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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  What Really Works On Wall Street

In Today's Daily Reckoning:
*** Retail sales falling - so is the dollar
*** Easy Al is not a Daily Reckoning reader
*** New bull market in gold?

*** Two important news stories met investors on Tuesday. 
But only one of them will turn out to be true.

*** "The remarkable surge in the availability of more 
timely information in recent years," said 'Easy Al' 
Greenspan yesterday, "has enabled business management to 
remove large swaths of inventory safety stocks and worker 

*** "Most of the gains in the level and the growth rate of 
productivity in the United States since 1995," he 
continued, "appear to have been structural, largely driven 
by irreversible advances in technology and its 

*** The chairman of the Federal Reserve System is 
apparently not yet reading The Daily Reckoning. He seems 
blissfully unaware that the productivity numbers are both 
unremarkable and unreliable. In fact, he said that those 
who question the BLS numbers were "cynical."

*** But there was nothing cynical about Wall Street's 
reaction. The rosy remarks of the Fed chairman were greeted 
with applause on Wall Street. The Dow rose 57 points and 
the Nasdaq climbed back 83 points.

*** The Commerce Dept. also cheered investors with its 
report that retail sales fell for the second month in a 
row. And the Bloomberg News headline signaled its 
importance: "Dollar Falls as U.S. Data Point to a 
Slowdown." The euro rose to 96 cents. 

*** While the productivity story will eventually be 
unmasked as a fraud, reports of a slowdown are almost 
certainly heralds of tougher times ahead. The dollar will 
fall. Corporate profits will shrink. Unemployment will 
rise. Investors seem to think that a slowdown would be good 
for stocks - since Easy Al wouldn't be forced to raise 
rates. But stocks will not be able to resist the general 
trend. Global investors have meters too. They will not want 
to stay invested in US assets while corporate profits fall 
along with the dollar. They will pull out, and the prices 
of U.S. stocks will fall.

*** "The Web improves the productivity of many kinds of 
businesses..." says a cheerful article in the San Francisco 
Chronicle. "One type of enterprise that benefits greatly... 
is fraudulent stock promotion." A well-placed discussion 
board post. A free e-mail newsletter or two... and voila: 
"...the stock price can soar from a few cents a share to 
$10, or in some cases, much more." After the pump and 
dumpers sell out... the share price plummets.

*** Earnings, as I explained yesterday, have been far from 
the concerns of most investors. And yet, a Fed study found 
that among the 140 largest non-financial companies, 40% of 
earnings were spent to buy back shares in '99 - up from 17% 
in '94. Dell spent 80% of its earnings over the last 3 

*** Another study by professors at Stanford and UCLA came 
to the shocking conclusion that "executives manage the 
disclosures of corporate news to increase the value of 
their options."

*** Oil rose by another 82 cents. Oil hurts the dollar, 
because the U.S. is the world's largest importer.

*** Gold, which rose $5 early in the day, ended the day $1 

*** I put the question directly to very long-time gold 
watcher and newsletter writer, Harry Schultz. Has a bull 
market in gold finally begun? "Yes," he replied, "I think a 
new bull market has begun in gold. I am awaiting 
confirmation or cancellation of that either via a break out 
above 290 or a break below recent low."

*** The World Health Organization just released an alarming 
report. The bugs that cause infectious disease are mutating 
faster than previously thought. "A decade ago in India," 
says the report, "typhoid could be cured with the use of 
three inexpensive drugs. Today, those drugs are largely 
ineffective..." In Eastern Europe, roughly 10% of 
tuberculosis patients have strains resistant to the two 
most powerful antibiotics.

*** My daughter, Maria, was in a little theatre production 
- a comedy skit, actually - at her school last night. She 
played an obnoxious American tourist at a French hotel. She 
played the part with such confidence - it seemed, well, 

*** Nothing but bad news on this day in history: June 14, 
1940... German troops entered Paris during World War II. 
And Che Guevara was born in 1928...

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


What a difference two decades makes.

Mark Hulbert was a former philosophy student from Kansas, 
when I met him. He had recently come back from advanced 
study at Oxford, where he had been a contemporary of Bill 

He had the demeanor of a philosopher - with wire rimmed 
glasses, blue jeans, and a careful, though light-hearted, 
conversational manner. He looked like someone who had 
actually read Kant and Wittgenstein. Maybe it was the cut 
of his hair that betrayed his philosophical tendencies. Or 
maybe it was just the quizzical way in which he addressed 
every thought that passed his way. 

"Mark," I asked him one day, when we shared an office "can 
you change the paper in the printer?"

"Into what?" he replied.

Later, I asked him if he would like to write a newsletter. 
The idea would be to track the performance of other 
investment newsletters.

He agreed to do so and has been at it now for the last 20 
years. In fact, the fruits of 2 decades of this work 
appeared this month in a brief article in the journal of 
the American Association of Individual Investors.

In early 1980, Mark selected 26 of the leading investment 
newsletters of the day and began to construct model 
portfolios based on their advice. There has been much 
controversy around this effort - Mark has been threatened 
with lawsuits often - because the advice given is often 
ambiguous, or simply very difficult to follow in a 
methodical way. Mark must apply certain rules to make it 
possible for him to compare the investment advice of a 
great number of quirky, idiosyncratic writers. 

One point of contention, for example, was Mark's decision 
to treat a "hold" as a "sell." The two produce, of course, 
vastly different outcomes...but they are logically the 
same. You are either long a stock or you are short. You 
either think it is worth buying at present prices, or you 
think it should be sold. A "hold" is merely the lazy ground 
in the middle, when you are not sure what to do or when you 
have a loss that you do not care to recognize. But a new 
subscriber to an investment letter has to decide whether to 
take the recommendation as a buy or a sell...or ignore it. 
The 'hold' gives him no useful advice. 

Newsletter gurus were so upset at this that there was, at 
one point, an effort to get up a class-action suit against 
Mark. One publisher told me that he thought what Mark was 
doing was misleading and unethical.

One of the most colorful personalities in the newsletter 
business was a guy named Bob White, author of the The Duck 
Book. White was a paving contractor from Florida who 
somehow got in the business of writing a financial 
newsletter. He cut a sharp, though ridiculous, figure in 
the industry - wandering around in his blue jumpsuit, 
threatening people, and pushing various conspiracy 

He believed, for example, that the Bank of England was 
engaged in a plot with the Federal Reserve to destroy the 
dollar. Spotting a BOE official on a flight from London, 
Lord Carrington, I think, White went up to him, pointed his 
finger at him and declared:

"I'm on to you, Ol' Buddy, and I'm not going to let you get 
away with it."

Lord C. must have thought he had a raving lunatic before 
him. Which he did.

Bob White met Mark Hulbert at an investment 
conference...and then came up to me, and said of him,

"Nice kid...but not much upstairs."

But rarely, if ever, has a newsletter complained when 
Mark's analysis showed him producing above average profits 
for his followers. 

So what do the figures show? Whose advice really paid off 
for subscribers over the last 20 years?

First, it should be pointed out, that many of the original 
newsletters Mark followed went out of business. There are 
only 16 left. Of those only 2 outperformed the Wilshire 
5000 on a risk-adjusted basis. 

The Wilshire 5000 grew at an annual rate of 17% during the 
last two decades. Few people were able to beat it. Those 
who did were, not surprisingly, those who invest 
unflinchingly in stocks.

Al Frank's Prudent Speculator is at the top of the list - 
with an annual gain of 20%. Next is Dan Sullivan's "The 
Chartist" at 18.4%.

Meanwhile, at the bottom of the list is Joe Granville, 
another colorful character. Joe was at the height of his 
glory in the early 80s. He was the George Soros and Abbey 
Cohen of the day. Word that he was buying or selling could 
move markets.

He was, and still is, also a great showman. He would drop 
his pants during a speech - to show 'the importance of 
shorts.' In one episode, he had a board painted blue and 
placed just beneath the surface of the water in a pool. 
Then, he strode across the pool - to prove that 'he walked 
on water.'

Yet, following Granville's advice during the last two 
decades would have left you penniless. In an average year, 
you would have lost 22% of your money. Over two decades - 
you would be wiped out.

Many of the old-timers in the newsletter business were gold 
bugs and stock bears. Because the big trend of the 70s had 
been the rise of hard assets - and the fall of paper ones. 
The lesson they had learned was to mistrust paper - and 
stay long gold.

Granville remained bearish throughout the greatest bull 
market of all time. It was a consistent, but costly, 

But now, a new lesson has been learned - that you cannot 
trust gold...and you must stay invested in paper. So 
persuasive has this new 20-year curriculum been that even 
many of the former gold bugs of have become convinced.

Personal Finance recently reported Granville's current 
position. He's become a stock bull: "[F]urther evidence 
indicates a new bull upleg," he says..."nothing has broken 
the bullish pattern of rising bottoms..."

The same issue of PF shows another fair weather friend of 
gold who has kicked the hard stuff in favor of some very 
soft paper. Mark Skousen is buying the dips. He says the 
Nasdaq decline "provides us with the biggest buying 
opportunity in years."

Harry Dent, meanwhile, goes completely over the top with 
his "bare minimum" targets for the Nasdaq of 
30,000...possibly 45, 2008.

"There is one characteristic," writes Mark Hulbert, 
summarizing the conclusions of two decades of work, "that I 
have discovered that does distinguish the top performers: 
discipline. They were willing to stick to their strategies 
during the discouraging interludes in which they were 
lagging the market or even losing money. In fact, I think 
the importance of discipline may be the most important 
lesson to emerge from my 20 years of tracking investment 
newsletters. It is what keeps us from dumping a good long-
term strategy because of short-term underperformance."

Best regards,

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"

" Your Daily Reckoning is the best in business commentary... mixing
serious warnings and the state of the market with gentle humor"

"It is actually better than some of the newsletters that I pay to

"Your statements and philosophy have kept me from storming into the market and in fact [I'm] making some money in put options" (Frank)

Open your mind with the most stimulating e-mail newsletter that you'll ever read, The Daily Reckoning. To receive this free daily email newsletter click here now.

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Last modified: April 02, 2001

Published By Tulips and Bears LLC