*** 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.
Will rising energy prices cause the dollar fall, and take
the Dow with it? One expert in 'inter-market
relationships' says yes. He called the ECB intervention
in the euro... now find out how global stock, bond,
commodity and currency markets are brewing up the biggest
financial disaster in a generation - and what prudent
investors can do to prepare today: http://www.dailyreckoning.com/imra6
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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?
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