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There are some incredible investment opportunities available. They are still available as of this writing because no one wants to buy them.

It is as if they didn't exist...so unfashionable are they. I have mentioned a couple in these letters. Octel...a company that makes additives for leaded gasoline. It is a bargain. If it had a dot-com following its name, and a plausible Internet story to tell, it might be worth billions. Instead, it is selling for less than one times annual earnings.

Another great bargain, I believe, is the mobile home industry...again selling for very low prices relative to earnings. But who wants to be associated with "trailer trash?"

Then...there are stocks in the former Soviet Union. I just got a report from James Passin's employers at the Firebird Fund that tells of some of the values available. How about a company with 1 billion barrels of oil...high-quality oil reserves...valued at a level that prices the oil at just 2.5 cents per barrel? You could buy the whole company for the price of a few 60-minute TV ads on Superbowl Sunday. Heck, you could probably buy it with the loose change under the seat cushions in the Amazon.com boardroom. 

The leading commercial bank in Kazakhstan should earn $20 million in 1999. It has an investment portfolio worth $50 million. And you can buy the whole company for $75 million.

The leading bank of Lithuania trades at 3.5 times earnings. Lithuania's oil industry trades at a 90% discount to Western companies. The largest retailer in Estonia sells for three times earnings...and "probably only a little more than the value of the company's building and real estate in Tallinn, the capital."

You get the idea. But while celebrity investors bribe CEOs to get in on the latest fad in the United States...these sorts of investments -- and more...as stocks fall -- are nowhere, man, in the public eye.

Last night...the point I was reaching for returned to me, like a ghost. It agitated me until I had to get out of bed and sit down, pen in hand, to do its bidding. The great mathematician, Henri Poincare, said he solved the most difficult mathematical problems in his sleep. I feel that I am getting close to something important, too...but maybe not...

There is a common thread that runs through market manias and politics...a thread that helps us understand the century of which we are about to take leave...as well as George Soro's comment about "detecting and punishing" the folly of government.

The rise of politics is the story of the 20th century. It begins with lies...and ends in bloodshed, "at the barrel of a gun," said Mao.

This phenomenon also describes what happens in market booms and busts...though usually with little violence. The boom-bust cycle in politics is tragic. It is only comic in the marketplace.

In both cases, it begins with a big lie...a mass delusion. The lie of all politics is that it can give people something for nothing. Every councilman, activist and presidential hopeful, except for the occasional maverick or incompetent, promises to deliver stolen goods. 

Jim Davidson has shown many times how the rich are exploited by a show of hands. There being fewer rich hands...they always lose -- and end up carrying the burden of the politician's larceny.

The big lie in a market mania is similar...that investors can get something for nothing. The real growth in the economy is the upward limit on what investors, as a whole, can expect to earn. Yet, once the mania gets rolling, these limits disappear...it's like All You Can Eat Night at a fat farm. Investors currently expect to earn approximately four times GDP growth -- investing in index funds.

In manias as in politics, group thinking replaces individual decision making. Individuals...and unique situations...are stripped of their rich details and turned into cliches, caricatures and empty slogans.

Mob courage replaces sober reflection. The crowd begins to believe that it is invincible -- which leads it to do the most irresponsible and disastrous things...such as attacking Pearl Harbor. 

Scapegoats are called in when needed. Lenin, seeing the appalling failure of his silly plans, identified the Kulaks, the bourgeoisie...and other class enemies. He said, "they must be liquidated." And so they were.

In the liberal democracies we see no bridge connecting the Soviet and Nazi misdeeds to our own public policies. We draw the line on the far side of robbery...stopping short of murder, usually.

But the technique of Marxist mob-think is the same. Hillary Clinton went on national TV to defend her husband during the Lewinsky scandal. Instead of addressing the unique and richly nuanced questions at hand, she chose Lenin's approach...accusing a "vast right-wing conspiracy" of being behind her husband's troubles. 

William Pfaff is saddened by election reform...or the lack of it. He should get a life. Real life is different from politics. It is not reported in the newspapers nor discussed on the editorial pages...but it involves genuine sadness and happiness. It is not make-believe. 

Election reform is little more than changing the hours of operation at a Las Vegas whorehouse. It may suit the customers better, but it doesn't change the nature of the business...What goes on upstairs is still the same - - roughly the same thing that happens to anyone who dares defy the mob or sell short in a bull market.

The key to making money is to separate the genuine...from the political. Mass delusions...group thinking...cliches...mob psychology -- they are the follies we need to "detect and punish." 

More on this to come...

But let's return to the former Soviet Union. Just as the mob is now convinced that it cannot lose in U.S. tech stocks, it is sure that it cannot win in Russian stocks of any form. The whole Russian stock market is valued at only $15 billion. These are not trivial companies, either. Surgutneftegaz alone will earn $1 billion in profit this year. Yet it is priced at a fraction of Internet companies that have never earned a dime...and never will.

Stocks at this level are at such a low point...that they seem to be beckoning to me in my sleep -- "Buy me now"...or the equivalent words in Russian...they say. "This may be a once in a lifetime opportunity."

I have to get off the "Nowhere Man" car...we're at Waterloo Station.

Regards,

Bill

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