| FICKLE FOOD OF FAME by Bill Bonner PARIS, FRANCE - FRIDAY, 10 DECEMBER 1999
In Today's Daily Reckoning: * Yeltsin rattles
* Internets soar
* The Contrarian's dream
*** The spike in techs and Nets is all that is left. And
it is turning into a needle. The Nasdaq, stalled on
Wednesday, managed a minor gain yesterday. *** Yeltsin reminded Wall Street that he could blow up
the entire world if he wanted… and still the Dow
gained 66 points. *** And the Internets just kept blasting into space…
following the path of the Mars Polar Lander. *** "Eureka!" I'm not making this up -- that is not only
an exclamation at VA Linux headquarters… it's the
handle of the woman who answers the phone at the press
office. *** They're celebrating because VA Linux has just become
the most successful IPO of all time… rising from $30
to over $300…before closing at $239. *** The company's products, by the way, are based on
software that you can get for free on the Internet.
Linux worries Microsoft… as it should. Even we use a
Linux server to distribute the "Daily Reckoning," I am
told. *** The Big River of No Return… Amazon.com… rose $15
yesterday. *** And, according to the sign on the Eiffel Tower,
there are only 21 days until the end of the world… I
mean the end of the millennium. *** Volume was huge… 1.1 billion shares on NYSE…
1.75 billion on Nasdaq. My guess is that a lot of people
are buying… reasoning that the Y2K scare will
disappear… the Y2K cash will flood into the market…
and stocks will soar after Jan. 1. Possible. Heck… why
not! *** The bear continues his work. He's a stout, reliable
worker. Punches in at 8… and out at 5. Yesterday,
1,221 stocks avoided him and advanced on the NYSE… but
he tagged 1,859 with declines. And there were only 108
new highs… against 407 new lows! Richard Russell
points out that this means more than 1 out of 10 stocks
on the Big Board hit a new high yesterday. *** Gold was down, too… to $280. I'm sticking with the
formula I announced a few weeks ago. Buy the dips in
gold. Sell the rallies in stocks. *** How do you invest in gold? Chris Weber suggests you
buy Austrian Coronas… "the lowest premium gold coin,"
he says, selling at only 1.8% over bullion. *** Chris is also recommending a stock he believes is a
"contrarian's dream." It's a stock that has been
battered down for years. It has huge operations in a
country that is as out-of-favor as a child molester. And
its main product is metal -- both precious and base.
Plus, it's paying a 10% yield. "So you can be wrong on
gold [and the country] and still collect a 10% yield,"
says Chris -- who tells all in the current issue of
"Fleet Street Letter." (Have you subscribed yet? Hope
you don't mind the pitches for "FSL" this week. But
subscribing is a way to make this pay off for you… and
me!) https://www.agora-
inc.com/secure!/form1.cfm?pubcode=fsus *** The euro fell below $1.02. My guess is that it will
test the $1 barrier once again… but that it will then
rise again. Neither Europe nor Japan are increasing
money supply at anything like the rate of the United
States. The Fed's assets have been growing at 12% over
the last 12 months… and 24% over the last three
months. By contrast, the European Central bank is
growing at only .5% over the last three months (it has
not been around for 12 months). And the Bank of Japan's
growth rate over the 12-month period is negative! As Jim
Grant puts it, "Evidently, Y2K is happening only in
America." *** Bill King cites a report in the "Seattle Times"
saying that Boeing's lawyers are claiming that the crash
of Flight 800 was not because of a problem with the
plane. The most likely cause, they say, was a missile
fired by the government. *** Not everyone agrees with the selection of Jimi
Hendrix as Guitarist of the Century. Andres Segovia, a
great classical guitarist, once remarked of Hendrix,
"Would that I could manage what he seems to manage with
his instrument. And then, of course, I would never do it
again." *** "We didn't read Emily Dickinson at Ole Miss," said
Beirne, on this, the anniversary of the spinster's
birth. "Don't you have to sit in a bubble bath to read
that stuff?" he asked. *** Beirne also informed me that today is the
anniversary of Mississippi's entry into the USA and the
first radio broadcast from the Grand Ole Opry in
Nashville.
THE FICKLE FOOD OF FAME
In my never-ending quest to connect all of life's
dots… I draw a line from Emily Dickinson's poetry…
to the distinction between political and personal… and
to current investment opportunities: "I'm Nobody!" one of her poems declared, "Who are you?
Are you -- Nobody -- too?
Then there's a pair of us?
Don't tell! They'd advertise -- you know!" Ms. Dickinson was nobody but herself. Private,
personal… poetically alone… until years after she
died. Neither a Rotarian, Rosicrucian nor Republican.
Then her poetry made her somebody she didn't want to
be… "like a Frog --
To tell one's name -- the livelong June --
To an admiring Bog!" Ms. Dickinson lived and died in the same Massachusetts
that expelled Mr. Bewitt two centuries before. His
fellow citizens simply ignored the curl of his hair and
the swing of his step. They deconstructed him into an
ideological stick figure… and banished him from the
colony… just as my Marxist friend deconstructed his
wife (and she left him!). Mr. Bewitt became political.
Ms. Dickinson remained intensely private. "Fame is a fickle food," said Emily Dickinson, from
intuition, not experience. It sits "upon a shifting plate…
Whose crumbs the crows inspect…" I am noticing more and more enticing crumbs in the stock
market. The famous bubble has not yet burst. But the
crumbs are falling from the table anyway. One of them is the extraordinary mining company,
mentioned above, and recommended by Chris Weber. It
gives you a yield of 10%. Not to mention the possibility
of a capital gain. The Bear has been at work for 19 months. There are a lot
of stock bargains beginning to appear. That is not to
say that they won't be bigger bargains in the future.
Most likely, the techs and Nets will crash… and bring
the whole market down with them. But some of these
stocks are solid enough, and cheap enough, that if you
have a long-term perspective, you wouldn't mind holding
them through the coming debacle. Especially if they keep
giving you a 10% yield. "In this crazy market, there's little interest in…
small companies in boring businesses like home
building," said the fund manager of Heartland Value,
recorded in this week's "Forbes." One of the crumbs that
"Forbes" puts back on the plate is a company called
Engle Homes. While Microsoft trades at 52 times Year
2000 earnings, Engle trades at 4.3. Like MSFT, Engle is
growing rapidly… sales up 700% in seven years.
Earnings are up nearly 300%. You can buy the whole
business for less than 20% of annual sales. I would bet that Engle has given few options to
employees. There is no mention of a pack of lawyers
angling for a settlement of a specious price gouging
complaint. Nor are there competitors giving away houses
for free via Internet. And neither is the government
threatening to break up the company. Engle is a crumb…
a forgotten company, knocked off the table by the bear
market. Or how about another home builder… Standard Pacific.
It's selling for 5.7 times earnings. And about one-third
of sales. Or Commercial Intertech. It makes industrial
machinery -- that is, pre-digital tools and equipment.
And the stock gives you a yield of 4.8%. The P/E is only
7.2. And it's priced at about a third of sales. Jim Grant notes that China.com… proposing to bring
more than 1 billion Chinese into the wired world… is
priced at 191 times sales. But a company that makes a
profit in growing trees in China -- Sino-Forest -- is
thought to be worth less than a single years' sales.
China.com, need I say it, has no earnings at all. But
Sino-Forest does… about $25 million this year. And you
can buy the whole company for just a little more than 4
times that amount. These are the kinds of Nobody… Nowhere stocks that are
now available -- crumbs on the floor of the great stock
table of Wall Street. Most people will not touch them. Because most people
prefer political thinking to private, personal thinking.
Mobs provide courage. Mobs eliminate individual
responsibility. That, also, is the hallmark of politics. A girl can be attacked on the street by a vicious
killer… or a bum can die of starvation in the middle
of the city. People will say to themselves -- "there
must be some agency to take care of this problem. It's
not my responsibility." They will avert their eyes from
the girl… and step over the bum. Likewise, fund managers who go along with the herd of
investors and buy Internet stocks at outrageous prices
will feel the comfort and security of the crowd. If the
stocks go down… it will not be their fault. It will be
Greenspan's fault. Or the short sellers. Or who knows
what. But it will not be a personal failing. But woe to the fund manager who buys the out-of-favor
crumbs. If they go down… he's an idiot. Personally. He
is not protected by the ideology of group-think. He is
on his own… like Emily Dickinson. Not surprisingly, fund managers buy the Internets. The
techs. Telecoms. The crumbs become more numerous… and
bigger bargains. But this "not-my-fault" feature of mob-thinking is
easily exploited by demagogues. That was Hillary's
intention in trying to shift the focus of the discussion
from her husband's personal failings to the political
agenda of the "right-wing conspiracy." It was also what allowed Lenin's putsch to succeed.
Following one Bolshevik failure after another, Lenin
shifted the blame away from himself and away from the
lumpenproletariat whose support he sought. Hitler actually learned from Lenin's example. The
Germans felt beaten, betrayed, humiliated, ruined.
Hitler told them it wasn't their fault. It was the fault
of the moderates, the communists, the bankers, the Jews. Politics releases individuals from responsibility for
their own situation and actions. Released from
responsibility… they act irresponsibly. Would the
average investor buy an unproven company that was
bringing the Internet to China… if he were alone in
doing so? Of course not. Likewise, only a career criminal or psychopathic slave
trader would think of taking half a man's income for his
entire life…if he could not do so under cover of a
ballot box. But such is politics that a man who might do so is not
only tolerated…but given a certain, fickle fame.
Adios,
Bill Bonner P.S. As they say in French, Bon Weekend.
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