THE DAILY RECKONING

PARIS, FRANCE

THURSDAY, 23 NOVEMBER 2000

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*** The Nasdaq - down 5 sessions in a row…45% below its
high - but, where's the bear market?

*** Gloat while you can…who knows what tomorrow will bring
- no cheers at Yahoo!

*** Harley gets chopped…ugly gold stocks starting to look
pretty good…what happened to savings?…and more!

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*** The Nasdaq fell for the 5th straight session - down 116
points. And the Dow fell too - dropping 95 points. This is
bad news for the bulls. There is usually a rally just before
Thanksgiving. But investors acted yesterday as if they had a
turkey's dread of the upcoming holiday.

*** The Nasdaq closed at 2,755 - 45% below the high set on
March 10 of 5,048. Yahoo lost $3.50. CMGI hit a new low. AOL
dropped almost $2. Oracle was off 6%. TheStreet.com Internet
sector index fell 6.4%.

*** Gloat, gloat, gloat - Oh, what a delicious sensation…
this schadenfroh! CacheFlow fell 50%. Novell dropped almost
20%. Intuit lost 9%. And Portal Software got whacked like a
Thanksgiving turkey - with a 63% loss. Strip naked and roll
around in it, take a deep breath and let it fill your lungs
with it's sweet fragrance…let it caress your body like a
Thai bar girl after a night of drunken excess…

The market will make fools of us tomorrow…so let's enjoy
ourselves tonight!

*** Uh…well, the auto companies are idling plants…GM,
and supplier Dana, just hit new 52-week lows. I mentioned
both of these companies several months ago as examples of
`darned cheap' stocks. Did I forget to tell you that they
might get darned cheaper?

*** There were twice as many declining stocks as advancing
ones on the NYSE. On the Nasdaq the ratio was nearly 3 to 1.

*** All over the world - London, Paris, Frankfurt, Tokyo and
Hong Kong - stocks fell. The world's largest company - GE -
fell below $50. Harley Davidson fell $2. Harley is a faddish
stock that is almost certain to be chopped in two.

*** But not all the news from Wall Street is negative.
"This year," reports my friend John Mauldin, "Managed Care
as a group is up 72%. Hospital Management is up 52%. Defense
stocks are up 52%. Homebuilding (of all things!) is up 46%.
Insurance (boring!) is up 40%. Oil and Gas (no surprise) is
up 40%. Airlines are up 34%. Alcoholic beverages are up 32%.
Drugs up 28%. Even Manufacturing is up a respectable 12%.
(stats courtesy of www.yardeni.com)"

"So, what's my point?" asks John, "Where's the bear market?
Only in a few over-heated sectors like technology and the
Internet. Now we are seeing fiber optics and the related
stocks come crashing down as well."

*** John is right. Not all investors have suffered. But
then, this bear market is probably just getting started.

*** And so far this week the best performing group is the
XAU - the gold mining companies, easily one of the ugliest
sectors of the market since 1993. The XAU index rose 7%,
Monday-Wednesday. Newmont gained a dollar yesterday. ASA and
Homestake both rose about 50 cents.

*** Natural gas rose to a 10-year high yesterday - up 2.4%.
Inventories fell 3.4% last week, about 30% more than
expected.

*** The economic news was mixed yesterday. Jobless claims
jumped 2.1% last week. But surveys show that employers
intend to add jobs in the first quarter…and retailers are
struggling to find workers. At a recent job fair in Santa
Monica 19-year-olds said they wouldn't work for less than
$10 per hour - anything below that "wasn't worth it."

*** Now that the old economy seems to be coming back into
favor, will the old economic rules also make a comeback?
"The American aversion to saving," said Atlanta Fed boss
Jack Guynn yesterday, "has the potential to take a toll on
the national economy." The saving rate in 1996 - among the
lowest in the world - was just 4.8%. But savings almost
disappeared completely this year…the rate dropping to
0.3%. "It's the pool of savings," Guynn observed, "that
provides the general capital to finance the growth of the
economy."

*** "Around the world," adds economist Paul Krugman, "bond
investors have been fleeing from anything that looks even
vaguely risky." Interest rates for emerging market borrowers
and junk corporate issuers "are at their highest levels in
nearly a decade," says Krugman. And the spread between
Treasuries and junk is the highest since the Asian currency
crisis of 1998. "These soaring rates on risky debt are,"
Krugman concludes, "a prophecy of future troubles for the
world economy."

*** On October 18th, the Financial Times reported that
Sprint became the first telecom to re-price its employee
stock options. Options have been a favorite trick of
`degenerate capitalism' - shifting operating expenses to the
balance sheet. Profits go up, but the company gets weaker.

*** Another phenomenon has been what the credit industry
calls "cession," - in which credit risk is passed from the
person who generated it to a third party. A local banker
might once have been able to judge for himself the
likelihood that the farmer sitting in front of him would be
able to repay his loan. But now loans are repackaged for the
derivative market - and sold to an investor without a clue.
It is fast money for the banker…and the credit risk is
somebody else's problem.

*** A website giving legal information on-line reports that
bankruptcy became the leading subject of inquiry during the
month of October. 35% of visitors asked questions relating
to bankruptcy…as consumer debt hit $1.5 trillion.

*** The world's first millionaires appeared in Paris 300
years ago, says Janet Gleeson's book, The Moneymakers. Now
there are 7 million millionaires in America alone. 600,000
Americans have more than $5 million. Getting rich is no
longer a source of distinction.

Still…

"Money, money, money…it's a rich man's world," proclaimed
a song Maria and I heard on Thanksgiving eve - while eating
at a creperie on the rue St. Honore. Maria takes a ballet
class with Mia Fry not far from my office. So she stops in
on Wednesday evening and we have dinner together.

Maria went to a party at a very rich friend's country house
last weekend. The friend is, I believe, one of dozens of
Saudi princesses living in Paris and London. She is
delivered to school, and picked up, by her family chauffeur.
Even when she goes to the movies with her friends, the
chauffeur takes them.

Wealth is relative, as we all know. Maria - comparing her
lot to the Saudi royal family - feels poor. Our apartment is
too small, she says, and there are too many of us in it. We
don't have a maid. Our car is not at all fancy. All of this
seemed to come together early in the week. "I hate this
place," she said, with the ire of a 14-year-old after coming
home on Monday.

But Maria's father, who grew up in a house with barely-
functioning plumbing, feels relatively rich. Though both of
us live in the same family, we appreciate our financial
circumstances in entirely different ways. I am content. She
is not.

So Maria went off to the party hoping to meet a rich Saudi
prince - or so she said. Alas, it was not to be. "It was
fun," she told me last night, "but there were only a few
guys there - and they were a little dorky."

Later, walking home, she took my arm.

"I don't know why I was so cranky yesterday," she said. "I
don't know whether we're rich or poor, but I feel pretty
lucky," she said on Thanksgiving eve. "Gala's parents are
divorced. And Martine's Dad is always gone away on business.
At least you're here…and you're not too dorky."

This, dear reader, was as close as a sentimental father can
come to pure bliss - and on Thanksgiving eve.

More on Thanksgiving…written last year…below…

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THANKSGIVING, (First Aired Thanksgiving, 1999)

I turned to my trusty assistant…Beirne White…this
morning.

"Beirne," I said gravely, "tell me about Thanksgiving in
Mississippi."

Beirne proceeded to tell me about a Mississippi bluesman
named "Son" House, who lived to be 102 by doing what
bluesmen tended to do…chasing bad luck, bad liquor and bad
women.

"What has that to do with Thanksgiving?"

"Nothing," he replied…whereupon he drew on the resources
generously provided by Britannica.com, formerly of Chicago,
lately of cyber space, to get me the research I requested.

Beirne hails from Mississippi. And while Mississippians will
sit down with the rest of the nation…and tuck into their
turkeys with equal relish…perhaps only substituting
Bourbon Pecan pie for the sweet potato or pumpkin pie
enjoyed in Maryland…it was not always so. Somewhere deep
in the most primitive part of his medulla oblongata, the
part of the brain where race memories are stored, Beirne
resists Thanksgiving. It is, after all, a Yankee holiday.

In the middle of the war between the states, both sides
would proclaim days of "thanksgiving," following the
progress of the war as we now follow the progress of the
stock market. After each of the first and second battles of
Bull Run-which sent the Yankees fleeing back to Washington-
the Confederates proclaimed days of thanksgiving. But it was
Lincoln's day that stuck. Declared after the battle of
Gettysburg-the last great Napoleonic charge of military
history-Thanksgiving was set for the third Thursday in the
month of November, commemorating the Northern victory.

Beirne doesn't say so…but this fact must stick in his
craw. It doesn't help that the original celebration took
place in Massachussetts. And that it was hosted by a dour
bunch of Puritans, who probably wouldn't have been able to
enjoy a good dinner if their lives depended on it. But they
certainly had a lot to be thankful for.

As the Wall Street Journal reminds us annually, they nearly
exterminated themselves in typical Yankee fashion-by wanting
to boss each other around. They had arrived in Massachusetts
by accident and bad seamanship, intending to settle in the
more hospitable climate of Virginia, which had been
colonized more than 10 years before. Once in Massachussetts
they proceeded to set up a such a miserable community that
surely most of them, had they lived, would have longed to
return to England. The Soviets could have learned from their
example and spared themselves 70 years of misery. Only after
the "witch burners and infant damners" abandoned their
communal form of organization, and allowed people to work
for themselves, did the colony have a prayer of survival.

But victors write the history books. And now this precarious
celebration by a feeble group of religious zealots has
turned into the most American holiday. After Appomattox, the
South was helpless. Its natural leaders, the plantation
aristocrats, were either dead, bankrupted and/or
discredited.

Many of them went to Northern cities, like New York or
Baltimore, where, Mencken tells us, they "arrived with no
baggage save good manners and empty bellies." They enriched
the North. But back home, they were sorely missed. "First
the carpetbaggers," says Mencken, "ravaged the land…and
then it fell into the hands of the native white trash…"
Scars of war can take a long time to heal. But 130 years
later, the South is the most economically and culturally
robust part of the nation.

Thanksgiving was declared a national holiday in 1931.
Through the Depression, and then WWII, Thanksgiving grew in
importance. In a country where roots meant almost nothing,
where people were ready to pick up and move at the drop of a
hat, where there were huge differences in what people
thought and how they lived, Thanksgiving served to provide a
unified, national myth… most popularly expressed in Norman
Rockwell's Thanksgiving cover for the Saturday Evening Post.
Roots mean more in Mississippi than they do in California.

"No man is himself," said Oxford, Mississippi's most
celebrated alcoholic, "he is the sum of his past." Unlike so
many other American writers of the 20th century, Faulkner
stayed home. The forward to the "encyclopedia of southern
culture" has a passage from Faulkner, saying: "Tell about
the South. What's it like there. What do they do there. Why
do they live there. Why do they live at all."

Even in Faulkner's Mississippi…Thanksgiving is now part of
everyone. Where Beirne goes…it goes too. And so, all over
the world, Americans, gathering in small groups, like
pilgrims on distant shores, celebrate the holiday (if not on
the actual day…perhaps the weekend following…as we will
do.) This can require a little ingenuity. Americans in
France have to search for the ingredients. Pumpkins are hard
to pronounce-citrouilles-and hard to find. Cranberry sauce
is unknown.

But my mother discovered a store in Paris specializing in
American groceries, named "the Real McCoy." She hastened
thither yesterday, and brought back canned pumpkin,
cranberry sauce and peanut butter. Thanks to this outpost of
American culinary supplies, we will be able to have a very
typical Thanksgiving dinner went we slide our chairs up to
the table on Sunday.

Art Buchwald has translated the Thanksgiving story for the
French, deftly turning Captain Miles Standish into Le
Capitaine Kilometre Deboutish. But no one has refashioned
American Thanksgiving recipes for the metric measuring cups
here in France. My wife, Elizabeth, descendant of the
Puritan fathers…former resident of New York…a Yankee-in
other words…and my mother - issuing from Southern Maryland
tobacco farmers and the French bourgeoisie - will do their
best.

And we will be thankful.

Bill Bonner

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