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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

LONDON, ENGLAND 
THURSDAY, 18 MAY 2000 

 

Today: THE BATTLE OF BRITAIN

*** Boo! Europe's first major dot-com disaster
*** The Greenspan Fed is locked-in to a course of 
action...
*** The "Most Outrageous Housing Deal" 

*** "Boo!" That's the news that greets U.K. investors 
this morning. Boo.com, described as an online sports 
retailer, became the first major Internet casualty in 
Europe. The company was worth more than $400 million last 
year at this time. But that was before it spent the $135 
million it had raised. 

*** "We have not had control of costs," explained the 
CEO, with perhaps a bit of English understatement. The 
dot-com was spending money at the rate of $1 million per 
day. London's major stock index, the FTSE, fell 122 
points.

*** Meanwhile, "Alan Greenspan is locked-in to a course 
of action," explained "Strategic Investment's" Lord Rees-
Mogg to me yesterday. "He has to continue increasing 
rates until he breaks the bull market psychology. Until 
he does so, consumers will keep spending too much, and 
investors will seize upon every piece of news -- good or 
bad -- to take stock prices up to ridiculous levels."

*** The fever has to be broken. Otherwise, inflationary 
pressures keep building. The economy "overheats" -- 
increasing spending and the demand for labor. And/or the 
stock market continues to create new "wealth." The supply 
of money increases, in other words, or the demand for it. 
Either way, it's inflationary...

*** Investors must have awoken yesterday morning and 
realized that continued rate increases would not be good 
for stock values. Duh...

*** The Dow sold off by 164 points. The Nasdaq -- which 
many people believe is immune to interest rates -- fell 
72 points. 

*** The dollar was up against the euro. Euros are now 
below 90 cents each.

*** Is a bear market anything to worry about? So what if 
stock prices go down for a while? Richard Russell 
(http://www.dowtheoryletters.com) provides an insight: 
"Prof. Robert Shiller's new book, `Irrational 
Exuberance'... shows four extremes in price/earnings 
ratios going back over history. The first occurred in 
1901 when P/E ratios rose to approximately 25. The second 
was 1929 when P/E ratios rose to about 33. The third was 
1966 when P/E ratios rose to about 24. And the most 
recent was this year when P/E ratios rose to roughly 44.

"The aftermath of the first three instances, 1901, 1929 
and 1966, was that the total real (inflation-adjusted) 
returns AFTER HOLDING FOR 20 YEARS for investors in 
stocks was -.02 for those who held stocks after 1901. It 
was 0.4% for those who held their stocks after 1929. And 
it was 1.9% for those who held their stocks following 
1966. 

"The implication is that for those today who are holding 
and will continue to hold their stocks for the next 20 
years, there will be little or no real return. The 
reason: you are holding stocks today that are 
ridiculously overpriced based on all historical 
experience. It will take the next 20 years for earnings 
to catch up to today's prices." 

*** "Since mid-April, oil and other commodities have 
surged," notes Bill King. "A new round of inflation will 
appear as gasoline, oil, food and industrial commodity 
prices are much higher. Unless they tank in the next two 
weeks, May PPI & CPI will be substantially higher..."

(To subscribe to Bill King's daily e-letter, call 1-800-
433-1528 and ask for code 3457.)

*** But April's CPI, which came out a couple days ago, 
showed low inflation. "How did BLS get a benign April 
CPI?" asks King. "They got energy -1.9% with heating oil 
-4.8%, gasoline -4.1%, apparel -0.5% and transportation -
0.7%, the biggest decline in three years. They limited 
electricity to +0.2% and housing to +0.1%. Heating oil 
was 64 cents in the beginning of April. It fell to 60 
cents on 4/11, then rose to 66 cents. Gasoline started 
April at 78 cents, fell to 72 cents, then surged to 80 
cents. Electricity was similar to heating oil except is 
rallied even more sharply due to the unseasonably warm 
weather in the East. BLS apparently sampled prices on the 
low day of the month...Housing costs are totally bogus."

*** One Internet columnist in California has begun what 
he calls "The Most Outrageous Housing Deal contest" in 
which he invites readers to send in examples that 
illustrate the mania in the S.F. Bay area. As imagined, 
"the hills are alive with deals that have rocked people 
back on their heels." For example: "There's...a four-
bedroom house in Presidio Heights that was listed for 
$2.4 million. It sold for $5 million."

*** Then there's: "A prominent local businessman, known 
for his generous philanthropy, was at his Atherton home 
one recent Friday when the doorbell rang. A real estate 
agent was on the porch and said he had a client sitting 
in the car at the curb. The client wanted to pay $25 
million for the businessman's home. But the businessman 
said he wasn't interested in selling, hadn't even thought 
about selling. `Take the weekend to think it over,' said 
the agent. When the agent returned on Monday, the offer 
was $45 million."

*** The front page of "The Times" says that Bill Clinton 
is considering returning to Oxford -- his old alma mater 
-- to teach.

*** And Cherie Blair, the wife of the prime minister, was 
rushed to the hospital yesterday. She is expecting a 
child any day...the first prime minister's wife to have a 
baby in 150 years.

+ + + + + + 
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went up a healthy 31%. In just the next two weeks, it 
lost nearly 10%. But with the power of leverage in a 
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Higher profits faster with less volatility. For more 
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http://www.dailyreckoning.com/tradeoptions5.

+ + + + + + 


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

THE BATTLE OF BRITAIN
 
 
 
 
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)

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

"It is actually better than some of the newsletters that I pay to
get"
(Joe)

"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

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