More Unicorns

The little church at Bourg Archambault was packed on Sunday. I have never seen so many people in it. There were even young people. And families with children.

It is Lent. The holiest season in the Catholic Church. It is the prelude to the Passion of Christ, which heralded a new era for Christians. Henceforth, Christians could have eternal life. “He that believeth in me will never die,” was the promise made by the Nazarene.

Pere Delattre told us the story of St. Theresa. The good woman went down to Spain during the invasion of the Moors. Asked why she had come to such a dangerous area, she replied, “I want to be killed so I can enter the kingdom of heaven.”

The crusty old priest did not tell us what happened to St. Theresa. But he made it clear that her course of action was not one we should follow.

“God gave us life to be lived,” he said, “not thrown away.”

Unlike the younger priests, Pere Delattre gives a good sermon. He spends most of his time at an old age home, tending to the spiritual needs of people very close to testing Jesus’ promise. Like a commander on the front lines, he cannot let his faith waiver.

The younger priests seem to see themselves as social workers with magical powers. They seem almost embarrassed by faith and eager to hang up the dark vestments that mark them as believers. They are all democrats, with more faith in the ballot box than the cross.

Pere Delattre’s message was that we do the work of God by living…not by escaping life. He went on to explain that too many people tried to escape life — not like St. Theresa — but by diverting themselves with mindless distractions and pointless obsessions. “In the end,” he said, “these diversions from real life will prove disappointing.”

St. Theresa was risking disappointment in a big way. What if, well…eternal life turned out to be an empty promise? What if the New Era did not exist — except as an enduring Christian myth?

Pere Delattre did not address that issue. Surely the question occurred to him. But he has far too much invested of himself in the New Era to doubt its authenticity.

One of the interesting stories told in the book, “Influence,” is the curious little tale of a group of cultists who believed the world was going to end. They had set a specific date and told the world’s news media.

But the date came and went. Did the group simply admit that they were wrong and go back to their business? No, they set a new date…and became more and more convinced that this time they would be right. They had invested too much in their forecast to give it up.

Likewise, those who have pinned their hopes on the New Era of the Internet will have a very hard time abandoning it.

Like the communists, who clung to absurd myths for decades, today’s New Era investors will hang on as long as they possibly can.

The promise of everlasting life cannot be proven or disproven by science. At least, not convincingly. It is a matter of faith. And hope. And what if they prove unfounded? Is the believer worse off than the non- believer?

By contrast, the promises of both communism and the new information era are said to rest on science — and can be proven. Both claim to produce remarkable rates of economic growth and huge increases in productivity, without any cyclical setbacks.

The Soviet Union, which operated, officially, on the myths of communist ideology for seven decades, simply fell apart. It didn’t take a forensic economist to see that the promises of Marxism were hollow myths, rather than reality. Anyone touring in Russia can see it for himself. Most things are in disrepair. And almost everything is third-rate, poor-quality, ugly and pathetic. Both communism and the New Information Era claim to improve the lot of mankind by increasing material prosperity faster than before. They both claim to liberate people from the limitations — not of mortality — but of observed economics.

Yet the spread of information technology — like communism — seems to have actually reduced growth rates. John Myer reported that real incomes for male high school grads actually fell during the period 1973-1997. College grads saw an increase in income — but only 3%. Family incomes, meanwhile, which had doubled in the 25 years from 1948 to 1973, rose only 9% from 1973 to 1997.

Corporations, which should have been immediately blessed by higher profits thanks to information technology, have been stagnant for the last two years.

Productivity and GDP numbers are similarly unimpressive. But to get to the true numbers you have to deconstruct the official figures — which magnify computer spending and productivity…so as to perpetuate the myth of the New Era. In fact, neither GDP nor productivity rates are rising as fast as they did during the pre-information age period.

In short, the New Information Era is a myth.

Bill Bonner

Paris, France April 10, 2000

*** A couple of Big Questions: Is the Nasdaq headed to a new high…or have we seen the top? And what is the meaning of the rise in bonds?

*** Last week the markets were the most volatile ever. Day traders must have either made a lot of money or lost a lot.

*** The Nasdaq lost ground during the week — down 2.76%. But it ended on an uptick — rising 178 points on Friday. Hard to know what to expect next.

*** The Dow, meanwhile, rose last week. It was up 1.74%. But it fell slightly on Friday.

*** Also, the market broadened out. There were 1,509 Advancing stocks, and only 1,394 Declining ones, on the NYSE. There were 54 stocks hitting new highs, while 32 hit new lows.

*** If the Nasdaq is going to hit new highs, it is going to have to climb over a lot of shares that had been “locked up” from previous IPOs and option deals. An analyst at Sanford C. Berstein reports that there are 2.4 billion shares from last years’ IPOs that are expected to hit the market in the second quarter of this year.

*** As for the stock options, “We’re giving away more and more of the future value of the company,” said Richard Wagner, president of Strategic Compensation Research Associates, quoted by the “NY Times” news service. Ten years ago, about 7% of outstanding shares were in the hands of management and employee equity plans. Now there are twice that many.

*** On the other hand, Steve Leuthold says that $36 billion in new money came into the stock market last month — an amount very close to February’s record.

*** Long T-bonds rose in price last week. The yield fell to 5.70%. As I have mentioned before, this is a curious thing. Don’t bond buyers know that the Fed is raising rates? Isn’t there supposed to be a whiff of inflation in the spring air?

*** You certainly could smell the odor of inflation last year. But since January, key prices have been deflating, not inflating. Bill King reports that bonds bottomed out on Jan. 18. That is, bond yields began to fall. The very next day, copper, which is supposed to have an uncanny knack for predicting economic trends, topped out. OTC markets, says King, went into decline in both the United States and Japan a couple of weeks later. Oil peaked on March 7.

*** But something else was going on. Because “meanwhile,” King reports, “the Fed pumped up M3 almost $80 billion in two weeks.” There was “some very strong deflationary force” at work in the first quarter, he says.

*** I’ve been guessing that bonds were anticipating a crash in the Nasdaq. That market represents about $6 trillion of capital values — on paper. A crash should at least cut it in half. But maybe there is something else going on…we’ll wait and see…

*** Not much worth reporting from today’s newspapers. An article in the “Figaro” tells us that farming in France has become so bureaucratized that it is almost impossible to enter the profession. As I have discovered, you can’t do anything without asking permission from some regulatory group. Some farmers are fed up — they’re leaving for the United States and Canada.

*** Land in France is cheap — perhaps as a result. An acre of farmland sells for about $1,200 on average. In Britain, farmland costs twice as much. In Holland, it’s $7,000 an acre.

*** Elizabeth and I took a little excursion on Friday. We drove about a half-hour south to a tiny little town called Mortemart. The town has only a couple dozen houses…but it also is home to a large convent and a very good restaurant. There were only two other people in the restaurant…a couple who held hands for most of the meal and gazed into each other’s eyes in a sappy way.

*** Mortemart is at the foot of the Monts de Blond — a small group of hills…It has an ancient church and a chateau as well as a covered central market. There must have been a group of gifted stonemasons in the area many centuries ago. Several of the houses and public buildings have imposing, well-crafted doorways. This is the sort of little town that seems to be on its way to becoming a tourist attraction…

The Daily Reckoning