THE PRICE OF STOCKS
The market is at record highs (sort of), and this is good. But in a world where most companies pay out little in the way of dividends – reinvesting their profits and/or using them to buy in their own shares – you’d sort of expect highs sooner or later. Even a 5% savings account will hit new highs every year.
Basically, as you know, the market got ridiculously overvalued in the late Nineties, peaking in early 2000, and has taken the last six years to catch up with itself.
But it’s not as caught up as it may appear.
Yes, the Dow has fully recovered – in dollars. But in euros, it is still only three-fourths what it was in 2000 – because back then a dollar bought 1.03 euros, whereas today it buys only about .78 of a euro. So to an Italian or a German or a Swede (do the Swedes use euros? I’m on the train, and I can’t remember), the Dow is about 25% lower today than it was six years ago. To a Canadian (I know they don’t use euros), same thing. In 2000, one of our dollars was worth $1.46 of theirs. Today, $1.12.
When the Dow peaked in March of 2000, it took roughly 40 ounces of gold (at $290 an ounce) to buy one unit of the Dow at 11750 or so. Today, with gold roughly double, a unit of the Dow is worth just 20 ounces.
And that’s the Dow.
The S&P 500 hit 1527 on March 23, 2000. Last night, it closed at 1353, or about 11% lower (or, in gold terms, less than half its value six years ago).
The NASDAQ hit 5048 on March 10, 2000. Last night, it closed at 2306, down 54% six years later in dollar terms, down 65% against the euro, down 77% versus having kept gold in a chest in the shed. (Who would think to look in a chest in the shed? That’s where I keep all mine.)
That the market is still not back to where it was in 2000 is good if you are a buyer, and good if you are no fan of overvalued markets (fearing the consequences when they return to earth).
The author of Dow 36,000, at which I poked a little fun when it was published seven years ago, still has a while left to wait.
And if the housing slump turns into a vicious cycle – dampening consumer spending, causing recession, dampening home prices and spending further, even as it sends the budget deficit sky-higher – it might be a long wait.
THE PRICE OF OIL
A couple of weeks ago, I remarked on the great good luck of the Republicans (and thus of the oil companies and Saudis who want to see President Bush’s power continue unchecked by a Democratic Congress) that the price of gasoline has plunged just in time to make voters happy for the election.
Now comes this post, adding a bit of color to the conjecture. In part:
From Walter Shapiro’s Salon review of State of Denial by Bob Woodward:
[…]It is not accidental that “State of Denial” begins with a reprise of the Bush family’s intimate relationship with a former Saudi ambassador to Washington, Prince Bandar. At the instruction of his father (Bush 41), Bush (soon to be 43) met with Bandar in 1997 and confided, “I’m thinking of running for president … And I don’t have the foggiest idea about what I think about international foreign policy.” You do not have to be a Michael Moore-style conspiracy theorist to find it worrisome that a Saudi prince is put in charge of giving a future president his worldview.
Bandar, who may now be much more willing to go public with Woodward since he has returned home to Saudi Arabia, keeps popping up in the narrative in chilling ways. The administration’s infamous rendition policy … may have begun shortly after 9/11 when Bush told Bandar, “If we get somebody and we can’t get them to cooperate, we’ll hand them over to you.”
The book also describes Bandar’s Oval Office meeting in early 2004 with Bush, Condi Rice (then the national security advisor) and White House chief of staff Andrew Card (another source, since he has now left the administration). Bush, Woodward writes, “thanked Bandar for what the Saudis were doing on oil — essentially flooding the market and trying to keep the price as low as possible. [Bush] expressed appreciation for the policy and the impact it could have during the election year.” Read on…
Woodward says that Bandar understood that economic conditions were key before a presidential election: “They’re [oil prices] high. And they could go down very quickly. That’s the Saudi pledge. Certainly over the summer, or as we get closer to the election, they could increase production several million barrels a day and the price would drop significantly.“
THE PRICE OF FOLLY
Mike Wallin: “Rep. Foley resigned (as he should have long ago). But why are people calling on the Speaker to resign? Is the Speaker supposed to keep track of EVERY member of his party?”
☞ I should probably let Bay Buchanan take this one – she’s the scarily conservative sister of conservative Pat Buchanan, and has been calling forcefully for Hastert’s resignation. But let me take a stab at it:
No, the Speaker is not supposed to keep track of every member of his party (or every member of the other party – he is Speaker of the entire House, so far as I know).
But if he gets information that a House member may be acting inappropriately with the pages, at that point he is expected to take a sharp interest.
And, finally, this, about Fox’s identifying Foley as a Democrat (he is a Republican):
I can understand if FOX and The Factor made an error the first time, but to post it repeatedly should be a firing offense, The most watched show on FOX News has now labeled the former Republican Congressman Mark Foley, who is in the middle of a sexual predator scandal that has Hastert’s career on the ropes – a Democrat. Was it an error or done by choice? I report – you decide.
Quote of the Day
A penny saved may be a penny earned, but it's one boring penny. A penny invested, on the other hand, bounces around. It gets bigger one day, smaller the next. A bit player in the drama of global finance, that penny buys a guy a balcony seat in the theater of macroeconomics.~Susan Stewart
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