The Living Universe

If any man come to me, and hate not his father, and mother, and wife, and children, and brethren, and sisters, yea and his own life also, he cannot be my disciple.

Jesus Christ
Luke 14:26

The Reverend Canon Philip Buckler wrestled with the above passage in his sermon at St. Paul’s Cathedral in London on Sunday. He is not the first to do so. For hundreds of years, this quotation has bothered and bewildered men of the cloth of all denominations – from purple-fringed priests to bible thumpers in sweaty searsucker suits…

This was one of Jesus’s “hard sayings” – hard to make sense out of. Because the words seem as much a contradiction of Christianity as the Albigensian crusade or the Borgia popes. It is almost as if Christ forgot himself that day.

Immediately prior to the Reverend Mr. Buckler’s sermon, the world-renowned boy’s choir had already revealed the problem.

Dressed in black robes and crenulated collars, the boys sang out:

“Love is his news, love is his name…love is his law, love is his word…love is his name, love is his law…”

Which is it? Love or hate? But consistency is the hobgoblin of small minds…and Jesus had no small mind. Surely the learned translators of King James’ day would have translated the passage more conveniently if they could have. Digging into the etymology of Aramaic or Greek words, they might have discovered that Jesus must have meant that you should “prefer” the kingdom of God even to the most important and basic pleasures of human life…and even life itself.

And yet, there it is, the dreadful word, “hate” – like a wart on a model’s nose. It is there for everyone in the world to see and to wonder about.

“Could it be that Jesus exaggerated, just to make his point?” asked Mr. Buckler from his gilded pulpit. Before him, an audience of casual worshippers would have been perfectly happy to believe that Jesus overstated his position.

Most of those sitting in the rows of chairs seemed to be tourists enjoying the spectacle of pomp and splendor, rather than a regular church congregation.

American tourists were there – recognizable in their blue jeans and running shoes. The Japanese tourists were recognizable too – with their orange hair and cameras. There were even a number of British tourists – middle- aged couples who looked as though they had come down from Leicester or up from Brighton for the weekend.

But Buckler knew better. “The Exaggeration Hypothesis” might be slipped by the lumpenchristians, but it would never pass through the ranks of ecclesiastical glitterati around him. For there was an entire team of priests, deans, vergers, wandsmen and canons upon the stage…including the lead priest, a pale man with the feeble, twitty voice of an aged vicar, and a team of clerics dressed in shimmering silver lame gowns.

If Jesus’ words could be dismissed as hyperbole in this case – maybe he was exaggerating about other things too.

Maybe he did not really mean you should “love your neighbor,” for example. Perhaps “admiring” or “respecting” your neighbor would be good enough.

And so the churchman put up a fight. Not as dramatically as an angel might wrestle with a devil or as amusingly as two fat women might wrestle in a mud bath. The contest was more the equivalent of a computer nerd trying to open a bag of potato chips. And like so many priests and pastors before him, Mr. Buckler was unable to get it open.

Daily Reckoning readers may wonder what this has to do with investment advice. I wondered too. So I put the question to Dan Denning, Bible Scholar and Investment Analyst, who just happens to be visiting us in the Paris office.

“The Bible is full of challenges and paradoxes,” Dan replied, “just like the financial markets. In this passage, I believe Jesus is challenging his listeners to understand that they can let nothing – not even life itself – interfere with their love of God.

“But there’s another side to this that has relevance for investors. Jesus goes on to say that those who would follow him must “give up all their possessions.” The idea here is that a person must be willing to forego the here-and-now pleasures…that is, current consumption… in order to realize a greater reward somewhere down the line.”

This squares perfectly well with our understanding of how economies really work. People must save money in order to get richer. If they are not willing to set aside some of their production – to delay gratification in favor of a hoped-for but uncertain reward later on – they will never get richer.

“Thus is the universe alive,” wrote Emerson. “All things are moral.”

Bill Bonner
September 10, 2001

P.S. – The living universe – created by God – has its own ways of punishing sin and rewarding virtue. But neither sin nor virtue is always easy to spot.

Fed governor Robert McTeer urges American consumers to keep spending, recognizing that this may be “irrational” for any individual household. Already deeply in debt, spending more now – on the eve of recession – may not be merely irrational, but a form of financial self- loathing. But there is the paradox: what may be bad for an individual, says McTeer, is good for the economy.

Is it really? Would the living, moral universe make a virtue of spending money you don’t have…and reward those who spend their money rather than save it?

Who will turn out to be dumber – the Americans who spend their money…or the Europeans who save it?

Will American baby boomers – who loved current consumption so dearly that they put themselves further in debt than any other generation – be saved by inflation? Will their debts be wiped out like a slate of sin by a forgiving god?

Or will they get what they’ve got coming – and get it good and hard?

I don’t know, dear reader. But we will all find out.

Whoa!

Last week was not a good week for stock market investors. The Dow dropped 234 points on Friday alone, bringing the week’s losses to 3.46%.

What’s going on? Investors are beginning to realize that we’re in a bear market – and it’s not just the tech sector.

Big, mainstream Dow companies are taking a beating. Walmart, the nation’s leading retailer, was at $70…now it’s at $46. GE lost 2% of its value on Friday, closing below $40. AOL is down to $32 – after losing 2/3rd of its capital value.

Fannie Mae, Freddie Mac and the builders are also heading down – suggesting that the real estate bubble may also have reached its end.

Little by little, investors are beginning to understand that the virtuous circle of expanding credit – increasing sales – increasing stock prices…has turned into a vicious circle of collapsing profits and pink slips, which will inevitably be followed by declining sales, more layoffs, further cuts in profits and ultimately, lower stock prices.

“The market looks ahead 6 months” – or so they say. Stock buyers are looking ahead towards a recession, bankruptcies, and deflation.

Bond investors, too, seem to be anticipating deflation. The premium they are willing to pay for protection against inflation (as measured by the gap between inflation-adjusted TIPS and normal 10-year notes) has fallen to just 1.52%. America has hardly ever seen inflation rates that low since the end of the Great Depression. But that’s what the bond market is telling us to expect.

Addison…additional observations?

*****

Addison Wiggin in Paris:

– “The market – and investors – are going to have to sweat for every penny of upside in the future,” reports the Industry Standard. The S&P closed Friday at levels last seen in 1998. Those “buy and hold” investors who’ve held on for the long run have toiled away for three years and come up empty-handed.

– The jobless rate rose to 4.9% Friday from 4.5% in July. 550,000 people have been “made redundant” in tech, or tech-related industries, since the beginning of the year. “The U.S. labor market will deteriorate sharply,” reports Bloomberg, “hitting consumer confidence, retail sales and slamming the brakes on recovery.”

– News also came Friday that manufacturers laid off twice as many people in August as in July. People with no savings and no paychecks make poor consumers. They can spend for a while, but not for long.

– That’s why credit card debt write-offs soared to $2.8 billion in the last quarter…up 27% from a year ago. People can still spend – by borrowing against credit cards and home equity. But they can’t keep up with the debt payments when they lose income.

– Things don’t look too good for new hires either. Colleges, says an article in the Dallas Morning News, are “taking steps to prepare their students for a Spartan job market.” [We have no idea what a Spartan job market is…no figures are available to us on the employment picture in ancient Sparta. Perhaps he meant “sparse”.] Businesses report that they plan to hire nearly 20% less new grads in 2002.

– And there’s evidence that consumer spending has started to act out Greenspan’s worst nightmare in broad daylight. The big “c”, which makes up 2/3 of the U.S. GDP, slowed by 16% in the 2nd quarter. “The most telling [sign of the times],” writes The Blue Team’s David Tice, “is that people who still have jobs are fearful and are firing their maids and lawn care services. Cell phones and cable services have been canceled and entertainment has been reduced to Blockbuster.”

– Another sign of the times? The dollar dropped 1.3% on Friday.

– And the Chicago Board of Exchange Gold Index (GOX) was up 3% on Friday. “Foreign demand for gold rises when the U.S. dollar weakens,” says Dan Denning, editor of The Daily Reckoning Investment Advisory. (Dan issued a buy on a new gold play Friday morning – and watched it rise 1.5% by the end of the day. If you are not currently a Blue subscriber, please see and subscribe today:

– As I reported in The DR Weekend Edition, Friday saw the S&P 500 fall 20 to 1085. 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 a 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.

– The opening days of September have been brutal for stocks. Last 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.

*****

Back to Bill, also in Paris (we’re all in Paris!):

*** This may be another big day on Wall Street. Investors are nervous. So far there has been no panic selling on Wall Street. But don’t rule it out.

*** Nor should you rule out a big bull rally. “There should be a major rally…that could last for a year or more…before the final collapse,” warned Sheldon Jacobs, a mutual fund “guru” whom I had the pleasure of meeting with over the weekend.

*** Stocks could go wild on the upside or wild on the downside. Either way, the fools need to fully express themselves before the bear market is over.

*** But thank God for fools. It would be no fun watching the market without them. And they will drive stocks down to bargain prices – at P/Es below 10 – before they finally hit bottom. Until then, the best advice is to enjoy the spectacle from a safe distance.

*** What else is new?

*** Well, I notice that the Japanese stock market is still racing Wall Street to the bottom. The Nikkei closed at just 10,280 on Friday as economic conditions reached their lowest point in a quarter of a century.

*** And, oh yes, Elizabeth got into London after two very nice women carried her passport over to her in Paris. We enjoyed a couple of days on our own in London – that is, without children. We rode the big Ferris wheel on the river, visited the national portrait gallery, had lunch at the Savoy…and went to church at St. Paul’s Cathedral…more below…