| THE MADNESS OF THE CROWDS THE DAILY RECKONING PARIS, FRANCE
THURSDAY, 2 DECEMBER 1999 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * In Today's Daily Reckoning: *** No sign of a crash… *** Billions in Internet advertising… *** The biggest fizzle of all time?
* * * * * * * * * * * * * * * * * * * * * * * * * * * * *
*** The Dow rose 120 points yesterday. But the Nasdaq
made up only a little lost ground. It will be interesting
to see if the Nasdaq returns to last week's highs in our
lifetimes. *** The Advance-Decline ratio has dropped an amount
equivalent to the bear market of 1973-74. But the damage
has been disguised by the action of the Dow and a very
thin spike in techs and Nets. *** Sooner or later the divergence has to be corrected.
Of course, it could be achieved by a rally in the A-D
ratio…meaning that most stocks could start going up
again. What happened in `29 and `73 was that the leading
stocks turned around and followed the majority down. *** Oil slipped down yesterday. And gold, too…trading
as low as $287. *** I don't have a TV…but I've been told that
advertising for Internet sites is becoming more and more
common. The numbers tell us that the Nets are spending
billions -- capital raised from investors, not operating
revenue -- on advertising. They have to make a name for
themselves…or the buzz may cease… *** Is all this advertising going to pay off? In the only
business I know anything about - publishing -- it would
be suicidal to advertise unless you had some test results
proving that the effort would produce a profit. These
guys don't have a clue. And the numbers put out by Media
Metrix, which keeps track of these things, are alarming.
Internet growth slowed in the summer. It turned into an
actual decline in early fall. The number of users has
remained about the same…but the time spent on the
Internet has dropped 5%. *** Meanwhile, Morgan Stanley tells us that if you put
all the Nets together, they're worth $500 billion. Or 20
times revenues. Profits? Forget it. The only chance that
Nets could ever be worth today's capital values is if
they were able to grow at a spectacular rate -- both
sales and profits. But it's not happening. *** Just a thought -- could the Internet turn out to be
the Biggest Fizzle of All Time? Or, as Jim Dines, who
loves capital letters more than the Defense Department
does, would say, TBFOAT? *** Australia's Department of Foreign Affairs has warned
its people in Russia, Belarus, Ukraine and Moldova to
clear out before the end of the year. The Ozzies think
Y2K is going to cause big problems in the former Soviet
countries… *** Bill King reports that Wall Street analysts are
wildly bullish. They're recommending more than 70 buys
for every sell. *** Bill Clinton threw Big Labor a bone yesterday…and a
curve to the WTO. In a bid to help the election chances
of Al Gore, Clinton proposed to use the WTO -- allegedly
an organization designed to promote trade -- to protect
U.S. labor from foreign competition. *** Drudge passes along a quote from Barney Frank --
"Trade has the potential to…split the Democratic
Party," just as civil rights and Vietnam did before. The
labor wing is definitely opposed to free trade. But the
New Democrats, of whom Bill Clinton is supposed to be a
member, know that "it's the economy, stupid." And the
economy is helped by trade…especially the post-
industrial economy. *** But, speaking of the WTO, any organization that draws
fire from Ralph Nader and Pat Buchanan can't be all bad. *** Where's George Mitchell when we need him? A number of
DR readers, with surnames suggesting bog-trotting origins
similar to my own, have written to say that `twas not the
fault of the Irish that there was famine in 1845. *** "Beau Geste" -- this was my favorite book as a child.
The kid tries to protect his stepmother…and has to run
off to join the French Foreign Legion. They didn't take
French citizens in the Legion. So the French who
joined…usually on the run from the law…claimed to be
Belgians. Most of the troops were Germans, Russians,
Poles…And now the French government has made a decent
gesture of its own…it has given French citizenship to
any member of the Legion who was wounded in action. *** Gosh, these letters seem to be getting longer and
longer. There's so much to talk about. But I'll try to
cut them back. *** It is quiet around the Bonner apartment. Elizabeth
has gone back to America to take care of some family
business. Fortunately, Nadiege was able to come up from
the country to help out for a few days. She cooks, cleans
and takes the kids to school. But it is not the same as
having Mom around… *** I took my two daughters, Maria (pronounced Mariah)
and Sophia, out shopping yesterday. More on that
below…and thoughts about bubbles, too… *** This royal throne of kings, this sceptred isle,
This earth of majesty, this seat of Mars,
This other Eden, demi-paradise
This fortress built by Nature for herself… This blessed plot, this earth, this realm…did this
England cause the Irish famine? More below…including a
sparkling defense of the precious stone set in the silver
sea…by Adrian Day… * * * * * * * * * * * * * * * * * * * * * THE MADNESS OF THE CROWDS I have two daughters. One dreams of becoming an actress.
The other, in gloomy moods, talks of taking up a life of
crime…or even prostitution. One disappears immediately
when we get to the department store. The other won't
leave my side. One is shy, fearful…a worrier. The other
is reckless and expansive. First we had tea at a charming little spot near the
office -- the Foret Noire, specializing, as the name
suggests, in Black Forest cake. Then we walked over the
oldest bridge in Paris, the Pont Neuf, to the
Samaritain…an old department store, a little like
Harrod's in London. (I saw no live models in their
underwear.) Maria and Sophia are both pretty girls. They are fun to
be with. I am happy to have them. No worries about the
greenhouse effect, or disappearing species or
overcrowding on the Metro make me wish they hadn't been
born. Am I being selfish? Though I have as many concerns
about the future as anyone, I am not convinced that
anyone would be better off if they did not exist.
Excuse me, I have made this discussion personal. Yesterday's reply by Virginia Abernethy went right to the
heart of the matter. It's all personal. Since there is no
way to know whether the world will be better or worse
off…or what the world's carrying capacity really
is…or what kinds of damage or lifestyle compromises
will be required…ultimately, your position on issues
like this tends to be determined by your
"mentality"…your attitude…your tolerance for
risk…your faith in the future…In short, it tends to
be a matter that the heart decides…rather than the
head. Today is the anniversary of John Brown's death. Brown led
a group of abolitionists to seize a federal armory in
Harpers Ferry, West Virginia. Robert E. Lee, at the time
still in the service of the U.S. Army, put down the
insurrection. Brown was captured…and later executed.
Lee was no friend of slavery. By the time of the Battle
of Gettysburg he was probably tired of being told, by the
Northern press, that he was fighting to preserve it.
Gettysburg was the most important battle in American
history. And Lee blew it. For years after, General
Longstreet argued that Lee wouldn't listen to
reason…and that he ordered a suicide charge up Cemetery
Ridge. But the nation was in no mood to hear criticisms
of Lee. For Lee was a decent man and fine soldier and
everybody knew it. And yet…Gettysburg was a blunder. "Gentlemen, there is
the enemy," Lee is reported to have said, pointing
towards the center of the Union line. "That is where we
must go." But going there was easier said than done. The
rebels were cut down. The army had to turn back. The fate
of the war was sealed. And all because Lee would not listen to reason.
Historians have written that Lee, no longer a young man,
was tired of war. He wanted to end it, once and for all,
in a decisive battle. Gettysburg would be a Waterloo for
one side or the other. Even that proved elusive…as the
war continued for many long months after. Historians also report that Lee was so beloved by his
troops that thousands of them…hungry, tired soldiers on
the march…tiptoed by his tent so they wouldn't wake him
from a nap. And what sense did this make? The war itself
was a colossal blunder…one that cost the South one-
quarter of its young men. Going to war was stupid beyond
reason…it was insanity. Rhett Butler said as much in
the opening scenes of "Gone with the Wind." But the war
spirit…the mass psychology that whips up mobs, turns
sensible people into morons and leads to the most
appalling excesses…could not be stopped. Even in a small gene pool…illustrated by my two
daughters…you can see the extremes of human
reason…and anti-reason. One would leap at the chance to
sign up for battle. The other, more timid and cautious,
would think twice. One would burst upon the
world…embracing whatever idea appealed to her at the
moment. The other would hold back…not wanting to take a
chance on being wrong. One would worry about the environment…the carrying
capacity of the Earth. The other doesn't seem to worry about much at all. One
would be a player in the Internet stock mania…the other
would bury gold coins in the yard, along with her dad.
But why would evolution allow such diverse personalities
to coexist so closely to one another? Wouldn't the
expansive personality get bred out…or the fearful one?
Even Christ seemed contemptuous of the timid investor in
his parable of the talents. Instead of the "well done my
good and faithful servant" that the others got…the
servant who buried his gold to make sure it would still
be around upon his master's return was beaten. (This has
never seemed fair to me.) The reason nature tolerates different mental
personalities must surely be that diverse points of
view…arising from the heart, not the head…are useful
to survival. The impetuous person ate the poisonous
mushroom first…thus signaling to the others to avoid
it. The cautious, conservative Cro-Magnon might have
hoarded a few more nuts and thus saved the gene pool
during a period of starvation. If the whole tribe were
timid and fearful, however, it might be attacked and
destroyed by another tribe…or be unable to take the
risks of hunting. At the margin, a tribe is probably
better off with both personality types. (I know my tribe
is.) Likewise, the perpetually fearful investor and the
chronically expansive one are both doomed. The key to
investing is to be contrary…not consistent. You must,
as someone put it, be brave when others are fearful and
fearful when others are brave. You make the most money by
investing against mass delusion. You make money alone. But this introduces another level of psychological
nuance…mass psychology. The idea is that markets
themselves have moods or personalities. They are either
bullish…or bearish…or somewhere in between.
Everything happens at the margin. And the marginal
investor is neither consistently bearish nor consistently
bullish…but someone subject to influence…depending
upon the influences that come his way. Buy him a drink an
election day, in other words, and he will vote whatever
way you want. Stir him up with the right sort of
demagoguery…he will lynch Mother Teresa. And at the great bar of a bull market, it is "drinks on
the house" all night long…for as long as the liquor
holds out. Which turns a lot of knuckleheads into bulls.
This is the Mass Psychology that Jim Dines is counting
on. People do not think. They do not reason. Especially
during the last stages of a bull market…the crowd gets
very brave. Reason does not merely sleep…it drops on
the floor unconscious like a bum on the sidewalk.
Crowds tend to amplify whatever emotion an individual may
feel. People who are normally sensible…who drive on the
right hand side of the road…who can figure out how to
use the electronic controls of their home sound
system…who have no trouble picking out the lowest price
at the supermarket…gradually become raving maniacs.
Greed and fear are loosed…prices are bid up to levels
that no sane man would pay if you put it to him on his
own…or driven down to levels that no sane man could
resist. But what does it matter? Sanity has gone out the
window. People will argue on television. Campaign speeches will
lie about this or that. Analysts will point out why the
market should go up…or down. But what will it really
matter? Not much…when the mob's blood is up.
Girls seem to be wearing long, black cloth coats this
winter. I bought one for Maria as an early Christmas
present. A short, better-insulated coat would have been
warmer. There were many that were cheaper. But who am I
to argue with fashion?
Bill Bonner
Single parent P.S. We walked back from the Samaritain. Christmas
decorations are going up. So are decorations for the big
Year 2000 celebration. They've bagged the trees on the
Champs Elysee, as if to protect them from bugs, and lit
them with different colors. And there's a huge, lit up
Ferris wheel down at the Tuileries. Then we walked to
Trocadero, where we had dinner at a bright
brasserie…and a long conversation about the family. It
was a nice evening.
* * * * * * * * * * * * * * * * * * * * * *
THE REAL CAUSE OF THE IRISH FAMINE It is refreshing to read your social commentary…But
having studied history myself, especially Irish history,
and being of Irish descent myself, I was taken back a bit
by your scenario of the Irish "famine." There is a great
dearth of facts about that sad period in Irish history so
I can understand why even people of Irish lineage think
that there was a famine in Ireland in the 1840s. The fact
is that there was no famine at all. There was simply a
potato blight on the only land that the native Irish were
allowed to gather their food. They worked on foreign
landlords' farms reaping abundant harvests, but that
produce was exported by England under armed soldiers. For
an excellent account of the events leading up to and
including the "Great Hunger" (An Gorta Mor) in Ireland,
please read the essay written in 1847 by Archbishop John
Hughs of New York at
the "National Ancient Order of Hibernians. Click on
"Irish Links" on the left side menu, then click on "The
Irish Famine or The Great Hunger" under the Education
subtitle, then scroll down to the last title in the list
"A lecture on the antecedent causes of the Irish Famine
in 1847". It is a very interesting read, especially being
written at the time of the tragedy. Vic Sackett
* * * * * * * * * * * * * * * * * * * * * *
DON'T BLAME THE ENGLISH Oh Bill. You have opened a can of worms. You will learn
that Ireland is a topic best not discussed in public or
at dinner tables where the English or Irish feed. The Irish do love to blame the English for all their
woes. They relish reveling in the horror of the potato
famine of the 1840s. The 1845 potato blight that led to the Irish famine also
affected much of Europe in 1845. The English were not
responsible for that, surely! But the blight had more
dire consequences in Ireland than elsewhere. Why was
that? Let me review. The population of Ireland had nearly doubled in the years
1800-1840. During this period, Irish political leaders
rejected emigration -- which would have relieved some
pressure. There was widespread emigration from the
mainland of Britain, which relieved poverty in England
and Scotland. Irish political leaders also encouraged the subdivision
of holdings, contrary to the policy of all British
governments of that time. That led to a steady reduction
in the size of land holdings, of which in 1841 there were
300,000 under three acres each in size and another
250,000 from three to 15 acres. It also led to a
dependence on a single (easy to grow) crop. As might be
expected, the vast majority of the land workers lived
from hand to mouth. The primary subsistence crop was the
potato, and when the blight -- which first appeared in
North America in 1844 -- reached England and Ireland, its
effect was devastating. Had landholdings been larger, some crop diversification
would have been feasible, and the destruction of a single
crop would not have had such devastating effects. The
blight affected potatoes in many other countries without
the same impact. So the English did not cause the potato blight, nor were
they responsible for the fact that the blight led to
famine in Ireland. Nor, once the famine took hold, were
the English responsible for the fact that its impact was
so devastating. Remember, in 1845 there were no
telephones or CNN. News of the scale of the famine
reached London only gradually. The government of the day
took the news very seriously: "I never witnessed such
agony," said the Duke of Wellington, describing Prime
Minister Sir Robert Peel's reaction to the news. Peel
promptly moved to repeal the protectionist Corn Laws,
laws supported not only by the landed gentry but also by
the new urban poor who wanted cheap bread. Repeal allowed
the export of corn to Ireland, a courageous move that
caused Peel's resignation as prime minister and destroyed
the Tory Party, which was replaced by the modern
Conservative Party. In addition, England did attempt to alleviate the hunger.
It sent large amounts of food relief to Ireland, amounts
that were extraordinarily large in the context of the day
and in the context of relief provided for the hungry in
England, Scotland and Wales. Many, including, for
example, the Church of Ireland's Archbishop Whatley,
"gave liberally from his personal wealth" to famine
relief. That is charity. Much of the government aid was
ultimately counter-productive, as one would expect from
any government program to assist the poor or disaster
victims, but it would be difficult to castigate England
for sending food to the Irish, and, certainly, it was not
the lack of private ownership that caused the Irish to
starve. The Irish potato famine was tragic, but it was neither
caused by nor exacerbated by England.
Sincerely
Adrian Day ============================================= TODAY'S STOCK ALERT European Internet stocks are exactly were the U.S. stocks
were three years ago -- fresh, frustrating and wide open
for innovation. This could be the site of the Second Internet bull
market. A few months ago, Brian Hicks -- editor of "Cutting Edge"
and "The Rogue Trader" -- met with his British
colleagues. As he listened to their explanations of why the web would
never be popular -- he discovered a spectacular profit
opportunity. This is exactly the type of talk we heard in the United
States, back in 1996. Immediately he issued a buy for Euro909.com. In less
than two months it shot up 256%. If you missed out don't worry -- there's another European
Internet company about to take off. This company just
inked a deal with British Telecom. Today it's up to $65
as a result! These companies could be among the leading information
age enterprises in all of Europe. To discover more tech and med-tech stocks to buy at start
of 2000 -- Click Here
http://www.cuttingedgeonline.com/reportsdr.html | 
