*** Rough week ahead for stocks?
*** Apple stock splits - 2 for 1...the hard way...
*** Still, bullishness at record levels...a remarkable
triumph for Mr. Bear...and a very unusual automobile
*** "Stocks Could Face Another Rough Week," says the
headline on today's Reuters line. This was, of course,
the same service that told us last week that stocks could
expect clear sailing.
*** Alas, the seas were a little choppy last week. The
Nasdaq took a loss of 105 points on Friday...which left
it down 3.75% for the week.
*** The Dow suffered a drop of 173 points on Friday...
bringing it down 1.75% for the week.
*** The immediate problem was earnings. Kodak,
Intel...and then Apple announced disappointing earnings.
But instead of taking it in stride, as the currency
markets took the Danish vote against the euro, the
individual stocks were pummeled.
*** Apple, for example, split two for one...the hard way.
Apple shares dropped more than 50% in price - so you can
buy more than two shares this morning for the same price
you could have bought one on Friday morning.
*** Investors are not digital men. They are analog -
reacting, over-reacting...and under-reacting with
whatever mob sentiments waft their way. Is a share of
Apple really worth half what it was on Friday? Was it
over-valued by 100% Friday? Or is it under-valued by half
today? Why the harsh reactions to a few pennies of
earnings?
*** Readers may recall a small historical note: during
WWI, it was in the U.S. that dissent from the war fever
was most severely punished. Questioning U.S.
participation in the war was made a criminal offense,
whereas France and Germany were more tolerant. Why?
Because, the case for participation in the war was
weakest in the U.S. ...Americans had less at stake.
Consequently, dissent was more dangerous to the war
effort.
*** Likewise, investors severely punish companies that
disappoint them. They've bought into the fever of Big
Tech investing - and cannot tolerate any evidence that it
may not be such a good idea.
*** Mark Hulbert made a similar point in a recent issue.
He noted that investors got angry with him when he
reported on bad performance by their favorite investment
guru. He was surprised that they were not delighted -
since he was doing them a favor by alerting them to poor
results. Finally, Hulbert concluded, "investors aren't
really open to changing their minds. They instead are
looking for validation and reinforcement of the decision
they've already made..."
*** Typically, 58% of earnings announcements are
negative. This year, the figure is 64%.
*** Last week's market action brought the Nasdaq down to
a 9.75% loss for the year. The Dow is down 7.4% for the
year.
*** But utilities hit a new high on Friday and are up 40%
for the year!
*** Pegasus Research, reported by Barron's, found that
273 out of 339 Internet companies surveyed were losing
money and "burning cash." Drkoop.com has moved up to
number 2 on the list of companies running out of money.
*** A poll from AAII has only 7% of investors bearish.
This is an all-time low...and represents a remarkable
triumph for Mr. Bear. Investors are overwhelmingly
confident and complacent, despite a drop in the major
indexes for the last 9 months...and one of the worst
single months ever for the Nasdaq in September - a loss
of 12.7%...not to mention large drops in the most popular
and widely held stocks.
*** You can buy a share in Yahoo for only $94. It was
$250 at the beginning of the year. Amazon, our river that
goes nowhere, used to cost $113 a share, now you can buy
one for $39. E-bay is about half of what it was in
January. And the Internet incubus, I mean incubator,
CMGI, is on-sale now at just $28, a discount of 82% off
its January list price of $163.
*** But heck, this is the Nasdaq Nation... People buy
stocks like they buy modern art - not because they like
them, or because they understand them...but because they
think some other fool will come along and buy them at an
even more absurd price.
*** "Apple [is] not a technology company" writes Kevin
Klombies "it merely manufactures boxes, powered by
computer ...Apple is a low tech manufacturer with a
trendy marketing gimmick that has been mistakenly given a
high tech valuation... 33 times earnings? Maybe 6 times
makes more sense."
*** About a year ago "Beyond.com (selling at $1.25, down
97% from the all-time high of $42) had a $25 million TV
commercial campaign showing a fictitious character, 'Reed
Woodson' who walked, apparently naked, around his house
while shopping for software on the Internet," writes Ray
Devoe. But today "The 'Naked Man' campaign is gone," as
are a host of other ludicrous ads produced by dot.coms
with seemingly limitless ad budgets. "The president of
Outpost.com," notes Ray, "was quoted as saying 'we could
have told consumers what we sell, but we shot gerbils out
of a cannon. What were we thinking?'" Indeed. (see: Where
Have The Flying Gerbils Gone?)
*** "Last year's 20% revenue growth at FEMSA - a 110 year
old Mexican beer company - beat all comers." Lynn
Carpenter tells me. "Bud, for example, registered a mere
4.5% growth, Coors did 8%. Moreover, FEMSA turned those
sales into bottom-line profits; with a 40% income growth
rate...Even a year-by-year 15% average [growth] is
nothing to scoff at. But FEMSA can do twice that. It
probably will." (see: Cheers To Mexican Beer, A Portfolio
Refresher)
*** Tomorrow, Harry Potter Greenspan and the other
prestidigitators at the Fed meet. After raising interest
rates 6 times in the last 18 months, they will do nothing
this time - it is too close to an election.
*** The comptroller of the currency reports that problem
loans in the U.S. banking system went from $50 billion in
1998 to $100 billion this year.
*** Saturday, I bought another car - one of the bug-eyed,
funky 2CV "deux chevaux" that you see all over France.
Actually, you see fewer and fewer of them, since they
stopped making them at least 10 years ago. Today, they
are only driven by very old people - or very cool people.
This car has a small, air-cooled engine and a top speed
of about 55 mph, downhill. And it is cheap to fix...an
important feature as Sophia is learning how to drive.
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Bill King,
Wondering why the media seem to favor Democrats
"Both Camps Call Debates Pivotal for U.S. Election"
declares the headline on the front page of today's
International Herald Tribune.
Next to it is the kind of photo newspapers love. It
shows, a man and his 12-year-old son getting shot in the
Gaza Strip. The man was wounded; the boy was killed. The
photo sends a hidden message: politics is important...you
better pay attention!
Politics can kill you...rob you...imprison and impoverish
you. Politics can make life miserable - and does, in
direct proportion to which it runs things. Show me a
world saturated with politics - such as late-stage Nazi
Germany or almost any-stage Soviet Russia - and I will
show you a world of almost unrelieved misery.
Politics can also bore you - as the presidential debates
are sure to do. Bush is a scarecrow, who desperately
needs the media to give him a brain. Considered
"lightweight," he will be careful to appear serious and
intelligent as well as compassionate in the debates.
As big as this challenge is, Gore has an even bigger one.
Tagged as 'wooden' or 'robotic' by the sensation mongers,
Gore has to appear alive...even human. Perhaps DNA
evidence would be admissible; the tin man needs a heart.
If either of the candidates has any dignity or common
sense left, after months on the campaign trail, these
presidential debates are a good opportunity for him to
unload it. Both candidates will pander to the lowest
common denominator of the TV audience...and the even
lower denominator of the media. The media are the
kingmakers now - spinning the news subtly this way or the
other in order to favor their own agenda...and nudge the
indifferent voter in the direction they want.
Politics - that is, the use of force - cannot make things
better. Improvement is accomplished with anti-politics...
that is, the private, personal efforts of millions of
people working together cooperatively. Government can
order people to work. It can force them to do this and
that. It can steal the money of one man and give it to
another. It can interfere with the market in countless
ways - all of them negative. Even a kiss - ordered at
gunpoint - loses its appeal.
It is no mystery why the media favors democrats. The
Democratic Party typically favors slightly more politics
than their Republican adversaries. A study from the
National Taxpayers Union, for example, found that Gore
has proposed five times as much additional spending as
his adversary.
The mass media cannot report the transactions that make
the world a better place. There are too many of them: A
young man tinkers in his garage and comes up with a
better way to write a software program...another man
takes a long lunch to visit his aging parents...a woman
writes a new book or brews a pot of coffee. A corporation
opens a few factories. A young girl gives her father a
kiss on the cheek to send him off to work.
Instead, reporters focus on mass-events, mass hysteria,
mob-thinking...and politics. Democrats promise more
politics. They want more ballots and more bullets - more
force and less persuasion. The news media loves it.
The Libertarian candidate for president - Harry Browne -
is perplexed. He is the invisible man of the national
election...never mentioned in politic company.
According to a recent letter from the Browne campaign:
* Harry Browne leads the third party pack in
Georgia with 4%. Buchanan trails at 1%, and Nader
isn't even on the ballot.
* Harry Browne is tied with Ralph Nader in
Illinois at 3%, and leads Buchanan by two points.
* In Colorado, Nader leads, but Browne is close
behind with 3%, while Buchanan polls only 1%.
* In Kansas, Nader and Browne are tied, and Browne
leads Buchanan 2 to 1.
* According to the Zogby, Rasmussen and Hotline
national polls, Harry Browne is tied with Buchanan
nationwide.
* And yet, a Lexis-Nexus search reveals that
national media coverage of these three candidates
is way out of balance. Buchanan is getting 60
times as much attention as Browne, and Nader is
receiving even more coverage.
On Sunday's "Meet the Press," for example, the nation got
to hear the views of Mr. Buchanan and the insufferable
Ralph Nader. Both Bush and Gore could drop dead on
election day and neither of these men would have a chance
of being elected. Still, Harry Browne was excluded.
Why?
The Libertarian candidate has a problem with the press.
If elected, he would reduce the size and importance of
all the ruling estates - including the 4th one.
Foreign policy? What foreign policy? Browne wouldn't have
one. Would he favor the expansion of Medicare...medical
vouchers...medical savings plans...or a whole new
national health system? Forget it - health would be a
personal matter and the government would play no role.
Imagine you were a reporter. What would you write about?
You could cover campaign finance reform - the
Libertarians would eliminate it as a subject of
discussion. How about suits against Microsoft and other
corporate giants? Forget it, the anti-trust division
would be out of business.
And what would much-coveted 'access' to top officials in
a Browne administration be worth? Not much.
And who would even want to conduct an interview with
Browne? He doesn't even want to talk about politics - he
wants to talk about matters of principle. He is a wet
blanket on the whole election process...a dissenter from
politics whose own partisans are likely to defect at the
first opportunity.
Principles are rarely seen or heard in political circles.
In the middle of the 19th century, Wilhelm I of Prussia
was offered the imperial crown of Germany by a parliament
of his subjects. He could not take it, because he
believed, as a matter of principle, that the elected
representatives in parliament had no power to offer it.
Only those who wore the crown themselves - other princes
- could offer the imperial crown.
In a way, this is Harry's problem, too. He is asking for
the crown...but will refuse to exercise the power that
comes with it. If he will not play the game of politics,
why should the kingmakers in the media give him the
crown?
Political reporting from,
Bill Bonner
P.S. This is about all the election coverage you will get
from me. I promise.
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Last modified: April 01, 2001
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