Doves, Hawks, Owls and the People - 26 March 1999

At one of the worst stages of the Vietnam War, when this country was rent apart by bloodshot hawks and screaming doves, one of my favourite senators, a marvellous, tooth-sucking Yankee and a man of a few well chosen words, said: "This country has too many hawks and too many doves. What we need are a few owls."

I thought of him the other day here in San Francisco when an audience of several thousand middle-aged and ageing men mostly, in suits or blazers and slacks, stood to attention in the most monumental convention centre here as a military colour guard escorted, to the thumping glory of a Sousa march, the all-American owl or big chief owl.

The great reverent audience bowed its heads and was summoned to a mass pray in honour of "a man of undisputed greatness who has led us to the promised land."

When the prayer ended a long, murmuring, "Amen" swept over the stadium like a great receding tide and the audience broke into a returning tidal wave of applause, which sang in the ears until the man had arrived at the dais and bowed his smiling, owlish face. No president I can remember since Reagan's inauguration has received such an ovation.

If the man had looked tougher or had a square moustache, the whole scene would have recalled one of those breathtaking rallies, staged and filmed by Leni Riefenstahl for the arrival in any stadium throughout Germany of her once-adored big chief, Adolf Hitler. The colour guard, the band, the lights, the ecstasy of the audience.

Now who was this man, the benevolent recipient of all this adoration? As modest an American as exists. He was Mr Alan Greenspan, the Chairman of the Federal Reserve Board. His job is to cut interest rates, to raise interest rates, to pump cash into the economy or siphon the cash back.

It's an awesome power, for it can well decide what you, whoever you are, wherever you are, pay next month for your coffee, your beef, your bicycle or your rent.

His audience was a convention of bankers and majestic tycoons who can face prime ministers, presidents and boards of directors with nonchalance, but they lean forward and listen to Mr Greenspan with breathless attention.

One hasty or misspoken word of his may ruin your product, your business. When the Dow Industrial Average, which is our barometer, touched the impossible 10,000, Mr Greenspan was asked if he'd like to comment, and he said the simplest word he's ever been known to utter: "No."

Why don't they pay such breathless attention to Mr Clinton when he talks about the splendour of the economy? Because, if you're going to divide Americans into hawks and doves on the economy, Mr Clinton is the number one hawk. Mr John Kenneth Galbraith and the old New Deal deficit finance economists are the doves. But Mr Greenspan is the owl - the man who will discover the kernel of wisdom in a big showy growth of boasting and wishful thinking.

The owl symbol has remained with us, probably because Senator Aikin of Vermont, who coined it, also coined the simplest, bitterest, truth about the Vietnam War. In the furore of hawks bombing everything and saying the war was winnable, and the moaning of the doves who said it was barbaric and wrong, Senator Aiken - the owl - said: "Why doesn't the president just say we won, and fetch the men home?" Which eventually is exactly what we did.

So it was quite a moment last week when the stock market flirted with this dizzy mark of 10,000 points. Only two years ago Mr Greenspan warned us of "irrational exuberance" when the Dow was well alone in the 6,000s and threatening to soar into the unknown 7,000s. Now 10, what did it mean?

Was it going on forever or was it, as an increasing chorus of doves were moaning, an ever-tightening, thinning bubble? Not unlike the notorious South Sea Bubble - the tulip bubble of other centuries. Mr Greenspan, Sir, My Lord, Our Father which are in control, will you tell us what 10,000 means? "No."

So what happens afterwards is what happened before. The hawks and the doves make their case all over again but more shrilly. This time you might say rather both of them have discovered two new extremes, each expressed in two opposing pieces on the so-called op-ed page of a single newspaper.

I don't know, incidentally, if the op-ed page is by now a normal journalistic convention of British, French, German, Australian, whichever papers but it's one of the healthiest democratic usages to settle in since the Second War.

It started here before that war when a famous New York evening paper regularly printed one on top of the other, two columnists of violently opposing views. The conservative calling his liberal mate, down below, a bleeding heart, and the liberal retorting that his successful pal up above had been bitten by an income tax.

The practice, which is now at least 30 years old, is that of having the full page opposite the paper's editorial page given over to four or five articles, at least two of which declare exactly opposing views of a burning issue of the day. And this often includes the paper's own columnists writing that the paper's official view on the opposite page is a lot of rubbish.

I don't know about you but I was not allowed in my time even to suggest that the editor of my revered paper was nuts.

So on the meaning of the stock market's 10,000 - if it makes it and holds it - here were two pieces published on the same day. One was entitled The Arrogant Ascent to 10,000, and the other simply, blatantly, Stock Prices are Still Far Too Low, with a tantalising sub heading: "Our calculations show that a perfectly reasonable level for the Dow would be" - hold your breath - "36,000 tomorrow, not 10 or 20 years from now."

Well first the dove. The dove says the rush to 10,000 and beyond is due to the arrival in large numbers on the market of amateurs, on the Internet - day traders - who buy in and out of many stocks in one day and earn themselves fortunes for themselves.

If they perform the same technique for you without your knowing it, you may find you're paying out commissions far in excess of the interest - the gains - that you're picking up. In which case your account is being 'churned' by a scoundrel, a practice unethical everywhere and criminal in some states.

The editor of a money magazine says this type of smart Alec is mainly responsible for the biggest bull market in history, and will ruin it. Mainly because Internet stocks don't have earnings, and what the man is doing is jettisoning the fundamentals of stock trading. It won't last.

The other piece says yesterday's fundamentals no longer apply, but the model of price-earnings ratio is not only old fashioned it's wrong. Their new model looks at how much money a stock will put in your pockets through the profits generated through the company that issued it.

Using those returns, they put a price on the stock that's in line with the price of another asset that carries the same minimum risk - namely, believe it or not, a government bond. The market will rise, they predict, until stock returns equal bond returns.

So that 36 or 40,000 will be what they call the "comfort zone" - the happy sticking place for long-term investors.

There's a fourth party of onlookers I haven't mentioned. Not the mourning doves, not the exulting hawks, not the wise but non-communicative owl - the people of the United States. And, as the magicians say, history shows that the people believe, rightly or wrongly, that the man responsible for prosperity or depression is - the President of the United States. No question, they had always thought so, no matter whether otherwise he seemed a great president or a weak one.

Just think: Warren Harding a simple-minded good time newspaper man from Ohio. Not fit, he said himself, to be president. Times were prosperous, he was immensely popular and credited with the prosperity.

Coolidge, the little crab apple of a public servant, who said almost nothing in the fewest possible words, was thought of as a magician and had the current prosperity named after him - the Coolidge Prosperity. Clinton, whatever his flaws and virtues, is believed by most to be responsible for the roaring prosperity of his time.

But if the present plunge of the market and the economy goes on down and down, watch for his great popularity to go down with it.

There was a president who unfortunately had a depression named after him - the Hoover Depression - because the great Wall Street crash happened, as they say, on his watch.

And yet he was the man about whom John Maynard Keynes, writing of the 1919 peace conference, said: "Of all the men gathered in the councils of Paris, he alone, if he could have been brought in, had the wisdom, the knowledge and the magnanimity to have guaranteed us the good peace." He was Herbert Hoover.

THIS TRANSCRIPT WAS TYPED FROM A RECORDING AND NOT COPIED FROM AN ORIGINAL SCRIPT. BECAUSE OF THE RISK OF MISHEARING, THE BBC CANNOT VOUCH FOR ITS COMPLETE ACCURACY.