So Sam Waksal may have helped to cure cancer, but he cheated on sales tax and grossly violated insider trading rules – seven years in jail. Leaving aside that George W. Bush also appears to have grossly violated insider trading rules (he was on the three-man audit committee and sold all his holdings just days before the release of very bad news), seven years seems like a long time. I think prison was warranted, but I hope he gets out after two (and that Bush gets out after four).

Meanwhile, the Dow is over 9000 again, and people wonder whether it’s becoming safe to jump back in. Of course, for those of you who put $100 or $1,000 a month into the market come thick or thin, and plan to do so all your lives, there’s nothing to wonder about. ‘Timing the market’ is very tough to do successfully, particularly in a taxable account, and your consistent life strategy is a good one.

But note that it was six and a half years ago that Alan Greenspan, alarmed that the Dow had shot more or less straight up to 6500, and fearing a Japanese-style bubble, floated the phrase ‘irrational exuberance.’ (What he should have done, I think, in addition, was gradually raise the margin requirements, as a less subtle way of putting the brakes on uninformed speculation.)

For the Dow to have risen from 6500 to 9050 in 6.5 years is for it to have grown at 5.2% a year, plus another 2% or so for dividends – not far shy, that is, from the ‘normal’ 9% or so annual return one used to expect from the stock market. So you might say that, adjusted for 6.5 years of normal returns, the Dow is not much below the level it was when Greenspan, alarmed, made his speech.

That is certainly a simplistic way of looking at things – many people don’t know that my middle initial, P, stands for Psymplistic – and one can certainly construct the case that stocks, though up dramatically since October, are still cheap here. That case generally rests on an expectation of low interest rates far out into future . . . without the bad economic environment that sometimes accompanies low interest rates.

I feel strongly that it’s better to invest at today’s levels than at the totally crazy levels of 2000 – obviously. But that the market may be displaying a bit of the exuberance Greenspan was alluding to on December 5, 1996.

The NASDAQ quadrupled from there, so rationality only goes so far anyway, at least in the short run.

I guess my point is just that it’s safer to jump back into the market before it rises 25%, as it just has, and somewhat riskier to jump once, having risen, it seems safer.

PSMany thanks to the 1% or so of you who clicked here yesterday to help avoid four more years of Bush/Ashcroft. That’s actually not a bad response rate for direct mail – and this direct mail costs nothing. If my math is right, I just have to run this link 99 more times.


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