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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

TUESDAY, 23 MAY 2000 



*** Dow and Nasdaq edging down
*** No plumber...
*** "Maybe I don't understand the markets" -- George 

+ + + + + + 

When the Fed raised the discount rate from 5% to 6% on 
Aug. 9, 1929, it launched the worst economic contraction 
in history. Did today's Fed do the same thing? Dr. Kurt 
Richebacher thinks so. Find out where the world's 
preeminent Austrian economist thinks the stock market and 
the economy are headed and what you can do to protect 
your assets. To read Dr. Richebacher's latest report on 
the fate of the New Era, please visit
+ + + + + + 

*** This market is taking an awfully long time to come to 
the point. But why shouldn't it take its time? It's the 
biggest, most expensive market in history. And it is 
dominated by new investors who think a mutual fund 
account is the same as a savings account -- only better. 

Even the people who are supposed to be pros know neither 
the history nor the logic of the market. There are two 
ways of understanding things -- from experience or by 
theory. They don't have the benefit of either one.

*** Richard Russell (
takes readers back to basics in yesterday's message. 
According to Russell, the bear market began on May 12, 
1999. That was when the Dow Industrials and Transports 
"recorded their last joint highs." The P/E on that date 
was 26.8, he says, the highest ever. And the yield was 
1.33% -- the lowest ever recorded. According to Russell's 
Dow Theory, the first phase of the bear market won't end 
until the Dow closes below 9,796. 

*** Yesterday the Dow edged in that direction. It closed 
down 84 points. The Nasdaq closed down 26. During the 
day, however, the Nasdaq was down as much as 200 points, 
coming back in the last hour of trading.

*** There were 1,161 stocks advancing and 1,771 
declining. And 119 stocks hit new lows while only 30 hit 
new highs.

*** The Fed is, of course, fighting inflation -- or at 
least the threat of inflation. According to the 
newscasters, it is the fear of further tightening that is 
spooking the market.

*** But the market is sending signals of its own. Gold 
refuses to move. Lumber is down. GM too a big hit 
yesterday, and the automakers, generally, look weak. 

*** And the euro, which looks more and more like it has 
found its bottom, is holding above 90 cents. 

*** Could these things be hinting that inflation is not 
right around the corner? Capital asset values have 
skyrocketed -- both stocks and Manhattan apartments. But 
they can come down even faster. Wealth can disappear 
overnight -- and shrink the money supply so quickly that 
deflation, not inflation, becomes the enemy of economic 
progress -- as it has been in Japan for the last 10 

*** We are all humans, after all...and the same animal 
spirits that lead people to believe that they can get 
something for nothing sometimes leads them to believe 
that something IS nothing. 

*** "Platinum demand went from nothing to half a million 
ounces in China last year," says Dan Ferris of Real Asset 
Investor. Jewelry and technology are driving the market. 
Another 200,000 to 300,000 ounces will come from computer 
hard drives over the next couple of years. Dan recommends 
shares in the largest platinum producer in the world. 

*** "Maybe I don't understand the market," said George 
Soros after losing a few billion dollars. Soros, one of 
the most sophisticated investors in the business, made 
big bets in the high tech area -- fully aware that the 
values were "insane." His analysts were the best in the 
business. They had access to the best information. They 
did not rely merely on the Internet buzz and CNBC babble 
-- they met with the people running the companies they 
bought. And even this did not produce winning numbers. 
How can ordinary investors expect to come out ahead? Are 
they smarter? Better informed? Or just luckier?

*** "I checked with my trusty ex-plumber..." wrote Barton 
Biggs, global strategist for Morgan Stanley Dean Witter, 
explaining how he understood what ordinary investors were 
thinking. Only Barton didn't check with the ex-plumber. A 
couple of days ago he admitted that the plumber was a 
"literary device." He made up the conversations. 

*** But just to put your mind at ease -- I don't make 
things up in the "Daily Reckoning." I'm not that clever. 
(Except my "Christmas Carol" -- which was obviously 
fiction.) What I sometimes do, however, is change or omit 
the names of the people I'm describing -- to avoid 
embarrassing them. 

*** "Time to buy the undervalued and oversold euro" says 
the latest trading advisory from Sentmontier Strategy 
( The 
Sentmontier team think the euro has been driven down 
about as far as it will go. It has lost 24% of its value 
since it was introduced. And while it has been a disaster 
for investors, it has actually done the job it was 
supposed to do -- and more. It has provided an 
alternative to the dollar...and boosted European exports. 
Buy the euro; sell the dollar.

*** I apologize to all those readers who have written me 
in the last couple of weeks. I have not been able to keep 
up with my personal correspondence. 

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

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

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