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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Clueless

*** Whew...the bear market is over! MSFT is back up to 
half its value a year ago. Hallelujah... and amen.
*** Trade deficit shrank in August - is that good news?
*** Signs of a the human body undergoes 
"measurable perturbations" in the Autumn of Anxiety...

*** "The worst is now over," said a Lehman Bros. analyst. 
"The perception is that the market isn't going any 
lower," said another analyst to a Reuter's reporter. 
We've just witnessed the "capitulation" of the bear, said 
yet another. 

*** Whew! I'm glad that bear market is over. 

*** Investors went to Redmond, yesterday, searching for a 
heart of gold - and they thought they found it. Microsoft 
said earnings rose more than expected and its Windows 
2000 was selling as forecast. So, MSFT shares shot up 
almost 20%. 

*** Nokia gave out similar good news - and its share went 
up 27%.

*** The Dow rose 167 points on the good tidings to close 
well above 10,000. And Nasdaq rose a stunning 247 points 
to close even weller above 3,000.

*** Intel climbed almost 10%. Broadcom added $24.75 to 
its share price. Cisco and Yahoo were each up about $6. 
Sun Micro rose almost 7%. LSI Logic jumped 23%. 

*** Advancing stocks beat declining ones more than 2 to 1 
- 1949 to 927. But the number of new highs was still 
disappointingly low - just 28, compared with 94 new lows.

*** The bullish sentiment even carried over to the old 
economy as Gillette posted a 17% gain after its CEO said 
he would leave. 

*** This was the 3rd largest gain ever for Nasdaq. Of 
course, the 2nd largest gain and the first largest gain 
also occurred during this year. And so far for this year 
the index is down 18.4% - even after yesterday's gain.

*** The Dow, meanwhile, is down 12.4% for the year.

*** What's going on? Is this rally going to chase Mr. 
Bear back into his cave for an early hibernation? Will 
the indexes recover, as Abbey Joseph Cohen forecasts? I 
don't know...but at least I know that I don't know...and 
what to do when I don't know. More below...

*** Not all the stock news was good yesterday. AOL lost 
$1.47, off 3%. Apple lost 6%.

*** Even after its surge yesterday, MSFT is only worth 
about half as much as it was last December. Analyst Doug 
Cook increased his target for earnings per share from 
MSFT but decided it was time to move his price target 
from $90 to $65, "to reflect the correction in the 

*** Henry Blodget, a longtime AOL bull, noted that the 
company was "clearly seeing the impact from the 

*** Does anyone take these analysts seriously? I hope 
not. Wasn't Blodget the one who said Amazon was worth 

*** "Clearly, the great consumer goods companies that 
were hailed as the 'winner-take-all' companies of the 
globalisation movement of the 1990s have fallen on hard 
times," writes Marc Faber. "Why is this the case? After 
all, the 1.2 billion Chinese and 1 billion Indians are 
increasingly purchasing soaps, films, razorblades, soft 
drinks, and jeans. In this respect, I remember well an 
investors conference hosted by a major investment bank in 
1997 in the Bahamas at which companies such as Kellogg, 
Gillette, and Coca-Cola were touted as the 'must own' 
stocks of the future. Why have these companies performed 
so poorly since then?" (see: There's Always A Bull Market 

*** "We're an investment bank that knows technology," 
says the ad for Goldman Sachs on FT.COM, "or is it the 
other way around?" You'd think they would know the 
difference between a bank and a tech company. Goldman has 
hitched its wagon to 'Technology' the way the Chase 
Manhattan Bank once hitched itself to third world debt. 
Good luck.

*** But Alan Greenspan assured investors yesterday that 
all was well - investments in high tech have held down 
inflation...and there's little evidence that this 
investment surge is coming to an end. What's more, said 
the former jazzman, higher oil prices are not yet posing 
a threat to the economy.

*** Also buoying investors' spirits yesterday was the 
news that the trade deficit shrank in August. But this 
might not be the good news investors think. The trade 
deficit is an indirect measure of how much Americans are 
willing to go into debt. When they are feeling rich from 
the 'wealth effect,' they do not hesitate to spend. But 
when the 'wealth effect' turns negative, so does their 
willingness to part with cash or turn to credit.

*** The 'wealth effect' has turned sharply down this 
year. Half of the nation's families own stocks. And 
stocks are down, on average, at least 15%. The most 
popular 'must own' stocks are down a lot more - like 
MSFT, AMZN and INTC...down 50% or more.

*** So consumers are beginning to de-leverage themselves. 
And the real economy - like the trade deficit - is 
feeling the effects. USA Today reports the Coca-Cola Co. 
is laying off 5,000 workers. Ingersoll Rand is laying off 
4,000. And 6 of the nation's largest movie theatre chains 
have declared bankruptcy in the last 13 mos. 

*** Outside of the smoky information technology sector, 
manufacturing output in America has been stagnant for the 
last 3 years. "Excluding high-tech," writes Caroline Baum 
on, "manufacturing output, which accounts 
for 88 percent of industrial production, is at the same 
level as it was in October 1999, according to the Federal 
Reserve. High-tech output is carrying the entire factory 
sector on its shoulders, with a 52.8 percent year- over-
year increase in September from a year earlier.... Output 
of motor vehicles and parts plummeted 20 percent at an 
annualized rate in the third quarter, the first quarterly 
decline since the first quarter of 1999 and the biggest 
since the first quarter of 1996, which coincided with a 
General Motors strike."

*** And even in the computer sector there are signs of a 
slowdown. Apple announced a hiring freeze last week and 
Intel said it would be "far more cautious" in the months 
ahead. Our guess is that consumers are going to be more 
cautious...and investors, too.

*** It is, after all, the Autumn of Anxiety. Caroline 
Baum adds this note: "Paul McCrae Montgomery, a market 
analyst and money manager at Legg Mason Wood Walker Inc., 
had studied the literature of cycles and knew some 
theorists found the power of the autumnal equinox, when 
the length of days and nights is equal, to be compelling. 
He never took it seriously, however, until he read some 
research from the Department of Neuroanatomy at Yale 
Medical School. 'They found that the human nervous system 
typically undergoes measurable perturbations,' coincident 
with the vernal and autumnal equinoxes, Montgomery says." 

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"Don't know much about the middle ages.
Looked at the pictures and then I turned the pages.
Don't know nothin' 'bout no rise and fall.
Don't know nothin' 'bout nothin' at all."

Sam Cooke

"What are you working on today..." asked my trusty right-
hand man, Addison, this morning.

"I don't really know," I answered, truthfully, "but I 
think it is important."

Yesterday, we marveled that even a stone at the bottom of 
the Pacific Ocean...where it could never be found and 
never seen...might be an effective store of value.

Ignorant of its location...or what it looks like...or its 
weight...color...geological make up - ignorant of 
everything about this stone, even its actual existence, 
Yap islanders would nevertheless trade it for valuable, 
tangible, consumable assets.

A private investor, buying a business, rather than a 
submerged stone, usually has access to much more 
information. He is able to go on location and ask 
detailed questions - often of the employees as well as 
top management. He is able to inspect the books, usually, 
and verify key numbers through independent audit.

He also typically buys a business that he understands. He 
has what Nietzsche called "erfahrung" - direct, personal 
knowledge. Often a guy who began his career pumping gas 
will eventually buy up other gas stations. Printers will 
buy other print shops - or maybe expand into related 

Erfahrung reduces risk. The more real knowledge you have 
- the more able you are to guess about what the business 
may do in the future. But even with thorough research 
before the check is sent, my experience is that only 
about one of two purchases works out as you expect. 

Buyers hedge the risk by demanding low prices. Private 
purchasers in the publishing business, for instance, may 
pay only 3 to, say, 10 times what they think the business 
will produce in profit annually. 

But in the public markets, a stock buyer has no personal 
experience...and no ability to closely examine, or make 
sense of, the business. Instead of erfahrung, he has to 
rely on "wissen," the same sort of collective ignorance 
that politicians, busy-bodies and editorial columnists 
rely upon.

David Ignatius, executive editor of the Washington Post 
and columnist for the IHT, of which the Post is half 
owner, recently visited a meeting of oil companies in 

"One executive explained for me the paradox of $35-a-
barrel oil," he writes, describing how markets work as 
though he had discovered it for the first time in his 
life. "In this topsy-turvy industry," he notes, a 
Promethean light striking his frontal lobe with 
unaccustomed force, "executives have to make billion-
dollar investment decisions for the long run based on a 
price that fluctuates wildly over the short run."

Oil executives, like stock market investors, labor in a 
penumbra of ignorance only slightly less somber than the 
total blackout at the IHT editorial office. Despite the 
explosion of information...the bandwidth-a-plenty 
described by George Gilder...and the vanishing cost of 
data transmission, oil executives can't tell you whether 
the price of oil is going up or down. And investors, no 
matter how many computer screens they have in their 
family recreation rooms, cannot know whether they would 
be better off betting their next $500 on a doggy tech 
stock or a nag at Pimlico racetrack. 

Newspaper editors, like public market investors, seem to 
have no direct experience with anything. Instead, they 
use big, dumb words that give them the pretense of 
knowledge. Technology, Globalization, Global Warming, 
Democracy, Terrorism...the words mean almost nothing - or 
anything you want them to mean. They are empty, puerile 
and misleading. But they are the building blocks of 
collective thinking...piled one on top of another...and 
capped with a stone inscribed with the first plural 
pronoun - "we". 

"We need to get serious about the election," writes Ellen 
Goodman. "We should support marriages," says Linda Waite. 
We need to act like a "grown-up nation" says Paul 
Krugman. We need to look more carefully at globalization, 
says Robert Samuelson. We "can no longer run away from 
the ugly realities of the shadow war directed against 
[America]," says Jim Hoagland.

But, rest assured I am not writing today's letter about 
the editorial page of the International Herald Tribune. 
My subject today is ignorance, which is the only reason 
the IHT leaped into my thoughts. 

The investor in publicly traded stocks relies on the same 
sort of knowledge as the editorialist - wissen... 
indirect, abstract, collective 'knowledge.' If there is 
an 'oil crisis' in the news, he expects his oil stocks to 
do well. If 'technology' is increasing productivity as 
Alan Greespan says, he jumps into Juniper Networks or 

And yet, he really has no idea what the future will 
bring. He makes an investment that he hopes will bring 
him more money...but he has no way of knowing what will 
happen. Nor does he even know what money is! He can count 
his wealth in dollars - but what are they really worth? 
What will they be worth tomorrow? Are they really any 
different from the Yap stones at the bottom of the ocean 
- which might as well be imaginary, and have value only 
as long as people agree that they have value? Thus, the 
money itself is a sort of collective illusion.

People buy stocks whose SEC reports they have never read, 
in industries they do not understand, with products they 
have never used, run by people they've never met. 

And then they measure their success in terms of dollars 
of whose real value, if there is any, they are completely 

But so what?

"The problem with your views," said my wife Elizabeth, 
who finds many problems with my views, and probably 
speaks for a fair number of Daily Reckoning readers "is 
that you are so cynical about everything. A person has to 
make decisions. You can't just go hide in cave 

Yes, you have to make decisions. And you can't always 
have the flashlight of erfahrung in your hand. So what do 
you do? 

Tune in next week...for 'why it's not a good idea to kill 
people...or buy 'must own' Tech stocks at 200 times 

...and what you should do with your money now, without 
any illusions about being able to predict the future...

...and why America's currency is an "accident waiting to 

...and more about gold, too...and politicians...and 
newspaper columnists...and...and...

...I'd better brain hurts.

Your humbler and humbler servant,

Bill Bonner

P.S. Best wishes for a beautiful autumnal weekend. I will 
leave you with the same advice that James Cramer's wife 
gave him: If you feel the urge to buy the Big Techs and 
dot.coms at today's 'bargain' prices - go out and rake 
some leaves.
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"

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Last modified: April 01, 2001

Published By Tulips and Bears LLC