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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

MONDAY, 26 JUNE 2000 


Today:  The Summer of Love

In Today's Daily Reckoning:
*** Amazon...down the river
*** Oil down...
*** The 'lost generation' and stock market bubbles...

*** Oh Amazon! You great, big, muddy river of no 
returns...The big news on Friday was the breakdown in 
shares of AMZN. The 'must own' stock of '99 has become the 
'must dump' stock of 2000. Down, down, down, $33.

*** The Dow managed a few points of profit Friday - rising 
28 points. But AMZN led the Nasdaq lower - down 91 points.

*** "The growing sentiment," said one fund manager quoted 
by Reuters, "is that the best times are behind us." But if 
the best times are behind us...what is ahead of us?

*** There were 1221 advancing stocks, 1595 declining ones. 
Only 25 stocks hit new highs. 62 hit new lows. 

*** Tomorrow the Federal Open Market Committee meets. After 
six rate hikes in 12 months, the overwhelming consensus 
among bond traders is that Greenspan will not push through 
another one. "Easy Al" believes in letting the street know 
what he will do in advance, in order to avoid shocks. So, 
the traders are probably right.

*** Oil rose $1.58. Eventually, oil price increases work 
their way into CPI increases. Wall Street analysts worry 
that even if the Fed does not hike rates this week - they 
will probably do so later in the summer.

*** Gold fell $2.40. It is hard to reconcile gold price 
movements with the inflation forecast. This leads many to 
believe the gold markets are rigged. That is one of the 
sub-themes entertaining conventioneers at the World Gold 
Conference here in Paris this week.

*** I had lunch on Friday with Harry Schultz, who is in 
town for the gold conference. Harry, Richard Russell and 
Jim Dines are the Grand Old Men of the investment 
newsletter business. They've survived bull markets and bear 
markets...and a lot of markets in-between. 

*** "The 1920's and today's bubbles," he writes in a recent 
issue of his newsletter (, "are both 
symptoms of a crisis of faith." 

*** Harry reminds us that the post-WWI generation was 
termed the "lost generation," in Hemingway's The Sun Also 
Rises. "I submit," he says, "that the irrational exuberance 
which ended in 1929 was an attempt to find meaning in a 
post-war age of cynicism and loss of life meaning. God 
seemed an antiquated myth, and the promise of a better 
world through 1920's technology was a pretty good 

*** Another lost generation arose during the Vietnam War, 
Harry maintains. This time it was a loss of faith in 
secular institutions. "As of now," he continues, "the total 
value of U.S. stocks is 200% of GDP, so logic also suggests 
a crash imminent. World GDP is $41 trillion, but there is 
$300 trillion in financial claims outstanding. Just as a 
newly-divorced people drown their sense of betrayal/hurt in 
excess, so a spiritually-bereft generation does with the 
stock market."

*** "Mugabe is an institution" said a spokesman for 
Zimbabwe's ruling party, explaining why "Comrade Bob" would 
not step down even if his party were defeated in the 
weekend election. Mugabe may or may not be an institution, 
but he should definitely be institutionalized.

*** Sacre Dieu. And what a relief. The school year ends in 
France this week. All of our children have passed into the 
next grade. Each one followed a different strategy. Maria 
studied intensely, but without really paying attention. 
Sophia eschewed intense study in favor of dumb luck. Jules 
calculated the minimum needed to get by and got by - 
minimally. Henry relied on his charm. And Edward, who never 
goes anywhere unarmed, must have threatened his teacher. 

*** This is the anniversary of Kennedy's "Ich bin ein 
Berliner" speech. A 'berliner' is a pastry.

*** It is also the anniversary of Pearl S. Buck's birth. 
The author won the Nobel Prize in literature. According to 
my usual unreliable sources, she is the only American who 
was not an alcoholic to do so.

* * * * * * * * * Advertisement * * * * * * * * * * * *
Jim Clark made billions on Silicon Graphics and Netscape - 
he's one of the best tech investors in the world. And he 
just bought $200 million of his new company's stock - on 
the open market - for $26. You can buy it today for $15. 
Find out why it's time to buy stocks again in this free 
report for investors. 
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * 


What Hath God Wrought

Samuel F.B.Morse, 
inaugurating the telegraph 

The rabbit jumped out of the grass on the right side of the 
road. I hit the brakes, and slowed enough so that he could 
have gotten across the road safely. But, instead of darting 
to the other side, he feinted to the left.

Rabbits do not run in a straight line to escape predators. 
They are not as fast as wolves. Over many hundreds of 
thousands of years, they learned to zig and zag, counting 
on the momentum of their pursuers to cause them to miss the 
turn. Those who could not learn to fake out the wolves, 
were eaten. Unfortunately, the Renault Espace, loaded with 
luggage, three adults and three children, did not take the 
feint. Thousands of years of evolutionary programming had 
failed to prepare the rabbit for the internal combustion 

The internal combustion engine was a "first order" 
innovation, according to Professor Gordon, to whom I 
introduced you last week. It changed things in a 
fundamental, revolutionary way. Before it came along, most 
people lived on farms. Man and beast working together could 
produce more food than they needed to support themselves. 
Still, agriculture took up the efforts of 80% to 90% of the 
working population.

Motorized farming and transportation changed everything. 
Within a few years, whole populations were moved around - 
with 90% of the people living in cities and suburbs, and 
just 10% still on the farm.

In Russia, technology took the place of religion. Instead 
of naming their children after saints, they named them 
after farm equipment. Just as Stalin changed his name to 
something in tune with the times - Stalin means "man of 
steel" - farmers gave their children names like "tractor" 
or maybe even "piston," but probably not "oil pump" or 
"universal joint."

Real revolutions don't come along very often. When they do, 
the instinctive behavior of hundreds or thousands of years 
- the institutions that have evolved over the centuries - 
may become a liability, rather than an asset. Revolutions 
are dangerous. 

The Internet looked like a revolutionary innovation when it 
first appeared. But it is turning out to be, as Professor 
Gordon, suggests, much less important than the internal 
combustion engine. It is not really a "first order" 
innovation, but a secondary one. The Internet is just an 
evolved stage of the telecommunications revolution that 
began with the construction of the French State Telegraph 
system in May of 1794. It was later greatly improved by 
Samuel F.B. Morse who officially inaugurated his system in 
May 1844 when he sent his famous message from the Supreme 
Court chambers in Washington to his assistant in Baltimore.

What God had wrought was a revolution. The Internet, by 
contrast, is merely the latest twist in the revolutionary 

One of the marks of a true revolution is that it destroys 
the old ways of doing things. Like rabbits, whose genetic 
code is unprepared for automobiles, the existing 
institutions and habits are run down, crushed and 

That is what was supposed to happen when the Internet 
Revolution was announced. The newspapers were supposed to 
go out of business, because the Internet would steal their 
classified advertising - as well as their content.

The retailers were supposed to be doomed - because people 
would do their shopping over the Internet. 

The music industry, movies, books - all would be out of 
business or radically transformed. Nothing would be able to 
stand against the superior, revolutionary new innovation of 
the World Wide Web!

Automobiles (who would need to commute?) would be hurt. 
Salesmen could take a hike. Car dealerships would soon be 
empty lots. 

Businesses of all sorts would be ruined as profit margins 
got thinner and thinner. Second tier manufacturers would be 
destroyed. Malls would close. Office buildings would be 

All of these businesses were supposed to end up as road 
kill. They were thought to be the unavoidable casualties of 
the Internet Revolution. 

And yet, the carcasses we are beginning to find on the road 
are not those of traditional businesses - but those of the 
new Internet companies! Amazon fell $8 Friday after an 
analyst noticed that the company was running out of cash 
and seemed unlikely to develop a 'category killer' business 
in the next 12 months. 

Barrons' reports that there are 50 Internet companies 
scheduled to run out of money in the next 8 months - among 
them some of the best known businesses in the industry:, Juno Online,, and Value 

The dot.coms are desperately trying to hold on to their 
remaining cash, in a very traditional way: they are laying 
off people. According to Bloomberg,,, 
and took this idea to it's logical extreme - 
laying off 100% of their employees. If they can figure out 
how to operate with no workers, even I will concede that 
they have developed revolutionary business models.

Meanwhile, share prices continue to drop. Salon was over 
$25 in January. And drkoop was over $15. Now both are below 
$5 and trending towards zero. (see: The Demise of the Greater 

Overall, Internet stocks are about 50% down from their 
peak. The industry had a market cap of $1.4 trillion 
earlier this year... which is down to $693 billion today. 

No Internet sector seems to be invulnerable. Just a few 
months ago, the business-to-business companies enjoyed 
great popularity, while the e-tailers were considered 
yesterday's news. Now they've all become last week's news. 

In a few months, you won't be able to find a single person 
who ever thought Internet stocks were a good idea. They 
will have made a full circle - from myth to news to myth 

The rabbits are safe.

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"

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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