In Church with a Hangover

The Daily Reckoning Weekend Edition
October 16-17, 2004
Atlantic City, New Jersey
By Addison Wiggin and Tom Dyson

The Rude Awakening is in Atlantic City. Your Baltimore-based editor is writing to you from an uncomfortable little booth in our hotel’s business center. It’s dirty, dingy, and hidden away from public view, down in the basement. That’s because people don’t come to Atlantic City to work…in this town, the business center is about as fun as a long church service with a hangover.

We’re in town to meet up with an old poker buddy. He flew out from London a couple of days ago on his way to the card rooms of Los Angeles and Las Vegas. We decided that Atlantic City would be the ideal place for a rendez-vous.

We used to play poker night and day back in Madrid. That was nearly six years ago. Since then we both got jobs in London’s financial district, working for investment banks. As it happened, we entered the market at just the wrong time; the bear market was just getting started.

Thousands of traders and analysts lost their jobs and those lucky enough to retain jobs received lousy bonuses. After two years in the doldrums, things finally picked up, after the Baghdad bounce, and 2003 turned out to be a bumper year in the City. Every bank in London was making money and compensation was back up.

But 2003 was especially good at Rory’s bank…his team was dominating a particular niche in the credit markets, and they made hay all year. The team shared a substantial bonus.

That was the day Rory quit. That bonus became his bankroll and now he’s traveling round the world playing poker.

Your editor cut out of work early yesterday, and hit the road to rags with two poker-playing colleagues.

We each have about $500 in our back pockets…

Be sure to catch Monday morning’s edition of the Rude Awakening to see if our pockets got lighter or heavier. We’ll have a full update on our progress at the card tables…

Astute readers of the Daily Reckoning may have noticed a change in schedule over the last couple of weeks. You used to get the DR in the morning – most of the time – but since we now mail the Rude Awakening in the mornings, we figured you’d prefer to get the Daily Reckoning in the afternoon.

Here in the Baltimore HQ of the Daily Reckoning, we’re all very exited about our new addition, the Rude Awakening. It’s based on Wall Street, so we’ll have a great view of all the action and absurdity. And of course, we’ll bring you the very best coverage.

In fact, your Baltimore-based editor will be traveling to the Rude Awakening HQ next week. We’re going to gamble in the biggest casino in the world – far larger than anything Donald Trump could have dreamed up. It’s called the NYSE, and hopefully they’ll let your editor have a sniff around while he’s in Manhattan.

We’ll also be working alongside Eric Fry for the entire week.

Now, we turn to the markets…

We had a look at the performance of several critical markets for the year to date. [Ed. Note: Readers can get the annual performance stats from a dozen markets at the end of every edition of the Rude Awakening] One market in particular grabs attention: oil. The goo is up 67% this year. "China’s decision to abandon attempts to cool off its over heated economy before the job was half done," says Alan Abelson, "is reflected in the resumption of the global bull in commodities, notably the spurt in copper and aluminum, as well as oil."

Abelson thinks China is starting to alter the way it recycles the flood of dollars it receives, focusing more on commodities and less on U.S. securities. "Greenspan & Co. may have no choice but to keep nudging up rates, if only to keep the dollar afloat," he writes.

The status quo is maintained, for now. The Treasury bond market actually gained ground last week, despite a sharp fall on Friday after the strong retail sales numbers were released. 10-year yields moved from 4.13% last week to 4.05% by Friday.

Retail sales jumped 1.5% in September, according to the latest data from the Commerce Department. The report was accompanied by reassuring words from Sir Alan, who said the spike in energy prices wouldn’t be nearly as damaging to the economy as it was in the 1970s.

Mr. Market found the news to be to his liking, and stocks went up. The Dow gained 39 points on Friday, closing the week at 9,933. But Friday’s strong performance wasn’t enough to lift the indexes to a winning week. Last week, the Dow lost 1.2%, the S&P 1.2% and the Nasdaq 0.4%. The Nasdaq closed the week at 1,912.

Gold declined $4.20 or 1% last week. An ounce of gold is now worth $418.90 at Friday’s prices.


Tom Dyson,
The Daily Reckoning
October 16, 2004


LESSONS OF HISTORY                                                  10/15/04
By Part I by Marc Faber

"The "bubble" model always involves a "displacement," which leads to extraordinary profit opportunities, overtrading, overborrowings, speculative excesses, swindles and catchpenny schemes, followed by a crisis during which fraud on a massive scale comes to light, then by the closing act, during which the outraged public calls for the culprits to be taken to account…"

Commerical Catastrophes                                             10/14/04
by Dan Ferris

"The Asian central banks accommodate the credit excesses in the United States, and in doing so, fuel rampant credit excesses in their own countries. Japan’s horrible aftermath over more than a decade after its credit excesses in the late 1980s does not seem to deter anybody."

THE KINDNESS OF STRANGERS                                 10/13/04
By Kurt Richebächer

"The Asian central banks accommodate the credit excesses in the United States, and in doing so, fuel rampant credit excesses in their own countries. Japan’s horrible aftermath over more than a decade after its credit excesses in the late 1980s does not seem to deter anybody."

SMELLS LIKE DESPERATION                                  10/12/04
by Marc Faber

"In fact, what I find most remarkable about the most recent weakness in consumption is that this weakness coincided with another upside explosion in consumer loans. To me this smells like desperation!"

BANKS AND BUTTHEADS                                      10/11/04
by the Mogambo Guru

"These buttheads (and notice that Bernanke and butthead both start with the letter "B") say that the entire 5,000 previous years of the history of economics is wrong and just because interest rates and inflation always eventually went up after all the other central banks created so much money, that was just an anomaly!"



by Peter Schiff

"With no risk, why not take a chance to live cheap and possibly make some easy money? Without this protection, buyers would hesitate to pay such ridiculous prices, or commit to future mortgage payments that they may not be able to meet."

Syncrude Awakening
by John Myers

"…In a world of increasingly volatile geopolitical tensions, Outstanding Investments has argued for months that domestic supplies of oil and gas will become increasingly vital to the well being of the U.S. economy. That’s why we recommend stocks like Suncor Energy, a company that literally "mines" oil from tar sands in Alberta, Canada…"

Consumers, Start Praying
by Byron King

"’Our economy is just chock-a-block with the wrong economic incentives. And most people don’t even have a clue. Our grandchildren will hate us.’"