There came a time when one thought that ten articles on the website was enough. A nice round number! Yet recent events perhaps now determines otherwise. It means that certain articles may have either lost their relevance or require continuous up-dating, or changes have to be made in order to keep up with the un-folding events. This is primarily so with two specific articles that concern Stock Markets, which were the first and last articles undertaken. The first dealt generally with the stock market and company shares, and the second was specifically about "High Tech." The resultant financial and economic changes which are now taking place and which have an important effect on the financial well-being and economic functions of "Government" world-wide, is in turn affecting interest rates and currency values everywhere. Thus there are additional implications to be seen in other articles on the website that dealt with "Interest Rates" and "International Currencies." Rather than revise all these articles, it would perhaps make more sense to write the "eleventh article" which is now being undertaken, which hopefully will deal with all the changing circumstances and their effects, and thus bring one up-to-date. The title -- as one proceeds will hopefully prove to be "self-explanatory."

The use of a word denoting "excrement" is perhaps to be regretted, yet it is used in place of the word "nonsensical" for emphasis. Other similar terms will be used for the same purpose. It will be for those who come upon this article to decide whether these have any relevance in the context in which they were used. Yet again it may be felt that the opinions expressed here have similar relevance as well. We leave it to others to decide it's applicability.

The article on Stock Markets was written nearly two years ago and recently a small portion was brought up-to-date. One deeply regrets that forecasts and warnings of what was due to happen, eventuated over the past two weeks, as this article is started as of March 19th. The same sentiments apply as to the article on High Tech which was undertaken about mid year 2000. There is no sense of joy in seeing so many people losing so much of their savings. One hopes that to an extent, it was more "paper profits" than actually the net value of their investments that are now being lost. In other words, the original investment cost of say "$100,000" which grew to be valued at say " $250,000" and is now down to it's original value--- or a little more, or perhaps a little less. One at least hopes that something similar may be the case.

Our "BEEF" lies elsewhere!

Why did this happen! And to an extent, who were primarily responsible for this unfolding scenario. The fault lies in many places and with many people. And finally what is being done---or should -or should not be done to remedy this situation.

YES----HYPE!!! And of course----THOSE WHO USED IT!!!

Stocks and the Stock Market. Everyone was in on the act. One dare not be left out of it. Every TV. station had to be "in - on - the - act." The "Talk Show Hosts" had to be in on the act. So too were all the newspapers and magazines. Every TV newscast had to have their "Business News " section devoted to stocks and the "Markets." The HYPE was pervasive! EVERYWHERE! Hours of daily TV time was devoted to discussing Shares and Performance and Profits. And in consequence, the money rolled in. And in

consequence PRICES ROSE!

On a number of occasions it was stated that the constant flow of money on to - or into the stock market fueled price increases. This is self-evident. Someone buys a share, and when someone else desires it, the seller asks a price higher than what was paid, and a deal is struck. As a result a new floor price is created. Of course the obverse result is created when a seller denotes an offer to sell, and accepts a price lower than the offer posted. Be that as it may. None of this concerns us. What does concern us is the use to which these constant inflow of funds are invested. Where they went. When and at what price they went : And finally why they went there specifically.

The problem with hype is in one's belief in it. Snake Oil Salesmen are adept at selling their products. However their belief in the products they sell can at times be questioned. Or better said, "do they partake of their products" themselves. When Investment advisers and Investment Managers deal with hundreds of millions and indeed billions of "dollars" of other peoples money they should be extra aware of the responsibility they owe to those who either listen to their advice or whose funds they are given the power to place for investment. The use of the word "dollar" is used for convenience and it alludes to all currencies in any country. The tragedy in the loss of one's life savings, lies in the punishment suffered by those who have sustained the loss. But what of those who gave out the advice and those whose judgment was used in placing those funds in specific investments. HAVE THEY ESCAPED PUNISHMENT! Is there to be no retribution?

We offer the following. Someone hands a Financial Institution say $5 million for investment with instructions to invest these funds equally between Coca Cola and Pepsi Co. The transaction fee is a mere 1% and the Institution made $50,000 for the time it took to post the purchase offers "on the board." Whatever! The investor gets transfer of the shares, collects the dividends for say the next five years. The Investment Institution makes no more from this transaction. The second scenario is allowing the Institution to place the funds as they see fit. Five "trades" are made a year, and over the same 5 year period the Institution makes $250,000 per year for the five year period, totaling $1,250,000 in earnings. If they went for 10 trades a year, their annual income has blossomed to $500,000 per year and totaled $2,500,000 over the five year period. At no time during this period were they exposed to a single "dollar" loss. It is "someone else's money" after all! One of course hopes that the investor was "lucky enough" to have made a similar capital profit during this time span. Yet again the thought crosses one's mind---"what if the costs of the trades and the charges to administer the funds were say---2%.?"

The point we are trying to make, is that a Financial Investment Institution has a VESTED INTEREST in making TRADES! They make their living from it. They make their money from it. They make their "million dollar" bonus's from it. Derive their Porsche or Lamborghini from it. Their perks. Their "first class travel." Their "stock options" are derived from it. Etc. Etc. Etc.!! ( We will get back to that stock option scenario later again.) All of a sudden the news is out that funds that previously were used to trade in shares, are now being "parked in the Money Market" to possibly 65% to 70% of either incoming funds or accrued funds from sales of shares made by both the Financial Institutions as well as the Mutual Funds. The cry is out. "Lower interest rates," so that folks who lost their money can again borrow money for investment in shares on the Stock Markets. WHEN WILL THIS STOP!

The same folks who gave out investment advice, are now bemoaning the fact that the slowing down of the daily influx of investment monies is by-passing the area where daily trades can be made and money earned for themselves. The same "HOOPLA" is underway already. "There's money to be made. There's bargains out there in under-valued shares. Keep trading. Keep buying. Keep investing." It's SICKENING!! And above all---it's tragic! How can one who has just seen millions of people lose billions, now advise lower interest rates and more debt creation in order to satisfy personal gain. It's OBSCENE.

Forgotten are those shares they either bought or advised clients to buy at RIDICULOUS PRICES. Prices in company shares where no profits had been forthcoming in years. In shares whose dividends were miniscule, in many cases as low as one tenth of one percent. Are these the sort of judgments in share values that have to be heeded? Prices that had no basis in net asset values or relationship to a price - to - earnings factors that made any accounting sense.

One of the major factors that fueled market growth, was debt. Easily available money at tempting interest rates. Debt fueled mergers. Debt fueled Company growth. And debt fueled the massive influx of money into Stock Markets world-wide. The resultant demand fueled prices; and thus debt was instrumental in finally creating the final "blowdown." "The Bubbles Finally Burst!"

While it became apparent over time, that all this could not last, yet the soothsayers were hoping for a soft landing. What no-one seems to have realized----is that this is EXACTLY WHAT WE GOT. How "soft" did you really expect it to be? In the past 5 years the best economies have averaged an annual growth in the 4 to 4.5 % totaling maybe at best 22 to 25 %. During the same period GNP or even GDP grew at best 5 to 6% per year. So the economies grew say 25% and their value was enhanced at best 30%. Yet over the same period of time share prices went stratospheric. For instance the Dow Industrial Index broke through the "4000" mark and ended up at one stage at around "11500." And that, believe it or not was for a mere 1ndex of 30 Industrial Shares! Meanwhile the Nasdaq change in values was even more impressive! How can the value of shares increase by an index of 300% and more, when the economy at best had grown less than 30%.

One has to also not forget that over the same period of time, debt world-wide was increasing at a similar rate.

Stock Markets are in reality experiencing "a soft landing", believe it - or not. It could have been far far worse----and far far more dramatic. With market indices up 250% or more, a loss of 35% from 11500 would result in a figure of around 7500, which would still reflect a growth from 4000 way ahead of that of the total economy itself. As for the Nasdaq, it should never never never ever have got to that ridiculous figure of 5000!! and said at best, it is now approaching the realistic figure it perhaps should have attained of maybe around 1750 to 1850 by this stage.

For the moment, let us deal with interest rates. When Alan Greenspan slowly increased interest rates to slow down the growth in the economy, he was applauded both domestically and world-wide. The economy grew, Stock Markets prospered, share prices grew, and inflation was kept in check. Everybody was tolerably happy, despite the warning of "irrepressible exuberance". And now, when his remarks and advice were not heeded, those famous remarks are now derided. Now the cry from the same quarters who deride what was said, clamor for drastic reductions in interest rates----AND DO IT NOW!

What is now being advocated is the creation of more debt. More private debt so that domestic spending should increase and more Company debt---when it is THAT VERY LOAD OF DEBT which already exists that brought most of those companies whose share prices have collapsed, to their knees and to the very brink of bankruptcy and beyond. Is This Wise? We would say NOT!

Forgotten is the present state of the Japanese Economy. Forgotten is the fact that it was and is primarily the horrendous debt and the nearly negative interest rates that brought it all about. One cannot starve the population of positive and meaningful savings rates, and yet still ask them to spend domestically. The lower the Reserve Bank lowered interest rates, the more it's people had to put away towards savings for their old age, and the less that was available to support the domestic economy. As an added problem, manufacturing went "off-shore" in order to overcome rising local wage costs as well as to assuage trading partners who were forcing Japan to open production plants overseas, instead of exporting from Japan. Sound familiar? What were healthy credit trade balances----went the other way, with consequent dramatic results now being experienced.

Were we to offer advice to Alan Greenspan and the Board of Governors of the Federal Reserve, as well as their counterparts world-wide; we would say, "step back and leave well alone." Let the economy cool down. Leave well alone for SIX MONTHS. Leave rates where they are and let the economy recover and find it's own level. One does not treat a patient who has suffered trauma, by giving a massive blood transfusion in the one vein and a saline drip in the other, then expect it to get up and start to run the marathon a few days later, as it is the wish of those who feed off that patient's savings.

Surely there are lessons to be learnt from the fairly recent meltdown that occurred in the Far East , in Mexico and in various South American countries. Forgotten perhaps the Bank Meltdown that took place in the mid 1970's in South America where the Reserve Bank had to come to the rescue of U.S. banks. Forgotten as well perhaps the debacle that concerned "The Savings and Loans" in the mid 1980's where again the Reserve Bank had to come to the rescue. And now!! The SAME BANKS are climbing into South America again in a big way! AND GUESS WHAT! Those SAME COUNTRIES are presently having liquidity problems and are looking to the IMF, THE WORLD BANK and the U.S. banks for massive loans to bail them out of a credit crunch!!

Let us return to Stock Markets and share values. How and why did it happen. We only dealt with HYPE. So let us deal with why and how it happened. Herd Instinct! Because others are there---we have to be there. Like Lemmings headed for the precipice without rhyme or reason! A big trade is made in a certain share or in a certain sector, so we have to do likewise. Those who deal in Millions and in Billions watch each other like hawks. No time to establish or surmise a reason----or we might miss the boat. We have to get our share of the money coming onto the Market. We have to show our growth in share values as against that of our competitor Mutual Funds or other Financial Institutions. The pressure is on with Fund Managers to produce results and percentage figures. Add to the equation salary increases, bonus's, benefits and share options. And the pressure is on TO PRODUCE RESULTS. Prudence was an unheard word. Or maybe a forgotten or even ignored word. Results and figures counted. In reality and in retrospect---WHY! Bonds in the AAA class were paying at best 5 to 6 %. So if dividends exceeded or equaled those figures and there was the prospect of a capital appreciation---however small of maybe 7 or 8 % we would be "home and dry." Not so----and not to be. "Bugger Dividends." We don't know what the bastards will pay. But what we are sure of ----is that the share price will possibly increase. We have to show an overall 17.5 to 27.5% increase in portfolio value this year. THAT's WHAT COUNTS. Sounds odd, doesn't it. "Screwball perhaps." But more than likely it was the reason for the Lemming procession towards the precipice. Of course in reality the dividends were in the main miniscule---especially in the "Tech Sector." If dividends were at all to be had. Maybe that wasn't important in the scheme of things, provided the share prices kept rocketing.

One is reminded of a joke that did the rounds after the last World War. It's basis was evidently scarcity and / or rationing. It goes as follows:

Jack is walking down the street when he meets his friend Peter carrying a large carton in his hands. "Hi there Pete, what you got there.? "

"A case of sardines."

"What did it cost you."

"Five Dollars." ( or Pounds--Francs-- etc.)

"Hey. I will give 6 for it."

"Done." ----and off goes Jack with the sardines.

To be seen by George-----and the carton changes hands at an increased price.

This scenario is repeated several times until a final purchase is made by Ron from Harry at "10" (dollars / pounds /etc.)

The next day Ron is banging on Harry's door demanding his money back.

"Why?"

"The wife and I opened a couple of cans. Then the whole bloody lot. They were all blown!"

"You damn fool you. They weren't for EATING. THEY WERE FOR SELLING!"

The moral of this tale is to illustrate the purchase and sale of shares on the Stock Exchange.

How many people : Investors : Stock Brokers : Fund Managers and / or their sales or investment staff took the time to check one "can" while the price kept rising. Surely somewhere down the line SOMEONE has to realize that prices were getting ridiculous.

So for this year, make do with last year's model Porsche. It will last you until next year. So the bonus this year will not be as big. But you will survive. Be happy you still have your job maybe, be it perhaps at the same or even a lower salary than last year.

Perhaps be happy that this is to be your only form of punishment visited upon you. The only form of retribution visited upon you by investors grieving over their monetary losses.

What is the next six months in your life : May peace be with you. Just leave the Investors alone for awhile while they lick their bleeding wounds.

STOP the HYPE and the HOOPLA.

Let us examine a few other factors. Take the DOW "Holy Grail" Industrial Index." Why is it that people believe more in the "DOW" than in the Bible. It is after all only an Index of only 30 Companies in the Industrial sector. A very narrow band indeed! Yet the whole performance of the New York Stock exchange; the performance of over 3000 Companies is gauged on ----to quote: "What the DOW did today!" Come on! Get with it! Be serious! The Standard and Poor that plots 500 Companies over all sectors of the economy demands greater respect than the DOW. Apart from the fact that the percentage daily change in the index is by far a better and truer reflection of what "The Market" as a whole is doing. Yet when Markets worldwide check the U.S. "Market"----they ask what "the DOW is doing."

Let us for a moment return to the clamor for Reserve Banks to lower interest rates. We asked that rhetorical question a number of paragraphs back, to which our answer was "No." And this is our reason for that reply. As more money, or a greater percentage of money moves out of the share market and is lodged in the "Money Market", there is only one logical result. More money is chasing borrowers, than there are maybe borrowers around---so interest rates drop! There is no need to "drop interest rates." They will drop themselves provided the flow of funds continues to move in that direction rather than into shares at this moment in time while the Stock Markets cool down. There is an additional and very important effect as well. As the pressure is lessened on share purchases, the over-valued shares of Companies will subside gradually to levels commensurate to their worth in relation to their profit performance. To where they should have been in the first place.

When Reserve Banks start to "play" with interest rates they have an adverse effect on currencies world-wide. Currencies tend to flee one country for another as interest rates change and this has a terribly destabilizing effect on the economic well-being of Countries. In many instances the whole economic and financial structure of countries becomes "at risk" and as such alters not only their capital reserves , but as well their very ability to repay their debts and honor their trade obligations. All currency cross-reference values are affected and as a result weakens trade world-wide. Reserve Banks should be very circumspect when they give thought to alter interest rates with "specific intent." We would go so far as to say that this should only be done "as a last resort" when "all else" has failed.

Awhile back we said that we would return to "stock options." We know and understand that these are offered to staff both as performance incentives, as well as in a number of instances, to keep wage levels down. What we bring into question is the "morality" or even perhaps "the legal morality " of this practice. Why should investors have to pay "market value" for a share while a member of staff can get it for way less. This sounds and feels "morally wrong." There is perhaps a connotation as well that all other investors are "subsidizing" the purchase of shares by staff. Maybe this aspect should be pursued by others.

If "Government" is serious about protecting Stock Markets, ( why else are they running to reduce interest rates), they should give serious thought to protecting the Companies who "operate" on the Market, and finally and most importantly above all---the Investor.

It requires three or four factors to be attended to. Dealing with the Investor first. If the Investor is so vital to the economy, he should be treated better----and protected better. When "government" requires a stable and strong domestic economy, it requires that it's citizens "invest in capital goods and services." While the money rattles into the tills of the nation, Industry and Commerce booms. Companies make profits and in turn they and the citizens pay their tax's. These Investors are defined as "consumers," yet they are investors as well. Either way. So if the desire is wealth creation and continued consumerism----then why a Capital Gains tax! If it is required that Companies prosper, and as a result their prosperity is reflected in the enhanced value of their shares----why are they penalized by their shareholders being "locked-into" a Capital Gains Tax. It is the most insidious and debilitating stifling of the prosperity of a Country's Companies and it's shareholders. If one is serious about giving the "consumer" the wealth to spend on capital goods and services, DO AWAY WITH THE CAPITAL GAINS TAX. For goodness sake stop bothering to lower interest rates. Stop and think about it for a moment. Is this not the obvious solution?

The other three factors are perhaps equally important, but in a different sense. They either require legislation, or a requirement of "Accounting Practice", or self-imposed legal requirements to be met by Companies whose shares are quoted on a Stock Exchange. One's preference would be to see these all legislated.

Company Debt : There should be a definite rigid formula which limits a Company's Debt. It should either be tied to a percentage of sales ; or a percentage of profit to the cost of debt service costs, or a relation to before - or - after tax profit to overall debt or any combination of these. Besides any or all of these, perhaps a better solution would to tie Company debt to a percentage of NET ASSET VALUE. But there has to be rigid rules that can be policed by Audit and Stock Market Committee scrutiny.

Merger Debt. To one's mind more important than above as an added protection to Investors. Where Companies undertake a merger, it should be with the proviso that not only shall the debt of the one be assumed by the other, but that it BE LIQUIDATED by the one for the other. In other words not just a merger of two debts, but a full retirement OF ONE DEBT. If not in it's entirety, then at least a minimum of 50% of the greater debt. While on the subject of mergers, their allowance should only be based on the differential between their respective NET ASSET VALUES----and not on the MARKET CAP values of their shares as is presently the case.

Legislated or as Accounting Practice protection for Investors against unwise investments, be it self-inflicted or practiced by Investment Managers. Sounds stupid. But maybe not. Let us take the investments under the control of Mutual Funds and Financial Institutions such as Stock Brokers. If these funds are being invested at the SOLE DISCRETION of these entities, they should be made to "answer for their sins." Held accountable. We are not asking for monetary recompense here for unwise investment decisions. But for moral accountability. Maybe a daily resume' or at least a weekly resume' of why a particular trade was made. Why purchased at that price or sold for that price. Of even of greater importance perhaps, a record of the answers given to the query. At least there is a deterrence to foolish or wild speculative action. And when the trade is ever queried by an investor, legitimate answers can be forthcoming. Where the "wound" is about to be self-inflicted by the investor, the advice ( good or bad) given by a sales person or Investment adviser or Stock Broker or any member of their staff---should be recorded and held on file , with maybe a copy to the investor.

Somewhere within the Stock Market system before the sale or purchase of a share is concluded, provision should be made for the following information to be made available to both parties. Three entities. Share market price to Net Asset value per share. Debt load per share to Market value of share. And finally Debt load per share to Net Asset Value per share. These are the types of safeguards that are perhaps specifically required to protect a purchaser against an ill-advised choice, either on their part or as recommended to them.

For the final paragraph of this article, we turn to the "Market Commentators" of this World. If you don't know or understand---say nothing! This applies equally to those who operate in the Press as well as on TV.

How's this for gobble-di-gook. " The Investors punished the Company by selling down their shares." Or "The Market punished the Company by marking down their shares. Bullshit! Horse Manure! Crap! The only people who were punished were the poor shareholders. "The Market" cannot punish. What of that oft maligned word, the "fundamentals." Perhaps the least understood word used. This word is invariably used to reassure investors. To soothe their frayed nerves. "Keep in the Market, the fundamentals are still there." Keep buying----the fundamentals are still there." The only thing fundamental is that orifice through which these pieces of advice classified as "fundamentals" are being extruded! Ever heard of that slang army word called "the fundamental orifice." What investors want to hear when we talk of "fundamentals" is "the price-to-earnings ratio." Or the "dividend yield." THAT'S FUNDAMENTAL!! Profit or Loss. Net Asset value per share. Debt Load per share Those ARE FUNDAMENTALS. All the rest are----YOU GUESSED IT!!

STOP THE HYPE : STOP THE GOBBLE - DI - GOOK!