| IS THE PILOT FEELING OK? THE DAILY RECKONING PARIS, FRANCE
THURSDAY, 18 NOVEMBER 1999 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
In Today's Daily Reckoning: *** Stocks fall…still a bear market
*** Gold up…
*** Explosion in cash… * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *** Wall Street is getting interesting again. DR reader Timothy McFadden reminded
me that I had cited Bill King's prediction on Oct. 7…that a classic bear market
rally might retrace its steps all the way back to 10,942. But if it went higher
than that…it would probably be in a new bull phase. *** After the market closed at 10,932 on Tuesday, McFadden was watching yesterday
to see if it would break through Bill King's magic number. As it turned out -- it
didn't. The Dow sank instead, preserving…for the moment…its bear status
intact. *** But there are a few other interesting things going on. Oil went up over $26.
The dollar sank against the euro. Gold rose slightly, for the second day. And
transportation stocks went down big -- 95 points. *** There were 96 new highs yesterday and 140 new lows. *** And Ed Yardeni reports that the Nifty 40…an index of the market
leaders…is up a staggering 474% since April 1998. *** Behind this market action is a tide of cash that is washing into the
financial system, courtesy of Alan Greenspan & Co. The Bulletin of the St. Louis
Fed reports that since Sept. 8 the Adjusted Monetary Base has been rising at a
20.1% annual rate. And adjusted reserves are going up at 78.5%. Hey…this is a
lot of money. The Fed is probably worried about Y2K. Maybe it's worried about
other things. But it's no wonder that speculative stocks are still rising.
And…it increases the odds of a rough landing… *** Microsoft is at the critical $85 level…Richard Russell believes it will
break down badly if it goes below this level. He sees the Transports already
breaking down. His Primary Trend Index, too, is signaling trouble. Poor Richard,
he just can't seem to get in the Bubble spirit. http://www.dowtheoryletters.com *** More evidence of the wackiness of the dot-com mania…Osprey Communications,
a firm in England, doubled in price yesterday. Why? Investors thought it was
Osprey.com. Osprey Communications has no Internet ambitions. *** So far…the market is behaving more or less as it should. The great bull
market is giving way to a bear market. More stocks are falling than rising.
Investors are crowding into the few that are still going up. *** But…Y2K…is such a wild card. The cash that the Fed is putting into the
system has to go somewhere. It is being taken up like a round of free beer at a
neighborhood bar. Given the bull market mentality that still dominates the
market…it is finding its way into the leading stocks. *** What will happen next? Hard to say… anything could happen. *** Our campaign to derail Britain from its European track got off to a rousing
start last week. Michael Gove spoke to an incendiary crowd of "Fleet Street UK"
subscribers and Europhobes. He might not have been the best person to lead the
rebels, reports Barnaby Towns from London, since he turned out to be the most
pro-Europe person in the room. He actually favored a sensible approach --
renegotiating the deal with Europe rather than abandoning it altogether. *** Now it's official -- you can get hitched in France without getting married.
They're called PACs. And the verb is "pacser." The paper carried a report on a
lesbian couple that tried to do so yesterday…but were turned away because the
paperwork was not ready. *** And more from Sodom on the Seine…a big department store made the news with
attractive live models showing off a new line of underwear in the shop windows.
(Certainly attractive, live models are bound to sell more underpants than ugly,
dead ones…) Hmmm…I think I'll take a walk across the bridge and see what this
is all about… *** Several readers complained that the line breaks were out of whack in
yesterday's message. Others reported no trouble at all. Different e-mail programs
handle messages different ways. If you had trouble, you can simply go to
http://www.dailyreckoning.com and check the archives. There you'll fine a
printable, readable copy of any DR issue. We do our best to make the DR easy to
read for everyone. But sometimes the results are less than ideal. *** Birthday greetings to Dan Ferris, editor of "Real Asset Investor"…and many
thanks to "the old bombardier" for sage advice on how to handle Sophia. Best
advice I ever got. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
IDIOTIC IDEAS "Idiots" was James Passin's comment as he sent me a note about demonstrators on
the roof of the World Trade Association building in Geneva. I had not intended to pay attention to the WTO…despite the fact that China has
just been given the go-ahead to join. But the demonstrators caught my interest.
What's with them, anyway? The banners said "WTO Kills People. Kill the WTO."
I wonder how. The WTO is probably one of the least harmful of the world's
political organizations. It is a voluntary association of sovereign states which,
near as I can tell, encourages trade and helps resolve trade disputes. The demonstrators probably have little quarrel with that. They probably wouldn't
mind world trade -- as long as they could boss around the people doing it. The
protestors want to tell other people what to do. They are not just harmless
idiots. They are the worst sort of idiot…the idiot who insists that you do as
he says. And what he says…of course…is idiotic. They are like the people who
drive around town with their auto's stereo system turned up to the decibel level
of a sonic boom. I wait in vain to hear Chopin, Leo Kotke or Jimmy Rogers coming
from these mobile disturbers of the peace. Instead, their taste in music is
always, like the ideas of the people who want to tell you what to do, execrable.
Once I thought a guy was having terrible engine trouble…boom, boom,
clack…boom, boom, clack…turned out to be a hit song which my son was able to
identify from a block away. The automotive sonic blasters of Baltimore do to your inner ear approximately
what these demonstrators want to do to world trade -- destroy it. They don't like
the fact that trade is done by big corporations. They don't like the fact that
they cannot control working conditions in foreign countries. They don't like the
fact that dolphins get caught in shrimp nets. And so…they aim to stop
it…using the same tools that these people always use -- politics. Politics is
the art of forcing people to do what they don't want to do. Either by direct
force…or by a ballot…backed by force. Harmless idiots go about their lives providing a useful service. They do dumb
things…and teach people, by example, what not to do. Every town and village
should be equipped with an idiot. Unfortunately, they usually have far more than
that…enough to give them a comfortable majority in local elections. But these idiots are far from harmless. Recently they took their campaign against
capitalism to the City of London (the Wall Street of the United Kingdom)…and
wielded scaffolding rods, causing dozens of injuries. Now they are threatening a
"Festival of Resistance" at the WTO meeting in Seattle later this month and using
the Internet to attract idiots from all over the country. Even smart people get caught up by the appeal of "managed" trade or "fair" trade.
Or they may be attracted to the idea of national self-sufficiency. Who wants to
be dependent on a foreigner, after all? But that is the idea of free trade…It is the nemesis of politics. It is done by
mutual consent. No one is forced to do anything. People trade because it benefits
them. And they only stop trading when they are forced to do so.
Economic progress rests on an ever-increasing division of labor. People
specialize in a given activity…and do it better, faster and cheaper. Trade is
merely the mechanism by which the division of labor is realized. It does no good
for one man to hunt and another to build lodgings if they can't trade the fruits
of their labors. Each needs what the other produces. As economies become
increasingly sophisticated, people specialize to an ever-greater extent and trade
at greater distances. A resident of Minnesota can eat oranges in January…thanks
to the division of labor and free trade. He doesn't have to grow the oranges
himself. Likewise, he can listen to his Sony Walkman as he walks to
work…without having to figure out how to make one of the gadgets himself. Today, most people are completely dependent -- for their lifestyles, if not their
survival -- on other people all over the world. And future economic progress will
depend on an ever-greater division of labor and trade that involves more and more
people. Or they will become more self-sufficient…and…poorer, doing for
themselves what could be done better by someone else. Personally, I resist the division of labor in matters involving home repair and
renovation. I know professionals could do the work better…but I like doing it.
I am like the woodcutter in Robert Frost's poem who chops wood for
pleasure…"whose work is play." Plus, a prudent person might be wise not to have
total confidence in the division of labor. Maybe Y2K will destroy the
distribution system…or the financial system. It's nice to have some gold
coins…and a large woodpile…just in case. But I am perfectly happy to let my
neighbor, Chantal, stuff our ducks with grain and bring back the foie gras…and
the duck itself, ready for the oven… All of this is obvious, I suppose. But the people on the roof of the WTO could
care less. They are idiots who want to tell other people what they can do and
what they can't do -- regardless of the cost. They are reactionaries…unaware
that the world has changed. They have not noticed that their archenemy -
capitalism -- is fading from the scene anyway. And a new paradigm…based on the
metaphor of the Internet…has taken over. Free trade is the name of the game --
you can't force anyone to do anything over the Net. And broad, supple, fast-
moving networks…where trade is easy, borderless and cheap…are arising all
over the place. Of course, it will be no comfort to them…or almost anyone…to
learn that one of the best selling books in Germany right now is Hitler's "Mein
Kampf." The book is banned in Germany…but it is available…over the Internet,
from Amazon.com and other sellers. Trade is now harder than ever to control. So they are double idiots…because what they want to do is stupid. And because
its hour has come…and gone… anyway. Your faithful correspondent, Bill Bonner
P.S. Rafael, in addition to being a financial analyst, works for Air France as a
pilot. We were coming back from Frankfurt when he noticed that the pilot was a
friend of his. So he went up to the cockpit to visit. Meanwhile, I had been
reading in the paper about how the Air Egypt pilot may have decided to commit
suicide and taken the whole plane down with him. Rafael explained that this was
becoming a serious problem. Pilots' schedules are so irregular…and their
whereabouts so variable…that it drives their wives crazy. Most of them are
divorced. They are not always a happy bunch. In one case, a friend of Rafael's
almost died when the co-pilot, who had been through a divorce and then a break-up
with a girlfriend, simply shut off the plane's engines in mid-flight. The pilot
had barely enough time to restart the engines before the plane touched down.
"So," I asked Rafael after his visit with the pilot, "did he seem to be in good
spirits?" | 
