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October 24, 2006

Thank you to John Snow

For helping drive down the value of the dollar, so that we can all pretend we are doing well, not on the brink of economic collapse.

From Daily Kos:

Wake me when the Stock Market peaks for real.

by Nylund

A big deal has been made recently about how the Dow is now at new peaks, but people forget that the dow is supposed to go up. Over its history it should be making new peaks practically every week.

The truth is, we are now barely above where we were six years ago, and this is hardly something to be proud of. A deeper look into the numbers reveals there is even less to be proud of and that in fact, we have yet to reach the peak of 2000.

Its fairly common knowledge that the DJIA is hardly the ideal index for the market as a whole. If anything, its a quaint relic from the past with a moderate ability to express market trends. That being said, it is a number that the public understands and one that gets a lot of press. So lets take a closer look at the new peaks reached by the Dow.

First thing's first. Is it a big deal that the Dow recently broke new high's? Not really. The Dow is supposed to go up over time. As such, it should be reaching new highs all the time. In fact, its now reaching new highs every few days. On October 3, 2006, the Dow closed at a new high of 11,727.34 and people went crazy. It was the highest it had been in six years. That seems pretty spectacular, but since then, it has reached a new closing high every few days:

11,850.61 October 4, 2006
11,947.70 October 12, 2006
12,011.73 October 19, 2006
12,116.91 October 23, 2006

This is much closer to what we'd expect to see from the Dow.

Going back to the last peak six years ago, and looking at the data, you will see that it also "peaked" a week before that, and it peaked another week before that time, and a month before that, and a couple months before that, and a week before that time, and a few days before that time.

It was basically peaking ALL THE TIME, just as it is now. To hear people talk now, you'd think that the DOW has only peaked like 3 times in the entire history of the stock market. This is hardly the case.

In fact, by my count, the Dow reached an "all-time high" 76 times during the Clinton administration.

What should be noted is that under Clinton it went from roughly 3,200 to 11,722. In other words, it went up by 366%.

And now we are supposed to be impressed that in the last 6 years we've gone up around 3%?

As everyone knows, a dollar today ain't want it used to be. Even ignoring grampa's stories about getting a burger for a nickel, we all know that a dollar now is not the same as a dollar six years ago.

Inflation over the last six years has been much higher than 3%, meaning, adjusted for inflation, we still have not yet hit a new peak. to be fair, I should do the same for the Clinton years, but I don't recall inflation being anywhere near 366% during the 90's.

But even if you want to ignore inflation, all we have to do is ask the the rest of the world whether or not we've hit a new peak or not.

At the 2000 peak, the Dow was 7,162 pounds. Now, it is 6,470 pounds. In Euros, the 2000 peak was 11,570, now it is 9,656. In Canadian dollars, it was 16,881, and now its 13,666.

To the rest of the world, we are still a ways off from reaching the peak of 2000.

So has the dow really peaked, or has the dollar just become more worthless? The evidence suggests the latter.

Don't get me wrong, I'm glad to see the market making its way back up, but we still have plenty of way to go, so keep the cork in the champagne a little bit longer people, for even after six years we're really not back to where we once were.

Even Chris Matthews gets it:

Many of us cheer as the bell rings 12,000 on Wall Street. But we know there are millions for which that bell doesn't toll. In a new Wall Street Journal poll, a huge majority of Americans say the stock market's new heights have had no effect on them. Eighty percent of the work force find their paycheck barely keeping up with inflation. These are the economic strugglers out there who worry not just that they can't get ahead, but they can't hold on.

You see their despair in what Democrats are promising voters this year: an uptick in the minimum wage, a promise to leave Social Security alone, a new Medicare drug deal, and government protection of pensions. You feel it in Democratic promises to use subpoena power to probe no-bid government contracts to Halliburton, the giant corporation once headed by Vice President Dick Cheney. To punish the oil companies for price-gouging. To probe the secret meetings with the energy executives. And to freeze Congress's own pay until it raises the minimum wage.

It's a far cry from the optimistic 60s, when Jack Kennedy told us, `A rising tide lifts all boats.' [...] The Democrats are saying we're not all in this together---the bells ringing on Wall Street may be clanging for those at the top, but hardly for everyone. The mid-term election results will tell us if voters agree.

-From The Chris Matthews Show

Posted by Mike at October 24, 2006 02:06 PM

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