Investors Irked, Voters Unnverved

November 11-12, 2000

Paris, France

By Addison Wiggin

MARKET REVIEW: Investors Irked, Voters Unnerved: Bad Week for Stock Markets and Politicians…

“Investors irked by poor earnings and unnerved by the presidential election limbo,” begins a Reuter’s weekly
recap. The beleaguered market – already seeking a nearby park bench to rest its earnings-weary legs – was in no condition to receive news of election uncertainty.

Thus, the Nasdaq crumpled down 171 points to rest on the curb at 3028… a disheartening loss of 423 for the week. The last time the Nasdaq finished this low was Nov. 3, 1999 – over a year ago.

The Dow wilted 231 points on Friday to end the week at 10,602 – down 215 from Monday’s opening. The S&P 500 slumped, too… an additional 34 Friday, closing the week 61 lower at 1365.

Around The World… it doesn’t get any better: Japan’s Nikkei tripped a 1/2 percent. Germany’s DAX index
staggered almost 2%, Britain’s FT-SE 100 try to collect itself, but slipped 0.65%, and then finally, France’s CAC- 40 fell 1.97%.

The Russell 2000 – 480 down 27 for the week. Wilshire Smallcap – 794 also down 29.

PRICES FOR THE WEEK…Great Week For Real Assets – All Commodities Higher, Currencies Not So Much

Gold: $267 up $2
Crude Oil: $34.03 up $1.32
Natural Gas: $5.46 up $.49
Platinum: $595 up a buck
Palladium: $785 up $75
CRB Index: 225 up two ticks
Dollar Index: 115 down
The sad, sad Euro: .85 even
British Pound: 1.42 down $.02
And…107 Japanese Yen will buy you one Washington

MARKET COMMENTS: What Was It Shakespeare Said We Should Do With All The Lawyers?

“Robert Ringer once said: ‘I abhor over-generalizations… Fairness compels me to point out that only 97% of
attorneys in the US are lazy, incompetent, negligent, and greedy – yet they give the entire profession a bad name.’

How fitting that the election should be tossed to this pack of wolves…the US has less than 5 percent of the
world’s population, but is home to more than two-thirds of the world’s lawyers.

For any of you that have ever been through a divorce, a lawsuit, or anything involving attorneys, you can
appreciate that this election may not be decided for a long, long, time.

As for me, I’m seeking a recess, and putting some of my money in escrow. The rest I’ll be keeping an eye on oil, gas and gold. It might not be a bad idea for you either.

After all the chances that the stock market will take off in the midst of this mess is about as likely as a lawyer telling his client to keep the retainer and make peace outside the courtroom.”

John Myers,
Editor, Outstanding Investments

THIS WEEK in THE DAILY RECKONING
By Bill Bonner

11/10/00 AMERICAN PESO

“…’All currencies,’ she did not say, ‘including gold and
silver, are features of the collective imagination. Their
only value comes from what people en masse believe them to
be worth.’ In the world’s collective imagination, the U.S.
has become a subject of ridicule. The question I pose
today: Will its currency become a joke one day, too?
Like most of the rest of the world’s press, Die Welt has it
backwards: “It’s not a cheap detective novel, not a soap
opera, but a debacle that could turn into a comedy.’ Quite
the contrary, dear reader, the presidential elections are a
farce that could turn into a disaster…”

11/09/00 DEATHWATCH

“…the collective mood that drives stock prices has
changed. Several websites have sprung up specifically to
mock the losses in the dot.com/tech area. Instead of
marveling at the new tech and net breakthroughs of the New
Economy – as did the aforementioned issue of MONEY MAGAZINE
– these sites watch ‘burn rates’ and estimate when
companies will run out of money. As Gary North put it, ‘The
venture capitalists will become vulture capitalists. They
will buy the bankrupt mistakes of other venture capitalists
for pennies on the dollar.’ One of these sites is called
Deathwatch…”

11/08/00 DEAD PRESIDENTS

“…when Americans borrow overseas, it increases demand for
dollars on world markets, boosting the value of the dollar
– thus further increasing the purchasing power of dead
presidents. The circle appears virtuous. But it is as vice-
ridden as a Chicago polling station. Debt levels increase.
Savings disappear. The whole country gets poorer. A sharp
observer of Spain’s economy, Pedro de Valencia, wrote in
1608, ‘So much silver and money…always has been fatal
poison to republics and cities. They believe money will
keep them and it is not true: plowed fields, pastures, and
fisheries are what give sustenance.’ The flow of new money
dried up in the second half…”

11/07/00 KIWI BONDS

“…on the fundamentals, the Kiwi dollar is no worse than
other dollars. And yet, thanks to the momentum recently,
and perhaps even still, favoring the U.S. currency, prices
in New Zealand are marked down by 40% since 1996. Houses,
stocks, businesses – all are available at a deep discount.
Telecom Corp. of New Zealand is priced to yield 8%. Several
of my friends report that beautiful farms and ocean-front
acreage can be bought at giveaway prices. There are also
Kiwi bonds. The 10-year note yields 6.75% – about a full
percent more than similar U.S. notes. There is a risk, of
course…”

11/06/00 SPECIAL ELECTION ISSUE

“…politicians need to position themselves as close to the
point of balance as possible – the point where the most money
can be squeezed out of people for the benefit of the largest
possible number of voters. The leading candidates take up
their posts on either side of the balance…close to the
margin. Both are candidates of the status quo – since the
balance point changes little from year to year. Thus, the
evil choice that they offer is similar to a pair of criminals
who break into your house at gunpoint and allow you to
choose: one will take 29% of everything you earned that year.
The other will take 31%. Choose one or the other and you
become party to your own expropriation…”

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HEADLINES, NEWS and INSIGHT: With American Political Woes
Looking Strangely Like The Old World: Voila, A Euro-Centric
Edition…

Austria: Still A Safe Haven
by Mark Nestmann

Vienna – pungent with the legacy of the Habsburg Dynasty,
the first Austrian republic, Hitler and the Soviet Union –
is changing. The latest governmental experiment that will
shape the face of Europe in the 21st century – that of a
unified currency, unified laws and a ‘borderless Europe’ –
and present significant opportunities for the adventurous.

Europe’s Large Dollar Hoard
by Dr. Kurt Richebacher

Today, Europe’s central banks sit on a huge dollar hoard of
$222 billion altogether. One of the arguments against
selling dollars is that it would come at a heavy cost to
the ECB’s exchange reserves. Stabilization of the weak euro
would probably require repeated rounds of dollar sales.
Nobody wants to give up their dollars – yet.

Who Will Put The Spring Back In The Euro?
by Brian Durrant

The euro will remain weak because global investors as a
whole are still overweight in euros. Some of these
investors, particularly the Japanese, are sustaining large
losses because they bought into the irrational euphoria
about the galvanising effects of European Monetary Union.
These investors have nowhere to go but to eventually sell
their euros.

Sectors To Own v. Those To Avoid (Like the Plague)
by Dr. Marc Faber

Investors simply bought the financial sector because, like
Dr Pavlov’s dog, they know that when interest rates
decline, financial stocks always go up. My dog, however,
having been raised in Asia, has a slightly different
reaction to declining interest rates. He knows that a
decline in interest rates after an economic boom financed
by excessive credit growth signals a period of mounting bad
loans – a la Japan after 1989 and the rest of Asia after
1997.

And one for the earnings weary…

Rich Beyond The Dream of Avarice
by Raymond F. Devoe, Jr.

Over the lifespan of this bull market, whether you date it
from August 16, 1982 (Dow 776) or October 11, 1990 (Dow
2365) the stock market has acquired an almost mystical aura
as a virtually certain wealth creating mechanism. Countless
magazine covers have featured “American Investors’ Love
Affair With Stocks.” Never mentioned in these rather gushy
articles is that many “love affairs” turn into marriage,
and more than half of American marriages end in divorce.
Another bitter experience.

FLOTSAM AND JETSAM: Everbank Announces The “Basket of
Currencies” Approach to Hedging Against the Dollar…

“Will the US currency become a joke one day, too? Like most
of the rest of the world’s press, Die Welt has it
backwards: ‘It’s not a cheap detective novel, not a soap
opera, but a debacle that could turn into a comedy.’ Quite
the contrary, dear reader, the presidential elections are a
farce that could turn into a disaster…”

Bill Bonner
The Daily Reckoning

In the Daily Reckoning we’ve been watching with brutal
attentiveness the skyrocketing current account deficit,
plunging US savings rate, the exuberant speculator’s market
– wondering all the while, with the fascinated horror of a
witness to a drive-by shooting – what will bring it all to
an end.

Of course, the electoral shenanigans in Florida this week
could simply be a symbol of “the vitality of our debate,”
as reigning president Clinton suggested on Thursday night.
But, we suspect it may also be the turning point in
investor psychology.

If so, I believe it’s worth calling to your attention an
opportunity we have made available to DR readers this week
via special e-mail invitation.

You may have read “Election Turmoil and The Great Currency
Battle” already, but if not… here’s an excerpt. We are
offering readers an opportunity to hedge against potential
weakness in the US dollar – while it’s still at near
historic highs against other currencies…

— From “Election Turmoil And The Great Currency Battle”

“…our friends at everbank World Markets have just
introduced the new FDIC-insured* Investor’s Currency
Opportunity Index CD to help serious investors like
yourself to efficiently capitalize on the multitude of
currency opportunities that are knocking right now. High
yields are available to Daily Reckoning readers who move
quickly…

…You may recall us mentioning everbank in the Daily
Reckoning before. David Galland, a long- time friend of
Bill Bonner’s, has helped to get everbank off the ground –
a job they did so well, everbank was named “Best of the
Web” by Forbes Magazine and On-line Banking Report. Gomez
Advisors ranks them among the top ten online banks in the
nation.

[everbank] caught our attention in the past for their
dedication to great service and consistent high values, but
now they’re offering a way for you to hedge against what we
feel is impending calamity for many investors who remain in
dollar-based investments. It’s an opportunity we feel is
well worth bringing to your attention.

The Investor’s Opportunity Currency CD offered exclusively
by everbank World Markets allows you to earn a high level
of interest while globally diversifying, and offers the
opportunity for capital gains from currency appreciation.
The Investor’s CD is a “basket of currencies” – including
the “kiwi” and Australian dollars, the Mexican peso, and
the euro – all carefully selected for their current value
and interest rates.”

Of course, we also advised Daily Reckoning readers of the
inherent risks: “… that the Kiwi and Australian dollars
could decline even further and that free market reforms in
Mexico will not lead to a greater economic boom. That ECB
intervention will not prop up the euro. But probably the
greater risk for the American investor is that the dollar
will fall.”

The fact is, we may have already seen a top in the dollar.
Of course, we can’t predict with any degree of certainty
what will happen. But with a contested election – popular
support for the “overbought” US dollar could turn sour very
quickly… and we feel that the Investor’s Currency
Opporunity CD – with it’s unique “basket of currencies”
approach – may be just the place for your money to wait out
the bear market.

Hope you’re having a great weekend,

Addison Wiggin
Weekend Edition

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CONTRARIAN GLOSSARY: Esperanto Money

ESPERANTO MONEY – this is the term best applied to the
euro. Esperanto was a made-up language designed to make it
easier for people to communicate. It flopped. The euro will
flop, too. And has. Gold on the other hand is a heavy,
yellow metal, rarely seen or spoken of. It is a barbaric
relic that has been going down in dollar terms for the last
20 years. It is about the only thing you can leave on the
seat of your car in Baltimore without worrying about the
windows being smashed.