Me? I was a captive in a giant bubble with a giant flat-screen TV blaring anything that came into the heads of the intrepid CNBC news team. We floated high over Manhattan and the busy waters of the Hudson, where ships, paying no attention to a woman looking desperately for the on/off button, sailed calmly by.
I tried not to look at the high definition images; but I couldn’t resist. Which was more obscene, I wondered: The perfect hair or the way the talking mannequins handicapped the Dow like a horse race? Or is it that the Dow is skewed for success? The index of 2009 is nothing like the Dow of 1999 or even the 10,000 Dow of October 2008 — which included the now discarded Citicorp, AIG, and General Motors?
What exactly is it that everyone is cheering? That Dow Jones had the good sense to ditch losers? There was a nod on CNBC to pain and joblessness — 15 million and growing. But after doffing its hat to the pain of the unemployed, the cheering resumed: A toast to the future! A sigh of relief for the able-bodied survivors of the economic smash-up.
From a bubble close to the sun, glare creates unexpected blindspots: it’s easy to miss both the plane coming at you and the details way below. But it should be quite obvious that this milestone is pretty bogus unless you are a momentum or day trader, in which case you are REALLY happy. I think of this Dow 10,000 as the “let’s pretend rally.” Let’s pretend Citicorp isn’t a ward of the United States, that AIG isn’t the biggest boondoggle in the history of financial screw-ups, or that General Motors didn’t cost taxpayers a dime. Let’s pretend that we aren’t still facing massive defaults on mortgages and credit cards. Let’s pretend that, say, if you’re a European investor that the value of your investment in the past decade isn’t down 25%- 30% with an unchanged Dow index because the greenback is, how shall we say, not even on the rez-de-chaussee and could soon be sharing a cold water flat with the Zimbabwe dollar, once home to more trillionaires than the Weimar Republic.
The blonde CNBC babe jabbering away on the floor of the New York Stock Exchange doesn’t seem to be focusing on those things — although to be honest I really wasn’t listening to what she was saying because to my amazement I thought she was showing some cleavage. Now I don’t normally notice women’s breasts. But somehow I thought, oh, great, there’s progress. In the course of ten years the Dow goes in one big fat circle and what the hell is she wearing? And then she starts to interview these two super-sized galoots in gray suits who tower over her buxomness. And I’m thinking, yeah, those guys are really focused on Dow 10,000; they’re staring down the next big milestone.
You know, the problem all starts with our assumptions. Ask any economist or derivatives wizard creating their models about that! So let’s look at the assumption that is the basis for our joy at this glorious moment of the deca-millennial Dow. It’s always called a leading index. But with all the dollars sloshing around the financial system looking for a home, there’s more than one or two people who think this whole rally is just a central-bank induced run-up. Maybe the Dow isn’t a leading indicator anymore; check out this chart that challenges that notion as well.
Just as I’m reviewing all my old assumptions while floating in my bubble, I notice that the CNBC cameraman has pulled back on the buxom business reporter revealing that… she has a huge baby bump. The girl is hormonally enhanced. She can’t help being over-the-top voluptuous because Mother Nature has sprinkled fairy dust all over her and now I think someone should be offering her a seat. What’s wrong with those galoots?
As my day winds to an end, the Dow kisses 10,000 and I miraculously board an elevator equipped with a pint-sized news screen (Weather: Sunny, not wet! The Dow dries our tears!) and then glide across marble floors toward the subway. Just before the exit, I pass a small, elegant restaurant. It’s no longer lunch, not yet dinner. The waiters snap open fresh white linen clothes and spread them on empty tables. Cobalt water bottles and elegant vases grace the recently changed tables. The sun sparkles. It’s a Dow 10,000 kind of place. At a riverside table two middle-aged men in dark suits linger; the one facing me wears a yellow tie. He is smiling, still good looking; jowls barely noticeable. A waiter appears with a bill in a leatherbound book. His friend reaches for the check. “Oh, no, no,” the fair-haired executive seems to say. His friend vigorously shakes his head. The fair-haired executive concedes but indicates that next time, lunch is on him.
And then, I imagine his dining partner countering: “Don’t worry about it. It doesn’t really matter. The taxpayer will pay. Every time.”
Bon appetit. And felicitations, Dow. Quite a splash.
Art: Musees royaux des Beaux-Arts de Belgique, Brussels