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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

PARIS, FRANCE 
MONDAY, 27 NOVEMBER 2000 

 

Today:  The Information Glut

*** Santa's derriere... will he save Wall Street?...


*** Saddest Turkey-day since JFK was killed? (Please)... 
workers step up stock option law suits... 4th quarter 
projections trimmed...


*** Hong Kong economy busting seams at 3 times the US 
rate... Thanksgiving in Poitou with Mr. Deshais' black 
turkey... and more.

*** The big question today is: Will Santa Claus pay an early 
visit to Wall Street? The run-up to Thanksgiving was a big 
disappointment. Stocks fell as corporate earnings softened, 
the economy suffered, and the election soured. Investors are 
hoping for better things as the next big holiday approaches.

*** While lower earnings and a cyclical downturn in the 
economy should have been anticipated, the election was a 
surprise. A dim Washington Post columnist wrote that it made 
his Thanksgiving the saddest since JKF was assassinated. The 
poor sap.


*** On Friday, investors got what they thought was a glimpse 
of Santa...or maybe Santa's derriere. The Nasdaq bounced 149 
points - or more than 5% - as investors believed they had 
seen the `big bottom' they were looking for. 


*** "...there's light at the end of the tunnel," said one 
analyst interviewed by Reuters, "especially if the Nasdaq 
has hit bottom..."


*** But has it? Certainly, not a big bottom. But who knows 
what holiday plans Mr. Bear is making. 


*** The Dow rose too - 70 points. 


*** Even with the boost from Friday's half-day of trading, 
the Dow ended down 1.5% for the week. The Nasdaq, meanwhile, 
was down more than 4%.


*** For the year, the Dow is down 9.5%; the Nasdaq is still 
down more than 40% from its high and 32.2% for the year.


*** Financial reporters are still talking about a post-
election rally. But "any Bush rally should be sold," advises 
Bill King, "as it is likely to be short in duration, if not 
in magnitude."


*** Joe Granville: "Protect yourself in every way you can. 
Investors [should be] in cash, 91-day Treasury bills, and 
government security money market funds. Traders [should be] 
short. All margin accounts should have been closed out last 
month."


*** Analysts' forecasts of profit growth in the tech sector 
have been trimmed back dramatically. The consensus estimate 
is now 16% for the 4th quarter. It was 29%. And the first 
quarter of next year, doesn't look spectacular either. 
Analysts scaled back their expectations from 26% to 16%. 
Estimates for Dow earnings have also been reduced - from 
623.12 a month ago to 618.02 now.


*** Junk bond yields are almost twice as high as Treasury 
bonds - the biggest spreads in 10 years. Sophisticated bond 
investors see what `degenerate capitalism' has done to 
America's corporate balance sheets - and they don't like it. 


*** But home prices are still rising in the S.F. Bay area. 
The average house in the area is now selling for $385,000. 
In Santa Clara county, prices rose 26% over the past year - 
to an average of $95,000. Houses in San Mateo country rose 
27.4%.


*** "We're no different from other companies," said a 
spokesman for the world's most sensationally unprofitable 
firm. Amazon's workers are threatening to unionize - first 
in the U.S. and now in France and Germany. Jeff Bezos 
appears baffled. "Everyone is an owner," he says, including 
himself along with the $10/hour customer service staff. But 
the capitalists in the mailroom want more job security, now 
that people are being laid off and their stock options are 
becoming worthless.


*** The LA Times reports that lawsuits over stock options 
are soaring. Employees who get laid off may not go to court 
over $15,000 in disputed salary - but $300,000 in options is 
bound to interest some fee-chasing lawyer. In one case, an 
employee charged that she was fired the day before her 
options were scheduled to vest.


*** The number of visitors to the top 50 websites rose at 
only a 2.8% rate in the 2nd quarter.


*** Tokyo stocks were up more than 2.5% this morning. 


*** And Hong Kong reports that its GDP is growing faster 
than expected - up more than 10% over the last year. Hong 
Kong's economy is growing nearly 3 times as fast as the U.S. 
economy. Pity the poor citizens of Hong Kong; they are freer 
than you and I, they pay little in taxes, but they don't get 
to vote for president.


*** Mr. Deshais left us a turkey on the kitchen table. He 
had cleaned and plucked the bird. Once in the mood, he must 
have decided to do the job on a couple of geese too - which 
I found hanging by their necks in the garage as though they 
had made a suicide pact. 


*** Our turkeys are ugly black animals. But Mr. Deshais 
insisted that they were tastier than the white ones, though 
not as big. We ate the bird with all the trimmings on Sunday 
- including a stuffing made of chestnuts the kids had 
gathered...and sausage. Sweet potatoes, cranberry sauce, 
pumpkin pie - we might as well have been enjoying our 
Thanksgiving feast back in Maryland.


* * * * * * * * * * * Advertisement * * * * * * * * * * *

A Collective Manic Euphoria Swept the Land... 

At the beginning of the decade, the tech stocks of the 
day... radio... automobiles...electric utilities... 
airplanes... were driving the market up wildly. It truly was 
a New Era... If you had invested $10,000 in General Motors 
in 1919, it would have been worth $1.5 million in the summer 
of '29.

But by 1933 unemployment had reached nearly 24%... 

What happened? Is it happening again? Yes. Says a respected 
Austrian economists - and you'd better be prepared. Falling 
technology shares are only the beginning. Here's what you 
need to do - right now - to prepare yourself for the 
collapse of the credit bubble: 
http://www.agora-inc.com/reports/RCLF/BubblePOP!
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


The Information Glut


"Americans today are literally drowning in information," 
observed Jim Owen in an article that I found on the 
Internet. "Today, we find ourselves awash in a vast ocean of 
data, what with the Internet, nonstop cable TV news, e-mail, 
voicemail, faxes, pagers with stock quotes, cellular phones 
and an explosion of newspapers, magazines and books and 
well, you get the idea."


One of the major conceits - if not the foundation - of the 
Information Age was that more is better. Having two 
mistresses is not necessarily better than having one. Nor is 
eating two lunches an improvement over a single one. But 
information is supposed to be different. The more you have, 
the richer and smarter you are supposed to be.


Yet, dear reader, most of the people I know seem no brighter 
than they were before the Information Age began. Most movies 
seem even stupider then those of the 50s and 60s. Art is 
even more grotesque. And the columns I read in the Herald 
Tribune (though it hardly seems possible) seem to be 
becoming even dumber. Could the Information Revolution be to 
blame?


"Bandwidth plenty," as Gilder calls the ability of modern 
technology to transmit digitized data in almost infinite 
quantity and almost zero expense, is supposed to be as 
important an innovation as the Industrial Revolution. 
"It's little appreciated," Jim Davidson writes in Strategic 
Investment this month, "that economic growth prior to the 
Industrial Revolution was invisibly meager. Before 1700, it 
averaged just 0.1% per annum, so glacial that the very 
concept of `economic growth' was practically unknown."
The economist Malthus, predicting mass starvation as 
populations increased, was merely extrapolating from the 
experience of 4,000 years. During all of history, a man's 
output barely exceeded what was needed to survive. If he 
worked hard, and was careful, and lucky, he and his family 
would survive. But their margin for error was small. A 
couple of bad harvests - and people starved. Malthus 
realized that it would be impossible to feed an expanding 
population with existing technology. He anticipated a 
disaster.


But a disaster did not come. Because, as Jim Davidson 
explains it, "the GDP growth rate began to rise dramatically 
after 1825 with the introduction of steam power and follow-
on technologies associated with the Industrial Revolution." 


In the 1600s, a crop failure at Plymouth Colony in 
Massachusetts or the Poitou region of France would have been 
a matter of life or death. But the industrial revolution 
nearly eliminated the danger. Not only did mechanization 
greatly increase output per man hour - it also made it 
possible to ship bulky and perishable produce over great 
distances. Good harvests from other areas could be loaded 
onto trains and ships and transported to the troubled 
region. Today, supplies of food in your local supermarket 
come from all over the world. A drought in England will have 
absolutely no effect on your standard of living. A drought 
in all of Europe would barely affect world market prices. 


After the Industrial Revolution, scarcity of food was no 
longer a problem. That is not to say that everyone was 
suddenly rich. Not at all, but the tools of wealth creation 
had been discovered - machines, capital investment, 
compounded growth, the division of labor. Everywhere that 
the Industrial Revolution was allowed to function - people 
were lifted out of a subsistence lifestyle to something 
entirely different - a lifestyle of hush puppies, cell 
phones, and summer holidays.


Many people think the Information Revolution offers a 
similarly dramatic uplift. 


"The result of an unfettered Information Revolution could be 
another major surge in growth, comparable to that in the 
early 19th century," Davidson believes. In short, the 
apparently temporary surge in annual GDP growth to 4.2% 
since 1995 in the U.S., the center of the Information 
Revolution, may be part of another permanent upward phase 
shift in economic potential."


Alas, information is not wealth. Correctly sorted and 
interpreted, it may help lead to additional wealth. But that 
is no easy matter. The more information you have, the harder 
it is to make sense of it all. 


"Data glut has become a serious issue in American 
workplaces," continues Owen, "where the average worker 
spends more than half his or her day processing documents. 
In the 1980s, per capita paper consumption tripled (to 1,800 
pounds annually), and third-class mail grew 13 times faster 
than the population. Nowadays, office workers can spend 
hours reading and answering e-mail, not to mention 
voicemail, faxes, etc. At first a blessing, e-mail has 
become a curse to those whose inboxes are deluged daily with 
"FYI" messages and other information that, previously, would 
have been too cumbersome or time-consuming to deliver in the 
old mediums."


Jim Owen quotes David Shenk's 1997, Data Smog: Surviving the 
Information Glut, noting that "information overload fuels 
stress and promotes faulty thinking." The data glut we all 
slog through every day at work simply "reduces our attention 
span" and "makes us numb to anything that doesn't lurch out 
and grab us by the throat."


In short, the increase in `information' has a very curious 
effect - one that has not yet been realized. It makes us 
numb to the subtle details and nuances that we actually 
observe. Processing information takes time and effort. The 
more of it that you have to deal with, the more you are 
likely to seek shortcuts - popular interpretations that 
lurch out, grab you by the throat and reduce the need for 
careful reflection on what you actually see and experience. 


Instead of actually figuring things out for himself, in 
other words, the average person becomes even more 
susceptible to the collective illusions around him. Mob 
thinking replaces individual thinking - simply because there 
is too much information for a person to process. Unable to 
keep up with all the data from Wall Street, for example, he 
is forced to rely upon the interpretations from CNBC, or 
popular analysts, or...uh, oh...even the Daily Reckoning. 


More about this as I figure it out...



Bill Bonner



P.S. It is not as if people suddenly discovered information 
with the introduction of the silicon chip and the worldwide 
web. The amount of information available to people has 
steadily increased with new technology and new material - 
the telegraph, telephone, television, radio, minitel, 
teletype, fax...all have increased the quantity of available 
information. A person in the 20th century had vastly more 
information than a person in the 16th. Is it just a 
coincidence that mass-thinking emerged with mass media? What 
are we to make of the fact that the availability of ideas, 
information, opinions and communications did not prevent 
some of the rudest and most appalling notions in human 
history? 
 
 
 
 
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"
(Timothy)

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get"
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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

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