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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  The End of Greatness

*** Microsoft - victim of anti-trust law
*** Dow back above 50% retracement level - what will 
happen next?
*** How much are votes worth? 

*** The big news today, screaming from every headline and 
website, is that Judge Thomas Penfield Jackson has ordered 
the breakup of the most successful new business in history. 
Judge Jackson excoriated Microsoft in his judgement for 
failing to admit that it broke the law.

*** What law? Whom did Bill Gates & co. murder? From whom 
did they steal? When did they bear false witness? Ah, but 
it was not the law of Moses nor any provision, big or 
small, of common law that MSFT transgressed. It was the law 
writ by politicians and interpreted by bureaucrats - that 
is to say, the law of fools and knaves - that Judge Jackson 
applies. Anti-Trust, it is called. A refuge of legal 
humbuggery if there ever was one. 

*** Had Bill Gates been a big contributor to political 
campaign coffers...and spent his time currying favor in 
Washington rather than providing the world with useful case would have ever been launched against 
the company and Judge Jackson might be spending his time 
locking up people for, say, littering federal highways.

*** The Dow rose back above the critical 50% retracement 
level of 10,762 again yesterday. Mr. Market seems unable to 
make up his mind. Or, perhaps he is just toying with 
investors the way a cat toys with a mouse, before eating it 
that is.

*** The Dow rose 77 points. The Nasdaq rose 82 points. 

*** "The Dow has had four rallies since April, EACH WEAKER 
THAN THE LAST," reports Richard Russell in yesterday's 
commentary. "The first rally ended on April 11 with the Dow 
at 11287. The second rally ended on April 25 with the Dow 
at 11124. The Third rally ended on May 16 with the Dow at 
10934. The fourth and most recent rally ended on June 5 
with the Dow at 10815." (

*** There are signs that the market wants to go up. For the 
7th day in a row, the Advance/Decline ratio has improved. 
More stocks are going up than down, in other words. 
Yesterday, 1606 rose on the NYSE. 1296 fell. 60 stocks hit 
new highs. Only 41 hit new lows.

*** Up or way or another...some day or 
another...stocks have to find more solid footing. It may be 
a long, hard, twisted and confused path they use to get 
there...but until further notice, we are still in a bear 
market and prices are still going down.

*** Of course, there are some prices that are already so 
far down they represent decent value. James Grant mentions 
American Greetings Corp., the #2 greeting card company in 
the world (after Hallmark). American Greetings is one of 
the "Old Economy" companies that is thought to be in danger 
of disappearing under the assault of free Internet services 
- that not only send out digital greetings for you, but 
also remember the appropriate occasions. 

*** Nevertheless, getting an emailed birthday remembrance 
is not exactly the same as getting its analog equivalent. 
Maybe it's the thought that counts. Or maybe, unlike 
pornography, anniversaries and weddings are things we are 
happy to be reminded of through the mail...and we don't 
mind displaying the cards on desks and mantels. American 
Greetings is selling at about 50% of sales, 90% of book 
value and a P/E of 7.6. 

*** Gold gave up some of its recent increases - falling 
$1.80. Oil, meanwhile, rose 20 cents.

*** According to CNBC, Tax Freedom Day was unofficially May 
2nd this year. But for people in the highest brackets it is 
June 9th. Tomorrow. 

*** But it's all relative. James Davidson: "Someone who 
graduated from college in 2000 with no net worth, earned $2 
million from day trading in Texas during the year, confined 
his expeditures to $120,000, and then was killed in a 
traffic accident on New Year's Eve, would owe an additional 
$550,000 to the federal government. The total tax take out 
of $2 million earned - $1,430,000, or 72%. For this fellow, 
Tax Freedom Day would fall on Tuesday, Sept. 19." 

*** Why do shareholders allow companies to buy back their 
own shares? Gary North: "A temporary employee -- let us 
call him a CEO -- can use the money generated by the 
company to buy back shares, which increases the CEO's stock 
option portfolio almost immediately. Pouring company money 
back into the company [instead of buying back its own 
stock] might produce long-term profits for investors, but, 
as Keynes said. . . .

"The question is, why do investors accept this policy? 
Because it makes them look smart. 'I bought 100 shares of 
Capital Consumption, Inc.,' [the investor says to himself], 
'and look how well I've done.' I call this the 'love me, 
I'm a genius' syndrome. Investment genius needs 
confirmation before the next quarterly report"

*** Another hot item in today's news: Jon Corzine, a Wall 
Street moneybags, called the "human ATM" by his opponent, 
won the NJ democratic primary. He did it by spending $137 
per vote. That doesn't seem like much to pay for a vote 
that could give you permission to take somebody else's 
property. But, it's depressing to think that this spending 
goes into the GDP along with real products, like haircuts, 
razor wire and whiskey. 

*** Commentators are calling for Campaign Reform. 
Immodestly, I repeat my reform suggestion: Choose members 
of congress by chance rather than by fraud. By lottery, 
that is, as juries are selected. 

*** It would cost nothing...nor would political campaigns 
continue to interrupt the taste and dignity of the regular 
MTV programming...and the resulting congress would be far 
more representative of the American people. Not only that, 
its members would have no incentive to act like potentates 
rather than citizens. After their terms were up - they'd 
have to go back to honest jobs.

* * * * * * * * * * * Advertisement* * * * * * * * * * * 

You can cash in on greed, ignorance and fear. A respected 
economist and former central banker, Dr. Kurt Richebacher, 
shatters the myths of the New Paradigm. Protect yourself 
and profit with his keen insights. Find the free report at

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

The End of Greatness

Amid the fed-watching and Gates-watching...and Anna 

Who has time to watch the dollar?

Yet, "the strong dollar," wrote a correspondent on the 
SiliconInvestor website yesterday, "is the only thing left 
underpinning a wildly overpriced stock market."

And the Bank of International Settlements frets, perhaps 
prematurely, that the biggest risk to the world's financial 
system is "coping with the reversal in the fortunes of the 

After a flurry of articles about the weakness of the euro - 
predicting its demise - the euro has done the predictable 
thing; it has risen. The dollar has fallen. The euro has 
been climbing a wall of worry for the last week or so. My 
lunch today will be marginally more expensive than it was 
yesterday - even if I order exactly the same thing.

Meanwhile, a report in today's International Herald Tribune 
informs us that a robotic telescope in Australia has 
confirmed that even "cosmic structures have a maximum size, 
a limit called 'the end of greatness..'" 

Could it be that the world's greatest currency has limits 

An American, at home in Des Moines or Sun City, has little 
interest in the foreign exchange value of the dollar. Only 
when on vacation overseas is he either delighted or annoyed 
- depending on the circumstances. Delight or annoyance, I 
should warn you, tend to be cyclical phenomena - not 
permanent ones. 

And yet, for the past few years, the dollar has been so 
strong and durable that it seemed that it would rise 
forever. Maybe not against the yen. But the yen is in a 
class by itself. The bank of Japan is not playing by the 
same rules. Its officials must not even breathe the same 
air (they eat raw fish, after all). Even taking interest 
rates down to zero and running the biggest government 
deficit in the industrial world does not seem to lower the 
value of the yen. Instead, the yen also rises. And rises. 
And rises. ( see: The Austrian Case 
against American Monetarism)

The dollar, meanwhile, does not so much rise as expand. It 
is America's number one export. It is the brand of choice 
for billions of money consumers all over the world - even 
in places where the local brand is in good competitive 
shape. Trillions of dollars have been shipped overseas over 
the past few decades. Not only have they been accepted, 
they've been welcomed like a tourist with a fat wallet. 

So welcome has the dollar become that it has encouraged a 
U.S. current account deficit larger than the world has ever 
seen. Every day, Sundays and holidays included, about $1 
billion more of goods and services is sold to America than 
America sells to the rest of the world. That $1 billion 
deficit hole is filled with dollars - one billion of them, 
to be precise. And the willingness of the world to continue 
to accept this paper - in return for products of real worth 
- is both one of the wonders of the modern world...and the 
subject of today's letter.

The dollar is, after all, the world's leading reserve 
currency. Central banks, corporate treasurers and 
individual investors throughout the world hold the dollar - 
instead of, say, gold or euros - as a reserve asset. There 
is, however, no law that requires them to do so. They might 
decide one day that they would rather have euros. In a 
trice - actually at the speed of light - they could convert 
their dollar holdings into yen or euro positions. Or even 

Why don't they do so? 

It is a matter of faith. Like an Internet stock, the actual 
value of the dollar is a hard thing to figure. How many are 
in circulation? What is the effect of derivatives? Against 
what assets is it a liability? What earnings? 

Lacking tangibles, the currency markets rely on intangibles 
- such as confidence, an emotion as subject to ups and 
downs as an elevator. 

Back in 1965, the American economy was nearly as robust as 
it is today. James Grant, ( excavates a 
passage from an issue of Business Week which appeared 
almost exactly 35 years ago, but which might have been 
written yesterday:

"Some European central bankers and economists have been 
watching the U.S. economy with utter amazement, some 
apprehension, and not a little jealousy.

"By all their rules, the U.S. economy should have started 
long ago to show the signs of strain that are the 
inevitable prelude to a bust. Yet despite an expansion that 
has carried gross national product up a startling 
30%...over the past 4 � years, the economy remains 
generally free from inflationary pressures and imbalances. 
And the businessmen who run the show fully expect their 
trouble-free prosperity to continue.

"The underlying factor behind this remarkable performance, 
so baffling to the European traditionalists, has been a 
sharp rise in productivity. Measured by output per man-
hour, productivity in the private economy has increased at 
an average annual rate of 3.5% during the past four years, 
compared with average rates of 2.5% in 1953-57 and 2.7% in 

Bringing the comparison up to date, "in the period from 
1961 to 1966," writes Grant, "output per hour in the 
nonfarm economy climbed by an average of 3.7% a year vs. 
2.3% a year for the period 1995-99."

Nevertheless, once again, strong productivity is thought to 
be the source, or perhaps the expression, of the U.S. 
miracle economy. 

Alan Greenspan, to the Senate Banking Committee in 
February: "It," he said, referring to the American economy 
speeding along with the pedal to the metal, "is 
characterized by a really phenomenal change in technologies 
which are inducing not only a high rate of growth and 
productivity but an accelerated, accelerating 

I have already bored you with the logic and figures behind 
what Dr. Kurt Richebacher calls the "U.S. productivity 
hoax." Using the helium of 'hedonic' measures, government 
number crunchers have managed to balloon GDP output numbers 
by as much as 700%. 

No one knows what the real output or productivity numbers 
should be. But whatever they are, they are no guarantee 
against financial decline.

"The Achilles heel of the apparently perfect economy of the 
early and mid-1960s," Grant continues, "was the dollar." 

Charles de Gaulle had caught on to the mysteries of a world 
reserve currency as early as 1965. "[W]hat the United 
States owes to foreign countries it pays - at least in part 
- with dollars that it can simply issue if it wants to."

Then, as now, the US was running a huge current account 
deficit. Then, as now, Americans were allowed to continue 
spending more than they earned as long as confidence in the 
dollar remained strong. Then, as now, the dollar eventually 
came to "the end of greatness," and was forced back. 

More on this tomorrow...

Your correspondent...still searching for the beginning of 

Bill Bonner
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"

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Last modified: April 02, 2001

Published By Tulips and Bears LLC