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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Easy Come, Easy Go

*** The thrill is gone...the romance is over...
*** Further down the river with Jeff Bezos...
*** Oil up, as a cold snap hits Baltimore...'Poofters'...
and more...

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*** The Nasdaq was down 130 points early yesterday, after 
having lost ground each of the last 5 weeks. Investors 
are turning away from the Big Techs - just as they've 
already turned away from the dot.coms.

*** Reality is meeting virtual reality. "Does everyone 
who wants a computer already own one?" asked a headline 
in the NYTimes. Investors are beginning to realize that 
even tech companies cannot expand forever. And just 
because a company has a neat technology does not mean 
that investors can make any money on the stock.

*** But it is not an over-night process. Steve Sjuggerud 
explained to me yesterday that big institutional holders 
need months to unwind their positions. Once the romance 
is over, in other words, breaking up is hard to do. 
Prices work their way over several months.

*** Intel fell about a buck, yesterday...Cisco lost 
$2.50. came out at $15 and rose to $90. Now 
you can buy a share for 70 cents. And Amazon dropped to 
$28...and then revived enough to close a little above the 
$30 mark... more about the "River of No Returns," in just 
a moment.

*** But while the live-in romance with the big techs 
seems to be over...and investors pack up their socks and 
prepare to move out...there's always a lot of talk about 
making up and "working things out."

*** Many investment analysts think the Big Techs are just 
too good to leave. Reuters quoted one who said, "We 
really got oversold [last week]." Another thought stocks 
were "too cheap." 

*** This sentiment seemed to gain momentum about midday 
on Monday...and Nasdaq came back to close just 5 points 
down. The Internet index rose 1%...and Yahoo managed an 
increase of $4.50.

*** But let's return to Amazon. Once the "must own" stock 
of the New Era, the big muddy river is becoming a 
piranha, I mean pariah. Analysts are turning against it. 
"In July alone," writes Matt Berger in Upside Today, 
"eight analysts downgraded Amazon in a storm of negative 
projections about its cash reservoir. Monday, investment 
bank Janney Montgomery Scott downgraded Amazon's stock to 
"sell" from "hold."

Berger cites a report from Robertson Stephens:

"As (Amazon) expands well beyond its core products of 
books, music and video, and into new categories such as 
electronics, kitchen, lawn and patio, and tools and 
hardware, we hypothesize that the exhaustive assortment 
which has heretofore defined the company could actually 
serve as a structural obstacle to achieving operating 

*** A NYTimes report says that Amazon has quietly raised 
prices - so much so that you can now find some books at 
lower prices in bookstores.

*** And the current issue of Red Herring includes an 
interview with the Amazon founder, entitled "The Fantasy 
World of Jeff Bezos." 

*** "To hear him describe it," begins the article, "Jeff 
Bezos lives in a perfect world. A world where bad news 
does not exist. It's as if the planet's greatest 
optimists have been plucked, packed and shipped to 
Seattle, then downloaded into one very smart, articulate 
and charming person. But optimism is often a clever cover 
for denial."

*** Time's Man of the Year just refuses to accept it: 
it's over...the romance with investors, that is. 

*** Meanwhile, the Dow fell 53 points yesterday. There 
were 1206 stocks advancing, against 1562 retreating. 23 
hit new highs. 87 hit new lows.

*** The weather has turned cold here in Baltimore. The 
cold snap was blamed for the rising oil price. Oil closed 
up a buck - to $31.86.

*** William Fleckenstein: "The Strategic Petroleum 
Reserve release was a political outrage... 30 percent of 
the oil went to folks who don't appear to have any real 
chance of executing the contract as required...when all 
is said and done, the amount of heating oil that's going 
to be released from the SPR will satisfy the Northeast 
for about 12 hours on a cold day." 

*** "The scariest statistic of them all," writes Uncle 
Harry Schultz, "and only reported in one newspaper (The 
International Herald Tribune)... is that it is not true 
OPEC raised oil production recently by 800,000 barrels. 
The truth is oil 'quotas' were raised 800,000 bbls but 
actual production was already 700,000 ahead of the 
quotas, so the net increase was only 100,000 bbls." 

*** High oil prices have been associated with three past 
recessions: the oil shocks of 1974, 1979 and 1990. 
According to Ed Yardeni, by way of Gary North, "Americans 
are paying $161 billion more for their oil, and the price 
worldwide is approaching $500 billion." That does not 
include the increases we are all feeling in electricity 
and natural gas. North: "It's as if someone increased our 
corporate and personal income taxes by 15-20% almost 

*** And it's not just in the United States. Singapore, 
France, Germany, Italy, Sweden, and the United Kingdom 
all turned in lower numbers for the Purchasing Managers 
Index, says North. "Every week I see more numbers 
indicating the world economy has begun to slow down."
(see: Oil Induced Recession In 2001?

*** What's a poofter? A couple of readers have written to 
ask what the word means. One suggested that I may be in 
violation of incipient Hate Crimes Act, since "poofter," 
he noted, is British pejorative slang for homosexual. Uh, 

*** "Poofter," is indeed slang for homosexual. But it is, 
at least in my usage, more whimsical than pejorative. I 
practice what might be called 'Comic Christian 
Universalism' - I make fun of everyone...but I love even 
the sinners. If that is a crime - well, put the cuffs on 

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"Every extraordinary capital market gain," said Jeremy 
Grantham, courtesy of Marc Faber, "has retreated 100% - 
or more." 

Grantham, Mayo, Van Otterloo & Co. have prepared charts 
that show what happened in various "extraordinary capital 

The gold market was extraordinary, for example, in the 
1970s. Reading the small type on the charts, I see that 
the price of gold was about $40 per ounce in 1970. The 
line spikes almost straight up to over $1,000 in real 
terms in the late '80s. And then it comes right back down 
in a near-vertical line to about where it started.

The chart for oil prices is very different. Yet, the 
overall pattern is the same. From about $10 a barrel in 
1962, oil rose to almost $70 a barrel (again, real 
prices)...and then collapsed back to almost $10 again.

Similar charts for other commodities - nickel and cocoa -
- show the same pattern.

Today's Reuter's wire included the opinions of various 
analysts and investors. In addition to the bullishness 
about the future were descriptions of present market 

"Panic and fear" was how one analyst described the 
mentality on Wall Street. Many of the major dot.coms and 
big techs have already taken stunning losses. Amazon, for 
example, was at about $110 a share when Jeff Bezos's mug 
was on the cover of TIME magazine in January. 

Since then, his stock has fallen below $30...a loss of 
more than 70%. The Nasdaq as a whole is down more than 
15% for the year. And many of the dot.coms - such as 
Theglobe, mentioned above, have lost as much as 99% of 
their value.

And yet, most investors still have faith. If the B2C 
stocks are out of favor, they switch to B2B. When B2B 
loses its sensational appeal, they move to the 
infrastructure plays...and when that romance ends, it's 
on to the bio-techs, bandwidth, and so on.

October is the month for surprises in the stock market. 
Often, there is a surprising explosion of prices to the 
upside. That is what many investors expect this year too. 
In their minds, the 'fear and panic' has been over-
done...stocks are oversold...and the short-sellers had 
better watch out.

Who knows? Maybe they will be right. But the Big Surprise 
is more likely to be the scope of the damage that lies 
ahead. Fear? Panic? You ain't seen nothin' yet!

Grantham's charts of "extraordinary capital markets" show 
what has happened in the currency markets. A chart of the 
dollar from 1979 to 1992 shows the greenback almost 
doubling in value on world markets - peaking in 1985 - 
and then falling back to where it began. The UK pound and 
Japanese yen charts show a more modest rise...but similar 

In stocks, the S&P 500 soared in the '20s. The chart 
looks like the Matterhorn. From the gentle piedmont of 
the early '20s, the mountain rises sharply later in the 
decade. Then, after August of '29, it falls 
symmetrically. Ominously, however, the line falls well 
below the starting point a decade earlier. The 
'extraordinary market' gave back all of its gains - and 
then some.

There is another chart of the S&P covering the years '46 
to '84. This mountain looks more like an Appalachian peak 
than an Alpine one. Again, what goes up comes down. Easy 
come, easy go.

Then, there is an interesting chart of the Japanese 
market relative to the world index, as measured by the 
EAFE, '81 to '99. Here too, the extraordinary gain of the 
'80s was erased in the '90s. But the bear didn't stop 
there - he erased much of the gain from previous decades 

The final chart is of the S&P 500, '92 to '99. This 
mountain is the most unusual of all - it has only one 
side. You see one side of an Everest-like gain in stock 
prices. The other side is shrouded by the mist of the 
future. Will it be a geological anomaly, different from 
any of the other 'extraordinary market gains' examined by 
Grantham? Will there be an even higher peak than the one 
registered in March of 2000? Or are we on the down slope 

We will see, dear reader, we will see.

But if the pattern of past extraordinary gains continues, 
the valley on the other side will be much lower than most 
people can now imagine. 

"Until 1982," writes Marc Faber, describing the latest 
and greatest market sensation, "the Nasdaq, which started 
trading in 1971 with an index value of 100, never 
exceeded 200. By 1990, it was still below 500. It touched 
1,000 for the first time in 1995 and 2,000 in 1998. From 
there it soared to over 5,100 in March of this year. 
Never before in the history of financial markets has 
there been such a highly priced large market (market cap. 
of over $6 billion at its March peak) as the Nasdaq. 
Based on current earnings of approximately $25 billion, 
my estimate is that the Nasdaq will decline to anywhere 
between 800 and 1,500."

"I base this forecast," he continues, "on Nasdaq earnings 
either remaining at about the current level (no growth) 
or rising to around $40 billion before major earnings 
disappointments kick in and reduce the Nasdaq's P/E to 
about 40."

We will see, dear reader, we will see.

Bill Bonner
About The Daily Reckoning:
The Daily Reckoning... "more sense in one e-mail than a month of CNBC."  That's what readers are saying about The Daily Reckoning.

Bill Bonner, recognized internationally as a brilliant writer, entrepreneur
and publisher of The Fleet Street Letter, offers you his daily market
commentary absolutely FREE. For the first time, outsiders are getting a peek into his powerful and profitable investment insights. Bill's practical contrarian advice empowers even average investors to protect their hard-earned wealth and achieve amazing gains.

Bonner writes his email letter from Paris, France, each morning --
describing the wacky, wonderful world of investment, politics and everything remotely related. Irreverent. Sharp. Honest. Thoroughly, unabashedly contrarian. It's also among the fastest growing e-letter on the Internet.  It's a brand new service... but it has a distinguished history..

For nearly 62 year, The Fleet Street Letter, the oldest investment
advisory letter in the English language has consistently delivered
invaluable economic and political foresights to savvy investors. Current readers regularly enjoy impressive investment gains even as the market falters. Here's more from his online readers...

"My small portfolio has followed true to my wife's description of my
investment philosophy, "buy high and sell low." However, that has changed since I started religiously reading DR... I credit this reversal of fortune directly to The Daily Reckoning"

" Your Daily Reckoning is the best in business commentary... mixing
serious warnings and the state of the market with gentle humor"

"It is actually better than some of the newsletters that I pay to

"Your statements and philosophy have kept me from storming into the market and in fact [I'm] making some money in put options" (Frank)

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Last modified: April 01, 2001

Published By Tulips and Bears LLC