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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

PARIS, FRANCE 
THURSDAY, 26 OCTOBER 2000 

 

Today:  Fiat Justicia, Pereat Mundus

*** Bottoms, bottoms, and more bottoms...
*** Dot.com executives more likely to be 'unsavoury'...
*** Return of the super cars...the madness of cows... 
Picasso's birthday...and much, much more.

*** "We've seen the bottom," said one analyst, whose 
silly comments were recorded by a Reuters' reporter. Hope 
springs eternal. And the great hope of brokers, analysts 
and tech investors is that the bear's bottom has not only 
been spotted, but that the beast has been shot dead, 
tagged and sent to the butchers. 


*** "October's low should mark the bottom for this 
cycle," said another commentator. The thinking on Wall 
Street is that October is the month for bottoms. 
Investors expect a boost now from the post-election 
optimism and Christmas season spending. 


*** All this talk of bottoms is making it hard to 
concentrate on investments. I have to get up from my 
desk, take a deep breath, and walk over to the window. Oh 
la la...that doesn't help...


*** The Dow rose for the 4th session in a row yesterday. 
It went up 121 points. Advancing stocks beat declining 
ones, but not very convincingly for a major rally...1560 
to 1229. Stocks hitting new lows on the NYSE outnumbered 
those hitting new highs, 92 to 54.


*** The Nasdaq fell 48 points. National Semiconductor 
lost 34% of its value. The Internet consulting firm, 
marchFIRST, fell 59%. Intel, meanwhile, lost a little 
more than a dollar, to close at $42. IBM was down about 
$1.50.


*** The weakness in the Nasdaq worried Asian markets this 
morning. Reuters reported the Asian market action as 
though it were a Godzilla movie: "Asian Investor Flee 
Chipmaker Shares," said the headline.


*** "In a bear market," goes the old Wall Street saying, 
"money goes back to its rightful owners." Well, not 
exactly. Billions, perhaps trillions, of dollars have 
been invested in projects that will never be profitable. 
It is as if investors had put their money planting 
watermelons in the Gobi Desert or manufacturing electric 
pogo sticks for people who want to hop to work. The money 
that went into these projects doesn't get returned to 
anyone - it just disappears.


*** Oil is still above $33 - after moving up and down in 
various markets. Crude oil inventories rose in the U.S. 
But inventories of heating oil fell - to 30% below what 
they were a year ago. 


*** "Internet executives are four times more like to have 
'unsavoury' backgrounds than executives from other 
industries," said a report from the security firm, Kroll 
Associates. Crooks and schemers always follow the money. 
Kroll reported that one dot.com had had 2 investment 
offers - and both people making the offers were 
subsequently murdered. Who says investing in these 
companies isn't risky?


*** You may remember that Lucent was the choice of an 
investment club I mentioned a few days ago, because "it's 
a market leader." Well, the market leader announced on 
Monday that not only would it not meet its original 
profit targets, it won't meet the revised ones either. In 
fact, it won't meet any profit targets. Lucent is merely 
hoping to break even. The stock fell another 2% yesterday 
to $21 and change. It was as high as $78 last December.


*** "Citibank announced last year that its 40,000 private 
banking clients," said former Congressman Bob Bauman, 
"each of whom had to prove a personal net worth of $3 
million in order to qualify for the bank's services, are 
watched every minute of every day to see if they may be 
engaged in money laundering or other financial crimes." 
His remarks concerning "the current state of the offshore 
financial world and the concerted attacks being made upon 
tax haven nations" were recently entered into the 
Congressional Record by Ron Paul, Rep. from Texas. (see: 
Threats To Your Financial Freedom 
http://www.dailyreckoning.com/body_headline.cfm?id=651)

*** My friend Michel, philosopher and car buff, reports: 
"Ten years ago, European stock markets were flying... 
money was flowing and housing prices were going to the 
heavens. This also was the moment that auto manufacturers 
came out with a new group of "super cars" - high 
performance prototypes at extremely high prices. The 
MacLaren F1, for example. I remember people standing in 
line to pay $100,000 to reserve a new XJ220 and coming 
back the next week to make another $200,000 down payment. 
And you had to wait 2 years for a new Ferrari.


"Then, bam, the market collapsed. Only 6 Jaguar XJ220s 
were ever built. Bugatti went bankrupt after building 20 
cars. Used Ferraris fell in price; a Testarossa, for 
example, dropped from 2 million francs to only 400,000 
francs. And most of the other super cars disappeared.


"Ten years later...autumn 2000...the big auto companies 
are once again presenting super cars... only this time 
they're even more powerful and even more expensive. 
Volkswagen is re-launching the Bugatti...and delays in 
delivering Ferraris are once again stretching out. D‚j… 
vu?"


*** Just a year ago, my farmer neighbor, Pierre, was 
complaining about British beef. The Brits did not take 
enough care with their animals, he said. That is why they 
were unable to stop the 'mad cow' disease. Well, now it 
is the French who are having trouble with the madness of 
cows. In the last few days, three supermarket chains have 
had to recall beef that may have been infected with the 
deadly disease.


*** Majoritarians have no sense of humor. A Chicago judge 
ordered the Internet site that was auctioning votes to 
shut down. "A spokesman for the Chicago Board of 
Elections," Reuters reported, "called 'its very 
existence' a crime at federal, state and local levels."
Apparently, it is okay to promise the voters anything you 
want to win an election...as long as you don't make good 
on the promises. 


*** Today is the anniversary of Pablo Picasso's birth in 
1881. Picasso, widely acclaimed as "the most influential 
artist of the 20th century," got his start in Parisian 
attics, a penniless bohemian artist. But he painted the 
stage sets for the Russian Ballet in London in 1918...and 
pretty soon Le Moderne was all the rage...and Picasso was 
lionized. In America, the popular sensation was taken up 
by the super-rich Euro-philes of New York, such as 
Rockefellers and Goodyears, who wanted desperately to be 
hip and modern. "By the mid-1930s," wrote Tom Wolfe in 
The Painted Word, "Modern Art was already so chic that 
corporations held it aloft like a flag to show that they 
were both up-to-date and enlightened... The Dole 
Pineapple Company sent Georgia O'Keeffe and Isamu Noguchi 
to Hawaii to record their impressions, and the Container 
Corporation of America was commissioning abstract work by 
Fernand Leger, Henry Moore and others...."


*** It is rumored that, late in life, Picasso confessed 
to an Italian newspaper that he knew his art was all 
rubbish, but that it had made him rich. If he didn't make 
this confession, he should have.


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Sure, the days where early stage IPO or other hot 
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long road to profits....

In this edition of the Free Investor's Library, we'll 
show you an easy 'point and figure' system for getting 
rich with value stocks, the easy way. To learn how to 
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


FIAT JUSTICIA, PEREAT MUNDUS

"I've never really tried investing," said a stout man 
named Paul at last night's dinner party. 


"I was planning to put some of my money in tech 
stocks...and the rest in mutual funds."


"Hmmmm," I replied, "this might not be the best time to 
jump into stocks - especially techs."


"Well," came his answer, "I have to do something...I'm 
going to retire in a few years. I'll need the money. And 
even if stocks go down a bit, don't you think they'll do 
well over, say, two years?"


"Who knows?" I shrugged and went back to my lamb with 
mint sauce. I did not want to get into a long discussion. 
And besides, I didn't want to be a sourpuss. I wished him 
luck and changed the subject. 


My guess is that stocks will be a lot lower two years 
from now than they are today. But that is just a guess. 
And what benefit is it to Paul to make this kind of 
guess?


Maybe stocks will be higher. Maybe the sun will shine 
everyday, the public fountains will run with Taitinger 
champagne, and there will be new and more appealing 
bottoms every day.


But we don't know. 


We don't know whether the price of oil is going up or 
down. We don't know whether a company's profits are 
increasing or decreasing. We don't know much at all.


Even when we are in the middle of something, with direct, 
personal experience - Nietzsche's erfahrung - we still 
often don't know what or why things happen as they do.


The ancient Greeks, fighting their primitive battles, 
often reported that an 'epiphany' - a ghost-like figure - 
appeared in the midst of the battle and was responsible 
for a decisive blow.


Life's most important decisions are taken in almost 
complete ignorance. When we get married - we don't know 
how our spouse will look, or act, 3 decades in the 
future. When we start a business, or make an investment, 
we really cannot know what will happen to it. 


We don't even know if we will be alive tomorrow. 
Existence itself, at least in the walking around, flesh 
and blood form, is always tentative.


In these letters, we've seen the limitations of reason 
and information. Hitler decided that the world would be a 
better place without Jews. He was sure he was right and 
took what seemed like reasonable measures in light of his 
insight.


He was such a good talker that he was able to get one of 
the world's most powerful, most sophisticated and best-
educated nations to march behind him. The nation kept 
marching long after it was apparent to everyone that it 
was a lost cause - and an imbecilic one, too.


Imagine if you were marooned forever on a desert island 
with one other person. Imagine that this person were as 
obnoxious as a democrat and as useless as a republican. 
Also imagine that there was only enough food on the 
island to feed one person. Wouldn't your future be better 
if you killed this person? And... why not? The crime 
would never be discovered.


What's more, he would probably be thinking along the same 
lines you were. If you didn't kill him, he'd probably 
kill you. Based on all the available information and with 
no gaps in the Cartesian logic, you might come to the 
conclusion that you should kill the poor oaf before he 
kills you.


People have to decide what to do. Reason, experience, 
luck and observation guide many actions. Others - such as 
the German people's support of Herr Hitler or the tech 
bubble on Wall Street - are driven by collective thought, 
which has a temper all its own and is almost always 
foolish and destructive.


So what do you do? 


Fiat justicia, pereat mundus is the Latin legal 
expression. It means follow justice [the rules], even if 
the world should perish. Judges used to be guided by it. 
But it is as out-of-fashion in legal circles as it is in 
investment ones.


It is against the rules to kill people. Or steal. There 
may be occasions when it 'makes sense' to break the 
rules... but as soon as you allow yourself the 
flexibility, you become like an alcoholic who allows 
himself a drink on special occasions. Plenty of occasions 
present themselves. Soon you are toasting "National Hair 
Products Week" and raising a glass in honor of St. 
Xavier.


I will put it to you directly, dear reader: there are 
rules that govern investing, too. They are not quite as 
simple as 'thou shalt not kill,' but they are not as 
complex as the 'rule against perpetuities' either.


Follow the rules and you don't have to worry about what 
you cannot know. 


More tomorrow.


Your correspondent,


Bill Bonner


P.S. Paul returned to the subject of investing after 
dinner.


"If I put my money in the bank," he reasoned, "I'll only 
get about 5% interest. I've got to be able to do better 
than that in stocks." He gave a small laugh...as if to 
say, everybody knows that stocks produce a lot more than 
5% per year.


"Well," trying to avoid being a party pooper, "5% may 
look pretty good 2 years from now."
 
 
 
 
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...

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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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