Memento Mori

We arrived at the cold, stone church on a cold, windy day to put the cold body of my aunt into a cold grave in the nearby cemetery.

As we stood outside, waiting to follow the body into the church, one of the gravediggers tapped on the coffin as if to make sure a mistake had not been made. I listened intently too… though I was sure there would be no sound from the other side.

He then began a conversation with Michel, a farm worker who spent his whole life — except for a stint in the Algerian War — on our farm, as his father had done before him.

Michel said he wanted to walk behind the casket, in the procession into church, along with the grieving family. He must have wanted to keep death in front of him — where he could keep an eye on it. He spent a career working with dangerous farm equipment and being shot at by Algerians. But it was his hobby, bicycling, that nearly killed him. A car knocked him from the road, and he hit his head on a rock. A year later, one eye still doesn’t work right… and he tastes nothing.

His brother, Francois, was there too. So were far more of our neighbors than I had expected. They could not have known Aunt Jacqueline. She had had a stroke and lost the power of intelligent conversation before she arrived in France. But she still smiled at people when they came to visit and seemed glad to see them.

Mr. Goupil was there… the communist mason with Royalist tendencies. Madame Brule, whose husband masterminded the renovation of our house as well as the stocking of its wine cellar. Madame Livet played the organ. Mr. Ducellier, his mother, and his sister, were all there. His uncle, Pierre, was there too. Pierre remembers growing up in a huge chateau with a staff of retainers to serve him. But that was then, this is now. The family fortune was divided amongst seven children and socialist governments. Pierre’s old money is gone… he now earns a precarious living on a small farm, and tends to the local business affairs of an American family whose money is so new they haven’t even made it yet.

His wife, Chantal — baroness by birth, goose stuffer by profession — was there too.

We followed the coffin towards the altar, preceded by Mr. Hepper, the Anglican priest, whose voice boomed with such authority I first thought a truck had run into the church. Aunt Jacqueline was as serious about religion as an Episcopalian can be. She would have liked Mr. Hepper. He looked the part in his black vestment, red hair, and bright, florid face.

She would have liked the whole thing. Aunt Jacqueline was never in tune with the modern world. She was a romantic who would have been much happier in the 19th century than the 20th. In fact, she lived an Emily Dickensian life, in a house straight out of the last century — without central heating, electricity or plumbing — until the 1960s.

She had seen almost the entire century. Born in 1911 — she had lived through the most remarkable events of the most remarkable era in human history. But she wasn’t the least bit interested in them.

Elizabeth read a passage from the Bible in English. Maria read another in French. We sang hymns in English — feebly. And I delivered a lame eulogy in French.

Mr. Hebber then gave his talk. He spoke of the way nature works — with death as a necessary feature… and a prelude to new life.

I was doing my part. I looked somber. Grieving in a dignified way. But my mind wandered, as it does during church sermons.

I could not help but think about the way the fevers of markets mirror the tempers of life itself — cycles of boom and bust… episodes of madness… greed, fear, the whole gamut of emotions.

A number of readers have written in response to my note a few days ago about the way Internet stocks have become a kind of currency. Companies are using stock to pay the rent… and almost all the expenses of doing business. They’re exchanging them for advertising. They’re paying off professionals — such as lawyers, consultants, and accounting firms with shares. Copywriters have been offered share options too. And paying employees with shares has become not only possible, but necessary. Employees insist upon it.

Maybe they should print up some shares in small denominations for cab fare and restaurant tips too.

Of course, other businesses accept the shares as payment for stock — as in the AOL/Time Warner deal. But it is not just the Internet stocks that are creating new currency.

UPS launched the largest IPO ever last October. Their stated purpose was to get a “currency” that could be used for acquisitions. But this deal illustrates how currencies inevitably go bad over time.

The idea of investing is that the money you put in is used for capital improvements that end up producing something that can be sold at a profit. The UPS money, however, will do no such thing. UPS is owned by employees. They are selling their shares to the public. The money ends up in the pockets of the employees, not in capital improvements. In fact, a UPS spokesman admitted that the men in brown had no particular need for capital. They have plenty of trucks and airplanes already.

If you can create wealth just by saying so — you will say so often. You will do so until your say so becomes completely worthless. Even UPS — which is a real company with real profits — sold 100,000,000 shares in October. But over the next 18 months, employees will be free to sell more and more of the shares they still hold. If they all decided to sell, the market would have to absorb more than 1 billion shares! If you have a currency, in other words, it is just a matter of time before it is an inflated currency.

This is why most currencies have a shorter lifespan than a drug dealer in Baltimore.

The Federal Reserve was begun in the year Aunt Jacque was born. The currency that had been stable for a century then began a decline that took 95% of its value away by the time of her death. The competition had been removed from the currency market. The Federal Reserve could create money — just by saying so. But compared to a lot of other currencies, the dollar has been as upright as a Baptist.

Back in America, I have a few currencies framed on my wall. They are beautiful — but, except as art, totally worthless. I bought them from Doug Casey, more than a quarter century ago… at a time when his own business fortunes were at a cyclical low.

Aunt Jacqueline was still a young girl when the Reichsmark became worth less than the paper it was printed on. Even before that, the Tsarist-era Russian bonds, which were plastered all over France, and practically used as currency, had become worthless. She was 18 years old when the US stock market crashed… and her father almost went bankrupt.

In the years that followed, hundreds of currencies became extinct. Dozens in South America. Remember the austral? Colons. Pesos. Sucres. And currency destruction is not limited to Latin countries. Roubles. Dinars. Lire. Baht. Just say the words and smile, because they are what American tourists call ‘funny money.’

I remember traveling in Poland in the 70s. Zlotys were practically worthless then. God knows what happened to them. Here in France, the franc had lost about 99% of its value since 1913 when DeGaulle knocked two zeros off in 1958.

Among Aunt Jacqueline’s effects is a US War Bond from 1942. The issuer is still solvent — and now paying off its debts. But the currency is not the same currency it was in 1942. Were she alive to collect, the $25 bond might be worth only about $1.85 in real terms.

Currencies expire as people do. But no one comes to the funeral. Christians believe that the sadness they feel at a funeral is for themselves… not for the dead. When a person dies, he goes on to a better life in a better place. The veil of tears is lifted. We say Alleluia… “even unto the grave.” But there is no cause for celebration when a currency goes bad.

After the service in church, the mourners filed by the coffin and sprinkled holy water on it. The casket was then turned around by two spindly men who looked like they might lose control of it, and placed back in the hearse. We followed, on foot, in procession to the graveyard, where the coffin was lowered into the ground and Mr. Hepper tossed the dirt upon it.

“Ashes to ashes,” he said, “Dust to dust.”

Rest in peace.

Bill Bonner

Paris, France January 26, 2000

P.S. Later, we all left the bitterly cold gravesite and greeted mourners at the house. Our hands were warmed before the crackling fire, and our hearts by the kind send off given by so many of our friends and neighbors to a woman they never knew.

*** The Exodus of stockholders from the market continued yesterday. But trading in the big index stocks… and the Rocket Chips… reversed towards the end of the trading day. While most investors were still heading for the exits, the Dow, S&P and Nasdaq rose.

*** We are, of course, very familiar with this. The leading stocks, techs and nets, and the indexes go up… while most stocks go down. There were 1243 stocks advancing yesterday. But 1772 went down. The A/D ratio actually hit a new bear market low. Most stocks just keep going down. Get this: There were only 33 new highs and 187 new lows.

*** The Dow was up 21 points. Investors are confused. They don’t understand what’s going on. The Herald Tribune announced today that consumer confidence is at an all-time high. Jobs are plentiful. And yet, consumers are so laden with debt that it appears they may be unable to continue spending at the current rate.

*** Retailers have been getting hit pretty hard — a bad sign. And, the automakers all went down yesterday — even GM, which has become quite a bargain. GE, meanwhile, went up. This divergence will reverse before the year is out.

*** Alan Greenspan was supposed to testify in the Senate yesterday. But the bad weather let him off the hook. So, investors were not reminded of the threat of interest rate increases.

*** Transportation stocks were down again — down 10% so far this year. They do not like the higher oil price. Oil may not be as big a component of the economy as it was in the 70s… but it is still important. *** The price of gold held up pretty well as the Bank of England auctioned off tons of the stuff yesterday. It fetched $289. This is all the more amazing when it was revealed that the Dutch were quietly selling an equal amount during the week.

*** “As June goes… so goes the year.” This is another of the old investors’ tales that the New Economy has supposedly made passe and irrelevant. January is not over. But so far, the Dow is down 4%. The S&P too. Most stocks have lost ground. But the Russell 2000 is up 3.77% — this is the small cap revival that I anticipated.

*** And this from Rick Ackerman: Russian workers used to say, ‘They pretend to pay us and we pretend to work.’ U.S. high-tech workers have taken the concept upscale with this capitalistic twist: They pretend to make us millionaires, and we pretend we’re worth it. Marx’s successors missed the trick that has made U.S. workers so eagerly complicitous in the swindle: pay in stock certificates, not rubles.

*** Friday, memorial services for the guillotined Louis XVI were held in France — the anniversary of his death during the French revolution. Actually, there were two separate services — one held by the Orleanists, supporters of claim of the descendants of Louis Phillippe… the other by the Legitimists, those who back the Bourbon family from Spain. The Bourbonists have the stronger genetic claim. But Louis XIV formally renounced and nullified any right to the French throne by the Spanish side of the family.

*** Who cares? At least monarchs don’t have to lie and pander their way into office. Monarchs can still command your respect, whereas no serious person would ever respect a politician. And who but intellectual sado-masochists would miss elections? What’s more, Americans would like having live aristocrats within their midst — good material for the tabloids. And, there would be some variety in Washington… produced by the luck of the gene pool… as opposed to the depressing mediocre sameness that the ballot box yields.

*** Another nice thing: there would be no question of the Monarchs’ authority — everyone would know they had none. You could ignore them. And cut their heads off every now and them, just to remind them.

*** And here’s another bit of archaism. Four Greeks were arrested in Nicosia for abducting a woman as a bride. In their defense, they claimed that such a practice was “a custom” among their people. Well, turns out, these guys were Pontic Greeks. From the time of the Trojan War, Greek settlements were set up on the Black Sea. But, classical Greece went into a decline after Alexander… and never recovered. So, the Greek settlements were cut off.

*** They were still there — and still speaking Homeric Greek — when Stalin came to power in the Soviet Union. Stalin didn’t trust any of the ethic groups along the Black Sea coast — so he relocated them to remote regions, such as Kazahkstan. Then, 50 years later, the Kazahks got their independence and wondered what the Greeks were doing there. The Greeks wondered too. Many of them decided to “go home” — to Greece. They arrived in Greece expecting to be greeted like long-lost cousins. Instead, the modern residents of Athens… or Nicosia… could not even communicate with them. Their language, and evidently, their customs, have not changed in 2500 years.

*** By the way, a reader explained to me that “indulgences” only remove the threat of earthly punishments. You can still go to hell. I recant.

The Daily Reckoning