Editore"s Note
Tilting at Windmills

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October 14, 2009

THE FLEETING SIGNIFICANCE OF WALL STREET BENCHMARKS.... House Minority Leader John Boehner (R-Ohio) was asked by reporters this morning if the Dow Jones reaching 10,000 points today has any significance.

Dow 10,000 just isn't that big a deal, House Republican leader John Boehner said Wednesday morning.

And anyone who places significance on the stock market hitting this symbolic number is "certainly not talking to the American people." [...]

"The American people understand that unemployment is almost at 10 percent, they understand that they might be next so there are concerns about the economy," Boehner said.

Oddly enough, I agree with this. The value of Wall Street indexes is hardly the best metric for measuring the strength of the economy. Dow 10,000 is just a symbolic milestone.

But while Boehner's remarks seemed fair this morning, I can't help but recall that Republicans weren't nearly as thoughtful earlier this year.

Over the first seven weeks of the Obama presidency, the Dow Jones Industrial Average, just one of many Wall Street indexes, dropped from 7,949.08 to 6,547.04. A wide variety of conservatives said this was necessarily evidence that the White House's economic policies were a mess, if not an outright failure, and that the president didn't know what he was doing. The Wall Street Journal ran an entire editorial on this in early March. The drop in the Dow, the WSJ insisted, was a direct result of investors evaluating "Mr. Obama's agenda and his approach to governance."

Karl Rove and Lou Dobbs made the same case. So did Rush Limbaugh, Sean Hannity, and Fred Barnes. It was one of Mitt Romney's favorite talking points for a while, too.

If the president's conservative critics were right in March, the recent upswing is necessarily evidence of a sound White House economic agenda, and the WSJ editorial heralding President Obama as sort of financial genius should run any day now.

Of course, using the markets as some kind of financial approval rating for the administration is foolish, and what Boehner said this morning was entirely reasonable. It's a shame, though, that Republican sensibilities shift so dramatically with the winds.

* Update: Several emailers remind me that Boehner though stock prices were far more relevant when he could use them against the White House.

Steve Benen 2:40 PM Permalink | Trackbacks | Comments (15)

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hey bonehead -- you jerk -- about a employment reform bill that guarantees employment in the united states?

Posted by: neill on October 14, 2009 at 2:50 PM | PERMALINK

Many of the factors leading to last year's crash are still in place, so the upswing in the Dow may be temporal, especially if other indicators like unemployment continue to rise.

Posted by: qwerty on October 14, 2009 at 2:54 PM | PERMALINK

Why is it that Boehner always seems to be downwind from a fart?

Posted by: stevio on October 14, 2009 at 2:56 PM | PERMALINK

Well it is symbolically important simply because of Republican projections back in March.

On Angry Bear, where I do some front page posting, my Right wing commenters were confidently predicting that Obama's policies would lead to unemployment double that of the highest point of Bush and that the stock market would settle out to 4000 and below. Well unemployment double that of Bush would mean 15.8% and even Dr. Doom-Roubini isn't going that far and the stockmarket is now six thousand points ahead of my commenter's schedule. I said a few months ago that while it didn't make much real world sense whether unemployment hit 10% before or after the Dow hit 10,000 that it was psychologically important. There are a lot of people whose 401k's were in deep shit in March who are breathing a little easier today, because under the kind of odd way we measure wealth Dow 10,000 means a lot more 'money' in the 'bank' than Dow 6,000 or Dow 4000.

I am not being pollyanna here, 'foreclosure' and 'bankruptcy' are looking to be more than just words in the dictionary for me in the next few months (altho Mega Millions is up to $160 million, so who knows), but if a five digit Dow adds a couple of points to the Consumer Confidence number that is all to the good.

So I'll go with 'fleeting' and 'temporary' and even 'reversable' but I can't get all the way to 'insignificant'.

Posted by: Bruce Webb on October 14, 2009 at 2:58 PM | PERMALINK

Well, at least Boner is doing his part to make certain the Orange-Glow Super Bronzer factory is going to stay in business no matter what!

Posted by: Galloping Trollop on October 14, 2009 at 3:04 PM | PERMALINK

The only thing Dow 10,000 signifies is a weak dollar. Unemployment is a trailing indicator and is not a reflection of where the economy will be next month.

Bruce Webb: I feel your pain. Best of luck to you in the coming months.

Posted by: Gridlock on October 14, 2009 at 3:08 PM | PERMALINK

Although the Dow doesn't portend job gains and it is clear that the financial situation remains precarious, the upside for some of us who are approaching retirement is that we have made up some losses in our 457 accounts. Of course, now the rub is managing them effectively. SO I wouldn't characterize the increase in the Dow as all negative.

Posted by: DTR on October 14, 2009 at 3:46 PM | PERMALINK

The guy whose head must be constantly exploding is Larry Kudlow. Not only was he one of those indicating that the market was going down because of Obama, since March he has been cheerleading for the market to go higher and at the same time constantly criticising each and everyone of Obama's policies. His latest deal is that as good as the market has been, it is only a matter of time before the chickens--deficits-- come home to roost as the dollar loses its standing among other currencies. With respect to Bruce Webb who knows a whole lot more about this than I do, I think market performance is very important because most voters in this country can follow the market but their eyes glaze over when we start talking about GNP, business cycles, lagging indicators etc. As one of Bruce's front page cohorts at Angry Bear pointed out some time ago if we look at any of these measures of economic growth since the 40's it is apparant that the economy fares much better under Democratic presidents than Republican presidents. It can be viewed as coincidence, bad luck for Republicans, but the data is there. Now selling that to the general public is like teaching them algebra. On the other hand they will buy into the Dow lost 3000 points while Dumbya was president for 8 years and has gained 3000 points while Obama was pesident for 8 months. That becomes significant when Republicans keep arguing for supply side economic remedies while Democrats argue for addressing some of the underlying structural problems including inadequate demand, growing income inequality, a health care system which discourages the efficient allocation of resources and entrepreneurs, an energy policy which not only could ruin the planet's climate but is unstainable etc. As to the weak dollar propping up the market as Gridlock suggests I do not see the logic. The weakening dollar should help exports and make imports more expensive. While it would allow foreigners to buy up dollar assets more cheaply including equities, most investors are seeking return and if the belief is that the dollar is on a straight downward trend, foreign money would stay away. What good does it do to get a 25% nominal return if the ability to buy oil, gold, copper, pounds ,yen or euros has decreased by 25%? The same holds true for US investors. Better to get a 5% nominal return in the Japanese market and tack on another 20% currency change than get 25% in the US market. Now if we were talking inflation I could buy the argument except that inflation really isn't rolling along at the moment. If Gridlock's argument is that the market is not controlled by investors, but by traders and speculators that too could make sense. The naked notion that the market is up because of the weak dollar, is not, however, convincing.

Posted by: Terry on October 14, 2009 at 4:01 PM | PERMALINK

No positive news reflects in any way on Obama, and no negative news does anything but, and it's always good news for the Republicans.

Posted by: Headline with a shelf life on October 14, 2009 at 4:03 PM | PERMALINK

I wish someone would explain to Boner that he can easily find out by state how many jobs the stimulus has created or saved, seems like every time I see him on TV he keeps asking 'Where are the jobs?' I would love for someone to tell him!

Posted by: JS on October 14, 2009 at 4:05 PM | PERMALINK

-let's REALLY piss off the Right, and get Obama the Nobel Prize for Economics. . .

Posted by: DAY on October 14, 2009 at 4:34 PM | PERMALINK

"Of course, using the markets as some kind of financial approval rating for the administration is foolish..."

Well except for the people who have their retirement savings invested in the market, or any portion of their wealth in the market.

Sorry to disagree with everyone, but this is huge. What they should have asked Boehner (pronounced boner) is how much he had made in the market since Bush left. All those asshats have buko dollars and they are all investing, so for them to claim "this don't mean jack", is truly delusional.

I for one am damn glad to recuperate some of the losses taken the last year of Bush. The market has grown at a rate that is truly remarkable. Remember all the dittoheads reporting how much money was lost, where are they when it comes to reporting how much money is being made on the run ?

Posted by: ScottW on October 14, 2009 at 4:44 PM | PERMALINK

I'm with ScottW. The value of people's 401K plans are often tied directly to the stock market. If you were smart enough not to sell last March, or even better if you were smart enough to buy, your retirement is starting to look a lot better.

The stock market is based on expectations of the future and is a leading indicator. Given its solid performance lately better times are probably coming.

Posted by: Pug on October 14, 2009 at 5:57 PM | PERMALINK

The financial "industry" has recovered to the point where they're making money hand over fist -- again. The rest of the country is barely making it (if they are at all).

If the Republicans really had their act together, they'd exploit this against the Dems, because it's pretty clear that they care more about their friends on Wall Street than the voters on Main Street.

Fortunately (for lack of a better word), Republicans don't care about voters on Main Street either & this line of attack doesn't seem to have occurred to them.

Posted by: zhak on October 14, 2009 at 6:27 PM | PERMALINK

The naked notion that the market is up because of the weak dollar, is not, however, convincing.-Terry

Gridlock is right. Terry, you seem to be confusing wealth and money. Most of the "gains" in the market between 2002 and 2007 measured as "points" on any given wall street index were largely due to the slide of the dollar against other currencies. By the Dow yardstick over that time period, 6,500 points worth of "money" was created. Surely your not suggesting, however, that we nearly doubled our collective wealth in that time?

What good does it do to get a 25% nominal return if the ability to buy oil, gold, copper, pounds ,yen or euros has decreased by 25%? The same holds true for US investors.

Clearly your not an investor, because that's exactly why they buy commodities. In large part, commodities are often bought as a hedge against projected inflation or weakening currency.

You are right, inflation has yet to hit, but gridlock is right that the dollar has slid significantly over the past several months. The two are not mutually exclusive, and both can happen at the same time or interdependently. Right now, much of the "gains" we're seeing are just the kabuki theater that Wall Street likes to play.

Posted by: about time on October 15, 2009 at 9:59 AM | PERMALINK
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