The Ghost of Christmas Present
"Fezziwig, not Scrooge."
This was my mother’s advice when I began my business career.
Hard to imagine, but that was already more than two decades ago. We celebrated our 22nd annual Christmas party on Friday evening.
It seemed as though everyone had the same idea for Friday night.
On Mt. Vernon Square, people dressed in gowns and tuxedos, suits and jeans, often carrying shiny, wrapped presents under their arms, made their way to parties. The Engineer’s Club was lit up with holiday lights…so was the women’s club next door. We outdid them – we had so many Christmas lights strung up that the whole city of Baltimore seemed to go dim when we turned on the switch. And whatever power we didn’t consume in light was promptly converted to decibels – Thom’s blues band entertained us with holiday favorites like "Dead Blind Man’s Christmas Blues" and "Mean Mrs. Santa’s Got Her Clause All Over Me." It was not the kind of Christmas music I recalled from my childhood. But we have among our employees Muslims, Hindus, Jews, Kwanzaans, nail biters, skinheads, and vegetarians. The nice thing about Thom’s band is that it was equally offensive to everyone, which seemed to be in keeping with the spirit of Christmas. The music was so loud that we couldn’t hear ourselves talk, which was okay, inasmuch as we had nothing to say anyway. So we shouted out our holiday greetings and lip-read best wishes for the new year, neighbors a block away called the police to complain – and the party was a big success. When I began my business the bubble du jour was in the gold market, where the price of the yellow metal had just hit its zenith – reaching above $850 an ounce. Just as, today, we recall Lenin’s prediction of using gold for the floors of public lavatories, back then we spoke of using stock certificates to paper the walls of our storage closets. Stocks were beneath contempt.
People were less interested in getting rich than they were in avoiding poverty. They did not dream of becoming millionaires so much as they had nightmares about dying paupers.
In the 2nd year of Jimmy Carter’s presidency, America’s perch on top of the world seemed much more precarious than it does today. It was not at all obvious that the greatest bull market of all time was about to begin.
At that time, stocks yielded as much as bonds yield today – more than 6%. But investors wanted neither stocks nor bonds. They wanted hard assets and natural resources. Oil seemed like the investment of the future. Buying Exxon seemed like the "sure thing." Buying gold seemed like an even greater "sure thing", for even if the economy collapsed, as was widely predicted, the price of gold would rise as the dollar became worthless.
Stocks generally were viewed as a dying asset class in 1980…one that was given last rites by the classic Business Week cover of a couple years later…the very bottom of the market…"The Death of Equities."
It was hard not to recall these things as I saw many of my old friends at the party, many of whom you may know, if not in person, by reputation. Jim Davidson was there. So was Lynn Carpenter. I have known both of them from childhood. We all failed to grow up together. Jim has grown a little more distinguished looking, and a lot richer. But otherwise, I wondered how much had really changed.
Jim and I got together with Mark Hulbert to launch the Hulbert Financial Digest, back in 1978. That was the beginning of our publishing business. We were curious about what kind of investment advice really paid off. We thought investors would be too. Mark Hulbert, a student of philosophy whom Jim had met at Oxford, took up the project with enthusiasm and continues to do it even now.
In 1980, our contrarian instincts told us that gold and natural resources were probably overbought. Doug Casey predicted a bull market in stocks in the early 80s. Gary North even recommended buying Microsoft in 1986 – an investment that turned out to be the call of the decade. Still, we were all "gold bugs" – more or less. We were convinced that inflation would destroy the dollar, bonds and the stock market – it was just a matter of time! And maybe it still is. But in the 20 years since, gold did not rise. Not $100. Not $10. Not $1. Not even a penny. Instead, it fell – in real terms – by about 80%. The dollar did not move into Weimar-style hyperinflation. Inflation declined. The federal budget deficit did not fly out of control. It almost turned into a surplus. Stocks did not die. They enjoyed the greatest growth cycle ever…
And here we are – Christmas, Anno Dominus, 2000. Richer? Maybe. Wiser? We can hope. Older? Definitely.
"Mishter Bonner," said one young woman, in a red velvet dress, late in the evening, slurring her syllables a bit, "I’ve wanted to say this to you for a long time. I love this company. I mean it’s great."
She was standing near the fireplace in the front room, with the Christmas lights adding a glow to her cheeks. I had just finished my annual ritualized humiliation. Thom had invited me to join the band. I sang the lead to that Christmas morning classic, "You Can’t Always Get What You Want." I couldn’t quite remember the words…or the music. But other than that I’m sure my performance was smashing.
Holding a drink in her hand, the young woman looked like someone I had seen in a liquor ad. Who was she? I didn’t know. Someone’s wife? Someone’s girlfriend? An employee in the accounting department?
"But y’know something…there’s just one problem…"she went on.
"Oh?" I replied, Fezziwigishly.
"C’mon…" she continued, "I mean, no offence, but this business sucks. Newsletters are gonna be out of business soon. Everybody’s giving away information on the Internet. Like, you can get, I mean, like all you want."
"Oh no," I reminded her, "you can’t always get what you want. And you definitely can’t get all you want of it."
Then, worried that I had placed an obstacle in her path…a puddle of repartee she couldn’t cross gracefully…I laid down my cape:
"Tell me more…" I said, honestly. I wanted her to go on talking. She was talking nonsense, but a man never tires of nonsense from a beautiful woman.
* * *
While this was happening, Ebenezer was being set upon too. But his was no earthly beauty. No beauty at all, in fact.
"Come with me," said the spirit. "I am the ghost of Christmas Present. Look upon me. Touch my garment."
Ebenezer did so and instantly found himself flying through the streets of Baltimore. Even from what seemed like hundreds of feet up in the air, he could hear the music blaring on Mt. Vernon Square. "What a strange time for a rock concert," he muttered to himself.
Christmas lights were run up the tower of the monument to George Washington and caused the whole square to glisten festively.
But the ghost did not pause. He continued his flight across Charles Street and over to East Baltimore. Finally, he stopped in front of a modest row house.
"What is this?" asked Ebenezer of his guide.
"This is a house."
"Yes, I can see that," Ebenezer pursued the issue, "but why are we here?"
"That is for you to answer," replied the phantom.
Ebenezer looked in the window. It was a very modest house, of the sort you could have bought with a few shares of Cisco a year ago. Now it would take twice as many shares.
And there was a family…and yes…he recognized now where they were. This was the house of his old trading partner, Bob. He had not seen Bob in 15 years – not since the two of them split up after their hedge fund went bust.
Poor Bob, he had given up investing altogether and got a job at a mining company. Silly bugger, thought Ebenezer, he saved his few pennies and bought gold coins. He probably has hundreds of them buried in the yard. Not worth the trouble of digging them up.
And he could have bought growth stocks…!
Bob’s wife and three daughters were talking in the front room. How pretty the girls were. And so full of life.
"Martha," said Bob’s wife, "Dad will be so glad to see you. We have so much to do to get ready for Christmas. But sit down in front of the fire. It will be so nice…now that you’re here."
"Oh…there’s Dad’s car," said another of the girls, with red, curly hair like that of a doll, "Hide, Martha! Let’s surprise him."
So Martha hid herself, and in came Bob. And there upon his shoulder was Tiny Tim. Alas, he bore a little crutch, and had limbs supported by an iron frame.
"Now, where’s our Martha?," asked Bob, looking round.
"Not coming," said his wife.
"Not coming," said Bob, with a sudden deflation of his high spirits, "not coming for Christmas?"
Martha didn’t like to see him disappointed, even if only in jest; so she came out from behind the closet door and ran into his open arms. "Oh there you are! I knew you wouldn’t disappoint us. It wouldn’t be Christmas without you and all the children."
"And how did little Tim behave in church?," asked Bob’s wife.
"As good as gold," said Bob, "and better. Somehow he gets thoughtful, sitting by himself so much, and thinks the strangest things you ever heard. He told me, coming home, that he hoped the people saw him in the church, because he was ‘disadvantaged’ and it might be pleasant to them to remember upon Christmas Day, who make lame beggars walk, and blind men see."
Ebenezer could barely suppress a "humbug." For he knew there were advances coming in the biotech and microtechnical sectors that would cure cripples and blind people. He had seen the IPOs go up by 10 times. It was just a matter of time until all of life’s inconveniences were done away with. And anyone who cared to could be rich too – they just had to stop being so stupid and stubborn, like Bob. Get with the program, for Pete’s sake.
The evening dinner progressed, with Ebenezer and the ghost watching. The table was set, the whole family seemed in motion. Everybody had something to do…and something to say, well, about everything!
And such merriment!
"A wonderful dinner," said Bob to his wife. "And the pudding was sensational."
His wife confessed that she had doubts about the pudding. Even in a low-inflation world, Christmas puddings can be expensive. And, in truth, it was a rather humble pudding, Ebenezer thought, for such a large family. He had seen that much left on the used plates at the Deutsche Bank/Alex Brown party the day before.
But no one said a word to suggest that it was a small pudding. Any member of the family would have blushed to hint at such a thing.
And when it was over, the cider was brought out and passed around. Bob proposed a toast: "A merry Christmas to us all, my dears. God bless us."
Close by his side sat his son, Tim. Bob held the withered hand in his, as if he feared the boy might be taken from him.
"Spirit," said Ebenezer, with an interest he had never before felt, "tell me if the boy will live." Even with all the advances of medical science, Ebenezer somehow sensed the answer was by no means certain.
"I see a vacant seat," replied the Ghost, "in the poor chimney-corner, and a crutch without an owner. If these shadows remain unaltered by the Future, the child will die."
* * *
By the time the ghost of Christmas Present left Ebenezer, our own Christmas party was coming to a close. The guests were leaving, one by one, and in small groups. Arm in arm, many of them made their way up to the top floor of the nearby Belvedere Hotel where they continued to enjoy a night of good cheer – until the good cheer was gone and the night itself was used up.
But I was worn out and retired to my small apartment around midnight. In less than 10 minutes, I was asleep in my bed, with visions, perhaps not of sugar plums but maybe of some kind of plums, dancing in my head.
Around about 4 AM – I looked at the clock – my sleep was disturbed. There was a tremendous racket on the steps. What ghosts were these, I wondered?
December 24, 2003
P.S. Tomorrow: The Ghost of Christmas Future…
Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the No. 1 NY Times and International Best- seller: "Financial Reckoning Day: Surviving The Soft Depression of The 21st Century" (John Wiley & Sons).
"Christmas is a capitalist plot."
The message was scrawled on the wall of the Paris subway. We are still puzzling over it.
The ‘recovery’ depends on Americans’ willingness to buy more things. But who doesn’t have enough things already?
If Americans buy enough new things, the reasoning goes, the GDP will go up and we will all be so much better off. Consumer spending is 70% of the economy, we are told, so buying things is the key to growth. "Go out and buy a new SUV, preferably a Navigator," urged Robert McTeer of the Dallas Fed, a couple of years ago. If consumer spending fell off, he explained, the whole economy was doomed.
But we can’t help but think that the whole hullabaloo – over the ‘recovery,’ growth, consumer spending, THINGS, and even the idea of consumer ‘wealth’ itself – is a giant practical joke that must have the gods clutching their stomachs and rolling in the clouds. Christmas is no fraud… but holiday spending surely is a plot against capitalism.
We only bring this up because trading is slow on Wall Street. There is little news to annoy and distract us. "Shoppers out in Force," is the best Reuters can do. Why not take a moment to think about THINGS?
We have pointed out – so often that you must be getting sick of reading it – that the ‘recovery’ is a fraud. The Feds never allowed a real recession… so there was never anything to recover from… and no savings or pent-up demand to recover with.
But even if there were a real pick-up in consumer spending – what good would it do? If I drink a bottle of whiskey or take a vacation to the south of France, am I a richer man for it? Or a poorer one? Real wealth is the ability to produce things… not consume them. The man who makes the whiskey is increasing his wealth. The man who drinks it is giving himself a handicap… he is consuming his wealth. Now, imagine that the man has no savings and is already living beyond his means. How can he buy whiskey without going deeper into debt? For him, every purchase not only makes him poorer, but brings him closer to his own ruin. He cannot borrow forever. Sooner or later, his creditors will wise up and stop spotting him money. Then, he’ll be in a serious jam… with no way spend… no way to borrow… and no way to get out of his hole without trimming his expenses and paying off his debt.
What a disaster! And yet… what difference would it make if the average American had to forego buying more things? Would his life really be less agreeable with fewer gadgets from China cluttering his house? Would he be worse off if he drove a Kia rather than a Navigator? Would his family be less happy… would his life be less rich or less interesting… if he read a book from the library, rather than going to the movies? Would his wife really be disappointed if he passed a romantic tête-à-tête at home… rather than watching his new big screen TV or going out to a basketball game?
That is why we are such optimists, dear reader – we look forward to our own ruin. We welcome the end of the consumer economy. Americans will be able to afford fewer things. Which would not be a bad thing, in our opinion.
Here’s more news, from Addison:
Addison Wiggin writing from New Hampshire…
– The lesser of your two evil Parisian editors had to interrupt his study of the days market news this morning for a noble purpose: he had to feed a brood of hungry children a hearty New England breakfast.
– The family has gathered deep in the Mink Hills of New Hampshire’s lakes region to fête up the holidays. Your editor rose early to beat the morning din. And almost succeeded. Alas, while contemplating the pointlessness of covering the markets on Christmas Eve, a little voice said: "Uncle Addy, can you help us decide what to make for breakfast?"
– The children (six of them this morning, more on the way) set the table themselves, then began to wonder what to do next. There wasn’t an adult to be found. Undaunted, we stoked up wood stove, fired up the griddle, threw on some bacon and eggs, slathered maple syrup on whole wheat pancakes, sliced a few apples, corralled the troops… and voilà, adults began popping out of the woodwork.
– Back at his post, your editor discovered that Mad Cow disease has been discovered on the homeland soil and is threatening the U.S. markets this morning. Now that’s a wonderful Christmas story, isn’t it? And sure to be the subject of many a Christmas table discussion tomorrow. How many, we wonder, bovine spongiform encephalopathy experts will be spontaneously generated overnight?
– Of course, nobody save the odd farmer whose herd will have to be destroyed will ever be affected by the "news." Still, if the scare two years ago in France is any indication of what to expect, at every holiday table in America the family know-it-all will be putting the fear of God into ignorant steak and hamburger eaters. Beef producers will suffer the consequences.
– Yesterday, McDonald’s – the behemoth beef consumer – got whacked for 6.6% and dragged the Dow down 17 points with it. Of the 30 companies that make up the Dow, 25 suffered losses. The Nasdaq lost 7 points to 1,967 and the S&P 500 fell 2 points to 1,094.
– Ahhhh… life in the age of information… beware the Mad Cow expert at a table near you.
– "Looks like your doom and gloom predictions are going to pan out," your editor’s mother said yesterday, referring to the themes in our book. The evidence? Consumer spending, upon which rests 70% of the fraudulent recovery, is lagging this Christmas season. "Durable goods orders plunge in November," reads a headline on CBSMarketWatch.com. Wal-Mart reported that a slight uptick in last-minute shopping would not be enough to offset the weak holiday season thus far.
– The current ray of hope for retailers? A 49% increase in gift certificate sales. These sales will be logged when cashed, presumably in January. Hopes now rest on the post- holiday sales season… to save the world as we have known it! And so it goes.
– Here’s more evidence, to "Any assessment of Alan Greenspan’s long tenure at the Federal Reserve has to present the stock bubble as his biggest failure," writes Dean Baker of the Center for Economic & Policy Research. "After his failure regarding the largest financial bubble in the history of the world, [which destroyed more than $8 trillion in paper wealth] it looks like Greenspan is now actively promoting the world’s second-biggest bubble: the housing market."
– Comparing the rise in prices in the rental market v. those in the homes sales market, Baker sees not only a bubble in real estate – but a bursting one on the horizon. "From 1998 to 2001, rental prices rose more rapidly than the overall rate of inflation, but not nearly as fast as home prices. If higher home prices are the result of a real shortage of housing, then rental prices should continue to rise to catch up with homes prices. That isn’t happening. Rental prices are barely moving as record vacancy rates nationwide force landlords to hold the line on rents. In bubble areas, such as Seattle and San Francisco, rents are falling."
– "Where does Greenspan fit in?" asks Baker. "He has promoted the housing bubble by reassuring people in public statements that there is no bubble. He also helped drive mortgage interest rates to 40-year lows earlier this year – allowing people to spend more money on houses, which adds to price inflation and to the bubble."
– Well, at least it’s Christmas… enjoy the holiday (while you still can, heh heh)…
Bill Bonner back at Ouzilly…
*** "I was amazed," commented our French teacher last week. "I mean by the reaction of my American students. Here in France there has been a lot of discussion about whether it was a good idea to show those photos of Saddam Hussein all over the world. I don’t know, of course, but what is amazing is how the Americans react. If you ask Europeans you get a mixture of reactions. Many think it was a mistake to humiliate the man that way. The entire Arab world might feel a little humiliated. It was a little vulgar… a little unseemly… a little unbecoming a great and gracious world power. So, you could at least have mixed feelings about it… "
We raised no objection in defense of our countrymen. Sylvie continued…
"But my American students all said it was a great thing. They all thought that it would finally allow the Iraqis to feel free from the tyrant. And after I explored the issue a bit with them, none seemed willing to even consider a more nuanced view. That is what is so astonishing about Americans. They are so sure of themselves. They see things in black and white and are completely unable to admit that they really don’t have any idea.
"Present company excluded, of course… "
*** Elizabeth is an optimist.
The kitchen was a hive of activity this afternoon. Your editor, down with the flu, watched it, barely conscious, from the couch in front of the fire.
"How are you feeling, Daddy," the girls would ask.
"Would you like to try a piece of the fruitcake or a chocolate chip cookie?"
"Can I get you a glass of punch?"
His mother, daughters and wife had made mulled wine, Christmas cookies tarted up in red and green sugar, fruitcake, egg nog, brownies and little salmon sandwiches. But all the Daily Reckoning scribbler could do was to groan and shiver.
Later in the day, we put on our traditional Christmas caroling party for friends and neighbors, as we have done for the last few years. There are no other Americans in the area but several English families have moved in. We invited them over along with our French friends.
We sing some carols in French and some in English. This year, as every year, the French could not sing the English carols, nor the English the French carols. Nor did the English sing the English carols to the same tunes we do.
Still, Elizabeth keeps trying… and after enough fruitcake and eggnog, no one seems to care.
*** There is no place like home for the holidays. This place in rural France, thousands of miles from our native mud, has become our home. With all the family gathered round, it has become the perfect place to adjourn for Christmas – serene, beautiful, enchanting.