The Wild Charge
Sometimes, it is a mistake to hold back. A kiss withheld is a worthless thing…like a business never begun or a trip never taken.
And of what use is the cold-blooded lover who holds back, and reflects on the course of love as though it were the stock market?
"There will be times of rising affection," he says, looking into the future, "and maybe a time of manic behavior, when we act out all the foolish excesses of besotted lovers."
"But all things fall back to trend," he goes on, "even life and love. Our affection will inevitably decline too…and end up by reverting to some mean of everyday life."
Romance, like war, needs a little madness.
Leading a wild cavalry charge, the last thing you would want would be a group of intellectual kibitzers by your side. Instead, you would want real men…men whose thoughts are as uncomplicated and blunt as a mace.
With such men behind you, you might have a chance of success – of crashing into the enemy line and breaking it up. But any hesitation, any doubts or arrieres pensees…and you are finished.
Neither the god of war, nor the god of love, favor half measures. "Audacity," said Danton to France’s generals in 1792. "We need audacity, more audacity and always audacity."
But a word of caution to Daily Reckoning readers…(and a little warning about where we are headed in today’s letter)…
Going a little mad, sometimes, is not a bad thing. But – there’s a time and place for everything…
France went to war with Germany in August 1870. You can read the history of it yourself and you still will not know why the countries went to war. But the flags came out, the recruiting offices filled to overflowing, and soon, the troops were on the road to the Rhine.
"One would have to search diligently through the pages of history," writes Alistair Horne in his account of the war, "to find a more dramatic instance of what the Greeks called peripeteia, or reversal of fortune. Where before has a nation of such grandeur (indeed, La Grande Nation), brimming over with hubris and refulgent with material achievement, been subjected to worse humiliation within so short a space of time?"
So confident were the forces under Louis Napoleon that commanders were outfitted with maps of Germany, but none of France. Alas, a bear market in French confidence was about to begin. From epic levels of pride, the French were about to fall to epic levels of despair.
After a couple minor battles, the French were in retreat and dead soldiers were scattered over the fields and roads of the countryside. The army was driven back to Sedan and trapped. The French general MacMahon observed: "We are caught in a chamber pot…and we will soon be in sh**."
Defeated, the Emperor was taken prisoner and Paris was besieged. By Christmas people were going hungry in Paris. "We ate Aunt Reinburg’s cat," wrote Berthe Cavaille on December 29th. "It’s a shame because it was such a pretty animal!…I have a piece of dog meat I’m going to marinate and eat it like a steak."
Near the end, one of France’s leaders, Leon Gambetta, escaped in a balloon! And finally, the French came to their senses, gave up, and waved a white flag.
Losing the war turned out to be as good as winning it. Following its defeat, France enjoyed the four greatest decades of its history. The country boomed. People got rich. Property values rose and people tried to outdo each other by building ever more beautiful and extravagant houses.
Restaurants and bistros overflowed. Artists and performers were drawn to the city like black flies to garbage. Huge sections of Paris were razed and rebuilt…the subway was built…the Eiffel Tower went up…and the Belle Epoque polished western civilization to a shine we have not seen since.
But in the years following France’s defeat in 1871, its military leaders studied the war and plotted their
return to glory. What had they had done wrong, they asked themselves? They came to the conclusion that they had been too cautious…that they should have gone over to the offensive and launched more wild charges. And soon, a perfectly good tactic was elevated to a bad strategy.
"In the offensive, imprudence is the best of assurances," wrote de Grandmaison, mad as a hatter, "Let us go even to excess and that perhaps will not be far enough…"
No one succeeded in "seeing through" this silly doctrine. No one suggested the ironic lesson so common in military history – that France might have prepared for the last war.
Forty-four years after Sedan, the French army tried out its new strategy. Once again, no one was quite sure why the war had begun, nor what anyone hoped to gain from it. All of the parties to the war seemed to act sensibly, according to the standards of the day. The flags were flying and the recruiting offices were again full. And so, the French attacked.
Alistair Horne: "Young men filled with a mighty lust for revenge were marching up at that rapid staccato pace, accompanied by the regimental music…the melodious refrain of "To die for La Patrie is the most beautiful end" on their lips. Magnificent specimens, these French soldiers of 1914…
"Many sang the Marseillaise. In the August heat, the heavily encumbered French sometimes attacked from the distance of nearly half a mile from the enemy. Never have machine-gunners had such a heyday. The French stubble-fields became transformed into gay carpets of red and blue. Splendid cuirassiers in glittering breastplates of another age hurled their horses hopelessly at the machine guns that were slaughtering the infantry. It was horrible, and horribly predictable. In that superb, insane courage of 1914, there was something slightly reminiscent of the lemmings swimming out to sea. But it was not war."
With the unthinking enthusiasm of the cavalryman or a moonstruck lover…the French had charged. Within two weeks, France had lost 300,000 men…and one out of every ten of its officers. Within the first five months France lost as many men as all U.S. casualties in WWII.
Within the first year, more Frenchmen were lost than American losses in both WWI and WWII. And there were 3 more years to go. By the end of it, more than 6 million French would be casualties.
And for what? No one knew.
September 28, 2001
Jobless claims reached a 9-year high last week. Office vacancies, in Boston, are at a 10-year high.
Microsoft fell below $50 on Wednesday. IBM dropped below $90. Cisco, which was once worth $600 billion, is now worth less than $100 million. Investors have lost more than half a trillion dollars on this single company. Cisco’s stock is nearing the $10 market…
And Amazon, too, dropped to $6.20. Recession in the U.S. is a "done deal," according to the IMF’s top economist. He also says that the world economy is the weakest it has been in 10 years. And tax receipts are falling for the first time in 18 years…
Surely, some epic change is underway. What do you think, Eric?…(last chance to catch Eric on TV…at least for a little while. Watch CNNfn – 9:30 am to 11:30 am EST today.)
– Early in the trading day, stocks looked a bit wan. But as the hours passed, color returned to their cheeks and the Dow and S&P 500 each climbed more than 1%. The Nasdaq erased a 3% deficit early in the session to end the day with a negligible 3-point loss to 1,461.
– Despite yesterday’s gains, the stock market instills little confidence. Earnings are falling and trading is volatile. Get used to it. Investors are fighting a new kind of battle for capital gains in the trenches on Wall Street. No more easy pickings. No more CNBC tips that double within hours of someone mentioning them on the air. No more 300% first day IPO pops.
– What a different place Wall Street has become!
– September will be the first month since December 1975 in which there were no IPOs, according to Thomson Financial. "It was a period in which the economy was recovering from the 1973-74 recession," the Wall Street Journal remembers, "’Jaws’ won the Academy Award for best picture and U.S. troops withdrew from Vietnam. That drought lasted 11 weeks from October 21st until January 8, 1976." (Okay, so investing wasn’t very much fun back then. But "Jaws" was pretty darn good!)
– In the new world we inhabit, the only thing easy about investing might be losing money. Investors may need to lower expectations, exercise greater patience, be much more selective, keep an eye out for opportunities in foreign markets and learn to diversify into other asset classes like real estate and yes, even cash.
– While heading in and out of the CNNfn studios this past week, many folks have accosted me with the question: "Do you think AMR (parent company of American Airlines) is a buy right now? Should I buy UAL? What about Southwest?"
– Short answer: Why bother? Maybe these stocks will recover and turn out to be great investments, but trying to pick a bottom in this group is like walking into the proverbial minefield.
– Longer answer: If we wait long enough, we’ll all own the airlines anyway. In other words, a bailout might lead directly or indirectly to a partial nationalization of the airlines by the U.S. government. We’re gonna own part of AMR whether we like it or not. "If the share of the economy controlled by the government were a tradable commodity," writes Jim Grant in the latest issue of Grant’s Interest Rate Observer, "we would buy futures." (www.grantspub.com)
– Now that oil-drilling stocks have collapsed more than 50% so far this year, ABN Amro decided it was about time to alert its clients to avoid the poorly performing sector. Alas, the S&P Oil Drillers Index rebuffed the call by rallying 3% on the day.
– Of course, investors could probably do worse than to poke around for opportunities in the oil-drilling sector. I know, I know…Saudi Arabia is our friend and all that, and that the rest of the Arab world will be delighted to make sure our fighter jets don’t run low on fuel while we attack their Moslem neighbors. But still, as John Myers suggests, a few domestic oil companies might decide that they’d like to keep drilling for oil and gas reserves right here in our own backyard (just in case).
– According to Doug Casey, investors could also do worse than poking around in the gold mining sector right now. Says Casey, "Why gold shares? Mainly because they’re the most volatile stocks on the face of the planet and that volatility can be a very good thing – if you have the nerve to take advantage of it. Despite the dismal state of the industry, its stocks are typically up 10-20% in just the last month or so." As we reported yesterday, the Gold Bug Index is up 73% on the year.
Back to Bill in Paris…
*** Kathie Peddicord writes to say: "Deals in real estate around the world abound…and provide one of the best ways to hedge the U.S. stock markets. Property along the south Pacific coastline of Nicaragua is worth on average 25% more than last year. Lots on Mexico’s Costa Maya are, in some cases, up 30%. I can’t say the same for the U.S. stock markets right now"…
*** Likewise, "The property market in Ireland continues to soften. In the west: a traditional stone cottage on a half-acre in County Sligo for US$20,000…a 6-acre site with planning permission for a four-bedroom house in County Leitrim for US$30,000…and another cottage with two stone outbuildings on a half-acre at Cornahow, County Cavan, for US$32,000. These cottages, admittedly, would be simple and basic. But for a holiday home or asan investment," you may find them tempting.
*** On another note, of the housekeeping variety, you’re probably aware of the Agora Wealth Symposium we’re hosting in Las Vegas on October 31st-November 3rd, but did you also know The Supper Club is meeting on Tuesday, October 30th, at The Four Seasons in Vegas…?
*** We’ve scheduled the meetings back to back to make travel arrangements easier for all concerned. (If you’re interested in finding out which companies will be presented for early round investment, send an e-mail to Vickie Beard: Vbeard@agora-inc.com)
*** Likewise if you haven’t reserved your space at the Wealth Symposium and you’d like to do so, contact Barbara Perriello at: 1-800-926-6575 or 561-266-6570. See you there!