*** IT'S ALIVE! Tech Comes Back from the Grave!
*** Telecoms connect...Nasdaq revives...up more than 5%...
*** But consumer confidence shaken...it's just not the
same... Edgy cows...false notes...and more!
*** Just as we were admiring the corpse of the big
Technology Boom...recalling all the amusing moments we've
had with the Cisco Kids and the River of No Return...
...Yes, and I admit, a tear was rolling down my cheek as I
bid farewell to all the over-hyped wonders of the New
...and then, all of a sudden, the Nasdaq sat up in its
coffin and roared!
*** The Big Tech index rose 177 points - or about 5.5%. All
the familiar forms came back to life. Cisco rebounded
$5.81. Oracle jumped $1.38. "A lot of people," said Bill
Meehan in the Financial Times, "were waiting to get back
into Cisco and Intel."
*** Apparently they were. The techs were "pretty
attractive," said another analyst. So, investors bought the
dip and there was rejoicing on Wall Street and throughout
its many mass media outlets. Even Amazon went up nearly $4.
*** One source of the resuscitation was the French telecom
company, Alcatel, which reported an increase in profits of
109%. This put some juice back in the whole telecom
industry. And with it, the rest of the tech sector seemed
to revive too. As the Financial Times headline awkwardly
phrased it, "Technology Is Back In Wall Street Good Books."
[Good books? Exactly what is that supposed to mean? Maybe
one of our British readers could translate.]
*** But the Nasdaq still ended the month of October down
8%. From its peak in March to its October low, the Nasdaq
lost more than 40% of its value.
*** But yesterday, there was no looking back. Once the
cadaverous Nasdaq seemed to have made a miraculous
recovery, the euphoria was hard to contain. The Old Economy
rose along with the new. The Dow ended the session up 134
points. There were 2047 stocks advancing on the NYSE; 893
declined. 99 hit new highs; 51 hit new lows.
*** And IBM rose 5%. But Big Blue is in a class by itself.
The immediate reason for its share price boost was that the
company announced it would - surprise, surprise - buy back
more of its shares!
*** Share buybacks have been IBM's major financial strategy
for many years. "Since 1995," wrote Jim Grant recently,
"Big Blue has spent $36 billion on share repurchases, $1
billion more than its accumulated net income over the same
*** Well, what's wrong with that? Investors are supposed to
buy what they know...using their own personal erfahrung to
gain an edge on other investors. Who knows IBM better than
its own board of directors and managers?
*** Uh...just one problem. The idea is to buy low. Serious
investors accumulate assets at bargain prices...trying to
avoid driving up the price. IBM does the opposite.
*** "Early in 1995," explained Jim Grant, "IBM was paying
2.3 times book value for its own shares... In the first
three months of 2000, in what may or may not prove to be
the last days of this long-running fandango, it paid 10
times book..." This despite the fact that the company now
carries 80% more long-term debt than it did in 1995.
*** The price of oil rose in Asian trading this morning -
to just below $33/bl. Oil inventories in the U.S. still
seem to be going down. There's a cold wind blowing here in
Ouzilly... does it portend a colder winter? If so, the
price of oil could return toward $40 a bl.
*** Consumer confidence took its biggest plunge since 1998.
The Autumn of Anxiety syndrome is reaching into the homes
of Mr. And Mrs. Middle America.
*** But, for no particular reason, new home sales rose 9.2%
*** Bond market quality spreads are at their highest levels
since 1991. A recession is coming, says Bill King.
*** Investors, business people, and consumers are nervous.
Equities, Earnings, Energy, the Economy...all the E's are
troublesome. Something is different... (see: When Will
Investors' Psychology Change?
*** "What did they know, and when did they know it?" asks
William Fleckenstein. "With about the same frequency as the
publication of the latest Stephen King novel, Merrill Lynch
released another of its super-duper lists last week - the
10-best recommended stocks of all time (or until they
change their mind). One stock on the list was Solectron.
"This morning Solectron announced that it is going to
acquire an Asian competitor for $2.5 billion and, wonder of
wonders, the company needs to raise some money through
equity and zero-coupon bonds entitled LYONs - a vehicle
pioneered by Merrill Lynch. My question is, did the stock
make the list because Merrill knew financing is coming?
Nah, they wouldn't do that, would they?"
*** A congressional advisory group has recommended new
federal subsidies to bridge the "digital divide." Think how
much better Shakespeare's tragedies would have been if he
had not been on the wrong side of the digital divide. Or
*** Here in the middle of the French countryside, people
seem edgy. Pierre was so concerned about the 'tension'
caused by having Francois still working around the farm
that he came to see me to ask me to get rid of him.
*** Even the animals are edgy. Yesterday morning, two of
Pierre's prize bulls were standing out in the middle of the
road. The animals are so handsomely contoured - they make
me hungry just looking at them.
*** After three practice sessions, the little choral group
at St. Marcel's is to perform live today - at the 11
o'clock mass for All Saints day. We never did quite learn
our parts - but my hope is that the false notes will
average themselves out...and the music will echo off the
stone walls with confidence, if not accuracy.
*** So, you are spared. I don't have time to elaborate on
when investors will meet their Waterloo, as promised. It
will have to wait until tomorrow. Below you'll find an
essay from the Daily Reckoning vault... adroitly selected
by Addison, who's tapping his way through yet another
French holiday in Paris.
Did you know? After BLACK THURSDAY crash in '29 the stock
market briefly recovered...
Following the carnage of October, stocks rose until April
1930 - up 20%. Everyone thought the "correction" was over.
Then in late 1930, the stock market got hammered again. By
mid-1932, it had lost 90% of value. THE LESSON: never
assume the worst has already passed.
In Today's FREE INVESTOR'S LIBRARY you'll find two solid
recommendations for lowering your exposure to stock market
risk... it's simple: getting out of stocks doesn't mean you
have to stop making money.
Isabelle, here in the Paris office, tells me that just 2 or
3 years ago the French didn't even celebrate Halloween. You
sure wouldn't know it if you had taken le metro home last
night. There were goblins, creepy drooling men, and witches
galore. Some people even wore costumes. The French have
truly begun to get into the spirit of Festivus... more
p.s. This episode of The Daily Reckoning originally aired
on November 1, 1999... enjoy.
"Pumpkins. I'm going to plant pumpkins next year." Pierre
has been raising beef - big, beautiful Limousin beef - and
sheep for many years.
But the European Union is forcing down the subsidies for
beef. And sheep are disappearing from the region
altogether...there are no longer any subsidies available
for sheep farmers. French farmers cannot compete with those
in New Zealand and Australia. And wool prices are so low it
no longer pays to shear the sheep.
Cereals, on the other hand, are heavily subsidized. The
difference, Pierre explained, came about because the cereal
growers could leave their farms in slack seasons and go to
demonstrate in Brussels. Large groups of farmers always
strike fear in what passes for the hearts of politicians,
so the cereal farmers typically get half to two-thirds of
their income from the subsidies...not from selling food.
Farmers who raise livestock, on the other hand, cannot get
away. They're forced to stay on the farm day after day to
take care of the animals. They pose less of a threat to the
taxpayers' purse. Even with the subsidies still in place,
raising cattle is not a way to get rich. Pierre has
suggested that we put our farms together. Apparently, you
need bigger and bigger holdings to make money. And he needs
to build a big new barn to make the operation more
efficient. The return on investment? About 2%.
Maybe pumpkins are the answer. The big orange vegetables
are new to France. So is Halloween. All Saints' has been
recognized and celebrated for many centuries. But Halloween
is a new import from America, along with the whole shebang
of decorations, customs and commercial opportunities that
accompany it. Department store workers wore costumes in
Paris last week -- stimulating interest and sales, no
doubt. Even out here in the middle of nowhere, Halloween is
My children held the first Halloween party in this region
three years ago. The invitees had barely heard the word at
the time. The kids took a candlelight tour of our attic,
with staged shows of various spook-house exhibits. In one
room, however, I decided to surprise them. I lay on a
bed...in a room with wallpaper peeling off the walls and
creaking floorboards...and put a sheet over me as though I
were a corpse waiting for an undertaker.
As the kids came in, I began making a low growling
noise...and then sat up. The kids were so alarmed and
shrieked so loud I was afraid someone would call the
police. Then they flew down the circular steps so fast that
their little bodies were still spinning like tops as they
swirled out the front door and into the yard.
That was three years ago. Now, Halloween decorations are in
Along with new things to buy and a new opportunity for
There is a world of difference between All Saints' and
Halloween. The spirits that one honors on All Saints' were
not, after all, all saints. They were real. They were
spirits that might be honored...or feared. (Of course, if
you don't believe in the spirit world...you have no
business celebrating All Saints' anyway.)
But regardless of your views on the afterlife, All Saints'
requires at least some reflection...on the lives of our
forebears, on the challenges they faced and perhaps the
lessons that could be learned from them. At the very least,
you might stand before the grave of someone you
knew...offer flowers...and spend a moment recalling the
This is not a ritual that lends itself to the Internet age.
(But who knows...maybe you'll be able to order flowers via
Internet...and maybe the screen will prompt you to think
about certain aspects of the deceased. And maybe
AllSaints.com will be a big hit as an IPO, giving people a
way to celebrate the ancient holiday without ever leaving
their day-trading terminals.) [Who would have thought this
comment would seem so outdated just one year later?...
Halloween, on the other hand, is an example of what
Philippe Muray calls "Festivus." Muray has noticed the way
in which the genuine, dark, primeval, wild and dangerous
currents and undercurrents in society have been tamed...and
transformed into harmless celebrations. This applies not
merely to the shift from All Saints' to Halloween, but also
the political process, where genuinely revolutionary
parties have been replaced by a token opposition and
Last week I noted how you cannot even say what you want
about taxes anymore...without fear of criminal prosecution.
Yet, is there any real opposition - of a sort that might be
described as dangerous to the government? No, we celebrate
the First Amendment now; we do not practice it.
Likewise, America celebrates liberty. It is like
Halloween...an empty expression...a hollow festival...
something to feel good about. No reflection required. No
risk, either. But what would the ghosts of Jefferson and
Adams think of us?
Who cares? As the GDP increases...stocks rise...and the
spirits of Liberty remain in the grave...pumpkins are the
business to be in.
P.S. Reader Kathryn George straightened me out. All Saints'
Day was first celebrated in 607 by Pope Boniface IV, when
he converted the Pantheon Temple to Christian use. It was a
day to remember the Christian martyrs persecuted by the
Romans. Pope Gregory II proclaimed the following day, Nov.
2, All Souls' Day, to remember all dead Christians. The
French, always torn between Catholicism and rationalism,
compromised...rolling them both together into a national
holiday on the 1st.
Halloween, on the other hand, is a pagan Celtic
ritual...imported to America from Ireland. Some Christians
are appalled at the rise of Halloween over All Saints', on
this, the 2000th year since the birth of Christ. They
believe Halloween honors Satan, and marks a return to
paganism by modern society.
But the truth is, the rise of Festivus means that all the
gods...even pagan gods...are dead or dying. Is there a day
set aside to honor dead gods? Who gathers at their
gravesites to remember them? How about Huitzilopochtli? It
is said that as many as 50,000 maidens were sacrificed to
him in what is today the capital city of Mexico. Surely,
that deserves a moment of reflection.
A CONTRARIAN'S GLOSSARY
FESTIVUS - Festivus is the name given by Philippe Muray to
the latest phase in European (including American)
civilization. The gods are all dead. So are the
politicians. Who would die for his religion today? Who
would die for his politics? Or for matters of principle?
Serious ideas, holidays, ideologies, virtues, religions,
cultures and convictions have all been hollowed out. They
are no longer honored. They are merely celebrated.
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Last modified: April 01, 2001
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