12/14/03
Last week, the state of New Jersey issued bear hunting licenses for the first time in 33 years.
Apparently, the bear population had become so large that it was beginning to annoy people. "Bears have broken into 58 homes in New Jersey this year," Fox News reports. "Fifty bears have been hit by vehicles… Black bears have killed eight people over the past three years in North America, but none in New Jersey."
Nevertheless, the state of New Jersey issued licenses to 5,200 lucky bear hunters, hoping to trim the 3,200-strong bear population by about 500. We don’t really understand the appeal of shooting a large, unarmed, slow-moving mammal. It doesn’t seem like a fair fight. But neither do we understand the appeal of paying 100 times earnings for a share of Amazon.com. Both seem like a bad idea. Hunter Harry McDole, 63, of Sussex Borough bagged the first bear of the New Jersey hunting season, a 160-pound female. "I’ve waited 33 years to shoot one in New Jersey. This is the best one because I got it in Jersey," McDole said.
The happy hunter also said he planned to have "a rug or something" made from the pelt and to eat the meat.
"Bears were hunted annually in New Jersey from 1958 to 1970," says Fox News. "Hunting was suspended when their numbers dwindled to about 100."
Over on Wall Street, bear hunting never goes out of season, no matter how small the bear population becomes. Indeed, on Wall Street, the object is not merely to eradicate the bears, but to inflict as much pain as possible while doing so. Even when the bear population thins to near-extinction, as it did in 2000, the bears are always targets… And now they’re on the run again. The stock market’s powerful, 12-gauge rally over the last year and a half has dramatically reduced the bear population.
Most of the popular investor sentiment surveys show an extremely small population of bears. And as we have noted previously, bearish investors tends to become very scarce, immediately before stock market sell-offs.
But the stock market keeps chuggin’ along. The Dow rose 1.8% this week, closing above 10,000 for the first time since May 24, 2002. The S&P 500 added 1.2%. The Nasdaq Composite Index climbed 0.6%. But the buoyant stock market was no help whatsoever to the U.S. dollar, which slipped to a new record low of $1.2276 per euro.
On Wednesday morning, the Bank of Japan’s aggressive dollar-buying boosted the greenback nearly 1%. But by Wednesday afternoon, the U.S. currency had forfeited all of its manipulated gains.
On Thursday morning, the dollar again rallied nearly 1%, before coughing up its gains in the afternoon. On Friday the greenback could muster no rally whatsoever; in merely tumbled to a new record low against the euro. "The surest bet around seems to be that the dollar will fall more," my colleagues in the Paris office predicted this week. Even TIME magazine is talking about ‘hedging’ against the dollar’s fall. Meanwhile, the smart money – Soros, Buffett, Templeton, Rogers – is betting against the dollar, hoping to make epic profits as the dollar declines."
Happily, the dollar’s struggles are gold’s strength. The yellow metal rallied gained $2.60 for the week to $408.90 an ounce. "In the gold market, ‘buy-the-dips’ has replaced ’sell the blips,’" we observed earlier this week. "Every time the metal falls a few dollars, eager buyers start showing up. The gold market has not known such steady, bullish buying for a long, long time. Ever since the gold price topped out above $800 an ounce 23 years ago, the gold market has doled out far more agony than ecstasy.
But the new millennium has been very kind to gold investors… and to investors in almost all other commodities. The steady drop of the U.S. dollar and the steady rise of our national indebtedness has rekindled a keen interest in the ancient monetary metal."
As investors flock to the gold market , they will inevitably flee the bond market. The steady drop of the U.S. dollar and the steady rise of our national indebtedness has rekindled a keen interest in the ancient monetary metal.
"Central banks have made the riskiest bets in modern history," Morgan Stanley economist Stephen Roach asserts. "policy rates of ‘zero’ in Japan, 1% in America, and 2% in Europe. At the same time, fiscal authorities have upped the ante as never before, with government budget deficits of 7% in Japan, 4% in America, and 3% in Europe. And the authorities have colluded in currency management in a period of unprecedented external imbalances.
Equally disconcerting is the possibility of an accelerating decline in the dollar. If that occurs, it seems reasonable that foreign investors would finally demand compensation for taking currency risk on dollar-denominated assets — pushing long-term US real interest rates higher.
All this points to the bond market as the next arena in which mounting global tensions are vented. The confluence of several forces – central bank exit strategies, undisciplined fiscal policies, and dollar risks — underscores the potential for a sharp backup in long-term interest rates.
Ironically, in this climate, it doesn’t take inflation to be bearish on bonds…
Hope you’re having a good weekend,
Eric Fry,
The Daily Reckoning
December 13-14, 2003
P.S. Sell bonds, sell the dollar… and don’t forget to buy little gold
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THIS WEEK in THE DAILY RECKONING
THE RAPE OF NANKING 12/12/03
by Bill Bonner
"… [The Rape of Nanking] provides evidence against those who believe in the perfectibility of man. Beginning in December 1937… only 65 years ago… the world was reminded of what evil was all about. Previous records in political depravity were broken when the devil worked overtime for a six-week period. When it was over, an estimated 377,000 people had been slaughtered… "
JAPANESE PHANTOM GROWTH 12/11/03
by Kurt Richebacher
"How to reconcile [the Bank of Japan's] dismal description of the economic situation with the officially reported stellar real GDP growth rate of 3.9% for the second quarter? Putting it bluntly: It is exactly the same statistical hoax as the 3.3% simultaneously reported for the U.S. economy. Japan’s statisticians have learned from their American colleagues how to conjure up the perception of an economic recovery that does not exist… "
THE FIVE YEARS ‘TIL TRAGEDY RULE 12/10/03
by Steve Sjuggerud
"… After a major stock market peak, there are five years until tragedy… five years until a dollar crisis – and soaring commodity prices. Five years after the stock market peak in 1857, the government got down to the business of creating inflation… crashing the dollar and causing gold and commodity prices like oil to soar. This was the first of many times this would occur. The same story is now unfolding once again… "
GREAT EXPECTATIONS 12/09/03
by Bill Bonner
"… Modern economists no longer believe in ‘ought’. They don’t appreciate her moral tone and try to ignore her. The whole method of modern economics [has] shifted from exploring what a man ought to do… to statistical analysis. Economists attach sensors to various parts of the great machine as if they were running diagnostics on an auto engine… and of course, it was absurd. Today, we take another look at ‘ought’ – and hope to discover more of life’s secrets… "
WEEP FOR AMERICA 12/08/03
by The Mogambo Guru
"… I think that a 30% devaluation in the purchasing power of the dollar is entirely achievable, if that is the term that one uses to describe such a catastrophe, and I have a hard time conceiving that all foreigners would [continue to] elect to invest in dollars, especially considering the economic ramifications of what is happening today. And all this is inflationary, which is The Thing That Is To Be Feared, according to that loudmouth Mogambo, which is me… "
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