| MELANCHOLIA THE DAILY RECKONING PARIS, FRANCE
MONDAY, 6 DECEMBER 1999 * * * * * * * * * * * * * * * * * * * * * * * * * * * In Today's Daily Reckoning: *** Mr. Bull charges down Wall Street
*** Getting killed in Baltimore
*** Do you feel lucky…? * * * * * * * * * * * * * * * * * * * * * * * * * * * *** Oh, what a wicked world…my heart sank on Friday
as the Dow soared over 300 points. How could I be so
wrong? Day after day…I expect THE END…well, the
end of the tech and Net mania…and now this! How
wrong could I be?! (Readers are invited to find out
by continuing to read…) *** The Dow closed up 247 points. Almost everything
was up after employment data confirmed that this
is…yes…the best of all possible worlds… *** The S&P and Nasdaq hit new records. The Dow is
just 40 points under its high. There were even more
advances than declines on Friday. *** The Nasdaq rose 5.5% last week…it's up 61% for
the year…These markets are like the Mars
probe…lost in space… *** Wait…the money supply is exploding, too. The
adjusted monetary base is growing at the fastest rate
in 15 years…up to nearly a 19% annual rate. *** And, recalling my comment of a few weeks
ago…this money has to go somewhere -- now we know
where. *** With apologies to Dirty Harry -- I know what
you're thinking…how many shots does this bubble gun
have left? Well, to tell you the truth, in all this
excitement…I don't know…but this being the most
powerful, highest priced market in all time…it
would blow your money clean to hell. So you have to
ask yourself, do you feel lucky? Well…do ya',
Punk…? *** Nah…I don't feel that lucky. Taking the week as
a whole…there were still 162 stocks hitting new
highs…and 780 hitting new lows. So, even in this
great Candidian euphoria…the odds were still 5 to 1
that your stock would hit a new low rather than a new
high. *** The stocks hitting the new highs were the
familiar techs and Nets…and big name auto and
financial stocks. But just getting a Net stock is no
guarantee. Our old friend, Amazon, fell on Friday. So
did our other old friend, TheStreet.com. Alan Abelson
noted that some savvy investors were dumping
TheStreet even now…with its stock down about 70%
from its high. You should dump it, too…the business
model makes no sense. The stock has a lot farther to
go down, in my humble opinion. My guess --it will
fall significantly today. *** The bottom line: this is a gambler's market…not
an investor's market. There are plenty of
opportunities for value investors…but not where
everyone else is looking… *** Et tu, aurum? Gold is disappointing us,
too…again. It's the money of choice when financial
conditions are NOT ideal. So today it stays in the
closet, like a winter coat in the
tropics…forgotten. *** What a pathetic experience. I'm referring to
reading the editorial page of the "International
Herald Tribune." William Pfaff, a regular columnist,
writes what he says is "the saddest thing I have ever
had to write." Gosh…did his mother die? Did his
local bar close? Nope…the source of his extreme
melancholia is the failure of election reform!
Elections should be a source of amusement…not
depression. They're like a circus in which nearly all
the performers are clowns. *** I was reading Friday's letter to you…boy,
something is going very wrong with the paragraph
breaks. I could barely follow how one thought relates
to another. And I wrote it! Sorry…Rick
(proofreader and message manager)…can you fix this? *** The founder of Republic National Bank, Edmond
Safra, died on Friday…strangely. He died of smoke
inhalation, locked in his bathroom with his nurse.
Firemen tried to get him to come out of the bathroom
before he was overcome…but he refused, fearing he
would be assassinated. *** "Grants Dispatch" sent this item: "Yet another
definitive top in high tech was signaled by a report
in Tuesday's "San Francisco Chronicle" that a
partnership consisting of active and retired
professional athletes will invest some $40 million in
Silicon Valley's leading venture capital funds…The
paper quoted ex-San Francisco 49er offensive lineman
Harris Barton: `Many professional athletes `have
gotten involved with a lot of dumb restaurant, car
wash and other deals, and had a problem with capital
preservation…' said Barton. Capital preservation?" *** Baltimore continues to buck the national trend
towards lower murder rates. Ten people were gunned
down in Charm City over the weekend. In these days of
disappearing traditions…it's nice to know there's
one place that still clings to the old ways.
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MELANCHOLIA William Pfaff ought to look out his window. He
doesn't know the difference between tragedy and
comedy. There's more sadness in a single brown leaf
than in all the election reform efforts ever
proposed. Uh-oh…I am going to ramble. But speed and
efficiency are not always desirable. The efficient
kiss has yet to catch on among true romantics…nor
is speedy lovemaking taught in the sex manuals.
Beirne tells me that just-in-time manufacturing is
still not practiced by those who make Tennessee sour
mash whiskey. Nor do people typically ask the
orchestra to rush through Bach's Passion of St.
Matthew. It can take time to draw out ideas, too. But I will give you a break today. I will admit,
right at the beginning, I have nothing to say worth
writing…let alone reading. I write just from the
force of habit…and beg your indulgence. We spent the weekend down in the country. I did not
try to think. And I succeeded. I didn't even read
anything worth mentioning. The weather was
spectacular…bright and sunny…though cold. I cut
wood and allowed my mind to wander. I loafed…and in
Whitman's words…invited my soul. The only thing that interrupted my idyll was the
brown leaves…which reminded me of the passage of
time…which caused a certain lachrymose reverie in
front of the fireplace. I sat there, across from my
aunt, who has had a number of strokes. She can no
longer speak. Time is a melancholy feature of human existence. We
all turn brown and drop to the ground, sooner or
later. But time is popularly considered a great
source of happiness to the investor. People believe
that all they need to do is to buy and hold…and
they will get rich. We are told that "Time defeats risks." This is a way
of saying that if you are investing for the "long
run," you don't have to worry about the ups and downs
between now and when you need your money. But we know that the more remote in time…the more
remote the odds of things, too. Time multiplies the
possible number of slips `twixt the cup and the lip,
as it were. The "time defeats risk" mantra is based
on the fact that at the top of a bull market…it
looks like stocks have been going up forever. There
is no guarantee, however, that they will go up for
the next five years. Or the next 10 or 20 years. What's more, the concept only applies to a broad
holding of investments -- the market itself. The
risks of any particular investment surviving and
prospering decrease over time. There is only one
major company today that was also a major company 100
years ago -- General Electric. All the other leading
companies of the beginning of the century have gone
bankrupt, been bought out or simply declined in size.
They've had strokes, accidents, illnesses…they've
turned brown, curled up and been blown away. Even companies in new industries…like automobile
manufacturers at the beginning of the century…are
doomed by time. Only three out of 400 turn-of-the-
century companies remain in business. Likewise you have to ask yourself what the point of
investing for the long run is…when, in the long
run, we're all dead. You have to wonder. Death is
probably not so bad…unless you get sent…down
there…where they poke you with pitchforks and read
the "International Herald Tribune" editorial page out
loud. My sister and her husband, a Baptist minister from
Virginia, were visiting. He told me of an emergency
call he had received the previous week. A man with a
heart condition was in the hospital. He was afraid to
go to sleep…for fear he would never wake up. John
went to visit him and within minutes, his calming
voice and reassuring manner had the man sleeping
comfortably…his heart still beating. "John," I asked cheerfully, "do your sermons have the
same effect?" We trotted off to Catholic church on Sunday. It is
Advent (of Christ) season…the priest asked if we
were clearing the path for the Savior's arrival. I
thought about raking the leaves. I might have fallen
asleep…but it was too cold. After church, a very
gray, very short man came up to me and asked if I
were American. He said that he had made friends with
an American soldier in 1942 when both were stationed
in Morocco. Both men spoke German so they were able
to communicate. He has not seen his friend for 57
years…but would like to make contact. He'll give me
his name and address next Sunday…I hope the man is
still alive. After lunch, Mr. Brule came over. I had given him an
old wine rack…which he wanted to show me. He'd
installed it in his wine cellar. So we went over…to
take a look. I really didn't want to spend any
time…but expected to be back soon. He's very proud of his cellar. There must be
thousands of bottles, collected over many years. "Look at this,"…he called me over. Here was a
Bordeaux wine…10 years old. "I wonder if it is still good," he asked
himself…searching for a corkscrew. Wrenching the
cork out…smelling it… "Let's try it…" Which we did. It was still good.
But once opened…we had to finish the bottle…or it
would go to waste. "And look…here's some aperitif I wanted you to
taste…" This bottle had a screw-on cap. I don't
know why…but some of these drinks don't seem to go
bad…even though, as near as I can tell, they have
the same base -- wine. Maybe it's the sugar content.
Mr. Brule just kept talking…about the wines…how
they were made…about his visits to various
vineyards and why the California wines weren't the
same… We tried the aperitif…which was quite good.
Then…"What's this…1986? Chateaux Bremeau (or
something like that)…we'd better try it." It was three hours later when we finally staggered up
out of the wine cellar. The sun was already so low in
the sky that the day was almost over. It sat like a
bright orange ball on the distant hedge. The whole
darned day was wasted. Or was it…? I don't know. But at least we weren't discussing
election reform. Bill Bonner
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