*** Saved by a couple pennies of earnings! What a crazy
market...
*** The Really Big Bottom - still ahead...
*** Amazon orders more books...euro goes - surprise,
surprise - down!... and $2 trillion goes to money
heaven...
*** "Uh, oh...oh la, la"...Rafael and Isabelle, the
financial analysts who share the office with Addison and
me here in Paris, were watching the Nasdaq. Yesterday
morning, it looked like the Big Techs were going to have
another very bad day.
*** But along came JDS Uniphase with 2 cents more of
earnings last quarter than expected...and bingo! The
markets turned around and ended the day in positive
territory. Why would a couple pennies of earnings by a
single overpriced company make any real difference to
investors?
*** A back of the envelope calculation suggests that JDS
Uniphase is selling for more than 100 times earnings...
after losing $1 billion on about $800 million in revenue.
If the company continues to grow by 100% per year for
about 4 years, today's stock price will be justified.
Will it? I don't know, but I'm perfectly happy to let
someone else find out.
*** The Dow was up 53 points by the close of business.
The Nasdaq rose 42 points.
*** 1455 stocks advanced; 1394 declined. 42 hit new
highs; 108 hit new lows.
*** Each time the Nasdaq seems to be heading towards
3000, it bounces back. So there was more salacious talk
of 'bottoms' - with most investors convinced that a Big
Bottom has been reached.
*** Amazon.com rose another $5 yesterday...pulling itself
out of the mud. This is good news. Michel reported to me
yesterday that Amazon had ordered another 60,000 francs
worth of books from us - including many obscure titles
that seemed impossible to sell.
*** But someone in the Amazon organization seems to have
gotten wind of the Daily Reckoning's coverage of the
Amazon story. Evidently, the folks floating down the big
'river of no returns' don't appreciate my views. They
think I don't like the company.
Not true. I love Amazon. Amazon - great company. Great
business model. Just keep ordering those books.
*** And keep selling the euro. My rent fell again
yesterday as the euro hit yet another record low. It's
about 30% down from where it began.
*** Kevin Klombies, who predicted the ECB intervention
under $.85 a few weeks back, says $.82 is a support level
for the euro... he's a buyer at $.80. Rick Ackerman
expects the Esperanto Currency to drop to the mid-70s.
*** Everybody had an opinion: "Business at the speed of
molasses has driven capital out of euros by the
billions," says the Oxford Club's Steve Sjuggerud. "It
has been estimated that net outflow from Europe to the
U.S. this year alone will reach $300 billion.
Intervention by central banks in the currency markets
will be helpless to stem the tide. In fact, a crashing
euro may just be the kick in the pants these
bureaucracies need." (see: The Bright Side Of A Crashing
Euro)
**** Half the stocks on the Nasdaq have lost half their
value - a total loss of about $2 trillion. That money
didn't go back to its rightful owners - it disappeared.
It went to money heaven, where it will no longer be
troubled by tort lawyers, newspaper columnists, rap
singers, presidential campaigns, Lee Greenwood, Barbara
Streisand, MTV or andouillette sausages. The presence of
any of these things would make the promise of heaven the
greatest fraud the human race has ever endured.
*** And half the households in America own stock.
Hmmm...let's see, that's a loss of about $40,000 per
household! Yet, according to a University of Michigan
study the average net worth of American households is
just over $30,000. Hmmn...
*** And the losses have barely begun. The Nasdaq still
trades at about 120 times earnings. It will probably fall
in half, at least, before the Really Big Bottom is
reached. Like all big bottoms, this one will be the
result far too much consumption and far too little
Calvinist discipline.
*** "The American consumer is rapidly running out of new
buying power," writes Dr. Kurt Richebacher in his October
newsletter. Dr. Richebacher notes that consumer spending
is going down. Why? "If you think it's due to credit
restraint, you are grossly mistaken," he continues, "This
restraint is coming from a highly surprising and, above
all, ominous source: sharply lagging growth of personal
real disposable income." In all of 1999 and the first
half of 2000 real disposable incomes have been growing at
less than half the rate of the GDP. And GDP grew at about
half the rate of debt. And with the wealth effect in
reverse and picking up speed, Americans have little money
to spend. (see: Free Fall of the Dollar - a la 1987)
*** Oil rose 75 cents. Gold fell $1.30.
*** There are rumors that a big bank in Argentina is
close to going broke. Argentine Brady Bonds fell to yield
more than 9% above U.S. government bonds. Now, there is a
rumor of a U.S-led bailout. Take your pick - Argentine
bonds or Amazon bonds. Both bring you more than twice the
yield of U.S. bonds. But which is most likely to pay off?
*** "The Mexican government has a history of developing
little bits of its coast," writes Kathy Peddicord from
Mexico. "Now it has set its sights on the Costa Maya.
Traveling in this region in early August I saw diggers at
work cutting new roads and crews at work stringing
electrical cables. The infrastructure is on its way. Soon
these long stretches of white sand won't be so difficult
to get to. And when access is easier...prices will rise."
"This is a moment of opportunity for the investor," she
adds. "This land will be worth more in a few years than
it is today. Maybe a lot more." (see: Return to Costa
Maya)
*** An actual telephone call at the office yesterday:
"Hello..." Rafael answered the phone.
"Oh...you're not Amelie. I was calling my cousin
Amelie..."
"I'm sorry, Madame, but there seems to be a problem with
the phones lines...we often get wrong numbers..."
"Did I dial the wrong number...?"
"No...it's probably the right number ... the lines must
be crossed..."
"Well, could you give her a message...?
"But, Madame, she is not here...this is a publishing
business...you have the wrong number...
"But you said it was the right number...Then let me speak
to Georges..."
"You don't seem to understand, the phone lines are
crossed...you dialed the right number...but you reached
me...not your cousin..."
Would you like a FREE CRUISE along the golden sands
of the Chang Jiang River...a FREE EXPEDITION exploring
the ancient palaces of Kathmandu...or a FREE TREK through
primitive jungles on an Amazon safari?
If you ever dreamed about the romantic life of a travel
writer, here's a very unusual opportunity to actually
live it:
(http://www.agora-inc.com/reports/twcr/dailytwc1)
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
One of 6 children, Henry realizes that a little dramatic
flourish will get the reader's attention.
It turned out that he was not really upset...but merely
frustrated. He has been staying at an abbey deep in the
French countryside with his school class. He mentioned
something about a fire - but, like the key clue in a
mystery novel, gave no further details. His only
complaint, with himself, was that he kept losing pens and
pencils - and perhaps underwear.
Henry seems to have a flair for writing. In an earlier
stage of his academic career, parents were called in to
the school to encourage the children to write. Each
parent worked with two or three students. But Henry was
so prolific, he needed one long-suffering parent all to
himself.
And maybe I have already told you this, but I will do so
again - the story of how Henry, at the age of 6, came to
be considered a genius by his teachers.
You may be wondering, as you often must, what this has to
do with investing. Well, I don't know either. But since
the Daily Reckoning is free, I feel entitled to some
gratuitous bragging about my children from time to time.
And perhaps, you'll find something in this story or what
follows that may be useful to you.
When kids begin school they are given a simple test to
make sure they are ready. The children at 5 or 6 cannot
yet read, so pictures of various things are held up...as
the kids are asked to identify them.
Well, the background to the story is that we were living
on our farm in Maryland, and Henry would help milk the
cows and goats from time to time. Being an inquisitive
chatterbox, he kept the dairyman busy by asking
questions, inducing a flow of information about the dairy
trade.
So, when the teacher held up the cards, Henry correctly
identified the cat as a cat, and the dog as a dog...but
when he got to the cow Henry chirped, "Oh...that's an
American short-horned milking breed."
Part of the program out at the abbey was an introduction
to computers and the Internet. Every child in the
civilized world is now supposed to learn how to use the
Internet before he learns how to conjugate verbs or find
the median line of a triangle.
What's more, teachers now expect their students - at
least here in Paris - to have access to the Internet at
home. Homework assignments often involve Internet
research.
So important is Internet access thought to be that
editorialists worry about the 'Internet gap' between rich
countries and poor ones, and between black and white
population groups in the US.
At this point, dear reader, you may be expecting a
curmudgeonly - almost sourpuss - comment from your
editor. I won't disappoint you:
Now that the Internet is considered an indispensable
learning tool, I can't help but wonder how the poor
unfortunates in pre-Internet, pre-Bandwidth plenty era
ever got along. Aristotle, Archimedes, Plato, Plutarch,
Gallileo, Michaelangelo, Erasmus, Pascal, Newton, Jimmy
Rogers, Jefferson...why do I even bother to list the
names? Rockefeller, Carnegie, Morgan...in any era, in any
pursuit...throughout all of mankind's history - people
have done remarkable things without ever getting an email
message or typing out www.
Dylan Thomas, who was born on this day in 1914, wrote in
ink on - would you believe it - paper:
"In my craft or sullen art
Exercised in the still night
When only the moon rages
And the lovers lie abed
With all their griefs in their arms,
I labour by singing light
Not for ambition or bread
Or the strut and trade of charms
On the ivory stages
But for the common wages
Of their most secret heart"
"What we call progress," said Havelock Ellis, "is the
exchange of one nuisance for another nuisance."
The Internet is certainly a handy communications tool...
like the telephone or the television. But it doesn't
improve the quality of a writer's poetry...and could even
reduce the wage rate 'of their most secret heart.' Like
TV and the telephone, the Internet is a great tool for
people who want to waste their time or the time of
others.
Hardly a day goes by that doesn't demand hours of time
spent handling various Internet-related chores. My e-mail
in-box has hundreds of messages in it at any given
moment. Which ones are important? Which ones are insipid?
Which ones will interrupt my thought process or maybe
even my sleep? I just don't know. But I know it will take
me a long time to find out. As I have pointed out many
times, the world has not too little information, but too
much - most of it useless rubbish.
No respectable desk from Helsinki to Singapore is without
its computer screen. Take it off, and the desk is like a
4-star general without his clothes on...a figure of
ridicule and contempt. And yet, how many hours of each
working day are wasted, sorting through the useless
information delivered in bulk via Internet?
Sophia, doing a research project for school, spent hours
on the Internet trying to find out about some event in
history. In less than a minute, better information was
available from a discarded set of encyclopedias, now
gathering dust on the shelves, like the forgotten horse
collars in the barn.
You may want to disregard this letter as the ruminations
of a romantic fuddy-duddy, but not every technological
development is beneficial. Television, which lights up
the houses of even the poorest families in America, is
probably a net loss to everyone. Hours and hours are
wasted in silent viewing - which could have been used to
produce things...or at least to get in a good argument
with your spouse. Who has not lost a good drink...or a
good meal...or maybe even moment of honest reflection to
the constant bawling of the electronic media?
Are people richer since the advent of the Information
Revolution? Not really. Real incomes peaked in the 70s.
People work more hours now, and more family members work
per household, but real disposable income per hour worked
is actually down. And most recently, as noted above, real
incomes are actually rising at only half the rate of the
GDP.
What's more, the Internet is expensive - eating into net
family income like a starving Ethiopian into a banana
tart.
"Twenty years ago," observes Marc Faber, "[a family]
spent its income on housing, clothing, food appliances,
cars a radio and a TV. Today, it will spend additional
money on a DVD player, computers, fax machines, printers,
several cellular phones and a whole host of other new
electronic gadgets...modern society requires people to
continuously enlarge the 'basket of goods' that are
considered necessary to lead a 'good life.'
My question is simply this: is all this communications
gear really improving the quality of life? Or is it
impoverishing us...drowning us in trivial pursuits and
time wasters as television did?
If the Internet does not make us richer...perhaps it
makes us happier. The most popular websites, I am told,
are those that offer pictures of people without any
clothes on...doing things that are usually done in
private. Surely, this amusement must lift the spirits of
the general population. After all, Bush's comment that a
NY TIMES reporter resembled a 'major league' fundamental
aperture lifted his poll standings.
But the only surveys I have seen on this subject suggest
just the opposite. People report that they are less happy
today than they were before Al Gore invented the
Internet.
The only figure I have readily in hand is this (from the
Internet, of course):
*** A shrinking share of Americans is happily married.
The percentage that said their marriages were "very
happy" fell from 60% in the mid-1970s to 53% by the late
1990s.
What to make of this? What to make of the Internet...and
all the other communications paraphernalia...?
It is not necessarily bad...but like every technological
'improvement' - it comes at great cost.
Your upbeat...plugged in...e-savvy correspondent...
Bill Bonner
P.S. Soon after Henry was declared a 'genius,' I decided
to conduct my own test:
"Henry," I asked, "if you were in the bathtub with the
water running...and the water was getting up to the
rim...and you couldn't turn the water off...what would
you do?"
"Uh," said the genius pre-schooler, who didn't think of
pulling the plug, "go get you, Dad."
P.P.S. A better-known poem from Dylan Thomas:
"Do not go gentle into that good night,
Old age should burn and rave at close of day;
Rage, rage against the dying of the light.
Though wise men at their end know dark is right,
Because their words had forked no lightning they
Do not go gentle into that good night.
Good men, the last wave by, crying how bright
Their frail deeds might have danced in a green bay,
Rage, rage against the dying of the light.
Wild men who caught and sang the sun in flight,
And learn, too late, they grieved it on its way,
Do not go gentle into that good night.
Grave men, near death, who see with blinding sight
Blind eyes could blaze like meteors and be gay,
Rage, rage against the dying of the light.
And you, my father, there on the sad height,
Curse, bless, me now with your fierce tears, I pray.
Do not go gentle into that good night.
Rage, rage against the dying of the light."
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