| WHISPERS OF A SOFT LANDING THE DAILY RECKONING
WEEKEND EDITION
October 28-29, 2000
Paris, France
By Addison Wiggin
MARKET REVIEW: Whispers of a Soft landing
The Commerce Dept. rolled over and whispered sweet nothings
into the market's ear early Friday morning... releasing GDP
numbers showing growth slowed considerably in the 3rd
quarter to 2.7%. Like a secret shared in the dark, that
number was just what investors' wanted to hear... and the
Dow swooned. The blue chip index ended up 210 for the day
at 10,590 ...364 points (+3.6%) higher than its Monday
opening. But its worth noting to the otherwise disinterested
audience, the GDP numbers reflect an "unexpected decline"
in government spending: a sharp cut back in defense and a
noticeable lack of census workers to pay. Perhaps, the
number-crunchers were just having their way... and enjoying
rumors of the much fantasized 'soft landing.' Overcoming losses early on Friday, the Nasdaq edged a few
points highest to 3278. But like the smallest child in a
family of 12 who wants to please its mother by doing well
in school goes unnoticed, positive earnings at JDS Uniphase
failed to boost the Nasdaq any further... it closed nearly
6% lower for the week - down 205. Two of Nasdaq's biggest losers this week: Nortel fell $24
bucks, or 29%, on Wednesday reflecting fears of slowing
capital investment in networks... and biotech champion
Amgen lost $9 - 13% - to close at 59 Friday, citing
"softening demand for their two flagship drugs." (WSJ) At the close on Friday the Dow was in the red 7.9% for the
year, 9.7% off its January high. And - including this
weeks losses - the Nasdaq has slumped 19%... down over 35%
from its March 10 high of 5048. The broad market S&P 500
lost ground, too... slipping 17 to 1379. Overseas markets: Japan's Nikkei fell 1.86%; Germany's DAX
climbed nearly 2.5%; Britain's FT-SE 100 and France's CAC-
40 each rose a mite: 1.02% and 0.97% respectively. The Russell 2000 index closed at 479 down 8 points for the
week. And the Wilshire Smallcap lost 15... dropping to
802. PRICES FOR THE WEEK...
Gold: $266.50 down $5.50
Crude Oil: $32.70 down $1.05
Natural Gas: $4.53 down $.40
Platinum: $569 down $15
Palladium: $755 down $5
CRB Index: 219 down 7 points
Dollar Index: 117 still robust
The sad, sad Euro: $.83 (saw a record low of $.82 this week)
British Pound: $1.45 same ol'
And...108 Japanese Yen will buy you one crisp US$1 on this
fine October day...
MARKET COMMENTS: Corporate Debt Reaching New Highs...
"Phew!! This ought to keep the Austrian economists happy.
The latest survey from PriceWaterhouseCooper found that
the biggest increases in debt is coming from product
makers with excess inventories already lounging on the
shelves. 425 CEOs of the fastest growing product and service
companies in the US say they are running up their credit
lines... and are borrowing more than ever. In the last quarter, 29% of the product sector companies
signed new loans despite higher interest rates. They are
now paying an average of 9.8% on this money. The borrowing
companies tended to be smaller than average, with around
223 employees, and to have big cash flow problems. Isn't that the story of the entire Nasdaq tech stock group
these days? It's just a cash flow problem. We don't have any of these companies in Fleet Street
Letter. Those are companies for momentum buyers... The
difference between what they do and what we do is simple.
The momentum chasers buy promise; we buy performance. Promises are easily broken, not easily measured. Good
performance is easily measured ... and not so easily
broken. Unless some fool goes out and borrows more than
the sales staff can repay, that is." Lynn Carpenter,
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* * * * * * * * * * * * * * * * * * * * * * * * * * * * CONTRARIAN GLOSSARY: Creative Destruction
CREATIVE DESTRUCTION - The economist Schumpeter came up
with this expression. It describes the natural process of
open markets - where old companies and old technologies are
destroyed by new ones. Dirigisme tries to block the forces
of creative destruction. By contrast, laissez-faire,
another French term, lets the chips fall where they may.
Bill Gates, America's Last Great Capitalist, built his
company on the dirigiste model. Linux is an example of the
laissez-faire approach. Gates created vast wealth. Linux,
and/or the process of Creative Destruction, will destroy
it.
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