| IS LUCY REALLY IN THE SKY WITH DIAMONDS? by Bill Bonner PARIS, FRANCE
THURSDAY, 9 DECEMBER 1999
In Today's Daily Reckoning:
*** Nasdaq stalled… *** The Car of the Century… *** Forgive and forget… * * * * * * * * * * * * * * * * * * * * * * * * * * * * *** All the arrows pointed down on the financial page of
the "Financial Times" today. The Dow was off just 38
points. *** Nasdaq -- the white-hot center of the speculative
melt-up -- fired up to 3,600…and then cooled off,
ending the day down. A lot of shares changing
hands…1.65 billion of them. *** Richard Babson calculates that just 10 big Nasdaq
stocks account for nearly half the index's
capitalization…and most of its profits. *** Forgive and forget -- that's the new Festivus
spirit. Forget the decades of hate…and join the rest
of the world getting rich. Israelis and
Palestinians…Mandela and de Klerk…Russians and
Americans…And now the Irish. But there are speed bumps
on the highway to peace. Gerry Adams, wearing a tie with
teddy bears on it, held up an electronic bugging device
found in his car…and wondered aloud how deep the new
friendship really was. *** The French have named the quirky little "deux
chevaux" as the Car of the Century. That's the funny
bug-eyed car with the roll-up cloth top you see all over
France. *** Red Hat, a company that distributes products based
on the Linux operating system, is now thought to be
worth more than the entire stock market of Russia. *** Continuing the bear market trend, there were 96 new
highs yesterday…and 398 new lows. There were 1,138
advances yesterday…1,937 declines. The decline in the
A/D ratio has been breathtaking.
*** The Department of Energy must have checked its gas
gauge. It announced that it had more oil than it
thought. The price of oil dropped below $25. *** And the dollar bounced back a bit. It is just a
couple pennies below the euro. And there are 103 yen per
dollar. *** "FT" reports that Baby Boomers expect to make 12%
per year on their stocks for the next 5-10 years. The
average return on stocks since 1926, however, has been
only 4.2% after taxes and inflation. *** Gold rose $7.20 on Tuesday…Monday's sharp decline
is beginning to look like a fluke, not a trend. Then it
gave back a little of the gain yesterday. *** I don't know what is going on with the Japanese
market…but I like what is going on with "Fleet
Street's" Japanese pick. It is now up 209% since
recommended a year ago! Which is another good opening
for me to remind you to subscribe to the "Fleet Street
Letter"…if you have not done so already.
https://www.agora-inc.com/secure!/form1.cfm?pubcode=fsus *** I attended two board meetings in London yesterday.
One of the companies is Pickering & Chatto…a fusty,
old Bloomsbury Square book publisher. Nothing could be
farther from the digital age than P&C. But it made its
first Internet sale last month -- the "Works of Robert
Boyle." *** Norman Rentrop, our German partner, joined me for
lunch at the Gay Hussar, a small restaurant off Soho
Square, on Greek Street, favored by the Labor Party and
featuring Hungarian cuisine. A nice restaurant. *** Norman built a substantial publishing business in
Germany…where stock values are nearly as high as they
are in the United States. He's only 42 years old, but
he's been at it for more than two decades and is
wondering what to do next. Sell? Go public? Will we see
these prices again in our lifetimes?
* * * * * * * * * * * * * * * * * * *
LUCY IN THE SKY WITH DIAMONDS On this day in 1640, Hugh Bewitt was banished from the
Massachussetts colony. His crime? He had declared
himself to be free from Original Sin…He believed that
he was born tabula rasa…a blank slate upon which
life's story would be written as he went along. I do not know how original Mr. Bewitt's sins were. But
his mistake was commonplace…if not for his time, at
least for ours. Mr. Bewitt shared the rationalist self-delusion of his
contemporary, Descartes…and anticipated the "free-
thinking" movement that dominated the world three
centuries later. I have put "free-thinking" in
quotations because those who believe themselves to be
free-thinking are often shackled to the heaviest iron
balls. They are unaware of their own prejudices. Three hundred fifty years later, Mr. Bewitt might have
been a fund manager…or maybe a college professor.
Untarnished by any pre-womb influences…or non-rational
decision rules…Mr. Bewitt could shine. He could go
with the flow on Wall Street, for example, embracing the
logic of "Dow 36,000" without qualm. He could get rich. The idea that has been disturbing my sleep this week has
been the difference between the personal and the
political…and their parallels in the markets. I notice that when I see people from a distance, I often
do not like them. I don't like the way they look…or
the way they dress…or what they represent to me. But,
like Will Rogers, when I get to know them…I invariably
like them. In fact, I can't think of anyone I actually
dislike. Some people make me uncomfortable. I enjoy some
more than others. I recognize some people as selfish,
stupid, ignorant or humorless…but taken as
individuals, people rarely displease me. Politics is anti-personal. And a lie. It ignores the
truth about people -- the specific, unique and
infinitely complex details -- and treats them as a
member of a category. Political thinking is the twin of wishful thinking…and
only a chromosome away from not thinking at all. It is
what happens to free thinkers who are free from thought.
It is a substitute for real thinking… Save the Planet…Kill the Jews…Tippecanoe and Tyler,
Too. And who can forget this popular bumper strip from
the Middle Ages: "No More Diaper Heads in the Holy
Lands"? Ike and Dick, Sure to Click. Save the Bay. The best of
the slogans invite counterattack…such as the popular
anti-environmental bumper sticker in Maryland: Pave the
Bay. Mr. Bewitt didn't understand it…but when he popped
into this world, he came with a disk operating system
and a lot of software already programmed -- by millions
of years (and divine intervention?) of natural
selection. It is no secret that twins, separated from
birth, usually dress…shop…vote…and think in
similar ways. One study showed that they shared a
similar degree of altruism, too. One of the hallucinations of political thinking is that
no such inbred prejudices exist…that a person can
think things out for himself, tabula rasa. "I think,"
said Rene Descartes…and everything else comes after. But sublime stupidity and malign arrogance lead people
to think that they can understand and direct things that
are infinitely complicated and inherently unpredictable. Lenin's economic team had no idea how economies actually
worked. The planners themselves had never run a
successful business. They detested the whole bourgeois
class and were contemptuous of the role played by
entrepreneurs and merchants. But that didn't stop them
from creating detailed Five Year Plans…pretending to
direct every economic activity in the world's largest
country. Naturally…the plans were disasters. Today, investors believe they can spend a few hours…or
maybe a few weeks…and learn how a business…or a
technology will do in the market place. They think they
can also divine the direction of interest rates, the
movement of stock prices generally…you name it. But I began my own business and have worked in it for
more than 20 years. If you asked me whether the business
will do well in the next year…or five years…I
wouldn't know how to reply. I just don't know. I do my best. So does everyone in the business. I think
we will succeed…but how do I know? There are too many
variables. Too many unknowns. It is far too personal, in
other words. Maybe we'll make the right decisions. Maybe
we won't. Maybe we'll run out of energy. Maybe the
market will change. If I can't tell you how well my own business will
do…how can an investor expect to figure it out? Wall
Street analysts don't really have a clue. All they are
doing is extrapolating current trends into the
future…as if nothing ever changes. It is all Lucy in
the Sky with Diamonds to them. And why not? They tell the public what it wants to
hear…what frees it from the burden of thinking --
that most stocks are BUYS. That the market is going UP.
That all will be well… And it is…for now. That's all folks…for now. Bill Bonner, Your sleep-deprived, back-aching correspondent * * * * * * * * * * * * * * * * * * * * * * * * The Daily Reckoning is a FREE e-mail service of The
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