THE DAILY RECKONING

PARIS, FRANCE
MONDAY, 8 NOVEMBER 1999

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In Today's Daily Reckoning:

*** Judge rules…Microsoft is not nice to competitors…
*** Lots of IPOs this week
*** Blame it on Lewinsky

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*** "Microsoft…will use its prodigious market power…to harm any firm that
insists on pursuing initiatives that could intensify competition," said U.S.
District Judge Thomas Jackson. What next?

*** Stocks rose Friday. The Dow was up 64 points. There were 100 new highs.
Almost as many as the new lows -- 103.

*** The Nasdaq is still rising, too…in fact, we could be witnessing the "final
speculative blow-off" which some analysts believe must occur before the mania can
end. Whatever happens…it should be fun to watch.

*** Richard Russell believes there is still "further to go on the upside"…but
he doubts that the primary trend, the bear market, will be reversed anytime soon.

*** We should get a good measure of the bubble this week. There are 25 IPOs
slated for the public market -- one of the hottest weeks in IPO history. The
quantity of tech and Net stocks is increasing…is the quality falling apace?

*** If there is any doubt that this is a mania…consider that stocks are now
worth 160% of GDP. The comparative figure in `29 was only half that much -- 81%.
In 1973, stocks hit 72%. And before the `87 crash…they reached 70%. But this --
160% -- is completely unprecedented.

*** While the Nasdaq and a few big companies continue to rise…last week was not
a great week for conventional stocks. Dow industrials, transports and utilities
were all down for the week.

*** Bonds rose…and gold fell. Gold is now just above $290. Neither bonds nor
gold are signaling inflation.
*** Blame it on Monica Lewinsky. The plump vixen gave cigar smoking a disturbing
aroma. Cigar companies fell like cold ashes. But Jim Grant discovered a
contrarian butt-end -- a company called General Cigar Holdings, which has $6.30
per share worth of current assets…and a share price of only $5.75. Which means
the business is free. http://www.grantspub.com

*** The Queen is still on her throne in Australia. Voters have decided to stick
with her majesty and remain a parliamentary democracy, for now, rather than
becoming a republic like the United States.

*** "We have a new God," said the Czech novelist Ivan Klima in the "International
Herald Tribune," "The new God is called Entertainment." Another Czech writer put
it differently: "We have ushered in an era of great stupidity." What both are
grappling with, I believe, is the Spirit of Festivus. Mother Bernadette Mary,
formerly known as the singer Sinead O'Connor, understands it better. Said she of
her vow of celibacy, "I meant well doing the celibacy thing…but it doesn't work
for me." In the world of Festivus, the sacred gives way to the profane…and
sacred vows turn into good intentions. And everyone celebrates Mardi Gras…but
no one keeps Lent.

*** The weekend weather was spectacular. The light in November makes the scenery
come alive in a new way. All the colors are vivid. The grass is still very green.
The leaves have turned various colors. And the sun's angle is low…so it doesn't
bleach out the color the way it does in the summer.

*** A woman with a very pukka British accent telephoned yesterday to ask about
local craftsmen. The English are invading this part of France because they can
live the English gentry dream life -- with its horses, dogs and rubber boots --
here at much less cost than in the United Kingdom. (This is not a development
that pleases the French.) This woman bought a chateau in Thollet, a charming
village about 20 minutes from us. I gave her the name of one of them…Mr.
Goupil…a left-leaning traditionalist…whom I will introduce more fully on some
other occasion.

*** My son, Edward, and friend John Forde, both celebrated birthdays yesterday.
Edward turned 6.

*** It was a less happy anniversary, too -- the 82nd anniversary of the Bolshevik
revolution…about which, more below.

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STALIN IS DEAD

The news rated barely a footnote in today's "Herald Tribune." But Nadezhda
Stalin, the granddaughter of the better known Josef and the only member of the
family willing to carry his chosen name, died yesterday.

Stalin was all politics. And like all politics…Stalin was all lies and brute
force. Thanks to him, his comrades and his henchmen, the Soviet Union was
saturated with politics…and drenched in both lies and blood.

The scale of violence used by Stalin can hardly be imagined, but it happened
within the lifetimes of most people reading this message. Millions of people were
starved to death -- intentionally. Millions were rounded up and sent to
concentration camps. Millions were liquidated in purges and mass murders. In
Poland, for example, 7,000 prisoners were shot in the back of the head, one by
one…and then the crime was blamed on the Nazis.

Nadezhda was lucky. Stalin murdered or drove to suicide almost everyone around
him -- colleagues, assistants and even family members. He stayed up late at
night…meeting, planning, plotting…personally inspecting the lists of people
to be liquidated. Then, around 5 a.m., he would watch a movie. Cronies who could
not stay awake were among the first to go. His wife went mad.

Stalin admired Hitler. He thought he understood him. But he was mistaken.

Hitler was not merely a power-mad, unscrupulous mass murderer like Stalin.

Hitler was also a man of vision. He actually believed his loony ideas.

Stalin, on the other hand, was more Clintonian. He believed nothing unless it was
useful for him to believe it. And one of the ideas that was very useful was
Marxism. This ideological humbug gave Stalin a cloak in which to hide his dagger.
It provided a rationale for murder, beyond mere convenience and ruthlessness. The
Bolsheviks were building a new society. They said it would be a rational
society…and a just society. And, as Marxist apologists proclaimed for seven
decades, you can't make an omelet without breaking a few eggs. Stalin broke
plenty…and the Western press, favoring politics generally and the hyper-
politics of the Soviet Union particularly, barely said a word. Eleanor Roosevelt
witnessed the work on the infamous White Sea canal…and commented
favorably…without mentioning that it was dug by slave laborers…almost all of
whom died in the process.

The central idea of Marx was that the Industrial Revolution had deprived workers
of their tools. And the central goal of Marxism was to return them. It was an
extremely reactionary notion…but people could still embrace it and call
themselves progressive. And the Bolsheviks could use the idea to gain both
popular and international support. Lenin, for example, was financed by an
American banker with modern art on his walls and progressive ideas in his head.

Marxism was a lie, of course. It tarted up the Soviet Union like a fur coat on a
cheap whore. After the revolution of 1917, the Bolsheviks took the tools away
from their rightful owners. But the tools weren't placed in the hands of those
who used them. They were placed in the hands of Lenin, Stalin and the bureaucrats
who worked for them. The workers ended up with less compensation and less say as
to how their lives were run. They lived in concrete hovels…ate things that
would make a high school cafeteria seem like La Tour d'Argent…and knocked
themselves out with cheap vodka. And party hacks ran the economy into the ground.

This is more obvious now than it was then, however. In the 1930s, when America
was in a depression, it was widely believed that the Soviet system would provide
a model for the West. Even as late as the 1970s…many people still believed the
Soviet model was economically and morally superior. In the early `70s, a friend
of mine came to Paris, joined the Communist party and decided to devote her life
to it. I was shocked when she told me…it was as if she had found religion…and
I guess she had. What would she do to earn a living, I asked her. "Whatever they
tell me to do," was her reply. Another college friend shocked me in the mid-`80s.
He still believed the Soviet system was "more efficient," since it did not have
to pay for advertising, competition or silly consumer fads. He was, by the way,
one of the smartest people I ever met. Another friend, also among the smartest
people I ever met, worked in our business for years. He, too, had been a Marxist
for much of his life…though he is now disillusioned.

But it's a different world today. All of these people now…as well as many
residents of the former Soviet Union, whose parents somehow escaped Stalin's
homicidal attentions…have at their disposal the very thing that Marxism
promised but couldn't deliver. Workers can once again own their own tools. Thanks
to the silicon chip…Steve Jobs…Bill Gates…and all the other entrepreneurs,
techies and financiers involved in the computer revolution…computers are now
available to anyone who wants them. At least one company will give them away for
free…in exchange for an Internet access contract.

This is a real revolutionary change. Marxism is finished. Even its rationale is
obsolete. But capitalism is doomed, too…or at least capitalism of the old-
fashioned kind. Workers now own their own tools. They can become "cottage
capitalists" and exploit themselves. Now they can work not just 40 hours a
week…but 60 or 80. And for a more demanding boss. With no sick leave. And no
paid vacations. Not even a union hall.

Regards,

Bill Bonner

P.S. Marxism's appeal was so strong that it allowed Stalin to create what
Alexander Zinoviev called a "supersociety." Zinoviev is a former Marxist himself.
He now sees Western civilization evolving towards a different sort of
supersociety, which I will be puzzling over as I fly back to Baltimore this
evening. Stay tuned.

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