*** 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.
You Bet. One reader pocketed over $23,000 in just a few
weeks!
Sure, the days where early stage IPO or other hot
momentum stock could make you rich overnight are long
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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
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make quick profits in today's value market, read your
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(http://www.dailyreckoning.com/specialreports)
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
"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."
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