Yanks, Frogs And Wine Speculators / The Daily Reckoning

verfasst von - Elli -, 28.04.2003, 18:27

-->Yanks, Frogs And Wine Speculators

The Daily Reckoning

Paris, France

Monday, 28 April 2003

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

*** No victory boom yet...Dow falls...GDP barely growing...

*** Average pay levels down - first time in 20 years...

*** Asian growth estimates...auto cuts...Mary Meeker...and
more!

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

Another week after the victory in Iraq...and still no
victory boom. The Dow fell 133 points on Friday, putting it
in losing territory for the year.

The latest GDP figures show the economy barely growing. In
the first quarter, GDP increased at a 1.6% annual rate.
Consumer spending increased at 1.4%...and spending on
services rose only 0.5% - the slowest pace in 12 years.

In the popular press, the depressing figures are blamed on
"geopolitical anxieties". But now that those are behind us,
said can-do Fed governor Ben"Printing Press" Bernanke,
things should get much better. In a speech last Thursday,
Bernanke said the economy should grow at a 4% rate in the
second half of the year.

Bernanke and his fellow can-do economists think they have
the situation under control. If they had been around in the
early '30s, they must think to themselves, the Great
Depression wouldn't have been nearly so great...but merely
a little dip in economic activity. And if they had been
allowed to yank on the levers of Japan's economy at any
time during the last dozen years, instead of sinking into
recession, bear market and deflation, the Japanese would
still be buying over-priced golf courses in California.

Which may only go to prove the Mogambo Guru is right when
he writes that"the vast majority of smug jackass people
who call themselves 'economists', are clueless nitwits, and
you can tell them I said so."

The problem Bernanke and the other clueless nitwits face is
that there are some things a central bank 'no can do'. It
can print money...but it can't make the money
valuable...and it can't increase real spending power just
by spreading it around.

For the first time in 20 years, average pay levels are
falling. According to a NY TIMES report, the top 10% of
earners take home $1,439 per week - down 1.4% from a year
ago. The guys in the middle and lower-end of the pay scale
lost ground too, with the median falling 1.5% year over
year.

Real consumer purchasing power won't go up until more
people earn more real money. When that will happen, we
don't know. But Bernanke can print all the green notes he
wants without increasing the nation's real wealth by a
single penny.

"The Fed created $6.9 billion in raw credit last week, to a
new record high," reports Mogambo."Government debt bought
outright was up only $1.7 billion, but also to a new
record."

If only it were that easy...

Eric, do you have some information for us?

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

Eric Fry in New York...

- The stock market emerged with a split decision last week.
The Dow slipped about half a percent to 8,306, while the
Nasdaq added half a percent to 1,434. But even the Nasdaq's
gain must have felt like a loss to the bulls, as the high-
tech index ended the week 2% below its mid-week high.

- It's clear that investors are attempting to focus on the
stock market's ostensibly bullish"fundamentals", like the
fact that 62% of the Standard & Poor's 500 companies
reporting so far have posted results that topped consensus
expectations. 22% were in line with the consensus, and only
16% fell short. Before uncorking the Dom Perignon, however,
remember that expectations had dipped so low they could
have won a limbo contest with ease.

- Unfortunately, the stock market's innumerable bearish
fundamentals will not be silenced. Rich valuations and slow
earnings growth - like a visiting mother-in-law - have a
way of making themselves heard. And the SARS epidemic
certainly does not enhance the stock market's risk profile.

- Move over MWD! There's a newer and nastier acronym in
town: SARS. As the virulent strain of pneumonia rages
through the Orient, the world's macroeconomic bean-counters
are furiously rubbing out GDP growth with their pencil-
erasers.

- The World Bank estimates that SARS and the aftermath of
the Iraq war will knock almost one-sixth off of Asia's
economic growth this year, cutting its GDP estimate for
East Asia to 5% from 5.8%. The World Trade Organization
voiced similar fears, predicting growth of two to three
percent in global trade this year - a pace that would be
less than half the 6.7 percent average rate of goods trade
growth seen in the 1990s.

- Over on the other side of the Pacific, the U.S. economy
is starting to feel the adverse effects of SARS. Air travel
and tourism are particularly conspicuous victims of the
dreaded disease."San Francisco noted that international
travel had weakened, due in part to the SARS outbreak in
Asia. Dallas observed a decline in air travel due to the
onset of the war and the SARS outbreak," the Federal
Reserve's Beige Book reports. Air travel to Asia collapsed
nearly 40% for the week ending April 20th.

- While the U.S. economy is not the most immediate victim
of SARS, it may be the most vulnerable - our economy's
immune system is still compromised by the effects of post-
bubble-itus. Corporations and consumers and municipalities
all grew accustomed to"living large" during the bubble
years. But now that the easy-money days are over,
ratcheting back our collective national lifestyle is a very
painful adjustment. Corporations have reacted fairly
swiftly to the new austerity - they are borrowing less,
spending less, firing salaried workers and granting smaller
pay hikes to their already overpaid executives.

- Consumers, likewise, are pulling in their horns. They buy
cars only when the auto companies are handing them out for
free. But they're buying very little else, and are saving
more than they used to.

- Unfortunately, the state and federal governments haven't
really gotten the hang of living in the post-bubble era.
They continue to spend, even while their income is
plummeting."State and local governments are spending a
record amount of the nation's wealth at the same time
they're warning that a sour economy is forcing cuts in key
programs," USA Today reports. A USA Today analysis found
that state and local spending consumed 15.2% of U.S.
personal income last year. That's the highest level since
record keeping began in 1929. The National Conference of
State Legislatures reported Thursday that states face $21.5
billion in shortfalls for the budget year that ends June 30
in most states. The projected gap between spending and
revenue next year is at least $53.5 billion."

- $53 billion is a lot of money. Then again, we spent about
$80 billion to blow up Baghdad. So how bad could a $53
deficit billion really be?

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

Bill Bonner, back in Paris...

*** GM said it would cut auto production by 10%. Ford said
it would reduce its output by 17%. Despite giveaway deals,
more than 4 million autos remain unsold.

*** But what's this? New homes sales are soaring - up 7%
last month...plus 11% year over year. And investors are
pouring money back into equity funds, too...$6.7 billion of
it in the week of April 16.

*** Poor Frank Quattrone. The Feds have decided to make an
example of him. Quattrone, you may recall, was one of the
big shills for tech stocks in the last '90s...along with
Henry Blodget, Jack Grubman and Mary Meeker. Both Blodget
and Grubman have been collared and dragged before various
tribunals. Now, it's Quattrone's turn.

At first, investigators decided they didn't have enough
evidence to prosecute him, but then changed their minds to
go after him on an 'obstructing justice' charge, after he
allegedly destroyed documents rather than turn them over.

That leaves only Mary Meeker. Michael Lewis, on Bloomberg,
describes how Frank Quattrone hired Meeker at Morgan
Stanley, before he left for another company:"They wanted
an analyst who was 1) desperate to be one of the boys, 2)
free of useful investment ideas, and 3) willing to define
her job as the pleasing of corporations that issued
securities rather than investors who bought them."

Unlike the other tech touts, Ms. Meeker is still on the
job.


The Daily Reckoning PRESENTS: Inverting the popular adage
that war is an extension of politics, the Yanks and the
Frogs are continuing their pre-war tiff under the motto
that politics is the continuation of war by different
means.

That's good news for investors...and lovers of the grape
alike.


YANKS, FROGS AND WINE SPECULATORS
by Chris DeHaemer

The funny thing about the anti-French fever that has swept
through the U.S. over the last month is that it has
produced an unusual buying opportunity in nice French
wines. The 2000 Bordeaux is much admired as the best year
in two decades.

The magazine 'Wine Spectator' (or should we call it 'Wine
Speculator'?) had this to say about Chateau Leoville Las
Cases St.-Julien 2000: 'Absolutely fantastic. This is one
of the most exciting young reds I have tasted in a long,
long time. Las Cases has always wanted to make first-growth
quality in a top-notch vintage, and it certainly did in
2000. Best after 2012. Collectible.'...$175.00 per bottle.

Last week, even those usually inclined to scoff at the
pretentious claptrap of gourmets and food aficionados might
have been tempted to buy a case or two of 2000
Bordeaux...which they could find heaped in the bargain
barrel beside the door at the local spirit merchant,
selling for 25% discounts.

As France-bashing spilled from late-night comedy shows
across the United States following the French government's
theoretical"support" for Saddam Hussein's Iraq, France's
wine exports to the U.S. fell noticeably in March. Wine
exports to the U.S. in 2002 were almost $28.5 billion. This
week, wine producers are holding emergency meetings in
Paris.

Before the most recent incarnation of the Gulf War, about
40% of Maison Latour's wine was shipped to America from its
vineyards in Bourgogne. The nascent U.S. boycott has seen
sales drop by up to 15%.

The downturn in March exports of French wines has yet to be
documented in official statistics. But unofficial numbers
bandied about by individual exporters indicate that the
upward trend witnessed during the first two months of the
year - when exports rose 16% to $287 million - will not
continue.

If you're stocking or replenishing a wine cellar, here's
the opportunistic thing to do: buy 2000 Bordeaux. In ten
years, nobody will remember this bit of Gaullist arrogance
and the wine will be in short supply to boot...with all
that noble stuff swilled by backyard barbeque boobs who
bought it in the bargain bin and stretched it with sugar
and seltzer for homemade wine coolers.

This line of thinking led me to search for French exporters
that have been flustered by the Francophobe fad. A
backbreaking and intensive search revealed this list of
companies (actually, I found it in my inbox, originally
compiled by NewsMax):

* Air France. Air Liquide. Airbus. Alcatel. Allegra
(allergy medication). Aqualung (including: Spirotechnique,
Technisub, U.S. Divers, and SeaQuest). AXA Advisors.

* Bank of the West in California (owned by BNP Paribas).
Beneteau (boats). BF Goodrich (owned by Michelin). BIC
(razors, pens and lighters). Biotherm (cosmetics).
Bollinger (champagne). Please note: Bank of the West,
Irving, TX, is locally owned and operated, and is not
affiliated with Bank of the West in California.

* Car and Driver magazine. Chanel. Chivas Regal (scotch).
Christian Dior. Club Med (vacations). Crown Royal Canadian
Whiskey (Seagram).

* Dannon (yogurt and dairy foods). Dom Perignon. Durand
Crystal.

* Elle magazine. Essilor Optical Products. Evian (which,
read backwards, spells"naïve").

* Givenchy.

* Hennessy.

* Jacobs Creek (owned by Pernod Ricard since 1989). Jerry
Springer (talk show).

* Krups (coffee and cappuccino makers).

* Lancôme. Le Creuset (cookware). L'Oréal (health and
beauty products). Louis Vuitton.

* Martel Cognac. Maybelline. Michelin (tires and auto
parts). Mikasa (crystal and glass). Moët (champagne). Motel
6. Motown Records. MP3.com.

* Peugeot (automobiles). Pinault - Printemps - Redoute
(Guicci, Yves Saint Laurent). ProScan (owned by Thomson
Electronics, France). Publicis Group (including Saatchi &
Saatchi Advertising and Leo Burnett Worldwide).

* RCA (televisions and electronics, owned by Thomson
Electronics). Red Roof Inns (owned by Accor group in
France). Renault (automobiles). Road & Track magazine.
Roquefort cheese (all Roquefort cheese is made in France).
Rowenta (toasters, irons, coffee makers, etc.).

* Sierra Software and Computer Games. Smart & Final.
Sofitel (hotels, owned by Accor). Sparkletts (water, owned
by Danone). Spencer Gifts.

* Tefal (kitchenware). Technicolor.

* UbiSoft (computer games). Uniroyal. Universal Studios
(music, movies and amusement parks, owned by Vivendi-
Universal). USFilter.

* Veritas Group. Veuve Clicquot Champagne. Vittel. Vivendi.

* Wild Turkey (bourbon). Woman's Day magazine.

* Yoplait (French company Sodiaal owns a 50% stake).

* Zodiac inflatable boats.

I don't know about you, but the fact that 'Road & Track'
magazine AND Wild Turkey are French-owned is wrong. Very,
very wrong.

That said, none of these companies offered ways to monetize
the American backlash against French stuff. In fact, the
Paris CAC 40 index has climbed from 2,400 to 2,903 since
the first week of March, thereby proving once again the
major moral component of film noir - there is no poetic
justice.

Make money, not war.


Sincerely,


Chris DeHaemer
for The Daily Reckoning

Thread gesperrt

 

gesamter Thread:

• Yanks, Frogs And Wine Speculators / The Daily Reckoning - - Elli -, 28.04.2003, 18:27