Manna From Heaven

The Daily Reckoning

Weekend Edition

August 25-26, 2001

Ouzilly, France

By Addison Wiggin

MARKET REVIEW: Manna From Heaven

“This was like manna from heaven for all the tech companies,” an analyst for A.G. Edwards told the IHT, following Cisco’s announcement Friday that it saw its business stabilizing. I guess any news that’s not desperate these days feels like divine intervention.

Unfortunately, “Stock mutual funds are suffering through the dog days of summer,” says USAToday. “As investors trade light and cautiously. The average diversified stock fund fell 1.5% the week ended Aug. 23, according to Lipper, the fund trackers. It is off 11.5% for the year. The week’s top performers were in the health and biotechnology category, which climbed 2.5% on average. Biggest losers for the week were again science and technology funds, down 5.1% on average, and telecommunications funds, off 5%.”

Meanwile gold funds lead are up an average 14.9% for
the year.

The Dow closed up nearly 2% Friday to 10423. The S&P traded up a little more and closed the week at 1184. But the big news was on Nasdaq – up 4% and flirting with 2000 once again.

THIS WEEK in THE DAILY RECKONING
by Bill Bonner

08/24/01 REDEMPTION

“…There is only one way to get richer – by setting aside resources for future wealth creation. [But for many Americans], both stock market and real estate seemed to offer a substitute for savings. With ersatz savings in stocks…and now in real estate…real savings have been neglected. This is the U.S. economy’s single biggest macroeconomic problem…”

08/22/01 BACKWARDS WALKING – II

“…Ever since 1945, homeowners have been trading more and more of their homes for ready cash, believing that unlike stock prices, property prices never fall. As more and more houses are refinanced, America’s homeowners walk backwards, using capital to finance current operations. They stay in business, but they get poorer by the day. How long will it be before they fall down?…”

08/22/01 ANATOMY OF A BUST
Guest Essay by Eric Fry

“…”Bust” is just a four-letter word for vicious cycle. It takes a little time to crank these babies up, but once they start humming, there’s no shutting ’em down… If six rate cuts haven’t managed to break the downward cycle, why should the seventh?…”

08/21/01 BACKWARDS WALKING

“…At the end of the last century, it seemed, as it does now, that progress was inevitable. The world’s economies were booming. Was there any reason to believe that this bounty would not continue? No. Yet, only a few years later, the entire world began the most costly and barbarous wars in history…Progress is never guaranteed. In any period of time, some people gain and some people lose…”

08/20/01 NICARAGUA

“…how little we really need to be happy. Just food, clothing, shelter…Everything else is vanity, little more than an attempt to feel that we are better than others…There are a lot of ways to feel superior, but in this age of materialism we gauge our superiority in dollars and sense…”

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HEADLINEs, NEWS And INSIGHT: Credit Card Profits… Dollar Pessimism Reigns…The Life Of An Expat… and more…

Why Do All Those Credit Cards Come From Deleware?
by Lynn Carpenter

Lenders like banks and credit card companies borrow funds for short terms at very low cost then turn them into high-interest credit for their customers. Despite the lower rates for Fed funds, credit card rates have stayed high. The spread and the potential profit gets better and better. And they’ve got the hottest product on the market…plastic.

Dollar Talk
by Andrew Kashdan

A slight drop in the dollar has spawned a plethora of comment, some of which ignores a harsh reality: Even if the U.S. had ‘a policy’ and the means to implement it, there is no easy solution to the problem.

The Days Of Wine And Roses
by John Myers

As the world’s oil reserves are drawn down, the area with the richest fields will take on greater prominence. Persian Gulf countries – Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates – produce 28% of the world’s oil and hold 65% of the world’s oil reserves. Over the next two decades, this region will own the lion’s share of demand, perhaps as much as 80% of the world’s exports.

Return To The First World
by Kathleen Peddicord

I travel regularly in Latin America. Everywhere I go, I ask the expats I meet how they came to be where theyare. They all tell similar stories. They left the Statesto escape taxes, crime, and government. They wanted abetter qualify of life. A lower cost of living. Betterweather. And, of course…a little adventure.

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FLOTSAM AND JETSAM: Writer John Forde reports from Lathus,France

“BULL MARKET OVER!” SAYS FRENCH COW

“LATHUS, France – Fifteen cows and their calvesmade a bold investment this morning.

A break in a stone wall offered a chance toescape. They took it. Cow-in-chief, Bessie,led the charge.

“It was a calculated risk,” said Bessie.”Our usual field has lots of grass and sun, butit’s boring. The grass on the other side…it just looked so much greener.”

But the venture didn’t pay off.

“It was the same old grass,” says Bessie.”Worse, there wasn’t a bull in sight! A fewmonths ago, I couldn’t get away from them.But NOW where are they?”

As she spoke, a calf nuzzled her udder. Clearly,the bulls had had their day.

But, in this reporter’s eyes, the goodtimes appear over. With no guarantee theBulls’ will return.

Frightened villagers will be glad to note:Bessie and the herd have since returnedto safer meadows, where they wait expectantlyfor their next big break.”

Bon weekend,

Addison