“When I hear the word culture, I reach for my gun.”

– Hermann Goering

I walked home last night…lugging my laptop computer. A victim of the information age, at least 190 messages remain unanswered. (Apologies to those awaiting replies.)

My intention was to try to catch up…

Alas, life is full of surprises for which the New Economy makes no allowances and with questions to which the Age of Information hath no answers.

“I’ve got to take Edward to the hospital…” said Elizabeth.

Indeed, the whole apartment seemed to be in a state of alarm. Edward was surely sick. He was throwing up and had a high fever. Yet, I realized that the life force was still in him as he yelled at his mischievous brother with the voice of 7-year-old still very much among the quick:

“Go away, Henry!”

Vomiting, fever, and outbursts of temper would not normally be cause for a visit to the emergency ward…but mothers are entitled to panic from time to time, and last night was one of those times.

The story might have ended there…and might have spared you, dear reader, today’s letter. But it was not to be. Elizabeth had organized an outing for last night…and invited some friends, who were already en route.

I had planned to duck the event all together and tend to my email. Now I found myself drawn into it, even put at the head of the expedition…like a reluctant general drafted to lead troops in a cause he didn’t believe.

In the event, we gathered up the guests – an English woman and her daughter, and an American woman – and along with my two daughters and Henry all headed out to Aubervilliers for what I was told was a circus.

And so I depart from our usual penetrating insights and suggestions on financial matters and offer you something different today.

Elizabeth has taken a keen interest in horses. She is also eager to subject the family to enriching cultural experiences whenever we let down our guard. This “circus” turned out to be a little of both.

Mr. Zingaro is a horse trainer. He has made a reputation for himself by getting horses to do unnatural acts for the entertainment of paying audiences. So successful has he been at this that he has toured the world – including shows in several North American cities.

But in last night’s performance, it was not only the horses that did odd things. You see, Mr. Zingaro was not content with an animal act. He decided to give his audience some real culture too.

There is nothing wrong with trying to upgrade one’s act. Vanity is the driving force of most of human action. People want to feel superior to others – and want to make sure others realize it.

“When we see that almost everything men devote their lives to attain,” wrote the philosopher, Arthur Schopenhauer, “sparing no effort and encountering a thousands toils and dangers in the process, has, in the end, no further object than to raise themselves in the estimation of others; when we see that not only offices, titles, decorations, but also wealth, nay even knowledge and art, are striven for only to obtain as the ultimate goal of all effort, greater respect from one’s fellowmen — is not this a lamentable proof of the extent to which human folly can go? The truth is that the value we set upon the opinion of others, and our constant endeavor in respect of it, are each quite out of proportion to any result we may reasonably hope to attain; so that this attention to other people’s attitude may be regarded as a kind of universal mania…”

The question is, why would Mr. Zingaro ruin a perfectly good horse circus with a lot of high culture humbuggery? The show included music with no melody, art with no artistry, and dance with no rhythm. Soon, I predict, he will get rid of the horses too.

I hope so. The horses did nothing much – just trotted around the ring and acted like the dumb animals they are. They took no notice of the dancers from India. Then again, I would just as soon have been able to ignore them.

The Zingaro performance played out like a Bennetton ad. In addition to dancers from the sub-continent, there were tokens of all the major races among the horsemen, who did the usual thing for an animal act: they stood up on the horses and practiced their other acrobatic stunts.

All of this took place during the first 15 minutes. After that, it was downhill. The next scene featured two dancers writhing and contorting themselves to the sound of random notes on a clarinet. This went on for an uncomfortably long time.

“What was that all about?” asked Sophia, giving voice to a question that must have occurred to every member of the audience.

But then it got worse…with Zingaro laying on even more pretentious claptrap. In the next scene, a group of very French young women, walked around, feeding carrots to pure white horses. I couldn’t figure out what that was about either…but I’m sure it was infected with some artistic quality to which I am happily immune.

Nor could I get much out of the next act – in which the women, exposing their silky-white shoulders in flowing 18th- century dresses, on their snowy mounts, cavorted around while a black man twisted and turned from a sling suspended above the center of the ring. Is that arty, or what?

By this time the benches had become quite hard and little Henry, 10 years old and bored, had fallen asleep. I wished I could do the same.

Finally, Mr. Zingaro himself took ring center. His entire act consisted of forcing his horse to prance to the beat of what sounded like a funeral dirge for an amazingly long time – without making any forward progress.

And then, the big surprise of the evening – the audience clapped enthusiastically.

Your reviewer,

Bill Bonner Paris, France February 7, 2001

P.S. The Zingaro show will probably hit the road again soon…and may turn up in a town near you. If you have a chance to see it, do yourself a favor and go to the movies instead.

*** The Dow shot through the 11,000 barrier yesterday…and then fell back, ending the day down 8 points.

*** Nothing special happened until after the stock exchange closed. Then, the Cisco Kids took the microphone and announced that for the first time in 11 years they missed analysts’ target. The target was 19 cents a share for the 2nd quarter. Cisco produced 18 cents…up from the 12 cents it made last year in the same quarter.

*** Of course, Cisco’s profit number does not tell the whole story. There is also the balance sheet. Both documents, according to those who have studied them, are marvels of inventiveness. More on this subject will emerge, I predict…

*** An analyst said yesterday that Amazon would soon suffer a “creditor squeeze” and cautioned investors to avoid Amazon’s bonds. But the report was countered by the River of No Return natives and AMZN actually went up 10%.

*** “Amazon, the premier e-tailor,” reports the Prudent Bear’s Marshall Auerback, “projects only a 20% growth in revenues this year after previously forecasting growth in excess of 40 per cent. With a loss of $4 a share last year, they clearly generate their revenues only by giving their products away. In an interview last week, their founder and chairman, Jeff Bezos, mentioned in passing that it appeared that consumers were getting bored with Internet shopping. We have also alluded to this trend in the past; the Internet appears to be going the way of the hula-hoop. Even more curious for a company with such a supposedly sunny outlook, Bezos also asked his recently laid off employees to sign a 15-page ‘non-disparagement’ agreement, which leaves one to ponder what exactly the company has to hide. There is no question that the plunge in fourth quarter sales growth to just 11 per cent was not what the market wanted it hear: it was ‘startlingly slow’ in the words of Internet perma-bull, Henry Blodget. Similarly, Mark Rowen of Prudential Securities has calculated that Amazon’s books, music and video business could be worth just $4 a share (compared to the current price of around $18). He noted that the company’s core businesses were rapidly approaching saturation and that the market ‘appears to be placing a significant value on Amazon’s newer businesses.’ We believe this premium is unwarranted at this time.”

*** In an uncommonly frank moment for a dot.com CEO, Bezos said to MSNBC: “I always try to warn small and individual investors away from Amazon.com. It’s such a volatile [stock]. I don’t think it’s appropriate for small investors.” He might have added that it is probably not appropriate for big investors either.

*** Investor’s Business Daily’s Mutual Fund Index is up only 0.06% for the year. But investors are still optimistic. They are sure that the lull in stock gains is temporary.

*** “Even amongst those market participants (such as PIMCO’s bond fund manager, Bill Gross), who believe that we started a recession months ago,” continues Marshall Auerback, “there is still a pervasive sense that somehow the Fed can act in time to save the consumer and underpin the market rally. According to Gross: ‘Business confidence has plunged, capital investment is slowing and production is contracting. Consumer confidence is clearly in a downtrend. This indicator is key as consumers account for as much as two-thirds of economic growth… We think the Fed will ease as much as necessary to restore confidence. That means the Fed Funds rate, which stands at 5.5% today, could be pushed down to 4% or lower.’ Such is the pervasive belief in the Greenspan Put, so skewed are market risk perceptions, that even the world’s leading bond market vigilantes eagerly lead the charge for easy money.”

*** The ‘bond vigilantes’ are supposed to make sure the Fed does its job. Whenever the money supply is increased above the rate of GDP growth – or interest rates pushed below market rates – the vigilantes are meant to dump bonds in anticipation of inflation. Collapsing bond prices are such a threat to the economy, that the Fed dare not embark on inflationary policies – at least, that’s the theory of bond vigilantism.

*** But the Fed just completed the most aggressive rate cuts since January of ’82…and the money supply grew over the last 3 months at a rate about 5 times that of the economy itself. The bond vigilantes, of whom Mr. Gross is one, seem to taking a siesta.

*** There are vigilantes elsewhere, resisting the Fed’s efforts to inflate the economy. The rate cuts are supposed to stimulate borrowing. But a Fed study found many banks tightening lending standards. The banks are afraid that credit quality is slipping. Their customers could get squeezed, like Amazon, and be unable to repay their loans.

*** The effects of inflation are showing up in the real estate market. According to the Mortgage Bankers Association, the number of families with average incomes that can’t find decent, affordable housing has increased by 90% in the last 2 years.

*** And the Atlanta JC says: “US Housing Market Strong Despite Times”.

*** “Last year, more than 80% of homeowners opted to borrow more money,” David Tice tells me, “Borrowers were either more aggressive or more stressed. These increased borrowings (from all sources) combined with the flagging stock market could make the year 2000 the first on record that consumer net worth did not increase.”

*** The rule for making money in real estate is the same as in stocks: buy low, sell high. “Few places in the world have lower real estate prices than Nicaruaga,” reports Kathie Peddicord. “I met an American today in Nicaragua’s capital city Granada who just finished his first renovation project here. He bought a big, old Spanish colonial-style hacienda a few blocks off the city’s central square. The roof was falling down…there were massive holes in the walls…many of the floor tiles were missing or broken…most of the doors were missing. Today, the house is a showplace. Given what he paid for the house and what he put into the renovations, he’ll double his money…in a little less than a year.”

*** Is it just rude…or stupid? Lynn Carpenter: “When I walk through a restaurant and pass some ninny with cellphone to the ear and day planner on the table, I have to think “what a boob…what oafs they are to be spoiling a good meal or nice social gathering.” It didn’t occur to me that all these people clanking around with their planners, palms, laptops and other gadgets were self-retarded!”

The Daily Reckoning