*** Finally -- a rally...
*** It wouldn't be that hard to "paint the tape"
*** "THE VOLUME SELLING LIES AHEAD"...
*** Turnaround Tuesday came a day late. "We finally got
the rally," said one trader, quoted by Reuters. The Dow
rose 113 points. The Nasdaq rose 106 points. And again,
the bulls are on TV claiming that the worst is over.
*** Almost every day, the market opens up. Sentiment is
still bullish -- or at least, not bearish. And when the
market seems to be melting down, there is often an
impressive rally in the last hour.
*** Could someone be "painting the tape" -- deliberately
trying to manipulate not merely the price of a single
stock, but the entire market? Moving the whole market
would be a Herculean task, but Richard Russell
(http://www.dowtheoryletters.com) points out how easy it
would be for a large institution to drive up the Dow
index. The purchase of 10,000 shares of IBM might take
the price up $6, for example, which would move the Dow up
*** The whole market, though, is another story.
Yesterday, for example, while the Dow was up 113 points,
more stocks fell than rose on the NYSE -- 1,485 to 1,410.
And the number of stocks hitting new highs was less than
a third of those hitting new lows -- 39 to 127.
*** So the turnaround was not very impressive. The Nasdaq
is still 35% below its high. The Dow is still down 10%
and the S&P is down 9%. So, unless something happens to
change our minds, we should expect further declines as
this bear market continues.
*** Richard Russell also points out that the real selling
has not even begun. So far, says Russell, "this market
has been sinking on the phenomena of No Bids. ...
[T]here's been no real selling, just a process of hitting
the bids. THE VOLUME SELLING LIES AHEAD."
*** The low volume is hurting the brokerage houses. The
online brokers, especially, are taking a beating. Thin
profit margins (or non-existent ones) really start to
hurt when volume falls. Ameritrade is just a little over
$11. And e-trade is below $14.
*** But the e-brokers are not the only ones in danger. A
consultant for Ernst and Young, quoted by Richard
Russell, says "there are 30,000 e-tailers out there, and
probably 25,000 will have to go away."
*** The bubble itself is still as big as when the Fed
first began tightening. It got bigger after the Fed first
began its niggling rate hikes...and then deflated
*** "Why can't it just stay as it is," you might ask...a
question I put to myself on major birthdays. I've had
enough birthdays: "I am old enough. Couldn't I stay right
here?" But "every day, all this earth ages, drooping unto
death," as it says in the ancient poem, The Earthstepper.
The bubble must be destroyed to make way for what comes
*** But when? And how? The Clinton Administration would,
no doubt, like to see the bubble persist at least until
after the November elections. "USA Today" reports that
three out of four likely voters own stock. Greenspan
would probably like to accommodate the Democrats. Any
significant crack in the economy or the market will
probably give him a rationale for not continuing the rate
*** Speaking of Democrats, I am in a hotel room in the
N.Y. Hilton and I turned on the TV last night. I do not
own a working TV and have missed much of what passes for
popular entertainment. Maybe that's why I am always
appalled when I see what people actually watch on the
tube. Last night there was some sort of Democratic
lovefest featuring Hillary, Bill, Tipper and Al -- none
with the slightest sense of charm or dignity. I guess
that is no surprise, but why was such a spectacle...with
no redeeming social value...broadcast to the nation?
*** I shared a cab with a woman who almost immediately
began telling me about her marriage...and how she would
stay with her husband for six months and then live by
herself for six months...and how her husband had a
"This is New York," I thought to myself...unaccustomed to
the openness. A French woman would never tell you such
things -- not even if you had known her all your life.
*** My fame precedes me. A young woman came up to me in
the lobby of the Hilton and began speaking to me in
French. She called me by name -- but I could place
neither her face nor her name. My center of gravity had
been shaken by the woman in the cab.
"What next?" I wondered. I thought she might be a
DailyReckoning.com fan. Maybe I could develop some
groupies who follow me around...ah... But it turned out
she worked for a friend's company in Paris.
*** I'm here to give a speech to the NY Direct Marketing
Association. The program describes me as perhaps "the
world's best copywriter." You have to take what you can
get in life...no matter how undeserved or inaccurate.
Actually, what I am supposed to talk about is the "Daily
Reckoning." How does it work? Why do you do it? Does it
make money? It's probably time I asked myself those
*** The trip up to New York from Baltimore was also
appalling -- in its own way. More below...
*** Oil rose $1.19 yesterday. Oil is now over $30...and
natural gas is over $4 -- for the first time in history.
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Contrarian instincts, like crowd-following ones, are no
guarantee of success. The contrarian insight is merely
the realization that people are swayed by emotion as much
as by logic -- and that they frequently become either too
bearish or too bullish. Prices eventually tend to regress
to the mean, so you can make money by buying what is
unusually cheap and selling what is dear -- assuming they
return to more normal levels.
But sometimes the trends that lie beneath cycles of
despair and euphoria are extremely long. In many of
America's East Coast cities, for example, real estate
prices peaked out, in real terms, early in the 20th
century. Since then, almost every investment -- even at
very low prices -- has been a losing one.
I have to give my speech in a few minutes. So I only have
time to tell you about my train trip from Baltimore to
New York. As the hippies used to say, it was a trip.
The trains pull out of Baltimore's station. You pass
through the slums of East Baltimore...and then the
white slums -- peering over fences and into backyards
onto scenes of such dilapidation and depravity that you
believe yourself transported -- either in space or in
Either you are visiting some Third World hellhole, such
as Lagos, Nigeria, or a 19th century Dickensian one.
Whichever direction you look, right or left, it is the
wrong side of the track. Mattresses lying on the ground
in backyards, rusted out cars and factories, boarded up
or broken out window -- garbage everywhere...in piles, in
ditches, even in the trees. The scenes are hard to
reconcile with the vision of a New Era -- and everyone
getting rich. These people certainly are not rich. They
are not even poor. They would have to work for years and
save their money to reach poverty.
Caen, Dresden, Hiroshima -- many European and Asian
cities were bombed to smithereens just a half century
ago. And yet every one of them is a model of prosperity
compared to these East Coast dumps. In fact, they
probably looked better even in 1946 than East Baltimore
In 1983, I bought a beautiful house in a "bombed out"
section of Baltimore for $27,000. I spent several times
that amount fixing it up. Seventeen years later I felt
glad to be able to sell it for less than I had spent on
But at least that house -- built for wealthy Jewish
merchants in the late 19th century -- was attractive to
look at. Most of the places you see from the train seem
to have been put up by people completely ignorant of the
architectural improvements of the last three millennia.
Glasgow's industrial slums are attractive in comparison.
In fact, it is hard to find anything that is not
appealing in comparison. Few areas of the world are so
misbegotten, forlorn and unmitigatedly depressing.
It is hard to turn your eyes away. The scenes are so
preposterously abject -- so unrelentingly ugly, trashy
and revolting -- it is like watching MTV...you are almost
hypnotized by the sublime wretchedness of it all. There
are hospital waste dumps that are more attractive and
healthier places to live. In fact, some of the buildings
are in such a condition that you can't tell if they are
dwellings -- or just heaps of discarded building
materials. And some of the neighborhoods are so bleak and
forbidding even the rats must have decamped.
If you believe there is an explosion of wealth creation
going on in America, I invite you to take the train and
open your eyes. Whatever explosions are occurring, no
shock waves of wealth have reached this corridor. No
houses -- visible from anywhere along the route -- are
being bid up to ridiculous levels. I would bet that not a
single one has sold above the offer price in the last 50
Not all the houses are abandoned -- or even in bad
repair. Some are well-maintained. With their aluminum
siding, formstone and Depression-era designs, however,
one wonders why anyone would bother to keep them up. It
would be better to walk away and call in a bomb strike.
They were a disgrace the day they were built. Today they
are an embarrassment. They are houses that bombs and
termites would improve.
I did not see a single building I would want to live in.
I say that not out of snobbery, but simply the instinct
for self-preservation. These places look lethal -- if not
to the body, certainly to the spirit.
Even nature seems to have turned malignant. The typical
bucolic scene along the NJ tracks is misshapen catalpa
trees with plastic bags hanging from the branches.
Somehow, the catalpa tree seems to have mutated so it
grows in concrete. And plastic bags are ubiquitous. Many
of the commercial buildings still in service seem to use
them to decorate the razor wire they run along the roofs
-- putting a blue or white plastic bag at intervals of
every three feet or so.
The most attractive thing I saw along the entire trip --
through Wilmington, Philadelphia, Trenton and Newark --
was a huge pile of smoking metal -- a place that looked
like it had been hit by a squadron of bombers about 3
hours before. At least the rubbish had been burned.
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Last modified: April 02, 2001
Published By Tulips and Bears