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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  Wealth of Information?

*** The `Annus Horribilus' gets worse. But it's not over!

*** Amazon...a "market performer"... Is that good?

*** How credit bubbles ALWAYS end...Consumer confidence 
down...GDP down...durable goods sales down...Dow 
down...Nasdaq down...Yahoo! down...dollar 
down... What's up? Deflation.

*** Today's website says the "Annus 
Horribilus Continues." This has nothing to do with a 
certain NYTIMES reporter, however. Instead, 
refers to the year 2000AD...being suffered by Nasdaq 

*** "Where's Festivus when you need it?" asks the reporter. 
Festivus? I looked in the dictionary. There's festival, 
festivity, festive - but no Festivus. 

*** Hmmm...apart from me, the only one I have ever seen use 
the term is the French philosopher Philippe Muray, who uses 
it to describe the way the politics of western democracies 
have been hollowed out, reduced to meaningless slogans and 
empty celebrations. I don't know if Muray has mentioned it 
or not - but American capitalism has also suffered from the 
Festivus effect. More below...

*** Festivus or no...the Nasdaq had nothing to celebrate 
yesterday. A few companies were the subjects of analysts' 
warnings...and fair-weather investors decided to abandon 
them. Juniper Networks, for example, lost $17...Sun 
Microsystems dropped almost $7. 

*** The Nasdaq itself was down 145 points - or about 5% - 
to 2,734. Three stocks fell on the Nasdaq for every one 
that rose, and 505 hit new lows.

*** Yahoo! sank $3. And Amazon almost as much, a loss of 
about 10%, after a Banc of America Securities analyst said 
he would "avoid" the stock. In typical Wall Street 
euphemism, he gave AMZN a "market performer" rating. 

*** Compaq fell 7% and Dell fell 8% as investors realized 
that computer inventories have been growing and demand has 
been falling. 

*** And Broadcom drifted even further from analysts' $200 
`target price' - it closed yesterday at $85.

*** The Dow also lost ground yesterday - down 38 points. 
The economic news was bad. The government reported that 
durable goods sales fell 5.5% in October. Durable goods 
include large items such as cars, airplanes and furniture. 
Lower durable goods sales mean lower business investment - 
which can be taken as more evidence for a recession in the 

*** Meanwhile, the Conference Board reported the consumer 
confidence fell again in October to its lowest point this 
year. It is now at 133 - but still high compared to the 
1985 benchmark of 100.

*** GDP growth will be nipped and tucked a little today. It 
was reported at 2.7% in the latest quarter...and is 
expected to be revised downward to 2.2% today.

*** If you want to lose money on the Dow, I suggest a 
simple and obvious stock: GE, the world's largest company. 
It is a conglomerate of businesses...priced as though the 
whole were worth nearly twice the sum of its parts. Over 
the last 5 years its P/E has risen from 15 to 33.8. But now 
GE's CEO, Jack Welch, is retiring...and the bull market is 
over. A modest prediction: GE will soon be back at a P/E of 

*** Goldman Sachs estimated profits for the 4th quarter are 
down 36.4% from a year ago. And 8,789 workers got 
pink slips in November.

*** More signs of deflation: bonds rose yesterday, and the 
spread between 10-year Treasuries and 10-year inflation-
adjusted TIPS fell from 1.9% recently, to below 1.8%.

*** Credit bubbles never end in inflation, says Dr. 
Richebacher, but always in deflation, as paper assets are 
marked down and wealth disappears.

*** The danger with U.S. bonds is the U.S. dollar. The euro 
rose against the dollar yesterday. So did yen. As I keep 
saying (and sooner or later I will be right): The dollar 
may have finally topped out. If so, it won't be long before 
the foreigners holding $2 trillion worth of U.S. dollar 
denominated assets decide that they are better off in 
another currency. When that happens, the dollar will do 
what the Nadaq has been doing. As Marc Faber suggested 
yesterday - buy quality euro bonds.

*** Gold fell 50 cents yesterday, but Newmont and Homestake 
shares were both up.

*** Al Gore accidentally spoke the truth on Monday. In the 
International Herald Tribune, he's quoted as saying: "The 
integrity of our democracy depends on the consent of the 
government..." He meant, no doubt, the governed.

*** Elsewhere, David Broder, editorializing in the 
Washington Post, gives "41 Fresh Reasons for Faith in 
Politics." The reasons are incarnate in the persons of the 
new members elected to the House of Representatives. But 
one would need the faith of Job for it to be restored by 
this mob of hacks, wonks and busy-bodies. Few have ever had 
honest jobs - and two seem to have some genetic defect 
predisposing them to a life of slime: they are the children 
of politicians. One graduated from the University of 
Florida...and scarcely two years later was a member of the 
Florida legislature. One has the dubious distinction of 
being "the first Latino woman elected to the California 
senate." Another earns Broder's approval for having won a 
"four-year fight to tax smokeless tobacco." One specializes 
in the environment. Another in "children's and youth's 
programs" was a CIA snoop...and another messed 
around with "major tax policies." What impressed Broder 
about them was precisely the point that should be cause for 
alarm: "The most striking thing," he says, "is the depth of 
their governmental experience. These are not, for the most 
part, rookies." 

*** This recalls my proposal to select members of Congress 
by national lottery: that is to replace fraud with chance. 
No counts. No recounts. No campaign finance 
reform. A Congress selected at random would be far more 
representative of the American people. Jurors - with the 
power of life and death - are selected by chance. Why not 
Members of Congress? And once selected - treat them like 
jurors: feed them chicken salad sandwiches and keep them 

*** And from the Toledo Public schools comes more evidence 
that mankind grows ever more dim even in the Promethean 
light of the New Era: The school's Jefferson-Madison 
Leadership Camp has voted to change its name. "The recent 
enlightenment that both Jefferson and Madison were slave 
owners puts a negative light on things," declared Ralph 
Schade, a school principal. Apparently, Mr. Schade had been 
in the dark, or perhaps the penumbra, on the slaveholding 
issue, until modern information technology somehow got the 
news to him.

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The "Crisis" Continues: 100% Profits From Electricity

The media has turned its attention elsewhere - the violence 
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the crisis in electricity rages... 

In this edition of the FREE INVESTOR'S LIBRARY, you'll 
learn how and why there is a power "crisis" at all. But 
best... You'll learn about a company that is making big 
profits, despite government regulations and interventions. 
Even if you don't believe in business cycles, you can't 
argue the change in seasons. And with investors distracted, 
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THE FREE INVESTOR'S LIBRARY: Your Money and Electricity 
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


"I am reading a book by Vladimir Poutine," writes my friend 
Michel, "which explains how the USSR fell apart. ... In 
about three years the Russians went from having no 
information they could believe - only rumors - to having 
all the information they could ever want. The result: 
whether they are underinformed or overinformed, the 
Russians continue to believe absolutely anything...and to 
know nothing."

Is all this information making the Russians rich? And what 
is it doing to Americans?

Americans seemed to think they were getting rich - at least 
until recently. Information itself was believed to have put 
the U.S. economy into a new phase...a New Economy...where 
things worked differently. And much better. Savings were no 
longer necessary - because information technology needed 
little capital. And information was supposed to have 
boosted productivity to the point where inflation was no 
longer a concern: metaphorically, or perhaps literally, 
information allowed people to build new wealth faster than 
then the Bureau of Printing and Engraving could print new 

"The new information revolution has been sold to 
investors," writes Dr. Kurt Richebacher, "as a technology 
that will do the greatest wonders to productivity, profits 
and wealth, far more than the industrial revolution has 
done... The general idea behind the unfolding euphoria was 
and still is that this technology is able to deliver almost 
limitless growth and productivity effects because its 
implementation requires very little input of capital and 

In the last couple of letters, we've observed that the 
whole idea was a fraud. There really has been no 
`information revolution' of the 1990s. The cost of 
communication has been dropping sharply for the last 200 

"If you go back to the 1800s," said Greg Blonder in 
Barron's, "sending a message across the ocean was a 
several-week process, and it involved dozens of people." 
Then came the telegraph, and that cut the time from a few 
weeks to a day. But you still had to go to the telegraph 
office, someone had to key it in, and it had to be keyed 
out on the other end... Then we went to a phone, which 
reduced the process to minutes from hours... Now you can 
send a message in milliseconds, at the speed of light, 
between here and England."

Of course, even the telegraph messages of 100 years ago 
traveled at the speed of light. But the cost of 
transmitting data has fallen dramatically, to the point 
where Blonder believes long-distance service in the future 
will be essentially free.

But as access to information increased, something 
unexpected happened - the actual effect of the information 
glut was to force people to accept group-think 
interpretations offered by the media, pundits and 
demagogues rather than to reason things out for themselves 
from personal experience and observation. There is simply 
too much information available on too many different 

Ideas, and the institutions that depended on them, became 
simplified, hollowed out, and mass-marketed. Wherever mass 
audiences were involved - such as elections, mass 
entertainments, and the stock market - things had to be 
taken down to a lower and lower common denominator - to the 
point where every blockhead could understand...and still 
believe what he wanted to believe. National elections, to 
use an example on people's minds, were reduced to the 
intellectual subtlety of heavyweight wrestling.

The mass media provided not only intellectual short-cuts, 
but emotional ones. Genuine, personal feelings - sadness, 
joy, sympathy - were hollowed out as the mob learned to cry 
and cheer in unison. 

But as we noted yesterday, mass-emotion and group-think is 
not without its hazards. Blonder, as noted by Barron's, 
"sees a clear downside to technology. One of the greatest 
dangers he sees comes from an increase in uniformity..."

Blonder is worried about the dangers of a computer virus... 
attaching a uniform system of communications software. But 
there is also the danger of an intellectual virus - a 
malignant idea, such as National Socialism, attacking a 
population which is overwhelmed by information and choices 
and yearns for a simple, and even final, solution.

Thus it was that the idea of the New Economy and 
Information Age fell upon the U.S. financial markets a few 
years ago. Awash in information - from the WSJ to Bloomberg 
to the reports of thousands of analysts and commentators - 
investors were delighted to discover that the hard work of 
investment analysis was no longer necessary. The 
Information Revolution would make them all rich. All they 
had to do was to buy the names they heard on CNBC and wait.

Meanwhile, the managers of publicly-held companies had 
their own experience with group-think. Building a 
successful business is hard work. It takes sacrifice, time, 
luck. Now, all of a sudden, it no longer seemed to matter, 
because investors no longer cared about building strong 
businesses; they just wanted stocks that would go up in 

This is, of course, just what the Information Age seemed to 
deliver. "The Internet has created more value more quickly 
than any other technology trend we know of," said a Merrill 
Lynch analyst, quoted by Dr. Richebacher. "According to 
another argument," Richebacher continues, "even after the 
stock market decline, the market value of the U.S. Internet 
sector is still $800 billion."

Thanks to the new information technology, the last five 
years produced "colossal gains in household net worth in 
the U.S.," writes Jim Davidson, "of 2.8 trillion in 1995, 
$2.6 trillion in 1996, $3.8 trillion in 1997, $3.3 trillion 
in 1998 and an astonishing $4.7 trillion in 1999..."

And now, dear reader, I come to the burden of this letter 
and the climax of this line of thinking: 

Were these gains real, the results of the Information 
Revolution? Or were they paper profits - the products of a 
mass-delusion, aided and abetted by the information glut?

I think you already know the answer.

But I will return tomorrow to belabor the point - and 
develop a slightly new one:

Just as group-thinking hollowed out ideas and emotions, so 
has it hollowed out American businesses. Tomorrow - more on 
Dr. Kurt Richebacher's "late, degenerate capitalism" in 
America...and how the information glut made people poorer, 
not richer.

Your correspondent...late, but not completely degenerate,

Bill Bonner
About The Daily Reckoning:
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Bill Bonner, recognized internationally as a brilliant writer, entrepreneur
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Bonner writes his email letter from Paris, France, each morning --
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Last modified: April 01, 2001

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