Weekend Edition: Pullback

Friday’s close:

Dow -89.99 to 8989
Nasdaq -8.73 to 1625
S&P 500 -9.60 to 976

Investors ignored Greenspan’s attempt to goose the markets with a 25 basis point cut to the Fed funds rate Wednesday. Losses overthe week culminated in today’s 89 point "pullback"… the Dow,the S&P 500, and the Nasdaq all fell… 2.3%, 2.0%, and 1.2%,respectively… 1536 stocks advanced Friday on the NYSE…1715fell.

Bonds also came under selling pressure, but managed to end Friday with the 10-yr Treasury up a skosch… its yield at 3.54%.

According to Briefing.com investors and consumers remainedbullish this week. Personal spending rose 0.1%, personal incomewas up 0.3%, and the revised reading for the Michigan Sentimentreport was 89.7… two points higher than expected.

Gold lost $8 bucks this week. But the "red-wine benchmark"improved slightly: after falling as low as $1.20 to the euro, the US dollar rose to $1.14 by the close on Friday…allowing youreditors to get a decent bottle of Bordeaux for under $5.00 again.

*** you’ll note the Weekend Edition is a little truncated thisweek. It’s likely to be so for awhile… we’ve got a little oneon the way. Cheers, Addison. (You’ll find a full week of TheDaily Reckoning below).

THIS WEEK in THE DAILY RECKONING

WE THE DEAD (06/27/03)
by Bill Bonner

"…The days of the American constitutional republic are longover. The neo-cons claim that they are bringing Wilsoniandemocracy to the entire world. Somehow, they seem to know thatthis is what the world wants and needs. Everybody gets a vote inthis new Democratic Valhalla. Every half-wit’s ballot is worth as much as George W. Bush’s. Every fool and moron gets to have anopinion. Only we, the dead, are left out. Excluded. Ignored.Forgotten…"

‘WHITE ELEPHANTS’ AND OTHER MONETARY AILMENTS (06/26/03)
by Dr. Marc Faber

"…In the real economy (with a small capital market), bubblestend to be contained by the availability of savings andcredit…whereas in the financial economy (with adisproportionately large capital market, compared to theeconomy), the unlimited availability of credit leads tospeculative bubbles, which get totally out of hand…Ignoring the difference could be disastrous…"

THE FIRST PANACEA (06/25/03)
by John Myers

"…The massive eight trillion dollars of U.S. financial assetsheld by foreigners means that all foreign central banks andforeign institutions have good reason not to liquidate stocks and bonds, even if the U.S. were to systematically debase itscurrency. Liquidating U.S. assets could create a vicious cycle of dollar weakness, leading to additional asset sales that wouldlead to additional dollar weakness, on so on it would go. WhatWashington really has then, is tacit permission from foreigninvestors to devalue the dollar; albeit slowly. And this isprecisely the path that the Fed is pursuing…"

VIPERS, AND THIEVES, TOO (06/24/03)
by Addison Wiggin

"[Louis] McFadden described the Fed as ‘one of the most corruptinstitutions the world has ever known’…an ‘evil institutionthat has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted ourGovernment.’ Given the fact that we’ve just experienced thefastest descent from ‘surplus’ to ‘deficit’ in the nation’shistory, McFadden’s observations seem as relevant today as theydid 70 years ago…"

ANTI-LEVERAGE: A THEORETICAL MASTERPIECE (06/23/03)
by the Mongambo Guru

"…And then – and this is the part that I think will swing it for me with the Nobel Prize people – I make the leap to the concept of government as an asset, and one whose maintenance costs make it also so, so, so, it is hard to think with your enthusiastic applause still ringing in my ear, subject to an exponentially approaching natural limit…"

HEADLINE, NEWS And INSIGHT: A unique way to play the goldmarket… pop divas getting burned out on excess… and a shorthistory of empirical demise…

Like Gold, Only Better
by Dr. Steve Sjuggerud

"…I went looking for the best way to get into gold right now… a way providing significant upside potential, but with limiteddownside risk. It’s actually hard to find… You could own goldoutright. But if we’re right in this Fed scenario, we’d like alittle more bang for our buck. You could buy gold futures, butthey’re risky — why risk losing more than your initialinvestment if you don’t have to? The next logical choice might be shares of mining companies, but mining shares are getting pricey. I had to dig deeper…"

Ka-Ching!
by Rick Terry

"…there is a great unspoken knowingness; a guttural,instinctual premonition that, for the idolized, gilded calf ofAmerican consumerism… the gig is up. Even our sex symbols arein on the secret. Everyone knows except Messrs. Greenspan,Bernanke, and McTeer. Although, I suspect even this trio sensesthe sea change – late at night when it’s just them and their MTV. Everyone knows it. It’s just that nobody wants the music tostop…"

The Decline of the Pax Americana
by John Myers
June 28-29, 2003