The other day, when the on-again, off-again battering of tech stocks was near a peak, James K. Glassman floated his explanation for why it was happening, and how much worse it would get, on the op-ed page of the Wall Street Journal: The government, "often in league with trial lawyers, threatens every high-tech firm in America," and investors were figuring that out. His Exhibit A is of course the Microsoft case. But Glassman says this was "only the catalyst," and trots out what he suggests is additional evidence of "government intervention" crippling business and blowing out stocks.
I guess if you're going to say something silly, you may as well say something spectacularly silly. Glassman is wrong in his particulars, but his wrongness about the big picture is far more startling. A recently published book, Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance, by a journalist named Daniel Gross, makes precisely the opposite big-picture case--that, in fact, the Clinton years have seen government (or more precisely, Democrats) embrace Wall Street and the markets as never before. The book is a lot more convincing than Glassman.
Glassman wrote that Bill Clinton and Tony Blair have made "veiled threats about ending private ownership of human genome information," thus driving down share prices in the biotech sector. In fact, they made imprecise statements that were initially misinterpreted and the market overreacted. To clear things up, Clinton had this to say in early April: "If someone discovers something that has a specific commercial application, they ought to be able to get a patent on it." Biotech stocks rallied 11 percent. Glassman left that out.
Next he contends that state attorneys general are going after the Web advertising firm DoubleClick the same way they went after tobacco and gun companies, this time for alleged privacy violations. Nothing of the kind has actually happened, yet he writes: "DoubleClick, by the way, is down 38% since the onslaught began." The profitless DoubleClick, by the way, has a price to sales ratio of 17. Any chance that its stock was, you know, a little overpriced and had plenty of room to fall? Then it's on to e-commerce taxes, which Glassman implies have been forced into law by the National Governors' Association. In fact, the anti-tax forces have pretty much won this battle, at least for the next several years.
Et cetera. So much for his evidence; what exactly would the government's motive be? This brings us to Gross' book, which argues that the Clinton administration is not hostile to the markets at all, but practically joined to them at the hip. This is not a surprising argument to those who follow campaign finance--the neoliberal Wall Street crowd that Gross calls the New Moneycrats donated money to Clinton-Gore and held Cabinet posts in their administration (à la Robert Rubin). Still, it's amusing to be reminded of Clinton's early 1990s attitude toward Wall Street, which was in fact the more traditional antagonism you would expect from a Democrat, railing against the fat cats who "speculate in paper" and so on. After all, the Dow was at 3,000. By January of last year, of course, things had changed, and Clinton was floating the idea of putting Social Security funds in the market.
The most interesting parts of Gross' argument are the earlier chapters of his book, particularly where he discusses how pension funds have subtly marketized core Democratic constituencies of labor and intellectuals. By now, Gross observes, the grand symbolic financial gathering is not Michael Milken's Predators' Ball but Warren Buffet's folksy shareholder gatherings in Omaha. "Running against the markets is a recipe for disaster," Gross concludes. "Anybody who tries to spook them, or who revels in a 300-point drop in the Dow, would be branded a traitor to the vast investor class."
He is more sanguine about all of this than I am--a government that is overly concerned with the investor class strikes me as a government following the path of least resistance. I suspect it would be healthier for someone to use the bully pulpit to remind this investor class how lucky it has been, rather than to, as Gross suggests, laud the CEO of Cisco for creating shareholder value.
Still, he is right that it is impossible to run against the markets now, and I don't even think Glassman seriously believes that anyone in government wants to see the Nasdaq collapse. I think what Glassman is doing, however, is something we may well see a lot more of in political campaigns, which is suggest that the other guy might hurt your portfolio--that the other guy, in short, is soft on bears.