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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter




*** The "Turnaround Tuesday" that didn't turn around
*** Best stock on the Dow?
*** "I'm just hiding under my desk..."

*** Yesterday was supposed to be a "turnaround Tuesday." 
After four days of falling prices on the Nasdaq, the 
strong rally late on Monday suggested that the bull was 
ready to come back to the party.

*** But nope. This bull seems exhausted. The Dow fell 120 
points yesterday. The Nasdaq was down 199 points -- or 
nearly 6%. And the Nasdaq 100 fell 241 points -- or 7.4%.

*** The Nasdaq alone lost capital value of about $300 
billion. This is, I believe, what gold has been trying to 
tell us -- that a meltdown in equity values will deflate 
the economy and the money supply.

*** Bonds seemed to get the message yesterday -- rising 
slightly. No one can say, of course, what will happen to 
stock prices. I expect them to go a lot lower. But why 
worry about it? You can get a yield of 9% on AngloGold. 
RJR, the big cigarette maker, has been beaten down so low 
that it sports a dividend yield of over 12%. And even 
muni bonds will bring you almost 10% after tax. 
Historically, the real return on stocks is less than 5% 
annually. What is the likelihood that this market will 
rise more than 10% in the year ahead? Who knows? But it 
seems much more likely that it will fall 10%. The Nasdaq 
is already down 22% for the year.

*** The Dow, the S&P and the Nasdaq are all now below 
their 200-day moving averages. And Wells Capital 
Management reports, in "Barron's," that 81.5% of stocks 
on the NYSE are below their '97 peaks...for the S&P the 
number is 59.7%.

*** There were 1,336 advancing stocks yesterday, 1,576 
stocks declined. And 29 hit new highs while 88 hit new 

*** I've been warning you to watch out for the big tech 
and Net companies. The little ones -- well, who knows 
what they'll do? But the big cap techs have been doomed. 
You cannot compound big numbers for very run 
out of space. These giants had to run out of market 
potential long before they could reach earnings large 
enough to justify their high stock prices.

*** CSCO and AOL both dropped near $50 yesterday. ORCL 
and MSFT both dipped around $63. And AMZN drifted further 
down the river of no returns -- passing the $46 mark 

*** "I think people are just looking for any excuse to 
sell tech stocks," said one hedge fund manager. Another 
who wished he had sold, Robert Loest, portfolio manager 
of IPS Millennium and New Frontier, said, "I'm just 
hiding under my desk, sucking my thumb." His two TNT-
laden funds were down 24.3% and 34% respectively in the 
last three months.

*** Meanwhile, Michael Shaeffer, whose beat is penny 
stocks in the natural resource sector, has located a 
company whose share price has risen dramatically -- up 
500% -- since November. See "Techs Down, Natural 
Resources Up" ( 

*** Productivity growth in the 11 countries of the EU is 
at a 25-year low. And only 60% of the working age 
population have jobs. A "Forbes" article blames European 
reluctance to adapt new technologies. Citizens in EU 
countries have fewer computers, fewer phone lines and 
fewer cable television subscriptions than Americans. 

*** But I doubt Europe's sluggishness has anything to do 
with technology. Instead, the drag on economic growth in 
Europe is of the old-fashioned kind -- taxes and 
regulations. The absence of phone lines might actually be 
a benefit. There is an amusing headline in this week's 
"Time" -- "Wireless Shrugged." I didn't have the patience 
to try to figure out what the article was about...but the 
headline makes sense. Online, plugged-in and connected 
all the time...some guys have the newer type of 
cellphone, with just a small microphone in front of their 
mouths. They walk through airports apparently talking to 
themselves. People today must have a lot of important 
issues on their minds. Or else, immediacy provides an 
illusion of urgency...which provides an illusion of 

*** Including his bonus, John Chambers, 50, made $121 
million last year as the CEO of Cisco systems. After five 
years in the job he is the fifth highest paid CEO in the 

*** Today, by the way, is the anniversary of the 
beginning of the "Victorian Internet." On this day in 
1844, Samuel F.B. Morse sent his message, "What hath God 
wrought," from Washington right here to Charm City, 
Bawlmer, Maryland

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market goes down as you can when it goes up? You can when 
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find bad companies destined for a fall... meaning big 
profits for you. To get this latest addition to our 
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * *


"How...can you think and hit at the same time?"
Yogi Berra

Thinking can be hard work. But there's a time to do the 
hard work of thinking. And a time to swing.

The last few years were a good time to swing. Thinking 
didn't help investors. Thinking caused investors to 
compare the market multiples to those of previous look hard at the earnings that TNT (tech, 
Internet and telecom) stocks were likely to 
reflect on how manias begin and how they end.

A thinking investor back in 1996 would have or should 
have come to the conclusion that TNT stocks were too 
expensive. He would have stayed out. And he would have 
missed a huge opportunity to make money. Last year alone, 
the Nasdaq rose 80%.

That is the trouble with the real pros in a manic market. 
They can't stop thinking...comparing...analyzing. They 
are paralyzed by it -- and unable to step up to the plate 
and swing.

And that is why the amateurs did so much better. No 
historic ratios intruded upon their thoughts as they 
bought Qualcomm or Oracle at hallucinogenic levels. No 
memories of bear markets complicated their decisions. Not 
even the fear of margin calls or the knowledge of the 
credit cycle disturbed their nights. They slept the sleep 
of innocents, dreaming of the riches that awaited with 
the morning light. 

Napoleon noted that there were at least two jobs that 
amateurs did better than professionals -- prostitutes and 
generals. To that short list, I will add investors -- at 
least in a Big Momentum market.

I am still recounting the story of the Battle of Britain, 
the crucial events of which happened almost exactly 60 
years ago. For 80 days, from May 10 to July 31, 1940, 
Hitler and Churchill fought for control of Western 
Europe. Both were professional politicians, but amateur 
generals. And both stepped up to the plate swinging.

This was the difference between Churchill and 
Chamberlain, and most of the rest of the English War 
Cabinet. Apart from Churchill, the English wanted to 
think, to talk, to analyze. Churchill, who had already 
done his thinking and made up his mind, was ready to 
fight. Once engaged, Churchill scarcely ever thought 
again. That is, he never reconsidered his fundamental 
position. Instead, he thought only about how he would 
bring it to fruition.

In this respect, the Soros/Druckenmiller hedge fund team 
might have learned a valuable lesson. Few people did more 
serious thinking about markets than they. In the early 
part of 1999, they had come to the same conclusion about 
TNT stocks that has long been expressed in these letters 
-- that they were overpriced. Soros and Druckenmiller bet 
heavily against the TNT sector in the first half of the 
year, only to lose 20% of their funds. 

Then they began thinking. They decided to reverse course. 
They brought in Carson Levit who, as the report in the 
"WSJ" puts it, "didn't mind paying sky-high prices for 
tech stocks." Mr. Levit recalls that in the eight-hour 
interview, Mr. Soros "looked at me like I was a sort of a 

Levit was hired by Soros and soon had replaced the Old 
Economy stocks in the fund with New Economy ones. Some of 
his picks were great successes. VeriSign was bought at 
$50 and rose to $258 by February 2000. "This is insane," 
said Mr. Druckenmiller, commenting on the action of one 
of these stocks.

Both Soros and Druckenmiller were right. Levit was a nut. 
And the stocks he bought were insane. But 500% gains are 
a hard habit to give up voluntarily. And soon, Mr. 
Druckenmiller had joined the Levit camp. He, too, had 
become a nut -- believing, against all his training, 
experience and professionalism -- that insane prices 
would become more insane. After VeriSign had risen more 
than fivefold, Druckenmiller stepped up to the plate and 
bought more. He had become an amateur.

But neither markets nor battlefields reward amateurism 
all the time. 1999 was a good time to be an amateur in 
the TNT sector. 2000 was not. In a few weeks, VeriSign 
began to fall. Soros warned him that "VeriSign is going 
to kill us." But Druckenmiller, who was heavily 
leveraged, held on. The stock then fell below $100. 

On April 18, Druckenmiller resigned. 

Churchill was an amateur general. Some of his plans were 
harebrained and foolish. He proposed, just before 
Dunkirk, to try to keep a beachhead of British troops in 
western France (which would have provided the Germans 
with something else to demolish). He then suggested that 
France and England form a political union, to forestall a 
unilateral French capitulation. "Fusion with a corpse" 
was how Petain put it contemptuously.

But Churchill operated within a gradualist, consensus-
oriented group. His personal power was limited. His worst 
ideas were beaten down immediately, while his fighting 
spirit...his willingness to swing at the enemy...were 
crucially important.

"We shall fight on the beaches," declared Churchill, with 
celebrated grandiloquence, "we shall fight on the landing 
grounds, we shall fight in the fields and in the streets, 
we shall fight in the hills; we shall never surrender..."

His opponent, on the other hand, had eliminated most of his 
internal opposition. He had made himself into a dictator, 
whose ideas, no matter how foolish, were implemented. 

At the beginning -- in May 1940 -- His opponent's amateurism 
seemed to pay off. He took risks his generals were 
fearful to take and realized insane success. But the 
early success only fortified his opponent's faith in his own 
instinctive abilities. He was like a new stock picker 
whose first selections go up. He believed himself a 
genius. But amateurism only succeeds in a bull market. As 
the war continued, his opponent's mistakes were magnified, 
unrestrained and, eventually, fatal.


Bill Bonner

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

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:
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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 02, 2001

Published By Tulips and Bears LLC