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Frames No Frame

March 2000 Economic Newsletter
An Analysis of March-April 2000 Market Volatility

In the book of Job, we read about the most righteous and richest man on the face of the earth. One day Satan pointed out to God that the reason why he was so true and faithful is that he had everything. God agreed to allow Satan to "touch his bone and flesh" to see if Job would curse him. As a result, Job's sons and daughters died, his wealth vanished, and he was smitten with sore boils. Job's reply, "Shall we receive good at the hand of God and not receive evil?" (Job 2:10). While I am not trying to connect the market with Satan, I feel what Job had to say is relative for today. Updated for the 21st century and the stock market, he would have said, "Shall we receive gains in the market and not receive the losses?" The difference is that what happened to Job was God-ordained, and what transpired in the U.S. stock market over the past four weeks was not. It appears that it was man-made. Therefore, since we are all finite and our money is too, we must take a closer look.

The precipitous drop on April 14 of 618 points in the Dow Jones and 355 points in the Nasdaq warrants scrutiny. Have we seen things like this before? Yes, most recently in August 1998 and, of course, October 1987. This decline, however, has been extremely unusual, volatile, and prolonged (four weeks). What began as a 10% correction, according to the wizards on Wall Street, has turned out to be something else, basically equivalent to the October 1987 stock market crash.

We live in a very dynamic time and age. We have witnessed many incredible feats in the last ten yearsin medicine, research, education, and technology. Bill Clinton said, "The entire store of human knowledge is now doubling every five years. In 1993 no one's computer had a zip drive or a Pentium chip. There were only 50 sites on the worldwide web. Today there are 50 million." Since the Internet, we have slowly but surely moved from casual time to real time where everything happens so fast that your head spins. Figuring out what is real from what is not is becoming harder. The following will present some thoughts on what has just transpired in the stock market.

I have seen these types of movements before and experienced themjust like you have. The last one occurred in 1998 when the Dow reached another historic high of 9300 on July 17. That new high was short lived as the Dow came crashing down between July 17 and September 1 when it lost 1798 pointsfor a variety of reasons. At that time, I specifically wrote an unusually long newsletter which analyzed both the stock market and possible ulterior reasons for its drop.

Those of you who are clients received a letter from me dated April 14 with regard to the market performance. That letter was written on April 13 and prepared for mailing on the 14th. In order to write the letter, I had spent some time researching the moves in the market. I had noted that while there were a number of serious slides, there was a 179 point gain on the previous Friday, April 7, which was the Nasdaq's 11th biggest percentage gain. I had hoped that this gain had signaled the correction was over. However, on the following Monday, April 10, the Nasdaq began a week of negative trading as one day's losses led to a second day's losses, culumating in the serious 10% decline on April 14. The five day loss totaled 25%. I woke up at 4:00 a.m. on April 14 with the understanding in my spirit that there was going to be a severe downturn in the stock market. I tried not to panic. As the events of the day unfolded, it felt just like August 31, 1998 when I went through the same thing.

In order to analyze what happened, we need to determine the difference between then and now: (1) In 1998, the Nasdaq was still in its "teen years" and fell 10% while the Dow fell 29.6%; (2) The Internet has become a prime medium for conducting business, including becoming a medium of its own for day traders; (3) America has continued with unprecedented economic growth which far surpasses any of our trading partners.

The next question which should be asked is, "Is America in trouble?" Even though we have an extremely strong economy, are there problems which could lead to difficulties? Just like beauty--which is in the "eyes of the beholder"--how one views America's problems is in the "eyes of the beholder." If the beholder is the Insider Establishment, the International Bankers, or the Federal Reserve, it could become very serious.

As I went through The Wall Street Journal, Barron's, The Financial Times, BusinessWeek, The Washington Post, and The Washington Times, I was struck by a number of things which need to be considered. Some are structural and some are political. The structural are: (1) The Old Economy versus the New Economy, (2) Liquidity and Market Strength, and (3) Imbalance in the World Economic Structure. Those which are political are: (1) Similarities between August 1998 and April 2000 and (2) The Biotech Sell Off. Lastly, we will consider what started the fall of the New Economy in March and the unusual market volatility of April 4 and the war which might be raging between the Old Economy and the New Economy.



The "old economy" is a phrase which refers to "brick-and-mortar blue-chip corporations" like Ford, General Motors, Exxon, and General Electric, and the "Old Boy Network" of the tycoons who made it happen like Rockefeller, Carnegie, Mellon, Vanderbilt, etc. Lastly, it refers to a tangiblesomething you can see. The "New Economy" phrase refers to computers and the Internet and all that supports themthe "computer geeks" who were out of date and not in tune with the real world until they birthed the Internet and made it part of mainstream America. It refers to knowledge which allows you to "get there first" before the other guy! After all, isn't that what the Capitalistic system is all about? Making a profit from your brains and hard work and "getting ahead"?

Sometime in 1997, we began to hear about something called "Y2K." For two years, most major magazines had eye catching articles about what would happened if it was not corrected. That year, Newsweek printed an article entitled, "The Day the World shuts Down" in which it listed all of the sectors of societyindustry, the military, banking, medicine, communications, and electrical utilities-- which are dependent on computers and microprocessors. While many people prepared for the worst, the lights never went out. So what really happened? While the world got electronically wired for business, commerce, and government in the Third Millennium, the Nasdaq grew by 86%, catching many investors off-guard.

Birthed in 1975 when Bill Gates started Microsoft, and followed by its siblings Apple Computer in 1976 and Sun Microsystems in 1982, it was not until Y2K that people started to realize the power and potential of not only the computer, but the Internet and its ability to change lives and conduct business. Interestingly enough, technology stocks started to get hot in August 1998 when the Dow dropped 1798 points. As a result of the 1999 meteoric rise everyone wanted in on the New Economy by January 1, 2000. A "divide" started to occur when people liquidated monies from the old economy stocks to invest in the new so they could catch some of the opportunity.

When you look at the leaders in sales and profits for 1999, most of the top 25 were brick and mortar corporations. With regard to the top corporations in sales, the only new economy stocks were IBM and Hewlett-Packard, along with telecommunications MCI, Lucent Technologies, SBC Communications, and Worldcom. The top corporations in profits included Microsoft and IBM, along with communications companies like SBC, Bell Atlantic, GTE, and MCI Worldcom. By March 10, the Nasdaq had climbed to another historic high of 5000. Please refer to "The Review of Market Moves" chart.

World Economic Forum

Every year for the last 33 years, the World Economic Forum (WEF) has brought together CEOs from multinational and transnational corporations, world leaders, Nobel Laureates, academia, and key leaders in the United Nations infrastructure to come together for a week of workshops, plenary meetings, and networking. There the CEO's learn about the "state of the world" in a short period of time. At the 2000 WEF, the Internet was the focus. Literally, the whole of the Silicon Valley was transported to the Swiss Alps. In many of the workshops polls were taken of all of the participants as to their attitudes and expectations of the Internet. In one workshop 85% of the CEOs said they felt the Internet would be the dominant force in business within five years. When they were asked how many used the internet now for business, only 24% responded. This created a stir and a gasp from the polled participants. The overall message from the Silicon Valley "buckaroos" was that "you ain't seen nothing yet."

What I thought was very, very interesting was the polarization of power between the old economy CEOs and the new economy CEOs. The old economy CEOs clearly were not amused at the arrogance of the buckaroos who were given all of the attention. I myself came away with a renewed sense of wonder at the power of the Internet. My observations in February were as follows:

The Internet buckaroos are the "new Royalty of Business". They are a cut apartthey have vision, acumen, they possess traits which have made them successful as they have seized the opportunity and moment. They live, move and breathe in a world apart from those who are not on their levelfor some it is pride, for others self-righteousness, and for others a humbling experience as a result of risk and guts. The electronic age will and is changing all of society and life. Did the printing press change government and laws? No, it changed society and revolutionized data and knowledge. While it eliminated scribes, it opened up the world of knowledge. The internet is the new electronic printing press. Did the cotton gin change government? No, it revolutionized farm work and made it more productive while eliminating slave labor. Did the airplane change government and laws? Not directly, but aviation laws came into being. Did the automobile or telephone change government or laws? No, it did not change government, it connected people in a new way. It opened up the world but still kept the distances between people and national borders. Did the television change government? No, it gave us entertainment and news and it became a way of bringing the world together.

It is the computer which changed and revolutionized business. Now in its evolution to the Internet, it will do more to totally change the world to such a degree that it could be considered the "second Garden of Eden" experience. How we live, how we are governed, how and where we work is and will change. Has the Internet "reinvented God?" It transcends time, space, and distance in a new way. It literally connects people, governments, institutions, and businesses as never before experienced. Given the fact that national borders are erased by the Internet, it appears that it will be an oxymoron to be a nationalist in a globalized world.

I came away knowing that the place to make money is in technology and the Internet. Was I wrong? No. When you look at the "blue chip" internet companies which include Intel, Microsoft, Cisco Systems, and IBM, they are the most widely held stocks in mutual funds. For example, 1002 mutual funds own $35.8 billion of Intel, 969 mutual funds own $64.9 billion of Microsoft, 967 mutual funds own $54.2 billion of Cisco Systems and 834 mutual funds own $24.8 billion of IBM. In comparison, Citigroup stock is held by 954 mutual funds for a value of $33.8 billion, MCI Worldcom is owned by 903 mutual funds for a value of $25.4 billion and General Electric is owned by 883 mutual funds for a value of $52.3 billion. Clearly, the internet blue chips are more popular than Citigroup and General Electric (WP, 4/9/00, H1).

For example, most of the $150 billion in new money that poured into mutual funds during the first quarter of 2000 went to technology and growth funds according to Strategic Insight. In January and February of this year, Munder Net Net took in so much money that they had to close on April 17 (WP, 4/9/00, H5). Seasoned portfolio managers were at a loss with how to compete with the Internet/technology stocks. In order to "save" their portfolio, they were forced to add technology stocks. Even I as an investment professional could not keep people in mutual funds which gained 22% when there were technology and biotechnology funds which at the very least were doing twice that. Besides the technology sector, monies went into the health, foreign stock, small growth and mid-cap growth funds with large value funds taking the brunt of investor liquidations at $100 billion.


What does liquidity mean? It means having enough money moving around in the marketplace for both buying, selling, and lending. One of the conclusions which I came to in August 1998 is that the world was having a liquidity crisisthere simply was not enough liquidity in the system. However, it appeared to go away. When I was in Davos I asked Federal Reserve Vice Chairman Roger Ferguson who is Alan Greenspan's understudy and the Number Two man at the Fed, why it was important for the U.S. Government to pay off U.S. Treasuries which are monies the government has borrowed from the Federal Reserve when we have carried a debt with them since 1913. His reply was that room was needed for additional liquidity to meet future borrowing demands. Let us take a look at several liquidity demands which had to be met in the last thirty days. They include: Margin Calls, Stock Liquidation, Day Traders, and American Households.

Margin Calls

On April 3 the Nasdaq dropped 7.64% as a result of margin calls which Charles Schwab reported, "were running about twice normal levels." At the end of last week, margin debt at the nations brokerage firms soared 48% from September to February to a record $265.2B" (Wall Street Journal-WSJ, 4/3/00, C1). Much of the margin was as a result of day traders who have entered the market in the last two years.

To be honest, I was not aware of the high amount of margin calls which had occurred with regard to the market run up. On the downside, it would exacerbate a down market because most people would have to liquidate positions in order to pay the margin call.

Mutual Liquidations

On April 4 it was reported that investors pulled out around $740 million in March out of the giant Vanguard 500 Index Fund, which tracks the large-company Standard and Poor 500 stock index. These were the first net withdrawals since August 1993. The redemptions from the fund were so investors could move to technology funds. Industry wide, investors have been pulling money out of large-cap stock index funds since late February, as much as $419 million a week. Russ Kinnel, a fund analyst at Morningstar, Inc. said, "If people continue to sell out of the index funds, their actions will drive down the indexes further" (WSJ, 4/5/00, C2). Obviously, if investors are pulling money out of an index fund, they also pulled money out of all other non-tech funds.

On March 10, it was reported that the record Nasdaq close of 5000 was as a result of investors "sucking money out of every other market sector and shoving it into a small number of companies" (Washington Post-WP, 3/10/00, C1). This is seen in the 14% gain in the Dow for the last twelve months while the Nasdaq was up 102% as of February (Barron's, 2/21/00, 29). In fact, many of the Dow Jones Industrial stocks were down 20-30% as a result of this shift in monies.

Day Traders

Just who are the "day traders?" As a result of the Internet, independent brokerage houses came into being which allow individuals, for an initial investment of a certain amount of money, to learn how to become their own broker and trade during the day using their own company-designated computer. Up until that time, the only way "Joe and Jane Average" could get into the market was through an account at a brokerage firm, using a broker like me. But day trading changed all that when the investor became analyst, risk taker, stock picker, and the executor of their own trades. For some, they struck gold while others lost their shirts, inheritance, or retirement savings. Many of these day traders margined their accounts so that they could double the money they were trading in the market. It is estimated that online trading now accounts for 17% of stock trades (WP, 12/26/99, H1).

American Households

As you will see, the day traders have caused more headaches than just the flurry of their own independence. "At the turn of the century, stocks were generally in the hands of the exceptionally wealthy, banks, and corporations. As the new century dawns, America is really a nation of shareholders. Half of all households own stock, directly or indirectly, and billions of individual dollars are mainlined into the market each week through 401K plans. More and more of the middle class each year has put its savings into the stock market leaving the markets awash with cash and entrepreneurs with seemingly unlimited options. As the ranks of capitalists expand, the tight lock that bankers and the Wall Street elite once held over the financial markets has dissolved. The result: Markets today are more democratic, but also more volatile" (WP, 12/26/99, H1).

"In 1929, only 1.5 million people were in the stock market or about 1.2% of the population.. Today 63 million individuals own stock. In 1986 there were only about 1800 mutual funds controlling $700 billion in stocks, bonds and money market assets. That has risen to 7,665 mutual funds controlling $6.2 trillion in assets. Today 77% of household's liquid financial assets are in securities and 23% are in bank deposits and certificates. Let me note that the banks have lowered the amount of interest they pay on savings accounts to 3%, forcing the smaller saver into the stock market. In 1998, Nasdaq's market capitalization was $2.6 trillion, about 24% of the New York Stock Exchanges-NYSE market capitalization. One year later, Nasdaq's market capitalization is $4.75 trillion, about one third of the NYSE" (WP, 12/26/99,H1).

I have used the analogy that the stock market is like a glass of root beer. You have the liquid which is the majority of the glass. It is "solid". Then you have the foam at the top of the liquid. It is in the "foam" which the day trades are made and the daily buying and selling. The liquid represents the long-term holder while the foam represents the quick play and fast gain. It is also the foam which creates the problems for the rest of the liquidwhen it goes flat, the liquid goes flat.

What I am saying is that there appears to be an imbalance in the marketplace. There are several groups of people who could have facilitated the drop in the Nasdaq: (1) the Federal Reserve because they believe the economy is too strong or overvalued and will lead to inflation and they wanted to "cool it off", (2) the international bankers because the market was high and they took their gain and will then buy low so they can take another gain in the future, and/or (3) the old economy CEO's who want to bring the tech stocks down so they can buy them cheap and merge the old and the new economies under their direction. Lastly, if it is none of them and the problem is that the system does not have enough liquidity, then there is a very serious systemic problem.


Who determines when the stock market is over-valued? It certainly is not Joe and Jane Average for they do not have the power to move the market individually but only collectively. What is the stock market? It is a centralized place of buying and sellingit is an auction. The price paid in an auction market is the value of the item or stock. For example, in an auction of household items or paintings, if there are two people who want the same item, the price is bid up. Whoever gets the last bid is the owner or winner. The price paid is the value of the item. So, too, in the stock market. Who determines if the stock market is too high? Certainly not you or I, for we are happy with how our accounts look and assume that the progress will continue.

There has been discussion that the Internet companies have no earnings. The whole concept of the Internet is completely different from the "brick and mortar"the tangible. It is based on brains and who gets there first. It is obvious from the divergence in the old economy and the new economy that millions of Americans see and understand the next level of innovation over and above the automobile, which will now use satellite navigation to guide it, or the entrepreneur, who will now bypass the middleman and go directly to the consumer via the Internet. Just who was left out of the process? The old economy. They wield great powerjust ask those who were usurped by the power of John D. Rockefeller or Andrew Carnegie. Interestingly enough, the anti-trust laws were passed in 1911 to break up the absolute power of the Rockefeller's Standard Oil . Out of it came Exxon Corporation and Mobil Oil. Last year, these two companies were reunited in one of the largest mergers in history, along with the British Petroleum/Amoco merger. With size comes powerthe power to mold and move both countries and mountains. Ask Microsoft, which is fighting an antitrust suit by the government who say they are doing it on the behalf of consumers! Could any of this be because Microsoft is the new economy?


Since 1980, numerous laws have been dismantled which have integrated our economy with other economies of the world. The first law to tear down the economic borders between countries was the 1980 Monetary De-Regulation Act. As a result, we now have international and foreign mutual funds which have integrated our monies and finances with companies from other countries. The final law which prohibited fuller economic integration with other countries was the Glass-Steagall Act. This law was eliminated in 1999. We now have a world which is completely integrated financially with one another on every level. Most recently on February 8, it was announced that the United States Department of Defense will be merging with the British Defense Department. The first wave of this merger will be the integration of our defense companies. Most recently Boeing and British Aerospace have agreed to merge.

In short, what you are seeing is a new world order which is different from what our forefathers set in place. If this were not true, Treasury Secretary Larry Summers would not be concerned with "external imbalances" between countries.


During the weekend of April 14 and 15, the Group of Seven(G7) Central Bank Ministers and Finance Ministers met in conjunction with the International Monetary Fund (IMF)/World Bank (WB) spring meetings. In a pre-conference press briefing, Treasury Secretary Summers stated that their discussions would focus on several areas which included economic imbalance and the restructuring of the international financial institutions ( IMF/WB). With regard to the first, Summers said, "It is critical that all of the G7 take the steps needed to promote global recovery and to reduce external imbalances which have been exacerbated by our very different patterns of growth over the course of the recent financial crises" (emphasis added). Now what is he talking about? What is wrong with being strong?

Between 1971 and 1999, there was a concerted effort by the Group of Seven leading industrial countries (the United States, Canada, England, France, Germany, Japan, and Italy) to bring the value of the dollar down against the other two leading world currencies: the yen and Deutsche mark which has been replaced by the euro. The dollar has dropped from being worth 3.66 Deutsche marks and 3.57 yen to basically one. In other words, our currency has been devalued 66% against the other two leading currencies of the world. This has been done to bring us into a world in which we are oneone world and one currency. Would it not then follow that if the currencies are equal, then the economies should be equal? Do you want the U.S. economy to be equal to the economy of Brazil, Mexico, South Africa, Zimbabwe, China or Vietnam? That is exactly what Treasury Secretary Summers is talking about. While Summers does not specifically state all the things that have to be done to "correct" this imbalance, he does say that America is not saving and that we need to increase our national savings and have higher exports since we are importing too much. That means the rest of the world has to want to buy our product over some other country's product. If we have the strongest economy in the world and we have a currency which is strong (even though it has been devalued 66%), then in order to have other countries buy our products so our exports go up, the cost of our product has to drop. The only way to do that is to devalue our currency so that our exports will be cheaper than the exports of other countries. We had better brace ourselves for a drop in the value of the dollar. I would tell the government that they are doing their math wrong. If they want to make the ground level without so much hurt, all we have to do is have a moratorium on manufacturing by U.S. corporations in countries outside of the U.S. !!



I find a number of similarities between the steep market decline in August 1998 and the April decline. The events surrounding that decline are similar to the current decline. At that time we had as many worries as we have today: the dollar had dropped against the Deutsche mark (to 118) and the yen (to 1.35), our deficits were rising, the Japanese had stopped buying our Treasury bills as they were now buying euros (creating illiquidity), and Bill Clinton, in a speech before the fall IMF/World Bank meeting connected global financial problems to the United States fulfilling its IMF obligations of $18 billion for a new short term IMF line of credit.

With regard to the stock market, in April 1998, investors poured $37.5 billion into old economy blue chip stock, propelling the Dow to 9000 for the first time. The Dow wavered between 8800 and 9000 up until the beginning of July. By mid-July, the Dow rose to 9337 and the Nasdaq crossed 2000 as a result of strong profits. On July 23, Greenspan raised the prospects of higher interest rates and the market started to fall. By July 25 when a lone gunman shot his way into the Capitol, the Dow dropped 401 points, reducing the year's gain to 13%. By mid August, there was concern over Boris Yeltsin resigning and the Russian ruble defaulting. The week ending Friday, August 29, saw the Dow drop 357 points as a result of these fears about Russia. The following Monday, September 1, the Dow plunged another 513 points to 7539, the low for the year. In total the Dow had dropped from its high of 9337 to 7539, 1798 points or 19.26%.

At the same time the market was dropping, there was a massive restructuring going on with regard to the international financial architecture. New groups, rules, and players were being put in place which are too numerous to repeat here. To top it off, I realized there was a concerted effort by President Clinton, Federal Reserve Chairman Alan Greenspan, and then-Treasury Secretary Robert Rubin to have the United States give the IMF $18 billion. In fact, I went back over their major speeches and found they had been asking for $18 billion for a whole year prior to September 1998!

Then something "miraculous" happened. When the House agreed to give the IMF monies, the Federal Reserve cut interest rates by 1/4 of 1% without even making an announcement. The stock market gained 330 points. Then on October 20 1998, Congress passed the $500 billion Omnibus Spending Bill which included $18B for the IMF. Within 10 days, the market had gained 15%, bringing it back up to 8592!

Today the events are pretty much the same: the dollar has dropped to one against the European euro and the Japanese yen, down another 33%, our deficits are higher, we have a continual problem with liquidity, and the President, Federal Reserve Chairman and Treasury Secretary want the United States Congress to help forgive part of the $32 billion third world debts to give the World Bank a new lease on life. Do you see what I see? Already legislation is being drafted for Congress to approve another bailout. I can assure you that once these monies are approved, we will probably see some "market relief" ourselves.


Up until now I have not discussed what led to the blood bath in the market. If you are not upset yet, then this just might be your last chance. The big news for late 1999 and early 2000 was biotechs. After being out of favor for years and as a result of incredible gains in science, biotechnology was on the map. By the end of 1999, the Nasdaq biotech index had jumped 43% since November 1 compared to 37% for technology stocks. Leading the biotech stocks was Celera Genomics.

The enthusiasm centered around a group of companies which are involved in the "Human Genome" project which is the mapping of the gene in the body. Whoever gets there first will get the bounty which comes with getting there firstmillions, perhaps billions of dollars in royalties.

There are two groups looking to crack the human genome project. One is a set of private corporations and the other is a public-private partnership between the U.S. government, the U.K. government, and a consortium of ten private drug corporations headed up by the Wellcome Trust. The Wellcome Trust is headed by Sir Dominic Cadbury (Chairman of Cadbury Schweppes).

A number of years ago an individual scientist from the National Institute of Health (NIH) felt that the best way to map the genes in the human body was to get a room full of computers and let them crunch the numbers. His superior at NIH disagreed with that methodology. A venture capital company offered this scientist, Dr. Craig Vetner, the opportunity to carry out his research in the private sector. The name of his company is Celera Genomics. On March 10, Celera made a public statement that they would be in a position to finish the body mapping by early summer since they already had sequenced 90% of all human genes. As a result, their stock rose to $240 a share. Their work is about 10 years sooner than the U.S./U.K. partnership.

On March 15 President Clinton made a statement with Tony Blair in which he encouraged private gene- research companies to make their raw data public by asking all researchers to provide "unencumbered access" to raw genetic information. Clinton said that the Human Genome Project funded by the U.S. and the U.K. requires its grant recipients to make the secrets that they discover publically available within 24 hours. In discussing what has occurred in the biotech field with the human genome project, "The field has become rife with jealousy and contentiousness. J. Craig Venter has put together the world's largest gene- sequencing laboratory and appears on track to beat the government-run Human Genome Project in publishing the first highly accurate version of the human genetic code, probably by this fall" (WP, 3/15/00, E1). What this does is put a knife in the patenting process.

I think Donald Luskin, president of, an Internet based investment advisor said it best, "I think this is a brilliant illustration of what happens when government policy suddenly changes. A critical component for technology innovation and business innovation is policy stability, not just in patent rights, but also in taxes, property rights, monetary policy, and international trade. Yesterday's announcement caused investors to focus on all the things that the government can alter with the stroke of a pen that can completely make and unmake whole business models".

As a result of Clinton's speech, the Nasdaq lost 200 points or 4.1%, closing at 4707 and extending Monday's 2.8% decline. The Nasdaq biotech index was down 12.5%. Ever since that point, both biotechs and internet/technology stocks have continued to drop. Celera's stock is trading around 80, down 67%, and the Rydex Biotechnology Fund is down $15 or 37.50% from its high of $40 (that is where I bought the stock for my own account). Rydex informs me that the fund had $1.1 billion in assets under management on March 6. Today it has $324 million which is as a result of Clinton's speech!

Now, while it hurts me to look at a 50% drop in value, what has changed in the biotech? Nothing. Science is still working on the same projects. Proteomics is for diagnostics and cures and builds on the genomics which is the body mapping of the genes in the body. Once you have the genes mapped, then proteomics is the next stepcuring and healing the body by correcting the defective gene which contains cancer, heart disease and other diseases. Again, we are seeing the war of titans because of the money which will be made.

While I realize the above may not be easy to digest, nevertheless, it all has a bearing on where our money is. Let me summarize:

1. Economy

Overall our economy is the strongest in the world, even though the dollar has been devalued

66% between 1971 and 1999, including a 33% devaluation between August 1998 and today.

This appears to be part of the devaluation of America to equalize the world's three major economies.

2. August 1998

The problems which we are told we face today, are exactly the same as those in August 1998.

A political level, monies are needed to bail out the World Bank, just as they were needed in August, 1998. It is possible that once our Congress provides these monies, the stock marketboth old and newwill rally.

3. Battle of the Titans

The battle could very well be a battle between the Titans. On one hand, we have Clinton wanting biotech secrets by throwing patent rights out the window in an effort to cash in on Celera's research and, on the other hand, the old economy CEOs want to eliminate the competition with technology stocks by buying them at depressed prices?

4. The Stock Market

I find it most interesting that while the Nasdaq stocks were considered over-valued, that the Dow is not. In 1998, the high which it reached was 9000. In 1999, it crossed 10,000. The Dow is at a historic high. How come the Dow is the underdog and the Nasdaq is the culprit? While the old economy stocks may have a lower price earnings,` for several years we have been told that the price earnings was out the window and no longer pertained. There are a number of inconsistences which don't quite make sense. Either the market is being manipulated or we have a more serious problem. If it is being manipulated that there is a two for one blue-plate special which the American people are receiving. The battle of the Titans automatically gives the titans the internet companies at the price they are willing to pay for them and it "corrects the economy to disperse monies away from the technology stocks to other market areas.

5. Liquidity in the System

OrGod forbidis it something more serious? If we do have a liquidity problem as a result of the

Japanese moving their monies to the euro, then the government is right to discuss new ways for Americans to save for retirement and to pay off our debt to the Federal Reserve. For the individual what is the answer to a problem with liquidity? Pay down your debt.

Lastly, when we look at this market, up until Clinton's speech on March 15, everything appeared to be normal. The fact of the matter is, when a government interferes with the due process of the market to change the rules mid-stream, the actions represent a philosophical change, the economic response is the immediate outcome. Maybe we should ask ourselves if there is any parallel between the government's action in the Gonzalez case and that of biotech stocks?

In Psalms 55: 16,22-23 we read, "As for me, I will call upon God; Cast thy burden upon the Lord; he shall never suffer the righteous to be moved. But thou, O God, shalt bring them down into the pit of destruction: bloody and deceitful men shall not live out have their days; but I will trust in thee."