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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

TUESDAY, 16 MAY 2000 



*** Great expectations...
*** Family of 7 wiped out...
*** Running out of buying power?

*** I had a lot of trouble getting on the Internet today. 
New computer. New town. I don't know what it was, but it 
cost me hours of time. So this is going to be very short.

*** "Half-point increase expected today," says the 
headline in today's "Financial Times." U.S. industrial 
production surged in April at its fastest rate in 19 
months. This bit of news is thought to guarantee a 50 bps 
increase by the Fed today.

*** Which is great news for those who are looking for 
great news. Once this rate increase is out of the way, 
goes the popular thinking, it will be clear sailing.

*** The Dow rose 198 points in greedy expectation of 
today's news (and presumed rally). The Nasdaq was, 
uncharacteristically, more restrained. It rose only 78 

*** "Buy the rumor, sell the news" is the old adage. If 
it proves correct, the market will surprise the experts 
by falling today, rather than rising.

*** Breadth was good yesterday -- 1,757 advanced while 
1,140 declined. There were 105 new highs; 57 lows.

*** Gold fell 50 cents. 

*** Supplies of natural gas are tighter now than they 
have been in 30 years, and the squeeze has driven up the 
spot price 35% in the last year. Consequently, Dan 
Ferris's gas producer has seen its shares rise more than 
33% since Jan. 1 -- with $1.11 in earnings per share. 
"But you ain't seen nothing yet," Dan says. He expects 
the demand for gas to keep rising by as much as 50% or 
more this decade. But Dan reports gas is just one in a 
rising tide of commodities. 

*** Warren Buffett's Berkshire Hathaway posted a 49% 
increase in first-quarter earnings. It's now up to $531 a 
share (earnings). 

*** Meanwhile, The Cisco Kids are at it again. This time 
they've purchased a Swedish "optical networking" firm for 
$800 million in paper. 

*** And it looks like Bill Gates' partner, Paul Allen, 
took some of his money off the table just in time. Allen 
sold $3.8 billion of his Microsoft holdings between 
October 1999 and March 31, 2000. As of May 5 those same 
shares would have been worth $2.8 billion, down 25%. But 
he's not the only one. "Barron's" reports top dogs at 
Dell, Gateway, Broadcom, E-Tek, Cisco and RealNetworks 
sold millions of their own stock before March 31.

**** "Wealthy Americans can cut income, capital gains and 
estate taxes to ZERO with a planned, long-term 
expatriation strategy," says Marshal Langer in this 
month's missive from the "Sovereign Society." A rich 
Bahamian citizen, for example, pays NO estate taxes; rich 
Americans, anyone with an estate worth $3 million plus, 
can pay 55%. Which is why both Sir John Templeton and his 
right-hand man, Mark Mobius, have given up their U.S. 

*** Gary North reported the work of Alan Newman in a 
recent letter. Newman compared money supply, M2, to stock 
market capitalization. He discovered that the situation 
at the end of '99 was the most extreme ever. The ratio of 
M2 compared to total market cap has never been lower. 
Sell equities. Hold cash. 

*** "Family of 7 wiped out by crazed DJ..." Wow, I love 
these British tabloids. On the cover is the photo of a 
gap-toothed "firebug" who set a house ablaze and killed 
"four generations of a family." Another one tells us that 
"Sophie [the countess of Wessex] To Sell Firm And Have 

+ + + + + + 

What do the government economic releases really say? Are 
the numbers being cooked? How has the stock market 
reacted historically to similar events as what is 
happening today? Do you know how you can profit? In 
what ways will the New Economy shape the future, and how 
can you benefit?
+ + + + + + 

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


There are lots of ways to earn a living. You could go out 
into the wilderness and hunt and fish...or grub up roots. 
Take along a copy of Euell Gibbon's classic, "Stalking 
the Wild Asparagus"; you may find it useful -- if not for 
the information, at least you'll be able to use the pages 
to light fires.

You could live in a cave. Or maybe make your own rude 
habitation. Keep it simple; you won't be doing much 

Or get a job. It's safer and easier than trying to eke 
out a grudging living directly from Mother Nature. With 
today's full employment, anyone who wants one can get a 
job. Criminal record...low intelligence...anti-social 
behavior...body odor...bad grammar? Don't worry about it. 
Businesses are desperate. Even former Grateful Dead fans 
are offered employment.

If you go the employment route, be sure to ask for stock 
options as part of your contract. Most likely, your 
employer won't give them to you, but posing the question 
marks you as an up-and-comer...or at least someone who 
has turned on a television set within the last five 

But today's letter is not about surviving -- it is about 
prevailing. It is about getting rich quickly, not just 
earning a living.

Saving and investing can make you rich. But...even with 
the miracle of compound still takes a long 
time. Compounding modest bits of money still takes a 
lifetime to turn into anything even close to wealth.

So if you want to enjoy wealth anytime soon, you have 
only two choices: you have to steal it...or you have to 
persuade others to give it to you.

Stealing is probably the simplest way. It lends itself to 
people with short attention spans. 

But theft is not without risk. There are the temporal 
risks -- you may be caught and sent to may be may lose your license to practice 
law...or you may even run into an ornery victim, like the 
grandmother in Australia who took the law into her own 
hands and shot the two rapists who attacked her grand-

There is also the risk of going to hell, which I will 
leave to your imagination.

No, the better way is not force, but persuasion. In this, 
you are able to harness not only your own talents, but 
those of other people, too. People want to 
believe...almost desperately...that they too can get rich 
quick. And they will be all too happy to deceive 
themselves in the cause of easy money.

Investors want to think that they can get rich quick. 
They are too sophisticated to be attracted by the bald 
promise of "Easy Money -- Fast." But that is what the 
Internet stocks -- and the Nasdaq, generally -- offer. 
Investors in these stocks do not know what they are 
buying. They have not studied the business plans or 
income statements. They have not surveyed the industry 
and analyzed its prospects. Often they don't even know 
what the company does. What attracts investors is not the 
business...but the siren song of Fast Cash. 

A recent column in the "Financial Times" explains how 
scams (and manias) work: "The simplest route has always 
been to lie," the article elaborates, "...but the 
likelihood of exposure and imprisonment deters most 

A better technique is to offer an explanation that lets 
people lie to themselves. In the typical pyramid scheme, 
you take in money from people and pay it out as interest 
or earnings or winnings. Those who get in first report 
the results to their friends. Soon, everyone wants a 
piece of the action.

Even bankers sometimes operate on the pyramid principle. 
They take in depositors' money by promising higher rates 
of interest. They pay the interest from the savings of 
the new depositors. Unless something happens to save 
them...say, a bailout from the federal government...the 
banks are doomed. But the first depositors -- and the 
bankers themselves -- still prosper, assuming they get 
their own money out in time.

Most often, these schemes offer investors some plausible 
explanation for how they can provide returns considerably 
higher than the market rate. In the case of the Nasdaq, 
the current explanation is one that we have been 
discussing for many months -- one which has brought us so 
much amusement -- the idea of the New Era.

In the New Era, productivity will be enhanced by the 
nearly miraculous influence of computers and the 
Internet. The whole planet is getting wired. Profits are 
just over the horizon.

But except for some very suspicious pre-Y2K numbers last 
fall, we have seen no outsized increases in productivity. 
And business profits have been stagnant for the last 
three years. 

A Ponzi-type scheme caused an economic collapse and 
nearly a revolution in Albania a couple of years ago. 
There the explanation was similar to the Nasdaq 
rationale: the age of communism was over in Albania; free 
enterprise and an opening to Western markets would 
provide the basis for extraordinary returns. Nearly 
everyone in Albania seemed to have been swept up by the 
promise of easy money. And when the pyramid collapsed, 
riots broke out all over the country.

So willing are people to believe in "Get Rich Quick" that 
you don't even need an explanation. The article in the 
"FT" tells of one such pyramid in Britain: "a company 
called Titan Business Systems entered Britain with an 
entirely clean Ponzi scheme -- it did not pretend that 
there was any source of revenue other than an ever- 
increasing number of new participants -- it showed that 
no deception is needed to induce gullible people to take 
part. The very openness of the scam caused the Department 
of Trade and Industry difficulty in shutting it down."

Even when it is obvious that the whole thing is only a 
"Get-Rich-Quick" scheme, people are still happy to 
participate. They know that many people will lose money 
but believe that they will be among the winners. People 
are naturally optimistic, especially about themselves. 

"When people are asked to compare themselves to the norm 
-- as drivers, lovers or executives of large corporations 
-- less than half the population rate themselves below 
average," says the "FT." "There is also another 
psychological quirk at work, called `prospect theory.' We 
focus on improbable outcomes to a degree that is not 
justified by their low probability."

People buy lottery tickets -- fully aware of the remote 
odds against winning. A rational calculation would show 
that the investment in the lottery ticket is a bad one. 
But neither lotteries, pyramid schemes nor the financial 
markets work on logic. 

"There is one enduring and unvarying feature of all these 
schemes. It is better to run them than to participate," 
concludes the "FT" piece. Sell Internet stocks; don't buy 

Bill Bonner, inexplicably cut off from the World Wide 

* * * * * * * * * * * * * * * * * * * * * * * * * * * * *

+ + + + + + 

Rock singer Alanis Morissette is selling $1 million worth 
of stock in She joins Paul Allen and a long list 
of others who are quietly trading stock for cash. Why are 
insiders suddenly selling? And what do they know about 
the Real Internet Economy that you don't? Find out by 

+ + + + + + 

The Daily Reckoning is a FREE e-mail service of The Fleet 
Street Letter -- If you'd like practical advice about 
profiting based on the ideas in this e-mail, then simply 
subscribe to my monthly financial communique, "The Fleet 
Street Letter." Right now you can save up to 50% off the 
regular price. Visit

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"

" Your Daily Reckoning is the best in business commentary... mixing
serious warnings and the state of the market with gentle humor"

"It is actually better than some of the newsletters that I pay to

"Your statements and philosophy have kept me from storming into the market and in fact [I'm] making some money in put options" (Frank)

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 02, 2001

Published By Tulips and Bears LLC