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Grizzly's Growlings Back Issues

Monday Morning Market Musings    12/07/98

"Bahdah Bing, Bahdah Boom, Bahdah BAMM"

Last week’s "Internetulip" rocket, Books-a-Million [BAMM], got bammed and bashed, and then it crashed. The stock exploded Thanksgiving week from $4 on Monday to $47 that Friday. Last Monday morning we said:

"If you’ve seen enough, and if you’ve got the guts, the short selling potential here is as lucrative as it gets."

BAMM promptly plunged on queue at Monday’s opening, free-falling to the mid 20s. By Friday, BAMM was "crying Uncle" around 13; a 70% drop for the week. Bahdah bing, bahdah boom, bahdah BAMM.

The DJIA made at least a short-term peak the Tuesday before Thanksgiving at 9380. From there, it dropped a quick 500 points, 6%, to 8880 last Thursday, before rebounding 135 points on Friday. This week’s trading will go a long way towards confirming or denying whether this peak is THE PEAK have been looking for, or is just another rung on the ladder to 10,000.

The rise and fall of BAMM exemplifies just how far and how fast a market can move when it's schizophrenic. We continue with our ongoing outlook that the market is 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!

Not much happening overnight going into Monday morning trading on Wall Street. The Asian markets are mostly higher, with the Nikkei 225 up a handful of point to 14,700. The S&P 500 futures trading on Globex are up a couple of points; perhaps capping off Friday’s strong rebound.

The IMF wants Russia to raise more revenue so it can start paying off the tens of billions it owes from all those failed bailouts over the past 15 months. The Russian government wants to cut taxes to encourage investments and capital inflow so they can start building the infrastructure of a new economy. The Russian people just want to get paid the months and months of back wages due them so they can buy enough food to survive what will no doubt be a dreary and dismal winter.

Accordingly, the Russian ruble plunged yet again to new lows. At twenty to the dollar, a ruble is now worth less than a nickel. Soon it will be worth less than a wooden nickel. It will hold near that level, but only for its value as kindling to keep warm through the winter.

Prime Minister Yevgeny Primakov summed it up to the World Economic Forum with brutal honesty:

"...the worst consequences of the crisis aren’t the fall of the ruble, or the drop in production, but a total crisis of confidence between creditors and debtors, owners and managers, the government and the population."

Grizzly's translation: "We’re on the brink of total chaos, and we can’t do a damned thing about it."

Also on the brink, of famine and collapse, is North Korea. In our world of life imitating art, North Korea is saying its dispute with the US over a suspected underground nuclear plant has pushed it to "the brink of war."

North Korea has only a kernel of rice more credibility and gall than The Grand Duchy of Fenwick, the noble and fictional country that declares war on the US in the film "The Mouse that Roared." The Fenwickians fully expect to lose the war, but then quickly reap the rewards of a massive Marshall-type recovery plan. [Starring the late great Peter Sellers, who actually played three roles, this 1959 film feels dated, but it’s still very wicked and funny. Highly recommended.] North Korea may have a bomb or two, but they don’t have a Peter Sellers to negotiate for them.

More evidence of the global depression that you won’t hear from Dan Rather or Peter Jennings:

Clear evidence that the Asian contagion has leeched into the US popped up last week at Boeing. The DJIA component stunned Wall Street, announcing 50,000 job layoffs and steep cuts in its 1999 profits forecast. Boeing blamed its newfound problems on "lower demand from Asian airlines." The wave has begun to ripple.

Last week’s Exxon-Mobil marriage was quickly followed by France’s Total Petroleum scooping up Belgium Petrofina to form the world’s sixth largest oil conglomerate. Even this level of international consolidation won’t help prop up prices very much. Unleaded gasoline now wholesales for a puny 40 cents a gallon. Add in about 40 cents a gallon in federal, state and local taxes, a few cents markup for shipping and handling and you get 87 cents or less a gallon at the pump in some parts of the US.

The US House of Representatives likely will vote on an impeachment resolution by week’s end. The White House as well as the Democrats on the Judiciary Committee really haven’t challenged any of the material facts of the case. Rather, they’ve stuck with the "if you can’t criticize the message, criticize the messenger" line of reasoning. The vote likely will be very close and very much along party lines. The Washington pundits and political pimps will make it all as dramatic as possible. Indeed, it is important, precedent-setting history in the making. The question is whether the history books will note 1998 as the end of a presidency, the end of a bull market, both, or neither.

"The present [world economic] crisis is not the result of market failure. Rather, it is the result of governments intervening in or seeking to supercede the market, both internally via loans, subsidies, or taxes and other handicaps, and externally via the IMF, the World Bank and other international agencies.

We do not need more government agencies spending still more of the taxpayers' money, with limited or nonexistent accountability. That would simply be throwing good money after bad. We need government, both with the nations and internationally, to get out of the way and let the market work."

                              -- Dr. Milton Friedman, Nobel Prize-winning economist.

 

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