Memo To: Louis Uchitelle, New York Times
From: Jude Wanniski
Re: The Rising DJIA
Your Sunday "Week in Review" article, "What Goes Up May Keep Going Up," takes an interesting approach to the DJIA hitting 9000 last week. You call up the bears -- the "Cassandras" -- and ask them what they think. My goodness, you even drag out Henry Kaufman, among the most celebrated bears of our time, who informs you he is unwilling to succumb to the optimism and has lightened his own stock portfolio. Says Henry: "We are in a financial mania where emotions overwhelm rational thinking," Now Louis, Henry began lightening his portfolio in 1982 when the Dow was under 1000, on the grounds that the federal deficit was out of control because of the Reagan tax cuts and runaway spending. Lo and behold, Fed Chairman Paul Volcker then did exactly the opposite of what Henry said he must do. He printed money like mad in order to prevent an international financial collapse. The stock market boomed, but so did the bond market! This was not supposed to have happened! The Keynesians had insisted the Reagan tax cuts would be inflationary and the monetarists had insisted the Volcker monetary ease would cause a collapse of the bond market. The only people around who were saying Reaganomics would work were the supply-siders, Louis. You know, like Polyconomics.
So here you are, dusting off your old Rolodex, and finding Peter L. Bernstein, another Keynesian Kassandra, who enlightens your readers by saying "the real reason [the market is rising] is that there is no compelling reason to sell." Hey, wait a cotton-pickin' minute? Are you going to let Peter get away with that? He has written more books about the markets in the last 50 years than you can shake a stick at and the Times has sung their praises, one and all, especially when he denounces gold and celebrates fiat money. Why didn't you ask him why he missed this bull market from start to finish? In fact, Louis, why didn't you ask yourself why so many of the most celebrated economists on Wall Street have missed the bull market from start to finish? That might lead you to ask how come the supply-siders — especially Polyconomics — have been on top of this bull market all the way.
Instead, you have located a "bull," Byron Wien, at Morgan Stanley, Dean Witter, Discover & Company. And you tell us that he thinks that at 9000, stocks are overvalued. Some bull. Now, c'mon Louis. You know Byron spent all of 1996 and 1997 predicting a collapse of the stock market. He became a temporary bull out of sheer embarrassment. Or maybe the coin he tosses at Morgan Stanley, Dean Witter, Discover & Company came up heads. (Is that really the name of the place where he tosses his coin? Why don't you just abbreviate it to MSDWD&Co ? It would save a lot of trees and ink in the years ahead.)
By the way, Polyconomics on January 2, 1996, predicted the Dow would hit 6000 during the year. On the same date in 1997, we said the Dow would hit 7800. As 1998 began, we said the Dow would hit 9000. Each and every time we gave our reasons. They had to do with taxes and money and politics and risk-taking. They are reasons you don't like, I know Louis, but they sure do work