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 2 decades ago. We celebrated our 21st 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 Engineers Club was lit up with holiday lights… so was the women’s club next door. We outdid them — hiring a Scottish bagpipe player, dressed in traditional plaid skirt, and protected by two off-duty police officers (it is after all, Baltimore, a city with its own traditions to uphold). He piped away, as he does every year, welcoming our employees, friends and significant others to the party… and drawing the usual complaint to the police department from an irritable Scrooge of a neighbor.

Twenty-one years ago the bubble de 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 we recall Lenin’s prediction of using gold for the floors of public lavatories today, 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. 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 1978… one that was given last rites by the classic Business Week cover of a few 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 since 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 who Jim had met at Oxford, took up the project with enthusiasm and continues to do it even now.

In 1979, 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.

But even our contrarian instincts were no match for the profound changes of the next twenty years. Gold did not rise. It fell. The dollar did not move into Weimar-style hyperinflation. Inflation declined. The federal budget deficit did not fly out of control. It turned into a surplus. Stocks did not die. They went on Viagra.

And here we are — Christmas, Anno Domini, 1999.

I love the Christmas party. Everything and everyone is so pretty. And I find out things I never would have learned otherwise:

"Mister 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. We had just finished singing Christmas carols. Thom led the singing, playing a 12-string guitar for accompaniment, while I hacked away on the six-string in the background.

Holding a drink in her hand, she 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 offense, but this business sucks. Newsletters are gonna be out of business soon. Everybody’s getting on the Internet. But we’re not even close… our websites are a joke."

"Tell me more…" I replied, honestly. I wanted her to go on talking. A man never tires of being set upon by 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. There on Mt. Vernon Square was a bagpiper, of all things, and people walking in groups, singing, laughing.

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 buy with a couple of shares of Yahoo on a good week.

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 belly up.

Poor Bob, he had given up investing altogether and gotten 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 Internet companies.

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 declension in his high spirits; not coming for Christmas?"

Martha didn’t like to see him disappointed, if only in jest; so she came out from behind the closet door and ran into his open arms.

"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 a cripple, 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 Deutchebank/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 night was over.

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, sugar free, 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?

Tomorrow: The Ghost of Christmas Future

Bill Bonner
December 23, 1999

In Today’s Daily Reckoning:

*** Another lunatic day for the Nasdaq
*** Life in the real world
*** Russian Mafia in America

*** How about that market! The Nasdaq 100 rose another 33 points yesterday. The Nasdaq itself hit a new record. So did the S&P.

*** I didn’t even notice what the Dow did — who’s watching that anymore?

*** But the bear market that has 75% of stocks in its grip continues. There were 1419 advances yesterday on the NYSE; 1689 declines. 81 new highs. 344 new lows.

*** If my lunatic hypothesis is correct — and why shouldn’t it be? — the hysteria should begin to wane, along with the moon itself.

*** Did you see the moon last night? It was bright in France. And it has brought Internet hallucinations with it. A friend tells me that a young girl he knows went to work for Yahoo in France as a secretary or something… but along with her modest salary, she got options. Those options are now worth about $3.5 million. "Why would anyone want to work anywhere else?" he asked.

*** Meanwhile, in England the Footsie hit a new high — driven by high tech stocks. One, JellyWorks, rose to a 1,000% premium over the offer price.

*** The gap between the lunatic economy and the earthly one gets greater all the time. Hourly wages were growing at only 4.3% a year ago. Now they’re growing at only 2.3%. Annual wage increases were 5.2% in ’90. Now they’re 4.2%. But US workers are putting in more hours than any workers in the industrialized world. "In the real world, people are still living from paycheck to pay check," says a Princeton economist recorded by Business Week.

*** Bonds were down a bit…gold too. What happened to all those gold short positions that we worried so much about when the price soared in September? Many were probably liquidated at modest losses when the price of gold fell a couple of weeks ago. But many are probably still there… extended, and perhaps increased.

*** Curiously, the Internet average was down a little yesterday too — it did not follow the tech frenzy.

*** The mania has reached into other areas. Fortune reports that biotech stocks are now acting a lot like the Internets. Idec Pharmaceuticals was selling for $2 in ’95. It’s $125 now. A question: if the new wealth explosion is based on the Internet… why would biotech stocks be rising just as much? Answer: it’s a mania… not a rational response to rising productivity.

*** Supposedly, the biotech frenzy is being driven by hopes of a cancer cure. Was no one looking for a cancer cure in ’95?

*** The Moscow Times reports that the Russian Mafia is infiltrating US politics. Infiltrating? They’re getting engraved invitations. Two Russian businessmen affiliated with the Mafia, and thus denied visas, were photographed with Bill Clinton and Al Gore at a Democratic fundraiser.

*** The US economy is growing even faster than expected — at 5.7%. Of course, these figures are suspect, however, because of the phony way computer sales figures are calculated.

*** Addison von Lunz reports from Baltimore that the city breathed a sigh of relief yesterday. It hit the big "300" — someone shot a guy in the back of the head last night to put the murder toll for the year over the 300 mark. It is an annual ritual for 10 years now — to beat the 300 number. If the end of the year approaches, and the city is a little shy of the magic number, the mayor goes on TV to ask citizens to get out their guns and get to work.

*** Meanwhile, Thom tells me that jurors in Pittsburgh were asked to show up for duty on Jan. 16, 1900. In an other Y2k incident, people were sent water bills with 100 years’ of interest. And Saturday, the power went out in our office.

*** Most people have Y2k fatigue — they’re tired of worrying about it. But the dangers are still real. And no one has done a better job of explicating them than our own Dr. Gary North. No one knows what will happen, of course. The damage could be light — or more horrible than anyone expects. We’ll know soon.

The Daily Reckoning