10/25/03 The Party Is Running Out Of Hors d'Oevres The Daily Reckoning Weekend Edition
25 October, 2003
Paris, France
By Addison Wiggin and Eric Fry
"The Borders in Brighton Michigan," Pat Cross writes in to say,
"can't keep Financial Reckoning Day in stock. I personally know
they had 2 copies, then ordered 6 more... then 12 more then 20
more! I still have not got mine. They sell out before I get home
from work." Mr. Bonner asked you Thursday if you wouldn't mind being our
"eyes and ears" on this project. He suggested sending an e-mail
to let us know when and where you find the book in your local
bookstore. The response has been incredible. We will write back,
as soon as we can, but we wanted to give you a little sampling of
the kind e-mails we've received: "...read it cover to cover and enjoyed every minute..."
- Del Mar, California "...I think you guys are great. The Daily Reckoning is one of the
highlights of my day. Keep up the great work..."
- Las Vegas, Nevada "...read DR each and every day. Thank you. It is a very different
viewpoint that I get from CNBC..."
- Knoxville, Tennessee "...Great book! I had a hard time putting it down, read it in
three nights..."
- Atlanta, Georgia Some readers have the experience of Dave Schmidt in Ames Iowa: "I
went to the local Border's at lunchtime today. I did not find
your book displayed (Bill O'Reilly's was), so I inquired at the
information desk. The nice young lady checked her computer, then
walked me all the way to the back corner of the store to the
business section. After a brief search, she located a lone copy
on the bottom shelf of the corner-most bookcase..." If the latter is your experience, too, we have a small request:
go immediately to the sales counter and give 'em holy hell! For
Pete's sake, how are we going to start a revolution if bookstores
are stuffin' "a lone copy on the bottom shelf of the corner-most
bookcase"?!? Thanks again, for your eyes and ears. We also received e-mails
from Singapore, Jakarta, New Zealand, South Africa, Australia,
Austria, England... and far away Nova Scotia. (Never fear... the
book will be available in the UK, Europe and points beyond
starting this week!) If, on the other hand, you would like to buy the book online, you
can get 35% off the bookstore price until November 12 at bn.com.
Follow this link: "The most important investment book I have ever read..." Regards and once again, THANK YOU!!!
Addison Wiggin,
The Daily Reckoning P.S. You may be interested to know, Bill recorded an interview
last night with our new friend Al Korelin, who runs a radio
program in Portland Oregon. If you would like to listen in, you
can do so on the Internet. Simply, follow this link: Bill Bonner Interview, The Korelin Business Report Al's program airs TODAY (Saturday, October 25, 2003) between 11am
and noon, Pacific Standard Time. Other than that... here's Eric with the Weekly Wrap... ------------------
MARKET REVIEW: THE PARTY IS RUNNING OUT OF HORS D'OEVRES
by Eric Fry, in the heart of the beast... Is the party winding down? Or are the hosts merely running out of
hors d'oeuvres and party favors? Without any titillating new reasons to buy stocks this week, many
investors called it a night and headed for the door. The Dow
slumped 1.4% for the week to 9,582, while the Nasdaq dropped 2.4%
to 1,866. Miscellaneous chatter about our recovering economy continued to
stream across the newswires all week. But these happy thoughts do
not arouse the same sort of exuberance they once did. Perhaps the
thrill is gone because the recovery is finally here, and it is
not as comely as expected. Our Greenspan-sired recovery is a
freakish changeling – not the hardy, all-American variety that we
are used to seeing. We are happy it's here, but boy is it ever
ugly! To be sure, the recovery is statistically pleasing...But
something is not quite right with this thing. GDP boomed during
the third quarter; and yet, many American workers are struggling
to find a job...and many of America's blue chip companies are
producing noticeably un-boom-like earnings.
Although most companies are meeting or exceeding Wall Street's
earnings forecasts, very few are registering any meaningful
revenue growth. We cannot say what the appropriate valuation
ought to be for the shares of companies whose sales are growing
slowly, if at all. But it is probably not 30 times earnings. The slumping stock market chased investors out of the U.S. dollar
again last week, and into sanctuaries like gold and bonds. Both
of these safe-haven assets enjoyed brisk demand, as the dollar
fell to $1.1787 per euro from $1.165 per euro the prior Friday.
Gold jumped $17 to $389.20 an ounce. One week does not a trend-reversal make. But it's worth noting
that gold and gold stocks both outperformed the S&P 500 again
last week. The Amex Gold Bugs Index soared nearly 9%. Gold stocks
have been dazzling performers ever since the bond market peaked
on June 13th. Since that date, the Gold Bugs Index has
skyrocketed more than 50%, versus a meager 3% rise for the S&P
500. Is Mr. Market trying to tell us something? Is he hinting that
dollar bills and long-dated government bonds are dangerous items
to own, and that the Fed's reflation campaign is succeeding very
nicely? One thing is certain, foreign investors are enjoying very little
of the bull market in U.S. stocks, unless they happen to be
buying U.S. gold stocks. The Nasdaq has tacked on 4.5% since the
end of August...for dollar-based investors. But euro-based
investors have LOST 4.5% over the same time frame! When gold
stocks dramatically outperform ordinary stocks and foreign
investors suffer steep currency losses, it's time to leave the
party. What's more, complacency is in a bull market...which means that
the stock market might not be. Stock investors are about as
bullish as they have ever been, which – from a contrarian
perspective -- is a troubling omen for share prices. As we noted in this column on Thursday, the most surprising
aspect of this week's stock market selloff was that it hadn't
happened earlier. "A 'correction' was long overdue, based on the
most recent sentiment readings," we noted. "The nation's
investors have rarely exhibited such universal exuberance. Let's
take a quick tour of the latest investors sentiment readings. The
four most widely followed gauges of investor sentiment -- Bullish
Consensus, AAII, Investor's Intelligence and Marketvane -- all
registered extremes of bullish sentiment as of Tuesday evening,
immediately before yesterday's trouncing. In fact, as professional sentiment-watcher Christopher Cadbury
observes, all four of the gauges showed that greater than 57% of
those surveyed are bullish. Never before have all for sentiment
indicators produced bullish readings above 57% at the same time.
The AAII survey, for example, which polls members of the American
Association of Individual Investors, finds that 60.3% of its
members are bullish, versus only 13.8% who are bearish. These
sorts of extreme readings often presage the end of stock market
rallies. At best, bullish sentiment does not reach an extreme
when the buying is good." Don't despair; the buying may not be good when bullish sentiment
reaches an extreme, but the selling is very, very good. Regards,
Eric Fry,
The Daily Reckoning P.S. This week in THE DAILY RECKONING below. Be sure to check out
Dan Denning's BED spread indicator, in Thursday's guest essay
below... it may prove a useful tool in determining the market's
'opinion' of US government debt while deficits skyrocket and the
dollar weakens. ------------------------
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THIS WEEK in THE DAILY RECKONING TYRANNY OF THE HERE AND NOW (10/24/03)
by Bill Bonner "...Many are the times we have railed against this injustice.
That is the problem with democracy and popular markets, we have
pointed out; only the living get to express an opinion. The poor
corpses lay mute, still, and lifeless as a senator..."
http://www.dailyreckoning.com/body_index3.cfm?id=7022 CONVERGENCE UNDER THE BED SPREAD (10/23/03)
By Dan Denning "...To get it, I established a spread between emerging market
debt and U.S. government debt. If I'm right about the U.S. bond
market losing its gold-standard reputation, the spread should
converge over time. U.S. government bond yields will rise as the
dollar falls. And emerging market debt yields will fall, as it
becomes comparatively less risky than dollar-denominated
debt..."
http://www.dailyreckoning.com/body_index3.cfm?id=7007 DECLINE OF THE OLD ORDER (10/22/03)
By William Rees-Mogg "...Early in the 20th century there was much fashionable concern
in Europe about the decline of the West. Many observers thought
that the European lead in 19th century manufacturing would prove
to have been a temporary advantage, that Europe was suffering
from long-term social decadence, and that Asia would become the
dominant continent by sheer weight of numbers..."
http://www.dailyreckoning.com/body_index3.cfm?id=6988 COMMODITIES V. THE DOW (10/21/03)
By John Myers "...It is a similar story for the adjusted monetary base, or the
super money that the Fed lends to banks, who in turn lend it out
in multiples. The surplus cash key component of the adjusted
monetary base is rising at an even more alarming pace than during
the tough stagflation of the 1970s..."
http://www.dailyreckoning.com/body_index3.cfm?id=6981
MOGAMBO MONDAY (10/20/03
by The Mogambo Guru "...And in case you are at a loss to understand why the sirens in
the Mogambo Bunker are blaring, why the klaxons are sounding, why
all the bells are ringing, or why I have maps showing emergency
routes out of town, the answer is that price inflation is
here..."
http://www.dailyreckoning.com/body_index3.cfm?id=6964 ----------------------
HEADLINE, NEWS And INSIGHT: Suspect recovery... the mythical PPT
- threat or foe?... financial calamity the globe over... Freddie And Fannie Distort The Market
by John Mauldin "...I am not going to dispute that the economy is not growing
strongly. It clearly is. It could grow at an above trend pace for
well into next year. That makes me happy. But I think there is
some inherent weakness in this recovery that makes it more
suspect than others recoveries we have experienced since the end
of WW2. As we will see, I find it hard to believe that there is
something in the economic water that could cause Greenspan to
raise rates 45 days in front of an election..."
http://www.dailyreckoning.com/body_headline.cfm?id=3505
The Plunge Protection Team: Urban Myth or Real Danger?
by John Pugsley "...if the PPT is intervening in the markets, the intervention
will only make the ultimate collapse more severe. If the PPT is
an urban myth, it's only because the wizards in government can't
figure out how to get away with it..."
http://www.dailyreckoning.com/body_headline.cfm?id=3501 The End Of Dollar Supremacy?
by Antony Mueller "...The consequences of dollar crisis would not be confined to
the United States itself. The dollar crisis would affect the rest
of the world and it would put the current international monetary
system at stake with the potential of bringing it down. While the
pillars on which the dollar stands may still seem to be intact
today--the statue itself may come down. But when the dollar
should fall, the pillars on which it has stood, will crumble
too..."
http://www.dailyreckoning.com/body_headline.cfm?id=3497 | 
