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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Take Me To Your Leader

*** Quick...hold up a a stake through its 
heart...the Big Techs refuse to die...
*** Soft landing gets softer...'new orders' slip for 4th 
month in a row...
*** The euro gets airborne, investors 'clueless'... Bernie 
Ebbers' stock gets hammered...Cramer expects 'the positive' 
to happen...the wind howls and the cows bellow...

*** Tech stocks came back to life on Tuesday...but quick-
thinking investors drove a stake through their heart less 
than a day later.

*** Wednesday, two things came out. First, Bernie Ebbers of 
Worldcom provided the stake - by announcing that sales were 
weakening. Then, the National Association of Purchasing 
Management produced the hammer - reporting its monthly 
figure for the manufacturing sector. For the 3rd month in a 
row, the index was down. Only once in 53 years has the 
index diverged from the rest of the economy, says Caroline 
Baum, a columnist on "As manufacturing 
goes," she says, "so goes the nation." 

*** The NAPM said that new orders slipped for the 4th 
consecutive month. And "even high tech isn't growing as 
strongly as everybody thinks," said Norbert Ore of the NAPM 

*** So the 'soft landing' is believed to be getting even 
softer. The Fed's Beige Book said it sees "slowing growth 
in some areas." The typical investor thinks he can feel the 
tires on the runway. He's ready to get up, stretch his 
legs...and get back to the business of growing at a 
'sustainable rate,' as the Fed puts it.

*** If it were only that easy! How nice it would be if we 
could all just ease off on the pedal of life a little and 
go on living forever. Wouldn't it be nice too, if the heat 
of summer could just give way to the cool evenings of 
autumn? Why does winter have come, too?

*** The Dow dropped 71 points yesterday. The Nasdaq fell 

*** Worldcom fell 20% to $18. As recently as July it was 
over $50. Another telecom supplier, Altera, lost 19%. The 
North American telecom index fell 4.5% yesterday.

*** You may remember that Worldcom's CEO, Bernie Ebbers, 
received the 'margin call from hell' a few weeks ago. 
Ebbers bought his own stock on margin...and then, when the 
stock went down, had to sell shares in order to cover the 
margin call. He seems to have made the same mistake as 
IBM's directors. Though they bought what they knew best - 
they forgot the cardinal rule of investing: but low, sell 
high...not the other way around.

*** There were about the same number of stocks going up 
yesterday as going down. And not much difference in new 
highs/new lows either.

*** "We're closer to clueless than any other spot in the 
knowledge spectrum," said Jim Weiss of State Street 
Research, quoted by the NYTimes. Weiss refers to the 
confusing indicators and stock market movements of the last 
few days. But investors are almost always clueless. That is 
why it is so important to stick to the basic rules of 
ignorance: buy low, say please and thank you... and never 
have an affair with an IRS agent's spouse.

*** AT&T lost another $1 to close at $22. 

*** The current generation of investors seems to think it 
invented technology...just as each new generation thinks it 
discovered sex. And yet, writes Christopher Byron, "An 
entire generation of companies that was once thought to 
stand at the absolute pinnacle of technological achievement 
and possibility are being consigned by Wall Street to the 
ash heap of history."

*** Byron refers to companies such as Kodak, Xerox, AT&T 
and Polaroid. Kodak is down a third since August...Xerox is 
down 70% from a year ago, and Polaroid has half the market 
cap it had in 1995. Polaroid's revenue is unchanged from 10 
years ago...and it's trading at less than 7 times earnings. 
Good companies? Cheap? Maybe. 

*** "You can hardly have $6 billion in revenues and do 
worse than Eastman Kodak has lately," writes Lynn 
Carpenter. Kodak is a "don't-touch-it-with-a-10-foot-pole 
stock" says Lynn, which "naturally, piques our contrarian 
interest." Since writing about the company for the November 
issue of Fleet Street Letter - just last week - the stock 
has already jumped 20% to $43. But, "you could buy this 
stock all the way up to $53 and still have room for double 
digit returns." Kodak is selling at a P/E of 6.9... and 
pays a dividend of 4.8%...and has recently been placed on 
the buy list of a big, institutional value player. (see: 
It's A Kodak Moment: Snap It Up)

*** Well, the 'flightly' euro seemed to take the air 
yesterday - rising 1.5%. The steadfast dollar seemed loaded 
with too much freight - the dollar index dropped sharply on 
the NAPM news. Why does the dollar matter so much? And when 
will investors meet their Waterloo? More below...

*** "As you know, [Amazon] has floated $2 billion (that's 
US dollars) in bonds," says Jonathan Poe, at the META 
Group, by way of Bethany McLean and "The bond 
market has been steadily bidding down the value of those 
bonds such that the call value is now 52 cents to the 
dollar, (very much junk status) which means that bond 
traders think that Amazon will default on its bonds before 
2008! The rate of return on Amazon bonds is currently 
16.5%... if you are an investor, and believe what the bond 
market is saying, you should sell your Amazon stock..."

*** The All Saints' service went as expected yesterday. 
After the service, people went to the graveyard, as is 
customary, to pay their respects to the dead. Cemeteries 
are amusing, sentimental...even mauldlin places. Many of 
the gravestones included photos of the dead, encased in 
plastic or behind glass. One showed a man with a fishing 
pole. Someone had placed a quote from a psalm on the tomb. 
I did not stop to read it, but hoped it was something 
appropriate, such as "Thy rod and thy staff comfort me." 
Another sported a photo of a Byronesque young man who died 
in 1931. 

*** But the weather seems to get worse and worse. The wind 
is howling this morning. It rains episodically. The cows 
bellow as if they see a butcher creeping through the woods.

*** Red Herring reports that venture capital investors are 
getting edgy too: "Underwriters have quietly begun entering 
special provisions into company prospectuses that allow 
insiders to sell a portion of their position in a company 
prior to the standard 180-day lock-up period. This new 
banking device is called an early lock-up release, and it's 
popping up all over the place. Aclara Biosciences, via 
Deutsche Banc; Avici Systems, via Morgan Stanley; and two 
Goldman Sachs clients, ONI Systems and Sonus Networks, have 
all recently structured pre-180-day lock-up provisions into 
their Securities and Exchange Commission-required S-1 

*** But James Cramer of is still thinking 
positive: "My thinking has been and remains that unless we 
get an improvement in the fundamentals of tech or we get a 
Fed bias to easing, we can't break out of these ranges that 
are being established every day. If we get a further 
deterioration of the fundamentals - as defined by slowing 
PC growth, lower wireless sales, less capital spending by 
telecoms, and no respite from the awful bond market - then 
we could break to the downside.

"But if we get the fundamentals to stabilize and the Fed to 
become more lenient, then we have a chance for a marvelous 
break to the upside. You know me. One of my rules is that 
with the market, what needs to happen positive tends to 
happen. I am becoming more and more convinced that we are 
on the right path for a breakout to the upside."

*** Yes, the positive tends to happen in a bull market... 
but in a bear market what tends to happen is negative.

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"Make money while you sleep."

Socialist President of France, Francois Mitterand,
describing, with contempt, how investments work

As recently as three months ago, it was widely believed - 
including by your author - that the end of the Tech Bubble 
would also mark the end of the broader illusion that you 
can get rich without effort or sacrifice.

But instead of going down with the Nasdaq, in recent weeks, 
the Dow has moved in the opposite direction. When the Techs 
get hammered down...the Old Economy stocks tended to bounce 
up. Ordinary investors are taking the destruction of 
technology casually, as they did the destruction of the 
previous market leaders - the dot.coms.


Apparently, the appeal of the stock market runs much deeper 
than the dot.coms, the Big Techs or the Biotechs. Stock 
after stock...sector after sector...may get killed. But 
investors still have faith. Not just faith in the bright 
shining star of stock market wealth...but in the whole 
constellation that includes the Fed, the dollar, Alan 
Greenspan, and the U.S. miracle economy.

When will the faith be destroyed? I asked Dr. Gary North 
recently in an e-mail.

"Dow 2000." was his terse reply.

Of course, I don't know if the Dow will descend to 2000... 
or not. And Gary may have been exaggerating to make his 

But investors will not give up on the dream of easy money 
readily. They will only give up when the dream becomes so 
expensive they can no longer afford it. When and how that 
will happen is the subject of today's letter.

Collective thinking is remarkable in that it can turn 
around in a second...but it can also be almost unbelievably 

"Crowds identify themselves with one or several leaders," 
Marc Faber wrote in his October issue, "and with an idea." 

In "The Greek Way of War," author Hansen explains that the 
leader of a group of soldiers went into battle in front of 
his men, rather than behind them, as is now the custom. The 
leaders of the losing side almost always died in the 
battle. And a Greek phalanx, seeing its leaders cut down, 
was much more likely to break ranks and retreat. In just a 
few moments, the psychology of the entire group would 
change - from determination and optimism to complete 

The difference between the German army's collapse in 1918 
and its fight to the bitter end in 1945 was essentially a 
difference in leadership. Sigmund Freud argued that the 
German masses were emotionally connected to Hitler, 
Goebbels and the rest of the Nazi leadership in a way they 
never were to the Kaiser. When the going got tough in 1918 
- the Germans did the reasonable thing, they gave up and 
made peace. But when the going got very tough in 1945, the 
Germans just kept fighting - even though the situation was 

Technology has been the stock market leader. Perhaps some 
investors are emotionally attached to it and disheartened 
by the setbacks it has received. More likely, most 
investors have their eyes on a different leader: the dream 
of getting rich in stocks. 'Technology' is merely a 
conveniently vague rationalization for why it is possible. 
As noted above, technology has been with Homo Sapiens from 
the very beginning. But the current generation of investors 
thinks it discovered it for the first time. 

Now that the Big Techs are getting under fire, investors 
are beginning to get nervous. They're asking questions. But 
the questions only seem to go so far - wondering what the 
tech companies really do, how many computers the world 
really needs, how many miles of cable, how much a company 
can afford to pay for a wireless license, how long an 
investor should wait for a company to be profitable.

So far, I've seen no one question the fundamental belief 
that all New Era investors share: that you can get rich on 
stocks just by being 'in the market'. Historically, the 
real rate of return from stocks is only about 5%. You can't 
get rich at 5% - unless you live to be very old. Investors 
believe they can do far better than that - with or without 

So, the techs can blow up in their Silicon Valley 
bunkers...and still investors will cling to the hope of 
getting rich in stocks. It is the idea that they are 
faithful to, not the current market leaders.

Which brings us back to what will ultimately destroy their 
faith. Already, most investors - especially tech investors 
- have taken losses. Many of those losses are just 'paper 
losses' of course - because the wealth destroyed was only 
on paper too. As one investor put it, "I've been investing 
in technology since 1995 - I may have lost money in the 
last 6 months, but overall, I'm way ahead of the game."

The game, however, is not over. My guess is that Mr. Bear 
has not yet sent in his best players. Right now, out in the 
bullpen, I can almost see one of his most under-rated 
rookies warming up. Could it be? The euro? He wouldn't put 
this green, farm league loser into such a big game, would 

Ah yes, dear reader, I tried to warn you. Once again, I am 
going to air my view that the dream of easy wealth in the 
stock market rests on a footing of dollar bills. That 
footing, contrary to mass thinking on the subject, is much 
less steadfast than people believe.

"It remains our conviction," writes Dr. Kurt Richebacher, 
unintentionally speaking for both of us, "that the greatest 
threat to world economic and financial stability is the 
dollar's impending collapse." (see: The Secret Fear)

And more on that tomorrow...

Your steadfast correspondent,

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...

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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"

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Last modified: April 01, 2001

Published By Tulips and Bears LLC