Solomon's Porch

Today, sick people rarely gather in public places. St. Peter has been dead for almost 2 millennia. His shadow no longer offers the hope of healing.

Today, people look for their miracle cures on the Internet.

The Internet is a curious thing. It extends Solomon’s Porch – the open market of ideas and popular sensations, as well as goods and services – to billions of people. And yet, it is not exactly a mass media.

Before the invention of the printing press, mass movements were difficult. Thinking was too personal and isolated.

But the innovation of moveable type, cheap paper, and easy distribution… not to mention public schools… gave rise to mob thinking on a much greater scale.

People changed the way they thought of themselves – corresponding to the reach of the media. Instead of being villagers in Poitou or Perche, for example, the newspapers, railroads, and telegraphic communications of the early 19th century gave people a new identity.

The media introduced a new set of ideas and beliefs, which the new French took up. They became citizens: French citizens, with adversaries on two sides – across the channel in Britain and on the other side of the Rhine river in Germany.

The national identity was an abstraction created by mass media and politics. The farmer in Poitou was no different. He had the same struggle with nature. The same sheep. The same wheat. The same neighbors and the same God.

But the newspapers spoke of the “challenge posed by the Germans”…or a blockade by the British fleet. Thanks to the media, he was able to live his life on a wider stage – with props and stock characters provided for him: The barbarian Hun – ready to storm into France at any opportunity… and perfidious Albion, the conniving Brit – ready to stab him in the back as soon as he turned around.

And there were other characters too – anthropomorphic abstractions of national powers, much like the figures of the Worldwide Wrestling Federation today.

Even at the end of the 19th century, a farmer in rural Poitou might be expected to have an opinion about what the Russian Bear might do if the Huns attacked sweet little Marianne (the woman who represents France.)

More than a hundred years later, in Baltimore, a lively debate occurred whose topic was the government of South Africa. People who knew perfectly well that they had no hope of understanding, let alone influencing, the way the garbage was picked up in their own city, nevertheless felt obliged to have an opinion about government policies in a country in which they had never so much as set foot. They had no idea what languages were spoken there…what people ate…nor even who these people were. They had never met a person from South Africa, had never read a history of the country and could probably not have found it on the map. But a good deal of their mental energy nevertheless was taken up providing advice to people they had never met. Bumper stickers defaced automobiles, editorial comment and letters to the editor filled the pages of the Baltimore Sun. Even political rallies on the subject were staged in downtown Baltimore.

Mass, political thinking had reduced a very complex situation in South Africa to a simple idiotic slogan 7 times zones away: Africa for the Africans!

The idea was, of course, absurd. Which Africans? The Hottentots – which had intermarried with immigrants from Portugal, Spain, France and the Indian Subcontinent – and were then classified a “coloured”…or the ‘white tribe’ of Afrikaaners who arrived in 18th century…or the black tribe of Zulus who arrived a few years later?

The ‘debate’ was thus a farce – like a professional wrestling match. But that is the tribal scar of crowd thinking. Or, to put it digitally, the larger the numerator of those taking part – the lower the common denominator of content.

Mob thinking permits a Baltimore parole officer and a Los Angeles computer hacker to participate in the same farce – in which neither of them has any real idea of what he is talking about. It is like a form of sign language for illiterates…

I have already explained how the media depicted the German invasion of Belgium in early WWI. The Hun was shown ravaging poor, innocent little Marianne. The Poitevin peasant was incensed. He made his way to recruitment centers and thence to the front lines. All over France, you can find monuments to these poor souls – with the names of the dead chiseled in cold granite.

Throughout most of the 20th century, people responded to the seduction of crowd thinking. They enlisted in the cause of making the world safe for democracy…or giving power to the workers…or fighting the red tide. For a hundred years they responded to the jingoes and code phrases – as if on cue, happily applauding whatever preposterous jimcrackery mob thinking came up with.

After the Berlin Wall came down, however, the media subtly shifted its attention from political concerns to financial ones. The public has become a little callous to the farcical election campaigns. Voting is down. “Isms” have lost much of their appeal. People are skeptical of mass thinking in politics.

David Ignatius, executive editor of the Washington Post, explained recently that people were no longer worried about the Russian Bear or Marianne. They’re worried about economics. TV shows, for example, such as “Who Wants to Be a Millionaire” reflect the new popular sensation – getting rich.

And the Internet, the Solomon’s Porch of the 21 century, seems to make it possible. All the world can now participate in the biggest market ever – like having the whole world gathered in a coffee-house in Amsterdam, where tulips were traded…or under the buttonwood tree in lower Manhattan. Gossip, rumors… get rich quick tips… it all flies around at the speed of light.

Stock analysis has been replaced by jingoes. The New Economy…the digital era…greater productivity… abstractions are piled onto abstractions. And the specific component ideas – when carefully examined – turn out to be every bit as wobbly as those that supported the 20th century’s silly political slogans.

But…of course…things still blow up from time to time. As we will see…

Tomorrow.

Your demolitions expert-in-training, working on Solomon’s Porch,

Bill Bonner

Paris, France September 14, 2000

*** The Big Techs, I suggested yesterday, are entombed in a Kursk of sinking prices. They’re well below their highs… and, in my humble opinion, there is no way they will ever make it back to the surface.

*** But yesterday, we heard a little tapping on the hull. They’re still alive! There was a “flight to more expensive stocks on the Nasdaq,” reported Reuters. This took the index up 44 points, reversing – for the present – the trend of the last week.

*** JNPR rose almost $9. Cisco and Oracle gained about $2.50 each. Intel is holding a bit above $60. Cisco is still a little below the $60 mark. And Microsoft, at $67.50, is still down more than 40% below its high of $119.

*** But the action on the Dow was less uplifting. The index fell 51 points – with no particular theme or direction.

*** J.P. Morgan is being purchased by Chase for $35 billion (in stock). This sent JMP shares to an all-time high of $182. Chase shares declined $5.40.

*** “A Return to the 70s” announces a headline in Le Figaro. The paper refers to the rising price of oil. In 1972 a barrel of oil cost about $12. Two years later, it was nearly twice that amount.

*** Already, oil has tripled in the last 2 years. But there could be other similarities with the early 70s. Arthur Burns presided over the Federal Reserve. He asked his economists to figure out what inflation would be if they took out ‘volatile’ oil prices. And guess what – inflation was lower. This lulled them into complacency, from which they failed to detect the even greater inflation ahead.

*** Several regional Fed bank officials warned of rising inflation pressures yesterday. A 200% increase in the price of oil, coming at a time of full employment, could result, they said, in higher consumer prices.

*** Not to mention a continued surge in the money supply. Cash is increasing nearly twice as fast as the GDP. More money, relatively fewer goods and services…hmmm…

*** DR reader AG writes: “If the dollar and oil continue to trade at new highs, will this cause the US stock markets to fall? Crude oil is priced and paid for in US Dollars. My thought is that the higher energy prices will compete for the US Dollars that are now being reinvested in the US markets from foreigners. The foreigners will need more US Dollars to pay off their energy costs. Therefore there will be less US Dollars available for investment in the US stock markets…”

*** The relationship between oil, stocks and the dollar is worth exploring. In the fall of 1972, oil was about $12 a barrel, and the Dow was about 950. So, it took almost 80 barrels of oil to buy one unit of the Dow. But, as I pointed out yesterday, you will need 312 barrels of oil to buy a unit of the Dow today.

*** By 1974, the Dow had lost a third of its value…and the price of oil had doubled. Let’s see…the price of oil has already more than doubled. But it is still very cheap relative to the Dow. Let’s say it doubles again – to around $70. And if the Dow fell by a third, it would be around 6700. Even this would leave the oil/Dow ratio a little rich. You’d still need more than 95 barrels of oil for each unit of the Dow.

*** Of course, the world’s industries have become more efficient too. A unit of output now only takes half the oil it took in 1970. So, let’s say the proper ratio is about 150 barrels of oil to every unit of the Dow. Either the Dow has to be cut in half…or the price of oil has to rise substantially… to reestablish the relationship.

*** Will history repeat itself? Marx said it did – first as a tragedy…then as a farce. But Marx had no sense of humor. The 70s was a farce. Since then it has been the theatre of the absurd. What’s next?

*** “Regardless of what pledges have been made in Vienna, new OPEC production is not going to hit the market anytime soon,” says John Myers of Outstanding Investments. “The reason? Oil tanker traffic is running close to full capacity. According to the Center for Global Energy Studies, ‘There aren’t any spare tankers to move the stuff around.’ In total the world has 3,100 tankers. But… the world consumes 76 mb/d today, up from 40 mb/d in 1968. Moreover, two-thirds of the world’s crude supplies must be shipped from the Persian Gulf.”

*** On the other hand, “Oil is setting up a lot of trend prices,” says Pirate Investor Porter Stansberry “… the bus is getting very crowded on the long side. A reversal is imminent. I bet you’ll see oil prices near $20 a barrel by March next year, half the $40 that the oil bulls predict.”

*** Porter, by the way, a digital man, has invited some of the leading thinkers in the high-tech world, the people he says are “literally changing the face of history,” for a conference in Jamaica on November 5-9th. If you’re interested in joining him send an e-mail to Andrea Shaw (andrea@pirateinvestor.com)…

*** A report in the Financial Times says that fraud on the Internet is increasing. And “the total level of fraud is growing so fast that it is eating into any price advantage established retailers get from selling over the web. Unchecked, it will affect their ability to make profits.”

*** “I think I speak for everyone out there (the entire planet),” wrote a dull-witted hacker who placed his message on the opening page of OPEC’s website, “when I say to you guys to get your collective asses in gear with the crude price. We really need to focus on the poverty- stricken countries…” he went on, in the usual way of feeble-minded do-gooders. Like a member of the Children’s crusade of 1218, the hacker seemed to think that he could conquer the Moorish oil producers with good intentions.

*** The dollar index rose 21 points. The euro barely budged.

*** Gold rose 10 cents. Platinum, Oct. contract, fell $102.0.

*** “…the stock market boom has not reached middle- income families in any important way,” says an economist with the Economic Policy Institute by way of the New York Times. “While median family income is up [to $46,737 a year from just over $44,000 in 1989], so is family debt and hours spent at work.” According to the article, from 1995 to 1998 ‘middle’ income workers “added 70 hours a year of work on average… nearly 1.8 additional weeks. And from 1989 to 1998 the increase in work time was 3.4 weeks.”

*** Kathie Peddicord, International Living publisher with whom I dined last night, reported that labor has gotten tight in Ireland. After centuries of exporting its surplus labor, Ireland is becoming a labor importer.

*** But thank God you can still exploit labor in some parts of the globe. Kathie recently returned from Ecuador where, she told me, the “cloud forest properties (mountain land near Quito) are unbelievably beautiful and unbelievably cheap.” Labor is $1 per day.

*** And the Thom Bomb sent me this note from the NY TIMES… evidence of the effects of global warming in Noah’s day: “Scientists said today that they had discovered remnants of human habitation under the Black Sea that they believe is the first proof that people thrived along an ancient shoreline before it was inundated by a great flood thousands of years ago.”

“The expedition, sponsored by the National Geographic Society and others, is part of a project to survey the coastal waters of northern Turkey for signs life at the time of the Biblical flood.”