*** Nothing happened on Wall Street on Friday...a fitting
end to the week
*** But the Dow is decisively below the 50% retracement
level
*** "Phony" PPI numbers...bad loans increasing...dot.coms
cutting back...and more
*** The PPI I referred to last week came out on schedule on
Friday. It showed inflation rising at the wholesale level
by .2%, small enough to qualify as "unchanged."
*** It was not a 'big day' on Wall Street. It was a little
day. Nothing comes from nothing...so nothing happened after
nothing was announced. The Dow rallied and then fell -
ending the day down 53 points. The Nasdaq managed to rise
49 points.
*** Advancing stocks led declining ones 1668 to 1185. And
there were 65 stocks hitting new highs on the NYSE, against
39 hitting new lows.
*** All in all, it was a fitting end to an indecisive week.
The Dow fell 1.67% over the week. The Nasdaq rose almost
the same amount - 1.61%.
*** The week ended with the Dow with a P/E of 20. The S&P's
P/E is 28. And the Nasdaq's P/E is still a sizzling 150.
*** No sooner had the PPI number appeared than critics
began attacking its veracity. Bill King described it as
"phony," intended more to help re-elect Al Gore than to
provide investors with meaningful information. The Bureau
of Labor Statistics, the agency officially in charge of
fudging the figures, reports that gasoline is down 10%
since March. King asserts that it is really up 30%.
[For a free one-month trial to Bill King's service please
call 1-800-433-1528 (code 3437)]
*** King leads us to the BLS website where the numbers are
explained (or obscured) and we encounter our old drinking
buddy, 'hedonic' measures: "An alternative quality
adjustment technique using hedonic regressions has been
incorporated into PPI adjustment processes. Hedonic
regressions estimate the functional relationship between
the characteristics embodied in the products in a market
and the products' selling prices" In other words, the BLS
quants take a guess at how much something is worth, rather
than rely on actual prices.
*** Hmmm...well, sounds like Pentecost. Everyone in France
celebrates the holiday today, but no one is quite sure what
we are celebrating.
*** I listened carefully as Pere Marchand attempted an
explication in yesterday's sermon. People spoke in tongues,
they were given the gift of healing, someone's hair caught
fire. It was all rather remarkable.
*** Richard Russell, interviewed in this week's Barron's,
reminds us that the Fed has raised the discount rate to 6%
or higher only 7 times since 1920. Each time, the market
performed badly afterwards. The most recent episode was in
1989. The Fed once again put the discount rate at 6% on May
16th.
*** And the Financial Times warns that a review of large
loans by federal bank regulators shows a sharp rise in the
number of bad loans. The proportion of "adversely rated"
loans in the March 1998 report was only 2.5%. In '99 it had
risen to 3.7%. The report this year is expected to show a
further increase.
*** The big number this week will be the CPI report
expected on Wednesday. In this numbers-watching market, you
would expect Wall Street to hunker down until the figures
are released. But this is also the week when June S&P
futures expire. Bill King expects the big players to try to
goose up the market before the close of business on
Wednesday.
*** Oil rose a little on Friday...it is still above $30 a
barrel. Gold fell 40 cents.
*** The dot.coms are cutting back. Industry websites are
full of staff cuts, budget cuts, and the unkindest cuts of
all - when capital is cut off and the company has to close
up shop. Salon.com laid off 13 workers. CBS laid off 24 in
its Internet group. Surfbuzz.com closed its cyberdoors.
APBnews laid off "all 140 staffers" (I wonder who's minding
the store).
*** Dan Ferris, editor of Real Asset Investor: "Natural gas
storage levels are 25% lower than last year. Gas prices
have gone from $2.30 earlier this year up to around $4.40
this week. Some traders have been talking about natural gas
prices in the $8-$10 range by the end of the year."
Climbing prices and falling inventories with no relief in
sight? Sounds like an unfurling opportunity...but not the
way most investors think. (http://www.dailyreckoning.com)
*** "Why are we not already in a major bear market, rather
than feeling nauseous?" asks Lord Rees-Mogg, who thinks he
knows... (http://www.dailyreckoning.com)
*** "Putin's Adviser Extols Ayn Rand" says The Moscow
Times. "Newly appointed presidential economics adviser
Andrei Illarionov showed his economic colors Tuesday as he
vociferously supported the ideas of one of the
most influential shapers of Western thought on free
markets, Ayn Rand," said the paper. Then, quoting Mr.
Illarionov: "Every import tariff and every limit on
foreign-exchange transactions is a blow to
our consciousness. Every tax acts against our freedom." The
new economics advisor to President Putin made the remarks
at a news conference Tuesday dedicated to the launch of
Rand's work in the Russian language. Illarionov cited
Chile's economic plan under the dictatorship of General
Augusto Pinochet as an ideal example of good economic
programming.
*** Labor markets all over the world must be getting tight.
Reuters reports that "Swedish furniture chain Ikea is
trying to attract young professionals with handwritten job
advertisements on lavatory walls." In the toilet, explained
a manager, "people are more relaxed and receptive to our
message." What sort of employees was Ikea looking for in
the toilet? Copywriters.
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You can't always get what you want
You can't always get what you want
You can't always get what you want
But if you try sometime
You just might find
You get what you need
The Rolling Stones
Copywriters are hyper-sensitized to the difference between
want and need. You can't sell people what they need. A man
buys what he needs reluctantly and at the lowest possible
price - with no margin for an advertising budget.
Imagine walking into a restaurant. On the chalkboard at the
entry you find this message:
"Today's special:
Nothing special, just a piece of dead cow, mistreated
terribly before it was cut up...and some cooked
plants...with enough calories and nutrients to keep
you alive until tomorrow. $25.
What more do you need anyway?
Sound appetizing?
After I completed Friday's Daily Reckoning, I wandered down
the street to my favorite luncheon spot - the Caf‚ St.
Andre.
The owner and waiters greeted me as a regular.
"What's the 'plat du jour?'" I asked.
"Ah," said the waiter, almost confidentially, "we have a
delicious blanquette de vaux with carrots a huile
d'olives."
Even if you don't know exactly what you're eating, it
sounds more appealing than the dead cow.
"Du vin?" the waiter inquired, nodding his head and pursing
his lips as if to prompt the proper response.
"Bien sur, un bordeau..."
As I was saying this, sitting against the plate glass
window of the caf‚, a woman walked by outside. 'Walk' does
not do justice to the way she passed. She moved with such
fulminating grace and such pullullating charm that the
whole sidewalk seemed to undulate in time with her steps.
The cold glass of the Caf‚ St. Andre caressed her as she
went by.
All of a sudden the rest of the world was out of focus,
only she could be seen clearly - a vision of such beauty
that it remained imprinted on my retina, like a flash of
light you see even after you close your eyes.
"Monsieur," said the waiter, bringing me back to my senses
"that is not on the menu."
Oh the agonies I suffer on your behalf, dear reader. I had
gone to the Caf‚ St. Andre for a relaxing lunch, with a
copy of Gary North's latest epistle, intending to find a
few nuggets of insight and information I could pass along
to you. But I had not reckoned on summer...
Summer seems to have struck Paris suddenly. It was like a
woman who had suddenly looked in the mirror and discovered,
for the first time in her life, that she was beautiful.
And then...her whole look changed. Her face. Her clothes.
The way she walked. The way she talked. Even the way she
smelled. Thus did the whole city seem to change the way she
presented herself.
It was bad enough in the winter months. Every drug store
window displayed ads for an anti-cellulite cream...making
its point with the most perfect derriere you ever saw. This
was neither the derriere you needed, nor were ever likely
to have, but it was certainly the one you wanted.
And CelioI don't know what they are selling but their ads
seem to celebrate the virtues of breast augmentation. And
then...there are the Aubade underwear ads...so bad, so bad.
It was hard enough, even in midwinter to focus on the GDP
growth rate, banking reserves, and hedonic measures. But on
Friday, hedonic measures seem to have gotten out of hand
altogether.
As you can see, today's letter is about more than just the
stock market. Maybe a parental warning is in order.
Today's, letter is about sex. No not the kind of tawdry,
vulgar sex you see on TV. This is about something
else...something much dirtier. Any connection to investing
or economics is purely coincidental.
I am probing the living heart muscle - like a nurse
searching for a collapsed vein...or maybe a doctor looking
at an EKG...what do those little peaks and valleys mean?
A redhead in long white pants, and a pink tank top
sauntered down the street. She was absolutely gorgeous,
too. A model maybe. She walked fast, as if she were late
for an assignment. Then, there was a woman who looked like
Greta Garbo. And another one - a young Deneuve. Following
her was a Brigitte Bardot-like woman with a waifish face
and a figure that reminded me of someone.
In fact, each one seemed to remind me of something - but I
didn't know quite what it was. It was like Proust's lemon
cakes - triggering a recollection so rich and inviting I
could barely resist. But a recollection of what? I was like
an aging writer, trying to recall love affairs I never had,
and lovers I only imagined.
A woman in an extremely small, extremely tight blue skirt
walked towards the caf‚. As she approached, the feeling -
whatever it was - increased, like the sound of an on-coming
freight train. And then, there she was - right outside the
window - all motion...voluptuous...irresistible. I cannot
describe her in detail. She was everything a woman should
be. And as she passed, the wave washed over me, leaving me
crumpled up, broken, collapsed on the beach.
Francis Galton, Darwin's cousin, was so fascinated by some
of the women he saw in Africa, he could scarcely believe
they were real. He got out his calipers and other measuring
devices and went to work, moved no doubt by the spirit of
scientific curiosity.
But it was not science that moved me on Friday.
Just as one wave subsided another wave built up - a woman
in a yellow dress, a stunning woman with hair nearly the
same color as her dress...riding a bicycle. Could a woman
in a dress that short be really be riding a bicycle, I
asked myself as she drew alongside the caf‚ window. And
then, she passed, and I felt as though my surf board had
slipped out from under me and I crashed down onto the
beach. Oh my...the rocks!
It is summer. Not technically yet. But it sure looks like
summer. The streets of Paris are full of attractions and
distractions. Enticing, enchanting, absolutely
intoxicating...
Of course, not all the people passing the Caf‚ St. Andre on
Friday were beautiful young women. There were also a few
handsome young men. (Do women feel the same way way when a
handsome man passes? I don't know...)
Then, too, there were quite a few tourists - many of the
recognizably American. One couple was typical. The woman
looked bright and chipper, like she had invested in
Microsoft back in 1987 and gotten a good night's sleep on
the plane from New York. The man was a different story. He
looked as though he had waited until December of '99 to buy
Microsoft and hadn't slept a wink. His jaw was slack and
looked as though he could use a good drink.
"Back in 1897," Gary North tells us, "economist-sociologist
Vilfredo Pareto's study of income distribution appeared. He
surveyed the larger countries of Europe and found that
there was a strange income distribution curve in all
nations that he studied. Something in the range of 20% of
the population received about 70% to 80% of the income."
The 80/20 rule became known as Pareto's Law. As recently as
1998, it was tested in a study of the U.S. and Canada.
Again, it was discovered that little had changed. In 1997,
the top 20% of the population owned 84.3% of the wealth.
Gary concludes that "Getting rich is simply not possible
for 80% of the population. Anything that offers the hope of
riches to the middle-class majority is a delusion."
It may be a delusion, but it is certainly a popular one.
People want to get rich. They do not need to get rich.
I remind myself that beauty is only skin deep. And like
money, it is superficial. But superficial seems plenty deep
enough. Money can't buy love. But it can buy those Russian
women in the Bois de Boulogne. And what would be nicer - a
30 minutes of cheap, imitation love with the woman on the
bicycle...or a lifetime of the real thing with Janet Reno?
Hmmm...maybe I'm thinking too small. Or too American. Why
settle for 30 minutes? French men often have mistresses
they keep for decades. President Mitterand's mistress
shocked society in France by showing up, with his
illegitimate daughter, at his funeral. It was not the
revelation that he had a mistress that was shocking.
Everyone knew that. But that she would attend the funeral -
- that just wasn't done.
Radical feminists, bless their hearts, (if they have
hearts), say that there's no difference between traditional
marriage and prostitution anyway. In both cases, the woman
is kept (at great expense, I might add) in order to give
the man what he wants.
But the radicals don't understand the difference between
want and need. What you want is what you don't have - even
if what you have is better.
Finishing my blanquette de vaux, the waiter returned.
"Dessert" he asked, "can I recommend a cherry tart?"
"Oh yes..."
Your correspondent, hard at work...
Bill Bonner
P.S. I am glad I am happily married. Otherwise, I might be
tempted. I might buy a tech stock at 200 times sales. Or
try to meet a redhead. Either way, I'm sure I would regret
it.
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Last modified: April 02, 2001
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