-->All Saints' Day

The Daily Reckoning

New Orleans, Louisiana

Friday, 31 October 2003, All Hallow's Eve


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*** Deception... Mundus vult decipi, ergo decipiatur...

*** GDP soars at a 'fantastic clip of 7.2%'! We wish we
could believe it.

*** Down in the 'Big Easy', 8 feet below sea
level... grilled termites... Wonder Woman... calling out the
FRD brigade... and a happy All Hallow's Eve.

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Deception.

This morning, we were served a morsel of enticement for
breakfast here at the W Hotel on Poydras Street in New
Orleans. We took breakfast in the room. And there, sitting
on the tray, was a curious little espresso cup filled to
the brim with un-ground coffee beans. A little sign planted
in the beans read:"What we see depends mainly on what we
look for."

GDP numbers were released yesterday. And the financial
media gasped.

Our own Christoph Amberger, writing in his daily missive
24/7 e-profits dispatch, writes:"What a turn of events! So
much for the 'Bush Depression' and the pious myth that the
Prez has 'wrecked the economy.'

"U.S. economic growth for Q3 2003 came in at a fantastic
clip of 7.2%, which makes it the fastest growth since the
Gipper was in office...

"Equipped with new houses whose windowless fourth exterior
wall indicates that there's nothing behind it but closet
and storage space, the American consumer increased spending
at a 6.6% growth. The last time that happened was in the
third quarter of 1997."

Of course, as Frédéric Bastiat pointed out over 200 years
ago, in economics as in life, there is the seen... and the
unseen. And it is often the unseen that matters. Few
headlines take note of two shady-but-significant
contributors to GDP - government and defense spending.
Likewise, few remember to mention that consumer spending -
which accounts for 70% of all U.S. economic activity - only
grows as high as the tide of the greatest credit flood in
history can lift it.

"Pivotal events in history come very infrequently," writes
Chuck Cohen today, at the Man Ray table of le Metropole
Café."Many of us have never seen one. On the whole, our
world in the past 30 years or so has been smoothly and
uneventfully chugging along. The debt level has been
climbing and climbing. The derivative complex has gotten
more and more out of hand. And yet a surreal complacency
has set in as if this is going to go on forever. But get
ready, all is about to change.

"World events, especially in the economic plane, are about
to explode onto our history books."

Of course, if you took the GDP numbers at face value, or
let the financial media decipher their meaning for
you... you wouldn't have any idea.

Mundus vult decipi, ergo decipiatur... goes a Latin proverb.

The world wants to be deceived...

So let it be deceived.

Here's Eric with more detail on the deception...

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Eric Fry, in another as-yet-unknown location, somewhere in
New Orleans...

- The stock market fought its way to a split decision
yesterday, as the Dow gained 12 points to 9,787 and the
Nasdaq slipped 4 points to 1,933. Earlier in the trading
session, stocks had jumped to much higher levels, as if
celebrating the news that the U.S. economy boomed in the
third quarter.

- According to the government's statisticians, U.S. GDP
advanced at a breathtaking 7.2% annual rate last quarter.
Does anyone really believe this number? If the economy is
growing at such a rapid clip, why are so many Americans
filing unemployment claims, and why are so many companies
struggling to generate profit growth?

- On the other hand, the restaurants, bars and casinos down
here in New Orleans aren't lacking for customers... Yes,
it's true, on Tuesday morning, your New York editor sprung
from his usual perch on Wall Street and headed south to the
"Big Easy" for the New Orleans Investment Conference.
Yesterday he addressed the conference-goers on three
separate occasions, dispensing the same sort of dubious
wisdom that he dispenses regularly in the Daily Reckoning.

- He predicted that the dollar would be"the first - or
second - best short sale in the U.S. financial markets,"
and suggested, therefore, that"gold may be a good thing to
own."

- Later in the day, he urged investors to continue scouting
for opportunities to invest in China, and suggested some
specific investment ideas. He also predicted that the U.S.
financial sector is close to a peak, and that financial
stocks are better sold than bought. But we have shared
these thoughts with the Daily Reckoning faithful on many
occasions.

- Later that afternoon, your New York editor was privileged
to listen to Jimmy Rogers address the conference. The well-
traveled"Investment Biker" provided a stream of
fascinating insights from his three-year, 152,000-mile trip
around the globe.

-"We ate everything," he told the conference-goers."And I
can tell you that grilled grasshoppers aren't so bad,
provided you mix 'em with grilled termites."

- During the question-and-answer session, Rogers was asked
to share his favorite investment destinations or investment
themes. He replied:"China is becoming the greatest country
of the 21st century. They call themselves communists, but
they're more capitalistic than you or I... They save and
invest 35% of their income."

- Rogers says that he owns a few Chinese stocks, as well as
the Chinese Yuan. But he suggests that one off the best
ways to"play China" is to invest in commodities.

-"The Chinese aren't going to buy light bulbs from the
rest of the world," Rogers says."But they're going to buy
commodities. They have to buy commodities because they do
not have enough of their own to keep pace with domestic
demand."

-"Commodities are in a bull market," says Rogers."The
bear market ended in the late 1990s, and the bull market
will probably last for another 8 to 12 years."

- Rogers' second investment theme is the U.S. dollar."I'm
pessimistic about the dollar," he says."The Federal
Reserve has as its official policy the debasement of the
U.S. dollar. They've got the printing presses and they
promise to use them... So if I could tell you only one
thing, it would be to get out of the U.S. dollar."

- Rogers' third investment theme is really an amalgamation
of the first two. He favors investments in resource-based
economies like Canada's. Not only would their economies
benefit from a commodity bull market, but their currencies
would also continue appreciating against the U.S. dollar.

- Rogers is not only putting his money where his mouth is,
he is also putting his family's future where his mouth is.
He is actively preparing his 5-month old daughter for the
world that he anticipates... Says the proud papa:"My 5-
month old daughter has a U.S. passport, a Swiss bank
account and a Chinese nanny...

-"Learn Chinese," Rogers concluded."This economy will be
the greatest growth story of the 21st century."

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Addison Wiggin, back at the W on Poydras...

*** We're back in New Orleans. We love this city. The
history alone strikes a certain fancy with us. Founded by
none other than the Mississippi Scheme's John Law, New
Orleans was meant to be the 'Paris of the New World'; the
main trading port for all the riches Law's Compagnie des
Indes would pilfer from the Mississippi territory. The city
was also the destination for the hoards of beggars,
pickpockets and thieves Law rounded up in Paris when the
shares in his company began to collapse. He sent the ne'er-
do-wells to the New World, under the pretense that they
would be working the mines in what is present day
Louisiana. Investors in the company's shares knew the jig
was up when the same beggars and thieves began showing
their faces in the same dark alleys of old Paris...

Today, of course, New Orleans - particularly the French
Quarter - is no place for a mine. In fact, the quarter is 8
feet below sea level. If the levée were ever to break, the
bars and restaurants would be inundated faster than an
investor suffering hyperinflation of the currency his
assets are parked in.

*** In the year 2000, just after the Nasdaq crashed, we
recall there were barely 200 people in attendance at the
New Orleans conference. This year attendance is in excess
of 1,000. If history holds true, the tidal wave of interest
is only just beginning. Back in the late 70s and early 80s,
when gold was trading in the $700-$800 range, attendance
was closer to 5,000. They held parades down Canal Street to
kick things off. Wonder Woman rode an elephant in one of
them.

Although the excitement level this year isn't yet at that
stage, Brian Lundin, the conference organizer (and editor
of the Gold Letter) and his crew are to be commended. They
- like gold itself - have stayed the course. Here's to
their ship coming in.

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The Daily Reckoning PRESENTS: Pumpkins, witches and
cobwebs. With all the décor around Paris at the moment,
you'd never know"Halloween" was once an unknown
holiday... this essay was originally aired on 1 November,
1999.


ALL SAINTS' DAY
By Bill Bonner

"Pumpkins. I'm going to plant pumpkins next year." Pierre
has been raising beef - big, beautiful Limousin beef - and
sheep for many years.

But the European Union is forcing down the subsidies for
beef. And sheep are disappearing from the region
altogether... there are no longer any subsidies available
for sheep farmers. French farmers cannot compete with those
in New Zealand and Australia. And wool prices are so low it
no longer pays to shear the sheep.

Cereals, on the other hand, are heavily subsidized. The
difference, Pierre explained, came about because the cereal
growers could leave their farms in slack seasons and go to
demonstrate in Brussels. Large groups of farmers always
strike fear in what passes for the hearts of politicians,
so the cereal farmers typically get half to two-thirds of
their income from the subsidies... not from selling food.

Farmers who raise livestock, on the other hand, cannot get
away. They're forced to stay on the farm day after day to
take care of the animals. They pose less of a threat to the
taxpayers' purse.

Even with the subsidies still in place, raising cattle is
not a way to get rich. Pierre has suggested that we put our
farms together. Apparently, you need bigger and bigger
holdings to make money. And he needs to build a big new
barn to make the operation more efficient. The return on
investment? About 2%.

Hmmm...

Maybe pumpkins are the answer. The big orange vegetables
are new to France. So is Halloween. All Saints' Day has
been recognized and celebrated for many centuries. But
Halloween is a new import from America, along with the
whole shebang of decorations, customs and commercial
opportunities that accompany it. Department store workers
wore costumes in Paris last week - stimulating interest and
sales, no doubt. Even out here in the middle of nowhere,
Halloween is catching on.

Our children held the first Halloween party in this region
three years ago. The invitees had barely heard the word at
the time. The kids took a candlelight tour of our attic,
with staged shows of various spook-house exhibits. In one
room, however, we decided to surprise them. We lay on a
bed... in a room with wallpaper peeling off the walls and
creaking floorboards... and put a sheet over ourselves as
though we were a corpse waiting for an undertaker.

As the kids came in, we began making a low growling
noise... and then sat up. The kids were so alarmed and
shrieked so loud we were afraid someone would call the
police. Then they flew down the circular steps so fast that
their little bodies were still spinning like tops as they
swirled out the front door and into the yard.

That was three years ago. Now, Halloween decorations are in
many stores.

Along with new things to buy and a new opportunity for
secular celebration.

There is a world of difference between All Saints' and
Halloween. The spirits that one honors on All Saints' were
not, after all, all saints. They were real. They were
spirits that might be honored... or feared. (Of course, if
you don't believe in the spirit world... you have no
business celebrating All Saints' anyway.)

But regardless of your views on the afterlife, All Saints'
requires at least some reflection... on the lives of our
forebears, on the challenges they faced and perhaps the
lessons that could be learned from them. At the very least,
you might stand before the grave of someone you
knew... offer flowers... and spend a moment recalling the
person.

This is not a ritual that lends itself to the Internet age.
(But who knows... maybe you'll be able to order flowers via
Internet... and maybe the screen will prompt you to think
about certain aspects of the deceased. And maybe
AllSaints.com will be a big hit as an IPO, giving people a
way to celebrate the ancient holiday without ever leaving
their day-trading terminals.)

Halloween, on the other hand, is an example of what
Philippe Muray calls"Festivus." Muray has noticed the way
in which the genuine, dark, primeval, wild and dangerous
currents and undercurrents in society have been tamed... and
transformed into harmless celebrations. This applies not
merely to the shift from All Saints' to Halloween, but also
the political process, where genuinely revolutionary
parties have been replaced by a token opposition and
emasculated rebels.

We have often noted how you cannot even say what you want
about taxes anymore... without fear of criminal prosecution.
Yet, is there any real opposition - of a sort that might be
described as dangerous to the government? No, we celebrate
the First Amendment now; we do not practice it.

Likewise, America celebrates liberty. It is like
Halloween... an empty expression... a hollow
festival... something to feel good about. No reflection
required. No risk, either. But what would the ghosts of
Jefferson and Adams think of us?

Who cares? As the GDP increases... stocks rise... and the
spirits of Liberty remain in the grave... pumpkins are the
business to be in.


Your editor,

Bill Bonner