God, Man, and Alan Greenspan, Part II

Life is full of paradoxes and ironies, dear reader. If it were not so, simple-minded bureaucrats might be able to plan the economy; Alan Greenspan, perhaps the best known public servant since Pontius Pilate, might be able to do as good a job of setting interest rates as the market.

But life is not simple. It’s most important features – love, faith, beauty, and stock prices – defy a thinking man’s efforts and resist his theories; just as a man’s wife frustrates his efforts at logical persuasion. Truth – such as it is – must be coaxed out by poetry…or by suffering. There is no other way.

Today’s letter examines one smallish question and raises a biggish one, in the following order. Why do Americans profess a greater admiration for the free market then, say, the French? Could it be that by submitting to God, they free themselves from the yoke of other men?

A Daily Reckoning reader from Seattle sets the stage for today’s drama:

“In historically Catholic countries, such as France, the ‘communion of saints’ – the idea that we are all in it together, spiritually (see 1 John 5:16-21 and Col 1:24) and materially (private property ownership was delegated from God and to be used for the common good) led to what you describe. ‘Solidarity’ is a Catholic virtue which has been adopted by the Commies.”

Meanwhile, “in historically Protestant countries, such as the US and UK,” he writes, “spiritual radical individualism was introduced by the reformation… That understanding of property is deeply Pagan in origin, but taken as Revealed Truth by most conservative protestants.

“By and large, Fundamentalists and Evangelicals have a deep faith in the infallibility of the market which Catholics find incomprehensible…”

“You have to have faith,” I recall my friend Mark Skousen telling his French audience in May. “Faith in the invisible hand of God…faith that the market will work things out to the benefit of all.” It is either faith in the market’s invisible hand… or faith in the iron fist of government. What else is there, dear reader?

A similar question was put to literary critic Harold Bloom by that well-known journal of theology, the Harvard Business Review.

“American society is characterized by its devotion both to capitalism and to religion,” observed HBR.

“As an acute observer of the human condition,” the theological journal continued its puff-ball pitch, “you are more interested in religion that in business. Why?”

“I believe the ultimate concern of America, for better and for worse, is religion,” Bloom replied. “I believe that it is religion in this country that refutes Marx. As I’ve said so often, religion is not the opiate of the American people; it is their poetry.”

That was the trouble with the play I saw in London, of course. The playwrite had the poetic talents of a tow truck. The central character of the play had discovered a letter from the 1st century, reporting that the resurrection of Christ had been staged by the Romans. (Those wily Romans!)

But what is really shocking about the story of the resurrection of Christ is not that it might have been faked – but that it might not. Any clown can buy a dot.com stock or pretend to be a dead man. But rising from the dead – defying the laws of nature herself – that is a real trick.

“The startling thing about the United States,” Bloom continues, “is not that 93% of us say that we believe in God, which is, in fact, except for the Republic of Ireland, the highest percentage in the world. The really shocking thing is that 89% of us…say that God loves him or her on a personal basis…

“All Americans are poets and mystics,” Ralph Waldo Emerson once wrote. “I presume that includes capitalists, too,” added Bloom.

Bill Bonner,
Continuing his magical mystery tour of contemporary capitalism…

Tomorrow: “A Snowball.com’s Chance In Hell” and other darned cheap stocks…

Paris, France
June 14, 2001

*** “Jeez Bill,” writes my friend Francois, “wonder what’s on your mind…talking abut true love in an investment newsletter! This conjures up a warning from the Old Bard (I quote from memory):

The course of true love never did run smooth …

… momentary as sound, swift as a shadow, short as any dream,

Brief as the lightning that in the collied night,

Unfolds both heaven and earth,

And ere a man has power to say: behold!

The jaws of darkness do devour it up.

So quick bright things come to confusion!”

(Shakespeare, A Midsummer Night’s Dream)

*** The quick, bright rally in the stock market has come to confusion already. As Eric reports, below, both Dow and Nasdaq fell yesterday.

*** And with the second half nearly two weeks away – there is still no sign of the ‘second half recovery.’ The Fed’s ‘Beige book’ of regional figures reports ‘decelerating’ or ‘little changed’ economic conditions.

*** Confusion everywhere! After hitting the worst 30-day delinquency rate ever last year, home mortgage payments improved in the first quarter. But the Houston Chronicle managed to find the cloud within this silver lining: the foreclosure rate increased!

*** “Inflation outpaces savings,” says a confusing headline from USA Today. What the paper means is that the yield on 3-mo T-bills, 3.5%, has fallen below the inflation rate of 3.7%. Savers, putting their money in CDs or money market funds, are likely to earn less interest than the inflation rate…and thus lose money.

*** Oh la la…if stocks provide little or no dividend yields, (and may suffer capital losses)…and money market funds produce negative yield…how are baby boomers to save for their retirements?

Well, let’s turn to Eric’s report from Wall Street:

– It’s starting to look a lot like a bear market again on Wall Street. The Nasdaq lost 48 points on Wednesday, its fifth losing session out of six. The Dow fell 77 points and now sits 129 points below the magical 11,000 level.

– Even the IPO launch parties on Broad Street are starting to reflect a bear market attitude. Gone is that delightful irrational exuberance. ‘Tis a pity; they were fun.

– Kraft Foods launched an IPO yesterday. Despite being the NYSE’s second largest IPO ever, did Kraft sponsor a gala, over-the-top launch party? Not even close. The company hung a few banners out on the street. It’s probably just as well. Would you want a festive Velveeta cheese on a Ritz cracker at 8:00 AM… even if it were free?

– The life expectancy of a Russian infantryman fighting in the Battle of Stalingrad was less than 24 hours. Likewise, every 24 hours another “soldier” in the tech stock ranks buckles to its knees. Tuesday, the Finnish cell-phone company, Nokia, took a mortar round to the chest after announcing that its earnings in the current quarter would be “less than expected.”

– Lynn Carpenter tells me she was perfectly placed for the Nokia announcement in her publication The Contrarian Speculator. “Today we made 271% on June Nokia puts and 138% on July Nokia puts… in 10 days,” Lynn wrote yesterday. Not bad… and just goes to show there is money to be made when the bear strikes.

– Also yesterday, telecom companies, Avaya and Lucent found bullets with their names on them. Former Lucent subsidiary, Avaya, announced that its earnings would fall short of expectations. Avaya’s shares promptly tanked 11%.

– Proud papa, Lucent, had some troubles of its own. Standard & Poor’s cut its credit rating to junk status.

– Troubles abound in the technology sector. Dell Computer co-president, Kevin Rollins, gripes, “We’re not seeing any change in the behavior of our corporate customers. We haven’t yet seen a signal that they’re ready to buy.”

– “Dell is now the leading PC seller to the world. If Dell is not seeing a pickup, then no one is,” wrote Fred Hickey last week. Hickey’s comments proved prescient as Ingram Micro, the world’s largest wholesale distributor of computer products, warned after the close of trading yesterday that its earnings would suffer from “the most severe slump in our industry’s history.”

– “Just because the mighty Wall Street Journal thinks the bottom may be in – doesn’t make it so,” writes grantsinvetor.com’sAndrew Kashdan. “In fact, having recently chronicled the current state of the tech sector, the history of bear market rallies and the conditions facing the overburdened consumer, we think investors should prepare for a different scenario. Nevertheless, a look at a few sentiment indicators appears to confirm the resurgence of what the Journal called ‘a baby bull rather than a roaring one’.” (see: < ahref=”http://www.dailyreckoning.com/body_headline.cfm?id=1224″>The Bulls Are Back In Town…But Why?)

– Gasoline inventories posted their eighth straight weekly increase, according to yesterday’s American Petroleum Institute report. The stockpiles are rising because gasoline demand is falling. Oh yeah? We’ll see what happens once Budweiser-laden Winnebagos start to pull out of driveways across America.

*** “We are not in a tech slump, or a business-cycle slump, but a policy slump,” writes George Gilder. He does not reveal how he knows these things. But he is sure that the policy slump will be overcome by the power of new technology. The tech companies, he opines, “are reinvigorating the still incalculable riches of the computer era with the infinite potential of electro- magnetic communications, transforming the world economy and every existing political and cultural arrangement as well…”

*** It is hard not to love Gilder. His writing is so deliciously loony. More on The Gildered Age…soon.

*** What else? How about some free land? International Living’s Mike Palmer reports: “The government in the Dominican Republic decided they own too much land in the western half of the country…so they’re giving some of it away to aspiring entrepreneurs. And what’s better – if they like your idea, they’ll throw in a 20-year tax holiday.”