The Daily Reckoning
Weekend Edition
January 22-23, 2005
Baltimore, Maryland
By Addison Wiggin and Tom Dyson MARKET REVIEW: METAL DETECTORS AND GUM BOOTS Eric Fry accused us of "being too contrarian for our own
good" in Friday's edition of the Rude Awakening; we had
suggested bonds might keep going up. "On the contrary," we'd respond. "Not contrarian enough." Incidentally, we received our February issue of True Wealth
on Friday. Steve Sjuggerud, the editor, is one of the most
devout investment contrarians we've ever met. He took up
the debate in his letter... "I'd rather have people squirm with contempt when they
first hear my investment idea. Then I know I'm buying
what's cheap and hated," he says. "My secret, you see, is
pretty simple - so simple most people won't believe it: I
buy what nobody wants." Not surprisingly, Steve is bullish on bonds too. But we're
not going talk about bonds today...that's for another time.
No, today we're going to talk about another hated asset... "Nothing has made people squirm more in the last few years
than old gold coins," Sjuggerud observes. "At first, nobody
I talked to would consider them. Even my parents and my in-
laws - who buy most everything I recommend - haven't bought
coins. And yet the coins have done very well." Last week, we traveled to New York with Steve. We went to
check out the 34th Annual New York International Numismatic
Convention at the Waldorf Astoria. Steve called it the
"Superbowl of coin shows." We wanted to know if people
still hated coins. It wasn't what we had expected...at least not your
Baltimore-based editor. The week before last, we went on an
unofficial tour of Baltimore's port. We saw evidence of a
huge trade deficit. At the coin convention, we expected to
see evidence of a bull market in gold, silver and other
hard monies. Gold started the year off on the downside. In the first
week of 2005, it fell from $437 to below $420. It's been
creeping back up ever since, and on Friday, posted a gain
of $4.80 to settle at $427 for the weekend. Silver had a
good week too...up over 3% to $6.81 an ounce. These two
metals have both made multi-decade highs in the last twelve
months, and we wanted to see if this coin show would
reflect that. It didn't. Firstly, these weren't your investment-grade
coins, like the ones Steve has already recommended to his
readers. These were ancient coins...the sort bearded men
find when they slip on their gum boots and explore old
Roman dwellings with metal detectors. More importantly, we saw evidence of a bear market in the
dollar. Why? Because everyone there was from Europe! I
talked to a couple of coin dealers...one from London, one
from Hamburg. They told me all the demand was coming from
Europe right now. "It's hard to buy the choice...historical
items," said one. "With low interest rates in Europe, and
such a horrible dollar, they all come over here looking for
bargains. But these aren't investors. These are collectors
with no interest in selling." "So how's attendance this year?" we asked. "Yeah, it's pretty good actually. Not a bad year at all. In
fact the last few years have all been steady. We thought
eBay's popularity might have an effect on the number of
people that come to these things, but it hasn't. We've
actually found eBay helps support prices." An eBay-effect...very interesting, but so far we'd found no
evidence of a bull market in unusual coins. Your editor's
next target was a collector... We found a gentleman from Finland named Jyrki. He had a
beard and judging by his rubber-soled brown lace-ups, he
could have been a professor of archaeology. He'd always
been fascinated with Finnish coins, he said, but the advent
of the euro had re-piqued his interest. (Of its three
Scandinavian neighbors, Denmark, Norway and Sweden, Finland
was the only one to accept the euro. Finland's former
currency was denominated in markka.) "Oh no, it's a big mistake to be in coin collecting to make
a profit," he said when asked if he expected to profit from
his investments. "We love the coins. That is why we come
here. And the dollar's nosedive makes it cheap for us.
That's all." Just as coins are cheap for our euro-friends, U.S. stocks
should be too. Last week they got even cheaper. The Dow was
off 165 points or 1.58% to 10,393 at the close. The index
is now down 3.6% on the year. The Nasdaq's performance is
even worse. It's off 6.5% this year...dropping 2.5% last
week alone. It now trades at 2,034. As for the dollar, last week it gained against the euro,
but fell against the pound and the yen. A euro is worth
$1.3044 at the time of writing, having dipped briefly below
1.30 in the latter half of the week. And finally, in a meaningless vote for the contrarians, the
bond market enjoyed a rally last week. 10-year Treasury
yields fell 8 points, while 30-year yields fell 9. As for the numismatic show, we'd gone there afraid that we
might find evidence of speculation and greed. We didn't. We'd been worried a mass of dumb money had already washed
over this tiny market and ruined any opportunity. It
hadn't. We feel these coins are still despised, at least, as far as
the average investor is concerned. Collectors like Jyrki
love them, but that's because he gets a kick out of them.
Dealers trade them and get paid for their services, but
other than those guys, no one else seems interested... ...except a couple of devout contrarians, that is. Regards, Tom Dyson
The Daily Reckoning P.S. Sjuggerud is not just a blind contrarian, he's one of
the smartest, most prudent investors we know. And he works
damn hard to produce winning pick after winning pick. In
his newsletter, True Wealth, Steve will lead you directly
to the cheapest, most undervalued, assets in the
market...ideas that have been scorned by the general
investing public. Here's an example: How China Can Fund Your Retirement
http://www.agora-inc.com/reports/TRW/WTRWF166/ P.P.S. Don't confuse Steve Sjuggerud with Steve Sarnoff. Steve Sarnoff is an options trader. Since January 1, 2004,
he made 34 option recommendations...and 30 were winners. 11
of them at least DOUBLED in value. In fact, since 1999, you
could have accumulated slightly over $1 million with
Steve's option picks. Here's the evidence...and an amazing offer...
http://www.agora-inc.com/reports/OHL/WOHLF113 --- Daily Reckoning Book Of The Week --- APPLIED ECONOMICS: Thinking Beyond Stage One
by Thomas Sowell, 2004, hardcover List Price: $30.00
LFB Price Only $20.25 *** You Save 33% *** In the author's own words: "The focus will be on dealing in
depth with particular real world problems, using economic
principles to clarify why and how things have happened the
way that they have. This is a book to enable the general
reader, with no prior experience knowledge of economics, to
understand some of the key issues of our times." He's an economist, but that shouldn't dissuade you. This
one knows how to write clearly...and that makes it an
enjoyable book to read. Applied Economics
http://www.lfb.com/cart/affiliate.php?code=10438&stocknumber=TS8744 [Ed. Note: Your weekday editor, Bill Bonner, is reading
'The Wisdom of Crowds' by James Surowiecki. He critiqued it
in Friday's edition, as part of the essay called 'Standing
Solo in the Crowd.' We featured 'The Wisdom of Crowds' in
this space, two weeks ago. For a link to Bill's excellent essay, keep scrolling down.
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------------------------ THIS WEEK in THE DAILY RECKONING STANDING SOLO IN THE CROWD 1/21/05
By Bill Bonner "Of course, this does not mean that every time you get a
couple of knuckleheads together they're going to write good
music or build an atomic bomb. Get any bunch of people you
want. We will bet that we will be better at guessing our
PIN code - alone - than all of them put together. Nor can
even a hundred of the smartest men on the planet do a
better job of telling us what we want for breakfast than we
can do for ourselves." http://www.dailyreckoning.com/body_index3.cfm?id=11320
A BANKER'S TALE 1/20/05
By Chris Mayer
"Company executives also usually took it personal. We went
up to see one company in which we had lent several million
dollars. We would debate a little amongst ourselves about
who would 'pull the trigger' - that is, who would actually
say the words that we no longer wanted to be a part of this
deal." http://www.dailyreckoning.com/body_index3.cfm?id=11307
THE NEXT NEW THING 1/19/05
By Jim Rogers
"Commodities are so pervasive that, in my view, you really
cannot be a successful investor in stocks, bonds, or
currencies without understanding them. You must understand
commodities even if you only invest in stocks and bonds.
Commodities belong in every truly diversified portfolio.
Investing in commodities can be a hedge against a bear
market in stocks, rampant inflation, even a major downturn
in the economy." http://www.dailyreckoning.com/body_index3.cfm?id=11293 AN ECONOMIC PLAYGROUND 1/18/05
By John Mauldin "Foreign central bank purchases of U.S. Treasuries in order
to maintain a competitive currency valuation to attract the
U.S. consumer is not a sign of strength. It is a sign of
desperate foreign central banks trying to maintain their
economies, which are dependent upon U.S. consumers. They
KNOW they are going to get hosed on their dollar holdings,
but feel they have no choice." http://www.dailyreckoning.com/body_index3.cfm?id=11286
PENSION PAINS 1/17/05
By The Mogambo Guru
"So, as an example, if you had $100,000 in purchasing power
two years ago, and now you have only $75,000 in purchasing
power, thanks to the devaluation of the dollar by 25%, and
you want to privatize Social Security by forcing people to
put money into the stock market? Hahahaha!"
http://www.dailyreckoning.com/body_index3.cfm?id=11277
---------------------- HEADLINE, NEWS And INSIGHT: Chipping Away at American Optimism
by Rick Barnard "In fact, I think that was what was so amazing about Dr.
Richebächer. He's 86 years old, and he still has a fire in
his eyes. As I've said, he constantly watches financial
news channels. His housekeeper has a hard time organizing
the daily stream of newspapers and magazines. And he's now
using the Internet for even more up-to-the-minute data." http://www.dailyreckoning.com/body_headline.cfm?id=4436 The Humble Homeowner
by Byron King "So in addition to our unseasonable winter warmth, we are
experiencing unseasonable January rainfall. Said rainfall
lands upon our humble roof, and apparently has managed to
find its own channel through the shingles and into the
walls of our humble home, thence to the ceiling of our
humble living room to form a nasty stain which serves to
remind us to remember our humble place in the vast, cosmic
scheme of things." http://www.dailyreckoning.com/body_headline.cfm?id=4428 Forecasts for 2005
by John Mauldin "The economy is going to be good, so I don't think we see
the start (yet) of the next major bear leg, although this
year will mark the high for what I think will be many
years. This will be a frustrating year for stock market
investors. You can always do well if you are a good
individual stock picker, but broad indexes and mutual funds
are not the place to be." http://www.dailyreckoning.com/body_headline.cfm?id=4423 ---------------------- --- Advertisement --- Your VIP Invitation - get 50% discount on a membership to
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