I think it’s kind of amusing for the media to jump all over the Dow crawling its way above 11,000 without noting that under the Bush administration the market is at about the same level the Clinton administration left it at. I’m also waiting for all of those armchair economists on the right who swore up and down a week ago that the Dow didn’t matter to know explain to me that it does matter because… er… well… Bush!
The president doesn’t have a magic wand that he can wave over the markets, but I’m willing to admit that the sound fiscal policy we had under Clinton (cutting taxes for the middle class, eradicating the debt) had something to do with the unprecedented economic expansion of that era.
On the flip side cutting taxes for Paris Hilton, Bill Gates, Ken Lay and Tom DeLay has done essentially nil — and the deficit has returned with a vengeance.
Remember the movie ‘Runaway Train’?
Except for the snail pace, it could describe the american economy.
There really isn’t anyone at the controls. Switch men can avert
greater disasters by diverting it off to a spur, but a crash is
inevitable.
Borrow, borrow. Spend, spend, is not just describing Congress.
It is the american public who have been driving this economy by
running up multiple credit cards and ratcheting up their mortgage
with re-fi cash-outs and equity loans to buy the ATV and the
speedboat.
What has been driving the economy is the flow of durable goods
which slowed creating sphincter puckering in 2001. New housing starts
and the demand for disposable-income type toys has been fueling
the growth which has been attended by less joblessness since
people are what move the durable goods through the pipeline.
But as interest rates rise and the new housing starts slow….watch out.
The piper will be paid. Just like Wall St jollied their way through
the dot.com boom which was based on smoke and mirrors, we’re
all positive-thinking our way to perpetual optimism about an economy
that will not have a happy ending.
sorry for double post. tried to circumvent the !@@##%%^$*&&%^&&^
MODERATION!
“The president doesn t have a magic wand that he can wave over the markets, but I m willing to admit that the sound fiscal policy we had under Clinton (cutting taxes for the middle class, eradicating the debt) had something to do with the unprecedented economic expansion of that era.”
The explosion of the internet and communication technologies are what drove the markets (especially the NASDAQ) during that time. And it was certainly a lot of smoke and mirrors as Leo suggests. Companies like Yahoo and Amazon saw their IPO’s sky rocket even though they posted no profits quarter after quarter. It was all speculation and couldn’t sustain itself. It started to unravel late in Clinton’s term. It wasn’t his fault and it isn’t Bush’s fault that the economy was already heading toward a recession before he took office. Couple that with 9/11, the Enron and Worldcom scandals and seriously overvalued stock prices and investors decided it was time to get out.
I don’t know about anyone else here, but my retirement account is still up about an average of 10% a year since Bush took office. 2000, 2001 and 2002 were bad, but things have rebounded nicely since. I made 38% in 2003, 14.5% in 2004 and about 11% in 2005.
Oliver:
FYI…the DOW includes 30 stocks. Although it is touted by the media on a daily basis, it is only 1 small barometer of the overall market. Financial types rely on the S&P 500 and the Russel 2000 as benchmarks for performance evaluation more than the DOW. People that have taken the time to educate themselves about proper diversification and asset allocation principles are doing just fine. Get yourself some financial education so you don’t keep spouting this same nonsense every few days.
The expansion during the Clinton era was much more than some dotcoms on the NASDAQ, though that was the most visible element of it. Yahoo and Amazon are now profitable, long-term companies. And any index is a snapshot of the market (I, for instance, am invested in the S&P 500) but you’re do the embarassment to yourself if you pretend that the Dow has no bearing on the market (as well as the Dow’s effect on how people invest in the larger market).
“no bearing” is different than “1 small barometer of the overall market”
I won’t repeat myself any further since the last time you pretended you understood the financial markets other than to say anyone who has a basic knowledge of investment principles has a diversified portfolio and has done nicely during the past few years.
What in the world does “Soft Bigotry” have to do with the subject of this post?
cutting taxes for the middle class?
Is that what you called his FICA increase, the largest tax increase in the history of the world?
Is that what you called his FICA increase, the largest tax increase in the history of the world?
The truth is revealed — Frank must be one of two things:
1) A liar.
2) An alien from the planet Tcolph’thek, the only world where this was the largest tax increase in the history of the world.
Since Bill Clinton probably couldn’t sign legislation that affected Tcolph’thek, I’ll pick the former, though if I adjust my tinfoil hat, I can pick up the NASA transmissions of the cooking procedures of captured Iraqis to the Tcolph’tekian ambassador.
The highest bracket for income tax (35%) begins at $326,450 for 2005. You’re leaving a few people out of your list (roughly 5% of taxpayers).
DLG — Don’t be such a jerk. I know the Rich People’s House passes revenue bills, but William Jefferson Davis Clinton wanted this one, and signed his approval. That makes it “his” in my book, unless you’re suggesting there was no FICA Tax increase.
The expansion during the Clinton era was much more than some dotcoms on the NASDAQ, though that was the most visible element of it.
You once again compared the DOW to what it was under Clinton and Bush. The fact is, the huge rise in the markets during the 90’s was in large part due to the dot.com frenzy. Much of it was overvalued as Sam pointed out. So once AGAIN, you’re pointing out a pointless fact about where the DJIA is now as compared to where it was when Clinton left office.
Yahoo and Amazon are now profitable, long-term companies.
That doesn’t change the fact that their stock was overvalued. Yahoo hit a price above $400 a share at one point. This from a company at the time, that didn’t have any revenue stream beyond advertising. Amazon didn’t start making money until they branched off and starting selling more than discount priced books. Their stock too, was way over-valued.
And any index is a snapshot of the market (I, for instance, am invested in the S&P 500) but you re do the embarassment to yourself if you pretend that the Dow has no bearing on the market (as well as the Dow s effect on how people invest in the larger market).
The problem is, you keep implying the DJIA is the be-all end-all of the market when it isn’t. You’re also ignorantly attempting to give the impression that because the market as at the same level it was 4-5 years ago, that people couldn’t have done well with their portfolios.
The Clinton economy was marked by a huge increase in venture capital, most of it earmarked by investors who didn’t know the Internet from a Dragnet. Don’t pretend it didn’t happen. Huge office buildings were being leased here in Atlanta by new Internet based businesses with venture capital and none of them had sold or even produced the first widget. Now all of that is gone. Nevertheles, Clinto gets credit for that good economy, but Bush deserves a lot of credit for maintaining a strong economy without the benefit of the Internet bubble (though one could argue he has NOW been helped by the Katrina recovery).
Dugger, Thats The Way it Is
If anybody wants to see some interesting insight into the dot.com era, they should rent ‘Startup.com’ because it’s a true reflection of what happened with so many companies in that era:
1. Young people with big ideas they thought would work because it was on the Internet.
2. Venture capital firms willing to basically throwing money at almost any idea (I’ve read some of the actual business plans for some of these dot.com’s and they were a joke)
3. Young people with big ideas who have no clue how to run a corporation (28 year old CEO’s, CFO’s and CIO’s).
4. From a small group of people at the start, (Govworks.com the company in ‘Startup.com’ started with 8), to an explosion of growth (Govworks had 250 employees at their zenith), to bankruptcy (Govworks was eventually sold to a competitor).
It’s not fair to say that the dot.com bubble was responsible for all the economic growth. It was however, largely responsible for numbers that simply too unrealistic to survive such as the high stock prices and unemployment rates of 3.5%.
Let’s also remember that part of that “sound fiscal policy” was driven by the GOP (a time when divided government was a good thing). Clinton’s first broken promise were tax cuts for the middle class. His tax cuts later on were politically necessary. Also, Clinton didn’t “eradicate the debt.” He didn’t even come close. The reduction in the deficit was largely driven by record tax receipts fueled in part by the dot.com boom.
Oliver :
“The expansion during the Clinton era was much more than some dotcoms on the NASDAQ, though that was the most visible element of it. Yahoo and Amazon are now profitable, long-term companies. And any index is a snapshot of the market (I, for instance, am invested in the S&P 500) but you re do the embarassment to yourself if you pretend that the Dow has no bearing on the market (as well as the Dow s effect on how people invest in the larger market).”
1. Since the expansion was much more than the NASDAQ run-up, perhaps you’d like to explain the specifics of that.
2. Yahoo and Amazon are NOW profitable companies but were not at the time of Clinton. Mr. Greenspan was referring to companies like these when he warned us of “irrational exhuberance” in the late nineties. He was right.
3. Nowhere did I say that the DOW was not a snapshot of the overall market and nowhere did I “pretend” that the DOW has no bearing on the overall market. What I did state was that the media puts too much emphasis on it. Smart investors don’t.
4. The S&P 500 is an index of large company stocks. Since you didn’t state otherwise, I’ll assume that’s the only place you invest. If you know anything at all about investing, you would also allocate your money to other indices as well. At your age, you should have a good portion in mid and small-cap funds as well as a strong position in international markets. You should further breakdown your allocation into “value”, “growth” and “income” stocks and funds. You could also have some exposure to the investment grade and high-yield bond markets, although at your tender young age, it should be minimal, if at all. And you may want to do some research and seek out funds that consistently beat the S&P and do it with less risk. There are plenty of them out there.
5. As you suggest, the DOW does have an effect on how people invest in the larger market. Mainly by people who don’t know too much and are running late to get on the train. But at least be honest and admit that the NASDAQ fever had the same effect in the nineties. Unless you want to keep embarassing yourself.
How well I remember that commercial about the vaguely hippie-ish dotcom business people who just set up their business and they had an order clicker and it clicked one and they cheered. Then 2, then 10, then 1000 then 10,000 etc (see, computer magic) and at that point they needed the supportive services of the commerical sponsor – maybe FedEx or UPS. That epitomized the attitude then towards the Internet business market: exponential magic-like business growth. The problem isn’t the market or production or making a profit, merely shipping for the tens of thousands of instant orders. Brick and mortar? What was that? That mindset truly did drive a decent portion of the Clintonian economy.
Dugger
“Hippie-ish”?
Why, those are Small Business Owners! The captains of economic growth! The beleaguered middle class, worshipping at the alter of Republican Tax Cut policy!
Funny how when they’re part of the “Clinton bubble” they suddenly become “hippie-ish”!
Haw.
According to SSA http://www.ssa.gov/history/pdf/t2a3.pdf
The FICA rate has been at 7.65% since 1990.
Did Clinton sign that retroactively, or did he time travel?
JustJohn: You were looking in the wrong column. Appropriately enough, the column to look at is on the far left.
Try again.
Clinton also raised the portion of Social Security benefits subject to taxation from 50% to 85%.
Also, check footnote “e” in the second column from the left.
Quaker,
Many times actually reading and considering those “-ly” words before another word will greatly enhance your reading pleasure (and I just know it is a pleasure reading my posts).
And yes they looked vaguely hippie-ish, in a Maynard G Krebs sort of way, to my admittedly conservative eyes. Scruffy, long haired, unshaven, slightly dilated pupils (but, in fairness, no bongos or expresso to be seen, man).
Dugger, Vaguely Liberal
Largest tax increase “in the history of the world” Frank?
Clinton was a piker:
The crown belongs to the king of the small-government borg, Mr. Reagan.