From Canada: How does the US media report on the Economy? Depends on who is President
Feb 5th 2007 | 10:35 pm
#1
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From Canada: How does the US media report on the Economy? Depends on who is President
The Politics of Bulls and Bears
How Does the U.S. Media Describe the Economy? It Depends on Who's
President
Posted: Monday, February 5, 2007
ARTICLES
National Post (Canada)
Publication Date: February 3, 2007
Want to get rich in the American stock market? Here's some advice:
Don't watch the news.
I'm not being facetious here. One of the iron laws of U.S. news
reporting is that the economy gets positive reviews under Democratic
presidents and negative reviews under Republican presidents.
In 2004, the Virginia-based Media Research Center (MRC) produced a
stark summary of the disparity.
In 1996, Bill Clinton ran for reelection as president. The U.S.
economy was doing well at the time: unemployment down to 5.2%,
inflation under control at 3%, and overall growth at 2.2%. And the
press reported all this good news: According to the 2004 MRC study,
85% of all major economic stories on the economy in the summer of 1996
were positive.
Eight years later, George W. Bush was running for re-election as
president. The U.S. economy in 2004 did much better than in 1996: The
economy grew at a 3.9% pace, while unemployment and inflation roughly
matched their 1996 levels (5.4% and 2.7% respectively). Yet this time,
77% of all major media economic coverage was negative. (For the full
report, see www.mediaresearch.org/realitycheck/2004/fax2004
1020.asp.) And since the 2004 election, the barrage of bad news has
continued: reports of housing bubbles, warnings of an imminent
collapse in the U.S. dollar, and so on.
The economist John Makin has done some interesting calculations on the
consequences of the euphoria of the '90s and the persistent gloom of
the '00s. As the economist who most accurately predicted the Japanese
stock market crash of the late 1980s, Makin deserves attention when he
assesses valuations.
Makin points out that the usual determinants of stock prices are a
function of expected corporate profits and interest rates. The more we
expect companies to earn, the lower we expect interest rates to be,
the more we will pay for a share in a company. Based on this formula,
economists calculate a "fair market value" for stocks--a base line
around which they expect stocks to trade.
Between 1998 and 2000, the S&P 500 traded at a premium of some 60- 80%
above fair market value: Investors, it seems, were making the mistake
of believing Bill Clinton's PR--and of course it ended in tears. In
the single year 2000, the S&P dropped from almost 1,600 in March to
1,300 by year end. The S&P finally hit bottom at under 800 in the fall
of 2002.
Then the recovery began. Investors who disregarded the gloomy Bush-era
reports from CBS and The New York Times noticed the rise in corporate
profits and the reductions in interest rates. They began to buy and
buy and buy--pushing the S&P past 1,400 at year end 2006.
Makin, however, points out that even at 1,400, the S&P remains some
20% below its "fair market value": "If the stocks in the S&P 500 were
currently valued as they have been on average over the past 20 years,
the index would be at 1,775 instead of 1,420."
Don't take that as a buy signal however. Because now, after the
elections of 2006, some very genuine reasons for concern have
materialized.
The new Democratic Congress takes office committed to a series of
measures intended to attack corporate profits. They have already voted
to raise the minimum wage--a measure that affects the entire U.S.
labour market, because many union contracts are tied to multiples of
the statutory minimum. Leading Democrats talk of changing labour rules
to eliminate secret ballots for unionization elections.
Even more ominously, Democrats are proposing higher taxation of energy
companies--and making it clear that they will not vote to renew
President Bush's cut in taxes on dividends and capital gains. Leading
members of the new Congress have expressed strong protectionist views.
Democrats hope to push labour costs up faster than productivity--and
to curb corporate profits they regard as inflated. If they succeed,
profitability must suffer, and stock prices must decline.
And yet, bizarrely, at this very moment of maximum worry, the press
reports--so negative, for so long--are suddenly turning positive
again. On Jan. 31, Associated Press reporter Andrew Taylor filed a
story from Washington that opened cheerily: "The House passed a [US]
$463.5-billion spending bill Wednesday that covers about one-sixth of
the federal budget as Democrats cleared away the financial mess they
inherited from Republicans."
In this case, "clearing away the financial mess" means adding tens of
billions of dollars in new federal spending to the budget--while
destroying hundreds of billions of dollars of national financial
wealth along with it. The economic results may be dreadful. But count
on it: The economic reporting will be glowing!
How Does the U.S. Media Describe the Economy? It Depends on Who's
President
Posted: Monday, February 5, 2007
ARTICLES
National Post (Canada)
Publication Date: February 3, 2007
Want to get rich in the American stock market? Here's some advice:
Don't watch the news.
I'm not being facetious here. One of the iron laws of U.S. news
reporting is that the economy gets positive reviews under Democratic
presidents and negative reviews under Republican presidents.
In 2004, the Virginia-based Media Research Center (MRC) produced a
stark summary of the disparity.
In 1996, Bill Clinton ran for reelection as president. The U.S.
economy was doing well at the time: unemployment down to 5.2%,
inflation under control at 3%, and overall growth at 2.2%. And the
press reported all this good news: According to the 2004 MRC study,
85% of all major economic stories on the economy in the summer of 1996
were positive.
Eight years later, George W. Bush was running for re-election as
president. The U.S. economy in 2004 did much better than in 1996: The
economy grew at a 3.9% pace, while unemployment and inflation roughly
matched their 1996 levels (5.4% and 2.7% respectively). Yet this time,
77% of all major media economic coverage was negative. (For the full
report, see www.mediaresearch.org/realitycheck/2004/fax2004
1020.asp.) And since the 2004 election, the barrage of bad news has
continued: reports of housing bubbles, warnings of an imminent
collapse in the U.S. dollar, and so on.
The economist John Makin has done some interesting calculations on the
consequences of the euphoria of the '90s and the persistent gloom of
the '00s. As the economist who most accurately predicted the Japanese
stock market crash of the late 1980s, Makin deserves attention when he
assesses valuations.
Makin points out that the usual determinants of stock prices are a
function of expected corporate profits and interest rates. The more we
expect companies to earn, the lower we expect interest rates to be,
the more we will pay for a share in a company. Based on this formula,
economists calculate a "fair market value" for stocks--a base line
around which they expect stocks to trade.
Between 1998 and 2000, the S&P 500 traded at a premium of some 60- 80%
above fair market value: Investors, it seems, were making the mistake
of believing Bill Clinton's PR--and of course it ended in tears. In
the single year 2000, the S&P dropped from almost 1,600 in March to
1,300 by year end. The S&P finally hit bottom at under 800 in the fall
of 2002.
Then the recovery began. Investors who disregarded the gloomy Bush-era
reports from CBS and The New York Times noticed the rise in corporate
profits and the reductions in interest rates. They began to buy and
buy and buy--pushing the S&P past 1,400 at year end 2006.
Makin, however, points out that even at 1,400, the S&P remains some
20% below its "fair market value": "If the stocks in the S&P 500 were
currently valued as they have been on average over the past 20 years,
the index would be at 1,775 instead of 1,420."
Don't take that as a buy signal however. Because now, after the
elections of 2006, some very genuine reasons for concern have
materialized.
The new Democratic Congress takes office committed to a series of
measures intended to attack corporate profits. They have already voted
to raise the minimum wage--a measure that affects the entire U.S.
labour market, because many union contracts are tied to multiples of
the statutory minimum. Leading Democrats talk of changing labour rules
to eliminate secret ballots for unionization elections.
Even more ominously, Democrats are proposing higher taxation of energy
companies--and making it clear that they will not vote to renew
President Bush's cut in taxes on dividends and capital gains. Leading
members of the new Congress have expressed strong protectionist views.
Democrats hope to push labour costs up faster than productivity--and
to curb corporate profits they regard as inflated. If they succeed,
profitability must suffer, and stock prices must decline.
And yet, bizarrely, at this very moment of maximum worry, the press
reports--so negative, for so long--are suddenly turning positive
again. On Jan. 31, Associated Press reporter Andrew Taylor filed a
story from Washington that opened cheerily: "The House passed a [US]
$463.5-billion spending bill Wednesday that covers about one-sixth of
the federal budget as Democrats cleared away the financial mess they
inherited from Republicans."
In this case, "clearing away the financial mess" means adding tens of
billions of dollars in new federal spending to the budget--while
destroying hundreds of billions of dollars of national financial
wealth along with it. The economic results may be dreadful. But count
on it: The economic reporting will be glowing!
Feb 5th 2007 | 11:31 pm
#2
Guest
Posts: n/a
Re: From Canada: How does the US media report on the Economy? Depends on who is Presi
"PJ O'Donovan" <[email protected]> wrote in message news:
[email protected]. com...
> The Politics of Bulls and Bears
>
Back to Story - Help
Feb 5, 2007
Reuters
Unseasonably warm weather may have tricked the world's smelliest plant
into blooming in the middle of the northern hemisphere winter,
botanists at the Eden Project where the native of Sumatra is housed,
told Reuters.
The warmth of 2006 and mild winter to date have encouraged the Titan
Arum or Corpse Flower into a phenomenal growth spurt and into flower
-- an event that usually happens only once every six to nine years.
"The Titan, standing at 164 cms tall is now giving off a revolting
stink," said curator Don Murray. "It is a cross between rotten cheese,
dog poo and something dead. Tonight the flowers will be in full bloom
-- as will the stench -- and that will last through Tuesday and
Wednesday. But by Thursday it will have started to die back," he told
Reuters from the project in Cornwall 220 miles southwest of London.
[email protected]. com...
> The Politics of Bulls and Bears
>
Back to Story - Help
Feb 5, 2007
Reuters
Unseasonably warm weather may have tricked the world's smelliest plant
into blooming in the middle of the northern hemisphere winter,
botanists at the Eden Project where the native of Sumatra is housed,
told Reuters.
The warmth of 2006 and mild winter to date have encouraged the Titan
Arum or Corpse Flower into a phenomenal growth spurt and into flower
-- an event that usually happens only once every six to nine years.
"The Titan, standing at 164 cms tall is now giving off a revolting
stink," said curator Don Murray. "It is a cross between rotten cheese,
dog poo and something dead. Tonight the flowers will be in full bloom
-- as will the stench -- and that will last through Tuesday and
Wednesday. But by Thursday it will have started to die back," he told
Reuters from the project in Cornwall 220 miles southwest of London.
Feb 6th 2007 | 5:24 am
#3
Guest
Posts: n/a
Re: From Canada: How does the US media report on the Economy? Depends
PJ O'Donovan wrote:
>The Politics of Bulls and Bears
>...
>In this case, "clearing away the financial mess" means adding tens of
>billions of dollars in new federal spending to the budget--while
>destroying hundreds of billions of dollars of national financial
>wealth along with it. The economic results may be dreadful. But count
>on it: The economic reporting will be glowing!
>
>
>
Why did the Fed stop reporting M3?
>The Politics of Bulls and Bears
>...
>In this case, "clearing away the financial mess" means adding tens of
>billions of dollars in new federal spending to the budget--while
>destroying hundreds of billions of dollars of national financial
>wealth along with it. The economic results may be dreadful. But count
>on it: The economic reporting will be glowing!
>
>
>
Why did the Fed stop reporting M3?
