An article in the Figaro tells of a new hypothesis about 
primitive man. A French academic researcher believes that 
the first homo sapiens arrived in Europe - and found it 
inhabited by Neanderthals...who had been around for 
500,000 years. Within 30,000 years, Neanderthals were 
extinct. 


What doomed the poor old Neanderthals? No one knows. But 
one theory is that they were less able to communicate... 
and perhaps less capable of collective thought and 
action. Cave paintings in France, say the researchers, 
were done by the newcomers - Homo Sapiens - indicating an 
ability to use common symbols to communicate ideas and 
sentiments...and give the whole tribe a sense of group 
identity and purpose. With single-mindedness they turned 
themselves to the task of making Neanderthal man extinct.


Solidarity has its uses. But they are limited. In 
conditions of extreme trial, for example, the disciplined 
cohesion of the group can make the difference between 
life and death. That is the lesson of the book, "Alive!", 
which told the story of the soccer team that crashed in 
the Andes...and "Endurance," recounting the remarkable 
survival of Earnest Shackleton's misbegotten expedition 
to reach the South Pole.


In one respect my mother and Margaret couldn't be more 
unlike one another. While Margaret, like Ralph Nader, has 
never married...my mother married while in the Army...had 
4 children and now has 18 grandchildren and one great 
grandchild. While Margaret reads the editorial pages 
regularly and is concerned with all the collective issues 
of the day - my mother has absolutely no interest in 
politics and focuses all her attention on her family. 
Margaret thinks about public issues; my mother thinks 
only about personal ones.


The two sides of the brain, it is believed, do slightly 
different kinds of things. The left-brain, I am told, is 
where the digital, rational thinking takes place. The 
right-brain is more poetic.


I predict that further research will one-day reveal more 
subsections of the brain. Conducting an autopsy on Ralph 
Nader, for example, an alert coroner may discover an 
enlarged, or in Nader's case - perhaps inflamed - area 
near the medulla oblongata: the "C" spot. If he is on the 
ball, he will recognize it as the peculiar organ where 
collective thinking is done and name it after his ex-
wife.


Your cooperative, correspondent...feeling sorry for 
bunnies and Neanderthals...



Bill Bonner


P.S. Readers may recall the rabbit I flattened on the 
road. Instead of getting out of my way, the animal darted 
this way and that. Feinting and dodging might have thrown 
a wolf off the mark. But my Renault van was indifferent. 
It just kept coming on and eventually, for a brief but 
fatal moment, the silly bunny and my left front wheel 
were in exactly the same place at exactly the same time.


In short, the evolutionary strategy for avoiding the jaws 
of a wolf proved counter-effective against an automobile.


We have seen that collective action helps groups of 
humans survive and prevail over the elements...and other 
groups. In fact, it may have been the evolutionary 
advantage that doomed Neanderthal man to extinction. But 
could this instinct to solidarity now be a liability? Is 
collective thinking an advantage or a disadvantage in a 
modern, cooperative society?

 
 
 
 
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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