Saturday, April 16, 2005

The NYT, the financial markets, and politics 

The New York Times has made something of a habit this year of offering the short-term performance of financial markets as proof of the Bush administration's shortcomings. This morning, for example, the Gray Lady is running a front page story about the stock market with the headline "Stock plunge to lowest point since election". This is of a piece with other recent reporting of the Times. On April 2, the New York Times editorialized that the U.S. dollar was on the verge of a steep decline "no matter what" (my post here), largely as a consequence of Bush administration policies (the dollar is stronger since the editorial ran, if we are to care about ten trading days). On January 1, the Times ran an article that tracked the performance of the stock market since Election Day, which article contained factual errors identified here (now corrected by the Times online). The January 1 article effectively understated the extent of the "Bush rally" by counting it from the day after election day rather than from October 26, when the market took off in anticipation of a Bush victory.

Today, the NYT's editors thought it appropriate to report that the stock market had reached its lowest levels "since the presidential election." Precisely what bearing that date has on the performance of financial markets in April is beyond me. The Times, however, obviously thinks there is a relationship between November 2 and the stock market that warrants elevation to a front page headline.

In any case, the story is accompanied by this graph:

Curiously, the graph makes precisely the point I offered in my post of January 1, which is that the New York Times understated the "Bush rally" in its article of that date. The rally that began at the nadir of the graph (October 26) was actually very impressive.

Curiously, the Times seems to have ignored its interest in the U.S. dollar, which on only April 2 was -- according to the currency traders on the Times editorial board -- on an inevitable downward "trajectory". Not only is the dollar stronger since April 2 (too short a period to draw the conclusion that the Times was either right or wrong), it is only slightly below its level of November 2 (vs. the Euro) and it closed yesterday at a higher level in Euro terms than on any date since November 4.

So if it is significant that the stock market has retraced its gains since election day, why isn't it important that the dollar has regained its losses in that period? If the dollar rallies above 0.784 Euros in the next couple of days, should we expect a headline that says "Dollar rallies to highest point since election"? I'm not holding my breath.


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