Contributed by Bill
Publisher of: The
Fleet Street Letter
FRIDAY, 28 SEPTEMBER 2001
The Wild Charge
*** Jobless claims at 9-year high...tax receipts fall
for first time in 18 years...
*** Worldwide economic weakness, recession a "done deal"
*** Stocks up...Cisco down half a trillion...we will own
the airlines whether we want to or not...Oracle earnings
beat estimates...heh, heh...
|Jobless claims reached a 9-year high last week. |
Office vacancies, in Boston, are at a 10-year high.
Microsoft fell below $50 on Wednesday. IBM dropped
below $90. Cisco, which was once worth $600 billion, is
now worth less than $100 million. Investors have lost
more than half a trillion dollars on this single
company. Cisco's stock is nearing the $10 market...
And Amazon, too, dropped to $6.20. Recession in
the U.S. is a "done deal," according to the IMF's top
economist. He also says that the world economy is the
weakest it has been in 10 years. And tax receipts are
falling for the first time in 18 years...
Surely, some epic change is underway. What do you
think, Eric?...(last chance to catch Eric on TV...at
least for a little while. Watch CNNfn - 9:30 am to 11:30
am EST today.)
- Early in the trading day, stocks looked a bit wan. But
as the hours passed, color returned to their cheeks and
the Dow and S&P 500 each climbed more than 1%. The
Nasdaq erased a 3% deficit early in the session to end
the day with a negligible 3-point loss to 1,461.
- Despite yesterday's gains, the stock market instills
little confidence. Earnings are falling and trading is
volatile. Get used to it. Investors are fighting a new
kind of battle for capital gains in the trenches on Wall
Street. No more easy pickings. No more CNBC tips that
double within hours of someone mentioning them on the
air. No more 300% first day IPO pops.
- What a different place Wall Street has become!
- September will be the first month since December 1975
in which there were no IPOs, according to Thomson
Financial. "It was a period in which the economy was
recovering from the 1973-74 recession," the Wall Street
Journal remembers, "'Jaws' won the Academy Award for
best picture and U.S. troops withdrew from Vietnam.
That drought lasted 11 weeks from October 21st until
January 8, 1976." (Okay, so investing wasn't very much
fun back then. But "Jaws" was pretty darn good!)
- In the new world we inhabit, the only thing easy about
investing might be losing money. Investors may need to
lower expectations, exercise greater patience, be much
more selective, keep an eye out for opportunities in
foreign markets and learn to diversify into other asset
classes like real estate and yes, even cash.
- While heading in and out of the CNNfn studios this
past week, many folks have accosted me with the
question: "Do you think AMR (parent company of American
Airlines) is a buy right now? Should I buy UAL? What
- Short answer: Why bother? Maybe these stocks will
recover and turn out to be great investments, but trying
to pick a bottom in this group is like walking into the
- Longer answer: If we wait long enough, we'll all own
the airlines anyway. In other words, a bailout might
lead directly or indirectly to a partial nationalization
of the airlines by the U.S. government. We're gonna own
part of AMR whether we like it or not. "If the share of
the economy controlled by the government were a tradable
commodity," writes Jim Grant in the latest issue of
Grant's Interest Rate Observer, "we would buy futures."
- Now that oil-drilling stocks have collapsed more than
50% so far this year, ABN Amro decided it was about time
to alert its clients to avoid the poorly performing
sector. Alas, the S&P Oil Drillers Index rebuffed the
call by rallying 3% on the day.
- Of course, investors could probably do worse than to
poke around for opportunities in the oil-drilling
sector. I know, I know...Saudi Arabia is our friend and
all that, and that the rest of the Arab world will be
delighted to make sure our fighter jets don't run low on
fuel while we attack their Moslem neighbors. But still,
as John Myers suggests, a few domestic oil companies
might decide that they'd like to keep drilling for oil
and gas reserves right here in our own backyard (just in
- According to Doug Casey, investors could also do worse
than poking around in the gold mining sector right now.
Says Casey, "Why gold shares? Mainly because they're the
most volatile stocks on the face of the planet and that
volatility can be a very good thing - if you have the
nerve to take advantage of it. Despite the dismal state
of the industry, its stocks are typically up 10-20% in
just the last month or so." As we reported yesterday,
the Gold Bug Index is up 73% on the year. (See: A Potential 1000% Run Up)
Back to Bill in Paris...
*** Kathie Peddicord writes to say: "Deals in real
estate around the world abound...and provide one of the
best ways to hedge the U.S. stock markets. Property
along the south Pacific coastline of Nicaragua is worth
on average 25% more than last year. Lots on Mexico's
Costa Maya are, in some cases, up 30%. I can't say the
same for the U.S. stock markets right now"...
*** Likewise, "The property market in Ireland continues
to soften. In the west: a traditional stone cottage on a
half-acre in County Sligo for US$20,000...a 6-acre site
with planning permission for a four-bedroom house in
County Leitrim for US$30,000...and another cottage with
two stone outbuildings on a half-acre at Cornahow,
County Cavan, for US$32,000. These cottages, admittedly,
would be simple and basic. But for a holiday home or as
an investment," you may find them tempting.
See: (IL's Free E-mail
Weekly): "The Best Market Hedge
In Troubled Times"
*** On another note, of the housekeeping variety, you're
probably aware of the Agora Wealth Symposium we're
hosting in Las Vegas on October 31st-November 3rd, but
did you also know The Supper Club is meeting on Tuesday,
October 30th, at The Four Seasons in Vegas...?
*** We've scheduled the meetings back to back to make
travel arrangements easier for all concerned. (If you're
interested in finding out which companies will be
presented for early round investment, send an e-mail to
Vickie Beard: Vbeard@agora-inc.com)
*** Likewise if you haven't reserved your space at the
Wealth Symposium and you'd like to do so, contact
Barbara Perriello at: 1-800-926-6575 or 561-266-6570.
See you there!
* * * * * * * * Advertisement * * * * * * * * *
The Hidden Costs of the New War
As the United States gears for war, President Bush has
warned, "there will be costs." He doesn't realize how
right he is. Our economy - and your wealth with it -
could be one of the casualties. Even before Sept. 11,
oil prices were on the brink of rising. A war in the
Middle East could make them skyrocket. Find out what you
need to know to protect your portfolio...
Read this FREE report now.
* * * * * * * * * * * * * * * * * * * * * * * *
THE WILD CHARGE
by Bill Bonner
Sometimes, it is a mistake to hold back. A kiss withheld
is a worthless thing...like a business never begun or a
trip never taken.
And of what use is the cold-blooded lover who holds
back, and reflects on the course of love as though it
were the stock market?
"There will be times of rising affection," he says,
looking into the future, "and maybe a time of manic
behavior, when we act out all the foolish excesses of
"But all things fall back to trend," he goes on, "even
life and love. Our affection will inevitably decline
too...and end up by reverting to some mean of everyday
Romance, like war, needs a little madness.
Leading a wild cavalry charge, the last thing you would
want would be a group of intellectual kibitzers by your
side. Instead, you would want real men...men whose
thoughts are as uncomplicated and blunt as a mace.
With such men behind you, you might have a chance of
success - of crashing into the enemy line and breaking
it up. But any hesitation, any doubts or arrieres
pensees...and you are finished.
Neither the god of war, nor the god of love, favor half
measures. "Audacity," said Danton to France's generals
in 1792. "We need audacity, more audacity and always
But a word of caution to Daily Reckoning readers...(and
a little warning about where we are headed in today's
Going a little mad, sometimes, is not a bad thing.
But - there's a time and place for everything...
France went to war with Germany in August 1870. You can
read the history of it yourself and you still will not
know why the countries went to war. But the flags came
out, the recruiting offices filled to overflowing, and
soon, the troops were on the road to the Rhine.
"One would have to search diligently through the pages
of history," writes Alistair Horne in his account of the
war, "to find a more dramatic instance of what the
Greeks called peripeteia, or reversal of fortune.
Where before has a nation of such grandeur (indeed, La
Grande Nation), brimming over with hubris and refulgent
with material achievement, been subjected to worse
humiliation within so short a space of time?"
So confident were the forces under Louis Napoleon that
commanders were outfitted with maps of Germany, but none
of France. Alas, a bear market in French confidence was
about to begin. From epic levels of pride, the French
were about to fall to epic levels of despair.
After a couple minor battles, the French were in retreat
and dead soldiers were scattered over the fields and
roads of the countryside. The army was driven back to
Sedan and trapped. The French general MacMahon observed:
"We are caught in a chamber pot...and we will soon be in
Defeated, the Emperor was taken prisoner and Paris was
besieged. By Christmas people were going hungry in
Paris. "We ate Aunt Reinburg's cat," wrote Berthe
Cavaille on December 29th. "It's a shame because it was
such a pretty animal!...I have a piece of dog meat I'm
going to marinate and eat it like a steak."
Near the end, one of France's leaders, Leon Gambetta,
escaped in a balloon! And finally, the French came to
their senses, gave up, and waved a white flag.
Losing the war turned out to be as good as winning it.
Following its defeat, France enjoyed the four greatest
decades of its history. The country boomed. People got
rich. Property values rose and people tried to outdo
each other by building ever more beautiful and
Restaurants and bistros overflowed. Artists and
performers were drawn to the city like black flies to
garbage. Huge sections of Paris were razed and
rebuilt...the subway was built...the Eiffel Tower went
up...and the Belle Epoque polished western civilization
to a shine we have not seen since.
But in the years following France's defeat in 1871,
its military leaders studied the war and plotted their
return to glory. What had they had done wrong, they
asked themselves? They came to the conclusion that they
had been too cautious...that they should have gone over
to the offensive and launched more wild charges. And
soon, a perfectly good tactic was elevated to a bad
"In the offensive, imprudence is the best of
assurances," wrote de Grandmaison, mad as a hatter, "Let
us go even to excess and that perhaps will not be far
No one succeeded in "seeing through" this silly
doctrine. No one suggested the ironic lesson so common
in military history - that France might have prepared
for the last war.
Forty-four years after Sedan, the French army tried out
its new strategy. Once again, no one was quite sure why
the war had begun, nor what anyone hoped to gain from
it. All of the parties to the war seemed to act
sensibly, according to the standards of the day. The
flags were flying and the recruiting offices were again
full. And so, the French attacked.
Alistair Horne: "Young men filled with a mighty lust for
revenge were marching up at that rapid staccato pace,
accompanied by the regimental music...the melodious
refrain of "To die for La Patrie is the most beautiful
end" on their lips. Magnificent specimens, these French
soldiers of 1914...
"Many sang the Marseillaise. In the August heat, the
heavily encumbered French sometimes attacked from the
distance of nearly half a mile from the enemy. Never
have machine-gunners had such a heyday. The French
stubble-fields became transformed into gay carpets of
red and blue. Splendid cuirassiers in glittering
breastplates of another age hurled their horses
hopelessly at the machine guns that were slaughtering
the infantry. It was horrible, and horribly predictable.
In that superb, insane courage of 1914, there was
something slightly reminiscent of the lemmings swimming
out to sea. But it was not war."
With the unthinking enthusiasm of the cavalryman or a
moonstruck lover...the French had charged. Within two
weeks, France had lost 300,000 men...and one out of
every ten of its officers. Within the first five months
France lost as many men as all U.S. casualties in WWII.
Within the first year, more Frenchmen were lost than
American losses in both WWI and WWII. And there were 3
more years to go. By the end of it, more than 6 million
French would be casualties.
And for what? No one knew.
* * * * * * * * Advertisement * * * * * * * * *
Are you tired of hearing about what you SHOULD STOP
DOING in order to stay healthy?
"Stay out of the sun!" "Cut down on fats!" "Don't drink
too much!" New medical studies show that certain
"healthy" practices may actually be hurting you...
Click below for 5 FREE health reports and find out why
M.D.s are suddenly telling male patients to: FIGHT
PROSTATE CANCER by eating steak and butter. SLASH
ALZHEIMER'S RISK by drinking more beer. BEAT MIGRAINES
by having more sex. And much more!
* * * * * * * * * * * * * * * * * * * * * * * *
The Daily Reckoning:|
author Bill Bonner
Bill Bonner is,
in spite of himself, a natural born contrarian. Early each morning, Bill
writes The Daily
Reckoninghis take on the financial markets and whats going
on in the worldand 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 upnot 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 90sopening offices in Florida, London, Paris, Ireland, and
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.