Bears devour bulls

I am a sick man. A wicked man. A connoisseur of human suffering. I am an avid fan of motor sports because I enjoy flaming automobile wrecks. I watch football games in the hope that I will witness yet another career-ending injury. But I have kept my most cherished pleasure deep in a hidden recess of my mind, and with the exception of a few acquaintances (needless to say, I have no friends) who know of my illness, I have shared it with no one.

Until now.

I simply adore watching the stock market crash.

Why do I feel I can reveal this now? The reason is obvious. The stock market is going down big time. I’m not talking about the Dow Jones dipping below 10,000. I’m talking about the big one. A financial fireball. An economic cataclysm that will have analysts dusting off the trusty “D-word.”

That’s D for Depression, in case you’ve never heard it before.

I can feel it in my very soul, what little I have of one.

I have been wrong before. I thought for sure the Asian contagion would bring it down back in 1998. The collapse of Russia gave me false hope. But every leading indicator says I am right this time.

The Dow lost five percent last year.

The S&P 500 was down nine.

The NASDAQ suffered a crushing 37 percent blow.

The indicators are by no means confined to the abstract indexes of Wall Street. Many local employers were battered by the market in the year 2000. Valley Media’s stock declined by a staggering 89 percent. Apple Computer, Hewlett-Packard and Intel, all three of which have major operations in the Sacramento area, saw stock declines of 71 percent, 44 percent and 26 percent respectively.

I know people who work at these firms and other local companies. I know I should feel their pain. But I have been waiting for so long.

For the past five years, I have listened with wry amusement to the enthusiastic banter of pundits who have proclaimed that the so-called New Economy is somehow immune from the historical boom-and-bust business cycle. I watched in awe as nearly half of America got sucked into the vastly overvalued stock market by the shrewd manipulators of Wall Street. Despite the market’s recent travails, they’re still pushing stocks like they were the next best thing to breast implants.

I was watching football last weekend in the hope that I might catch some quarterback getting his block knocked off, when a commercial for one of the more popular online brokerages interrupted the potential carnage.

“What are you planning to do for your retirement?” was the question posed as a rather pudgy man, bare midriff exposed beneath a T-shirt two sizes too small, set up a lawn chair on the beach. The camera cut to a well-coifed woman staring down at him from the balcony of her beachfront home.

“What are you doing?” she screams. She wants him off her beach, now. “I’m calling the dogs!”

The man scurries off, tail between his legs, and the lesson was clear: Start trading shares on the Internet, and you too can have your own private beach.

Admittedly, I admired the commercial’s mean spiritedness. But do these people still honestly believe the boom is going to last forever? Back in 1996, Federal Reserve Board Chairman Alan Greenspan coined the phrase “irrational exuberance” to describe the overheated market. At the time, the Dow had just broken the 5,000 barrier and the NASDAQ was hovering just over 1,000. If 5,000 and 1,000 were irrational then, what about 10,000 and 2,500 now? And keep in mind, that’s where the Dow and the NASDAQ are after last year’s losses.

We have a long way to go before we hit bottom.

Greenspan, arguably one of the most respected public figures in America, seems at a loss for what to do. After two years of jacking up interest rates to cool down the market, he suddenly reversed course at the beginning of this year. The stock market responded with yet more irrational exuberance. It was short-lived of course, because Greenspan was right the first time. America has been engaged in a speculative frenzy—the market was and still is completely, totally, utterly overvalued, and people are just now beginning to realize it.

They call economics the dismal science, and it has been joined by a discipline that is equally as suspect, psychology. When President-elect George W. Bush was finally handed the reins and discovered the extent of the mess he’s about to step into, he immediately started crying foul. Shut up, Dubya, Wall Street admonished, you’ll scare everybody. It’s as if the only thing that’s been keeping the market afloat is the power of positive thinking.

This strange and terrible melding of economics and psychology has come to dominate every aspect of our lives. It has turned otherwise good Americans into greed-crazed idiots, hooked on get-rich-quick schemes like they were Prozac. There is no escape from the stock market. It consistently leads the stories on national news broadcasts. It commands the front pages of newspapers and the covers of magazines. CNN, CNBC and even PBS have stock market shows on around the clock. Every major Internet service and Web browser has the latest numbers from the Dow, S&P 500 and NASDAQ prominently displayed on its home page.

We’re wired in tight, and where the market goes, we go. And right now, it’s only going in one direction.

Down.

There are few positives left to cling to. The unemployment rate is low, but that will surely change as the economy falters. The trade deficit and consumer debt are at near record highs, energy prices are spiking upward, manufacturing is in a slump, the dollar is down, and the stock market’s dirty little secret is coming to light. George W. Bush’s proposed tax cut for the rich will do little to alleviate any of this. Nothing short of a massive Keynesian priming of the pump—à la Reagan’s $3 trillion military build-up—will keep the entire economy from collapsing into recession.

I can hardly wait to watch it on CNBC.

If you’re expecting some sort of call for government intervention from me, forget about it. I’m a sick man, a wicked man, and I have learned to appreciate the beauty of a good crash. I’ve been waiting for this one for some time.

It’s not going to be pretty. Times will be tough.

But that’s not necessarily a bad thing. In a recent issue of the New Yorker, Thomas Penfield Jackson, the judge in the Microsoft trial, described Bill Gates as having “a Napoleonic concept of himself and his company, an arrogance that derives from power and unalloyed success, with no leavening hard experience, no reverses.”

Well, a reversal is coming.

Let’s see what this New Economy is made of.