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The big news this week is on Wall Street, where stock traders have been enjoying more cheap highs than the road crew at a Cypress Hill show.
Most nights, the TV newsmodels proudly recite the Dow Jones Industrial Average like a winning sports score, accompanied by video footage of excited bald guys in Brooks Brothers suits messing up each other's combovers.
You're supposed to think happiness on Wall Street is good news for the rest of us.
It's not.
Last week was a good example:
There's this thing called "momentum investing." Simply put, it's buying into whatever stock is going up really fast, assuming there must be a good reason, and trying to get back out before everybody else realizes there isn't.
Momentum players cause enormous temporary price gains, which in turn attracts more cash into the casino. People who think of themselves as too smart for the lottery pour their IRAs into mutual funds, and if there aren't any bargains, fund managers still have to put the money somewhere. So even some truly lousy stocks are still going up, and most folks are pretty happy.
That's why private companies like the Boston Celtics, Ticketmaster, and Super Wash (the car wash chain) are rushing to go public: people are simply willing to pay more for their shares than they're probably worth.
(Somebody explain the growth potential here: Ticketmaster isn't any more likely to double the capacity of concert halls than the Celtics are to begin franchising. And as for Super Wash, do you really want to sink your life savings into a company you can replace with a garden hose, a bucket, and a damp rag?)
The skyrockets make a pretty show, but by most historic pricing yardsticks -- earnings, yield, book, etc. -- the stock market is looking at about a 15 percent drop just to reach a relatively normal value. That's about 1000 Dow points from here.
Yaaaaa.
That won't necessarily happen right away, if at all. Maybe prices will hold for a year as earnings catch up; maybe kablam tomorrow. Maybe three more years of tulipmania, and then we party like it's 1999.
Anyhow, Federal Reserve Board Chairman Alan Greenspan, who speaks like an undertaker trained in hypnosis, made a single small mention last week of "irrational exuberance," hinting that stock prices might be approaching speculative levels.
(Greenspan went on to theorize that cheese comes from cows, bowling balls roll, and [Millenium] is such turgid crap you wonder why [The X-Files] is any good.)
Boom. Worldwide panic selling. 130 points off the Dow in 30 minutes.
Why all the fuss? Greenspan and the Fed can deworm the tequila at will by raising interest rates a notch or two, which makes money itself more expensive and discourages speculation.
That would hurt business at the Harrah's on the Hudson.
Traders calmed down quickly, however. Some good news came in.
Read this next with bitter irony:
Fortunately for investors, "the Labor Department reported early Friday that non-farm payroll jobs grew by just 118,000 in November, and the nation's unemployment rate rose to a four-month high at 5.4 percent. The two figures suggested that the economy is slowing down, allaying some fears about rising interest rates."
Read that paragraph -- which comes verbatim from CNN -- again. Go on. You glazed the first time. Read it again.
To Wall Street, low job growth and surging unemployment are [good news], because the Fed is forced to keep interest rates low so the faltering economy won't flatline entirely.
This is not unusual. It's just the most recent example.
As the labor/management covenant FDR called the New Deal is dismantled, wealth centralizes, and America moves toward a third-world, two-tier economy, good news for Wall Street is increasingly bad news for you and me. And vice versa.
This simple fact is openly discussed in [Barron's], the [Wall Street Journal], [Fortune], and the rest of the nation's business press. Without shame.
Next time you want to find a searing indictment of how deregulation and globalization are destroying the American middle class, don't bother looking for a progressive voice in the corporate media darkness.
Just pick up [Business Week] or [Forbes] or watch CNBC. And pay close attention to what they consider good news.
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Bob Harris is a political humorist who has spoken at over 275 colleges nationwide.
Original file name: THE SCOOP- Panic on Wall Street
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