SUMMARY - "PIG" :
The Contrarian's View is published 11 times per year on a mostly-irregular schedule, and the views expressed are those of the author and editor, Nick Chase. Because nobody can predict the future, results of past suggestions or recommendations are no guarantee of future results. Material in this publication may be freely quoted provided proper attribution is given to its source. Subscription rate: Free on the Internet through the World-Wide Web service at Assumption College. Using your favorite Web-browsing program, Open URL http://www.assumption.edu. Mailed paper subscriptions, one year for $39 to The Contrarian's View, 132 Moreland Street, Worcester, Massachusetts 01609. There is a limit of 50 paid subscribers at one time; please check for availability before sending any money. Sorry, Visa and Mastercard are not available. Overseas subscription rate, U.S. $54. Unsolicited material sent to us by UPS or by courier other than the postal service is refused and returned to sender! Phone: (508) 757-2881
Then, on a spring weekend trip to New York City, I discovered in a discount bin (my favorite way to buy books!) a copy of Larry Burkett's 1994 book, What Ever Happened to the American Dream. I have always enjoyed reading Larry Burkett's economic treatises (especially The Coming Economic Earthquake), even though I don't always agree with him, for he is a talented writer, so naturally I devoured this book on how overregulation and excessive taxation are slowly eating away at the vigor of our economy.
One part of the book that particularly caught my attention was the section on the ozone hole "myth". Burkett claims in the book that the scientific theory that chlorinated fluorocarbons (CFCs) are depleting the ozone in the stratosphere is bogus.... that scientists and governments have been caught up in a mania of "scientific political correctness".
Specifically, Burkett sums up his arguments with the following statements (pp. 122-23):
1. The hole in the ozone over Antarctica was first discovered in the early 1950s, before the proliferation of Freon and aerosol cans.
2. This phenomenon was satisfactorily explained at the time, with no link to CFCs.
3. CFCs are significantly heavier than air, and nobody has explained how they reach the upper atmosphere.
4. CFCs must "break down" into chlorine to destroy ozone (which they very slowly do), but the total world output of chlorine from CFCs is miniscule compared to the chlorine output of a single active volcano or of the world's oceans. (A chart on page 117 illustrates the point.)
5. Even if the ozone layer were being depleted, people at the equator survive several times the ultraviolet radiation of those living in the temperate zones.
6. Monitoring stations show a steady decline in ultraviolet radiation reaching the Earth's surface, from which we should infer that the ozone layer is increasing.
"If all this is really so", asks Burkett (page 123), "then what in the world are we doing spending multiple trillions of dollars to solve a problem that only exists in the imaginations of some envirinmental fanatics?"
Good question, and one ideally suited for finding answers on the Internet, I thought, so I set out seeking answers as any novice might. I first clicked on the "Net Search" button of my Netscape browser, which took me to the Lycos search engine, where I asked for a search on "ozone AND hole". One of the sites displayed as a result of the search was at Ohio State, which had a "FAQ" (answers to frequently-asked questions) on the ozone hole.
Under the subject "When did the hole first appear?", the answer was: It was first observed in 1980-84, with measurements going back to 1956. "But I heard that Dobson saw an ozone hole in 1956-58...." is another question answered: "This is a myth, arising from a misinterpretation of an out-of-context quotation from Dobson's paper". Then a table showed that ozone-level measurements in the Antarctic during "hole season" are now about half what they were in the 1950s, 1960s and 1970s. So much for Burkett's points 1 and 2.
A link from Ohio State took me to the British Antarctic Survey web site, which explains how chlorine from the breakdown of CFCs destroys ozone in the stratosphere. Returning to the Lycos search results, I then followed a link to NASA for a primer on the ozone hole. Well, I was certainly convinced by now that the ozone hole is for real, is getting worse, and that scientists who specialize in this area almost universally believe that CFCs are causing the problem.
So I again returned to the Lycos search engine to "customize" my search. In his book (page 119), Burkett mentions Dr. Rogelio Maduro as theorizing that the ozone hole is caused by thermal drafts. Searching on "ozone" and "Maduro", with both terms required to be present, returned me to Ohio State and its FAQ, this time with the statement "Volcanoes put more chlorine into the stratosphere than CFCs". The answer: "Short reply: False". Long reply: This is one of the most persistent myths... but basically, most volcanic eruptions do not reach to the stratosphere, and for those that do, most of the water-soluble chlorine is "leached out" on the way.
The end of the long reply, discussing the eruptions of Erebus in the Antarctic, refers to an article by Rogelio Maduro (which is why I was linked to this page) in the July/August 1989 issue of 21st Century, which "is published by Lyndon LaRouche's political associates, although LaRouche himself usually keeps a low profile in the magazine", according to the FAQ. The FAQ concludes with "The only places where I have ever seen Erebus described as a source of stratospheric chlorine is in LaRouchian publications and in articles and books that, incredibly, consider such documents to be reliable sources."
Again glancing back at Burkett's book, a look at page 117, which has the chart showing that sea water produces most of the atmospheric chlorine, gives this caption below the chart: "Reprinted with permission from The Holes in the Ozone Scare: The Scientific Evidence That the Sky Isn't Falling, by Rogelio A. Maduro and Ralf Schauerhammer (Washington, DC: 21st Century Science Associates, 1992), p. 13."
At this point it sure looked to me like Larry Burkett was the victim of politically-inspired "science". But just to be sure, I returned to the Lycos search engine with "lyndon larouche" , and it provided me with a link to the LaRouche Exploratory Committee. On these pages I not only found out more about Lyndon LaRouche than I ever wanted to know but, listed under the candidate's publications (LaRouche is a contender for the Democratic presidential nomination) is "21st Century Science & Technology, Published bi-monthly by: 21st Century, P.O. Box 16285, Washington, D.C. 20041", along with subscription information. The circle was complete.
I won't bore you with the details of the remainder of my Internet travels in search of refutations to the remaining points; I'll just give you the results. On point 4, the ouput of chlorine from CFCs is miniscule compared to the oceans or a single volcano, true but irrelevant: The natural sources produce water-soluble chlorine (as HCl), which washes out of the atmosphere before it reaches the stratosphere, while CFCs break down only very slowly after they reach the ozone layer. On point 5, higher UV levels at the equator, true, but these people generally are darker-skinned, and that still isn't a valid argument for allowing the ozone layer to be destroyed. On point 6, ultraviolet radiation actually reaching the Earth's surface is declining, probably not true for the U.S. To date, there is not yet a measurable difference (either way), apparently because the ozone-depleting nature of CFCs was detected and corrected early, before ozone depletion in the stratosphere caused a problem at the earth's surface (other than over the Antarctic).
At the web site of the National Oceanic and Atmospheric Administration is a pie-chart, drawn from actual measurements of the stratosphere, which sums it all: Human-made sources of chlorine in the ozone layer (CFC-11, CFC-12, CFC-113, HCFC-22, etc.), 82%; natural sources (HCl, etc.), 18%.
After I had presented the results of my searching at the IICE conference, an attendee dug up and gave to me a biographical sketch on Mario Molina, who won a Nobel prize after solving the riddle of Burkett's point 3: Atmospheric turbulence "circulates" CFCs upward into the stratosphere.
It's always a sad thing when bogus "facts" work their way into the writing of an otherwise-worthwhile book, because it casts doubt on the accuracy and validity of the entire work. I can't help but wonder if Larry Burkett approached the writing of this book with a particular point of view already firmly planted in his mind, then went in search of "facts" to support that point of view.
I won't argue his assertion that removing CFCs from refrigeration systems is a costly proposition; this is his area of expertise, and he may well be right. But I think he would have better served his point if he had weighed the economic costs of prohibiting CFCs against the economic costs of allowing ozone depletion to occur, rather than categorizing a great number of serious (and evidently, correct) scientific researchers as environuts.
That brief segment was the outcome of an hour-long session earlier in the week during which I was interviewed in the basement of our home by an anchorwoman who was normal weight, not superskinny like most (the camera adds weight, as anybody who has appeared on TV can tell you) and videotaped by a camerman who drove all the way from New Jersey (four hours away) that morning for the session.
Now I don't seek out press exposure; rather, I avoid it like the plague, because I find the denizens of the press usually have their own agendas to pursue, and anything I might say probably will not conform. But they find me anyway, and when they do, I am usually polite and try to accommodate them.
This time was no different. I got the feeling before we even began that the anchorwoman was enthralled with the idea of a lone person cranking out supposedly earth-shaking ideas from a basement studio in a private home, right out there competing with the giants of Wall Street. During the interview I not only described how I produce The Contrarian's View, but I also outlined my scenario for the coming market meltdown.... but I had to volunteer the latter information; she didn't ask me for my views on the market. Nothing I said about the stock market was "sound-bite" size, nor did it fit her agenda, so it didn't make it onto TV. This was, after all, a story about how market letters are produced. What the letters predict for the future is unimportant.
Then, last week, I was again interviewed, this time by a freelance writer in a two-hour-long phone conversation for a story which will probably appear in the November or December issue ofWorth magazine. What attracted this freelancer to me is that I produce The Contrarian's View primarily for the joy of it, not for the money, which gives me the freedom to always write what I honestly think. This time I didn't bother to offer my view of the future, because I knew it would not fit into the "David vs. the Goliaths" nature of the story he was planning to write.... how a lone author, in the basement of a private home, produces a letter which holds its own with the output of the big Wall Street firms which spend gazillions of dollars on advertising and marketing strategies to give their products that "homey" feel.
In all fairness, the freelancer has World Wide Web access, so if he wants to, he can at any time check out the substance of what I'm saying. But I got the feeling that my stock-market opinions are not central to what will be the theme of his story. Should the market melt down before his story goes to press, hopefully he will have the decency to revise his tale to point out that I anticipated it.
There is only a handful of market prognosticators calling for a stock-market crash or meltdown.... me, Gary North, Robert Prechter, Thomas Henning, maybe Jim Stack. You would think this would be worth writing a story about (especially in my case, where I have an excellent track record for anticipating crashes). Why is it, then, that the feature story writers/producers get hung up on the medium instead of the message?
I think the answer may be that rearranging other peoples' money (which is Wall Street's product) is not a very creative enterprise, unless your job is to invent new ways of rearrangement that nobody else has thought of yet. People sign onto Wall Street to make money, not to satisfy creative urges. Journalists, on the other hand, aspire to the epitome of creativity.... maybe even by writing a novel on the side, if they can't find satisfaction in the more mundane aspects of their jobs. Market letter producers are, in a sense, writers.... a profession the journalists know and understand.... but are writing about a MEGO (my eyes glaze over) product as far as the much more creative journalists are concerned. Guess which is of greater worth in the journalists' eyes.... the act of writing, or the MEGO product? No contest here.
Another factor is the subtle shift in journalism that's taken place during the past generation. At one time, journalists would move heaven and earth to dig out the truth and to report it as accurately as they could. Today, journalism is an appendage of the entertainment industry. Whether or not a story is accurately told is secondary to the flair with which it's presented; and some journalists, particularly those in television news, are arrogant enough to think thet they, not the news, are what's important, and that what's true is what they present (subjective "truth"). (For example, if The Washington Post had spent just one-tenth the effort on the so-called Vince Foster "suicide note" as it did on unmasking Joe Klein as the author of Primary Colors, recent political history might have been considerably different from what's actually transpired.)
Several people have said to me, if the stock market melts down the way I anticipate, I will suddenly become famous. I doubt it. The journalists will probably spend their time congratulating each other on how well they covered the market's collapse, and go hunting for wounded bulls (tragedy always sells) and people who will tell the public that everything will turn out all right (reassurance also sells). People like me, who will have sidestepped the meltdown and who expect it to be part of a megabear market, perhaps one lasting many years, will be castigated in a classic shoot-the-messenger syndrome, because what we say doesn't sell well.
Presumably, dear subscribers and Internet readers, you are interested in what I have to say because you want to make money, or protect what you have made; the flair, or lack thereof, with which I say it is secondary. In the world of market letters, as in the world of investing generally, focus on your objectives; don't rely on third parties to botch up the job for you.
Why do I focus on my message? (The freelancer asked a similar question, why do I bother to put out a letter if not for the money?) Well, there is always an "ego trip" in (usually) being proved right by going against the conventional wisdom.... in my case, anticipating and describing stock-market crashes, then having them unfold more or less as I expected.
But I also have memories of the late 1960s when, being young and green, I thought the good times and exorbitant stock prices would last forever. What actually transpired was a terrible investment climate for several years (unless you were short or into natural resources), culminating (for me) in a visit to the unemployment line. I'd like to spare those few people who do pay attention to me a rerun of the financial pain and suffering I endured back then. A historical "fact" that has yet to be repealed is that, during times of great financial excesses, it pays to be very conservative with your capital, even while knowing that nobody can predict the exact peak of those excesses.... and this, I feel, is my most important message.
There is a remote chance that the Dow could see new, marginal highs in this rally, as gobs of money are thrown after that which went down the least. But the NASDAQ will remain well below its highs of May, which probably will not be seen again for many years.
Generally (using 1929, 1987 and 1989 as guides), it's about two months from market peak to market crash. I think we should use the peak of this "quality rally", which will probably arrive soon, as the point from which we begin to measure; that would place the stock market meltdown in September or October. It's also "traditional" for crashes to arrive in the fall.... sometimes I wonder if we humans have really escaped from our eons-old link to the changing of the seasons (rebirth and renewal in the spring, decay and death with the onset of winter).
The "experts" are congratulating themselves that mutual-fund investors did not panic in the June/July selloff. Actually, that's not accurate.... some did panic, just not enough of them to have an impact. From this, the "experts" conclude that the newcomers will not panic if the going gets even rougher. This is self-serving nonsense.... of course they will. They always have.
A. "Phoenix" -real portfolio, begun on October 1, 1995.
Original cost: $ 8,090.45
Present value: $ 8,985.82
Increase: $ 895.37 [11.07%]
Yield: $ 311.53 [3.87%]
The performance of this portfolio and its predecessors ("Hedger's Delight", "Present and Future Income", "Crapshooter's Folly") from January 1987 to the present is +25.34%, for a compound annual rate of return of 2.43%.
B. "Professors' Investment Group (PIG)" - investment club portfolio.
SUMMARY - "PIG" :
Portfolio cost: $ 5,395.00
Present value: $ 5,445.47
Increase (decrease): $ 50.47 [0.94%]
COMMENT on "PIG": There is no change from the last issue. (It would seem the PIGs really know how to take a beating in a bear market).
C. Fidelity IRA - real portfolio, includes commissions:
SUMMARY - IRA:
Original (1983-86) cost: $ 8,326.19
Present value: $19,286.09
Increase: $10,959.90 [131.63%]
Current yield: $ 886.95 [4.49%]
The performance of this portfolio (including its predecessors) from January 1, 1987 to the present is +75.85%, for a compound annual rate of return of 6.07%.
F. CREF Pension plan; I switch between indexed stock/bond/money funds:
Date Sold Bought
13Mar92 stock @ 56.65 MM @ 13.41
29Apr92 MM @ 13.48 bond @ 31.19
19Jun92 bond @ 32.14 MM @ 13.55
29Jun92 MM @ 13.57 stock @ 56.74
24Jul92 stock @ 56.76 MM @ 13.61
29Oct92 MM @ 13.72 stock @ 58.61
23Dec92 stock @ 61.48 MM @ 13.78
16Jan95 MM @ 14.83 equity-index @ 26.44
20Jan95 eq-index @ 26.19 MM @ 14.84
Values, 31Jul96: stock, 95.32; MM, 16.14
Gain, 1988: 18.91%; 1989: 14.48%; 1990: 8.28%; 1991: 27.93%; 1992: 10.20%; 1993: 3.08%; 1994: 4.07%; 1995: 4.80%
Gain, January 1 through June 30, 1996: 2.57% (5.21% annual rate)
Total gain since January 1, 1988 (8.5 years): 139.63%
Compound annual rate of return: 10.83% (My long-term target: in excess of 15%)
Gain shown excludes the impact of additional monthly cash contributions.
Buying CREF stock on January 1, 1988 and holding it gained 218.89%, for a compound annual rate of return of 14.62%.
COMMENT on "Timer's Trend" : We're still on the SELL signal given on June 7, in spite of the surge in the Dow and the other blue-chip averages. (The 4th of July whipsaw was too brief to count).
{, } = "Timer's Trend" (4% and 10% exponential) SELL ({) or BUY (}) signal
=============================TIMER'S TREND===========================
Mon 18 Mar 96 . | . # }| 5683.60 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 19 Mar 96 . | .# | 5669.51 | . + *
Wed 20 Mar 96 . | .# | 5655.42 | . + *
Thu 21 Mar 96 . | # | 5626.88 | . + *
Fri 22 Mar 96 . | .# | 5636.64 | . + *
Mon 25 Mar 96 . | .# | 5643.86 | .+ *
Tue 26 Mar 96 . | .# | 5670.60 | .+ *
Wed 27 Mar 96 . | .# | 5626.88 | .+ *
Thu 28 Mar 96 . | # | 5630.85 | .+ *
Fri 29 Mar 95 . | # | 5587.14 |~.*~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 1 Apr 96 . | . # | 5637.72 | . + *
Tue 2 Apr 96 . | .# | 5671.68 | . + *
Wed 3 Apr 96 . | .# | 5689.74 | . + *
Thu 4 Apr 96 . | . # | 5682.88 | . + *
Mon 8 Apr 96 # . I . {| 5594.37 | + *
Tue 9 Apr 96 . I .# | 5560.41 |~+*~~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 10 Apr 96 . I# . | 5485.98 |+.~~~~~~~~~~~~~~~~~~~~~~~~~~~
Thu 11 Apr 96 . & . | 5487.07 + . *
Fri 12 Apr 96 . I . # | 5532.59 + . *
Mon 15 Apr 96 . I . # ]| 5592.92 | .+ *
Tue 16 Apr 96 . | . # }| 5620.02 |~.+~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Wed 17 Apr 96 . I # | 5549.93 | . + *
Thu 18 Apr 96 . | . # | 5551.74 | . + *
Fri 19 Apr 96 . | . # | 5535.48 |~.~~*~~~~~~~~~~~~~~~~~~~~~~~~
Mon 22 Apr 96 . | . # | 5564.74 | . + *
Tue 23 Apr 96 . | . # | 5588.59 | . + *
Wed 24 Apr 96 . | . # | 5553.90 | . + *
Thu 25 Apr 96 . | . # | 5566.91 | . + *
Fri 26 Apr 96 . | . # | 5567.99 | . + *
Mon 29 Apr 96 . | .# | 5573.41 | . + *
Tue 30 Apr 96 . | .# | 5569.08 | . + *
Wed 1 May 96 . | . # | 5575.22 | . + *
Thu 2 May 96 . #I . | 5498.27 |*.+~~~~~~~~~~~~~~~~~~~~~~~~~
Fri 3 May 96 . I # | 5478.03 |~.+~*~~~~~~~~~~~~~~~~~~~~~~~~
Mon 6 May 96 . I #. | 5464.31 | + *
Tue 7 May 96 . I# . {| 5420.95 |~+~~~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 8 May 96 . I #. | 5474.06 |+. *
Thu 9 May 96 . I .# ]| 5475.14 | + *
Fri 10 May 96 . | . # }| 5518.14 | .+ *
Mon 13 May 96 . | . # | 5582.60 |~.~+~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 14 May 96 . | . # | 5624.71 | . + *
Wed 15 May 96 . | . # | 5625.44 | . + *
Thu 16 May 96 . | .# | 5635.05 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 17 May 96 . | . # | 5687.50 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 20 May 96 . | . # | 5748.82 |~.~~+~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Tue 21 May 96 . | .# | 5736.26 | . + *
Wed 22 May 96 . | . # | 5778.00 | . + *
Thu 23 May 96 . | # | 5762.12 | . + *
Fri 24 May 96 . | .# | 5762.86 | . + *
Tue 28 May 96 . |# . | 5709.67 | .+ *
Wed 29 May 96 . & . | 5673.83 | + *
Thu 30 May 96 . | .# | 5693.41 | + *
Fri 31 May 96 . I #. | 5643.18 |~*~~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 3 Jun 96 . I #. | 5624.71 |+.~~ *~~~~~~~~~~~~~~~~~~~~~~~~
Tue 4 Jun 96 . | . # | 5565.71 |~ +~~~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 5 Jun 96 . | . # | 5697.48 |~. +~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Thu 6 Jun 96 . | #. | 5667.19 | .+ *
Fri 7 Jun 96 .# I . {| 5697.11 | + *
Mon 10 Jun 96 . I #. | 5687.87 | + *
Tue 11 Jun 96 . I #. | 5668.66 | + *
Wed 12 Jun 96 . I# . | 5668.29 |+. *
Thu 13 Jun 96 . & . | 5657.95 + . *
Fri 14 Jun 96 . I# . | 5649.45 |+. *
Mon 17 Jun 96 . I# . | 5652.78 |+. *
Tue 18 Jun 96 . & . | 5628.03 + . *
Wed 19 Jun 96 . & . | 5648.35 + . *
Thu 20 Jun 96 .# I . | 5659.43 + . *
Fri 21 Jun 96 . I #. | 5705.23 + . *
Mon 24 Jun 96 . I #. | 5717.79 + . *
Tue 25 Jun 96 . #I . | 5719.27 + . *
Wed 26 Jun 96 #. I . | 5682.70 |-. *
Thu 27 Jun 96 . & . | 5677.53 |-. *
Fri 28 Jun 96 . I . # | 5654.63 + . *
Mon 1 Jul 96 . | .# | 5729.98 + . *
Tue 2 Jul 96 . | #. }| 5720.38 |+. *
Wed 3 Jul 96 . |# . [| 5703.02 | + *
Fri 5 Jul 96 # . I . {| 5588.14 | *.~~~~~~~~~~~~~~~~~~~~~~~~~~
Mon 8 Jul 96 # . I . | 5550.83 | *.~~~~~~~~~~~~~~~~~~~~~~~~~~
Tue 9 Jul 96 . & . | 5581.86 | - *
Wed 10 Jul 96 .# I . | 5603.65 | .- *
Thu 11 Jul 96 # . I . | 5520.54 |~ *~-~~~~~~~~~~~~~~~~~~~~~~~~
Fri 12 Jul 96 .# I . | 5510.56 | . - *
Mon 15 Jul 96 # *. I . | 5349.51 |~.~-~~~~~~~~~~~~~~~~~~~~~~~~
Tue 16 Jul 96 # . I . | 5358.76 | . - *
Wed 17 Jul 96 . #I . | 5376.88 | . - *
Thu 18 Jul 96 . I # | 5464.18 |~.-~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Fri 19 Jul 96 .# I . | 5426.82 | .- *
Mon 22 Jul 96 # . I . | 5390.94 | .- *
Tue 23 Jul 96 # . I . | 5346.55 *|~-~~~~~~~~~~~~~~~~~~~~~~~~~~
Wed 24 Jul 96 # . I . | 5354.69 | .- *
Thu 25 Jul 96 . #I . | 5422.01 | . - *
Fri 26 Jul 96 . I# . | 5473.06 |~.~-~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
Mon 29 Jul 96 #. I . | 5434.59 | .- *
Tue 30 Jul 96 . #I . | 5481.93 | .- *
Wed 31 Jul 96 . & . | 5528.91 |-.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~*
=====================================================================
[, ] = 4% exponential change unconfirmed by 10% exponential (not a signal).
@ = market overbought or oversold. I or & (on baseline) = 10% exponential SELL.