09/27/03
The September Jinx The Daily Reckoning Weekend Edition
September 27-28, 2003
Paris, France
By Addison Wiggin and Eric Fry
MARKET REVIEW: The September Jinx [Ed note. National bestseller! We told you about our book,
Financial Reckoning Day, making it to the Wall Street Journal
best-seller list… and wouldn't you know it, the link we sent
along with the announcement malfunctioned. If you are interested in
purchasing the book, Amazon.com does have copies in stock, and you
can lock in a 30% discount by using this link, which with any luck,
will work properly: Financial Reckoning Day - 30% off
http://www.amazon.com/exec/obidos/ASIN/0471449733/dailyreckonin-20 Sorry, if we caused you any inconvenience… Addison]
And now… Eric Fry, live from New York! The September jinx remains alive and well. "It wasn't a good week to own anything," one professional investor
griped to your New York editor yesterday. "Gold fell, stocks fell,
and gold stocks REALLY fell." The XAU Index of gold stocks tumbled
6% for the week, despite hitting a fresh six-year high on Thursday.
But almost no one cared about the pain and suffering of the gold
bulls; most investors were preoccupied with their own pain and
suffering, as the Dow fell 3.5% to 9,313 and the Nasdaq dropped
5.5% to 1,792. The steep stock market losses plunged all of the
major market averages into the red for the month… The bond market, meanwhile, floated comfortably above the fray. The
10-year Treasury note gained ground for the sixth straight week,
lowering its yield to 4.02% from 4.15% at the close of last week's
trading. For the week, the dollar slumped about 1% against the euro
to $1.1483. Despite the slumping dollar and stock market, gold ended the week
with a loss of more than $1 an ounce, just one day after hitting a
seven-year high of $394.80. The yellow metal seemed to have trouble
acclimating itself to the rarefied air near $400. Gasping for
breath, it stumbled to lower and lower elevations until collapsing
Friday afternoon at $381.80 an ounce, its lowest close since Sept.
18. Oh well, maybe next week will be better for the gold market. Thursday morning, your Paris editor anticipated the gold market's
unnerving volatility by observing, "We remember urging you to buy
gold when it fell below $350. We don't remember buying it
ourselves. Now we don't know what to do. The price will go up and
down. If it does what we expect, buying at $388 - today's price -
will turn out to be a brilliant move; gold will go over $1,000
before this bull market is over. But if it falls back below $350,
we will feel like idiots for buying at $388… "Likewise, the euro. We suspect that the euro will rise to $1.50 or
$2.00 before this cycle is over. We feel a little stupid buying
euros at $1.14 when we could have bought all we wanted at 88 cents.
But how much stupider will we feel when the euro hits $2.00?" We would feel stupid, all right, but still not as stupid as a CNBC
commentator. In a departure from his habitual creative process,
your New York editor did not "mute" the television while working in
his office. So, while typing away at his keyboard on Thursday, he
overheard a parade of experts on CNBC offering up a series of
absurd comments about the stock market. Your editor learned, for example, that the Dow "would have"
produced a nice gain Thursday, "if only Eastman Kodak's 4-point
drop hadn't pulled the blue-chip average into the red." He also
learned that retail sales "would have" been much stronger, "if only
Hurricane Isabel hadn't dampened economic activity." It is equally true, we suppose, that the stock market averages
"would have" advanced last week, if only fewer stocks had fallen.
Or that Amazon "would have" earned billions of dollars last year,
if only it hadn't deducted its expenses from its gross revenues. Or
that the Titanic undefined ex-icebergs -- "would have" completed its maiden
voyage. So you see, the world is a perfect place, and the U.S. financial
markets are perfect in every detail, except for the imperfect items
that do not rightfully belong in a perfect world. The stock market
has been near-perfect all year, despite the various imperfections
plaguing the U.S. economy -- the most glaring imperfection of which
is the weakening U.S. dollar, which has slipped 12% against the
euro year-to-date and more than 35% against gold over the last two
years… Of course, the dollar would have been much stronger, if
only the euro and gold had been much weaker. For several months, Fed Chairman Greenspan has been damning the
dollar with faint praise. Not surprisingly, he is succeeding. The
dollar's value tends to slide downhill, even when Chairman
Greenspan isn't pushing from behind. In the olden days, of course, the Fed was supposed to pursue
"monetary stability." But in the enlightened 22nd century, the Fed
pursues much grander designs. It imagines itself a kind of
marionette to the world's largest economy, making it dance whenever
it wishes, simply by tugging on one little interest rate… or by
tugging on the dollar. And so it tugs, hoping to revive the
economy. The dollar as a "store of value" is anathema to the shamans at the
Fed. Rather, for the sake of the economy, the Fed seems to desire
that each crisp new dollar bill begin losing its value the moment
foreign creditors drive them off the U.S. mint's showroom floor. Who else besides Alan Greenspan and Treasury Secretary Snow would
imagine that a feeble currency could pave the road to
prosperity?… Investors, at least, seem to have some doubts. As
the dollar slips, so do stocks and so does the bravado of
investors. We've seen this movie before… and it doesn't have a happy
ending.
Eric Fry,
The Daily Reckoning P.S. You'll find this week in The Daily Reckoning… Bill's essay
"Hurt" is a classic. If you didn't get a chance to read it yet, we
highly recommend it. ---------------------
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THIS WEEK in THE DAILY RECKONING HURT (09/26/03)
by Bill Bonner "… When the Grim Reaper comes around for a politician of
consequence… a Roosevelt or a Lincoln, for instance… apologists
make a great effort to turn him into a kind of plastic archangel.
An honest man, on the other hand, ought to get an honest send off.
John R. Cash brought dew to our eyes when he died a couple of weeks
ago. Now that the man is dead, we feel poorer. We have lost
something. Not a fulminating vote-getter, but a real man with
decent instincts and genuine feelings… "
http://www.dailyreckoning.com/body_index3.cfm?id=6745 THE NEXT EMPIRE (09/25/03)
by James Boxley Cooke "… Even with the current global economic slowdown, China is still
likely to grow at more than 7% a year. That's a huge number for an
economy this size. And it represents huge potential profits for us
as investors. Yet for all its potential, many investors still
blanch when it comes to investing in this part of the world, noting
that China is still a communist nation with a notoriously corrupt
bureaucracy and only a gradually evolving rule of law. Are there
enough positives to justify risking his capital in this part of the
world?… "
http://www.dailyreckoning.com/body_index3.cfm?id=6727
EMPLOYMENT DISASTER (09/24/03)
by Dr. Kurt Richebächer "There has been much talk to the effect that America has just had
its slightest recession in the whole postwar period. That is
measured in real GDP growth, being bolstered by many statistical
tricks. Measured, however, by job losses, which certainly are the
far more important gauge, it is already America's worst recession
by far."
http://www.dailyreckoning.com/body_index3.cfm?id=6710
NEPAL (09/23/03)
by Marc Faber "… [Would] Asian stock markets… suffer should the U.S. stock
market experience a serious correction or a crash in the next few
months? This question prompted me to look at some very simple
economic, financial, and social statistics in Asia, and to compare
them to the rest of the world. My conclusion? The long-term
favorable potential of the Asian region may remain intact even if
the Western economies were to weaken once again. In fact, a
decoupling of the Asian stock markets from the performance of the
U.S. is a distinct possibility… "
http://www.dailyreckoning.com/body_index3.cfm?id=6699
TRADE POLICIES OF THE CAVEMEN (09/22/03)
by the Mogambo Guru "… Just as Michael Boskin showed the government how to lie with
statistics about inflation - as if the government ever needed any
help with lying, since they seem to cleave to it so naturally - our
sainted leaders make ludicrous assumptions about adjusting prices
for quality and the substitution effect and all the rest of that
lying crapola that any second-grade kid can easily see through. But
to get with the program and show that I am a team player, I want to
prove to you that the Mogambo can be just as clever, and has just
as many tricks up his economic sleeve… "
http://www.dailyreckoning.com/body_index3.cfm?id=6690 ----------------------
HEADLINE, NEWS And INSIGHT: A pertinent question,
now that the dollar is under attack… and the world's best asset
haven (also rather pertinent these days, n'est-ce pas?)… Did the Framers Favor Hard Money?
by Scott Trask "… Not only did the framers not intend [a Federal banking power],
they thought it was forbidden. Alas, a Federalist-controlled,
mercantilist-minded Congress passed Hamilton's charter, and
President Washington signed it into law in early 1791. It is worth
noting that the charter forbade the bank from issuing bank notes
less then ten dollars ($200 in today's money). Even the Federalists
intended the circulating currency of the country to be composed of
gold and silver coin. Two centuries later, our money supply is
composed entirely of government-issued fiat currency and bank
deposits redeemable in the same currency… "
http://www.dailyreckoning.com/body_headline.cfm?id=3450 It's A Good Question: Why Panama?
by Robert E. Bauman "… As a member of the U.S. Congress In the mid 1970s, I had
reason to visit Panama repeatedly. I did not return until 1999 and
have been back five times since. The 30-year transition was truly
amazing. From a sleepy American colony and military garrison state,
Panama City has blossomed into a major urban center with a skyline
dotted with huge hotels, international banks and countless
condominiums. Urban, rural and ocean front real estate investment
opportunities abound and retirement havens are everywhere… "
http://www.dailyreckoning.com/body_headline.cfm?id=3449 | 
