Declines Abound

The Daily Reckoning

Weekend Edition

November 17-18, 2001

Paris, France

By Addison Wiggin

MARKET REVIEW: Declines Abound

Friday brought very little action to Wall Street as stocks fell slightly following a three-day rally. The Dow dropped 5.40 to close at 9866.99, while the Nasdaq fell 1.99 to 1898.58.

Also on Friday, the Federal Reserve reported that October industrial production at the nation’s factories, utilities, and mines declined for the 13th time in a row, dropping by 1.1%. Will news like this pave the way for yet another rate cut when the Fed meets again on December 11? We shall see, dear reader, we shall see…

THIS WEEK in THE DAILY RECKONING by Bill Bonner

11/16/01 ACT III

“…The U.S. economy seems to us to be following a script written in Japanese. With only an occasional improvisation, and a broad allowance for cultural differences, the essential dialog in America 1995-2001 has been very much that of Japan1985-1991…”

11/15/01 DEAD WOOD

“…’tight money’ is no more the source of economic trouble in America than it is in Japan. Banks can borrow money and pay a negative interest rate of 2%. Corporate borrowers – if their credit is good – pay not much more. Money is not merely free at these interest rates – people are being paid to take it…”

11/14/01 GETTING THE STORY STRAIGHT

“…The interdependent network of political, monetary, and military relationships – known by some as America’s Oil Raj – mirrors Britain’s collection of territories and petty kingdoms on the Indian subcontinent. And, suggests Young, ‘consists of the old imposed artificial colonial client states created by Britain andFrance’…”

11/13/01 BACK TO JAPAN

“…No comparison is ever perfect, and every situation is different. The economy is always new. But the novelty of a situation is often less instructive than its essence – that is, the things that are not new about it. Thus we turn again to Japan…”

11/12/01 ARMISTICE DAY

“…’Today, we honor those who risked their lives in time of war…for their country’…”

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HEADLINE, NEWS And INSIGHT:

The Mores Of Cannibals by Raymond F. Devoe, Jr.

Over the last few months Americans have been jolted in many ways, and one of them has been to see themselves as others see them. Not everyone admires and likes this country. It is not particularly comforting to wake up to the realization that the world is a much more dangerous place. It’s going to be a long war.

Persuasion v. Force by Mark Skousen

“…it is the duty of every advocate of human liberty to convince the world that we must solve our problems through persuasion and not coercion. Whether the issue is domestic policy or foreign policy, we must recognize that passing another regulation or going to war is not necessarily the only solution to ourproblems…”

The Most Underrated Investment Secret Of The Bull Market by Lynn Carpenter

The secret of the late, great bull market. most investors would have done better collecting dividends. Now with the economy in recession, they’re even more powerful.

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FLOTSAM AND JETSAM :

– from John Myers, Outstanding Investments

“…There’s nothing less certain than absolute certainty. I don’t care if it is politics, fashion or investing – the consensus is hardly ever correct. This is especially true in the commodity markets where everyone, it seems, thinks it inevitable that prices will continue to fall. The news of recession has turned even die-hard bulls into bears. However, there are powerful fundamentals arguing for a turnaround in commodity prices.

One fundamental is that commodities are “oversold.” When measured in today’s money, commodities are cheap. But when measured in constant dollars – accounting for the reduction of the dollar’s purchasing power – they are dirt-cheap. Let me give you a couple of examples.

– Gold is selling for $280 an ounce. In 1980 dollars that puts gold at $122 an ounce, or one-sixth of its 1980 high.

– Oil can be bought for $22 a barrel. Is that expensive? Hardly. Measured in 1980 dollars, a barrel of oil sells for less than $10 a barrel, or less than a third of what it traded for in 1980. In fact, to equal its all-time high, oil would have to trade at $88 in today’s dollars.

So what is going to turn prices around?

Surging demand for commodities – such as in Third World countries that are just beginning to undergo their own industrial revolution – will push prices higher. Add to this the world’s population, which continues to soar.

I expect commodity prices to begin rebounding over the next several months. And when all is said and done, the bear market in commodities will be over…”

Bon Weekend,

Addison Wiggin

The Daily Reckoning

PS – Best line from the week? “Most Boys Can’t Stop Thinking About The Virgins”…an advertisement headline for John Myers’ Outstanding Investments…

Maniacs In The Desert