Helpless in the face of inevitable death, Parisians turned against the authority of the Church. Mock ceremonies were conducted on the city's overflowing mass graves. Wearing grotesque masks, the "Pope," "Bishop," and "Clergyman" led the "Parishioners" in the "Danse Macabre," or Dance of Death, a ritualistic orgy in which men, women, children, and corpses mingled their filthy organs to the feverish tunes of lunatic musicians.

Ironically, the Danse Macabre did not emerge until the plague had mostly run its course. The first documented depiction was painted in 1425. The participants in the Dance of Death were survivors who had somehow built up an immunity to the plague.

You can count on two things: The consensus is always wrong at key turning points in history. And the masses always turn to parades in times of extreme upheaval. The mirror image of the Dance of Death is the Carnival of Renaissance Europe, an orgiastic frenzy of tumbling dwarves, three-armed jugglers, and gypsy whores that traveled from village to village, offering the masses a chance to escape from the rigidities of the feudal hierarchy.

Edward Chancellor proposes in his book, Devil Take the Hindmost, that the Carnival is the origin of the modern stock market. During stock market manias, the spirit of Carnival is reborn. In the Carnival, the traditional social hierarchy is turned upside down, and the village idiot is named King of the Carnival.

Investors are placing their chips for a post-Y2K rally. The common wisdom is that stocks will rebound once January 1st passes. Your neighbor will cash in his gold coins and buy CMGI.

Greenspan contributed to the pre-Y2K relief rally. The Fed wants to keep the banking system liquid over Y2K. Consequently, money supply has rapidly expanded -- and is manifesting itself in ballooning equity prices. While there is no clear statistical evidence, I suspect that other major central banks are taking the same precautionary measures.

Mutual fund managers are contributing to the rally by "window dressing." This involves disposing of losers (like financials or small caps) and switching to winners (Internets). Daytraders sense the presence of large buyers and bid up internets even higher. And if you're sitting on a big profit in stocks in a taxable account, you probably want to defer profit taking until after January 1st to avoid a big tax bill.

The whole constellation may unravel in the first quarter. The Fed is likely to withdraw liquidity by hiking rates in January. Since the market has discounted "nothing catastrophic happening," the market is unlikely to rally after Y2K -- even if nothing catastrophic happens.

The Utility Index has topped out prior to every textbook "bear market" over the last two decades. A major peak in the Utility Index has occurred 4-7 months before each peak in the Dow. The Utility Index peaked in February 1987, December 1989, and September 1993 (the Dow declined by 20% or more from peak to trough during 1998, 1990, and 1994). The last major peak in the Utility Index was set in June 1999...

From the point of view of technical analysis, the Utility Index looks terrible. It has diverged from the other major indices, hitting new 52-week lows. The utilities are down 20% from the June peak.

Based on the 4-7 month rule, a bear market in the Dow should begin by January 2000.

Who knows? Maybe the market will hold up in January. But given the "easy money" being made in the current Carnival atmosphere and the poor technical condition of the Utility Index, it is prudent to take precautions. I'll tell you what I'm doing: raising cash.

As a high tech/telecommunications holding company, ELBTF should be analyzed in terms of Net Asset Value (NAV). Based on my revised estimate of the realizable value in ELBTF's assets, I am raising my estimated NAV to US$44 per share. Applying a conservative 30% discount to estimated NAV, ELBTF's fair value is over US$30 per share. The current share price represents a glaring 50% discount to fair value.

When I recommended the stock, ELTBF traded around US$2. And a self-righteous gaggle of Wall Street analysts and Israeli journalists predicted that the cellular operations of Partner (an ELBTF affiliate) would fail. They were dead wrong. The Partner IPO (PTNR-NASDAQ) was a resounding success. PTNR is up 37% since the IPO. ELBTF's 12.4% stake in PTNR is worth US$18.50 per share to ELBTF's NAV (while ELBTF would incur a 36% tax expense on the sale of its PTNR shares, the stake could be sold at a significant premium to another major shareholder). ELBTF is currently trading below the market value of its stake in PTNR!

I just met with ELBTF's management to get an update on the company's progress. I'm delighted that they're finally selling the Elbit story to U.S. institutional investors.

ELBTF's (60% held) Peach Networks subsidiary is commercializing a revolutionary digital set top box technology for low-cost Internet access. The competition (WGAT, OPTV, Liberate, Web TV) for set top box Internet solution is fierce; however, Peach's compression-based software solution lets cable operators piggyback their existing cable infrastructure by keeping the Windows NT/Internet servers in the cable central office and sending "mirror images" to the end user (competing technologies turn the set top box into a mini-computer).

I anticipate that Peach will go public within twelve months. As a public company, Peach will easily achieve a comparable market cap to Worldgate (WGAT-NASDAQ), an US$800 million company. If my projections are accurate, then Peach will add US$18.60 per share to ELBTF's NAV within twelve months. There's no risk to us: the market is currently valuing Peach at zero.

But ELBTF's (50% held) Contop subsidiary is the real potential blockbuster. Contop has developed a revolutionary low-cost technology for converting cellular phones into wireless virtual credit cards. Contop is compatible with any digital cellular network. Using Contop, you can buy cokes from a vending machine, pump gas at a filling station, or pay a parking meter -- with your cell phone. All you have to do is punch a short numeric code into your cell phone. The code is printed on the vending machine or parking meter. The charge is added to your monthly phone bill. Contop is currently being beta-tested around the world.

Since Contop is a low-cost, software-based solution for wireless e-commerce, it represents an extremely attractive proposition for cellular operators. Everybody wins: the customers, the cellular providers, the handset manufacturers. The cellular operators can maximize the value of their subscriber base by generating additional income from Contop purchases. Vendors can lower costs by reducing or eliminating the need for coin collection. The full range of Contop applications extend to every type of daily economic transaction (ordering a pizza, buying movie tickets, etc.). I believe that Contop will become the de facto world standard for wireless cellular commerce. I anticipate that ELBTF will float Contop in a NASDAQ IPO within approximately eighteen months.

ELBTF has financed the development of its high tech subsidiaries and affiliates without diluting shareholders by a single share. ELBTF has a US$30 million cash pile on its balance sheet and zero debt. My twelve-month target is US$30. The only short-term risk is the potential collapse of the US tech bubble. However, this would only represent a short-term setback to ELBTF's stock price. I rate ELBTF as a Buy at current levels.

James Passin is a Portfolio Manager with Firebird Management and Contributing Editor to Taipan. James Passin's views are strictly his own and not necessarily the views of Firebird Management or Taipan.