*** Bill visits the modern day Gamorrah... the Fed
rests... and the momentum turns...
*** A "pretty aggressive move to the downside" ... and
the "Naz" gives back its summer gains...
*** Muckety-mucks net $1.8 billion...
*** This is great. I flew for 13 hours and I can still
see the Eiffel tower out of my window. I'm not kidding.
It's right here in Las Vegas - a city lit up as if it
were expecting to greet dignitaries from another
*** Addison is writing the notes today...my letter is
*** Bonjour. Yesterday the Fed met... and did nothing.
*** For the third consecutive time Greenspan and Co.
ended their meeting of the minds fully rested, content
the last of its rate hikes in June had sufficiently
*** "In other words," reported the Wall Street Journal
this morning "no hint of better days to come." Once the
announcement hit "the momentum turned" in the markets and
"there was no stopping it. No one wanted to step in ahead
of what appeared to be a pretty aggressive move to the
*** The Nasdaq, or "The Naz" - as you might see in a
bulletin board populated by digital men - fell 165 points
on the Fed decision... wiping out any early gains...
ending the day down 3.2% at 3,455.
*** "The market has one, sick-looking tech sector on its
hands..." began today's market recap on the Microsoft
Investor website...The Naz is 32% off its March high,
down an aggregate 15% for the year, and "has given back
all it's summer gains." (WSJ)
*** Microsoft and Apple have sunk to 52-week lows.
*** However, "old economy stalwarts" Dupont and Alcoa -
producers of chemicals and aluminum - both had good
days... helped the Dow retain a positive close.
*** The Dow, which saw mid-day heights above 10,850,
slumped down late in the day to finished just 19 points
higher at 10,719.
*** "The inexorable rebalancing of portfolios" writes
Bill King, "from grossly over-weighted in technology to a
more equitable weighting will perpetuate for a while.
Yes, that means more liquidation [and an end] to the 'New
Paradigm' one-decision - always buy stocks."
*** On the Big Board, as they say, 1330 stocks advanced,
1,554 fell back.
*** The S&P 500 barely moved... finishing the day at
*** Goldman Sachs investment strategist Abby Joseph Cohen
remains optimistic. The Journal reports she "expects
[once third quarter earnings begin to be announced] the
S&P 500 to hit 1575 by year's end, again of about 10%
from here." That, Ms. Cohen explains in a letter to here
clients, would reflect "our projected fair-value levels."
*** The rumor yesterday, supposedly catching flight from
internal reports at Merrill Lynch, was that IBM and
Oracle might have to get in line behind Apple, Intel and
Priceline.com and issue warnings they will not meet
*** One wonders from which companies Ms. Cohen is
awaiting Q3 earnings, anyway. Earnings have not
necessarily played an important role in the new era
momentum-stock paradigm... "Since Ariba became a public
company on June 23, 1999," writes Eric Fry "insiders have
filed to unload about 13.2 million shares of stock, to
realize about $1.8 billion. That's not a bad haul for
officers and associated muckety-mucks of a profitless
company that has amassed less than $200 million in total
revenues since its inception in 1996." (see: Ariba, And
All That Jazz
*** The dollar index advanced to 114. Gold dropped $1.50
*** And over a week after fatuous efforts by governments
on both sides of the Atlantic...oil is still above $30
closing yesterday at $32.07... and the euro is still
below $.90... slipping a skosch to $.87.
*** "The biggest reason for the euro's rout" writes Steve
Hanke in Forbes, "is the dollar's role as the premier
*** For example "The world prices 90% of its commodities
in dollars - oil among them," continues Hanke. "When the
euro was launched, oil was trading at $13 per barrel. Now
it is fetching $32, a 146% increase. For residents of
euroland, that has translated into an unbearable 229%
*** "Thanks to its stability, liquidity and low
transaction costs," Hanke glows, "the dollar occupies the
commanding heights, a position that is fortified with
each passing day." Fortified that is, as long as
foreigners - through direct investments - continue to
encourage Americans to spend, consume and fritter... as I
reported last weekend, American's savings rate dropped in
August to negative 0.4%... the lowest on record.
*** "While [foreign direct] investment flows rose 27.5%
last year to $865 billion, that growth was far slower
than the 43.5% rise of 1998," reports the Wall Street
Journal. "The U.S. was the largest recipient of foreign
investment, as the tendency toward investing in developed
countries over emerging markets continued." A flight to
value... it was called in the article.
*** Meanwhile, "you can own the best companies in
Argentina right now for 68 cents on the dollar" Writes
Steve Sjuggerud. "By buying the Argentina Fund... you get
an underlying value of about $15 per share, priced at
the market price closer to $10. A rise from $10 to $15 in
this fund would mean a 50% gain for you and me, and the
stock market doesn't have to rise at all for that to
happen. The current "discount' to net asset value just
has to go away." (see: The Best of Argentina For 68 Cents
On The Dollar
*** I notice too, today that the news headlines are all
a-glitter with news about Gore and Bush going "head-to-
head" last night. Sounds painful. But maybe they ought to
try more of this activity. Between the two of them they
might find a brain.
Oil prices 3 times what they were last year... a Big Tech
melt-down... and the dollar still rising? What's going on
here? Much more than you think. And the answer is the key
to great profits from large-scale market movements.
In this edition of THE DAILY RECKONING INVESTOR's LIBRAY,
you'll learn the secrets to harnessing hidden market
trends to build a fabulous portfolio... with fat and easy
"Could September be a down month for the Web?" asked
James Cramer in a recent column. "Is it possible that not
only was there no natural lift to the Net come the fall,
but it has ticked down?"
"Wouldn't shock me," he continues, "the Net has gone from
being the most exciting thing in our lives to a giant
drag in no time flat and everybody who's involved with it
knows this but refuses to admit it. We go right along
staring at the Media Metrix numbers and page-view data
and we pretend that everything's just fine. But stocks
don't lie. The Net, for now, has had it."
Just to remind you, James Cramer was one of the people
who "got it" early. He founded a web-based financial
service called "TheStreet.com." Like most people, his
enthusiasms followed his balance sheet. If I recall
correctly, the Street, sans dot.com, once valued Mr.
Cramer's web business at more than a billion dollars.
Mr. Cramer was, understandably, very fond of the World
Wide Web. There are two kinds of knowledge, as Nietzsche
pointed out and I am fond of repeating. The first kind is
the knowledge you get first-hand or that you infer from
the experiences of others. Nietzsche called this
The second type of knowledge - what Nietzsche called
erfahrung - is what you might pick up from presidential
debates...or the editorial pages of newspapers...or you
might gin up yourself with a little abstract thinking and
time on yours hands. I'm going to use Nietzsche's terms
here in the Daily Reckoning in order to give it the vapor
of pseudo-intellectualism that I strive for.
Cramer's knowledge was an example of "wissen." Though a
big fan of the web last year, he began to notice that it
did not work the way it was supposed to. With no profits,
there was no way to determine what companies were worth.
For a while, people thought you could make money on the
web just by getting a lot of people to visit your site.
So websites were valued on the basis of how many
'eyeballs' they had.
But in a now-famous remark which I reported to you at the
time, Cramer wrote: "I've got news for you. They don't
take eyeballs at the bank. They take cash. They only take
eyeballs at the eye bank."
As time went on - Cramer found it harder and harder to
make money on the web...and his stock price fell. But the
web might soon get a big boost. An explosion of
bandwidth, says James Davidson, "gives you another chance
to capture gaudy wealth..."
"In fact," Davidson writes, "I expect that the gigabit
Ethernet will be just as disruptive as the personal
computer...I expect exponential growth of bandwidth to
dramatically improve productivity because it will
significantly expand the capacity for the effective
action by the ablest individuals." People can listen to
Brittany Spears all over the world.
Davidson's point is that the explosion of bandwidth makes
it possible for the stars in many other professions to
develop worldwide audiences - as bandwidth and the web
"Who needs visas?" asks a headline in this week's Forbes,
making Davidson's case. The article describes a company
in Santa Clara, CA, that puts engineers, software
programmers and other specialists on assignment. U.S.
companies no longer have to settle for 2nd rate local
engineers. Now they can get the Brittany Spears of
engineers - from Bengladesh...or maybe Croatia - without
worrying about immigration. The techies work via
Will this produce the explosion of "promethean light"
that Gilder expects? Who knows? But if Cramer is right -
a lot of people are getting bored with the Web...and it
may be a huge commercial flop, too. Davidson didn't "get
it" until recently.
Meanwhile, Cramer seems to have lost it: "The great sums
spent to make great [web]sites," he writes, "look like
colossal wastes if even the best of them, Amazon, is
having trouble making money. (Is that even the intent of
those guys? I can't tell anymore.)
"For me, I've seen the absurd, ridiculous anomalies of
the Web firsthand. You pay $3 a week for Time magazine,
but it's free on the Web, as though all those technology
costs associated with publishing on the Web didn't exist.
"So, the Net sinks as we all come to grips with the idea
that this great medium, which is much faster and more
alive than the print or the fax or the weekly version, is
unpalatable as a place to get a return."
Ever willing to go out on a limb on your behalf, dear
reader, I predicted that the web would be the biggest
breakthrough since the printing press...and the biggest
It looks like I was right. Cramer: "The hope was that the
organic growth of the Web would morph into something
advertisers would clamor for even as readers refused to
pay. The September figures show otherwise.
"It's the Web's endgame. Who would have thought it would
have arrived so soon?"
Your correspondent in Las Vegas, searching for the
Promethean light...and never quite "getting it."
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Last modified: April 01, 2001
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