The Wasteland

T.S. Eliot, American by birth, English by choice, was once asked why he had moved to London, instead of settling down in St. Louis with a nice woman from the midwest.

“I didn’t like being dead that much,” was his reply.

Eliot shared one of American intellectuals’ most unflattering prejudices — a contempt for things American. Just sit in the cafes on the Left Bank in Paris today. Make sure you are in the company of American intellectuals… and mention McDonalds. Or Monica Lewinsky. Or Guiliani, and the Brooklyn Museum of Art. Whether they come from San Diego or Portland… no matter what other goofy ideas they may have… you are almost guaranteed to find they despise the views of the common American and the things for which America is best known.

I visit this subject because almost everyone expects the next century to be dominated by America… by its culture, its businesses, and its stock market. Nearly every editorial page makes some reference to “American Triumphalism.” Nearly every editorial writer is appalled by McDonalds… and contemptuous of the great hoi polloi of middle-class America… but proud to sit with them on top of the world. My prediction: they will slip from their perch before the end of this decade.

Eliot spent most of his life in London. His first wife went mad and had to be institutionalized after their separation.

His most famous poem, The Wasteland, described the hollowness of post-WWI feeling. God was dead. What was left? Eliot had no interest in politics.

“What shall I do now? What shall I do?” ‘I shall rush out as I am, and walk the street ‘With my hair down, so. What shall we do to-morrow? ‘What shall we ever do?’

Eliot went back in time. After being lionized for his portrayal of 20th century disillusionment — thus foreshadowing Camus by two decades — he announced that he was “a classicist in literature, royalist in politics and anglo-catholic in religion.” In short, he had looked into the abyss of nihilism and existentialism — and turned around. What the heck… say a mass, hobnob with aristocrats, read the classics — life didn’t have to be all bad. Later in life, he actually decided to eat a peach too — marrying a woman 38 years younger than he.

But he never went back to St. Louis.

For a long time it had been the habit of European intellectuals to disparage America… and for American intellectuals to agree with them. Sydney Smith, in the mid-Victorian era, asked if anyone would really care to see an American play or listen to an American tune. I believe it was he who called the whole nation an “experiment in vulgarity.”

Perhaps it was. Perhaps it still is. But that didn’t stop Americans from making money. Indeed, it seemed to encourage it.

The Figaro newspaper has been around in Paris for a long time. It reprinted a copy of its front page from 1900 — as part of its first edition of the year 2000. I noted an interesting article about Senator Andrews Clark. I never heard of him. But the Washington correspondent said he was the richest man in the senate, richer than the next 8 richest senators put together. He made his money, the article tells us, starting with nothing but a team of oxen. He drove them out to a copper mine, the Verde Mine, where he made his fortune. By the turn of the century, he had banks, railways, rubber plantations, you name it.

Was he vulgar? Probably as vulgar as a bus station. But, in New York, he also had a collection of masterpieces from the “modern french school,” which probably adorn the walls of some public museum today. The Figaro wondered wistfully whether it might be possible to get “this prodigious businessman” to Paris, where “our artists and poor would have no reason to object.”

While America’s intellectuals fawned over their English and European cousins… America’s dynamic businessmen built McDonalds. And made films that are shipped all over the world. And marketed music that people now hear (and often cannot escape) in even the most remote and desolate outposts of humanity.

Joseph Conrad described this quality of American business in his character, Holroyd, who says, “we shall run the world’s business whether it likes it or not.”

And indeed, that is what happened in the 20th century. It turned out to be an American Century, just as Henry Luce had suggested.

But America’s chattering classes have no idea of what brought about America’s triumph, nor what to do with it. President Clinton, a man fond of peaches, says “we must never forget the meaning of the 20th century, or… the triumph of freedom.”

It was freedom that the US had in abundance in 1900 — and which set people like Senator Clark and Mr. Holroyd on their paths to commercial glory. Freedom allowed them to be prosperous and vulgar at the same time. The more prosperous they were — the more vulgarity they could afford.

Investors and politicians still believe America has a competitive edge in the 21st century. They claim that our economy is free… and more flexible and innovative that those of other nations. It is largely in view of this that the Rocket Chips have been bid up to such extreme levels. And American consumers believe it too. They no longer save. They go into debt and spend like crazy — all in the belief that the American economy is headed for even greater glory.

Fortunately, foreigners believe the hype too. They continue to accept dollars as the currency of choice, despite the fact that the dollar — America’s most successful export — becomes less valuable, intrinsically, with each one in use. Even Cuba… a country that still clings to politics like the Pope clings to the cross — has accepted the dollar as legal tender.

Amid all this good cheer… could I suggest that America is overbought? You bet I could. As reported here yesterday, the US economy did less well than the German economy over the last 10 years. And its competitive advantage, freedom, has been largely dismantled.

American Triumphalism, like democracy and the Nasdaq 100, is another example of a trend whose premise is false. It will discredited sometime in the next decade.

Sell the dollar.

*** My grandfather went broke in the depression and used to like to tell the story of a stockbroker who jumped off the top of the Maryland National Bank building in Baltimore. As he was going by the 6th floor, the secretaries heard him say to himself: “Well, I’m alright so far.”

*** Well, it’s day 4 of the year 2000. All right, so far. “It’s the end of the world as we know it, and I feel fine…”

*** Richard Russell had guessed that the smart money was buying in December. They were betting that that Y2K would be nothing and that the market would crest just after the first. Buy the rumor, sell the news.

*** Markets took off with a bang in Europe yesterday morning. Everyone had predicted a big bullish day — as investors took the lack of a Y2K problem for a green flag.

*** But by the time the market closed in New York, they were whimpering along in reverse.

*** The Dow fell 141 points. The S&P fell too.

*** What the markets didn’t like was the very problem I mentioned — the overhang of Y2K money and its implications. The Fed’s balance sheet grew by 17.7% last year. Alan Greenspan had put in two wussie little rate hikes last year to try to dampen the “irrational exuberance” he feared. But then he reversed course and fired up the markets with armloads of tinder-dry new money. The markets caught fire and blazed through the Christmas season like a yule log soaked in rum.

*** So, bonds fell to yields over 6.5%. Financial stocks and utilities also reacted negatively.

*** The bear was back at work, too, though a little groggy from his Christmas pudding and a late night out on New Year’s eve. He knocked down two stocks for every one that managed an increase in price. He drove 142 stocks to new lows, while allowing only 113 to hit new highs. Same old. Same old.

*** But the Rocket Chips kept going. At current levels, the Nasdaq is discounting 200 years of earnings. But at these levels, the old measures mean nothing. This is not investment — and not even gambling. The Rocket Chips have achieved escape velocity. They’ve lost touch with earthly values. Houston, do we have a problem yet?

*** The Nasdaq rose 61 points yesterday. Amazon rose 13. This has got to be the explosive finale — like the last burst of fireworks on New Years Eve — for this ‘River of No Returns’ company. Bezos was on the cover of Time as the Man of the Year. He’s doomed.

*** And I’ll give you some advice: take the money off the table. Sell the nets, the techs, and big cap wonders of the Dow and S&P. Buy good stocks that have fallen to decent prices.

*** One example: Chris Weber recommended a preferred mining share a few weeks ago. It’s already risen by 15%. And it’s yielding 11%! Even if the stock goes nowhere for the next 11 months… Chris will still earn a 25% total return. See www.fleetstreetletter.com

*** There are lots of stocks available at good prices. Which is not to say they won’t be available later at even better prices. But you can never hope to micro-time the market. Just wait until something you want is at a good price — then buy it.

*** The latest spin on Y2K, as reported in the Los Angeles Times, is that the $225 billion spent to repair computer systems could “propel the US economy to new heights.” In this best of all possible worlds, everything is beautiful, in its own way.

*** Not only is politics a bore to voters — it’s becoming a bore to other governments too. Used to be that beggar nations sought financial assistance from other governments. But now, it’s the market that provides assistance. In 1999, the 29 borrowing nations – – including Brazil, China and the like — raised $22 billion from the World Bank and other governments. But they raised $136 billion from private sources.

*** On this date, 35 years ago, Lyndon Johnson announced his goals for a Great Society at his State of the Union address.

*** T.S. Eliot died on today’s date in 1965. And Albert Camus died in a car crash in 1957.

Your Correspondent,

Bill Bonner

Paris, France December 4, 1999