THE DAILY RECKONING

PARIS, FRANCE

WEDNESDAY, 31 OCTOBER 2001

* * * * * * * * * * * * * * * * * * * * * * * * *

*** From mezzanine to asinine...America's best and brightest getting spooky...

*** America's best and brightest.

*** There was a time when the best and brightest would line up, fresh out of college, resumes in hand... visions of startups and IPOs dancing in their heads... at the pearly gates of Wall Street.

*** Now they just want to be spooks.

*** "Last week," Maureen Dowd tells us in a NY Times op- ed, "Georgetown University held a job fair. At the booths of the big Wall Street companies and banks, students had little wait. But to talk to a CIA recruiter, the line stretched for over half an hour."

*** Dowd quotes Ed Friedman, 21, a senior at the School for Foreign affairs. "Two years ago," says young Ed, "Goldman Sachs was the place to be - even people from the School for Foreign Affairs lined up there. People were interested in six-figure salaries and they viewed the CIA as not having much of a purpose."

*** Alas, this "War on Terrorism" is "not just war, but a just war," Dowd chides. And "everyone wants to be a part of it, to help," says Ed.

*** "In wars of choice, [such as Viet Nam]," writes Charles Krauthammer, "losing is an option. The war on terrorism, like World War II, is a war of necessity. Losing is fatal. This is no time for restraint and other niceties. This is the time for righteous might."

*** Might be righteous. Then again, might not.

We have a question: If America's best and brightest are descending from the mezzanine level to covert ops, who's going to direct the efforts of the Plunge Protection team? Assuming of course, one exists.

*** "...while Lyndon LaRouche and his ilk evidently think the CIA and Trilateralist Commission run the world," writes Rick Ackerman. "I seriously doubt whether those two institutions combined possess the operational savvy to run a back-alley crap game. Even so, there is reason to believe that the U.S. government may be loosely in cahoots with some top Wall Street firms to ensure that the stock market does not spook investors too badly, or too often.

*** "Now this does not necessarily mean, as some market- watchers now assert matter-of-factly, that there is a Plunge Protection Team which snaps into action whenever some crisis manager monitoring the market's vital signs on CNBC lifts a red phone at the White House.

*** "To begin with, who could run an operation like that? With the possible exception of former Treasury Secretary Robert Rubin, no Cabinet-level honcho comes to mind who could conceivably be entrusted with such a difficult job. And who actually believes that even Rubin could second-guess the markets any more successfully than, say, last month's top-rated guru in Hulbert's Digest?" Who indeed...?

*** Apparently no one...the Dow got trounced for 147 yesterday on the heels of Monday's 275 rout... constituting more than a 4% drop since Friday's close.

*** And "the fall is not over yet," according to the Prudent Bear's Lance Lewis. "I find it extremely unlikely and bordering on the impossible that we can unwind the biggest bubble in history and not have some sort of panic, at some point, along the way."

*** The Dow is now down 15% for the year. The S&P is down 19% and the Nasdaq...while these indexes may not have plunged exactly...they are certainly suffering a slow-motion defeat.

*** The market, say the talking heads, was reacting to a host of bad news - CVS, Enron and MacDonald's all reporting dastardly details of deeds undone. Just one feature in the latest installment of "The Bad News Review". Here's more...

...The Conference Board's index of consumer confidence plunged to its lowest level since 1994. And "the world's premier consumer of global output," Richard Daughty reports, "those stupidly heroic American consumers, have finally charged their credit cards to the max that they can carry. And ta-da! set a new, all-time record of one trillion, six hundred billion dollars."

...Meanwhile, stock funds recorded the biggest net cash outflow in history in September. Cash outflow totaled over $29 billion, outpacing the previous record of $20 billion set this past March.

...The telecom industry may never repay almost 80% of the $900 billion in debt, "a failure exceeding the savings industry loan collapse," says Global Crossing CEO Leo Hinery, by way of Bloomberg.

...As reported here yesterday, Argentina's restructuring of $38 billion in debt is inducing visions of the Thai Baht and the Russian Ruble circa 1998. "In the coming months," economist David Malpass told Money.com, "we expect broad debt crisis for developing countries with negative impact on global growth and corporate earnings. [We expect] a drown-out global recession extending through 2002."

... Merrill Lynch's Lauren Rich Fine also told Money: "Believe me, September ad revenue decline was one of the worst ever, and October unfortunately will bring more of the same."

..."Enron dropped 19% to their lowest level since 1992 on Tuesday," reports Reuters...itself a victim of profligacy, bandwidth gambling and the machinations of a "New Era" chief financial officer. North America's biggest trader of natural gas and power - and a favorite with the New Era energy crowd - has suffered 10 straight day of losses and shed more than $17 billion in market cap in the past two weeks. Rumor has it, suggests Money.com's Bethany Maclean, that Enron "might make tasty prey for a major oil company."

*** "We're seeing, and will continue to see, consolidation in the petroleum industry," says John Myers, "as the war on terrorism and increasing strife in the Middle East make things interesting for Canadian and American purveyors of the world's most widely used energy source."

*** Tomorrow, GDP numbers for Q3 come out. How bad will it be? The world awaits the net result of 9 Fed rate cuts and a fiscal stimulus package worthy of an Arabian prince. "Congress is simultaneously chipping at taxes and spending big money on fiscal stimulus, thus insuring that deficits start to spiral out of control," writes the Mogambo Guru.

"The economy, absent a genuine miracle of Biblical proportions, will continue to spiral down to a well- deserved depression, brought down by the same force that produced one in the 30's. Debt. There is no stopping it, because all that humongous debt accrued from forty years of government profligacy is still there."

Addison Wiggin

-- PHO (owennos@bigfoot.com), November 01, 2001