The Daily Reckoning - Pigs Get Slaughtered, Part Deux (Bill Bonner)

verfasst von Firmian, 18.12.2003, 20:16

-->Pigs Get Slaughtered, Part Deux

The Daily Reckoning

London, England

Wednesday, 17 December 2003

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

*** Stocks up triple digits... bad habits resume...

*** But so does the 'jobless recovery'... and the trade
deficit... and the federal deficit... and the war in
Iraq... and the falling dollar...

*** Consumer prices falling - if you live in a cave...

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

The Lumps rubbed their eyes and shook off their sudden
attack of prudence. Yesterday, it was back to bad habits.

All around them, the noise and distractions were as
appealing as ever.

Saddam was behind bars.

November housing numbers were strong.

Industrial production registered its biggest gain in 4
years.

So what's the problem, the Lumps asked themselves?

"People who are looking at day-to-day events are really
missing the forest for the trees," explained an economist
interviewed by TheStreet.com.

"The fact is," writes Alan Abelson in Barron's,"this is
still very much a jobless recovery."

While admiring a pretty sapling in the day's news, they
have failed to notice the thicket growing up around them -
becoming darker, wilder, and more dangerous every day. It
now takes $45 billion per month of foreign capital to make
ends meet in the U.S., while foreigners become less and
less willing to fly over and drop supplies of new
money... which is why the dollar is falling.

Yesterday, the dollar fell again - to a new record low
against the euro.

Americans, who keep score in dollars, think their economy
is growing... their stocks are becoming more
valuable... their wealth is increasing.

But it is all a colossal fraud and a scam. The economy is
'growing' only insofar as Americans are ruining themselves
at a faster rate - buying things they don't need with money
they don't have while counting on the kindness of strangers
to make up the difference. And in terms of euros or real
money - gold - neither the stock market nor the economy nor
even real estate is going up. Since the beginning of the
year, the value of U.S. assets in global terms has remained
unchanged... while Americans have gone deeper into debt.

The underbrush is becoming impassable, inescapable. As the
dollar falls, foreigners become even more reluctant to
finance Americans' spending spree - which puts even more
pressure on the dollar itself.

Without financing from overseas... Americans will be unable
to borrow... and unable to spend. In any direction we turn,
the vines of debt and thorny limbs of recession will block
the way.

Addison is traveling today, so we've taken the liberty of
glancing at the financial news ourselves.

*** What's this? House prices have fallen 25% in Alameda
County, CA. Hmmm...

*** And what's this? Consumer prices are still falling... at
least for consumers who live in unheated caves and get
their food from hunting and fishing. Last month, energy was
rising at a 6% rate. Medical care rose at a 3.5% rate. And
the number for food and drink was 3.1%.

*** And this? The Xinhua Financial Network - a partially
state-owned news agency - has purchased a Wall Street news
organization. They'll now be broadcasting stories of the
Asian miracle direct from Wall Street themselves. Pao Mo!
Pao Mo!

*** Daily Reckoning reader Michael Boyd just returned from
a three week trip to China. Mr. Boyd sends this note:

"What most people probably don't know is that China's
current boom is unsustainable because it is based on a
massive expansion of credit (i.e. it's financed by debt).
This should sound familiar because the same situation has
existed in the U.S., only on a much larger scale. The
latest figures show that China's M2 money supply grew by
21.6% over the past 12 months. At some point over the next
year or so China's government will be forced to take
serious steps to curtail the credit expansion. When this
happens there will probably be a very sharp downturn in
growth.

"In fact, excessive credit creation has already attracted
the attention of policymakers in China, who have announced
their intention to sharply restrain credit growth. Thus,
China's growth will probably slow down considerably
beginning next year, as a result of the government reigning
in excessive credit growth. In addition to the slowing
domestic demand, China's growth will further weaken because
Chinese exporters are currently shipping next year's
exports ahead of the removal of export tax breaks which
will take effect early next year."

*** Everybody knows that education is the key to success in
life. And everyone knows that good medical care is the key
to health. Which makes us suspicious...

A letter in Barron's from Dr. Thomas G. Pretlow:

"How many people know that [in the U.S.] our life
expectancies are the shortest among the 10 largest
industrialized democracies (they were among the longest in
the 1950s), that we have the highest mortality rates in the
first year of life, that we have the highest maternal
mortality rates, that we pay more than twice the average
cost per capita for health care?"

***"Economists are almost unanimous," we read recently,
"in believing the dollar will continue to fall."

This makes us suspicious, too. Economists are almost always
wrong about important market trends. And yet, the continued
decline of the dollar seems inevitable to us, too. How
could the dollar decline and still make the economists look
like fools?

While economists are nearly unanimous in believing the
dollar will fall... they are also nearly unanimous in
believing that it will not fall too much nor too fast.
Instead, they expect a 'soft landing' for the U.S.
currency... much like the soft-landing of the late '80s.

What if the dollar crashed? What if it went down far more
than they expected? What if the whole Dollar Standard
system collapsed?

Brace yourself, dear reader.

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

The Daily Reckoning PRESENTS: Harkening back to the glory
days of the late 90's, Bill Bonner describes the demise of
a different sort of pig. This DR Classique, originally
published on 22 January 2002, inspired themes in Chapter 1
of Financial Reckoning Day.


PIGS GET SLAUGHTERED, Part Deux
By Bill Bonner


Have you seen the bigger piggies,
In their starched white shirts
You will find the bigger piggies,
Stirring up the dirt...
Always have clean shirts to play around in

In their sties with all their backing
They don't care what goes on around
In their eyes there's something lacking
What they need's a darn good whacking...

- George Harrison, R.I.P


It is the fat pig that feels the butcher's knife, say the
Chinese.

On March 20th of 2000, few pigs were fatter than Michael
Saylor. And perhaps none felt the butcher's knife more
sharply...

Of all the messianic madmen of the era, Saylor stood out -
perhaps as the maddest... certainly as one of the richest.
But, today, we rise to praise Saylor, not to bury him. It
is one thing to bring the fat pig down; but it is against
the Daily Reckoning code of honor to kick him after he has
fallen. Besides, Saylor brought entertainment to
millions... and helped separate countless fools from their
money.

"We're purging ignorance from the planet," Saylor once
said, setting a lofty goal for himself. He was on a
"crusade for intelligence," he claimed; he wanted to make
information"free" and have it"run like water." He planned
to write a big book on the subject, to be entitled
"Intelligence."

We take a little credit for plunging the knife into Saylor,
dear reader. In a contest between ignorance and stupidity
on the one hand, and information and intelligence on the
other, we know how to bet. Purging the planet of ignorance?
Only a buffoon or mountebank would say such a dopey thing.
Saylor was clearly one or the other - maybe both.

We were also suspicious of a man who didn't waste his time
on women. Wasting time and money on women is practically a
moral obligation for a straight man. But Saylor saw women
as"a time sink" and avoided them. In fact, Saylor didn't
drink, either - at least, not back then.

We reckoned that Saylor was stark, raving mad. He made a
public spectacle of himself every time he opened his mouth.
"I think my software is going to become so ubiquitous, so
essential, that if it stops working there will be riots,"
he told New Yorker magazine. A certain level of madness is
often an advantage in the business and entertainment world.
But as it turned out, Saylor had less visible corruptions,
too... he had hidden massive indiscretions in the company's
financial statements.

On March 15, the week before Saylor had his rendez-vous at
the abattoir, we ridiculed Saylor's Information Age
pretensions. The following day, too, we made fun of his
idea for a"Ivy League Education on the Net." Ivy League
educations were already bad enough, we pointed out, even
when you attend in person.

Saylor's company, MicroStrategy, had developed software
that helped businesses figure out who was buying their
products.

"By using the software," explained a Washington Post story,
"McDonald's could tell if a Chicago franchise was four
times more likely to sell Big Macs on a winter Friday than
was a franchise in Miami (where customers
disproportionately preferred filet-of-fish sandwich.)"
Maybe the company would be a big success. We didn't know.

But we knew the stock market had gone mad over companies
such as MicroStrategy. Shares were offered to the public on
June 11, 1998. Nearly two years later, the stock hit $333.
Saylor made another $1.3 billion that day and $4.5 billion
in the preceding week - bringing his personal net worth to
$13.6 billion. MicroStrategy, with sales of only $200
million, and a reported profit for 1999 of $12.6 million,
was worth more than Dupont.

Saylor became the richest man in the Washington DC
area... wealthier even than Oracle founder, Larry Ellison.
At $333, the MicroStrategy stock price was as insane its
CEO. But there was no guarantee that either would get his
comeuppance anytime soon. (Still, we hope at least a few
Daily Reckoning readers went short).

While we were mocking MicroStrategy, its share price and
its dizzy CEO, the rest of the financial press was praising
them. Hardly a single report failed to find something
flattering to say. The English language has thousands of
negative words, but before the 20th of March, 2000, the
ink-stained hacks, analysts, and TV presenters couldn't
seem to find a single one that applied to Michael Saylor.

Then, on March 20, under pressure from the SEC,
MicroStrategy admitted that it had cooked its books for the
previous two years. Instead of a profit of $12.6 million in
1999, the company would now should a loss of $34 million to
$40 million. Revenue, too, was downsized.

That day, Michael Saylor made history. Never before had a
man lost so much money in such a short time. In six hours,
his net worth dropped by $6.1 billion.

From that day on, Saylor's life was different. Instead of
being praised by investors and the financial media, he was
whacked hard. Investors were out $11 billion. Some of them
were angry. Others were suicidal."I never thought I could
lose like this," said one investor on the
Yahoo/MicroStrategy message board. He went on to announce
that he was going to kill himself.

Before March 20th, Michael Saylor could do no wrong; after,
he could do no right. Most prominently, Fortune magazine
listed him as #1 in the"Billionaire Losers Club," with
total losses of $13 billion.

But a difficult failure does more good for a man than an
easy success. On the evidence, Saylor is a better man today
than he was a few years ago."He began to drink," reports
the Washington Post."At least two MicroStrategy officials
received calls from people who were concerned that they had
seen Saylor drunk in public..."

When he's not drinking, Saylor is tending to his business.
The stock is still overpriced... but a lot less overpriced
than it used to be.

Is Saylor still a visionary? Yes, but"maybe an older,
wiser visionary," he says.


Your pen-pal in Paris,

Bill Bonner

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gesamter Thread:

• The Daily Reckoning - Pigs Get Slaughtered, Part Deux (Bill Bonner) - Firmian, 18.12.2003, 20:16
  • Dt Fassung - Firmian, 18.12.2003, 20:19
    • Wollte Dir Deinen Job nicht wegnehmen, - off-shore-trader, 18.12.2003, 20:46
      • Re: Wollte Dir Deinen Job nicht wegnehmen / bis zum 250000. Beitrag... - -- Elli --, 18.12.2003, 20:59
        • Re: 250.000. Beitrag oder Beitrag mit der Nummer 250.000? ;-) - Uwe, 18.12.2003, 21:23
          • Re: 250.000. Beitrag oder Beitrag mit der Nummer 250.000? ;-) - -- Elli --, 18.12.2003, 22:03
          • Re: 250.000. Beitrag oder Beitrag mit der Nummer 250.000? ;-) - Herbi, dem Bremser, 18.12.2003, 22:50
            • Re: 250.000. Beitrag oder Beitrag mit der Nummer 250.000? ;-) - Uwe, 18.12.2003, 23:19
              • Re: @Uwe: 250k bleiben 250k - Herbi, dem Bremser, 18.12.2003, 23:41
      • Re: Wäre ich etwas aufmerksamer, hätte ich das Original an die Kopie gehängt... (owT) - Firmian, 18.12.2003, 22:55
  • Wo bekommt man das? Link? Danke (owT) - daxput, 18.12.2003, 20:30
    • Re: Wo bekommt man das? Link? siehe... - Firmian, 18.12.2003, 23:10