Poor House II - The Daily Reckoning
Paris, France - Friday, 10 October 2003
-------------------------
*** Stocks up... dollar up... euro down... gold down... It just gets madder and madder...
*** Russia may begin pricing its oil in euros...
*** When will the bear market end? 2016? Running into people... and more!
------------------------
The Nasdaq is selling at 8 times SALES... but stocks went up yesterday.
Even at Wal-Mart, the people who know what they are doing are selling stock... but the lumpeninvestoriat takes no notice; the dumb money keeps buying.
Asians work for 1/5th to 1/10th the wages of Americans. And Asians economies are growing 2 to 3 times faster than the U.S.. Still, Asian stocks are priced much lower than stocks on Wall Street.
The U.S. is running a current account deficit of about $1 million PER MINUTE... but the dollar rose yesterday.
The average American is deeper in debt than at any time in history... but consumer spending just rose at the fastest pace in 18 months.
The Moscow Times reports that Russia, the world's second-largest oil exporter, is considering shifting its oil dealings from the dollar to the euro... but the price of the euro fell against the dollar yesterday.
As a percentage of family income, house prices have risen nearly 50% since the early 70s. Houses are selling for such high prices that fewer and fewer people can afford them... but the price of the median house continues to rise five times faster than income.
The U.S. army is the greatest offensive military force the world has ever seen. But it has been placed in a position where it is forced to DEFEND itself against desert tribes... and the price of gold still dropped more than $6 yesterday.
Meanwhile, the world's only super-power seems to be at war with ITSELF over what to do next, both on the economic front and in the Iraqi front. It is running a budget deficit of more than $1 billion per day...
.. and people lend it money as if it were the Eisenhower
years.
The more we think about it, the more we love this market... this economy... this world! It gets madder and madder. But imagine how boring it would be if people did the reasonable thing?
Instead, we are treated to the spectacle of investors, economists, homeowners and politicians sitting on stacks of dynamite... and lighting the fuse!
Advice to readers: watch out. Sell the dollar, sell the Nasdaq, sell Treasuries, sell real estate. Buy gold, the euro and Asian stocks.
And now over to Addison with more of the madness of crowds:
-------------
Addison Wiggin, writing from Paris...
- Little by little, people are beginning to realize that reports of growth in the GDP are greatly exaggerated. Last week, an economist at Merrill Lynch went public with the story. "One economist who's telling the truth," is the headline in the NY Post.
- According to John Crudele, the column's author, David A. Rosenberg, Merrill Lynch's chief economist for North America, has a bone to pick with government statistics. First of all, Rosenberg "concluded that the money being spent on computers and other technology by businesses is nowhere near what is being reported by the government."
- Using what our own Dr. Richebächer calls "hedonic price indexing" - valuing computers by their computing potential, rather than dollars spent on them - government number crunchers pretend that businesses have spent $133 billion on computers and peripherals since the recession bottomed out.
In fact, according to Rosenberg, the number is closer to $15 billion.
- Crudele: "[Rosenberg] notes that the tech spending 'accounted for 30 percent of the overall increase in GDP, so the economy ex-computer expenditures has only risen at a 2 percent annual rate.' The government is officially reporting GDP at nearly twice that rate."
- Secondly, Rosenberg's work suggests the recent report on job figures - the vaunted 57,000 increase that arrested media musings on the 'jobless recovery' - was "not a strong report in and of itself and we shouldn't let the shock factor of a '+' sign confuse matters... more companies are still cutting workers than adding them; the drop in hourly wages shows 'income growth is sluggish'; and the number of people who only have a part-time job because they can't find full-time work soared last month."
- Yesterday, the market spent the better part of the morning climbing higher as several bullish pieces of news floated about the ether. Strong earnings results rolled in from the New Era holdout Yahoo... and a less-severe-than-expected new jobless claims report put in an appearance. The major averages were all up - the Dow climbed 49 points to 9680, the Nasdaq rose 18 to 1911, and the S&P 500 closed at 1038 after rising 5 points.
- The mid-cap S&P 400 and small-cap Russell 2000 indices both put in new 52-week highs.
- We remember our friend John Mauldin asking earlier this year: "What if they threw a dollar devaluation party, and nobody came?" ertainly, the dollar has been under pressure since officials of the G7 met at Dubai, and John Snow & Co. began gently trying to talk the dollar down from the precipice off of which it is currently considering a swan dive. But Snow's sweet nothings have not stopped Japan from
intervening to restrain the yen. According to Reuter's, they have even enlisted the help of the New York Federal Reserve to sell yen on its behalf.
- "Much of the dollars bought in that intervention could well end up in U.S. assets and will be held by the Fed," Reuter's reports, "which holds some $786 billion of Treasuries on behalf of foreign central banks, mostly from Asia." And the reflation attempt goes on...
- Meanwhile, fearing their own economy may be 'overheating,' the Chinese have moved to limit foreign direct investment. According to a piece in London's Financial Times, "China has stalled the expansion of a scheme to attract foreign investment funds into its domestic capital markets because of concerns about its use by investment banks for currency speculation." The British bank HSBC was shut out of half of a recent $100m bid... and an informal request from Union Bank of
Switzerland to increase its $300m target was rejected flat out.
- Singapore, a leading member of the ASEAN trade pact we talked about yesterday, saw 3rd-quarter GDP come in at an annualized 15%...
- In his book Tomorrow's Gold, Marc Faber describes the world's capital markets by way of metaphor. Imagine the world's investment funding as water filling a large bowl. For much of the last decade, that bowl has sat squarely over the corner of Wall and Broad in lower Manhattan. Despite the combined efforts of all the world's meddling central bankers, the bowl appears to be steadfastly tipping toward the Asian markets... waiting for the great inundation to begin.
-------------
Bill Bonner, back in Paris...
*** Stocks have been rising. But it is almost surely just a normal rally in an extraordinary bear market. How long might the bear market last?
A message on the Richard Russell website gives a clue:
1910-1929 - Bull market, DJIA peaks at 381
1929-1948 - Bear market, DJIA went as low as 41 in 1933 and ended in 1948 at 161
1948-1966 - Bull market, DJIA goes from 161-975
1966-1982 - Bear market - DJIA starts at 975, goes to 1000, bottoms in 1973 at 577 and finishes in 1982 at 974.
1982-2000 - Greatest bull market in history, DJIA goes from 974 - 11,722
2000-???? - Potentially the greatest bear market in history
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Paris, France - Friday, 10 October 2003
-------------------------
*** Stocks up... dollar up... euro down... gold down... It just gets madder and madder...
*** Russia may begin pricing its oil in euros...
*** When will the bear market end? 2016? Running into people... and more!
------------------------
The Nasdaq is selling at 8 times SALES... but stocks went up yesterday.
Even at Wal-Mart, the people who know what they are doing are selling stock... but the lumpeninvestoriat takes no notice; the dumb money keeps buying.
Asians work for 1/5th to 1/10th the wages of Americans. And Asians economies are growing 2 to 3 times faster than the U.S.. Still, Asian stocks are priced much lower than stocks on Wall Street.
The U.S. is running a current account deficit of about $1 million PER MINUTE... but the dollar rose yesterday.
The average American is deeper in debt than at any time in history... but consumer spending just rose at the fastest pace in 18 months.
The Moscow Times reports that Russia, the world's second-largest oil exporter, is considering shifting its oil dealings from the dollar to the euro... but the price of the euro fell against the dollar yesterday.
As a percentage of family income, house prices have risen nearly 50% since the early 70s. Houses are selling for such high prices that fewer and fewer people can afford them... but the price of the median house continues to rise five times faster than income.
The U.S. army is the greatest offensive military force the world has ever seen. But it has been placed in a position where it is forced to DEFEND itself against desert tribes... and the price of gold still dropped more than $6 yesterday.
Meanwhile, the world's only super-power seems to be at war with ITSELF over what to do next, both on the economic front and in the Iraqi front. It is running a budget deficit of more than $1 billion per day...
.. and people lend it money as if it were the Eisenhower
years.
The more we think about it, the more we love this market... this economy... this world! It gets madder and madder. But imagine how boring it would be if people did the reasonable thing?
Instead, we are treated to the spectacle of investors, economists, homeowners and politicians sitting on stacks of dynamite... and lighting the fuse!
Advice to readers: watch out. Sell the dollar, sell the Nasdaq, sell Treasuries, sell real estate. Buy gold, the euro and Asian stocks.
And now over to Addison with more of the madness of crowds:
-------------
Addison Wiggin, writing from Paris...
- Little by little, people are beginning to realize that reports of growth in the GDP are greatly exaggerated. Last week, an economist at Merrill Lynch went public with the story. "One economist who's telling the truth," is the headline in the NY Post.
- According to John Crudele, the column's author, David A. Rosenberg, Merrill Lynch's chief economist for North America, has a bone to pick with government statistics. First of all, Rosenberg "concluded that the money being spent on computers and other technology by businesses is nowhere near what is being reported by the government."
- Using what our own Dr. Richebächer calls "hedonic price indexing" - valuing computers by their computing potential, rather than dollars spent on them - government number crunchers pretend that businesses have spent $133 billion on computers and peripherals since the recession bottomed out.
In fact, according to Rosenberg, the number is closer to $15 billion.
- Crudele: "[Rosenberg] notes that the tech spending 'accounted for 30 percent of the overall increase in GDP, so the economy ex-computer expenditures has only risen at a 2 percent annual rate.' The government is officially reporting GDP at nearly twice that rate."
- Secondly, Rosenberg's work suggests the recent report on job figures - the vaunted 57,000 increase that arrested media musings on the 'jobless recovery' - was "not a strong report in and of itself and we shouldn't let the shock factor of a '+' sign confuse matters... more companies are still cutting workers than adding them; the drop in hourly wages shows 'income growth is sluggish'; and the number of people who only have a part-time job because they can't find full-time work soared last month."
- Yesterday, the market spent the better part of the morning climbing higher as several bullish pieces of news floated about the ether. Strong earnings results rolled in from the New Era holdout Yahoo... and a less-severe-than-expected new jobless claims report put in an appearance. The major averages were all up - the Dow climbed 49 points to 9680, the Nasdaq rose 18 to 1911, and the S&P 500 closed at 1038 after rising 5 points.
- The mid-cap S&P 400 and small-cap Russell 2000 indices both put in new 52-week highs.
- We remember our friend John Mauldin asking earlier this year: "What if they threw a dollar devaluation party, and nobody came?" ertainly, the dollar has been under pressure since officials of the G7 met at Dubai, and John Snow & Co. began gently trying to talk the dollar down from the precipice off of which it is currently considering a swan dive. But Snow's sweet nothings have not stopped Japan from
intervening to restrain the yen. According to Reuter's, they have even enlisted the help of the New York Federal Reserve to sell yen on its behalf.
- "Much of the dollars bought in that intervention could well end up in U.S. assets and will be held by the Fed," Reuter's reports, "which holds some $786 billion of Treasuries on behalf of foreign central banks, mostly from Asia." And the reflation attempt goes on...
- Meanwhile, fearing their own economy may be 'overheating,' the Chinese have moved to limit foreign direct investment. According to a piece in London's Financial Times, "China has stalled the expansion of a scheme to attract foreign investment funds into its domestic capital markets because of concerns about its use by investment banks for currency speculation." The British bank HSBC was shut out of half of a recent $100m bid... and an informal request from Union Bank of
Switzerland to increase its $300m target was rejected flat out.
- Singapore, a leading member of the ASEAN trade pact we talked about yesterday, saw 3rd-quarter GDP come in at an annualized 15%...
- In his book Tomorrow's Gold, Marc Faber describes the world's capital markets by way of metaphor. Imagine the world's investment funding as water filling a large bowl. For much of the last decade, that bowl has sat squarely over the corner of Wall and Broad in lower Manhattan. Despite the combined efforts of all the world's meddling central bankers, the bowl appears to be steadfastly tipping toward the Asian markets... waiting for the great inundation to begin.
-------------
Bill Bonner, back in Paris...
*** Stocks have been rising. But it is almost surely just a normal rally in an extraordinary bear market. How long might the bear market last?
A message on the Richard Russell website gives a clue:
1910-1929 - Bull market, DJIA peaks at 381
1929-1948 - Bear market, DJIA went as low as 41 in 1933 and ended in 1948 at 161
1948-1966 - Bull market, DJIA goes from 161-975
1966-1982 - Bear market - DJIA starts at 975, goes to 1000, bottoms in 1973 at 577 and finishes in 1982 at 974.
1982-2000 - Greatest bull market in history, DJIA goes from 974 - 11,722
2000-???? - Potentially the greatest bear market in history
