Life In The Sisyphus Cycle

The Daily Reckoning

Weekend Edition

September 08-09, 2001

Paris, France

By Addison Wiggin

MARKET REVIEW: Life In The Sisyphus Cycle

Friday saw the S&P 500 fall 20 to 1085 – back to lows
it hasn’t seen since October 1998. That means, for just
a month shy of three years, ‘buy and hold’ investors have been toiling away under the illusion they were getting rich… only to end up where they began before the “stock bubble” kicked into high gear. (For more on the The Sisyphus Cycle, see Friday’s Daily Reckoning… below.)

The Nasdaq logged its own worst close since April 4, down 17 to 1687. And the Dow followed up its 192 point loss Thursday, with 234 drop Friday to close out the week at 9605 – also a low since April 4. Only 216 points remain between here and the Dow’s weakest finish for the year. Look out below!

The last couple of weeks have been brutal for stocks… This week the Dow lost nearly 3.5%, but it and the S&P are down 8% since opening trading on the 27th of August. The Nasdaq tumbled 6.5% for the week, and has lost nearly 12% in the last 10 trading days.

THIS WEEK in THE DAILY RECKONING

By Bill Bonner

09/07/01 PAYING DEARLY

“…if this bear market repeats the pattern of the last two major bear market cycles in the U.S., many if not most people reading this Daily Reckoning will never again see share prices at these levels in their lifetimes. Investors should be preparing for more than 15 years of falling prices and a collapse of their assets prices to about a quarter of today’s levels…”

09/06/01 GETTING SMARTER

“…since the beginning of the last great bull market, U.S. workers added an entire workweek to their annual total. They now work 499 more hours per year – or about 12 additional weeks – more than Germans. Compared to America, Dr. Richebacher might have added, the Old World enjoys lower crime rates, often better roads, better schools, more extensive public transportation, far higher savings, a positive balance of trade, little debt, and GDP and productivity growth rates equal to or better than the current rates in the U.S…”

09/05/01 BLACK GOLD OUTLOOK

Guest Essay by Jay Akasie

“…It is important to note that non-OECD oil demand has consistently exceeded IEA forecasts. Acknowledging this fact, the agency estimates that if past is prologue in 2001 and 2002, total world oil demand could rise an additional 0.4 million barrels per day beyond the IEA’s current forecasts. In other words, expect an upside surprise on the demand side…”

09/04/01 MASSIVE DEFLATION

“…Lately, we’ve been wondering how long the current business downturn and bear market might last…Intuition tells us that nature is symmetrical. Americans climbed a mountain of rising stock prices and apparent economic prosperity over the last 18 years. We imagine that the other side of the mountain will be similar. What goes up, we figure, will go down about as much…Every bubble is fully corrected. Every one. There have been no new eras. None…”

09/03/01 LABOR DAY

“…Ending tobacco growing has some popular appeal. People all over the nation seem convinced that the plant is as dangerous as a bureaucrat and as obnoxious as a tort lawyer…But for hundreds of years people have enjoyed tobacco. Besides, a few thousand deaths seem a small price to pay for tobacco’s many benefits…”

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HEADLINES, NEWS AND INSIGHT: Corporate Profits On The Ropes…Doug Casey On The Ground In Turkey…and Offshore Advantage – On The Rise…

Profit Meltdown

by Dr. Kurt Richeb?cher

The implicit, necessary market reactions to monetary easing – higher bond and stock prices, and a lower currency – have always occurred promptly in the past. But this time it’s different. For the first time in the postwar period, the measures are proving to be a complete fiasco in the financial markets.

Turkey – Fear And Ignorance

by Doug Casey

I ran across almost no other Americans on this trip, something I can only attribute to fear and ignorance. The fact is that Turkey is everything Spain, Italy, and Greece are supposed to be, but aren’t: it’s friendly, cheap, clean, exotic, and not awash with tourists.

The Onshore-Offshore Convergence

by Mark Nestmann

Propelled by the realization that more than 50% of the world’s wealth now resides offshore, high-tax countries are rapidly lowering taxes, decreasing regulatory barriers and rolling out the red carpet for outside investment. Thus, the distinctions between ‘onshore’ and ‘offshore’ have begun to break down.

FLOTSAM AND JETSAM: Passing Through the Eye of the Needle

– from John Myers,

Editor, Outstanding Investments

“The Persian Gulf is a nightmare for America’s strategic planners. It is a 600-mile-long body of water that separates Iran from the Arabian Peninsula. About 5.4 billion barrels of oil travel through it every year. At its narrowest point, inside the Strait of Hormuz, the waterway stretches just 34 miles across between Oman and Iran.

The vast majority (nearly 90%) of oil exported from the Persian Gulf is transited by tanker through the Strait. It is the world’s oil ‘chokepoint’. Two-fifths of all traded oil in the world must squeeze by this canal.

The Strait consists of 2-mile wide channels for inbound and outbound tanker traffic, as well as a 2-mile wide buffer zone. It is so difficult to protect America’s aircraft carriers inside the Strait that during the Iran hostage crisis, President Jimmy Carter refused to sail one inside it, out of fear that it would be sunk.

And if transport wasn’t the only issue … don’t forget that of the five countries that supply the majority of the world’s oil (Iraq, Iran, Kuwait, Saudi Arabia and the United Arab Emirates), the first two hate the United States and the other three are politically unstable.

The ultimate problem facing the World is that the Middle East, whose cheap fuel has driven much of the growth and development of the Western World over the past three decades, will not remain a low cost producer.

Inevitably the draw-down on even rich Gulf reserves will occur, and depletion will ensue until they are no longercapable of production levels anywhere close to what theyare today.”

Bon weekend,

Addison Wiggin,

The Daily Reckoning