The Song Remains The Same

The Daily Reckoning
Weekend Edition
December 29-30, 2001
Paris, France
By Addison Wiggin

MARKET REVIEW: The Song Remains The Same

New home sales and consumer confidence figures pockmarked the news on the penultimate day of trading in 2001. The Conference Board released its Consumer Confidence Index, which rose to nearly 94 from 85 in November. Sales of new homes climbed 6.4% in November, the largest increase in nearly a year, according to the Commerce Department.

On the news, the Dow gained little but finished at its highest level since the Sept. 11 terror attacks. Still, barring a miraculous rally Monday the Dow will close out its second consecutive losing year…Friday it was down 6% YTD. The S&P and Nasdaq were down 12% and 19% respectively for the year.

More rough sledding for stock market investors in 2002? We’ll see…

“You don’t have the biggest bubble in history,” writes Lance Lewis of the Prudent Bear, “then just bounce back like it never happened.”

“The imbalances built up during the bubble take time to work out,” Lewis continues “So, the question then becomes what event or lack thereof will make people begin to doubt their swift recovery scenario that they are so certain of right now and cause stock prices to move lower once again?”

Below… an eclectic wrap-up of Daily Reckonings and a few alternative ideas on the state of the world economy from our associate editors…

Enjoy your weekend,

Addison Wiggin
The Daily Reckoning

THIS WEEK in THE DAILY RECKONING
by Bill Bonner

12/28/01 THE HANDICAP PRINCIPLE

“…The trouble with doing something stupid to impress other people is that that they might be impressed by how stupid you really are. Thus, buying stocks at 30 times earnings may not be a sign of fitness…but mental infirmity. And Ted Turner’s gift, in our view, hardly designates him as a good breeding partner. Instead, it suggests such a severe handicap that he should be a prime candidate for forcedsterilization…”

12/27/01 PLAYING THE GAME

“…Money, money, money. That is, of course, the subject of the Daily Reckoning. Day after day, the game goes on. Once your family has food, clothing and shelter, money is merely a diversion, an entertainment — like a board game or a newspaper’s editorial page. For what difference does it really make if your wife carries a bag from Louis Vuitton or one from K-Mart? Do they not render the sameservice?…”

And A Christmas Carol for the 21st Century: In Its Entirety (Merry Christmas. And God bless Us, Every One!)

THE GHOST OF CHRISTMAS FUTURE

THE GHOST OF CHRISTMAS PRESENT

THE GHOST OF CHRISTMAS PAST

HEADLINE, NEWS And INSIGHT: Corporate Accounting Practices on The Carpet…Enron Fallout – Prime Example #1…Another Deflationary Scenario…

The Profit Mystery
by Dr. Kurt Richebundefinedcher

“Goodwill” in corporate balance sheets generally reflects the preposterous difference between the crazy prices paid for acquisitions in excess of the asset values shown in the books of acquired companies. The mystical profits never materialized. All of a sudden, multi-billion dollar “goodwill” write-downs and restructuring charges are littering American and British corporate incomestatements.

Enron And Its Intrigues
by Doug Noland

The Enron collapse is an unfolding story of extraordinary intrigue and complexity, with significant ramifications for the perception of soundness for “sophisticated” Wall Street “structured finance” and, as such, the stability of the U.S. financialsystem.

Crossroads: Will Deflation Destroy The Commodities Market?
by John Myers

Do darkening clouds of deflation mean tough times for commodities…or will a tidal wave of new money push real asset prices through theroof?