The More Things Change

I got a message on the Internet yesterday. A news report is being circulated that says people are being recruited to work as telephone psychics in New York. Apparently, the market is so strong for psychic services that a labor shortage has developed. The job offer says that “training will be provided.”

Ah…if only you could be trained to look into the future.

I find myself unable to do it. And anyone who claims he can is a liar, a fool or a telephone psychic. All we can do is look into the past…and, maybe, looking backwards, we might see darkly a dim reflection of what is to come.

As soon as automobiles were invented, futurists began to predict the next logical thing — the flying car. In fact, flying cars were a staple of every science fiction and futuristic fantasy for many decades. Yet, here it is, 100 years later. Where are the flying cars?

Another thing that seems to be missing is space travel. This, too, was the logical extension of thinking about where space exploration and commercial aviation might come together. Remember the movie “2001”? Made in the `60s, the film predicted that by now commercial space travel would be in full swing. You would be able to go to work or vacation at an orbiting space station just as you might take a trip to Europe.

Not only that, but “2001” predicted that computers would learn to think — and become dangerous. This, too, was a standard feature of much of the science fiction genre.

Need I point out that we are almost at 2001 — and routine, commercial space travel remains far in the future? And evil, thinking computers? Well, we all work with them every day.

Mr. Deport, the farmer I talked about yesterday, noted how much life has changed since he was a boy. The price of wheat has fallen. It is impossible to find farmhands willing to work for low wages. Small farms are no longer profitable — unless they master some high valued added product such as specialty cheese or designer vegetables.

“And things seem to be changing even faster now,” he said, voicing a popular observation. But I wondered if that was really so.

When Mr. Deport and I were children — in the 1950s — we had television, telephones, automobiles, trains, electricity, refrigerators, record players, freeways…and drive-in movie theaters.

With the exception of the drive-in movie theaters, we lived not so much differently than we live today. The major breakthroughs — in science, technology, medicine, politics and entertainment — took place not in my lifetime, but in the lifetimes of our parents — and many readers of this “Daily Reckoning.”

The first half of the century produced the two World Wars. Just reading about them today is to pass through a veil of wonder and amazement. Could these things have actually happened during my mother’s lifetime? Could they even have happened on our planet?

The Russians, for example, lost 2 million people in the first three months of WWII. There were so many corpses on the ground in the Eastern Front that both sides used them to build “corduroy roads” through the swamps…laying them down like railroad ties so that mechanized transport could make their way over soft spots.

German soldiers at Stalingrad went to sleep in their bunkers with feet numb from the cold. They woke up to find mice had eaten off their toes. On both sides, soldiers and civilians alike resigned themselves to death — as if in the service of some great calling or obligation…millions of them — on the most colossal fool’s errand of all time. And yet, who objected?

The Soviets tried to demoralize the Germans and their Italian, Rumanian and Austrian allies — by playing tango music day and night! But it wasn’t the music that did the Germans in. It was monumental imbecility. The generals read de Caulaincourt’s history of Napoleon’s fiasco against Russia and joked about it. They could not believe that the same thing would happen to them. It was supposed to be a new era — brought about by the introduction of mechanized warfare!

By 1942, Germany was producing 500 tanks a month. But the Soviets were producing 1,200 per month. And the Russian tanks were better designed for the terrain. Hitler had faith. If he were alive today, he might be managing an Internet fund — and making a fortune. Instead, he applied his vulgar form of Nietzsche’s idea of willpower to warfare. If the generals cannot win at Stalingrad, he said, it wasn’t because they lacked the materiel…or because their tanks were stuck in the mud…or because the engines were so cold they wouldn’t start. It was because they lacked the Will to Victory.

I mention Stalingrad because it was the turning point in the war. The Germans lost — big time…and were soon rolled back all the way to Berlin.

This marked the end of Hitler…and the end of the whole period of Prussian militarism…Japanese militarism was doomed, too. And soon the whole culture of political violence was swept away. If there is one thing people agree on today — it is that Hitler was a bad egg. And so was Stalin. People want no part of them.

Stalinism persisted for a few years into the second half of the 20th century…but the handwriting was already on the wall by the time Mr. Deport and I were born in 1948. Khrushchev, who played a key role at Stalingrad, publicly denounced Stalin’s errors in 1956 — so the whole world knew, even if many decided not to notice.

By 1948…the world we lived with for the whole second half of the century was pretty much in place. Communism was fading as a creed. Violence was getting too expensive…and had lost its appeal. There have been a few wars here and there in the second half of the century — but nothing on the scale of WWI and WWII.

By 1948, the major technological breakthroughs had been made, too — the jet engine, the television, penicillin.

In 1900, most people lived on farms and did their work with teams of horses. Our farm in France had a compliment of 40 people who tilled the soil, tended the vines, cleaned the house, baked the bread and sawed the firewood in a manner not too different from the way it was done 100…or 1,000 years before.

But by 1948, tractors had appeared. People were already moving to the city to get jobs. Leon Blum had introduced the vast social welfare state to French politics two decades before, and Franklin Roosevelt had done the same for America in the `40s. McDonald’s was already serving burgers. The highway system was already under construction. And TWA was already flying passengers all over the world.

Computers had made their appearance, too. And though they are now thought to be speeding up the pace of change throughout the world, there is little evidence of it. GDP growth during the last eight years has been modest compared to the levels of the `50s and `60s. Computers are said to be improving efficiency and productivity in the office — but there is no proof of it.

In short, it was not the baby boomers who saw the big changes — it was their parents.

Until tomorrow,

Bill Bonner

Baltimore, MD February 1, 2000

*** Another rocking, socking day on Wall Street yesterday. This time the dead cats and dogs bounced back a bit from Friday’s fall.

*** The Dow rose 201 points. The Nasdaq, down 100 points in the middle of the day, bounced high enough to close 53 points higher.

*** Volume was suspiciously low, however. Most investors probably stayed away — unsure what to do.

*** “This is the most deceptive market I’ve ever dealt with,” says Richard Russell in today’s commentary at He’s referring to the fact that even though the Dow rose 201 points — most stocks continued to fall. The advance/decline ratio fell…and the number of new highs, 21, was no match for the number of new lows, 175.

*** Stocks are still going down — just as they’ve been doing for more than a year and a half.

*** But yesterday was a milestone for the economy. It broke the record for the longest uninterrupted expansion in history. The previous record was 106 months of growth ending December 1969. I guess I don’t need to point out that the end of a long expansion is not the ideal time to buy stocks. Typically, one is better off buying assets at the beginning of a boom.

*** The “WSJ” notes what an odd boom it has been. Many people earn less today, adjusted for inflation, than they did nine years ago. Teachers, for example, and salespeople, food-service workers and airline pilots. And I feel sorry for ministers — their pay is down nearly 10% over the period.

*** Meanwhile, according to the Commerce Department figures, consumers are saving less than ever before. All together, Americans earned $7.9 trillion in December and saved $100 billion.

*** I also note that margin debt increased by a whopping 62% last year, which is not a healthy sign for stock market stability.

*** The euro just keeps going down. It’s worth just a little more than 97 cents. I warned against the “Esperanto currency” six months ago. But I wouldn’t bet too heavily against it now. It’s main rival, the dollar, looks overbought.

*** One of the things weighing on the euro is the political situation in Austria. The anti-immigrant Freedom Party of Joerg Haider came in second in the national elections. But his party is said to harbor people with neo-Nazi inclinations. Democracy is fine…so long as it produces outcomes acceptable to the ruling classes. So, Euroland officials in Brussels have warned that if Haider is brought into the government, Austria will be isolated.

*** Among the correspondence I get from DR readers is a complaint: “Doom and gloom…that’s all you have to say. It’s depressing.” Well, just to show you that I can think POSITIVE, too — here’s another stock that forgot to put a dot-com after its name and is stuck in the Old Economy at a pathetic price. It’s another homebuilder, mentioned in “Barron’s” by a couple of the Roundtable panelists.

*** D.R. Horton operates out of a converted schoolhouse, for which it pays about $4 per square foot. It expects to sell about 19,000 new houses this year…and make money on each one of them. At current prices, it’s selling for only about 4.7 times earnings.

*** But remember, when the Wealth Effect turns into the Poverty Effect, house sales will go down. People who do buy will want fewer expensive options. And stocks as cheap as D.R. Horton may get even cheaper. (There’s that old doom and gloom again…just can’t get away from it.)

*** Baltimore looks better covered with snow. It covers trash and keeps the bums off the streets.

The Daily Reckoning