The Daily Reckoning Weekend Edition

October 7-8, 2000

Paris, France

By Addison Wiggin

MARKET REVIEW: The Anti-Wealth Effect…All Indexes Down For the Week…

“The Wealth Effect has gone seriously into reverse,” Bill Bonner wrote in the Daily Reckoning on Friday… the Nasdaq, suffering severe Big Tech earnings warnings lost a total of 8.5% for week. The index is down over 15% for the year.

Some $800 billion in paper wealth has – vanished.

Yesterday witnessed a one-day drop of 3.2%… as the Nasdaq closed down 111 to 3,361. It’s a curious thing to predict market weakness. When you’re right, you’re right. But who’s happy about it?

The Dow and S&P 500 both lost ground, too. Both indexes surrendered all their gains from an otherwise stable week. The Dow – down 128 to 10,596 – ended 54 points lower than Monday’s opening. The S&P lost 27 on Friday, and 28 for the week.

Friday, 1,969 stocks dropped on the NYSE, while just 850 rose. Ouch.

The employment numbers didn’t help… Friday at 9:30 the BLS announced unemployment dropped to 3.9% in September. The report was absorbed by the market as bad news – and helped soften it up for the day’s selling. “In the wake of the Fed’s decision on Tuesday to leave interest rates unchanged,” reports the WSJ, “[Greenspaon and co.] remain on alert for inflationary pressures.”

Tight labor markets, skyrocketing real estate prices (+ 11.4% in Seattle, +15.4% in DC), and prices at the pump are keeping the FOMC on their toes… easy money, ain’t so easy anymore…

This week, saw trouble for central bankers on the other side of the Atlantic, too. The European Central Bank surprised everyone and raised rates a quarter point, nullifying the G7 bail-out efforts the week before. The euro dropped to $.86.

Overall not a good week for the investing class. Even the broad market indicators got humped: The Russell 2000 closed at 491, down 30. The Wilshire Smallcap shed 67… closing at 792 Friday.

PRICES for the week…

Gold: $269, down $7 bucks.

Crude Oil: $30.86, up $.52

Natural Gas: $5.08, down $.04

Platinum: $590, up $11

Palladium: $749, up $42 (volatile stuff, this palladium.)

CRB Index: 226 unchanged

Dollar Index: 114 up a point

Yen: $.009 (yawn)

The sad, sad Euro: $.86 down $.02 despite Wim’s best intentions

British Pound: $1.44, down $.03

FLOTSAM AND JETSAM: This Week The Daily Reckoning Announced An Agreement with Grant’s…

– Excerpt of a letter from Bill Bonner

“…The Grant’s team – located right on Wall Street (which I don’t hold against them) – does the kind of research that Goldman Sachs or Merrill Lynch analysts ought to do, but don’t.

You’ve heard me mention some of their suggestions in my daily emails: Finmeccanica, Dana Corporation, Ariba. Finmeccanica is a stock I especially like because it’s a) cheap, b) a defense contractor, and c) it is priced in euros.

Again, it was Grant’s team of analysts who discovered it. Unlike most analysts on Wall Street, the Grant’s people actually do research and analysis. So, they not only find good value situations…they also reveal anti-value when they find it.

The most recent report from Grant’s, for example, provides more evidence of what I have described as the “exploitation of the capitalists by the workers.” 3Com of Santa Clara, CA, sold off its Palm unit…and generously re-jigged its managers’ stock options…so that the managers, who had a claim on 4% of the shares before the Palm spin-off, ended up with more than 20% afterwards.

Grant’s is about the only service that does this kind of research – a welcome relief from the ceaseless cheerleading and bullishness of the mainstream financial press.

What’s more, their reports are so elegantly written that my jealous little writer’s ego shrivels each time I read it.”

– Bill Bonner

Have a great weekend,


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SENSATION MONGERS: People think the news media just report the facts. Yet, a zillion things happen every day…and the news media doesn’t mention any of them. Instead, the media confines itself to amplifying the madness of crowds and reporting all the news that fits its “group-think” agenda.

The Daily Reckoning