FORECAST #1: When the NASDAQ's 200-day MA crashes...the S&P
breaks support...
FORECAST #2: After the Dollar falls - hard!...
FORECAST #3: And bonds and equities bottom out together...
It's all plain to see in this revolutionary charting system
designed to help you time the market to perfection; and
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*** Investors are still groping for the "Big Bottom." They
know it can't be far away.
*** "The worst is over," said several commentators
yesterday. And Morgan Stanley opined that stocks are now
10% undervalued.
*** Few customers reached out to grab the bottoming stocks.
Volume was light, which was blamed on an approaching
blizzard. Still, there was enough activity to drive the Dow
up 95 and the Nasdaq up 25.
*** Dell added $1.37 to its stock price. Amazon rose 26%
after a report in the Sunday Times of London said the e-
tailer was in talks with Wal-Mart. AMZN climbed all the way
to $12.63...
*** GE rose too...plus 2%.
*** Gold got in the spirit of the day, up 40 cents. Gold
mining stocks rose 2% on average.
*** But "beware of false starts, false bottoms, and false
prophets," wrote Fred Barbash in the Washington Post. He
noted that there is "a tendency among experts and amateurs
to prematurely interpret short-term movements as either the
beginning or the end of bad news."
*** "It's time to call the bear market what it is," suggests
Mr. Barbash. He continues ominously: "Never before have
Americans' spending habits - personal and corporate - been
so tied to stock-market performance."
*** Taking $4.1 trillion out of stocks' value has to leave
a big hole somewhere. But so far, there has been no
panic selling of stocks. People seem to have resigned
themselves to the bear market. Have they any idea of how
bad it might be? Probably not. Instead, they are still
"looking across the valley" to the rich pastures and rising
slopes on the far side.
*** In the meantime, they're beginning to take revenge on
the prophets whom they believe led them into this
wilderness. The "holier-than-thou," New York Times, says
Bethany McLean of money.com, "happily broadcasted [Henry]
Blodget's insane predictions to millions of readers (who
would otherwise have remained blissfully ignorant)." But on
Sunday, the NY Times criticized poor "King Henry" in a
front page article.
*** Likewise, yesterday's Wall Street Journal, which for
the last several years has reported Abby Cohen's
predictions as if they mattered, took her to task in an
article headlined "How Could They Have Gone So Wrong?"
*** The mighty fallen. Sic Transit Gloria Mundus.
*** "The US dollar is now undergoing a stealth decline,"
writes the Oxford Club's C.A. Green. "While the US
experiences negligible GDP growth, European economies are
expected to grow an average of 3.4% this year... which
means, the euro and the dollar are headed for parity.
Goldman Sachs is forecasting the euro will hit $1.20 in the
next 12 months. If that happens, euro-denominated stocks
would be worth 31% more - even if the stocks went nowhere."
*** "The global demand for oil is 75.5 million barrels a
day," says John Myers, "China consumes over 6% of the
total. Even today, as prices retreat amid a global
slowdown, China's demand for oil remains 'the wild card, if
not the trump card,' in determining the direction of oil
prices. What we're seeing is... natural resources are being
re-valued as demand from a progressive third world
continues to grow."
*** "By the way," Dan Ferris reminds us, "longtime Daily
Reckoning readers may remember we said that 'before the
lights go out around the world' uranium was a good play.
Well, since April 2000, just before the lights started
going out in California, Cameco (CCJ), the largest uranium
producer in the world, is up 190%. But the penny shares-the
wildcatters-have gone nowhere."
*** "The private sector hasn't been too bad for Robert
Rubin," notes Chris Matthai of the Fleet Street Letter.
Former member of the "Committee To Save The World" and now
chairman of Citigroup's executive committee, Rubin received
$16.5 million in salary, bonus and "other compensation" in
his first year at the company. By comparison... Mike Myers
(no relation to our John) who, as special agent Austin
Powers, saves the world in every film, signed a $25 million
deal to star in the third installment of the movie series.
Saving the world isn't cheap...
*** I have to leave in a few minutes to go to London...so
you will get a little holiday from the Daily Reckoning
today. You will find it shorter than usual. Still...more
below...
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"In the day of prosperity there is a forgetfulness of
affliction: and in the day of affliction there is no more
remembrance of prosperity."
Ecclesiastes 11:25
"Memories are about to get jogged."
Dan Ferris, 3:5
Thank God it is over.
The mania, that is. The Clinton boom...the credit and stock
market bubbles...have not yet been corrected. But at least
the frenzy over new technology, IPOs, dot.coms, the
Internet, and the most preposterous excesses of the
Gildered Age are behind us.
The worst is over.
From the Atlantic coast to the Pacific, the nation breathes
a sigh of relief.
Not that it wasn't fun for some people - the overnight
billionaires...the day traders...the celebrity analysts and
the techno-so-very-superiors...
But for most people, the tech mania was like a loud party
to which they had not been invited. "The financial asset
inflation of the last 20 years, with the proliferation of
generous option packages for executives and the 'new
economy,'" explains Marc Faber, "has produced an
unprecedented wealth and income inequity."
In 1982, he points out, "it took a worker around 100 hours
to buy one Dow Jones; it now takes more than 800 hours of
work." Real estate, too, has become less affordable. "In
other words," he continues, "today's unskilled laborer has
to work far longer than he did 20 years ago to afford a
house, or to invest his savings in equities in order to
secure his retirement nest egg."
Much of what passes for progress, (I paraphrase a point
made by my gardener), is made under false pretenses. I find
that I live at least as well in Paris, without an
automobile, as I did in Baltimore with several of them. I
eat at least as well from the small table that Mr. Deshais
ladens with his fresh vegetables and dead animals....as I
could from all the bins and shelves at the super market.
And, often, a misunderstanding built up in an hour of email
exchanges can be cleared up in a 15-minute conversation, in
person, over a cup of coffee.
It is rare, though, that an innovation turns out to be such
a complete and unadulterated imposter as the "New Era."
But finally, the music has died down and we can go on with
out lives free from the jealousy and resentment which
always threatened to overshadow our nicer qualities.
Now the partyers are getting their comeuppance. Henry and
Abby....Bezos and Ellison - they've all been humbled. The
day traders have gone back to their day jobs. No one -
other than the Fed chairman, whose birthday we celebrate
today, and a few diehards - still believes in the
transforming power of the new technology. And even the
press has finally caught on: 'It is a bear market' after
all, says the Washington Post.
"How could they have gone so wrong?" asks the Wall Street
Journal.
"The 90s boom left me both financially battered and
psychologically troubled, " says David Callahan, writing in
the International Herald Tribune, last month. "As the
economy has slowed, I'll confess that my main reaction has
been relief."
Mr. Callahan's beef with the mania was that it drove up the
cost of living in Manhattan, where "total wages and
salaries for workers in the city increased by only 19%
between 1989 and 1998" while the average price of a co-op
or condo below 96th Street rose from $395,035 in 1990 to
$787,708.
"To be sure," says he, on a point of which the reader is
less than sure, "I feel bad for the swelling ranks of
people who had been laid off. But until Americans find a way to
share the country's wealth more equitably during boom times
and make sure that income gains aren't wiped out by rising
costs in housing and health care, it's hard to get too
excited about surges in national prosperity."
The boom, he continues, "inevitably brought out the worst
in people. Materialistic values came to pervade U.S.
culture. The ideal of working hard over many years to
achieve wealth lost traction. The pressure to pursue wealth
instead of other goals grew enormously as the media focused
on those winning big in the new economy. It became easy to
feel that missing the gold rush was plain stupid."
From the other coast, much the same sentiment was voiced by
David Coursey on ZDNetnews, last summer:
"In the past couple of weeks, community resentment of the
'dot-commies' or 'e-holes,' as we're being referred to in
some circles, has reached a new high. No, we're not being
assaulted on the way to our cars - quite yet - although in
some San Francisco neighborhoods, emotion is running pretty
high.
"Silicon Valley used to exist in the old fruit orchards
down near San Jose, about 40 miles south of the Golden
Gate. It had expanded over the years, but nothing like
we've seen in the past half-decade. Now everything between
San Francisco and San Jose is ripe for tech companies on
the prowl. And the East Bay - Oakland and environs - is
getting annexed as well.
"And this is pissing the hell out of local residents, who
are beginning to root for a big economic downturn as a
means of getting back some control of their communities.
And giving the rich kids their comeuppance.
"Apartments that were $1,100 a month four years ago are now
impossible to find at $1,750. And the low-income
neighborhoods of East Palo Alto - and low-cost housing
generally - are being gentrified right out of existence.
"Last week there was a story about two houses - three
bedrooms, nice but not swank by Palo Alto standards - going
on the rental market. They were priced at a bargain-
basement $10,000 and $12,000 each - and that's per month.
"Rather own than rent? $3.3 million is the opening bid. Oh,
yes, for $12K-a-month you get a pool.
"Another story that caught my eye was about a neighborhood
bakery not far from my office. The bakery is facing a
quadrupling of its monthly rent - from $1,500 now to $6,000
come Jan. 1. The baker was talking about the likelihood of
going out of business..."
But that was 6 months ago. Since then, the rich kids have
been getting a least a little of what they've had coming.
The fraud has been exposed. The worst is over. Prices are
coming down. The gap between the techno-wunderkind and
everyone else is narrowing.
"Sooner or later," said Mr. Deshais this weekend (or words
to that effect)..."they're going to wish they planted
gardens."
Your correspondent,
Bill Bonner
About
The Daily Reckoning:
Daily Reckoning
author Bill Bonner
Bill Bonner is,
in spite of himself, a natural born contrarian. Early each morning, Bill
writes The Daily
Reckoning—his take on the financial markets and what’s going
on in the world—and sends it off by e-mail before most Americans’
alarm clocks have buzzed. Many readers say it's the first thing they want
to read when they get up—not only because it's informative and thought
provoking, but also it's inspiring, in its own quirky and provocative way.
Of course, there's
much more to Bill than his daily market commentary. He's also the founder
and president of Agora Publishing, one of the world's most successful
consumer newsletter publishing companies. Bill's passion for international
travel and big ideas are reflected in the company he's successfully built.
In 1979, he began publishing International Living and Hulbert's
Financial Digest . Since then, the company has grown to include
dozens of newsletters focusing on health, travel, and finance. Bill has
vigorously expanded from Agora's home base in Baltimore, Maryland since
the early ’90s—opening offices in Florida, London, Paris, Ireland, and
Germany.
Agora's publication
subsidiaries include Pickering
& Chatto, a prestigious academic press in London and Les
Belles Lettres in Paris, best known as a publisher of classical
literature in bilingual editions.
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