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 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 Engineers 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 those holiday favorites such as “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, kwanzans, nail biters, and skin-heads, vegetarians, and followers of the late prophet Elijah E. Neuman, who claimed to have been reincarnated from the spirit of Rocky the Flying Squirrel, and believed he could leap from tall buildings without suffering severe injury.

It was tragic what happened to him. He took a dive off the roof of a low-rise Subway shop on North Ave and sprained his ankle. But as he was getting up, someone shot him.

Thus martyred at 23, he has become a cult figure locally.

Anyway, 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.

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, 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 even 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 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 offense, 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 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 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 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.

“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 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 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 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?

Bill Bonner Paris, France December 22, 2000

P.S. I will conclude this story on Monday – Christmas Day.

*** ‘Here comes Santa Clause, Here comes Santa Clause…’ my sources tell me you could practically hear them singing on Wall Street yesterday. Why? Rumors circulated that Alan Greenspan was on the phone talking about a ‘surprise’ rate cut.

*** And who knows? Maybe Old St. Alan will come through with a rate cut sooner, rather than later. But no matter how soon, it is likely to be too late. The economy is breaking down faster than expected. And the negative wealth effect is so great it cannot be reversed by a few basis points.

*** At least, that’s my story…and I’m sticking with it until it is proven wrong.

*** Eventually, the markets make fools of us all. But how? When? That will be the big surprise.

*** But, yesterday, investors were content to believe that the Fed would come to the market’s aid with lower rates. The Dow regained most of its loss on Wednesday…and even the Nasdaq managed a token gain. The Dow rose 168 points; the Nasdaq inched up 7 points.

*** There were 1619 stocks advancing on the NYSE; 1230 declined.

*** “Value Stocks Experience Rebound,” says a WSJ headline. Fund manager Richard Rosen: “After the Nifty 50 in the early `70s, we had seven years of value, and after the energy crisis of the early `80s, we also had seven years. I expect the same here, now that the tech bubble has burst.”

*** “Investors seemed to be rediscovering companies with earnings, revenues, and viable business models,” noticed Companies with none of those things – notably, the Internets – continued to fall. The index was down another 8% . And The Standard reported that online ad revenue fell for the first time ever. It declined 6.5% in the 3rd quarter.

*** Amazon lost $1.50. Palm fell 32 points. Real Networks took a really big hit – minus 44%.

***, itself, made news yesterday, announcing that it would spend $10 million buying back its own shares on the open market. A cynical observer might suspect that the insiders want out at a better price. The stock, which had dropped below $2, rose more than 40% on the news. Notice to shareholders: if you want out and are willing to sell for less than a dollar, talk to me.

*** One of the major shareholders in is Flatiron Partners, a New York venture capital firm. The WSJ reports that Flatiron backed 55 new ventures. 11 of them went public, everyone of which now trades for less than its IPO opening price.

*** The WSJ piece tells of a recent Flatiron start up: On October 25, Scout Electromedia, makers of a $99 pager – Modo – that alerted its users to movie reviews, restaurant tips other vital entertainment information, held their launch party at Hollywood’s trendy Le Deux Cafe. But even before the champagne bottle cracked against the bow of the ship it had slid into the water and sank beneath the waves. Just the day before, Scout they received a fateful email. The company was informed that its backers who just a few weeks earlier had showered praise on Modo, were pulling the funding plug. Scout had exhausted the $22 million in venture backing including millions from lead investor, Flatiron Partners.

*** You win some and you lose some in the venture capital business. But the Flatiron Partners will probably still be able to afford a Christmas pudding. Like most venture groups, they get their shares for pennies during early stage financing. Flatiron has turned $250 million invested between 1996 and the end off 1999 funds into $1.2 billion.

*** Capital was absurdly cheap in the last half of the last decade of the last century of the 2nd millennium. A company like could raise hundreds of millions – without ever having to prove that it could make a dime. It has never made a dime. The money was frittered away…and now and companies like it are fast running out of cash – with no way to raise more. For while the cost of capital was cheap in the last millennium, it has become very expensive in the new one.

*** Bloomberg reports that junk lending (to high risk borrowers) has fallen off for the first time in 8 years. Investors, as I have pointed out, are becoming less concerned with the return on their capital. They’re worried about the return OF their capital.

*** “Analysts, economists and business executives now worry,” reports the New York Times, “that the [credit] binge may take years to cure.” People who expect a quick fix from Alan Greenspan may be disappointed. After the market crashed in ’29, it took three years before the Big Bottom finally arrived. Following the top out in 1968, in real terms, the bottom was not reached until 14 years later. And in Japan, the market crashed in 1989. As of this morning, stocks were just 3% above the low recorded in 1998.

*** The Big Techs have been taken down. Cisco is down 55% from its high. Intel, 58%. MSFT 65%. Ebay 78%. They have not gone down as much as the Internets – but because they were much bigger stocks, more people have lost more money,

*** And as of this morning, Juniper Networks is still worth $30 billion – or more than the value of GM. Juniper has sales of only $102 million. But GM has $17 billion in sales. There is still a lot of room on the downside.

*** A headline in the International Herald Tribune warns that the dollar may have a lot further to fall too. The virtuous circle of the `90s, the article explains, has been replaced by a vicious one. Falling stock prices cause foreigners to withdraw funds from U.S. assets. The dollar falls. This makes the performance of dollar assets even worse. So they sell more.

*** Investors’ Business Daily’s Mutual Fund Index shows the leading funds with a 22.5% loss for the year. This is about what the average investor is realizing. Half the families in America own stocks and for the average stock-holding family, stocks are the number one asset.

*** My own family seemed happy to see me when I finally got home last night – especially since I was carrying a bag of Christmas presents I had bought on my trip to America. Today, we’re packing up the van and heading out to the country for the vacation – along with, it seems, almost every other family in Paris.

*** The roads out of town are going to be packed. Jean-Luc Goddard made a movie about the holiday exodus back in the `60s. In the film, people spend the entire weekend in a traffic jam.