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Grizzly's
Growlings Back Issues
Monday Morning Market Musings 11/30/98
"A Tulip by Any Other Name..."With apologies to that all-time great investment advisor William Shakespeare,
"...[T]hat which we call a tulip, by any other name would smell as sweet."All astute investors should familiarize themselves with the great speculative bubbles and blow offs of all time. The most dramatic and colorful such example is the Tulipmania of 1630s Holland, where prices of a single tulip bulb reached truly absurd levels. A single "Viceroy" tulip bulb was sold for "four tons of wheat, eight tons of rye, four fat oxen, eight fat swine, twelve fat sheep, two hogsheads of wine, four kegs of beer, two tubs of butter, 1000 pounds of cheese, one complete bed, one slightly used men’s suit, and one tarnished silver drinking cup." That was one helluva bargain, eh? Of course tulips crashed down to earth shortly thereafter, devastating the Dutch economy.
Check out Charles MacKay’s classic study of Tulipmania and other "Extraordinary Popular Delusions and the Madness of Crowds" for a detailed account.
The investment tulips of 1998, and perhaps the entire 20th century, are Internet stocks.
A heretofore undistinguished company named Books-a-Million was just one of last week’s tulips. This former "bricks and mortar" bookseller announced to the world that it had opened a slick new Internet sales operation. Just mention the "I" word and ZOOM, the stock takes off like a rocket, starting the week at 4 bucks and hitting 40 on Friday. Not too shabby; a ten-fold increase in four trading days. Check it out at Yahoo [BAMM] or your favorite service for all the details. If you’ve seen enough, and if you’ve got the guts, the short selling potential here is as lucrative as it gets.
Seems like every Monday of late is "Merger-Mania Monday," an equally visible and significant sign of a speculative blow-off. The 40 percent deflation in crude oil prices over the last 12 months is spurring a survival of the fittest mentality in the oil patch. The proposed merger of former Standard Oil Trust descendents Exxon and Mobil, if it is ever consummated, evidences just how desperate is the state of the world economy.
The global depression rolls on, although you won’t hear about from Dan Rather or Peter Jennings.
- The personal savings rate of US consumers fell again last month, to a negative 0.2 percent. For the second month in a row, consumers spent more than they earned. October’s performance was the worst since 1959, when the government first started collecting monthly figures. The last time there was a negative savings for an entire year was 1933, the depths of the Great Depression. If US consumers are in net outflow position with stocks at record highs, just how bad are things going to be at the Great Bear Market low?
- Retail sales in Hong Kong in September collapsed by 21% from the prior year. Sales of new cars fell 53%!
- 1998 will go down on record as the most expensive and perhaps most deadly year ever for weather-related disasters. Some 32,000 inhabitants of this planet were killed by unprecedented floods, typhoons, hurricanes, famines, volcanic eruptions, and an assortment of other natural disasters. The Worldwatch Institute estimates that $89 billion in damages was inflicted upon mankind by Mother Nature this year. Some say that such death and destruction is ultimately bullish for the world economy because of the resultant reconstruction boom. Following that logic, why don’t we just launch a few Nukes to start WWWIII, and then rebuild the entire planet?
Boris Yeltsin’s physical and political fate remains in the hands of Russia’s top docs. At least they’re admitting that he doesn’t have "a cold," and that he does have pneumonia.
Bill Clinton’s political fate remains in the hands of the US House of Representatives. The Judiciary Committee may pass a set of Articles of Impeachment to the full House, but it appears the practical politics of reading the public polls will prevail over the US Constitution.
Not much happening overnight going into Monday morning trading on Wall Street. The Asian markets are mixed, with the Nikkei 225 dipping back below the widely watched 15,000 level. The S&P 500 futures trading on Globex are off a couple of points from Friday’s holiday-shortened session.
Our outlook remains unchanged. We continue with our call of the market as being in a massive bull trap rally that is merely setting the stage for an inevitable and historic market crash. See the back issues index for a refresher.
US stocks remain on FULL CRASH ALERT!
Grizzly
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