October 26, 2002
From the desk of Jane Galt:I hate to bring it
I hate to bring it up, but it's interesting, and several readers have emailed about it. Remember a couple of weeks ago when Slate had an article claiming that the stock market liked Democratic presidents? Which was cute, because the article achieved this miraculous effect by carefully choosing it's time period: 1947 on. If you'd chosen something more obvious, like say, the 20th century, you'd find that the stock market absolutely hated Democratic presidents, since it enjoyed all but one of its worst years under FDR. Or if you'd knocked out the most glaring bubble portions of the Clinton years, where it's obvious the stock market wasn't doing us any favors by rising so precipitously, you'd reverse the effect. Which is not to say that this is correct either. The data is extremely thin, and there's generally too many things going on to isolate the effect of the executive. Was Nixon a better president for the economy than Carter? Worse? Everything was so awful in the 70's, it's sort of like trying to answer that age old favorite: burn to death or freeze to death?
[The answer, by the way, is freeze. Sure, it takes longer, but at the end you get nice and sleepy and deliciously warm, as anyone who's ever had hypothermia will tell you. Overall, not a bad way to go. Burning, on the other hand. . . not so nice. But I digress.]
The article wasn't any sillier than any other sort of spurious correlation journalists pick up on to fill the barren expanse of column inches their editor demands. But it was hardly the compelling economic evidence that some lefty bloggers decided it was.
However, over very short time periods, it's much easier to both establish correlation, and do something akin to a natural economic experiment. Which is why what happened in the stock market yesterday is so interesting: as soon as word came across the wire that Paul Wellstone had died, the market turned around and started going up. It's hard to avoid the conclusion that traders were trading on the now-suddenly-higher probability of getting a Republican Senate. It wasn't Wellstone in particular; it could have been any Democrat up for re-election. But the traders clearly think that a Republican Senate will be good news for them. The timing is just too close for it to be anything else, particularly as there was no other news I'm aware of in the market.
Now, that isn't necessarily good news for us. They might have decided that they were going to get less crackdown on corporate thieves, which is not, on net, a good thing. They might have decided that this meant we were going to invade Iraq, subdue the Middle East, and begin shipping booty, women, and slaves back for the kings of Wall Street to feast on. We don't really know what it is they preferred about a Republican Senate. Hell, if my experience with traders is any guide, they probably don't know what they prefer about a Republican Senate.
But at the very least, this should teach people to stop taking every puff piece as a sterling vindication of their deeply held convictions.
Posted by Jane Galt at October 26, 2002 09:07 AM | TrackBack | Technorati inbound links