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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

PARIS, FRANCE 
FRIDAY, 28 SEPTEMBER 2001 

 

Today:  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" 
in U.S....

*** 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 
about Southwest?"

- 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 
proverbial minefield.

- 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." 
(http://www.grantspub.com)

- 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 
case).

- 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!

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* * * * * * * * * * * * * * * * * * * * * * * *


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 
besotted lovers."

"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 
life."

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 
audacity."

But a word of caution to Daily Reckoning readers...(and 
a little warning about where we are headed in today's 
letter)... 

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 
sh**." 

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 
extravagant houses. 

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 
strategy.

"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 
enough..."

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.

Bill Bonner


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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