Financial Friday
Jenson Hagen
It's Friday! Everyone probably wants to talk about something light. How about the price of light, sweet crude hit over $76 on Thursday. December futures hit over $78.
Whenever the Wall Street Journal leaks these commodity prices they help our enemies. By letting Iran know that political agitation inflames oil prices, the WSJ has in effect shown Iran how to destroy our economy. Right?
There are strong relationships between oil prices and inflation numbers, but with a slight lag. These high oil prices are going to cause another surge in our CPI data, which could be running at about 8% in two months.
Iran has already won. The Fed will have to continue raising interest rates at a time that $3.6 trillion in interest-rate sensitive mortgages will reset over the next 2.5 years. That's 40% of total mortgage debt in this country. How do you say housing bubble in Farsi?
Why are oil prices so high? Is it these darn speculators? Remember this; a speculator cannot invest if a speculator has no money to invest.
Bank of Japan, the European Central Bank and the Federal Reserve all dropped reserve requirements to 0-1% and printed billions worth of currency after the last slowdown. That drenched the markets in liquidity and now that this money has found its way to speculators, they are using these global strifes to justify a ballooned futures market. It's too much and too quick for arbitrage to handle, unfortunately.
Too much money is now chasing too few investments. In order to correct this problem, you have to mop up excess liquidity. Bear in mind that the same money used to prop up the stock/commodity markets is the same money that is fanning inflation. Our economy is about to get socked in the face.
Damned if you do. Damned if you don't.
Why is the inflation risk worse for us, however? PETRODOLLARS. We've forced the world to trade oil in dollars and our dollar's in the crapper. Other countries exchange less of their currencies into dollars with which they buy oil. That $76 barrel of oil costs the Europeans 60 Euros. That a 26% price reduction.
Other countries can in effect crowd us out of the market by working to weaken our currency. Oh, crap! I hope nobody from China reads this.
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Jul 14, '06
"Wall Street Journal leaks these commodity prices they help our enemies" please tell me you are kidding with this comment...
Jul 14, '06
"It's too much and too quick for arbitrage to handle, unfortunately."
seriously?!?!?! do have a different definition of arbitrage then the rest of financial community???
Jul 14, '06
Jenson -
Thanks for bringing this subject to the table. What it seems will be interesting to watch is if and how folks connect the state of war Israel has apparently declared with what it seems is going to be a dramatic run-up in gas prices. And if and how that will shift their political allegiances in the Mideast.
For those who didn't wait for hours in line during the "gas crisis" of 1973, that was the direct result of the Yom Kippur War and the decision by OPEC to cut-off supplies to countries that supported Israel. (And for those who didn't have to wait in line again in 1979, most but not all argue it was largely because of supply disruptions due to the Iranian revolution.) Since then, U.S. involvement in the Mideast has not really resulted in major supply disruptions. So only the issue of Israel has been pivotal in supply disruption in recent history. Although OPEC is no longer as functional as it was, given that the U.S. has already managed to alienate most of the former OPEC members including Venezuela, it is reasonable to contemplate whether U.S. behavior in this conflict could result in oil supply disruptions that didn't even result from our unjustified attack on Iraq.
If the radical right can manage to get folks to accept very high energy prices and not demand a new era of diplomacy in the Mideast out of fear or religious ideology, we will witness a new chapter in the drift of our country towards facism. The collatoral question is whether a lot of those who confuse humane progressive values with their particular versions of environmentalism, and who even on this site have applauded high gas prices for that misguided reason, will continue to do so in these circumstances given the political threat to our democracy.
Of course, the more conspiracy minded might suspect the right-wing in the U.S. has been planning to do what it can to insure a friendly regime in Mexico that would try to buffer supply shortages. But that is another topic for another thread.
Jul 14, '06
Jenson the overall higher prices are due to the Federal Reserve pumping out the money to pay for all the government debt. Oil prices have risen faster in the U.S. than elsewhere because of this devaluation of the currency, but it still doesn't help that the Bonehead-In-charge decided to conduct a war in the Middle East. Because of the war the cost of shipping is higher and insurance for the cargo as well. That adds to the cost. M.W.
Jul 14, '06
Everyone right this down....
Dan J is going long the US equity market with the Dow Jones currently printing at 10793.
Anytime I see a wild eyed Liberal yelling "the sky is falling", I jump into the market with both feet.
Jensen, for you edification, all of (mostly) facts you stated have been discussed for several months now. These "fears" of a housing bubble, variable rate mortgage re-sets, and falling US dollar have been printed in so many different publications for so many months now, I'm wondering where you've been.
Gold has went from $400 to $660/ounce on the slide of the US dollar and strengthening economies of 2nd and 3rd world economies.
Most home building stocks, as of today, have fell from 50-60% in the past year. I think you're a bit late on this public service announcement.
Fortunately, the US economy (& Oregon economy) is booming!
In addition, federal & state revenue's are surging. Did you all see the report on State revenues this week?
Will thing slow down some day? Of course. It's called a business cylce. Cycle means up and down by definition.
Pleaes Jensen, since you've got it all figured out, tell us where you are investing right now to take advantage of all of your revelations.
Jul 14, '06
Jensen,
there is just to much in your commentary to leave it alone.
"..the WSJ has shown Iran how to destroy our economy." & later "Iran has already won."
Hmmm. Destroy our economy. Ya, good one. Did you happen to read the earnings release from Federal Express a couple of weeks back? FedEx and UPS are two companies that paint one of the best pictures of the overall health of the economy. They touch all parts of the economy.
FedEx, of course, spends a great deal of money buying both diesel and jet fuel which have both risen dramatically. Funny, they reported record revenues and profits & raised their estimates of business going forward. Their CEO said that if there was any weakness in the economy, they weren't seeing it.
It doesn't appear Iran has won. Is that a dissapointment to you?
"too much money is chasing too few investments"
What are you smoking? As an investor, large or small, you can choose from an almost unlimited # of investments. The futures markets are massive and extemely liquid. There are more than 10,000 publicly traded equities. There are thousands of private investment pools. Real estate is for sale anywhere you go, and the supply of fixed income is staggering.
"PETRODOLLARS" Thank goodness oil is priced in dollars. Can you imagine how much more expensive crude would be if priced in Euro or Yen? If the Euro was the global reseve currency, dollars would get dumped by institutions. The dumping of dollars would create a supply glut driving down the price of the dollar vs. the Euro. This would make oil much more expensive than at present.
Do you understand why the US dollar is the worlds reserve currency?
Think hard.
No, its isnt because of some neo-con conspiracy. The US dollar was even the reserve currency when Democracts controlled where in the Oval office.
It is because the US is considered the safest country to have your money. Thus, people must trade their currency into dollars to purchase our dollar denominated investments.
Do you know why we are the safest? Because we have a strong military and general freedoms of investment not seen in weak socialilst countries.
Jul 14, '06
FedEx, of course, spends a great deal of money buying both diesel and jet fuel which have both risen dramatically. Funny, they reported record revenues and profits & raised their estimates of business going forward. Their CEO said that if there was any weakness in the economy, they weren't seeing it.
Isn't FedEx adding a fuel cost adjustment to their rates? I guess that might explain some of the revenue increase huh?
There is no doubt that for every chicken little there is a polyanna and both will be proved right occasionally.
Is there a housing bubble? We will see what happens to home prices as those adjustible rate loans need to be rolled over. It certainly ought to be a concern.
Will high oil prices fuel inflation or stagflation just as they did in the 70's? I don't think any reasonable observor doubts that is a concern.
Do you understand why the US dollar is the worlds reserve currency?
It is because the US is considered the safest country to have your money.
Its because the US has been considered to have the stablest currency relative to the cost of purchases. That is largely because it has the largest economy in the world, thus provides the marketplace in which a large amount of the worlds production is traded. Its not at all clear what happens if China and/or Japan decide the US dollar is not the most stable and start unloading them. Of course, they hold a lot of dollars. So its not in their interest to do anything that reduces their value until after they have reduced their own exposure.
But there is plenty of reason to be concerned that we have lost control over our own currency and economy, largely through debt and trade deficits. The slow and feeble response as the Fed lowered interest rates may be matched by an equal lack of response as they raise them.
But, in truth, like all ideologues, economists are only good at explaining what happened, not predicting what will.
10:07 a.m.
Jul 14, '06
Dan J.: Anytime I see a wild eyed Liberal yelling "the sky is falling", I jump into the market with both feet.
Really, Dan? I've done exactly the opposite, with the following strategy:
<h1>1 When we have Democratic president and screaming Republican financial gurus whining about taxes, invest in American stocks. ("The market's at 270 and Clinton's raising taxes! Sell! Sell! It'll never be this high for a decade!!!!!")</h1> <h1>2 When we have a Republican president and happy idiots like yourself cut U.S. taxes and infrastructure to the bone, invest in everything but America.</h1>Starting with an extremely modest 401K plan(rolled into a directed IRA) from my first job 20 years ago, this has led me to millions (in untouchable funds - alas). Still, thanks to Democratic competence and Republican idiocy, it looks like my retirement (when I eventually get there) will be reasonably posh.
When you say you're "jumping in with both feet", how much are we talking about? $150? $175? Every penny of your Republican tax "rebate"? Have you ever even bothered to figured out how much you've sold out your piece of the country for?
Jul 14, '06
Warren Buffet is dumping dollars for Euros....
Jul 14, '06
8% inflation is not going to happen again. Not while Bernanke is Fed Chairman. He would rather drag us into the next great depression than let the inflation genie out of the bottle.
I believe the Fed will raise rates another 1/4% in August, and then announce they will monitor incoming data for any lingering signs of inflation, but believe they have reached equilibrium.
Global GDP growth will certainly moderate, but the U.S. will continue to grow at twice the rate as Europe. Oil will stay above $60/barrel, and may even trade as high as $90 to $95 if the Iranians come to the aid of Lebanon.
Despite the alarmist drumbeat from CNN (and others), this is UNLIKELY to result in WWIII. Caveat: if it does result in WWIII, Portland will be uninhabitable, given our downstream proximity to Hanford.
If Syria joins the battle, they will survive less than a week before Bashar Assad falls, and Syria falls into chaos. Then the Israeli's can relocate the "Palestinians" to their old homeland, and maybe even persuade Jordan to cough up some land, as required under the original U.N. Resolution which created the State of Israel.
If Syria falls, Iran will try and step up the attacks on U.S. forces, hoping to squeeze the Americans between the "Arab Street" on two sides. They are unlikely to achieve their objective.
If Iran mobilizes tanks, troop carriers, or aircraft, they will soon discover 8 different U.S. aircraft carriers sailing off their coast, just waiting for the turkey shoot. It will look very similar to the Iraqi Army's retreat from Kuwait (the "dead highway"), and the mullahs and politicians in Iran will be deposed by force.
Likely outcome: the stock market drops by 50%, we reinstate the draft, and (a year or two later) we occupy Arabia from Syria to Iran, at least until the oil runs out.
Worst case scenario: Putin thinks he will look weak if he doesn't intervene, and threatens to go nuclear if the U.S. doesn't withdraw their forces. Bush launches a pre-emptive strike from our submarine fleet in order to cut off the command and control mechanisms, while NATO troops secure most of Russia's nukes. A limited number of Russian ICBM's are launched against major U.S. population centers, none of them are defeated by our missile defense system. WWIII is on, and we vaporize Moscow and North Korea. Because we can.
In the plus column, the nuclear winter theory is nowhere near as bad as expected. Mass human migration to the Southern Hemisphere is necessary, and the Third World becomes the New World. The survivors live happily ever after (albeit with a renewed interest in diplomacy), and China is the world's next superpower, lasting for 900 years.
PEACE!
Jul 17, '06
Steve,
you guessed it.
I've only got abotu $38 bucks until my next paycheck. I bought 2 shares of Intel.
One problem with your investment strategy Steven.
Since we've only had a Democratic Presidnet 8 year out of the past 24, and you only invest when a Dem held the ovum office, you wouldn't have had enough time for your paltry little investment account to do very much. Especially considering how much money you probably lost buying into the Janus funds during the Clinton bubble.
Good luck. You'd better vote for tax increases because it is the only way you Dems can finance your retirement: transfer payments!
Jul 17, '06
Ross,
you are the master of the cliche. Good job.
As for your comments on FedEx.
FedEx (like ALL) transport companies, have added on a fuel surcharge. What is impressive is that the higher cost of their freightbill hasn't reduced the shipping traffic. It's increased!
So have their profits! Revenue don't matter if the profits aren't there. Just ask Amazon.com.
FedEx is setting profit records. GE reported record profits on Friday. Citigroup reported record profits this morning.
Put your pajamas back on and get back to that bluestate dream.
Jul 17, '06
you are the master of the cliche.
There is a reason some things are cliches ...
What is impressive is that the higher cost of their freightbill hasn't reduced the shipping traffic. It's increased!
Well I am sure FedEx is happy about their profits, its not really surprising in light of the shift to internet purchases. So, despite inflation in shipping costs, that trend is apparently continuing. What exactly is impressive about that?
Jul 17, '06
Ross,
you may want to take a basic class on Economics and Finance. It will clear up some of these elementary issues you seem to struggle with.
I've neither the time nor interest to educate you on,
"What exactly is impressive about that?"
Its a major dissapointment to you socialist leaning Libs, but the capitalist system is working extremely well in adjusting to higher commodicty prices. FedEx is the case in point.
Oh, and your point about internet shipments up...yes, you are correct, they are way up.
When given a choice to receive & send things US Postal Svs vs. private expedited shipping, more and more people chose private business vs. Gov't subsidized(high relative cost/low service) options.
Jul 17, '06
the capitalist system is working extremely well in adjusting to higher commodicty prices.
And this is surprising because ...
When given a choice to receive & send things US Postal Svs vs. private expedited shipping, more and more people chose private business vs. Gov't subsidized(high relative cost/low service) options.
That may be true - but FedEx's higher profits aren't really evidence of it. They aren't even evidence that the number of deliveries Fedex is making is up. They may have taken the opportunity provided by higher fuel prices to eliminate unprofitable service while increasing revenue by increasing their prices.
It will clear up some of these elementary issues you seem to struggle with.
Dan, if ever there was ever a misunderstanding of elementary issue you expressed it here:
"you only invest when a Dem held the ovum office, you wouldn't have had enough time for your paltry little investment account to do very much."
It doesn't matter how long you hold an investment in the stock market. You make or lose money on the difference between what you paid for it and what you sold it for whether there are 8 or 80 years in between. That's the idea - buy low, sell high.
The standard and poors index was at about 400 when Bill Clinton come into office, it was at about 1600 when Bush was elected. Its around 1200 now. In other words, take away those 8 years of growth and there is no value left. The growth in value during the 90's was almost as extraordinary as the stock market crash of 29. If that was the only time you were in the market you were very lucky.
Jul 17, '06
Ross,
Your ignorance is only exceeded by your arrogance. Arrogance is what continues to cost your wooley eyed Libs both elections and ballot measures.
"That may be ture - but FedEx's hihger profits aren't reaaly evidence of it. They aren't even evidence that the number of deliveries that FedEx is making is up. ".
Oh really? See FedEx current earnings release
In FedEx's annual report they disclose record shipping pick-up and delivery in all business segments. This helps to support the 27% profit growth.
Get your facts straight Rossy boy. You come off as a speak first get the facts second Liberal.
As for the investment guru who claims to have engineered a Hillary Clinton type financial miracle, there are a couple of problems with both his statement and yours.
He claims to have turned a an extremelymodest little 401(k) rolled into an IRA that has led me to millions.
Either he started with millions and ended with millions or he did not using an index fund as you suggest.
Your numbers are a bit exaggerated, but lets give you the benefit of some doubt. Both the Dow Jones and the S&P 500 basically tripled in value from Clinton's first day in office to his last. A tip of the hat goes to President Clinton.
The only way this gentleman could have tripled his money and ended up with millions is if he started with a at least $600,000. But, he didn't. He stated it was "extemely modest."
It appears, he either wasn't telling the truth, or, he's one of the greatest traders of all time.
Hey, I know, he's really George Soros!
The Reagan and Bush Sr. years provided an equally impressive run in the markets. Too bad he sat this one out since he only invests with Dem's in the office.
Lastly, unless you are a trader, the amount of time in the market is extremely important. Close to half of the total return in the market is comprised of interest and stock dividends, re-invested. Go to Valueline.com and take a look at the importance of time IN the market.
Just stick with Certificates of Deposit Ross. There insured by the Gov't up to 100K. That Gov't involvement should appeal to you.
Jul 17, '06
In FedEx's annual report they disclose record shipping pick-up and delivery in all business segments. This helps to support the 27% profit growth.
From Fedex Link you sited: Total combined average daily package volume at FedEx Express and FedEx Ground grew approximately 4% year over year for the quarter
Lets see, a 4% increase in shipments and a 27% increase in profit ...
The Reagan and Bush Sr. years provided an equally impressive run in the markets.
No, they didn't. Not even close. The markets created almost their entire current value during the Clinton administration. They have lost almost as much as they were worth when Clinton came into office since Bush was elected (and yes I am counting the dive that Bush predicted right after his election that, not surprisingly, happened.)
Valueline.com
Thus proving once again - "there is a sucker born every minute".
Either he started with millions and ended with millions or he did not using an index fund as you suggest.
But I didn't suggest he used an index fund - he may very well have done better than the market. The point is that if you made any money in the market for the last 40 years, it was probably while Clinton was President. If you were invested in the market the rest of the time and not then, you likely didn't make anything. The market has been essentially flat over the rest of its history.
Jul 17, '06
Ross,
you are intellecually dishonest!
To claim that the Reagan/Bush Sr. years were "not even close" is a bold faced lie, to put it mildly.
The return on the S&P 500 with dividends re-invested is as follows: (Reagan/Bush Sr. years) 1981: -4.9% 1982: 21.5% 1983: 22.6% 1984: 6.3% 1985: 31.7% 1986: 18.7% 1987: 5.3% 1988: 16.6% 1989: 31.6% 1990: -3.1% 1991: 30.4% 1992: 7.6%
Source: Capital Research Group (A.K.A.: American Funds Group)
Please note, I gave full credit to the fact that the Clinton years were great years for the market. For you to claim that the Reagan/Bush Sr. years were "not even close" is typical liberal hyperbole.
You erroneously stated:
the markets created almost their entire value during the Clinton years
As can be seen above, you are very wrong.
I doubt many of your cohorts would mind claiming the returns in either the Reagan/Bush Sr. years or the Clinton years. All were outstanding. There is not disagreement that the GW years have been flat to down for large stocks. It should be pointed out, they have been outstanding for small stocks.
Do I need to point out the returns for the Russell 2000 Index during the GW years or can you figure that out all by yourself?
Jul 17, '06
the markets created almost their entire value during the Clinton years
As can be seen above, you are very wrong.
Not really. You can play with the numbers all you want, but the S&P stands at a little above 1200 right now and it went up by about 1200 points under Clinton. Of course there were gains other years but those gains were offset by roughly equivalent losses.
I would remind you that your original argument was that someone couldn't make millions just investing when Democratic Presidents were in office because they weren't in office long enough. That is flat out untrue. And that is the only point I have tried to make as to the markets.
As to Fedex, I guess when you say look it up, people ought to look it up. Because that article seems to confirm my speculation that the growth in revenue and profits were not a result of a huge growth in the number of items being shipped.
Jul 17, '06
Taking my own advice, I looked up the Russell 2000. Its not surprising that it was at about 200 when Clinton took office 500 when Bush took office and 670 now. In other words, those "outstanding" results for small stocks are still only about half what they were during the Clinton years. And, to be clear, once again I am ignoring dividends.
Jul 17, '06
Y'all ever heard of irrational exuberance? It speaks to the folly of using the stock market as a measure of partisan or Presidential achievement.
More importantly, all the Democratic talking points about the failed Bush Economy ignore the cataclysmic impact of September 11th. Considering the excessive equity valuations when Clinton left office, and the follow on burden of September 11, it is worth noting that our economy is growing twice as fast as the EU, unemployment rates are declining, and corporate profits have never been higher.
Besides, doesn't liberal dogma tell you that only the elite and wealthy actually benefit from rising stock values? If you didn't inherit your wealth, then you must have subjugated your fellow man in order to take more than your fair share.
Right?
Jul 18, '06
ignore the cataclysmic impact of September 11th.
Most ot the economic costs of 911 weren't caused by the terrorists, they were self-inflicted by the President when he paniced and shut down all air traffic across the entire country. That isn't a Democratic talking point because a lot of voters were in a similar state of panic.
Y'all ever heard of irrational exuberance? It speaks to the folly of using the stock market as a measure of partisan or Presidential achievement.
Actually, no. Greenspan was not talking at all about presidential politics when he used the term "irrational exhuberance". But Clinton did in fact help sustain that exhuberance by constantly reassuring the country that he was committed to making the economy continue to grow. Almost the first words out of George Bush's mouth on being elected was a prediction that there was going to be an economic downturn. It was quite a switch from Clinton's reaassurances and certainly didn't help stock prices.
Jul 18, '06
Ross,
Once again, your words are hollow. It is plain to see that the down years didn't even come close to offsetting the strong years in the Reagan/Bush Sr. years. Anyone with two eyes to see can quickly look at the annual returns from 1981 to 19992 and make that connection.
Math must not have been your strong suit.
The Dow Jones average roughly tripled in the Reagan/Bush Sr. period. That hardly supports your false statement that those gains were offset by roughly equivelant losses.
As for FedEx, you obviously didn't read the report. If you did, it is then apparent you do not understand the concept of "earnings leverage". Let me give you a lesson, as apparently you need one.
If you purchase a home for $250K, and put down a 10% payment of 25K, and the home rises by 5% to $262.5K, guess what your return on equity is? Answer: 50%. Thus, a small rise in value translates into a large rises in profit.
I've no arguement with you about how strong the Clinton years were in the market. Clinton understood things that far left liberls (such as you) do not. He let trade move freely and worked with Repubs to implement NAFTA, over the screams of Libs. He, along with a Repub congress, lowered capital gains taxes. Clinton reformed welfare (another conservative ideaology). I would agree that Clinton is much more of a fiscal conservative than is GW. You Libs should love GW from a fiscal standpoint, he is the most Liberal President in that regard that we've had in many a moon.
As for my original statement about Steven Mauers investment strategy: If true, it has everything to do with his near super-human trading ability. You don't turn a modest amount into a "millions" given the market conditions (even though they were good) in place.
Ross, as to your response to Alice, you are completely out of touch.
To claim that the financial losses after the 911 strike is due to Bush's actions, rather than the truth (markets panicked after being attacked by terrorists) is just one more notch in your history of low IQ comments.
8:30 a.m.
Jul 18, '06
The Dow Jones average roughly tripled in the Reagan/Bush Sr. period.
Since when is the DJIA a barometer for how well the economy is doing? It might be a fine yardstick for the stock market, but not for the real wages in people's pockets.
Jul 18, '06
"To claim that the financial losses after the 911 strike is due to Bush's actions, rather than the truth (markets panicked after being attacked by terrorists)"
The market certainly panicked - but that doesn't last for five years. Most of the actual damage was the economic losses caused by shutting down the country's transportation system for a week along with a number of other businesses that depended on flying aircraft.
"If you did, it is then apparent you do not understand the concept of "earnings leverage". "
That concept has nothing to do with whether their increase in profits and revenue resulted from their increased competitiveness against the post office. The report states clearly that FedEx revenue and profits increased mcuh faster than their number of shipments. Which is exactly what I speculated was the case.
"You don't turn a modest amount into a "millions" given the market conditions (even though they were good) in place."
There are plenty of market millionaires from the 90's who picked the right high tech investments. Of course they got lucky, but doesn't every Republican think their luck is a result of hard work and their brilliant mind? Why should Democrats be any different.
If you purchase a home for $250K, and put down a 10% payment of 25K, and the home rises by 5% to $262.5K, guess what your return on equity is? Answer: 50%. Thus, a small rise in value translates into a large rises in profit.
The profit on that house was $12,500 whether you paid for it in full or had a mortgage.
Jul 18, '06
The Dow Jones average roughly tripled in the Reagan/Bush Sr. period.
Over a 12 year period it went up almost 2000 points. During the 8 years of the Clinton period it went up roughly 9000 points and quadrupled. If you think those are comparable, fine.
Jul 18, '06
That 9000 isn't accurate. The Dow Jones was roughly 900 when Reagan started, 3000 when Clinton came into office and close to 11,000 when he left.
Jul 18, '06
I can't believe you guys are using the stock market (especially the ridiculous runup in the tech boom) as a political debate on presidential acumen. What a waste of breath.
It's like saying Clinton was a great president because air traffic was safer under him than Shrub because there was this massive spat of airline-related deaths right after he took office.
If Bob Dole were president in the 90's, the stock market would have done roughly the same thing. If Gore were president in 2000, we'd be roughly where we are now (in the market). Presidents just don't have that much to do with the market under normal conditions.
11:23 a.m.
Jul 18, '06
One more time... Since when is the DJIA a barometer for how well the economy is doing? It might be a fine yardstick for the stock market, but not for the real wages in people's pockets.
Who cares what the Dow Jones did? Talk to me about median family incomes.
Jul 18, '06
Presidents just don't have that much to do with the market under normal conditions.
I don't really think that is true. It think length and strength of the tech runup in the 90's was largely a reflection of the optimism expressed in Washington.
Who cares what the Dow Jones did? Talk to me about median family incomes.
This argument is with a Republican. Since when are they concerned about the median family income? I don't think the median family income has even kept up with inflation since Ronald Reagan was elected.
Jul 18, '06
Ross,
I appreciate the fact that you start many of your sentences with the following " I don't think"
There may be a subliminal message there?
This is splitting hairs, but, since you enjoy doing it, here is a bit more mental weed for you to roll up and smoke:
When Reagan came into office, the Dow Jones was at 1010. When Bush Sr. left and the womanizer entered the oval closet, the Dow Jones stood at 3300. When Clinton left office, the Dow Jones was at 10765.
The Clinto years were better. That was never debated. Both time segments were very positive though. Very positive. Your limp attempt to discredit the Reagan/Bush Sr. timer era is pathetic. One other key difference: Reagan inherited a disastrous economy from Jimmy Hugo Chaves Carter, while Clinton took over an economy in good shap by any measure of comparison.
At this point, the market was already down 940 points from its high of 10,722. The Clinton bear market was already in bloom. Bush did little to help the situation, nor did 9-11. The Bush tax cuts have had a dramatic impact though. The market rallied from a bottom of 7940, to better than 11,600 in May of this year. This is especially impressive considerin that the price of crude oil has tripled over the past four years. The economy has been able to make adjustments and move forward.
You may want to stick to a nice game of Monopoly with your nephew.
Kari,
you put out the statement about family incomes. How are they? Is the standard of living higher today than it was in 1981, or lower? What is your official source?
Don,
I agree with you, Presidents don't have a lot to do with the performance of the markets in the long run. I just enjoy watching Ross blabber.
Jul 18, '06
I agree with you, Presidents don't have a lot to do with the performance of the markets in the long run. I just enjoy watching Ross blabber.
Thus your protests about my intellectual honesty ...
1) First you claim Fedex is making record profits by taking business away from the evil government post office, then you post a link that proves the opposite.
2) You claim no one could have turned a modest investment into millions by invesging in the markte during the Clinton years because he wasn't President long enough and then deomonstrate that isn't true
3) You claim "The Reagan and Bush Sr. years provided an equally impressive run in the markets" and now you claim "The Clinto years were better. That was never debated. "
But you accomplished your goal, you reduced me to blabbering.
Jul 18, '06
Ross Williams:
I should have been more direct in my writing. I wrote:
Y'all ever heard of irrational exuberance? It speaks to the folly of using the stock market as a measure of partisan or Presidential achievement.
I was not suggesting that Alan Greenspan was thinking of politics when he used the term irrational exuberance.
Rather, if you accept the premise that equity markets often behave irrationally (dropping too low in times of panic, rising too high in times of euphoria), then they are a lousy measure of Presidential acumen or performance.
It's also worth noting that the President has very little direct impact on the economy, with the exception of the tax code, transfer payments, law enforcement, and trade policy. And many of those things would take care of themselves if the bureacrats were simply left alone. The Federal Reserve or the S.E.C. are going to have much greater impact on how financial markets perform than the President of the United States.
Jul 18, '06
I don't really think that is true. It think length and strength of the tech runup in the 90's was largely a reflection of the optimism expressed in Washington.
Respectfully, Ross, the runup was due to the emergent technology that now allows BlueOregon to exist. Even if the optimism in Washington had some remote effect, could it not be argued that it was because the Republicans won the house in 94, right before the tech boom started? Now, before any of you throw anything at me, I don't believe that's the case, but it's the same argument. Corrolation /= causation.
Jul 19, '06
I don't believe that's the case, but it's the same argument. Corrolation /= causation.
No it isn't. What exactly did the Republicans in Congress do? I am not arguing correlation. There was a reason Clinton reappointed Alan Greenspan, and it wasn't because they were philosophical soulmates. It gave the market and business community confidence and the market responded.
You seem to ignore Clinton's commitment to balancing the budget and reducing the deficit. Have we already forgotten the surpluses of the Clinton years. They didn't just happen, they were a result of Clinton's policies.
You seem to have forgotten the dot com bubble was a bubble. There was an underlying technology boom, but the runup in stock prices, the "irrational exhuberance", was on top of that. I think part of that was because whenever confidence in the economy waned, Clinton was talking about how he expected things to improve.
You can say that Bush's little speech about expecting a downturn was precient or just coincidental. But I remember at the time that is was a shock to hear someone who had just been elected bad mouthing economic expectations. Clinton simply never did.
Jul 20, '06
Ross,
do you still have a picture of Bill Clinton hangin over the fireplace?
So now you are argueing that markets were strong under Clinton because he re-appointed a Fed Chairman that was put in place by Republicans.
Good one Ross.
And yes, it was a shock to hear President Bush speak the obvious and state that a slowdown was in the works. We weren't used to the truth after 8 years of Clinton.
"I never inhaled"
"I did not have sex with that woman"
"I feel your pain"
When Bush took over the White House, the markets were already in decline. The Dow Jones had dropped 9% in Clinton's last year.
Bush wasn't acting as a genious. He was just stating the obvious.
The obvious is something you appear to struggle with.
One final thing. You keep talking about the flat returns of the Bush years. He still has two more years. Let's take a look at the end of '08. It's not over yet. He's a two term President, just like your hero, Bill Clinton.
Now get back to that monopoly game Ross.