Cyber-Colt .45
The Daily Reckoning
Ouzilly, France
Thursday, August 26, 2004
---------------------
*** Squanderville...when will the Asians own more of
America than we do?
*** Laguna Beach...Lubbock, Texas...and a browbeaten
husband...
*** Lucky Luciano...Wahhabism...bottled water...and more!
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---------------------
We take it back: Maybe the Chinese aren't so dumb, after
all.
"Reversion to the mean," our friend Tim Price reminded us
earlier this week, is the fundamental rule of all
investing. When things get out of whack, they tend to go
back to where they tend to be, in other words.
Never before have trade deficits been more out of balance
than they are now. The difference between what America
imports and what the rest of the world - notably Asia -
exports to her equals 2.5% of the entire world's GDP.
America imports; Asia exports. America buys; Asia sells.
America consumes; Asia produces. America spends money; Asia
makes it. America squanders her fortune; Asia takes it up.
Never before has any major nation been willing to ruin
itself at such a rapid rate. This year alone, approximately
$600 billion in U.S. assets will be transferred to foreign
hands - mostly Asian. The most important of those assets
are U.S. Treasury notes and bonds, which represent a claim
against the nation.
Treasurys are denominated in U.S. dollars - over which no
one has more control than the United States itself. Since
the custodians of the currency seemed hellbent on
destroying the dollar, we naturally assumed that anyone who
would take an IOU from the U.S. government, denominated in
U.S. dollars...paying interest at a rate scarcely above the
inflation rate...was a fool.
Of course, we always thought that the people issuing the
Treasurys - thus squandering the wealth built up by
generations of Americans - were even bigger fools.
Now we revise our opinion of the foreigners...and redouble
our bad opinion of ourselves. This year, for example,
nearly a quarter of a trillion dollars worth of U.S. assets
leaves America and finds a new home in China. Mostly U.S.
Treasurys. If the dollar were to plummet or inflation rates
to soar, the Chinese would be chagrined and annoyed.
But the dollar shows few signs of imminent decline. What's
more, instead of heading into an inflationary period, the
entire world economy seems to be sinking. Growth rates are
falling. The price of oil, after scaring everyone, is now
dropping. Bonds are holding up quite well. Gold is stuck at
$400.
What if the world economy - led by the U.S. - really were
slipping into a long, slow, soft decline, as Addison and I
guessed in our (best-selling, riveting, delightful,
insightful...choose your own adjective) book? Well, it
would mean that the Chinese would have an opportunity to
redeem their U.S. Treasurys at high prices...against more
tangible U.S. assets - factories, buildings, land, gold,
resources, farms - at low ones!
Oh, those wily, inscrutable Asians! Soon they will own a
big part of the United States. Warren Buffett complains
about it already. "Squanderville," he calls us. At the
present rate...it won't take many years before the Asians
own more of America than we own...
But we Americans aren't so stupid. In exchange for our
factories, companies, businesses, land, buildings and other
productive assets, we will have gotten nifty DVD
players...and those thin-screened TVs...and nice
automobiles...
What delicious irony...what a marvelous comeuppance...what
fitter "reversion" to a mean, mean world?! After buying
Manhattan from the savages for trinkets...we now sell it to
Asians - and get trinkets in return! Oh...we feel Nature's
dagger deep in our own soft flesh.
Dear reader...we have some advice. Learn to say "please"
and "thank you" in Chinese. You may need it. [Ed. Note: See
the irony for yourself. Come to China with Addison Wiggin!
He's decided to take a select group of investors to meet
with some of China's most innovative business leaders in
November. Learn more about this trip...
The Trip of a Lifetime
http://www.agoratravel.com/china/dr/ ]
And now, the U.S.-based crew with more news:
---------------------
Eric Fry, reporting from the land of surf dudes and
volleyball babes....
- Here in Laguna Beach, Calif., the brilliant sunshine
glistens all day long off of the exotic cars that roll like
glossy waves along Pacific Coast Highway. The same
brilliant sunshine also illumines a postcard-perfect array
of beach town scenes - tanned 20-something females playing
volleyball, as well as swarthy 40-something males driving
Ferrari convertibles. Laguna Beach is prosperity incarnate.
No sign of economic distress is evident anywhere.
- But we would imagine that the folks here in this pretty
Pacific hamlet are living just as far above their means -
if not farther - than folks in Lubbock, Texas. And we would
also imagine that Laguna residents are just as certain as
Lubbock residents - if not more so - that home prices will
continue rising. Lastly, we would imagine that folks here
in the Golden State believe in "stocks for the long haul."
In other words, if you strip away their perfect tans,
flawless bodies and vegan diets, Laguna Beach residents are
no different from most Americans.
- For the moment, the nation's universal faith in stocks
for the long haul seems like a worthwhile belief. The stock
market has bounced back very nicely from its midsummer
swoon and seems ready and able to continue moving higher.
The Dow Jones Industrial Average jumped 83 points
yesterday, to 10,182, while the Nasdaq Composite rose 1.3%,
to 1,861. We wouldn't want to quarrel with the stock
market's recent success, but we suspect that the current
rally is little more than an "oversold bounce." After a
punishing July and early August, the stock market was more
deserving of a break than a browbeaten husband.
- The stock market's newfound vitality is no mystery; one
need look no further than the oil market, where the price
of crude oil is slumping. Falling oil prices mean falling
price pressures throughout the economy, which mean strong
stock prices...more or less.
- Yesterday, crude for October delivery tumbled $1.66, to
$43.55, while gasoline prices fell as much as 6% on the New
York Mercantile Exchange. And once again, Wall Street
analysts were falling all over one another to proclaim the
end of the oil bull market. Maybe so; but we're still
inclined to trust the oil market more than Wall Street
analysts.
- In other words, the price of crude oil may well drop
below $40 a barrel, but we suspect that it will not stay
down there for long...so we should not be surprised if
crude oil resumes its stunning advance, nor should we be
surprised if stock prices resume their decline if/as/when
oil mounts a new charge toward $50 a barrel.
- The stock market cannot always be as agreeable as a
Laguna Beach day, especially not when the dark clouds of
rising oil prices gather overhead.
---------------------
Bill Bonner, back in Ouzilly...
*** Herb Greenberg:
"Yes, the market could very well go higher in coming weeks,
especially if there's any relief with oil prices.
"But it's just as likely to go lower - not just in coming
weeks, but after the election, as well.
"Interest rates aren't going lower. (And if they are, we're
really screwed.) They're going higher, but the same talking
heads who reminded investors to follow the Fed when rates
were falling are now finding every reason known to man to
ignore their very own advice as rates are rising.
"Inflation isn't going away, and it's worse than the
government says. For example, the Bureau of Labor
Statistics said that for the quarter ended in July, prices
of food and beverages rose at a compounded annual rate of
around 5- 5.5%. Yet Sysco, the big food distributor, says
that inflation last quarter, "as measured by the rise in
our cost of goods," was 8%.
"Here in San Diego, as housing prices continue to rise, the
affordability index on housing is now at an all-time low of
11%; that means only 11% of households here can afford to
pay the $565,030 for a median-priced home. (This is going
to end badly, I tell ya, badly! The house next door to me
just sold for 20% more than I paid a year ago. But don't
worry, it's not a bubble.)
"Then there's oil.
"It's really that simple."
*** And a Daily Reckoning reader:
"Regarding your theory about the stock market [that, over
time, Wall Street is a capital destroyer...that the typical
investor loses money, rather than make it], you perhaps
have heard the story about Lucky Luciano (Richard Ney
recounts one version of it in his book on the specialist).
"Around the time of his deportation to Italy, Lucky Luciano
granted an interview in which he described a visit to the
floor of the New York Stock Exchange. When the operations
of floor specialists had been explained to him, he said he
suddenly realized 'I'd joined the wrong mob.' (Other
versions have it as 'I got into the wrong racket.')
*** And another reader:
"Your ranting and raving about our 'pre-emptive' war in
Iraq is rather small minded. Yes, ostensibly we invaded
Iraq under the guise of this policy but Wahhabism is the
real threat to America's physical security, as well as to
the oil supply of the region, and thus the world. We just
can't say that directly without upsetting the billion or so
Muslims in the world. We all must remember that the United
States of America did not attack first. If South African
criminals backed by an elaborate mafia came to Germany and
murdered 3,000 people and the South African government did
not cooperate to put a stop to the mafia, then I would say
let the South Africans have at it. Your argument is weak
and stupid.
"Most people know that our real intention is to secure
bases in the Middle East to protect the world oil supplies
as well as to pressure the Saudis to do something about the
troublemakers in their kingdom. I have no problem with the
USMC using radical Arabs for target practice. Besides,
several justifications already existed before the invasion.
First, Saddam violated every single UN resolution that came
out of Gulf War I. Second, Saddam deserved what he got.
Last, you could use the excuse of WMDs (which were probably
transported to Syria and sit there now). The United States
of America acted. That is something that would never happen
under the auspices of the UN.
"Furthermore, the French, Germans and Russians were too
worried about losing out economically should the United
States take over Iraq. That is the ONLY reason that we did
not get NATO backing on this. Politics is a dirty game
filled with chicanery on all sides. I was against what G.W.
did at first, but now I have come to the conclusion to
support his action in Iraq. My only concern is that it will
probably bankrupt us."
*** And yet another reader:
"You're snobs, the whole bunch of you," Jules had charged.
Well, Jules, I couldn't agree with you more.
Wow, how has America survived all this time without the
comments and helpful criticisms of the Bonner family?
I was in Paris years ago on tour, and we were at a
restaurant. One of the ladies in our group ordered water,
and she was brought bottled water. She slammed the bottle
down on the table and yelled, "I wanted WAAATER." I almost
slid under the table in embarrassment and was truly ashamed
at that moment to be an American. This was the way water
was served in Paris, and I thought she had damned well
better get used to it and keep her mouth shut. It is
downright RUDE to question the culture of others. I was
there to observe European culture and embrace the
differences, not ridicule them.
And even though I would have loved a Denny's breakfast, I
made do with my croissant and coffee and kept MY mouth
shut.
[Editor's comment: Like, whatever.]
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---------------------
The Daily Reckoning PRESENTS: We have a real treat in store
for you today, dear reader. An exclusive! An alternative-
media revolution has transformed America in the last half
century...Washington insider Richard Viguerie explores a
menage a trois with Mike Drudge, Hillary Clinton and Monica
Lewinsky as the principals...
CYBER-COLT .45
by Richard A. Viguerie
On January 17, 1998, the Internet made its debut as a
world-shaking tool of political communication. That was the
day Matt Drudge used his Web site to introduce Monica
Lewinsky to the world as the White House lover of President
Bill Clinton. Drudge's expose started a chain of events
that culminated in the president's impeachment, and in the
process, he placed the spotlight on an irrevocable change
in the balance of power between the ordinary citizen and
the political establishment.
Monica wasn't the beginning of the Internet's involvement
in politics, by any means. Drudge himself had been covering
all the Clinton scandals for four years. Jim Robinson's
FreeRepublic.com was the leading right-wing political site
on the Web, and in 1997, Joseph and Elizabeth Farah started
WorldNetDaily, the first independent newspaper on the Web.
But in 1998, the Internet was just beginning to penetrate
mainstream America, and print media - notably The American
Spectator - had been getting most of the spotlight for
Clinton exposes. Monica changed all that.
Drudge grew up in Takoma Park, Md., a politically far-left
suburb of Washington, D.C., also known as "the People's
Republic of Takoma Park." He graduated 325th in his high
school class of 350, but loved current events and was
hooked on talk radio. "What a great place, Washington,
D.C., to grow up in," he later reminisced. "I used to walk
these streets as an aimless teen, young adult, walk by ABC
News over on DeSales, daydream; stare up at The Washington
Post newsroom over on 15th Street, look up longingly,
knowing I'd never get in..."
Instead, he headed west to Hollywood and became manager of
the gift shop at CBS Studios. He volunteered in the
mailroom from time to time. "I hit pay dirt when I
discovered that the trash cans in the Xerox room at
Television City were stuffed each morning with overnight
Nielsen ratings, information gold." He sensed the thrill of
a scoop, but didn't know what to do with his inside
knowledge.
Then his father bought him a computer, hoping it might
spark a desire for a more promising career. Matt was a
quick learn, and within two months he was posting his
gossipy scoops on Usenet and AOL and doing some writing for
Wired magazine. "I collected a few e-mail addresses of
interest," he later recalled. "People had suggested I start
a mailing list, so I collected the e-mails and set up a
list called 'The Drudge Report.' One reader turned into
five, then turned into 100. And faster than you could say
'I never had sex with that woman' it was 1,000 - 5,000 -
100,000 people. The ensuing Web site practically launched
itself."
"Lewinsky almost fell through the cracks," says Drudge. "It
was a stray e-mail that came in. You just go for it." The
results were far beyond anything he expected. "I had
something like 400,000 visits that Saturday when that thing
broke." For three days he had the story to himself, and the
whole world was clicking in. "I barricaded myself in the
apartment. I was terrified, because from my Hollywood
apartment, a story of this magnitude was being born. I
remember I teared up when I hit the 'Enter' button on that
one that night, because I said, 'My life won't be the same
after this.' And it turned out to be right." Then Rush
Limbaugh read his entire reports over the air; and then
finally the establishment media acknowledged the story,
which they had known about for weeks but had hushed up.
Speaking at the National Press Club a few months later,
Drudge asked both himself and all those credentialed
reporters listening to him, "How did a story like Monica
Lewinsky break out of a Hollywood apartment? What does that
say about the Washington press corps? It just baffles me. I
haven't come up with answers on that."
Throughout this book, we have shown how the new and
alternative media empower the individual citizen by
bypassing the gatekeepers of the media establishment, those
editors and news anchors who want to decide exactly what
news you should be allowed to read or hear or see. Direct
mail, the fax machine, talk radio, cable television - each
has given you stories and viewpoints you never would have
gotten from Dan Rather or The New York Times.
These new and alternative media have also given you new
ways to communicate your wishes directly to other citizens
and the politicians who are supposed to represent you,
again by bypassing the gatekeepers. In this case, the
gatekeeper may be a union chief who wants Congress to
believe all union members think alike on a piece of
legislation, when you know it isn't true. Or a Republican
lobbyist who wants the Congress to cave in on an issue you
consider critical. Thanks to the new and alternative media,
you now have ways to be heard.
None of these new and alternative media, however, empower
you directly, as an individual, quite as effectively and
forcefully as the Internet does. Your modem is your
equalizer, your cyber-Colt .45. You have a direct line,
with no intermediaries or filters, to any publication or
Web site around the world, to other citizens who share your
interests and viewpoints, to government bureaucrats, to
your political representatives, to the stores you want to
do business with, to people who want to buy something
you're trying to unload - you name it.
It is to Matt Drudge's credit that he fully understands all
this - the Big Picture beyond his own Web site. He probably
sensed it from the moment he sat down in front of that
keyboard and monitor his dad bought him. To see how fully
he comprehends this, take a look at his address before the
National Press Club on June 2, 1998, and his sharp answers
to the contemptuous questions presented to him afterward.
"What's going on here?" he asked rhetorically. "Well,
clearly there is a hunger for unedited information, absent
corporate considerations." Zap! Right off the top he slams
the ball back at all those reporters facing him, who, with
all their credentials and college degrees and corporate
conglomerate bosses, let this gift shop clerk in Hollywood
scoop them on the biggest story of the decade.
"We have entered an era vibrating with the din of small
voices," he continued. "Every citizen can be a reporter,
can take on the powers that be. The difference between the
Internet [and] television and radio, magazines, newspapers
is the two-way communication. The Net gives as much voice
to a 31-year-old computer geek like me as to a CEO or
speaker of the house. We all become equal."
"And you would be amazed what the ordinary guy knows," he
added.
Then he rubbed their noses in it, citing major stories
other than Monica that he broke in The Drudge Report. And
all the links on his Web site - another great innovation of
the Internet era: "This marks the first time that an
individual has access to the news wires outside of the
newsroom. You get to read all the news from The Associated
Press, UPI, Reuters, to the more arcane Agence France-
Presse and the Xinhua. I'm a personal fan of the Xinhua."
Drudge continued:
"And time was only newsrooms had access to the full
pictures of the day's events, but now any citizen does. We
get to see the kinds of cuts that are made for all kinds of
reasons, endless layers of editors with endless agendas
changing bits and pieces, so by the time the newspaper hits
your welcome mat, it had no meaning. Now, with a modem,
anyone can follow the world and report on the world - no
middle man, no big brother."
(Later interviewed by WorldNetDaily's Geoff Metcalf, Drudge
asserted, "We don't need the gatekeepers: the Ted Koppels,
the Peter Jennings, the Dan Rathers, Tom Brokaw. They're
all the same anyway...you don't need these gatekeepers in
Washington, who are basically just feeding off each other
and bouncing things off of each other.")
Drudge acknowledges that each new medium scares the devil
out of the old media. But, he assured his National Press
Club audience, "The Internet is going to save the news
business. I envision a future where there'll be 300 million
reporters, where anyone from anywhere can report for any
reason. It's freedom of participation absolutely realized."
It's not just the media-establishment types who worry about
the lack of gatekeepers in the new media. That worries
members of the political establishment, too. The new media
jeopardize their cozy arrangement with reporters who know
their place.
Speaking to the Wednesday Morning Club in Los Angeles, a
series of talks arranged by David Horowitz, Drudge told how
he tried to remain civil with first lady Hillary Clinton,
to no avail: "I tipped my hat to her at the White House
Correspondents Dinner a couple of months ago and got quite
a dirty look."
One of Hillary Clinton's functions as co-president was to
handle the White House Millennium Project. At a press
briefing on the Millennium Project, she was asked her
opinions about the Internet, and she came across as far
less enthusiastic than, say, the vice president at that
time.
Stumbling for words at times, she rambled on about how "We
are all going to have to rethink how we deal with this,"
whatever that means. "As exciting as these new developments
[the Internet] are...there are a number of serious issues
without any kind of editing function or gate keeping
function...['I wonder who she was referring to,' Drudge
quipped.] I mean, it is just beyond imagination what can be
disseminated. So I think we're going to have to really
worry about this..."
"Sounds like you favor regulation," someone asked.
"I don't know what I'm in favor of," she replied.
(Actually, her actions as first lady tell us a lot about
what she'd like to do with the Internet.)
The first lady continued: "I don't have any idea what we're
going to do legally, regulatorily, technologically - I
don't have a clue. But I do think we always have to keep
competing interests in balance...anytime an individual or
an institution or an invention leaps so far out ahead of
that balance and throws a system, whatever it might be -
political, economic, technological - out of balance, you've
got a problem...[and] it can lead to all kinds of bad
outcomes..."
To this amazing example of Ludditism, Matt Drudge
responded: "Would she have said the same thing about Ben
Franklin or Thomas Edison or Henry Ford or Einstein? They
all leapt so far ahead out that they shook the balance. No,
I say to these people, faster, not slower. Create. Let your
mind flow. Let the imagination take over. And if technology
has finally caught up with individual liberty, why would
anyone who loves freedom want to rethink that?"
Summing up their opposite reactions to the Internet, Drudge
avowed: "The first lady says we need to rethink it. I say
we need to embrace it."
Regards,
Richard A. Viguerie
for The Daily Reckoning
Editor's Note: Richard A. Viguerie is a Washington insider
with impeccable credentials. He started the conservatives'
alternative media revolution in the 1960s and '70s, and is
credited by liberals and conservatives alike for
transforming American politics.
The essay you have just read, "Cyber-Colt .45," was taken
from Richard Viguerie's latest book, America's Right Turn,
a lively and insightful explanation of exactly how
conservatives used alternative media to take power and what
is likely to happen next.
To learn more about the political, ideological and media
battles ahead, see here:
America's Right Turn
http://www.rightturn.us/agora.htm
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