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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Honor Insolvency

*** Americans are depressed...and losing sleep...

*** S&P 500 down $1 trillion in last quarter. Mutual 
funds down 20%... 

*** Credit card delinquencies up...Amazon below $6...a 
small, dead deer...and more!

More than 2 out of 3 Americans say they are 
depressed, reports a NY Times article. In the aftermath 
of the terrorist attacks, one out of every two people 
has had trouble focusing on his out of three 
has had his sleep disturbed.

Americans were so busy with high-minded frets, 
they might not have had a chance to notice the low-
minded ones. The S&P 500, alone, took a trillion dollars 
from the asset side of their personal ledgers in the 
last quarter. The Nasdaq sank 31%. Investors Business 
Daily's index of leading mutual funds is down more than 
33% so far this year. 

And, as Eric reports below, the average stock fund 
lost 20% in the latest quarter. Here's the rest of 
Eric's report... 

Eric Fry in New York:
- While the stock market turned in a very respectable 
showing last week...the Dow and the S&P 500 each gained 
more than 7%, and the NASDAQ tacked on about 5%...the 
third quarter of 2001 was a disaster for most investors. 
The Dow and S&P 500 fell about 15% each, and the 
beleaguered NASDAQ tumbled more than 30%.

- The Stock-Market-for-the-Next-Hundred-Years trades 
like it won't be around for the next hundred days. Last 
week, Nasdaq announced that it would suspend rules 
barring stocks under one dollar from remaining listed on 
the exchange. About 15% of the 669 stocks listed now 
qualify for the far the mighty have 

- Whatever else might be going on in this vast economy, 
massive stock market losses can't be helpful. While John 
Q. Public finds himself with mounting debts and 
diminishing job security, his investment portfolio is 
taking it on the chin. Fund data firm Lipper reports 
that the average diversified U.S. stock fund lost nearly 
20% during the third quarter - the worst quarterly 
performance since the October 1987 crash.

- With numbers like that, it will surprise almost no one 
to learn that loan delinquencies are on the rise. "The 
numbers are not alarming at the present time," assures 
Northern Trust economist Asha Bangalore. "However, 
layoffs and a sluggish economy can add an additional 
burden to an already indebted economy."

- Mr. Bangalore notes that credit card delinquencies 
jumped 11% from June 2000 to June 2001. Even more 
worrisome, the loan delinquency rate of commercial and 
industrial loans soared 36% over the same time frame. 
And remember, these numbers run only through last June. 
We can only imagine what the September data will show.

- Even though the stock market ended last week on a 
strong note, it will face a daunting task trying to 
build on those gains. "The hand-wringing starts Monday 
with a cascade of scary auto sales numbers," writes's Igor Greenwald. "[It] gathers speed 
Tuesday after another likely rate cut by the weary Fed 
and culminates Friday with the monthly tally of the jobs 

- Still, some rays of hope pierce through the economic 
cloud cover. Options trader Steve Sarnoff, anticipating 
today's auto industry figures by about 6 weeks, just 
logged 1,202% on GM "puts" for readers of his advisory 
service Options Hotline. In a volatile and increasingly 
uncertain environment, Steve's managed a whopping 12-
for-12 record over the summer months...and an average 
gain of 240%.  (See: Hot Options On Bad News)

- With every day that goes by, life starts to feel a 
little more normal in and around New York City. In fact, 
to judge from the packed restaurants around here, 
business is more "normal" than ever. A friend of mine 
whose father owns a restaurant just outside New York 
City says that his father's restaurant is as busy as 

- The commercial real estate sector is another industry 
that seems to be thriving in the post-attack economy. 
The instant loss of 15 to 20 million square feet in 
lower Manhattan has put a premium on the space available 
elsewhere in the city and also in New Jersey.

- Not surprisingly, the stock of Mack-Cali Realty Corp., 
a REIT focused on New Jersey office properties is among 
the very few stocks to have gained ground since 
September 11th, 2001.


Back to Paris:

*** John Myers pointed out last week that during the Yom 
Kippur War in 1972, oil surged from $3 to $12 a barrel, 
a 4-fold increase; during the Iranian Revolution (1978), 
oil doubled from $12 to $24; and in both the Iran/Iraq 
War (1980) and the Iraqi invasion of Kuwait (1990), the 
price of oil rose from around $20 to $35. 

*** "In each of these cases," says John, "investors that 
caught the move early...did very well for themselves."

*** But that doesn't mean you have to invest in 
companies in the region. In fact, as an alternative Mr. 
Myers is recommending companies working the vast 
Athabasca Oil Sand region in Canada - a total area 
covering more than 26,000 square miles (roughly twice 
the size of Virginia). "Within this unconventional oil 
deposit rests more than 300 billion barrels of oil..." 
says Myers. "And the best part? It's 7,000 miles from 
the Mideast."  (See: A Matter of National Security)

*** Hunters were out in force at Ouzilly this weekend. I 
watched as a group of them parked behind our farmhouse 
and then dispersed, following a pack of yelping dogs.

*** About a quarter of an hour later, a small deer - a 
chevreuil - bounded out of the woods at almost the exact 
spot the hunters had collected, and set off in the 
direction the hunters had gone.

*** He outsmarted them, I thought. Circling around, he 
had managed to get behind them. Now, he could follow 
safely, at a discreet distance. 

*** But he was not smart enough. Twenty minutes passed 
and we heard gun shots. Moments later the hounds changed 
their tune - howling, baying, yelping in a furious 
crescendo. And then, the horn sounded and in a few 
minutes, all was quiet.

*** "The poor chevreuil," reported Mr. Deshais, who had 
been working in the woods near where the animal was 
shot. "The dogs got to him before the huntsman. Finally, 
a hunter came up, chased off the dogs and cut his 

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

Conveniently, the WTC attacks are being blamed for a 
surprise "slowdown" that has rocked the U.S. economy. 
Suddenly, it seems, corporate profits are dropping; 
investors are less sure...consumer confidence has been 

But... the writing WAS ALREADY ON THE WALL!

And according to one of the world's leading economists, 
we "ain't seen nothing yet." Experience proves that if 
you've been listening to the Fed's high-octane "new 
paradigm" propaganda you're in can ruin 
you. Here's what you need to do - right now - if you 
haven't prepared for:

The Coming Economic Crisis
* * * * * * * * * * * * * * * * * * * * * * * * * 


"Men, it has been well said, think in herds; it will be 
seen that they go mad in herds, while they only recover 
their senses slowly, and one by one." 

Charles Mackay 

"The struggle against terrorism," said French Prime 
Minister Lionel Jospin last week, "is not just the 
business of judges, the police and the secret service. 
There is also a response that heads of business, 
investors, and consumers can give!"

I took the liberty of adding an exclamation point. Such 
a statement needed a little flourish at the end, I when a man claims to have invented a 
perpetual motion machine or been visited by space men in 
his backyard. The preposterous needs emphasis. 

"Lionel Jospin invited the French to show their 
'economic patriotism' by continuing to consume in order 
to avoid a recession," says the Associated Press report. 
"The head of government invited business leaders and 
consumers to 'resist intimidation' and to 'support 
economic activity'."

"Let's show, all together, our economic patriotism," 
Jospin urged.

I am not making this up. It would be impossible. I 
couldn't imagine that anyone outside of an asylum could 
say something so absurd. But there it is. 

The French prime minister also gave assurances that 
economic fundamentals "remain favorable" and that 
"Neither the U.S. nor Europe is in recession; there is 
no collapse of production."

Jospin did not cite his sources. All available evidence 
suggests that the U.S. economy is presently shrinking, 
i.e. in recession. And factory production has been going 
down for the last 11 months - one of the greatest 
collapses in history. But ignorance has never been a 
barrier to public office. 

Despite the fact that no economic difficulty exists, 
according to Jospin, the government is nevertheless 
taking measures to deal with it. On one side of the 
Atlantic as on the other, politicians have the same idea 
- to find ways to keep the consumer spending. 

It may come as a relief to many Daily Reckoning readers, 
but Americans are not the only ones made mad by the 
terrorists attack. A kind of Esperanto madness - a 
common language of absurdities - seems to be spreading 
across borders and seeping into casual conversations 
between grown-ups. Everywhere, patriotism, nationalism, 
jingoism, militarism, religion, culture, and finance 
seem to have gotten jumbled up. 

But I do not write to criticize. The day is long past 
when I attempt to tell the world how it should conduct 
itself. Instead, I write to honor those caught up in the 

Daily Reckoning readers may recall those dark and 
shameful events of the 1960's...when soldiers were sent 
off to Vietnam to risk their lives in a war they 
couldn't win...and then spat upon and reviled when they 
returned home. The prospects for today's economic 
patriots seem no better: for they are surely on a fool's 
errand. But, even so, they deserve recognition. 

All over the world consumers and investors are being 
mobilized to fight the campaign against terrorism. They 
take up their credit cards and portfolios and aim at an 
enemy they can neither see nor understand.

It's madness, of course. Economies are not really helped 
by investors who make bad investments, nor by consumers 
who buy things they can't afford. 

But madness needs to run its course. 

So, there ought to be some form of recognition for the 
casualties. Soldiers - even those sent off on the most 
preposterous campaigns...such as the French attacks in 
the opening days of WWI, or the British "Charge of the 
Light Brigade" in the Crimea...were still able to come 
home (if they survived) and live in dignity. On 
appropriate occasions, they got to wear their campaign 
medals, to the delight and pride of all around them. 

Surely, some medals should be prepared for people who 
blow themselves up in the name of "economic patriotism" 
too. Let me make a few suggestions: 

For a man who distinguishes himself by running up huge 
credit card debt, for example, I suggest awarding a 
small pin, made of plastic...depicting a Visa card 
surrounded by a cluster of dollar signs.

And what of a man who loses his house in a bankruptcy 
proceeding? Maybe a pin shaped like a house would be 
appropriate. It should be made of an inferior grade of 
plywood - with the number "11" on it... or "7" for those 
who choose the liquidation route.

Shopping recklessly ought to be worth some kind of 
medal...something like a Distinguished Consumer Award. 
Anyone who increases his personal consumption through a 
recession should get at least a ribbon...maybe in 
dollar-bill green with red ink slashes.

And an investor who remains steadfastly bullish in a 
bear market also deserves recognition for his self-
sacrifice. A small pin - of base metal - would be 

But a real hero, an investor who mortgages his house, 
his business, and his wife's engagement ring, in order 
to continue going long in the face of huge reversals, 
collapsing prices, and spreading panic - that person 
deserves something special. For he may lose everything 
for the Homeland, as it is now called - his house, his 
business, his money, and, most likely, his wife. 

I suggest an Order of Economic Merit award - a medallion 
depicting a man in a barrel might be appropriate, with a 
flag in one hand and a credit card in the other. The 
medallion should be suspended from a red, white, and 
blue ribbon and worn around the neck on all state 
occasions...Armistice Day, VE Day, Veterans Day and so 
forth. It should also be required at weddings and serve 
a cautionary emblem for those just starting out in life.

What's more, this top honor should be bestowed, 
personally, by the Secretary of the Treasury, Paul 
O'Neill, with, perhaps, a kiss on each give 
it the right preposterous flourish.

Your correspondent in Paris,

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 02, 2001

Published By Tulips and Bears LLC