*** Oooh...that Mr. Market - always full of tricks...
*** "Election Still in Doubt" says a headline on today's
Reuters wire...I know I have my doubts...Hillary for
President?
*** When the going gets tough...Heidi gets going; More poop
on Pets.com...the miracle of collective thuggery...and,
yes, more!
*** Mr. Market is full of surprises. On Tuesday analysts
were almost unanimous - whoever won the election...
Wednesday would produce a rally.
*** Well, Wednesday came and went. Neither Mr. Bush nor Mr.
Gore had won. And the market did not rally. Instead, the
Nasdaq fell more than 5% - or 184 points. The Dow was down
too - 45 points.
*** You have to admire Mr. Market - he always seems to have
some tricks up his sleeve and always finds new ways to make
fools out of us.
*** Take poor Henry Blodget - the Merrill Lynch Internet
analyst who never met a dot.com he didn't like. He was
bullish when the dot.coms hit the market as IPOs. He was
bullish when prices shot up into the stratosphere. And he's
still bullish - now that they've come back down with a
thud.
*** For example, Mr. Blodget was bullish on Pets.com when
it trading at $14... and then, after the stock had fallen
about 90% - he downgraded his rating from "buy" to
"accumulate." If you wanted to accumulate shares you
certainly could have gotten a lot of them. They were
trading at only 8 cents on Tuesday when the company
announced that it was putting itself to sleep.
*** Of course, the e-pet lovers did everything they could
do to save the company. But, to paraphrase a NY Daily News
headline from years ago: Wall Street to Dot.coms: DROP
DEAD. More below...
*** Meanwhile, Priceline.com is also in the news as another
key executive announced her departure. Fortune Magazine's
2nd most powerful woman in business, Heidi Miller, said she
was leaving last week, after 9 mo. in the dot.com world -
and about a 90% collapse of the stock price. When Heidi
joined Priceline.com things were much different. The
financial media wondered how Old Economy companies would be
able to keep talent in the face of competition from the
stock options and glamour of the dot.com world. Now we know
the answer. When the going got tough for Ms. Miller, she
got going - and will probably end up right back in the Old
Economy where she began.
*** "The American people have now spoken," Bill Clinton is
reported to have said to the NYTimes, "but it's going to
take a little while to determine exactly what they said."
*** With the election still in doubt, analysts described
Wall Street yesterday morning as a "wait and see
situation." But investors could not wait to dump tech
shares. Cisco had let the cat out of the bag: inventories
were piling up - look for weak sales ahead. Cisco fell more
than $4 yesterday. Broadcom sold off by $24.
*** The whole sparkling spectrum of the tech rainbow
clouded over yesterday. And a few companies, such as
Priceline.com, mentioned above, plunged into darkness.
Priceline.com - the name-your-own-price auction site - fell
$3.25.
*** 1301 stocks advanced on the NYSE yesterday. 1477
declined. There were 86 new highs; 38 new lows.
*** The dollar rose - with the Dec. Dollar Index up to 118.
The euro, of course, fell - but it still above its previous
lows.
*** "Today, Europe's central banks sit on a huge dollar
hoard of $222 billion," writes Dr. Richebacher. "One of the
arguments against selling dollars is that it would come at
a heavy cost to the ECB's exchange reserves. But what is it
that makes these reserves so precious? ... Nothing but
foolish thinking."
*** In fact, Richebacher wonders, "what would happen to the
euro-dollar exchange rate if the ECB declared its dollar
reserves 'excessive', and decided to unload about $50
billion? To be sure, the mirage of dollar strength would
vanish within minutes. It would cause panic. Under a system
of floating exchange rates, such a decision appears
rational." (see: Europe's Large Dollar Hoard
http://www.dailyreckoning.com/body_headline.cfm?id=742)
*** Oil fell slightly. Gold rose 70 cents.
*** The election is still in doubt. But whoever wins may
turn out to be the big loser - perhaps the Herbert Hoover
of the 21st century. William Fleckenstein explains:
"When millions of Americans realize that not only are they
not going to be rich soon, but they may also have problems
keeping their jobs and retiring at all, whoever is in power
will be blamed.
"[I]t is almost preordained ...given the size of the bubble
that has been created and the number of participants that
have become involved. The stock market is the economy. It
is on shaky ground and bad things are going to happen. In
my opinion, it is not debatable and the die has been cast."
(see: It's Not About Indecision
http://www.dailyreckoning.com/body_headline.cfm?id=741)
*** "Those whom the gods wouldst destroy are granted their
first wish." That warning from ancient Greece may apply to
presidential contenders as well as American consumers
looking for something for nothing. American conservatives,
voting for George W. Bush, could find their worst
nightmares realized - as predicted by William Rees-Mogg
more than 9 months ago. Lord Rees-Mogg guessed that
Republicans would win the White House - but that they would
be destroyed by the inevitable collapse of the great
financial boom.
*** Then, the nation, troubled and bitter, would turn to
the junior senator from New York for presidential
leadership in the 2004 election: Senator Hillary Clinton.
*** But we will have to wait and see.
*** One DR reader was disturbed by the logic of democracy.
His idea, stripped of its puerile slogans, is that people
who resent taxes are selfish and uncaring. And yet, if this
same reader were confronted by a group of thugs in a bad
neighborhood, he would probably be offended if they took it
upon themselves to redistribute his wealth. Isn't it
amazing how collective thinking transforms grand larceny
into a virtue? Even more remarkable is that the voter, like
the thug, gets to express his own virtue collectively, with
other peoples' money ...and thus relieves them of the need
to actually be kind to the poor fellow next door.
* * * * * * * * * * * Advertisement * * * * * * * * * * * *
Before Labor Day we began with a simple warning...
IT'S NOT ROCKET SCIENCE - GET OUT OF BIG TECH!
Bear market sentiment works hardest against the bull's
highest flyers: Intel, Sun, Oracle - you name a tech
darling - we'll show you how far they will fall...
? Yesterday's carnage: Oracle down 6.59%, Cisco
down 8.15%, Intel down 7.58%, and Sun - nearly
a perfect 10 - down 9.98%.
? Trouble is, you may own these stocks and not
even know it. If you still haven't - now is the
time to check your 'retirement' money. Will it
be there when the bear is done mauling?
Your FREE report: "While The Nasdaq Burns" will tell you
which stocks to sell. And, suggest 7 value-for-all-time
companies to keep your money safe. After a day like
yesterday - you simply can't afford to miss While The
Nasdaq Burns. Read it immediately.
A few months ago, Gary North reminds us, the cover of Money
Magazine told investors how to get rich:
Tech Stocks: Everyone's Getting Rich!
Here's how to get your share.
That should have been a tip-off...when 'everyone's getting
rich' - it's time to sell, not to buy.
"A week later," Gary continues, "the Nasdaq peaked. Now the
mania is faltering. One sign is the enormous volatility of
stock prices. On October 25 Nortel Networks fell 28% in
three hours... Why? Because it announced earnings of 18
cents per share...' beating Wall Street estimates of 17
cents a share... But its revenue 'fell below analysts'
expectations.'"
Investors are no longer in love with techs and dot.coms. In
fact, the relationship has gone a little sour. At times, it
seems that investors are just waiting for an excuse to dump
them...like a man waiting for an old car to break down so
he'll have an excuse to buy a new one.
Owning techs is no longer cool. In fact, it is as likely to
be a cause of embarrassment as pride.
If, a year ago, you had told someone that you were loaded
up with Intel, Cisco, Nortel, Amazon, Dr. Koop and the
other 'must own' shares of the Information Age, and you
would have immediately signaled that you were forward-
looking, successful...maybe even rich.
But now, the same statement will provoke looks of pity and
contempt - the kind of looks that are normally given to
people who forget to attach the cords to the bungee before
they jump. "How could you be so stupid?" will come to the
minds of your interlocutors, if not to their lips.
The collective mood that drives stock prices has changed.
Several websites have sprung up specifically to mock the
losses in the dot.com/tech area. Instead of marveling at
the new tech and net breakthroughs of the New Economy - as
did the aforementioned issue of MONEY MAGAZINE - these
sites watch 'burn rates' and estimate when companies will
run out of money. As Gary North put it, "The venture
capitalists will become vulture capitalists. They will buy
the bankrupt mistakes of other venture capitalists for
pennies on the dollar."
One of these sites is called Deathwatch. Dr. North quotes
from the homepage of October 16:
"Most of the stocks on Deathwatch are in the tank, just
like we predicted. Not that this is rocket science. All we
do is look at cash flow. When you run out of money, you're
in trouble. The incredible thing is that, for a brief
period in 1998 - 1999, people believed otherwise."
"Some stock graphs on Deathwatch have flat-lined. Trading
in those stocks has ceased. We'll be seeing more of those,"
says Deathwatch triumphantly.
Ray DeVoe surveyed the carnage in mid-October.
AOL - down 44%
AT&T - down 59%
Cisco - down 39%
Dell - down 61%
Hewlett Packard - down 38%
Intel - down 52%
Microsoft - down 55%
Lucent - down 76%
Oracle - down 33%
Worldcom - down 59%
Yahoo - down 73%
Ray discovered that $2 Trillion of market capitalization
had been lost in just 14 of the biggest, most popular tech
stocks. (see: What Went Wrong With Wall Street
http://www.dailyreckoning.com/body_headline.cfm?id=
Smaller companies suffered even greater damage:
Breakaway Sys. (seems to have broken down) - down 96%
MicroStrategy (now with a micro cap) - down 93%
Palm (which seems to have lost its pilot) - down 71%
Priceline - down, down, down 97%.
Gary North quotes Christopher Byron with a similar
recitation of the wreckage on Oct. 23:
"Almost all advertiser supported Internet stocks have
similarly collapsed," wrote Byron. "24/7 Media, Inc., an
Internet advertising shop, has dropped 89 percent so far
this year, to about $7. DoubleClick Inc., the leading
Internet ad agency, has fallen 90% to $12. Even Yahoo,
Inc., the largest online search service and bluest of the
blue-chip Internet stocks, has dropped 74 percent since
Jan.1, to $55.25."
"All business-to-consumer Internet stocks have crashed,"
continues Byron, and "Almost all business-to-business
stocks have tanked."
The Financial Times today carried an article about
Lastminute.com, whose shares dropped below one pound
yesterday. The company made its co-founder, Martha Lane-
Fox, famous as "the best-known woman in the dot.com world."
But Lastminute.com is down 80% from its peak and is now a
penny share - where probably most of the surviving dot.coms
will end.
"What major financial columnist or economic forecaster
predicted any of this in January," asks Dr. North.
"The U.S. stock market mania has captured the financial
experts," Dr. North continues, "as thoroughly as it has
captured the investors."
And it is far from over. The Nasdaq 100 still has a P/E
ratio of 125 - with a lot more downside and many more
deaths to watch before health is restored.
Lastminute.com, though now a penny share, still has 90
million pounds in cash. At their present burn rate of 4
million per month - they can survive for nearly two years.
Perhaps in that time they will even discover a way to make
money.
And the company still has a market capitalization of 150
million pounds. How much will the company be worth if and
when if finds a profitable business model? Maybe 10 million
pounds. Maybe nothing. But the deathwatch on the tech
sector won't stop until the rattles and wheezes have ended,
last rites are performed, and the corpses are finally
dumped in Potters field.
Hallelujah, even unto the grave.
Your cheerful, caring correspondent...
Bill Bonner
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Last modified: April 01, 2001
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