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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter

MONDAY, 3 JULY 2000 


Today:  Que Sera Sera

In Today's Daily Reckoning:
*** Is this still a bear market?
*** Dell computer's 6% earnings growth
*** Working on the 'blue yodel'...

*** The Dow fell a bit on Friday. The Nasdaq rose a bit. 
More than a bit, actually - 88 points. 

*** The week ended with the Dow up nearly half a percent. 
The Nasdaq rose more than 3% over the week.

*** More stocks rose than fell during the course of the 
week - 1917 vs. 1421. Is this a bear market? Yes...but it's 
the strangest bear market ever. Which makes sense...because 
the bull market was the strangest, the most extreme, in 
history, too. 

*** We're in a period in which stock prices are mostly 
falling. But it's the 'summer of love.' People still think 
that everything will get better. Sure, the Internet stocks 
are getting crushed. The e-tailers, B2B, and content sites 
seem on the verge of bankruptcy...but everyone now claims 
to have realized that their valuations were insane...and 
maybe they should never have been taken public in the first 

*** Following the 'summer of love,' most likely, will be 
the 'autumn of anxiety' and the 'winter of our discontent.' 
But that is, of course, in the future... and we seen into 
the future darkly, if at all.

*** "An unusually high number of companies have already put 
Wall Street on notice that they may fall short of profit 
estimates," says today's Reuter's article. The New Era, as 
I explained in an earlier letter, may produce marvels, but 
profits are not among them.

*** Dell computer reported a very healthy earnings growth 
in the last quarter. According to the company, earnings 
rose to 19 cents per share, well above the expectation of 
16 cents. David Tice, writing in Strategic Investment, 
reports, however, that "a closer look at the numbers 
reveals that despite rapid sales growth, EPS grew only 6% 
when gains from investments were removed. That's hardly the 
typical growth rate for a company with a 70 P/E."

*** Well, at least it has earnings. And at least they are 
growing. In fact, Dell - one of the leading "New Economy" 
companies - has earnings growth very near to the average 
growth rate of corporate earnings for the last 40 years - 
5.7%. Maybe 'new' is not-so-new, after all.

*** Bees go where the honey is. In the mid-90s only 6% of 
IPOs were for foreign companies. But in the first half of 
this year, nearly a third of the money raised on Wall 
Street through IPOs was destined for overseas firms.

*** Gold rose 80 cents on Friday. Platinum, which Harry 
Schultz ( says will go to $800 
before the end of the year, rose 50 cents.

*** Today, the purchasing managers will give their number - 
showing the rate of price increases at the wholesale level. 
But, on the eve of the 4th of July, few people will be on 
hand to react. Friday, payroll numbers will be disclosed.

*** And tomorrow, Japan unveils its Tankan Report. This 
document is supposed to pave the way for the elimination of 
Japan's zero interest rate policy. Free money from Japan, 
lest we forget, has been one of the major contributors to 
the U.S. hyper-bull market. 

*** What else is interesting? Hmmm...100 years ago 
yesterday, Jean Sibelius premiered his "Finlandia" - one of 
the great achievements of musical history. And Hemingway 
committed suicide on this day in 1961.

*** Last evening, I was working on my own music - 
practicing my version of Jimmy Roger's 'blue yodel.' I 
believe I am the best blue yodeler in the greater Lathus 
area. I was by myself on the veranda. But the animals 
seemed to like it. The cows bellowed and the chickens 
squawked. Or maybe they didn't like it.

*** It's summer vacation time in France. Everyone who could 
left Paris on Friday evening or Saturday. I got down to 
Ouzilly in time to meet the group of International Living 
( subscribers who were 
learning how to cook a la francaise under the tutelage of 
master chef Jean Rouget. I've been eating their delicious 
leftovers all weekend. But Edward, 6, took a bite out of 
the terrine de saumon and pronounced this verdict - 'yech.' 
Edward is no gourmet.

*** While the Parisians begin taking it easy, the farmers 
are working almost around the clock. It's `peach pickin' 
time in Georgia' for them. 

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Emotions interfere with investment judgment (not to mention 
everything else in life). Would we be better off without 
them? Would the purely rational man be a superior man? 
Maybe even the 'new man' of the Marxist imagination? 

Imagine the discussions with your teenaged children - 
without drama, heartaches, or emotional eruptions. No more 
Vesuvius at the dinner table. No more Krakatoa at 
breakfast. No Mount St. Helens at lunch. 

Without the force field of emotion to persuade the data in 
one direction or another, an investor could coldly 
calculate the pros and cons...weigh out risk and analytically and honestly as a butcher 
without thumbs or a stockbroker with a conscience. 

Matt Ridley, in his book, The Origins of Virtue, cites a 
remarkable study of brain-damaged people. "There is a small 
part of the pre-frontal lobe of the human brain," he says, 
"which, when damaged, turns you into a rational fool. 
People who have lost that part of their brain are 
superficially normal. They suffer no paralysis, no speech 
defect, no loss in their senses, no diminution of their 
memory or general intelligence. They do just as well in 
psychological tests as they did before their accidents."

This sounds pretty good, so far, but he continues, "Yet 
their lives fall apart for reasons that seem more 
psychiatric than neurological...They fail to hold down 
jobs, lose their inhibitions, and become paralytically 

"But this is not all that happens to them. They also 
literally lose their emotions. They greet misfortune, 
joyful news and infuriating checks with equanimity and 
reason. They are simply flat, emotionally."

In short, a person with this kind of brain damage is a 
less-than-ideal candidate for a game show contestant. He 
would not jump and up down as expected. Nor could he be 
relied upon to hug his wife or bring a tear to his eye at 
the appropriate moment. 

Nor would he be an ideal investor. "Patients become so 
cold-blooded about rationally weighting all the facts 
before them," says Ridley, "that they cannot make up their 

What a shame. A small operation on the brain - and whammo, 
you might be as good an investor as, say, Warren Buffett 
before 1997. Or, maybe Jesse Livermore before he went 

But it won't work. Because the more you greet the world 
with equanimity and reason, the more the world confounds 
you with facts. There is an endless supply of information 
you must throw into the balance. The Internet merely speeds 
up the delivery and lowers the cost.

But "this time IS different" writes my old friend, partner 
and school chum Jim Davidson in Strategic Investment. I 
have yet to read a persuasive argument for why or how this 
'new era' really is different. But if anyone could make 
such a case, Jim could do so. His powers of reason and 
rhetoric are compelling.

"My basic contention," says Jim, "is that the advent of the 
Information Economy has fundamentally changed the 
conditions which contributed to the bust phases of previous 
asset booms."

Why? Because "as New Growth theorists like Paul Romer have 
shown, ideas are not only more important in realizing value 
than economists have traditionally thought, they are also 
less subject to diminishing returns than physical capital 
and labor."

As near as I can tell, Jim believes that the data, facts 
and ideas now so prodigiously being loaded on the scales of 
reason will produce a self-reinforcing prosperity of the 
sort the world has never seen. 

Why this would be so, I do not know. But I do know that 
Jim's reasoning once led him to a very different 
conclusion. "I spent years looking through the telescope 
the wrong way around," he confesses. But "at the end of the 
day," he writes, having finally turned the telescope 
around, "one must be either exceedingly smart or downright 
stupid to persist in a practice that is as economically 
punishing as being globally bearish was in the 1990s."

Jim was definitely wrong in the 1990s, though I might have 
forgotten to tell you at the time. But is he right now?

Jim is aware of the tug that emotion exerts on reason. "If 
I were fully self-aware," he writes, "I would admit that at 
least part of my new attitude might reflect wishful 
thinking, in that I have extensive investments in high-tech 
companies which I wish to see come to fruition."

'Where thy purse is, there also is thy heart' it says in 
the Bible. This little gem of wisdom is like the Lost 
Dutchman mine - neither Bible scholars nor I have ever been 
able to find it. (Perhaps it doesn't exist...but it 
certainly should.)

But none of us live, as Jim puts it, "immaculately in a 
textbook." We all have hearts and purses. Even I have an 
investment of sorts - a reputation for believing the New 
Era is nonsense. I would not want my reputation destroyed, 
anymore than Jim would relish the destruction of his New 
Era companies. 

And so perhaps it is back to reason, after all. And luck. 
What more do we have to work with? Que sera sera.

Your exceedingly smart, or downright stupid, but in any 
case hopelessly devoted man-on-the-scene,
down on the farm in Ouzilly, France...

Bill Bonner

P.S. Why doesn't reason work better? Because the reasoning 
process is not digital. We do not pile facts upon though we were building a pyramid. Instead, we 
know and understand things by analogy. That is, we 
understand things creatively, not logically. In a moment of 
recognition, we say, 'Oh that is like...' That is why it is 
so hard to talk to people about the politics...and why 
intelligent people of good will and good judgment may 
disagree about almost everything. They use different 
analogies to understand the world around them - which leads 
to very different conclusions about how things work and how 
thing should work.
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)

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Last modified: April 02, 2001

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