Friday Five April 13

I like how the writer of this article focuses the first principle on building your career on more than just income and the accumulation of money.

Over the last five years, over half of the new jobs created in the United States were created in the State of Texas. This is supported here and here.

Under which party does the economy tend to grow? Well, much to the chagrin of my conservative friends, the data shows that our economy grows best when we have a Democrat President. This fact – not fiction – is highlighted in a sidebar article today. For an extended discussion of this, please look at Stocks for the Long Run, authored by Jeremy Siegel. In it, he writes:

“It is well known that the stock market prefers Republicans to Democrats. Most corporate executives and stock traders are Republicans, and many Republican policies are perceived to be favorable to stock prices and capital formation. Democrats are perceived to be less amenable to favorable tax treatment of capital gains and dividends and more in favor of regulation and income redistribution. Yet the stock market has actually done better under Democrats than Republicans. The performance of the Dow Jones Industrials during every administration since Grover Cleveland was elected in 1888 is shown in Figure 13-2 [not shown in this post]. The greatest bear market in history occurred during Herbert Hoover’s Republican administration, while stocks did quite well under Franklin Roosevelt, despite the fact that the Democrat was frequently reviled in boardrooms and brokerage houses around the country. The immediate reaction of the market—the day before the election to the day after—does indeed conform to the fact that investors like Republicans better than Democrats. Since 1888, the market fell an average of 0.5 percent on the day following a Democratic victory, but it rose by 0.7 percent on the day following a Republican victory. But the market’s reaction to the Republicans’ success in presidential elections has been muted since World War II. There have been occasions, like Clinton’s second-term election victory, when the market soared because the Republicans kept control of Congress, not because Clinton was reelected. It is also instructive to examine the returns in the first, second, third, and fourth years of a presidential term, which are displayed in Table 13-2 [not shown in this post]. The returns in the third year of a presidential term are clearly the best, especially since 1948. It is striking that this is true since the third year includes the disastrous 43.3 percent drop that occurred in 1931, during the third year of Hoover’s ill-fated administration and the worst 1-year performance in more than 120 years. Why the third year stands out is not clear. One would think that the fourth year of a presidential term, when the administration might increase spending or put pressure on the Fed to stimulate the economy for the upcoming election, would be the best year for stocks. But the fourth year, although good, is clearly not the best. Perhaps the market anticipates favorable economic policies in the election year, causing stock prices to rise the year before. The superior performance under the Democrats in recent years is documented in Table 13-3 [not shown in this post]. This table records the total real and nominal returns in the stock market, as well as the rate of inflation, under Democratic and Republican administrations. Since 1888, the market has fared better in nominal terms under Democrats than under Republicans, but since inflation has been lower when the Republicans have held office, real stock returns have been slightly higher under Republicans than under Democrats. But this has not been true over the past 60 years, when the market performed far better under the Democrats whether or not inflation is taken into account. Perhaps this is why the market’s reaction to a Democratic presidential victory has not been as negative in recent years as it was in the past.”

Siegel, Jeremy J. (2007-11-27). Stocks for the Long Run, 4th Edition (pp. 227-230). McGraw-Hill. Kindle Edition.

The market is reacting negatively to the lower-than-expected jobs numbers for March, 2012. Last month, our economy created 120,000 new jobs – which is pretty bad, considering that we need to create 150,000 new jobs a month just to account for college graduates and new adults entering the job market. The buzz is that there is a growing fear we will have a stagnate latter half to 2012, which could be exacerbated by the growing recession in Europe.

I should start a page on all of the stupid things people do that legislators feel they must regulate. This story not only illustrates the sheer lack of common sense among the populous, but it also confirms that no good idea goes unlegislated. People – please – don’t we have better things to do that worry about this?

Bill English, CEO