06/30/01 Oh Boy! Things Are Looking Up! The Daily Reckoning
Weekend Edition
June 30-July 1, 2001
Paris, France
By Addison Wiggin
MARKET REVIEW: Oh Boy! Things Are Looking Up!
"The week-long tech rally owed itself to an improving
outlook for the economy," USAToday tells me this morning.
"The fact that blue chips traded lower Friday was also
encouraging, because it could be a sign that investors were
favoring battered tech shares over relatively safer stocks
such as pharmaceuticals and financial companies." How buying overvalued companies with falling earnings
constitutes a sign that things are looking up - is beyond
me. But, hey it's USAToday. If they printed it, it must be
true. Computer problems Friday cut the week's tech rally short.
Tech investor's spent the better part of the week
"celebrating" Microsoft's win. The Nasdaq rose 35 to 2160
closing the week up 125... or 6.2%. The Dow fell 63 to
10,502 on Friday down a percent for the week. The S&P 500
barely moved for the day or the week. ADD'L PRICES FOR THE WEEK: What's up with the dollar?
Gold: $271
Crude Oil: $26.25
Natural Gas: $3.09
CRB Index: 205
Dollar Index: 119
The Sad, Sad Euro: $.84
British Pound: $1.40
Japanese Yen: $.80
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By Bill Bonner 06/29/01 MAKING A DIFFERENCE "...looking to the left these students find claptrap about
government, Rousseau's noble savage cavorting in their
mind's eye with pilgrims of Plymouth Rock and the
Democratic Platform of the Roosevelt Administration in
1948. To the right, lies the Labor Theory of Value, which -
no one bothered to point out - is complete rubbish. But
there it is, next to Keynesianism, monetarism and
Greenspanism. No matter what direction they look they see
only the detritus of a dozen years of expensive
instruction..."
http://www.dailyreckoning.com/body_index3.cfm?id=593 06/28/01 PRISONERS OF THE AVERAGE "...In paradise, dear reader, perhaps a man can drink all
he wants, and stay happily drunk forever. But in this
world, a binge of inebriation comes at a price...a
headache, or perhaps only a period of quiet repose. We are
all prisoners of the average. This is not merely an
intuition...it is based on observations too varied to try
to organize by genus and phyla. So I will just heap them up
in front of you: darkness and light...yea and nay...heat
and cold...good and evil...sickness and health...wealth and
poverty...beauty and ugliness...subjective and objective...
positive and negative...big, little...high, low...just,
unjust...you name it..."
http://www.dailyreckoning.com/body_index3.cfm?id=592 06/27/01 A FED CELEBRITY DEATH MATCH?
Wednesday Guest Essay by grantsinvestor.com's James Padhina "...It smells like a fight to me... Fed Chairman Alan
Greenspan v. Fed Governor Larry Meyer. Being neither
prizefighters nor kings, these guys aren't battling for
money or for a come-hither woman named Helen. They're
central bankers - so, of course, they're fighting about
inflation. Ladies and gentlemen, are you rrready to
rrrumble?..."
http://www.dailyreckoning.com/body_index3.cfm?id=591 06/26/01 THE NEW NEW ECONOMY? "...There are many new things about our economy. But what
if the most important new thing really has nothing to do
with technology...and everything to do with aging
populations? What if Japan's deflationary economy, rather
than America's recently booming one, represents the wave of
the future... the NEW new economy?..."
http://www.dailyreckoning.com/body_index3.cfm?id=590 06/25/01 TURNING JAPANESE "The Fed's number one objective," to repeat James Stack,
"is to prevent a Japan-style scenario." But how will it do
so? Lower interest rates did not work in Japan, why would
they work here? Perhaps they will not..."
http://www.dailyreckoning.com/body_index3.cfm?id=589 * * * * * * * * * * * * * * * * * * * * * * * * * * * * HEADLINE, NEWS And INSIGHT: Lots of questions: Real Estate
Peaking?... The Bear Just Getting Started?...Global
Deflation Setting In?... Coal Making A Comeback? Qui sais,
mon frere, qui sais... House Afire
by Eric J. Fry U.S. home prices have been rising like, well, a house on
fire, for more than five years. The hottest markets,
predictably enough, were in the Northeast corridor
California, Florida, Georgia and Arizona. Not so
predictably, prices in Kansas, Minnesota, Michigan and
Washington state leapt ahead, too. But recent evidence
shows skyrocketing U.S. housing prices may have reached
their zenith.
http://www.dailyreckoning.com/body_headline.cfm?id=1262 Why The Bear Market May Just Be Beginning
by David W. Tice A strategy of "buy and hold" worked well for investors over
the past 20 years. Since 1980, the Dow advanced every year
but four. The Year 2000 was the first down year for the Dow
since 1990. Similarly, the Nasdaq had an enormous run over
the past decade. Even at 1,900, the index sells for five
times its 1990 level.
http://www.dailyreckoning.com/body_headline.cfm?id=1259 Global Economy: The Cavalry Won't Be Riding In This Time
by Marshall Auerback Investors and pundits alike have taken the explosion in
money growth as virtually de facto proof that the Federal
Reserve has succeeded in engineering a monetary reflation
and, ultimately, an economic recovery. If only it were that
easy - this time.
http://www.dailyreckoning.com/body_headline.cfm?id=1245 Suffocation, War or Coal
by John Myers Coal has been a crucial source of energy since the time of
the Pharaohs. It has been used extensively for fuel since
the Industrial Revolution (not much need before then, was
there?). Now carbon black is coming back into vogue.
http://www.dailyreckoning.com/body_headline.cfm?id=1243 Derivatives: The Risk Of Systematic World-Wide Failure
by Dr. Marc Faber Every major invention or innovation leads first to a boom,
then inevitably to speculative excesses and a vicious
downturn for the revolutionary new sector. Why should this
well-established pattern only apply to industrial and tech
inventions and not also to financial innovations? Given the
complacency and the intellect of the central bankers, it is
a question of when - and not if.
http://www.dailyreckoning.com/body_headline.cfm?id=1238 * * * * * * * * * * * * * * * * * * * * * * * * * * * * DR BLUE HOTWIRE - Investor's Intelligence From Around The
Globe Perversions Of "Strong Dollar" Logic From Dan Denning,
The Daily Reckoning Blue Team
"...A strong dollar helps prop up the stock market. When
the dollar is strong relative to foreign currencies,
foreign exporters sell their goods at fatter profits while
U.S. exports take a competitive blow by having
comparatively higher prices overseas. A strong dollar is
good for the financial markets because it draws foreigners
to dollar denominated assets, like stocks and bonds.
But there are two perversions to the strong dollar logic.
First, it disguises the fact the U.S. continues to
consume more than it produces--to the tune of $1.5
billion a day. As long as the dollar remains strong
foreigners agree to subsidize this over-consumption by
agreeing to hold dollars. But the moment the dollar
weakens, the floor comes out from under the current account
deficit--which is already dangerously in the red.
The second is that a strong dollar erodes U.S.
corporate profits. When U.S. companies are less price
competitive overseas because of the divergence between the
dollar and euro, profits get eaten up. Talk about getting
it coming and going. Stock prices go up because foreigner
own U.S. assets. But the only reason foreigners own U.S.
assets (the strong dollar) is also the same reason U.S.
corporate profits are eroding.
Will the dollar give soon? Who knows? Sooner or later it
has to, simply because this is the nature of markets. In
the meantime, look for big U.S. businesses to put more
pressure on the Bush administration and Treasury Secretary
Paul O'Neill to devalue the dollar to give a boost to
corporate profits." Enjoy the 4th...
Addison Wiggin,
The Daily Reckoning
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