At the Fee Convention

"What was it like in prison?" I asked my friend, a woman who had just spent 8 years behind bars at a federal penitentiary.

"Well, I don’t want to pretend to be a martyr for the cause of liberty," she began. "It could have been a lot worse. It’s funny, but you adapt. Or you go crazy.

"For some of those women – there were a lot of foreigners from Africa and Asia – it was the best life they ever had. We had three meals a day. It was clean. Nobody beat us.

"But for the poor women with children…it was almost unbearable. These women had never really done anything wrong. They never stole anything. They never hurt anybody. And here they were, locked up…and didn’t get to see their children very often.

"And then, when the children did come to visit…the scenes in the visiting room were heartbreaking…"

Moses, coming down from the mountain, brought with him stone tablets inscribed with God’s Ten Commandments. Even before the advent of the decimal system, the Lord Himself seems to have gone metric. Ten rules were enough for the ruler of all the universe.

Even that seemed like too many to Jesus of Nazareth. Standing on the mountain, he told listeners that there were only two that really mattered.

But even 10 were not enough for America’s elected hacks and pooh-bahs. In the years following the founding of the republic, they have added approximately 25,479 "Thou Shall Nots" to Moses’ list. Most of the women at the federal penitentiary in San Francisco may have broken God’s rules from time to time. But it was usually one of the other 25,479 that got them in trouble with the law.

In today’s letter, dear reader, fear not. We will not wail and whine, again, about the loss of freedom in America. Today, just to be contrary, we regret the loss of something else. For while Americans seem to have surrendered their liberty without a fight, they still permit themselves great liberties.

"You have to find a morality that is right for you," said Harry Browne in his speech. "Who knows what you really want? Who knows what you really feel? Nobody knows what you want better than you do. So, you and only you can decide what is right for you."

"But Harry," I asked over lunch. "Suppose someone decides that what is right for him is to murder you?" "Well, he would just be shortsighted," came the reply from the hyper-rationalist. "If he really thought things through he would realize that murdering me would not be a good idea…for him. Because, if he lived in a society where people could murder one another, his own life would be at risk."

"But what if he didn’t care? People come up with some pretty strange ideas…"

"It doesn’t matter," said Harry. "Either you decide what’s right for you…or someone else does."

Later, in his speech, Harry elaborated: "Many people think they should do what is best for their spouse, or their parents, or their children," continued the Libertarian Party candidate for President, "but this is just a trap that steals away your freedom. I call it the ‘Unselfishness Trap.’ You feel as though you ought to put someone’s interests ahead of your own.

"But think about it a minute. Think of happiness as a big, red ball. If you were unselfish, you would want to give this ball to someone. But if he were unselfish, he would want to give it away too. Who would want to accept it? In order for this to work you’d have to give the ball to someone who was selfish enough to accept it."

It seemed to this listener that Harry had fallen into his own trap. Who could possibly define happiness or unselfishness in such simple-minded terms? Besides, couldn’t the recipient of the red ball take it – just to make the giver happy? Wouldn’t the selfish person, accepting the ball of happiness, be the least selfish of all?

The English language gives us words to describe things. Rarely is there a word without a thought or an idea behind it. "Unselfishness" tells us something about the way people sometimes act…distinguishing a certain kind of behavior from another kind. Not that the word can’t be used for lying and false accusations! Still, it isn’t going away, no matter what Harry thinks.

"I had an experience once that showed me how pointless ‘unselfishness’ really is," Harry continued. "When I was a young man, I moved into an apartment. The landlady, trying to be nice, brought me a piece of cake.

"But I didn’t like the cake. Now, I had to get rid of it. And I didn’t want to offend her by telling her that I didn’t like it. But if I lied and told her that I enjoyed her cake…she might give me another one.

"As you can imagine, getting rid of the cake and giving back the cake dish took up time that could have been used for doing something I really wanted to do…"

Harry will have a hard time connecting with voters with this kind of thinking. Like so much libertarian thinking, it is logical, intelligent…and absurd. But libertarian thinking was very much the fashion at the FEE convention. Like the rest of middle America, the conventioneers applauded the American myths – freedom and democracy – and enjoyed feeling superior to the rest of the world.

"If it were not for America, there not would be freedom in the world," said one speaker whom I will not embarrass by disclosing his name. "Thank God, we’ve been able to keep America from becoming another European socialist society."

"Europe is in danger of becoming a theme park," said Charles Murray, picking up the idea. Meanwhile, outside the convention hall, great hulking hordes of tourists dressed in tee-shirts, shorts and running shoes trundled the pavement as they made their way from one fantasy to another. Deciding what was right for them, they had pondered where they would take their next vacation… would they visit the Eiffel Tower, or the Great Pyramid? So at ease are they with America’s place in the world and their own financial prospects that they allowed themselves a vacation in Vegas…on credit. And why not? Who knows, maybe they will win at the slot machines? And what does it matter? They know what they really want – the gaudier, tackier, more vulgar and more garish, the better. But hey, this is Vegas!

Libertarians are encouraged to think for themselves, and then follow their own rational self-interest. They may not be able to enjoy genuine freedom in America, 2002, but at least they can figure out what they really want out of life…and get it…when they free themselves from the restraints of conventional morality and the dictionary. But believing in nothing save their own ability to figure things out – like the rest of America, they will believe anything…even that they could vote their way towards a free society.

"But Bill," Harry challenged me. "Either you decide for yourself…or someone decides for you."

Our luncheon ended before I had a chance to reply. "It is not who that matters, Harry," I should have said, "it is what. Whether you put an innocent person in jail because you think it is a good idea…or because someone else tells you it is a good idea…it is still wrong."

But the end of the evening came quickly. There was no time for rejoinders.

"What have you gotten out of all this?" I should have asked the woman at my table – the woman with the criminal record.

"What do you mean, ‘all this…?’"

"I mean libertarianism…"

"Five to ten…" she might have replied.

Your hyena editor…

Bill Bonner
May 10, 2002 — London, England

P.S. "How can you live in France," asked a friend, getting in the mood of the FEE get-together. "It’s a socialist country!"

"Well, it may be a socialist country…but I can drive down the road at 100 mph and nobody tries to stop me. My daughter and I can order a drink in a restaurant and nobody asks to see her I.D. I can smoke a cigarette without standing out in the cold…

"If I don’t like it in Paris, I can go to Germany, Italy or Spain…nobody even asks to look at my passport…

"But that’s not really why I live there. Life is either tragedy or comedy. In America, it pains me to see the things that go on. I take it personally. But in France, it is all comedy. ‘What will they do next?’ I ask myself, smiling."

Gold stocks up…other stocks down.

The astrological seer Mahendra Sharma says gold will continue to rise. Why? "Jupiter is saying," he points out. In the three months beginning March "gold can reach U.S. $350," he says. Why not? Mahendra’s prediction is as good as anyone’s.

Cisco fell 3.2% yesterday, leaving it still 20% above where it began the week, though nearly 80% below it’s all-time top. The company earned 2 cents more in the last quarter than analysts expected.

And, "If you read carefully enough (and have an accountant to guide you through it," John Crudele explains, in the N.Y. Post,) "you will eventually find that profits were only 10 cents a share when you don’t ignore the stuff that Cisco wanted to ignore." What’s more, while investors still think of Cisco and the other techs as growth stocks, the Cisco kids managed to increase sales by only 2% year over year.

Still, some tech mongers were go giddy they began hallucinating:

"Tuesday after the close, Cisco Systems announced earnings that beat the street number by more than 20%…," gushes Michael Murphy, "And that, my friend, is a KEY SIGNAL of the technology recovery I’ve been writing to you about for some time now. [A very long time…]

"A recovery that can make you a ton of money over the next six months to start. But only if you DON’T get scared off by the wailing hyenas that want you to believe that "tech is dead" – gone forever.

"AND when the gains come, I’m looking for a flood of profits in a very short period of time. Let me explain why.

"Technically speaking, these stocks are way oversold. Perhaps you’ve seen ‘Bollinger Bands’ discussed on CNBC – it’s simply a tool to show when stocks prices are way above, or below, the norm over time.

"I don’t want to get too technical here, but today we’re about 2.5 standard deviations below the average – which is just about as oversold as stocks ever get. Heck, we didn’t even see that mark in the plunge following September 11th.

"Yet the hyenas are running around telling you that tech stocks have nowhere to go but down! AMAZING!

"I don’t need to name names. You know who they are. Their job is to panic you into selling at the bottom – making themselves seem prophetic, so they sell more books or ink a new deal on Fox."

What can we say…but ha, ha? Bollinger Bands…on CNBC? Ha..ha…ha…ha…hee…hee…ho…ho…what next?

What do you think, Eric?


Mr. Eric Fry from Wall Street…

– Like a pro football player volunteering for the United Way, Mr. Market decided to "give a little something back" yesterday. However, the only beneficiaries of his community service were the bears.

– The Dow "gave back" 104 points to 10,037, while the Nasdaq gave of itself even more generously by falling 2.7% to 1,651. Even after the giveback, however, the Dow is 200 points ahead of its closing price on Tuesday, and the Nasdaq is about 5% ahead.

– Is this the start of a new bull market, just like the folks on CNBC suggest? Or was Wednesday’s rally merely the latest in a series of "bull traps?" The latter interpretation seems the most likely, according to Richard McCabe, Chief Market Analyst at Merrill Lynch.

– "It may come as a surprise to many people," McCabe writes in a research note, "but there have been seven other times since the beginning of 2000 in which the DJIA has risen 300 points or more in one day." On two of those occasions, the market rallied for a few weeks thereafter.

– "In the other five instances, however, subsequent rallies lasted for only a couple of weeks to a couple of days prior to renewed weakness." Therefore, McCabe concludes, "The burden of proof is on the market at this point."

– For all those investors inclined to dismiss McCabe’s caution and jump into the stock with both feet, Dr. Kurt Richebacher offers a warning, "The stock market abides in unflinching denial…The ominous profits implosion of the last few years is ignored as a thing of the past," he observes disdainfully, "Euphoric new profit forecasts simply take their place."

– But the facts are the facts: "Corporate profits of the nonfinancial sector as a whole peaked in the second quarter of 2000 at $518 billion, annualized," Richebacher observes. "By the fourth quarter of 2001, they were down 44.4%, to $287.7 billion."

– Not surprisingly, these "downward spiraling profits" are restraining business fixed investment. Consumers might be spending up a storm, but businesses are not. Most US corporations seem far more concerned about cutting costs than about investing in future growth. Moody’s notes that business investment spending tumbled 11.7% in the first quarter of 2002 compared to the first quarter of last year. Without business investment, the US recovery will perish in its infancy.

– "Considering that fixed capital investment is not only stagnant but plummeting," says Richebacher. "There can be no doubt that it will again defeat the bullish consumer."

– Or, as James Bianco puts it somewhat more delicately in a recent interview with Bloomberg Markets magazine, "The recovery is here, but it’s going to be short-lived. If recessions are supposed to cleanse away the excesses of the boom, this one only did part of the job. Consumers never slowed their buying pace, and stock valuations were never brought down to recession levels."

– Bianco’s prediction for stock market performance will please neither bulls nor bears. "In five or six years, I would not be surprised if the market is at exactly the same level it is now."

– Sounds a little like the 1930s, doesn’t it? Bridgewater Associates thinks so.

– Bridgewater notes that the Fed began easing 17 months ago, reducing short-term interest rates by 475 basis points. "Normally," says Bridgewater, "at this stage of an easing cycle the stock market would be up by about 20%. This time it is down 20%…The last time something like this happened was 1930. Back then, they called it pushing on a string." If current trends continue, that phrase may enjoy a resurgence of popularity.

– Continuing the Depression-era theme, Richebacher relates, "After the stock market crashed in late October/early November 1929, it rallied sharply until mid-April 1930. During this period, the consensus discarded the market’s prior plunge as a healthy correction in a basically healthy economy.

– By early spring 1930, the economy seemed to be gaining strength, and the economic "correction" was considered over. Both the earlier market crash and the economy’s slowdown were thought of simply as one more pause on the endless road to prosperity…Yet very few regarded the stock market crash as a serious event."

– Even President Hoover believed the economy to be on the mend. "We are not through the difficulties of our situation," Hoover declared on May 1, 1930, "but I’m convinced we have passed the worst and with continued effort we shall rapidly recover."

– Okay, so maybe Hoover wasn’t a market-timer.


Back in London…

*** I know you look forward to the London newspapers, as do I. So, let me bring you up-to-date on the latest stories.

*** Well, there’s the usual naughty vicar story in the tabloids. Seems an aging minister has run off with an Asian woman he never met in an arranged marriage. Then, there’s the heart-warming story of a woman who was doing something really dirty with her "lover"…something that involved whips and chains and so forth…and in the middle of this lovemaking decided to give him 20 (!) whacks…with an axe. Imagine the exquisite joy…the ecstasy of pain! Alas, it didn’t last long; he was pronounced dead a few minutes later.

*** While the British papers are still amusing, TV in the UK has gone downhill badly. Flipping through the channels last night, as I made my way to CNN, I discovered: a tawdry soap opera, with fat, ugly women yelling at each other…then crying…then yelling again…The viewers probably felt like taking an axe to them all.

*** And then there was a documentary on prostitution. The show pretended to be a crime-fighting news show, but the real purpose must have been to titillate readers. Hidden cameras spied on Massage Parlor entrances, while microphones listened in on the pimps’ conversations. On both scores, the show was a complete waste of time – for it raised neither prurient interest nor indignation.

*** What is it with prostitution in Britain? The English seem obsessed with it. Another pseudo-documentary, called Red Light Girls, competed with the crime busters on another station. This one was even worse – interviewing prostitutes and following them around. The poor women were, of course, unattractive featherbrains with the sex appeal of wet floor mops.

*** Michael Murphy is wrong about us laughing hyenas getting book contracts. I’ve been working on a book about the similarities between the U.S. financial situation and that of Japan. But major book publishers are reluctant to take it. "They just don’t believe that anything is seriously wrong with the U.S. economy," says my agent.

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