Unmitigated Gaul

It was another beautiful weekend out in the country. The wild cherry trees were preparing to blossom. Bluebells were poking out here and there. And what I took to be jonquils, but are actually some other kind of bulb, were up another inch or so over the week before.

Dull roots had been stirred by warm rain. Nature’s progress was under way.

So, too, was nature at work on my two daughters, who at 14 and 17 are both in the early springtime of their lives. And both were agitated this past weekend, straining against the bonds of nature, the harness of life and the unfairness of it all.

Maria, 14, was still smarting from what she took to be insults from her French teacher when she found injury to add to her insult in the pages of “Junior Loisirs” — a free publication sent to school-age children, paid for by the government. In the “letters” section, a young diarist had recorded his sentiments concerning the execution of Odell Barnes in Texas last week. Needless to say, he found the affair repulsive and uncivilized.

Maria moved from indignation to anger at the unmitigated gall of the French and decided to write a letter of her own to “Junior Loisirs.” She merely reminded readers of what Mr. Barnes had done to earn his extermination and then went on to tell the French that they could mind their own business.

But Jack Lang, socialist former minister of culture and now minister of something else, who made the “Affair Barnes” a cause celebre in France, has never minded his own business. His m?tier is politics. As Culture Czar, it was Lang who tried to get the French to stop watching American TV shows and movies and stop listening to U.S. music. He managed to get limitations on U.S. culture imposed — and provided subsidies to French filmmakers to help them compete. You can imagine how successful a film industry subsidized by the state would be.

Friday’s letter concerned the events in Russia after the Bolsheviks had come to power. The mania of the revolution in 1917 soon gave way to the “moment of truth” — when the peasants and industrial workers realized that their expectations would never be met by these new dictators. Thereafter, the Bolsheviks held power — and only did so by astonishing all opponents with their ruthlessness. They murdered millions. No courtroom dramas. No hearings. No appeals. No visits from foreign ministers. Just death…often in the most horrifying way.

Jack Lang’s socialist predecessors back then must have been considerably less sensitive to the appeal of justice…or perhaps equally sensitive to the appeal of politics. “The Big Black Book of Communism” records that the Jack Lang of the pre-war era, Edouard Herriot, French Senator and leader of the Radical Party, was escorted through the Ukraine in 1933.

The Ukraine was the center of Stalin’s efforts to “liquidate social parasitism.” By 1933, the scene in the Ukraine, and other areas, was appalling. As recorded in photographs and documents recently made available to scholars, millions of people were starving to death. One photo shows rows of the emaciated bodies of children laid out on the ground. Another shows people slumped on sidewalks, ignored, dead or dying.

Famine was used as a political instrument. The areas most affected were the most fertile and productive areas of the Soviet Union — the areas that resisted the communists’ farm policies.

Peasants hid food. They sabotaged tractors. Even party officials in the area cooked books and lied to the central authorities. They all knew that the Bolsheviks’ plans would be destructive, if not fatal.

Stalin fought back with criminal penalties against any “theft or damage to socialist property.” Every ear of corn and grain of wheat belonged to the state. So even hiding some grain to feed your family through the winter would get you killed. The communists handed out death sentences like U.S. banks now hand out credit cards. In four months at the end of 1932, 125,000 were convicted of such crimes, and 5,400 were executed.

But even that didn’t stop the resistance. So Stalin decided to starve them out. He ordered the Cheka to confiscate almost all the food in the area.

Local party leaders protested that unless some food was left, “there will be no one left to sow next year’s harvest.”

So what, replied Molotov, “we Bolsheviks cannot afford to put the needs of the state…in second place.”

The peasants were tortured in order to find the food. A Russian writer recorded the favorite method: “The `cold’ method: the worker is stripped bare and left out in the cold…The `hot’ method: the feet…of female workers are doused with gasoline and then set alight.” The writer went on to point out that “these are not abuses of the system; this is the present system for collecting grain.”

With nothing to eat, the farmers tried to find food and work in the cities. Stalin banned the sale of railway tickets and set up special barriers to keep them from leaving.

The Italian consul in Kharkiv reported, “there is no hope of survival in the countryside…children are abandoned…attendants in white uniforms collect the children and take them to the nearest police station. …Anyone who is not yet swollen up…is directed to Kholodnaya Gora buildings, where a constant population of about 8,000 lies dying on straw beds in the big hangars. Most of them are children. People who are already starting to swell up are moved out in the [freight] trains and abandoned about 40 miles out of town so that they can die out of sight…”

In all, about 6 million people died. But Stalin justified the deaths. “These people,” he said, “tried to undermine the Soviet state.”

Whether Edouard Herriot was a liar or a fool, or both, I do not know. But he managed to notice nothing. “I have crossed the whole of Ukraine,” he reported, “and I can assure you that the entire country is like a garden in full bloom.” Herriot’s report put the West at ease. Stalin had said there was no famine in the Soviet Union. Herriot, the “useful idiot,” had confirmed it. One of history’s worst crimes went almost unnoticed for half a century. History’s worst criminal died, apparently, of natural causes. And now Herriot’s heir, Jack Lang, the unmitigated Gaul, rails against the Texas criminal justice system.

Maria is right. Life is not fair. One can only hope that the justice system in the afterlife puts things right…and that Josef Stalin is now roasting in some particularly forbidding corner of Hell…and that Edouard Herriot is not far away.

Your correspondent,

Bill Bonner

Paris, France March 6, 2000

*** The most remarkable stock market of all time became even more remarkable on Friday.

*** The rally that began weakly at the beginning of the week finally managed an impressive flourish — perhaps a finale — with almost everything going up.

*** The Dow itself rose more than 2%. Nasdaq hit yet another new record. Dow Chemical rose 10%.

*** Even breadth finally improved — with nearly 50% more stocks advancing than declining. Transports, utilities…almost everything that could be indexed rose.

*** The only small cloud on the horizon was the number of news highs and new lows, of which the latter exceeded the former, 135 to 114.

*** The reason for the big burst of positive energy was, curiously, news from the Bureau of Labor Statistics informing us that the labor market is softening.

*** Just what the bubbleheads wanted — a reason to believe that Alan Greenspan will not boost interest rates…and thus, stock prices will rise from here to eternity.

*** The BLS number comes amid a growing number of signs that the economy is slowing down. Retail stocks are, generally, down — including Warren Buffett’s new purchases. Bond yields are down. Auto stocks are down. Housing starts have been drifting down for four months. And gold seems to have lost its bullish shine.

*** Taking the week as a whole, the Dow was up more than 5%. Utilities were up more than 3%. Transportation stocks up 3%. The Nasdaq 100 up 6%. Nasdaq itself up 7% and the Russell 2000 up 7%.

*** Greenspan is in a trap. Inflation is in the capital markets. Last week’s market action added, on paper, $75 billion to the nation’s wealth. People think it’s real money. They think they can spend it. If Greenspan wants to stop this inflation, he has to act boldly. Maybe a half-point rate increase would do the trick.

*** If he does nothing, the market will do the jobitself. Every bubble eventually finds its pin. This one will be no exception. But this market is dominated by amateurs, talking heads and guys on the Internet — all convinced that this is the greatest casino ever, where everyone who’s not afraid to put down his money is rewarded.

*** Greenspan would rather let the air out in a controlled manner — engineering the soft landing that earns praise among economists and central bankers. But the market is not cooperating.

*** Here’s another of the freakish things being upchucked by this intoxicated market, reported by William Fleckenstein of Siliconinvestor.com: Time One is a stock that went from 50 cents to $9 recently, reaching a market cap of $74 million. A hot new Internet technology? A biotech with a new immortality elixir? Nope. Time One operates “a car wash located in Murray, Utah.” Having never visited Murray, Utah, nor the car wash, I cannot comment on the earning potential. This one is reported to have two tunnels and eight gas pumps.

*** And a potentially profitable anomaly, this one from James Grant: Infosys Technologies Ltd. is an Indian company doing to U.S. software and infotech firms roughly what the Japanese did to U.S.-based appliance and TV makers 30 years ago. Indian software programmers are no less familiar with digital technology than their U.S. counterparts. But they are paid a fraction of the going rates in Silicon Valley. So Infosys is giving U.S. companies a run for their money.

Infosys is traded in New York as an ADR. Oddly, the ADR recently sold for nearly 200% more than the same underlying stock in India. There is nothing to stop a person from buying the stock in India (which requires a $10,000 license and some administrative delay) and selling it in the United States. Anomalies, by definition, do not last forever.

*** My friend, Ed, just got back from an extended trip to the Far East. He stayed at a hotel in Saigon called the REX, which for $44 a night provides a charming and meticulously-maintained room. Ed did not like Saigon, however. He reports that the people seem unhappy and unfriendly. By contrast, Ed had kind words to say about Bangkok, a city he knows well. “It is so soft,” he says, “and such a pleasure to visit.”

*** And here’s something I picked up from Rick Ackerman, I think. (If not, will the source please identify himself so I can give credit.): “Veteran U.S. technical trader Mr. Bill McLaren, regarded as a trader’s trader by analysts and a Gann trading method guru, has stuck his neck out and predicted the date of the next Wall Street crash. In an interview with `The Australian Financial Review,’ Mr. McLaren said investors should move to protect their portfolios before the crash, which had an 85 percent probability of happening on March 16.”

I pass on this prediction not because I have confidence in it, but merely because I find it amusing. And I’ll be able to say “I told you so” if it comes to pass.

*** “This is the scariest market I have seen and I have been in the markets since 1965,” said McLaren. “In January, U.S. mutual funds had the lowest cash levels in 30 years. Those cash levels are what support the market when it starts to fall, so we don’t have a lot of support in the market…The crash will be big. I can give you a date: the low would be around March 16 and it could be below 1,100 on the S&P 500.”

*** While we are looking for a pin, “Let’s Not Rule Out an Old-Fashioned Oil Shock” says economist Paul Krugman in the “New York Times.” Krugman, to whom I also owe the title of today’s letter below, believes that this summer could see a “spike in gasoline prices — to $2 a gallon — looks entirely possible.” And it will not necessarily be short-lived. As the price rises, oil nations begin “to regard oil left in the ground a pretty good investment…Higher prices lead to lower overall supply [in the short run] and hence to still higher prices.”

*** “Colonel Harper,” said the mayor of Montmorillon, with whom I dined on Saturday night, “is coming back!” He was excited. Who is Colonel Harper? He is an American pilot who bombed the German military base at Sillars, nearby, during WWII. His plane was shot down. But Harper survived and was hidden by the French and made his way back to Britain. Harper, now 80 years old, is coming back for a special ceremony and reunion in June. It should be interesting. Any WWII vets who want to join us…please let me know.