-->May Day, May Day

The Daily Reckoning

Paris, France

Wednesday, May 1, 2003

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*** End of the world...has it already come?

*** Stocks down...dollar down...gold up...

*** Natural gas! May Poles...Japan still sinks...and more!

We warned you.

The EOTWAWHKI...remember that? Well, it's here.

The End-of-the-world-as-we-have-known-it came sometime during
the last year or so...and hardly noticed by anyone.

But it is surely a New World now. Never before has American
monetary and military policy been so forward-looking, so
'can-do' optimistic, so ready to intervene anywhere, anytime.

At the Fed, Ben 'Printing Press' Bernanke has promised to
destroy the dollar rather than allow it to rise in value. (We
can make them at practically zero cost, he reminds the
world's dollar holders.)

And at the White House, George Bush has promised to destroy
any country that even thinks about causing us trouble.

As might be expected, foreigners are getting nervous. The
International Herald Tribune reports that 4 European nations
- including France and Germany - got together to create a
joint defense capability, just in case the Americans turn out
to be not as friendly as they think they are. Colin Powell
dismissed the idea as just another European bureaucracy. But
Americans dismissed the euro when it first came out, too. The
euro was meant to be an alternative to the dollar; yesterday,
it rose to a 4-year high against the greenback.

In related news, both business and consumers seem to be
reluctant to borrow or buy."Mortgage demand down for 6th
straight week," says a Reuters headline."Lingering business
caution could be an impediment to improved economic
performance," Greenspan told Congress yesterday."Consumers
wary," adds ABC News.

In the past, we could count on Americans to spend money...and
count on foreigners to lend it to them. But that was back
when Fed governors promised to protect the value of the
dollar...and American presidents pledged to preserve the
peace.

We don't know, of course. This New World may be better...or
it may be worse. But it is surely different.

Eric...?

--------------

Eric Fry in New York...

- The dollar captured top billing on the Wall Street marquis
yesterday, as it tumbled nearly 1% to a fresh four-year low
of $1.118 per euro. Gold responded to the dollar sell-off by
rocketing more than $5.00 to $339.40. By comparison, the
stock market action was downright boring. The Dow slipped 22
points to 8,480 and the Nasdaq eased 7 points to 1,464.
The dollar also topped the marquis at the annual Grant's
Spring Investment Conference, which your New York-based
editor attended yesterday. As usual, the distinguished line-
up of speakers - including Grant himself - presented a
valuable array of investment insights.

- When Grant addressed the assembly, he apologetically
reiterated his long-held bullish view toward gold and his
reciprocal bearishness toward the U.S. dollar. He recited the
litany of dollar-bearish phenomena that have become the gold
bulls' creed - like the fact that America's gaping current
account deficit now totals more than half a trillion dollars
annually. Grant also noted our nation's ballooning net
international investment deficit - that's the difference
between the amount of foreign stuff we own and the amount of
U.S. stuff that foreigners own. At last count, foreigners
owned $2.3 trillion more of us than we owned of them. (Of
course, this figure does not include the imminent annexation
of the Iraqi oil fields, the value of which should greatly
enhance our net investment position).

- These frightening statistics - which we've reckoned with
from time to time in this column - are not NEW news. But they
are no less frightening for being familiar to us. And
certainly, they are reason enough to worry about the
greenback's future value. But that's not all, says Grant. He
also worries that the Federal Reserve's audacious promise to
reflate at all cost is a promise that is likely to be
kept...to the chagrin of dollar holders.

- In reference to Fed Governor Ben Bernanke's remark that the
U.S. government could"produce as many U.S. dollars as it
wishes at essentially no cost," Grant flashed a slide showing
an artist's rendering of Bernanke-style reflation:"The Fed's
own squadron of C-130" transport jets are conducting a
"monetary sortie" over Brooklyn, dropping dollar bills out of
their cargo bays. The point was made loud and clear: the
dollar's value is at risk...

- T. Boone Pickens, the former president of Mesa Oil, kicked
off the Grant's conference with some fascinating observations
about the state of the natural gas market. In short, he is
bullish...very bullish. The 74-year old oilman declared,"I
don't believe I'll ever see natural gas below $4.50 again."
Inventories are extremely low, he explained, supply is
falling and demand is holding steady - a potentially
explosive situation for gas prices."If we get another cold
winter next year," Pickens predicted,"the gas price could go
to $10 an mcf or more...The gas price could do anything, and
I mean anything!"

- Unfortunately, Pickens, who runs a couple of hedge fund
devoted to the energy sector, did not name any specific
stocks that would benefit from the natural gas rally he
anticipates...

- But John Myers, our man in the resource sector, has
identified a handful of energy stocks that would benefit
nicely from soaring natural gas prices. For example, John
says that Anadarko Petroleum Corp. expects to earn about
$4.00 a share in 2003. But if natural gas price average even
$5.50/mcf for the year, Anadarko's earnings could be closer
to $6.00 per shares...At $10.00/mcf, we would imagine,
Anadarko shareholders may be wintering in Gstaad.

See also: After Iraq...America's NEXT Crisis
http://www.agora-inc.com/reports/OST/Riches/

--------------

Bill Bonner, back in Paris...

*** It is May Day...the streets are empty this morning. The
first of May is a major holiday in most European countries,
typically with mass demonstrations by communists,
syndicalists, and labor parties, griping about this or that.

Your editor remembers, fondly, the May Pole dance at his
local school...the little girls dressed gaily...the bright,
sunny weather...

Where has it gone? Does anyone still dance around the May
Pole? What has become of it? Is the idea too sexist, too
seasonist, too moss-backed and pretty to be on the public
school system calendar? Surely, somewhere, perhaps in secret,
little girls in white dresses, with ribbons in their hair,
still do the forbidden skip...and celebrate the coming of
spring.

***"Bleak outlook for Japanese Economy," begins a BBC story.
Wages are falling on the hopeless island - minus 2.1% year
over year. In a poll of business leaders, 73% thought the
economy"was at a standstill". They were the optimists.
Twenty percent thought it was"deteriorating gradually". Five
said it was getting worse. What the other 2 thought is not
recorded.

*** What do the authorities do in the face of this grim news?
The same thing they've been doing for the last 14 years, and
the same thing the Fed has been doing for the last 2 years -
make money easier to get."Bank of Japan eases monetary
policy," says a Financial Times headline. This article caught
our attention. Interest rates in Japan have been at zero for
years, we thought...what will they do next? We imagined BOJ
employees handing out cash at subway stops...instead, the
bank is raising"the target for current accounts". We don't
know what that means; the article offered no explanation. But
we know it won't work. We'll explain why...

..Leaving you on the edge of your chair, dear reader...

..until soon...

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The Daily Reckoning PRESENTS: Ruminations on the nature of
global capitalism. A DR Classique originally broadcast on May
Day 2000.


MAY DAY, MAY DAY
by Bill Bonner

"It's the final struggle," sang the crowd of thousands in
unison. The year was 1969...I was a student, exhilarated by
the intellectual flora that bloomed in every corner of
Paris that year. So rich. So exotic.

I had gone with a friend to a meeting of Trotskyites. At
the time, I had only the dimmest idea of what Trotskyism
was all about. I was hoping it was a free love group.
Imagine my disappointment when I saw the crowd of
humorless, earnest would-be Che Guevaras. And then, as the
crowd raised its right fists in the traditional
revolutionary salute, I knew I wanted no part of it.

These people were like football fans who had read Marx and
Engels...hooligans with an exaggerated frontal lobe and an
unbounded faith in their own ability to run other people's
lives.

Speaker after speaker exhorted the mob to continue the
fight...to sacrifice themselves, like Internet investors,
to the cause.

The cause was, of course, foolish. And every one of the
millions of people who worked for the cause over the course
of the last 10 decades was on a fool's errand - making the
world a worse place to live...both for himself and everyone
else.

But that is more obvious now than it was then. Many still
thought communism would work. People still had faith, in
other words. The mania was still alive...the fraud was
still working. GDP figures from the `60s, as I mentioned in
a previous letter, showed the Soviet Union growing at twice
the rate of the United States. Who could be sure they were
nonsense?

Now we know. We know the whole thing was a fraud from start
to finish.

May 1 is the big day for the proletariat.

Back when people still believed Marx's class theory - that
is, back when there was a proletariat - huge parades were
organized throughout much of the world. Communist countries
used them to show off military hardware. In the West, they
were used to demonstrate the voting power of the demented.
Both exhibitions were threatening. Either the force of
arms, or the power of the ballot, put liberty and property
in danger.

It is hard to recall what a threat it was. Communism seems
- like modern art - something of a joke today. How could
anyone have taken its pretensions seriously, we ask
ourselves?

But it was a deadly serious matter. Socialism and its next
of kin, Nazism, caused the deaths of about 100 million
people - more than the population of France or Britain or
Germany. Hundreds of millions had their property and
liberty stolen...and even those who had no property and
didn't care about liberty suffered a severe drop in living
standards. While the rest of the world got rich, socialist
countries got poorer - depending upon the degree to which
they put Marx's ideas into practice.

Nazis, Bolsheviks and other parasites did more damage than
any group in any period in history.

May Day no longer brings out the proletariat. They are busy
going on picnics or following their stocks on the Internet.
Today, the big parade is for the intellectuals. A new book
by Jean-Francois Revel, entitled"The Great Parade",
describes the parade of intellectuals who are trying to
revive the ideal of 20th century socialism. Picking up the
dead ideas from death camps, barbed wire walls and
cheerless apartment blocks where they dropped - the Marxist
apologists are giving them new life.

Revel, who is said to have been drunk for the last 25
years, is testament to the clarifying power of strong
drink. Throughout the Western world, he says,"we are urged
to return to the 'real' Marx." Forget about the damage done
in Marx's name, say the resuscitators of Marxism, who, in
Revel's words,"urge a new transition towards a government
that is qualitatively new, and towards a new, more human
socialism."

"The more Marxism ceases to be practiced," writes Revel,
"the less it is criticized. The more Liberalism (Western
liberal democracy and the free market) is criticized, the
more it is practiced."

This creates, for the Marxist mind, a new sort of dialectic
that allows him to envisage the next big inevitable shift,
towards a new socialist utopia.

Nazism, a brand of socialism mixed with prehensile
tribalism, was thoroughly discredited after WWII. Very few
intellectuals openly long for a sort of"pure" Nazism -
unblemished by Hitler's crude attempts to apply it.

Nazism is dead. Stone dead. Because intellectuals cannot
traffic in the creed without taking on the responsibility
for Hitler's crimes. Even an unremarkable comment on
Hitler's employment policies was sufficient to get Joerg
Haider branded as a Nazi sympathizer. Nazism, the idea,
cannot be separated from those who acted in its name.

But Marxist intellectuals, and socialist politicians, have
never had to take responsibility for the crimes of
communism. In fact, among Marxists, the idea of a"pure",
utopian form of collectivism - completely removed from the
imbecilities practiced by socialist governments - is
gaining strength, according to Revel.

"They admit the imperfections of applied Marxism," writes
Revel,"but they answer with the hope of an infinitely
perfectible revolution that has not yet been achieved...
Now that they are rid of the unfortunate reality that was
the Soviet Union, for which they deny any responsibility,
[Marxist intellectuals] feel finally free to worship
socialism as it was meant to be - a utopia."

Utopia is hard to argue with. It is, by definition, beyond
reproach.


Bill Bonner