The Daily Reckoning Weekend Edition

September 30 and October 1st, 2000

Final Weekend in Q3

Paris, France

By Addison Wiggin

MARKET REVIEW: Earnings Fears Body Slam The Indexes… Savings Rate Hits Record Low…Denmark Rejects the Euro

The Four ‘E’s logged a final day victory in round three of their title bout for the Year 2000 this week – as worries over energy, the euro, and earnings continued to hammer the indexes.

The Dow closed down 173 Friday… marking a 197 loss for the week. But the ol’ boy retreated to his corner calmly at 10650… he finished Q3 up 1.9%, and analysts promise Monday’s Q4 bell will see him up and at ’em again.

Nasdaq’s Friday close of 3798 weighs in at a loss of 105 for the day and 131 for the week. Chez Big Tech was especially weakened by a round-house of earnings trouble at Apple – which tumbled down, down, down more than 50% on Friday, crumpling the all but lifeless to 25 and change.

“With oil hanging in there above $30,” John Myers reminds me “company’s who produce products made with petroleum – computers, air conditioners, ping-pong tables, tooth paste, building adhesives, detergents, plastic garbage bags, and paving asphalt – are going to see significant earnings troubles…” At this time last year oil was trading at around $10 a barrel.

The Nasdaq is 7.4% lower than its Q3 start and 28% below its springtime high of 5132. At 1436, the S&P 500 had closed down 21 for the day, but was only 12 points lower for the week.

The euro sustained a glancing blow, too, this week when the Danes rejected adopting the currency at the polls. The market, however seems to think the euro has had enough… the euro held steady at US$.88.

And the economy… well what can we say? “Incomes rose steadily in August,” the WSJ reports “but spending increased… even faster.” Sending the nation’s savings rate to an all-time low of negative 0.4%. Vive la bubble, folks, vive la bubble… we live in extraordinary times.

The Russell 2000 closed the week up 3 at 521.

The Wilshire Smallcap was up 2 at 859.

PRICES for the week…

Gold: $278.90, up $2.70

Crude Oil: $30.34, down $2.34

Natural Gas: $5.12, down $.01

Platinum: $579, down $6

Palladium: $707, up $20

CRB Index: 226 unchanged

Dollar Index: 113.25 down a quarter point

Yen: $.009 … same ol’, same ol’

The sad, sad Euro: $.88 up a cent from last week.

British Pound: $1.47, up $.02

MARKET COMMENTS: OPEC Blames Excessive Taxation for Oil Prices…A Great Time To Own Oil Stocks…

“…OPEC isn’t ready to take the heat for higher prices. This week the cartel issued this statement: ‘Excessive taxation on petroleum products accounts for the highest share of the final price to the consumers in the major consuming countries.’

Iranian Central Bank governor Mohsen Nourbakhsh agreed: ‘producers were told to adjust their economies, while consumer governments strengthened their economies by increasing taxes.’

Hmmmn… rising energy prices and falling stocks remind me of a time most bulls would just as soon forget. Long-of- tooth traders will remember – that was a very good period to own oil stocks…”

John Myers,

Real Asset Investor

*** HOT PICK OF THE WEEK: The “Hedonics Brawl” Heats Up… The Real Inflation rate…

“The great digital divide between America and Europe is least of all in the economies. It exists overwhelmingly in the statistics and propaganda.”

Dr. Kurt Richebacher

“The last two issues of Barron’s have included a series of articles challenging our own Dr. Kurt Richebacher. Specifically, his contention that the Bureau of Labor Statistics incorrectly measures the growth in GDP by using what are called “hedonic” measures…

…”hedonic price indexing” Richebacher maintains, has distorted the CPI and productivity figures – the very tools the Fed uses to determine the inflation rate and subsequently… monetary policy.

Point blank: the American economy and stock market are not as strong as they look.”

Dan Denning,

The Fleet Street Letter

For more on the “Hedonics Brawl”:

**** See: Dr. Richebacher’s article “Lousy Economics, Statistical Wizardry…Who Gains?” Below…

**** Note: I’ve also posted a letter from Bill detailing some eerie parallels between today’s market and the credit- financed stock market boom of the late ’20s… Plus, some very important differences: the euro; the use of hedonic measures in calculating GDP; and the true rate of inflation… all factors which make today’s market far more volatile than anything in US stock market history. To read Bill’s letter – and invitation to delve further into the hedonics debate – click here.


Of course, there’s more Weekend Edition to follow…

FLOTSAM AND JETSAM: Mencken and Gibbon on Religion

– Excerpted From “End Notes” in Doug Casey’s International Speculator

“Mencken loved to talk about religion, and in doing so made few friends among Boobus Americanus. It1s tough to pick any one of his hundreds of choice comments.

‘One of the most irrational of all the conventions of modern society is the one to the effect that religious opinions should be respected. …[This] convention protects them, and so they proceed with their blather unwhipped and almost unmolested, to the great damage of common sense and common decency. That they should have this immunity is an outrage. There is nothing in religious ideas, as a class, to lift them above other ideas. On the contrary, they are always dubious and often quite silly. Nor is there any visible intellectual dignity in theologians. Few of them know anything that is worth knowing, and not many of them are even honest.’

HL Mencken,

Minority Report, 1956, pg 380.

Gibbon attributed the fall of Rome as much to Christianity as anything else. Of course, who’s to say the Fall of Rome wasn’t a good thing, at least in the long run?

‘The policy of the emperors and the Senate, so far as it concerned religion, was happily seconded by the reflections of the enlightened, and by the habits of the superstitious, parts of their subjects. The various modes of worship which prevailed in the Roman world were all considered by the people as equally true; by the philosopher as equally false; and by the magistrate as equally useful. And thus toleration produced not only mutual indulgence, but even religious concord.’

Edward Gibbon, Decline and Fall

of the Roman Empire, 1777, Ch.2.”

Doug Casey,

International Speculator

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THE “C” SPOT: A Dangerous little corner of the brain where collective thinking occurs. It is useful in sporting events… cavalry charges, and political campaigns… and essential for reading the editorial pages without laughing… but otherwise it is an impediment to the human race and should be surgically removed. end WP import block

The Daily Reckoning