*** 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 http://www.dailyreckoning.com/corprofits2/
+ + + + + +
*** 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 (http://www.dowtheoryletters.com)
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
*** 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. http://www.dailyreckoning.com
*** "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
*** "Time to buy the undervalued and oversold euro" says
the latest trading advisory from Sentmontier Strategy
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.
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Last modified: April 02, 2001
Published By Tulips and Bears