Dow Jones 11,727 - Bush's Fault [Archive]

jersey_guy

10-04-2006, 04:18 PM

Zat0pek

10-04-2006, 04:33 PM

Stocks were extremely overvalued in 2000/2001, having more than doubled in price in just a couple of years. Anyone with half a brain did not have a significant part of their portfolio in the stock market in early 2001. That's why intelligent investors have earned way abov inflation level in the last 5.5 years.

That's exactly what I was going to post. That was right before the tech bubble burst and the market went through a huge (and long overdue) correction.

A stock broker buddy of mine at the time said, "The market's had a belly ache for a long time and it just needs to puke and get it over with."

I haven't taken the time to do it, but I bet if you measure from, say, 1/1/03 or 6/1/03 to now you'll see the market beating inflation again.

Jwaksman

10-04-2006, 04:58 PM

Actually, if you look at P/E ratios, the stock market is still overvalued. I've tried to argue that the equilibrium P/E ratio should actually be a little higher now in the Internet age. My dad insists that the P/E ratio is what it is, and that it still needs a little bit more of a correction to return to equilibrium. Either way, there's no question that most of the correction has already been accounted for in the market. There aren't many companies left with $10,000 in revenue who have stock valued at more than GM.

Zat0pek

10-04-2006, 05:40 PM

My dad insists that the P/E ratio is what it is

YOUR DAD IS KING99?!?!?! :D ;)

jersey_guy

10-04-2006, 05:59 PM

I haven't taken the time to do it, but I bet if you measure from, say, 1/1/03 or 6/1/03 to now you'll see the market beating inflation again.

Since 9/30/02 the market went up by 59.7% in four years. I would say that's quite above inflation.

jersey_guy

10-04-2006, 06:08 PM

Blue collars might have been fashionable 100 years ago, but we are in a postindustrial society now, so unless they adapt they will suffer economic consequences regardless of who is in power.

Jwaksman

10-04-2006, 07:03 PM

But nevertheless 10 steps back followed by 8 equal steps forward doesn't make forward progress. Nor does standing still equate to positive movement, if we could actually boast we'd held our ground. And by the way the Dow never doubled in a couple years, those perceptions must be reserved for the broader smaller public venture indeces. The max 2-year dow increase in the 90's was '95 & 96 when we saw it rise from 3,834.44 to 6,448.27 across two years, an increase of 68%. The rest of the decade after that was flatter.

It goes without saying that the picture this century looks worse yet if we focus on those smaller public venture indeces.

If you want 'rosy' then just ask yourself what industries this administration has strong ties to and look there. Rosy it is.

This is the difference between economics and politics. A politician can appeal to the masses by talking about how we had an increase from 3834 to 6448 in 2 years and how great that was, and the public eats it up. An increase is good, right? So a bigger increase has to be even better?

Actually, the answer is "no." An increase that quick is bad because, as any economist will tell you, whatever comes up must come down. In the longrun, P/E ratios will tend towards about 15. So, just doing some mental math, those two years probably had total economic growth of about 12% (not accounting for inflation - since the stock market doesn't either). If the market went up about 60% that tells me that P/E ratios grew more than 40% - from about 15 to over 20. The P/E ratios need to return to normalcy, which means that over some finite period of time the stock market will have to grow 40% less than the economy in order to return to equilibrium. Since the rich investors are the smartest, they will most likely be able to prepare for this and get out in time. It's the middle class that will bear the brunt of this correction and get killed in the market.... which is exactly what happened.

You can't pass a law to change the equilibrium P/E ratio. It is what it is.

mzungu

10-04-2006, 08:22 PM

obviously greater economic growth THROUGHOUT the bush years would justifiably buoy prices. the fact is that there's been significant redistribution of income during the bush years toward the very top of the income scale. almost all of the gains have gone to the top 5%. and tax changes have played a significant role in that. you can say that the stock market was overvalued in 2001, which it was and always is at the end of a long rally. but that doesn't change the fact that the market's lost value over the past 5 and a half years. don't forget also that the current numbers don't take into account all the companies that went out of business and were replaced in the indices. investors in those companies certain took account of it, but the indices replaced them, diminishing the loss. but in any case jersey_guy's using straw man arguments. people blame bush for things he has done or refused to do. years ago we said that cutting taxes on the rich was an INEFFICIENT means of stimulating the economy, that it would produce relatively few new jobs, and certainly the statistics have borne that out.:mad:

Kalaby

10-04-2006, 09:36 PM

The run-up in the market through the 90s was one of historic proportions and completely unsustainable. By the time it was finished climbing, it was among the most overvalued markets in U.S. history if I recall correctly. That's hardly a baseline you want to measure off of in order to draw any conclusions about the market's performance over the last 5-6 years or so.

Jwaksman

10-04-2006, 09:59 PM

It was by FAR the most overvalued market in the history of the US. Just look at what was going on with stocks like Yahoo, it was absurd. It is an economic FACT that the stock market needed to readjust and drop at some point in the near future.

It is also an economic fact that while the US economy is not booming like it was during the Internet crush (and it probably never will again), it is still above its historical average. Productivity is up, output is up, wages are up, wealth is up. This country is doing just fine. The fact that this is all happening despite the huge rise in oil prices (which is artificially increasing inflation levels, making statistical wage growth lower than actual wage growth) is pretty remarkable. Most economists are startled at the quick turnaround in the economy. No one expected it to do this well this fast.

Before JG jumps in, of course, Bush is not why this is so. Obviously tax cuts helped everyone at all levels - no one questions that. But the main reason is the strength of our economy and the people within it. No President can mess with the US economy enough to hurt it too much. It's just too powerful.

mzungu

10-05-2006, 09:05 PM

when you say wages are up, go back and chart the median wages in this country, adjusted for inflation, and report on it.

jersey_guy

10-06-2006, 01:27 AM

11,866 today, just how bad can it get???

Jwaksman

10-06-2006, 02:19 AM

"My boy"??? The Minnesota Senate Race ranks about 15th on my list of senate races I'm watching. Kennedy is definitely struggling, although the election isn't over yet. He's down about 8-11 points right now.

As for you actually believing that incomes are down over the last 35 years... I really don't know what to say. Inflation is always over-estimated, because it is simply impossible to account for increased quality of products and changing bundle ratios. It reminds me of a speech Ned Lamont gave where he was talking about returning America to the power and prosperity of 100 years ago.... I mean, I guess it's no less plausible to suggest that Americans were better off in 1750 than 1970. It's remarkable how people believe this nonsense.

There are a lot of new books out on this subject, on the subjectivity of the average American. The average American thinks they work harder than their parents did 30 years ago, although they work less. They think they're worse off, even though it's not even close. The field of analyzing how Americans are less satisfied with their lives as they grow richer is rapiedly expanding, and pretty fascinating. The average American in poverty would be defined as "upper middle class" by 1970 standards. There's no argument - go ask a senior economic professor from the university you work at. I've explained this too many times so it's not worth explaining it again. I can also recommend some books if you want to do some reading.

Sebrle

10-06-2006, 03:07 AM

True, the simple fact is that median wages for the male working individual in this country haven't been anywhere near where they peaked in the late 70's adjusted for inflation, and simply continue to drop. And that's an assessment that completely ignores traditional employment fringes that have almost completely evaporated.

National homeownership rates are 10 points higher than they were in the 70's

jersey_guy

10-06-2006, 09:30 AM

This thread has delivered beyond my expectations.

MoMo

10-06-2006, 09:39 AM

Apologies for posting on topic, but ...

(from the NYT, six weeks ago or so):
"[W]ages and salaries now make up the lowest share of the nation's gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960s. UBS, the investment bank, recently described the current period as 'the golden era of profitability.'"

Between 2000 and 2005, the real median income of households headed by persons under the age of 65 fell by 5.4 percent, paralleling the nosedive in incomes during the Reagan era. The U.S. Census Bureau reported in August that wages and salaries fell by 1.8% for men and 1.3% for women last year alone.

Roughly one-fourth of all low-income families with a full-time worker has been unable to pay the rent or mortgage at least once during the past year, and the same number report being unable to put enough food on their families' tables.

In 2005, the number of Americans without health insurance increased for the fifth straight year. The number of uninsured Americans rose to 46.6 million in 2005, to 15.9 percent from 14.2 percent in 2000.

Economists at Goldman Sachs noted, "The most important contributor to higher profit margins over the past five years has been a decline in labor's share of national income."

Jwaksman

10-06-2006, 10:01 AM

You guys always post stats like that - relative stats that don't actually tell anything. It's not about how wealthy the average family is, it's about how wealthy they are relative to the richest people. Well guess what, the richest people have gotten a lot richer. There are more billionaires than ever. Is that a bad thing? No, I don't care. If all those billionaires gave up half of their investment profits then wages would make up a higher percentage of the gdp and no one would be ANY RICHER. Even with regards to health insurance: surveys have shown that more Americans have easy access to a doctor than Canadians, even though Canadians supposedly have that free health care. The reason is that outside of the richest areas of Canada there are huge health care shortages, and not nearly enough doctors to serve the people. So the rich either pay extra to get their doctors or come to America, and the poor get left behind. The US is one of the only countries in the world where anyone can see a doctor whenever they want.

Richer societies always have greater differentials in economic growth. The rich need the possibility to get richer or else they will take their business elsewhere.

For the 1 millionth time: I (and any other economist) will concede the fact that wealth DIFFERENTIAL has grown in the last 35 years if you will admit the fact that the average American and the average American in poverty is FAR wealthier than they were 35 years ago.

MoMo

10-06-2006, 11:08 AM

jwack, you must have read the first paragraph i posted and blipped over the rest.

i repeat:
Roughly one-fourth of all low-income families with a full-time worker has been unable to pay the rent or mortgage at least once during the past year, and the same number report being unable to put enough food on their families' tables.

In 2005, the number of Americans without health insurance increased for the fifth straight year.
---
what does that have to do with the rich being richer? how does our glut of millionaires and billionaires mean that life is better for the other 99 percent? do you not understand where their money comes from??? increasing productivity is a good thing when it comes from finding smarter ways to work. but it's good only for the rich when it comes from getting people to work harder for the same or less money and fewer benefits.

SteveU

10-06-2006, 11:38 AM

some of the nasty posts were deleted. Please be civil

patti

10-06-2006, 12:04 PM

[QUOTE=Jwaksman] The US is one of the only countries in the world where anyone can see a doctor whenever they want.

What part of the country?

exjersey1

10-06-2006, 01:08 PM

[QUOTE=Jwaksman] The US is one of the only countries in the world where anyone can see a doctor whenever they want.

What part of the country?

Maybe he means TV doctors? Even without cable there are medical shows on all the time if you don't mind reruns.

Andrew Carey

10-06-2006, 04:29 PM

http://img356.imageshack.us/img356/666/internet8hk.jpg

Jwaksman

10-06-2006, 05:03 PM

I'm on a different computer so I don't have the studies I've posted before. You can search for the previous threads. Don't pretend you haven't read them - if you've been here more than 6 months then you've seen them.

The Canadian system is notorious for major shortages. That's why there are so many Canadians that come across the border every day to see American doctors. This is the epitome of wealth differential - only those wealthy enough to travel to another country can get the health care that they need. I wonder why mzungu's incessent rants on the differences between rich & poor never cover that issue.

Jwaksman

10-12-2006, 08:24 PM

I don't want to bring back this thread (because JG's title is so obnoxious) but I thought I'd bring up a good point I heard today. We have all forgotten about dividends. The fact that the dollar price of the Dow is back to where it was before is not all that relevant because the dollar price of a stock isn't the only way to make money off it. It's true that the dollar value of the Dow has only recently gotten back to its peak from 2000. But, if you include dividends, someone who invested in "The Dow" back at its peak would have gotten his money back by November of 2004.

I've come up with two conclusions for why the media has chosen not to point this out (now OR then). One conclusion is simply that they were deathly afraid of giving Bush any credit right around Election time. Another reason is simply that the people writing stories for the AP/Reuters/etc don't understand economics. They were english majors - not math or economics majors. It's the same reason that we constantly hear about how high oil prices are now compared to way in the past, while they conveniently forget to point out that if you account for inflation then the prices of today actually aren't all that high.

Another fun example was an AP article a couple months ago about the US deficit (the link, again, is on my old computer). They were obliged to put out the article when the estimate for the deficit for this year was dropped to around $250 Billion (or whatever the number was). But then they had a line along the lines of "The deficit is expected to drop to around $200 Billion next year but it is expected to balloon to $1.7 Trillion over the next decade." Of course, $1.7 Trillion over the next decade works out to $170 Billion each year, which is actually a lowering of the deficit - not a "ballooning." Anyone with a 2nd grade math education would know that. But most people don't do the math in their head and just accept the adjectives. It's the same technique that they used last year when I pointed out the AP's article titled "US unemployment slips to ___%". Either MoMo or Herr or Mzungu tried to argue that "slips" was the proper word, but any linguist will tell you that 99% of Americans will see "slips" as "worsens".

It's stuff like that which really makes you question why the AP has such a grudge against the US economy....

Zat0pek

10-12-2006, 10:04 PM

I don't want to bring back this thread (because JG's title is so obnoxious) but I thought I'd bring up a good point I heard today. We have all forgotten about dividends. The fact that the dollar price of the Dow is back to where it was before is not all that relevant because the dollar price of a stock isn't the only way to make money off it. It's true that the dollar value of the Dow has only recently gotten back to its peak from 2000. But, if you include dividends, someone who invested in "The Dow" back at its peak would have gotten his money back by November of 2004.

I've come up with two conclusions for why the media has chosen not to point this out (now OR then). One conclusion is simply that they were deathly afraid of giving Bush any credit right around Election time. Another reason is simply that the people writing stories for the AP/Reuters/etc don't understand economics. They were english majors - not math or economics majors. It's the same reason that we constantly hear about how high oil prices are now compared to way in the past, while they conveniently forget to point out that if you account for inflation then the prices of today actually aren't all that high.

You are exactly right Jwaks.

About 2-3 years ago, I had a lively discussion with MoMo about my propostion that I would eliminate both schools of journalism and education from college campuses, and those degrees would be relgated to being minors, not majors. I would instead require degrees in the core subject, and a minor in education or journalism.

If one wants to be, say, a math teacher, one would get a math degree and a minor in education. Obviosly, this wouldn't apply to the primary grades, but it would in high school.

Ditto journalism. You want to cover economics? Get an econ degree and a minor in journalism. To cover science subjects, you would have to have a degree in physics, chemistry, engineering, etc., and a journalism minor.

Maybe I'll talk to a venture capitalist about getting some seed money to start my own news bureau using these qualifications. I have to think we could run the AP, UPI, Reuters and NY Times out of business in a matter of months. :rolleyes: ;) :D

MoMo

10-12-2006, 10:39 PM

Ummm, Mr. Bloomberg -- not a bad businessman before he became mayor -- kind of beat you to the punch, Zat, though he hasn't run anyone else out of business.

Jwaksman

10-12-2006, 11:29 PM

jersey_guy

10-13-2006, 01:52 AM

The people who OWN the newspapers are all good businessmen

Really?

http://ichart.finance.yahoo.com/z?s=NYT&t=2y&q=l&l=off&z=l&p=s&a=v&p=s
http://ichart.finance.yahoo.com/z?s=WPO&t=2y&q=l&l=off&z=l&p=s&a=v&p=s

MoMo

10-13-2006, 10:01 AM

The people who OWN the newspapers are all good businessmen (or else the children of good businessmen). The problem lies with the correspondants who are on the scene to write about situations. For example, the problem with the huge media bias during the recent Lebanon-Israeli conflict was that the AP and Reuters relied heavily on freelance Lebonese "journalists" who were almost all working for Hezbollah. The fact that the editors at these journalism establishments didn't edit these things is another issue. Or, perhaps, they did edit them heavily - which makes you wonder what the original articles looked like.

jwack, before making such patently unfounded assertions, please attempt to provide the slightest bit of evidence. if you're suggesting that those wire services were pro-Hezbollah, or anti-Israeli, that's just garbage. If some stories examined the lot of suffering Lebanese civilians -- and they were the main victims of the war -- this is simply what journalists SHOULD do. There were stories from Israel about Israeli suffering as well, but the suffering there was FAR less than what happened in Lebanon.
Please cite some AP or Reuters disptaches that you find biased, or provide evidence of a pattern of bias. Otherwise, you're just tooting out your kazoo.

MoMo

10-13-2006, 10:11 AM

Really?

http://ichart.finance.yahoo.com/z?s=NYT&t=2y&q=l&l=off&z=l&p=s&a=v&p=s
http://ichart.finance.yahoo.com/z?s=WPO&t=2y&q=l&l=off&z=l&p=s&a=v&p=s

You can be a good businessman but have a bad business model, or be passing through a difficult conjuncture of business challenges, or be out of phase with business cycles, or be suffering from high raw-resource costs (due to, say, competition from Chinese and Indian factories).

The news business has been struggling, no question about it, but a lot of thought has been given to ways to make newspapers -- or I should say journalism, because increasingly it will be shifting away from what we call the dead-tree newspaper -- more relevant, and it appears that maybe a corner is starting to be turned.

The New York Times has lost something like half its value in the last year or so, but lately, with a lot of hard and creative work on its web site, video offerings, podcasts, individually tailored news pages, live blogs of sporting events like the World Cup and the Tour de France, etc., is starting to come back up. http://marketwatch.nytimes.com/custom/nyt-com/html-companyprofile.asp?MW=http%3A%2F%2Fmarketwatch.nyt imes.com%2Fcustom%2Fnyt-com%2Fhtml-companyprofile.asp&symb=NYT

Smart people are looking for better ways for journalists to give their audience things they NEED ( http://www.poynter.org/content/content_view.asp?id=112061 ).

The L.A. Times has launched something called the "Manhattan Project," perhaps a geographically poor choice of words but one aimed at underscoring the huge ambition of throwing every creative ounce of energy they have at finding original and out-of-the-box ways to stay relevant.

And of course, the bottom line, ignored by some of journalism's most bloody-mouthed critics (I'm talking to you j_g, and jwack), is that if there were no newspaper journalism, then bloggers and television news and radio talk shows and so on would have nothing to feed their voracious maws.

It's actually kind of an exciting time for journalism, with huge possibilities --- and nowhere to go (bottom-line-wise) but
up.

Zat0pek

10-13-2006, 11:24 AM

Ummm, Mr. Bloomberg -- not a bad businessman before he became mayor -- kind of beat you to the punch, Zat, though he hasn't run anyone else out of business.

So your telling me that all of Bloomberg's reporters have degrees in the subject matter which they cover? Is that only business related subjects? I'm talking about a comprehensive news bureau.

KenA55

10-13-2006, 12:21 PM

I'd submit that the only degree that really matters gets earned (or not) out there on the beat; that the stuff picked up in the academic world particularly outside of the areas of mathematics/hard sciences all too often amounts to absorbing someone else's toxins and waste products for better or for worse.

And finally that in the final analysis for these two professions, natural and innate abilities to communicate well and in an interesting fashion outweigh any number of degrees- some things simply can't be taught, you've either got it or you don't, and if nobody's paying any attention because you can't deliver in a captivating manner then very little communication occurs.

In the end what a person understands and what they don't understand is about what they absorb in the world, not about what they're subjected to in a classroom setting and can successfully regurgitate at test time.

Zat0pek

10-13-2006, 01:14 PM

I agree with you to a certain extent, Ken.

The problem in journalism is that if you don't know the subject matter, you can't possibly know when someone is BS'ing you or what questions to ask.

I'll bet nearly everyone reading this has had the experience of hearing something on the radio, seeing a story on the news or reading something in the paper about which you have particular knowledge and you KNOW that something is wrong with you've just heard/seen/read but that the reporter didn't know the subject and didn't know what question to ask or that they were being BSed.

As a wise old mentor once told me when I first starting practicing, "It's not what you don't know that will get in trouble in a case; it's what you don't know isn't so that will kill you." What he meant, in that convoluted sentence, was not knowing what you don't know is far worse than not knowing something, but at least being aware you don't know it.

Without knowing the underlying subject matter, it is impossible, in my opinion, to cover something much more sophisticated than who Paris Hilton is currently dating effectively.

Which explains why Paris gets so much press.

MoMo

10-13-2006, 01:16 PM

Well, I agree completely with KenA.

The best reporter is the best learner -- the best observer, assimilator, student, questioner, analyzer, understander -- and not necessarily the person with the highest stack of Ph.D's.

Zat, I didn't mean to say that Bloomberg News only has degreed specialists covering everything they cover, though their specialty is business news and they do require a background in the field for those people (and their reporters covering other subjects -- the White House, Congress, whatever -- also have to pass a test proving knowledge of business, finance, etc. That's not unique to Bloomberg, but Bloomberg puts greater emphasis on the biz side.

The fact is that only the biggest and richest news outlets can afford to hire specialists to cover every area. Papers like the NY Times, the Washington Post, the Chi Tribune, the LA Times and the Miami Herald often have lawyers covering the law, doctors covering medicine, and so on.

But to take an example, Linda Greenhouse of the NYT is probably the most respected Supreme Court reporter in the country. She's won at least two Pulitzers. She gets calls from the justices themselves sometimes, so highly do they respect her analytical talents. Is she a lawyer? No. But she is a brilliant student of the law and the courts, and a brilliant explainer.

Or consider Tom Ricks, the Washington Post's Pulitzer-winning military correspondent. I'm not absolutely sure, but I don't think he was in the military. But he has been to Somalia, Haiti, Korea, Bosnia, Kosovo, Macedonia, Kuwait, Turkey, Afghanistan and Iraq -- a claim not many soldiers could make -- and been shot at and bombed, and had plenty of close calls. And if you read the following, you'll see that there are some people skeptical of his reporting, but all the current and former military men who post there show the highest respect for his knowledge, or that of someone like his NYT counterpart Michael Gordon.

http://www.washingtonpost.com/wp-dyn/content/discussion/2006/07/07/DI2006070701061.html

.

KenA55

10-13-2006, 01:19 PM

Without knowing the underlying subject matter, it is impossible, in my opinion, to cover something much more sophisticated than who Paris Hilton is currently dating effectively.

Which explains why Paris gets so much press.

LOL, great observation.

Jwaksman

10-13-2006, 03:20 PM

jwack, before making such patently unfounded assertions, please attempt to provide the slightest bit of evidence. if you're suggesting that those wire services were pro-Hezbollah, or anti-Israeli, that's just garbage. If some stories examined the lot of suffering Lebanese civilians -- and they were the main victims of the war -- this is simply what journalists SHOULD do. There were stories from Israel about Israeli suffering as well, but the suffering there was FAR less than what happened in Lebanon.
Please cite some AP or Reuters disptaches that you find biased, or provide evidence of a pattern of bias. Otherwise, you're just tooting out your kazoo.

Even you admit that the media coverage of that war was absurdly biased, right? Some of the coverage could be based on stupidity (like when a CNN anchor asked an Israeli spokesperson why, since Israel was capable of shooting down the Katyusha rockets, they were letting those rockets get through to kill Israeli citizens) but most of it is just clear bias. Assuming that most people in the media are not hardcore anti-semites (like Ted Turner is), this must be mostly attributed to the "freelance correspondants" that all news services relied heavily on in Lebanon.

MoMo

10-13-2006, 03:55 PM

I'm still waiting for some examples of SYSTEMATIC bias, not just the occasional stupid question by an underinformed anchor person.

I would also point out that it was not easy for the outside news providers to get a lot of people into southern Lebanon during
that time, because the Israeli jets had blown up the bridges and roads, and were bombing everything that moved. But that has
nothing to do with bias.

Jwaksman

10-13-2006, 04:22 PM

Wow. I'm not even going to have this conversation. I've criticized you for saying ridiculous things before, but this is 10x more ridiculous than anything before. So let's just not cross that bridge.

MoMo

10-13-2006, 05:28 PM

There's nothing in my preceding post that is not confirmed by a hundred sources (and I personally talked to at least
a half-dozen people -- Americans and Lebanese-Americans -- who had a terrible time evacuating southern Lebanon because of the Israeli bombing).
What are you denying here? The efficacy of the Israeli attack? If you're trying to imply that the Israelis did NOT
drop a lot of bombs in southern Lebanon, then you haven't even been reading the Israeli press (as I do).

This is one of your quickest retreats, I must say. I think you've lost a half-step there, jwack.