| DOING YOUR DUTY PARIS, FRANCE MONDAY, 22 NOVEMBER 1999 * * * * * * * * * * * * * * * * * * * * * * * * * * * * In Today's Daily Reckoning: *** The spikes gets sharper...
*** Most stocks still in a slump...
*** Trouble on TheStreet.com... * * * * * * * * * * * * * * * * * * * * * * * * * * * * *** The Nasdaq spike is getting sharper and sharper...that is, thinner and
pointier. Sooner or later...it must reach its pinnacle... *** Only the leading Nasdaq stocks in the Nasdaq 100 showed any real progress
on Friday. The Dow was down 31. There were 1,201 advances against 1,818
declines -- 65 new highs, 178 new lows. *** The transports look weak...following a continuing climb in the price of
oil -- now at 26.56 a barrel. *** Gold was up a smidgen. So was Microsoft. No breakdown in that stock yet. *** Dividends are disappearing. About 80% of companies paid them in the `50s
and `60s...now it's only 20%. Many companies are using share buybacks in place
of dividends. Buying back the shares raises the price of the shares.
Shareholders get a capital gain instead of a dividend, which is arguably more
tax efficient. *** Alan Abelson, in "Barrons," reports that the earnings boost in Hewlett
Packard that sent the share 20% higher in a single day last week was, in fact,
not an increase in operational earnings -- but just a decrease in taxes.
Earnings from operations were actually down. *** And Ned Davis Research tells us that 72% of S&P 500 stocks are down more
than 10% from their 52-week highs -- 47% are down more than 20%. *** I missed the big financial conference in San Diego last month. But I was
able to watch it on video. Dan Ferris recommended three water companies. Sui-
Yee Ng...who has a phenomenal track record this year...revealed some new IPOs
she is following...Brian Hicks, who follows bio-techs, had some
suggestions...and Jack Wheeler, the emcee for the program, explained why and
how Russia was going to break up. He also provided his description of the
"Roaring Zeros" -- the years of growth and prosperity just ahead. If you'd
like to see the video yourself, there's an advertisement for it below... *** Trouble on TheStreet.com...its stock is down about 75% from its high...and
the numbers don't look good. It pays $22 to $56 per month to acquire a new
subscriber. But it only gets about 5 bucks per month per subscriber in
revenue. Friends don't let friends run businesses like that... *** I'm watching the numbers with more than idle curiosity...I'm still trying
to figure out how to earn a living with this Daily Reckoning. Charge for it?
Take advertising? We'll be trying a number of things.
I'll let you know how they work out. *** When I flew back from Germany last week, the moment the plane came to a
stop, practically everyone on the plane got out a portable phone. They're all
over the place. Walking down the street...driving...eating in
restaurants...people have portable phones to their ears. Now some have little
earphones and lapel pins so they don't have to hold the phone up. It's
amazing...who are these people talking to? About what? *** Jeffrey Archer withdrew from the race for mayor of London. It was not so
much that he had been hanging out with a high-priced hooker that got him in
trouble...it was the fact that he got a friend to provide a phony alibi. On
the basis of this fraudulent testimony, Archer won a multi-million dollar
libel judgement against a London newspaper. But when the friend `fessed
up...Archer decided to "spare his family" and pulled out of the race. *** Meanwhile, Bill Clinton was down in Florence hobnobbing with other leaders
with a center-left inclination. They seek a "third way" between capitalism and
communism...and call it "progressive governance." The third way recalls Ernie
Fitzgerald's political definition of a moderate. "A conservative favors
boondoggles for the rich," Ernie told me. "A liberal favors boondoggles for
the poor. And a moderate favors boondoggles for everybody." *** The latest boondoggle proposed by our commander in chief is to close the
"digital divide" by making sure that there is Internet access in every
classroom in America by the end of next year. *** Meanwhile...the prime minister of France, Lionel Jospin, whose hand Jules
shook on Armistice Day, told the group in Florence that he was completely in
favor of the digital age, but "it must not sweep away the nation- state."
Jospin understands what is as stake. He went on, "I'll accept a networked
world economy, but I don't want a world dominated by networks because they
would be run by the private sector." *** It was a cold and snowy weekend at Ouzilly...and the times they are a
changin' there, too...more below...
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DOING YOUR DUTY
I hope you will indulge me today with this little memoir of life in small town
France. It has no financial significance...but our lives would be pretty dull
if that was all that we thought about. Skip it if you're busy. This region...about midway between Poitiers and Limoges...is very pretty. And
nothing ever happens here. At least, not since the 8th century...when the
Moors advanced through here on their way to Paris...and got beaten at the
Valley of the Dead. Maryland has changed so much since I was a child. It is hard to believe, but
50 years ago, the area around Annapolis was remote and bucolic. I probably
only imagine this...but it seemed like every family had been there
forever...and most were related, though often in obscure ways. This was true, not just of the white population, but blacks, too. The boy I
played with across the road was black. I was aware that there was a
distinction between his family and mine. I was not aware that he was a distant
cousin, too...though unacknowledged. We were happily interbred...all raising
tobacco...none of us with any money to speak of...and the sun shown hot and
bright every summer day. Nothing ever changed. And you always knew your place. But, without hardly noticing, everything changed. The tobacco economy
disappeared...everyone went off to school...or went to work for the federal
government in Washington...and farmers switched to planting a new crop --
houses. Now the area is full of people. Malls. Highways. Suburbs. And these
people have never even seen a tobacco plant. It is a different world. My black
cousin went to medical school...and now drives around in a big BMW and battles
prostates for a living. Here at Ouzilly...things are changing, too. But more slowly. There are no
housing developments. We are too far from any major town. Still, it is not the
same world it was a few years ago... When we bought our house here we didn't realize that it came with certain
unanticipated social responsibilities. Mr. Goupil, for example. Mr. Goupil is
a tile and plaster man. His father and his grandfather both worked on our
house in their time...it is only natural that Mr. Goupil should continue the
tradition. We are his clients. He will not abandon us. Mr. Goupil probably votes for the communist candidate. The region is red. But
it is an odd sort of red...maybe mauve...a red with a lot of purple in it.
These people are not revolutionaries, they are traditionalists. Almost
monarchists. Mr. Goupil despises the former owners of our house. They were
gentry whose fortunes had ebbed in the last half of the 20th century and who
found themselves unable to continue paying for Mr. Goupil's services. The house went to ruin. But, you see, Mr. Goupil takes a very old view of
things. It is his duty to do the work on the house and outbuildings...but it
is the owners duty to pay him. If an owner tries to do the work himself, to
save money, or just for the pleasure of it, or because he can't afford to have
the work done, it is a threat to the whole scheme of things. We each have a
job to do. Failing to do it is a moral failing. Mr. Goupil's job is attending to our plaster and ceramic tile at $30 an hour.
And he works slowly. But fine with me. I have plenty of other things to keep
me busy on weekends. So Mr. Goupil does the work. For weeks on end, he could
be seen on all fours...with his stomach practically reaching the floor...and
his pants pulled too far down his enormous white derriere. "Don't look," I
tell the giggling kids...it is either embarrassing or disgusting, depending on
your point of view, to look at him while he works. But he came with the house. People think of communism as a revolutionary, modern contrivance. Actually, it
is just the opposite. In the pre-Industrial European world, the feudal world,
one's place in society was determined by birth...and thus by God. Mr. Goupil
was born into a line of masons. He could desert his Catholicism in favor of a
kind of free-masonry, if he liked. But he couldn't desert his work. Nor could
the lord of the manor abandon his obligations to his peasants and artisans.
Only a bounder would do so. Everyone knew his place in society...like a part in a theatrical performance,
his job was to play his role well. The rise of the urban bourgeoisie threatened the social order, just as the
rise of the Internet threatens the nation-state today. Suddenly, an ambitious
upstart could play whatever role he wanted. The world was changing
rapidly...seemingly out of control. God was dead...or taking a break. But Karl
Marx provided an alternative for those who longed for a fixed order. In the
communist scheme, once again everyone had a place, a role, a duty. God was no
longer thought to be in charge of temporal affairs...the worker's paradise
would be run on a more rational model. But every person would know his place.
They were assigned new jobs -- as cogs in the great machine of the Marxist
state. Here in this part of rural France...people like Mr. Goupil are often very
conservative in their attitudes...and still support the Marxist hallucination.
They even go to church. This past Sunday, at the church of St. Marcial, was a great day for the
penitential orders. They do not heat the churches...except in a laughably
ineffective way. So the 30 or so gray-haired faithful were bundled up as
though they were at a football game...with scarves and hats...in the huge,
stone building. We all shivered as the priest reminded us that if you walk by
a beggar on the street, you might as well be walking by Jesus Christ himself.
"If you do it to the least of them...so you do it to me," is my translation of
the Matthew's gospel as rendered by the priest. Tricky area...I thought to myself...remembering all the bums I ignore in
Paris. Giving them money only encourages them. And yet, I tell myself...if I
see someone really in need, I'll rise to the occasion. This gospel lesson,
too, is used by Mr. Goupil, as well as many of the clergy to support various
government programs...the kind of thing Tony Blair, Bill Clinton and Lionel
Jospin had in mind this weekend when they agreed that "the new economy imposes
new responsibilities." (More pavement for the road to hell.) Mr. Goupil, other artisans and lumpenproletariat, sit in the pews directly in
front of the priest. On the side, the right wing actually, we sit with the few
moss-backed aristocrats who still have faith in God's grace. This, too, seemed
to come with the house. It was once a grand house. So its owners...even
clueless Americans...are expected to assume their proper place in church as
well as secular society. Nothing was ever said. We were not even aware of the
subtle distinctions and traditions. But there we sit, behind the de
Liniers...and others with the "de" in front of their surnames...indicating
aristocratic pretensions. Our friend, Chantal de Liniers, who stuffs our
ducks, is -- improbable as it sounds -- a baronness.
Mr. Goupil likes the de Liniers -- as long as they don't try to do their tile
work themselves. After the church service, we gathered in a well-heated, utilitarian room. Cold
spaces are okay for praying, but in France you want to be comfortable when you
eat. It was a celebration of the end of the church year...advent begins next
week. Our fellow parishioners are very nice...very friendly people...like the
people you would meet at almost any church supper in America. It was the kind of dinner that made me glad to be Christian. You see, French
Catholics do not deprive themselves of the fruit of the vine -- even at church
dinners. First they served an aperitif of local "pineau" -- a sweet wine.
Then, there were plenty of bottles of ordinary Bordeaux with the lunch.
Elizabeth was seated between Father Jean-Claude and Sister Marie-Francoise.
Rarely did a bottle go by them without suffering the loss of at least half its
contents. Sister Marie-Francoise had been in service in a nursing order in
Gabon...where she had almost died. But I can report that her appetite has
fully recovered. She was the only one present who ate more than I did. Then,
after dinner...and numerous desserts...there was a homemade plum brandy. All
and all, it was a convivial and satisfying afternoon. Aristocrats...plumbers...priests...and American sentimentalists...we all did
our duty. I'll write tomorrow on a more serious topic. Regards, Bill Bonner
P.S. Friday was an odd day...as evidenced by this email: "the numerical format
for today is 19-11-1999. All of the digits are odd. The next Odd day will be
1-1-3111 - which is well over a thousand years away...
And another interesting email: "the next significant event I know of is an
extremely rare and massive Grand Cross alignment of all the planets on
5/5/2000. This alignment includes the separate astrological causations that
always mark both major bottoms and major tops. How this stark contradiction
will effect human emotions is anyone's guess, but "schizophrenia" and
"paranoia" are good terms to keep in mind. The way I see the possibilities at
the moment, the market could tank on 12/26/2000 and be in bear market until
around 5/5/2000 or the market can continue into the heights of lunacy for a
sickening crunch around 5/5/2000."
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