*** 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.
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!
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
"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?
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Last modified: April 01, 2001
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