Market Review: The Picasso Economy

Like the misplaced ear of a grotesque Picasso visage, a few minute features in the unraveling Bubble Economy came into view this week:

* A former Enron Corp. executive – who resigned after challenging the firm’s accounting practices – was found shot to death in his car. News reports indicate there was a suicide note.

* The White House ordered "a review" of $70 million in federal contracts with Enron to determine whether the embattled companies are worthy of government business. (Can you say ‘Whitewater’?)

* Riot police used tear gas and rubber bullets to shun hundreds of demonstrators and rock-throwing youths in Argentina Friday.

Both Enron and Argentina appear to have suffered from too-close contact with derivatives. As Martin Weiss described for us this week, the unraveling of some $100 trillion in derivative instruments could be devastating.

But wait… what’s this?

* "Americans, showing amazing resilience during the recession, snapped up existing homes last year and pushed sales to an all-time high," reports USAToday. Sales of previously owned homes jumped to 5.25 million in 2001, said the National Association of Realtors on Friday. The previous record was 5.21 million recorded in 1999 – when the economy was "booming."

* Investors boosted the stock market higher for the fourth straight day following the Martin Luther holiday. The Dow climbed 44 on the day to 9,840. The Nasdaq dropped 4 to 1,937. The S&P 500 barely moved.

* And Amazon.com posted a profit (albeit $16 million came from Euro-based investments).

Hmmnn… I guess your editors at The Daily Reckoning still have their work cut out for them in determining the outline of this freakish beast. More on derivatives and the like below…

Addison Wiggin, The Daily Reckoning
January 26-27, 2002 — Paris, France

THIS WEEK in THE DAILY RECKONING
by Bill Bonner

01/25/02 FULL OF HOLES

"…Money can be gotten in many different ways. Some quick and easy. Some sordid. But real wealth has to be earned, by hard work, taking chances and forbearance. I bring this up to introduce today’s topic of discussion:productivity…"

01/24/02 REMEMBERING 1930

"…the credit boom of the 1920’s and the aftermath in 1930 are so similar to recent – and perhaps upcoming – events that it wouldn’t hurt us to rememberthem…"

01/23/02 NO TIME TO BE SWAYED
Guest essay by Martin Weiss, PhD

"…The collapse of Argentina is far worse than anyone dreamed possible. Even in the "worst-case scenario," those with big stakes in Argentina were expecting either a default or devaluation. Now they’re being slammed with both at the sametime…"

01/22/02 PIGS GET SLAUGHTERED, PART DEUX

"…In a contest between ignorance and stupidity on the one hand, and information and intelligence on the other, we know how to bet, dear reader… thus, we do take some credit for plunging the knife into Michael Saylor, CEO ofMicroStrategy…"

01/21/02 PIGS GET SLAUGHTERED

Your thoughtful editor details the intricacies of hog slaughtering…in case a serious breakdown in the division of laboroccurs…

The Daily Reckoning