Completely Opposed to Something or Other

A DR Classique, written by your editor one year ago today, in honor of the week’s May Day celebrations…

Stupidity, like poverty, is relative.

The sentiments expressed by London’s May Day protesters ranged from the pathetic to the sublime. "I’ve spent a lot of time in India," said one. "A lot of people are living a good life in the West and don’t need these luxuries."

"Capitalism commits atrocities and illegal acts and hides behind a corporate whitewash," noted Adam, 30, who described himself to Daily Telegraph reporters as an "anarchist."

"Women do most of the world’s unwaged work," said Liz, a member of the Global Women’s Strike. "We want wages for all caring work to establish women’s entitlement to the wealth and resources we have produced. We want wages for housework."

"We are sick of big companies making money just for greed," added another woman.

Another protester, describing the people around her: "This is the cream of society with intelligent people who have a passion for life." Cream rises to the top of a fluid society. But so does scum. Sometimes, it is hard to tell the difference between the two.

None of these comments made much sense. So, I listened carefully to a talk show, on which the guests represented various factions of the anti-capitalist crusade. Would they have a new critique of modern society…a new crackpot theory…? Would there be a new Marx or Engels among them?

Alas, not a sentence…not a word…not even a half- formed syllable that might be mistaken for an original thought was uttered.

"Everything is being privatized," an environmental activist observed. "Big corporations are taking over. We are losing control over our own lives. That’s the real problem with globalization. The companies have become more powerful than government. We vote, but it doesn’t make any difference. We still get the same products shoved down our throats…while corporations make obscene profits for the benefit of their shareholders, not the public."

I was hoping he would name names. Daily Reckoning readers would be delighted to invest in a company making obscene profits for the benefit of shareholders. Even mildly titillating profits would be nice. But as soon as a company makes enough money to get investors excited, competition and share prices increase and the big profits quickly disappear. In a matter of months, profits are merely respectable.

Also in the Telegraph was an article about author Naomi Klein. The daughter of Vietnam War protesters who fled to Canada, she spent her early years, she says, wanting to play with Barbies, eat at McDonalds and hang around shopping malls. But as she grew older, her radical genes seem to have asserted themselves. In fact, her book, "No Logo," published by the capitalist enterprise, Harper Collins, owned by Rupert Murdoch, provided both inspiration and rationale for the rioters. The Financial Times, which ought to know better, called it "a manifesto and call to arms that sometimes reads like an Orwellian nightmare."

I picked up the book at Heathrow Airport on my way to Madrid last night. I thought I would save you the trouble of reading it.

Ms. Klein’s kvetch is that corporate branding is taking over her "space." Her space is radical politics.

Have you noticed that corporate advertising seems to celebrate vulgar, depressing, corrupt, stupid or perverted culture? Ghetto life, AIDS, Che, identity politics – the causes that Ms. Klein and other activists labored over for so long have been taken up into corporate advertising themes.

Tommy Hilfiger, for example, used to be a brand of "Young Republican clothing." But Hilfiger found he could sell more pants by "selling white youth on their fetishization of black style, and black youth on their fetishization of white wealth." So powerful was the allure of the ghetto and the process of borrowing the trash styles of urban black youth that Nike had a word for it: "bro-ing."

Ghetto cool…then gay cool…AIDS cool… revolutionary cool…Diesel had an ad showing two sailors kissing. A soda company uses a photo of Che to sell its "Revolution" brand drink. How could the real radicals keep up?

"Let’s face it," said an AIDS activist, "when you’re a story line on Friends, it’s hard to keep thinking you’re radical."

But Ms. Klein has a suggestion to fight back against the brands. She calls it "culture jamming." Like painting mustaches on billboard figures, culture jamming – with ironical comment, ridicule and parody – gives radicals a way to take back the initiative. "This generation wants their brains back," is how one activist put it.

But culture jamming works in both directions. One man in London’s crowd of revolutionaries wore a T-shirt with the following statement: "Completely Opposed to Something or Other."

Your correspondent,

Bill Bonner
May 05, 2002 — Cursing in Baltimore, Maryland


After getting up at 4:30 this morning to write the Daily Reckoning, I come to end of my labors and then hit the wrong button on the ding-dong computer – and poof! It’s gone…

So, let’s go directly to Eric’s notes.


Eric Fry, reporting from the Naked City:

– The list of neuroses besetting Mr. Market is growing longer by the day. We’ve seen how manic-depressive he can be. And now we’re discovering that he also suffers from schizophrenia. The Dow side of his personality is a hard-charging, type-A sort of fellow. But when he calls himself "Nasdaq," he is downcast and lethargic.

– Yesterday, "Dow" advanced for the third day in a row – – a feat he did not manage to achieve during the entire month of April. The blue chip index gained 32 points to 10,092. "Nasdaq" however, skidded 2% to 1,645 – a fresh 6-month low. Remarkably, the tech-laden index has now erased all of its gains since way back on October 11th.

– Even the mighty Microsoft is wavering. MSFT fell about 3% yesterday, bringing its loss for the year to 23%.

– Oracle Corp. fared even worse, falling 10% to the once-unthinkably low price of $8.55. Meanwhile, the woebegone Worldcom’s death spiral continues. In its heyday, one Worldcom share was worth about $60, enough to buy a couple of Grey Goose martinis (including tip) at the Peninsula Hotel bar in Manhattan. Today, at $2.03, one share is worth barely enough to buy a Big Gulp soda at Seven-11.

– While investors beat up on tech stocks, the SEC is getting ready to beat up on the folks who foisted these stocks on the public. "Wall Street firms have been given a two-week deadline to comply with the Securities and Exchange Commission’s request for e-mails about technology, telecommunications, Internet, media and biotechnology stocks," Bloomberg News reports.

– The SEC is targeting all the major Wall Street firms and has sent subpoenas to six of them. Pull up a seat, this ought to be better theatre than the OJ trial.

– Now that the Nasdaq has fallen to such a low estate, aren’t tech stocks starting to become cheap? In a word, "No." Apogee Research’s Robert Tracy made a fascinating comparison between Cisco Systems – the one-time poster child of the New Economy – and Valero Energy, an oil refiner straight out of the old economy. Both companies pull in nearly the same annual revenues – $18 billion for Cisco and $16 billion for Valero. But Cisco’s revenues produced a massive $2 billion loss over the last 12 months, whereas Valero earned more than $400 million.

– Surely investors consider Valero the more valuable company, right? Not even close. Valero’s market value is only $4 billion. Cisco’s market cap, even after the stock’s colossal decline, is $100 billion – or 25 TIMES more than Valero’s. It would appear that at least one of these valuations is off base. In short, even though the Nasdaq has fallen 15% year-to-date, there is no particular reason why it could not continue to fall.

– "If GDP’s so great, why have profits been so punk?" wonders Moody’s John Lonski. "Why is it that despite so powerful a first-quarter burst by GDP that the U.S.’ corporate credit rating downgrades outnumber upgrades by 5 to 1 for 2002-to-date?"

– One possible answer is that the GDP number is weaker than it appears. The government tells us that GDP boomed 5.8% in the first quarter. But a quick look inside the numbers tells a different story.

– Inventory growth, alone, accounted for 3.1 percentage points of the 5.8% total. In other words, GDP got a boost from the fact that inventories piled up on warehouse shelves. Government spending kicked in another 1.4 percentage points. Usually, Uncle Sam’s contribution to GDP is much, much smaller.

– So if you add it all up, inventories and government spending together totaled 4.5 percentage points of the 5.8% total. In other words, honest-to-goodness private sector GDP growth was only about 1.3% annualized. That’s hardly a robust recovery.

– Here’s an interesting observation from Charles Peabody, banking analyst extraordinaire at Portales Partners(formerly Ventana Capital): Banks might have a few too many credit cards in circulation for their own good.

– During the boom years of the late 1990s, credit cards became the all-you-can-eat shrimp of the consumer finance menu. Banks and finance companies issued cards by the plateful, and consumers gorged themselves on the easy credit.

– We all know what happened next. Consumers spent money they didn’t have and the economy boomed. And all the while, those credit card solicitations kept on arriving in the mail. Incredibly, banks and finance companies have been issuing credit cards faster than consumers can draw down the credit lines. Therefore, despite the consumer’s free spending ways, untapped credit card lines total an astounding $2.9 trillion…and that’s what concerns Peabody. He worries that "those [cardholders] that are least capable of paying back their debts are drawing down their unused lines in an effort to stay afloat." This phenomenon is called adverse selection, and it might be a big problem for the banks.

– The downside of the boom is never fun.


Back in Baltimore…

*** I had lunch with the mayor yesterday. Here at the Daily Reckoning, we hate politics as we do all sin. But we love sinners – even politicians. And we couldn’t help but like Baltimore’s new mayor. More…on Monday (I can’t write this twice in one day…I don’t have the energy for it. Enjoy the Classique below.)