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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Buy Low, Sell High

*** Another bottom the Nasdaq falls 5%...
*** Amazon - a stock "with Madonna-like ubiquity" - 
rises...for now... more "unsavoury" dot.commers...
*** The bear's hot there a silver lining? 
...Technology, War and more! 

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*** The last few months have been marked by 
disappointment and the reluctance of investors to give up 
on the dream of easy money. 

*** Nortel was the latest victim of investors' 
frustration. The poor company posted only a 90% increase 
in sales over the last year. Investors had expected 120%. 
So, the stock was punished with a 29% drop - effectively 
splitting the stock, the hard way, over the last 3 

*** The disappointment was felt first in the Nasdaq where 
the dreamers have focused so much of their REM waves over 
the last few years...but soon moved to the Dow...and then 
to Asian markets.

*** The Nasdaq lost 190 points, or about 5.5%, in the 3rd 
straight loss for tech stocks. The Dow lost 66 points. 

*** Declining issues outnumbered rising ones on the NYSE 
by a 2 to 1 margin. 

*** In addition to Nortel, Cisco fell $4. Broadcom fell 
$21. And Yahoo lost $3. 

*** Lucent dropped another $1.50. It is now barely over 
$20. PMC Sierra fell $37.75, or 19%. 

*** Conspicuously absent from the bear's victims was - which reported better than expected results 
yesterday. Instead of losing 26 cents a share in the 
latest quarter, as it did last year, the 'River of No 
Returns' stock only lost 25 cents a share. At this rate, 
the company will breakeven in 2024. On the strength of 
this good news, AMZN rose about 8% to almost $32. 

*** But while stock investors dream, bond investors are 
wide awake. They've priced Amazon's bonds to yield twice 
the going rate - betting that the company has only about 
a 50/50 chance of survival.

*** "If [] - with a strong brand name, 25 
million customer accounts and Madonna-like ubiquity - is 
poised to become the Wal-Mart of the Internet," asks 
columnist Borzou Daragahi in, "why are so many 
people saying so many nasty things about it?" Well, the 
writer continues: "the company's market cap remains 10 
times that of profitable bookseller Barnes and Noble's 
and its price/sales ratio stands at quadruple Walmart's; 
and the company keeps scaling back expectations."

*** In the Far East, Samsung Electronics felt the bear's 
hot breath down its neck. Shares fell 9%. 

*** It is not only on this side of the globe that 
executives are 'unsavoury.' The Financial Times reported 
today that executives of a Japanese company, Liquid 
Audio, kidnapped a rival. They handcuffed and blindfolded 
him...and eventually released him in the woods.

*** This latest drop in the Nasdaq triggers another round 
of bottom-searching. Investors believe that stocks tend 
to register their lows in October. But Richard Russell 
notes that this has not been the case in at least 17 
different years since 1937. "The constant search for 
bottoms," writes Bill King, "is the most pernicious 
aspect of bear markets." Investors, trained to buy the 
dips, keep looking for the bottom of the dip - and are 

*** Almost everything was going down yesterday - except 
bonds. Gold lost $4.20 - bringing it to its lowest point 
in more than a year. The XAU, the gold mining index, hit 
a record low of 41.83 yesterday. Even oil went down 41 
cents. And the euro hit another record low of 82.46 

*** Meanwhile, the GDP report will come out tomorrow. "Be 
prepared for a fairly dramatic slowdown," advised Robert 
McTeer, president of the Dallas Fed.

*** What are these things telling us? The economy is 
slowing. Stocks are erasing trillions worth of assets. 
Gold is shriveling. And the dollar, and dollar-based 
bonds, are triumphant? Are these indicators of 
deflation... or the bottom of a dis-inflationary cycle 
before inflation surges again? I don't know. In fact, I 
don't even have an opinion. But see below for why you 
don't have to have an opinion...

*** "As early as 1985," writes Dr. Kurt Richebacher, "We 
warned that the first weakening of U.S. economic growth 
would initiate the dollar's collapse. In fact, stopping 
the dollar's surge in 1985 by joint intervention actually 
cost the central banks less than $10 billion of their 
reserves. But to prevent the dollar's freefall in 1987, 
they had to buy almost $100 billion in a single year and 
several hundred billions in the following years." The 
credit excesses of the 1990s, says Dr. Richebacher, and 
the increasing imbalances in the financial system (i.e. 
the current account balance) have made the likelihood of 
a dollar collapse far more imminent today than in the 
late 1980s. (see: Freefall of the Dollar - a la 1987)

*** "Assuming the revenue prediction for 2005 provided 
recently by Cisco's management - a cool $50 billion - is 
met," Rick Ackerman reports, by way of Kevin Klombies, 
"Cisco would likely have operating income per share, 
after taxes, of about $1. Let's see...this company trades 
at close to 50 times 2005 earnings. Lovely."

*** "There's a silver lining in a market like this," 
writes Porter Stansberry. "The high interest rates that 
the Fed is imposing and the tough conditions in the 
capital markets are very healthy in one respect: they 
weed out the folks that shouldn't be in business at all, 
freeing up capital for those who should." Well, yes. That 
sounds rational. Too bad investors are not rational. When 
they get scared...there will be little money around for 
any businesses, good or bad.

*** "Buy me some Cisco and AMCC..." writes William 
Fleckenstein, taking up the tune of 'Take Me Out To The 
Ball Game', "...I'm not scared of a sky-high P/E". 

"The other day," he continues, providing evidence for 
what he calls the 'Mania Chronicles', "after one of his 
players hit a home run, New York Mets manager Bobby 
Valentine said: 'It's kind of like getting in early on an 
IPO - immediate returns.' Not to be outdone, Seattle 
Mariners manager Lou Piniella apparently joked to one of 
his players just before he stole second base, 'I told him 
that the Nasdaq was down 113 and Cisco was a helluva 

*** Yesterday was the anniversary of the Battle of 
Agincourt in 1415. A force of 5,700 English soldiers, 
mostly archers armed with longbows, defeated a French 
army 4 times as large. The bowmen destroyed the heavily-
armed French as they labored towards them through the 
mud. Technology is sometimes decisive in politics...but 
not often in investments.

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There are a number of rules to successful investing. Cut 
your losses. Never meet a margin call. Diversify. Invest 
only in things you understand.

Jesus reduced the moral laws to just two over-riding 
principles: love God and love thy neighbor. Investment 
rules can be reduced to a single principle too - buy low, 
sell high.

Most people have no problem with the first part of this 
formula in their private lives. When they go to the 
grocery store, they don't buy the soap packages that 
advertise: "Now, one-third less cleaning power!" They 
don't pick up the bottles that proclaim: "Special Bonus - 
20% fewer ounces!" They don't rush to buy up the cereals 
that offer "half the flakes at twice the price."

Instead, they seek value for their money - more, better, 
new & improved lower prices.

This is true of business people, too. It is a rare 
purchasing agent who gets promoted for buying 'leaders in 
their field,' or choosing a supplier because 'it has been 
going up in price'. Even in their professional lives, 
people want value for money. They shop for the best value 
in their computers. They bargain with suppliers for 
better deals. They will work for hours, days, weeks, to 
get a small reduction in the price of their raw 

Buying a business is no different. If you went out to buy 
the corner gas station or funeral would want 
to examine every detail and make sure you were getting 
value for your money. You wouldn't rely on a stochastic 
chart or media buzz. You'd want to make sure you were 
getting something that would pay off. If you couldn't get 
the information you needed, you'd probably pass...and go 
look for another business for sale. 

In all these transactions, people think as individuals... 
using direct, personal information and experience 
(erfahrung)...and make their decisions as though 'the 
market' did not exist.

But most people approach investing in an entirely 
different way. They are no longer interested in value for 
money, because they have no idea what value is...or how 
much of it a dollar should buy. Instead, they make their 
investments - as if investing were voting or a team sport 
- using mob-thinking and the collective knowledge 
(wissen) of the financial media.

Even Al Gore and David Ignatius, as well as Abby Cohen 
and Henry Blodget, drive on the right hand side of the 
road, close their doors in the wintertime, and avoid the 
dark alleyways of S.E. Washington. I don't know any of 
them personally, but I see no reason to doubt that they 
are smart people...they may even have a sense of humor. 
Like everyone else, they are not likely to be drawn into 
a store that advertises: GOING OUT OF BUSINESS...PRICES 

And yet, collective thinking turns them all into 
jackasses. This is not a matter of opinion - it is simple 
fact. Gustave Le Bon explains (courtesy of Marc Faber):

"The reasoning of crowds is always of a very inferior 
order...however great or true an idea may have been to 
begin with, it is deprived of almost all that which 
constituted its elevation and its greatness by the mere 
fact that it has come with the intellectual range of 
crowds and exerts an influence on them." 

Crowds think like they act - like morons. Even smart 
people, when they rely on that primitive little part of 
the brain responsible for collective thinking, become 
very stupid. Carl Jung made the point: "A crowd of a 
hundred influential people together make up one 

The bigger the crowd, the lower the common denominator of 
intelligence descends. That is part of the reason that 
the financial media has been dumbed down in recent years 
- it is playing to a much wider audience.

Collective thinking is difficult to resist. It is so much 
more fun to worry about what 'we' should do about public 
health ...or how 'we' can improve 'our' schools...than it 
is to actually do some exercise, stop eating like a pig 
and help your children to learn something. And what a 
thrill it must be to start a revolution and call each 
other 'comrade'...and have the pleasure of robbing and 
destroying 'our' enemies...

Collective thinking is what keeps CNBC in business. 
Investors, cut off from any direct knowledge of the tech 
industry, for example, and hearing almost every day about 
how people are getting rich by investing in tech stocks, 
find it almost irresistible to 'get in the market'. 'The 
Future is Technology' they've been told. Who wants to be 
left out of the future?

And so they pile into expensive stocks like teenagers in 
a Volkswagen - and drive off as though they had somewhere 
to go.

But resisting collective thinking is exactly what is 
required for good investing. And it is especially 
important at those moments in market history when the 
great mass of investors are about to suffer the 
consequences of their own collective delusions. It is all 
very well to go along with Napoleon on his march to 
Moscow...but the trip back will be a nightmare.

How do you do it? How do you just say no to crowd 
thinking about investments?

Well, you have to approach investing as a private buyer 
would. You don't want to 'get into the market' or 'invest 
in stocks'. You just want to find a decent business. So, 
you have to do what Warren Buffett does. Ask yourself, 
would you buy the entire business if you could? Ask 
yourself that question of General Motors or Philip Morris 
and the answer might be 'yes'. Ask it of Cisco or 
Amazon...well, you can decide for yourself.

You might also pretend that 'the market' did not exist. 
Suppose you would have to sell the stock as though you 
were selling a used car. You'd have to convince a private 
buyer that the shares represented good value for the 
money. Again, you might be able to get rid of your GM 
shares...but you might have to send your AMZN shares to 
the junkyard.

And what about gold, bonds, antiques, real estate? You 
cannot know whether prices are going up or down. Every 
day, in the Daily Reckoning, we try to understand what is 
going on in the world...and often guess about which way 
prices are likely to go. But you don't want to base your 
investments on those guesses. You need to stick to the 
rules - and buy only what makes sense as a good value, 
such as the 'Darned Cheap Stocks' I mention from time to 
time in these letters. Then, you don't really care what 
happens to the collective 'market' - you have investments 
that you are happy with.

Does this sound too 'straight and narrow'...too dull and 
boring...too Calvinist? Perhaps it is. But it doesn't 
mean you can't take some of your money and bet on a tech 
stock...or on the crap tables in Las Vegas. You don't 
want to take money too seriously, or you'll end up stuck 
in the eye, unable to get into heaven. 

But it's a good idea to understand the difference between 
investing and entertainment - just as you understand the 
difference between sin and wickedness.

There's a time and place for everything.

Your preachy correspondent...still trying not to be a 
Calvinist sourpuss,

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