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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  The Rich ARE Different

*** Uh oh...Intel down another 11%...
*** But analysts are not surprised by the downturn in 
Nasdaq Nation...
*** CALPERS pulls out of tobacco...the euro falls on a 
'Wim'...and ditto-heads discover the Daily Reckoning...

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*** The investment club members I wrote about yesterday 
were separated from their money sooner than I expected. 
Intel, the stock they decided to buy, was certainly a 
"leader in its field" yesterday. It led the losers with 
an 11.6% drop, down more than $4 per share.

*** Following the giant Intel was the giant Microsoft, 
which shed 5% of its value. Down $3, MSFT dropped below 
$50 - its lowest level in 2 years and 60% below its high 
of last December.

*** Also conspicuous in the pack of losers was the once-
giant Xerox, down more than 25% - at a 9-year low of $7. 
Xerox's commercial paper is selling for 72 cents on the 

*** Meanwhile, fell $4 a share; this 'must 
own' Internet retailer has lost 75% of its value since 
the end of 1999. Would it be too immodest of me to point 
out that I began making fun of this River of No Returns 
stock while it was still over $100? Yes, it probably 

*** "Nasdaq's fall no surprise after meteoric rise" is 
the headline on Steve Harmon's Internet Insight. 
Unfortunately, like so many New Economy analysts, Mr. 
Harmon may have forgotten to make this point before 
prices fell. 

*** The 30% drop in Nasdaq prices now seems to have been 
inevitable - even to those who never saw it coming. And 
now they are as sure that it is over as they were that it 
wouldn't happen. "But that won't stop technology," they 
say. Harmon points out that the Nasdaq was only 500 in 
March of '91. In the next 9 years, thanks to the wonders 
of technology he believes, it rose 1,000%. Didn't they 
have technology in '91?

*** Could it be that it wasn't really technology that 
lifted the Nasdaq - but debt and irrational exuberance? 

*** In January 2000 stocks were worth a record $16.8 
trillion, compared to a GDP of $9.5 trillion. Somehow, 
technology seems to have lifted up stock prices, but left 
actual output to take care of itself. Even at the height 
of the Japanese bubble in 1989, stocks only slightly 
exceeded the value of GDP. 

*** Throughout the 90s, consumer credit grew about twice 
as fast as GDP. Even now, consumers are increasing their 
borrowing at nearly 10% per year...while a record 1.28 
million people filed for bankruptcy last year.

*** This could be an important week for Wall Street. 
Investors are getting nervous. They still believe in 
technology and in stock market wealth...but they are 
beginning to have doubts. If the Nasdaq could stage a 
rally - it would help restore confidence and complacency. 

*** But yesterday, investors seemed to be looking for 
safety. The Dow rose 46. The Nasdaq fell 26. More 
worrisome is the fact that 1483 issues declined, while 
only 1373 rose. Also, there were 3 times as many stocks 
hitting new lows as new highs. This does not look like a 
rally. It looks like a pause.

*** The huge California state pension fund, CALPERS, 
decided to sell its tobacco stocks. Tobacco, though, is 
one of the best investments the retirement fund has had 
all year. Would it be too immodest to remind you that 
Philip Morris rose more than 50% since I suggested it 
earlier this year? Yes, I guess it would.

*** "Stunning incompetence" is how the head of currency 
trading at Goldman Sachs described Wim Duisenberg's 
remarks yesterday. Duisenberg, head of the European 
Central Bank, broke the cardinal rule of currency 
managers - never discuss your strategy publicly. 

*** The euro got knocked down below 85 cents, near a new 
all-time low, and considerably lower than the point I 
thought might be a bottom. But its leading competitor, 
the dollar, is still probably "an accident waiting to 
happen," in the words of economist Peter Bernstein.

*** And the nemesis of both currencies, gold, lost 90 

*** In late August, Lynn Carpenter issued a report that 
warned readers to sell the leading Big Techs. "Since 
Labor Day," Lynn wrote last Thursday, "those stocks are 
all down: MSFT down 20%, SUNW down 18%, ORCL down 30%, 
INTC down 47%... and CSCO down 22%." (We've reposted the 
report here: The 5 Most Dangerous Stocks You Can Possibly 
Own Today...

*** Meanwhile, current assets of India's largest telecom 
- Videsh Sanchar Nigam Ltd (VSNL) - "exceed current 
liabilities by a ratio of more than 2 to 1," writes 
Grant's Investor analyst Jay Akasie. "The company has 
cash equivalent to more than one-third of its market 
capitalization, and there is no long-term debt - amazing 
in a world in which global telecoms are often highly 
leveraged with high equity valuations to match. Despite 
the potential in VSNL's vast reach... the stock has 
failed to click with investors. The company trades at 4.6 
times estimated 2001 earnings." Nigam Ltd. was listed on 
the NYSE in August. (For more see: Talk Is Cheap

*** Daily Reckoning fame spreads. A reader reports that 
Rush Limbaugh refers to it in his monologue. 

*** I decided to paint clouds on the ceiling of one of 
our rooms at Ouzilly. So, I asked Sophia, 18, to try her 
hand at it as a test. In the billions of clouds, no two 
are the same. There are an infinite variety of swirls, 
and puffs, and a multitude of grays, blacks and 
crimsons...and yet, Sophia's cloud looked like no cloud 
that ever existed... or could exist. Instead, it reminded 
me of a glop of rice pudding, left in the refrigerator so 
long, mould had taken up residence. (By the way, you can 
see a photo of Ouzilly by clicking here:

*** Henry, 10, left on a class trip. For 11 days, his 
class will stay in an ancient abbey a couple of hours 
outside Paris. 

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The Rich ARE Different

"A fool and his money are soon parted."

- An old saying

"A rich man came up to Jesus with a question. 'How can I 
be sure of getting into heaven,' he asked.

"Well," replied Jesus, "you have to obey the 10 

"No problem there," said the man, "I have obeyed them 
since my youth..."

I cupped my ear with my hand to make sure I could hear 
what followed. Pere Marchand was recapitulating a 
particularly annoying gospel passage. His voice quaked 
whenever he quoted the words of Jesus. Moderating your 
voice in that way is probably not required in the 
handbook of reverence, but the gray-haired priest must 
have felt that he was getting too old to take chances: 

"Well, then," said Jesus [perhaps with a challenging 
twinkle in his eye], "you can give all your wealth to the 
poor and follow me... for it is more difficult for a 
camel to go through the eye of the needle than for a rich 
man to enter the kingdom of heaven."

Preachers and rich men have wrestled with this passage 
for many generations. The priests, who have taken a vow 
of poverty, generally take Jesus's words without 
question. Rich men, and those who want to be rich, even 
the one speaking directly to Jesus, balked. They would 
rather be camels...

The Nasdaq has lost about a third of its value from its 
high of March. Few people will rejoice - even though, 
taking the Biblical passage literally, they now have a 
better shot of getting into heaven. Surely, a few months 
of losses, followed by a few years of relative poverty, 
is worth an eternity in heaven? But why would being a 
greater fool get you a ticket to heaven?

Today's letter, dear reader, has no answers to these 
questions...just more questions.

Taking the logic on its face, taxes must make it easier 
for people to get into heaven too. At least those from 
whom the wealth is looted will have smaller humps - and 
will pass more easily through the eye of the needle. On 
the other hand, the people to whom the loot is given may 
find themselves - along with tort lawyers and rap singers 
- doomed to hell. At least, I hope so.

Barron's reports that Warren Buffett, the son of a moss-
backed member of Congress and now a "Democratic Party 
stalwart," appeared at Columbia University to endorse the 
candidacy of Hillary Clinton. Buffett told the audience 
that he considered himself "very under-taxed." 

Buffett, the fourth richest man in America, says he 
doesn't mind the estate tax either. "I do not believe in 
the divine right of the womb," says the billionaire who 
forced his daughter to sign a promissory note before he 
would lend her $20 to pay for a pizza.

Buffett likens inheritance to welfare: "People are 
leaving tons of money to their kids. And when those kids 
emerge from that womb, instead of a welfare officer, they 
have a trust fund officer."

Buffett is so rich; how come he's not smart?

Whoever gets Buffett's wealth risks being damaged by it, 
if not in this life, perhaps in the next. He may choose 
to give it to his own children, or to welfare children. 
It's up to him. There is no 'right of the womb,' divine 
or otherwise.

The only issue is who decides what happens to Buffett's 
money - Buffett himself? Or the government? Yet, Buffett 
sees no difference in having his own children receive 
money willingly given by him or forced at the point of a 
gun from unwilling taxpayers.

You may recall my discussion of the 'marginal utility of 
money' about a year ago. The principle is simple: each 
additional dollar you earn is worth less than the last. 
You can easily see why. If you have only $5 to your name, 
and someone gives you $50,000, it will completely change 
your circumstances. But, if Buffett were to get an 
additional $50,000, he wouldn't even notice. The extra 
dollar is worth a lot less to Buffett than it is to other 

Thus, Buffett's views on taxation come cheap. He built 
his fortune by compounding capital gains, thus avoiding 
income taxes. Now that he is filthy rich, his excess 
capital means nothing to him - its marginal utility has 
declined to almost zero. 

Plus, Buffett says he intends to leave his children very 
little money anyway - the rest he will give away to 
abominable tax-exempt causes. 

"Can't buy me love..." wrote the Lennon/McCartney team, 
"Money can't buy me love." I'm not sure. Maybe it can't 
buy you the best quality love, but at least it will bring 
you the economy class variety. Studies show that richer 
men, generally, get more sex.

One of the unattractive features of human nature is the 
way people regard other people with more money. Let a man 
make a fortune in the stock market and soon people ask 
his opinion on foreign policy or tax policy or some other 
collective absurdity. Why else would Warren Buffett 
appear on a stage with Hillary Clinton?

Americans are particularly prone to this weakness. With 
no hereditary aristocracy before which they can grovel, 
the rich will have to do. People feel an almost 
irresistible urge to bend a knee and crook a neck when 
meeting rich people.

But it doesn't stop there, because as much as they want 
to genuflect before the super-rich, they are also envious 
and feel the need to cut the rich down and see them 
squirm. Many, if not most Americans, would have been 
happy to see Bill Gates not merely hauled up before the 
thieves and knaves in Congress - but taken out onto the 
Capitol lawn and beheaded.

The super rich develop their own defenses. Upper class 
Brits stutter and do funny things with their mouths when 
talking. Americans act like buffoons. They become 
Democrats and hang expensive modern art on their walls - 
monstrosities that prove their susceptibility to popular 
sensations. They wear blue jeans and work-shirts. They 
hug people they don't know.

Perhaps as evidence that inheritance turns people into 
Democrats and morons, Nelson W. Aldrich Jr., the author 
of "Old Money" and the editorial director of Civilization 
magazine, proudly tells the world that he is happy to pay 
estate taxes on his family inheritance (which includes a 
New England Coast beach house where "four generations" of 
his family have lived). 

Perhaps Mr. Aldrich is rich enough, too, so the cost of 
the estate tax is marginal. Besides, he didn't earn the 
money anyway. Easy come, easy go.

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)

Open your mind with the most stimulating e-mail newsletter that you'll ever read, The Daily Reckoning. To receive this free daily email newsletter click here now.

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Last modified: April 01, 2001

Published By Tulips and Bears LLC