A Baptism in Blue

The Daily Reckoning
Weekend Edition
September 11-12, 2004
Baltimore, Maryland
By Addison Wiggin and Tom Dyson

"In the spring, they plant 85,000 tulips. Tour buses come from 5 different states to see our tulips…"

Your entirely misplaced British editor was in a truck with Rudy ‘the Rude Dog’ Strukoff, a local blues musician. The Dog was showing me around a large garden on the way to his house.

"I’ve been to a party in that one, and that one…oh yeah, and in that one several times…" Rudy is pointing out some of the houses in his neighborhood, "…and that guy over there’s got a wine collection so big, it’s probably worth a million dollars."

We were headed to the Voo Doo Lounge, Rudy’s Blues club, to think up some lyrics for a Daily Reckoning Blues track. "Try’n keep it simple, you know, one syllable words work best. And a theme, or a story, something like that," The Dog advised. "Otherwise you lose the single most important element of a blues song – it’s got to be cool…"

Here at the Daily Reckoning, we don’t know much about composing Blues songs and even less about being cool – we leave that to the Rude Dog – we just provide the doom and gloom…

…if we can find it.

But we can’t, at least, not in the markets. Stocks and bonds rose together last week.

Tech stocks were strongest. The semiconductor index gained 7.2% last week, in a huge 26-point bounce.

After steep falls in the chip sector the week before last – including a one-day 7% drubbing for Intel – the semiconductor index was 36% below this year’s peak. "The extreme weakness in the chip sector seems quite extraordinary when considered in isolation," says the Speculative Investor 8 days ago, "but what’s even more extraordinary is that several of the world’s most important technology stocks are down by around 40% from their highs with the S&P500 Index only down by 4% from its high. In fact, even the tech-heavy NASDAQ100 Index is only down by 12% from its high."

And then yesterday, the Speculative Investor after the rally: "It’s generally not a good idea to get enthused by powerful 1-2 day advances during bear markets because they happen quite often and are seldom the precursors to multi-month rallies…however, in light of the relative strength in the SOX and the fact that the NASDAQ100 Index has just confirmed the multi-week highs recently achieved by the S&P500 and the Dow, we now think the odds favor an upside breakout…."

Steve Sjuggerud recommended a tech stock in the September issue of True Wealth.

And Bill Bonner, last week: "You expect something to happen…and then, when it doesn’t happen, you’re surprised. After awhile, you begin to expect that it will never happen; then you’re surprised when it does. The financial world is always full of surprises."

What kind of surprise? Impossible to say. But no surprises last week, the Nasdaq gained 2.7% to 1,894, and the Dow added 53 to 10,313.

If nothing much was accomplished in the markets on Friday, even less was accomplished in the Voo Doo Lounge, Friday evening. We were in a Blues club; the markets had closed and the special beer fridge was full. And instead of working, we watched the Rolling Stones play to a packed-out Wembley stadium in 1989 on a wide screen T.V.

Regards,

Tom Dyson
for The Daily Reckoning
September 11, 2004

P.S. The Rude Dog has produced a c.d. called Baptism in Blue. It’s a collection of Baltimore Blues with performances from guitarist, Linwood Taylor and from Mark Wenner of the Nighthawks.

— Daily Reckoning Book Of The Week —

Adventure Capitalist by Jim Rogers

We love Jim Rogers. We loved him when he was being bearish on the dollar in the ’80s. We loved him when he was being bearish on the dollar in the ’90s. We loved his first book, Investment Biker, and we loved his second book, Adventure Capitalist. And guess what…he’s bearish on the dollar in both!

Despite his seemingly perennial views, Jim Rogers has made shed-loads of money in the markets. But more importantly, even if you have absolutely no interest in the markets or in Jim’s views on where you should invest your money, Adventure Capitalist is still a great read.

It’s a great travel adventure!

Jim Rogers covers 116 different countries in a three-year road-trip – putting him in the Guinness Book of World Records. He uses his experiences to impart his unique investing wisdom and show you how to profit from this ever-changing world.

THIS WEEK in THE DAILY RECKONING

UNDAUNTED COWARDICE                              9/10/04
by Bill Bonner

"…What makes courage worth celebrating is that it is as rare and as delightful as a liquor store that still makes home deliveries. It is uncommon…and persists only until stamped out by regulators, legislators or a bullet to the head. The idea of a whole nation of it is preposterous…"

THE LAZY INVESTOR’S REWARD                       9/9/04
by John Mauldin

"…I should note that this makes a very big difference in retirement lifestyles. At a 5% return, we are talking about the difference between $2,400 per year and $11,000 per year on that original $10,000…"

THE GREAT MACRO PROFIT ILLUSION                     9/8/04
by Kurt Richenbacher

"…The biggest surprise in the GDP data was the reported sharp slowdown in consumer spending to just 1% at annual rate…"

THE TRADER-ECONOMIST HYBRID                            9/7/04
by Nassim Nicholas Taleb

"…The nascent emerging market desk of a New York bank hired Carlos in 1992. He had the right ingredients for success. He knew where on the map to find the countries that issued "Brady bonds," dollar-denominated debt instruments issued by less-developed countries. He knew what gross domestic product meant. He looked serious…"

———————-

HEADLINE, NEWS And INSIGHT:

Food for Thought
by Dan Denning

"…There are a lot of risks, of course. But you know that already. I mention it now simply to remind you that seventy percent of your total return in any investment comes from being in the right asset class. In other words, you can own the best company in the world, but if stocks are in a bear market, you’re in the wrong asset class…"

A Brooklyn Bridge Bull
by Paul Mampilly

"…Today, looking at the future, prognostications are once again for more of the same of what we’ve had recently: low interest rates, higher prices for stocks, bonds and real estate, Alan Greenspan, inflation, contained financial crises, loose credit, more consumer spending, the continued primacy of money over value or values, the belief that things simply cannot go seriously wrong without some painless fix…"