Our View–Stocks or Mortar?


One of those perpetual questions among economists involves the relationship between Wall Street and Main Street. Just where do the considerations of big-time investors leave off and those of everyone else begin?

While there was a fairly clear delineation of purpose in the not-too-distant past the era of Wall Street-led hostile takeovers that sometimes led to corporate teardowns and the loss of jobs these days it’s much harder to tell the difference between the two streets.

This was again in evidence the other week when the market took some pretty big hits and the Dow closed for one trading session below 10,000. Most notable about the fall was the participation of blue-chip stocks, many of them among the market’s best bets during the 1990s’ run-up. Even some of the big tech issues got hammered.

All of which led to the media’s usual red flags about whether stocks have, at last, peaked out. But as with other corrections in the past few years, a funny thing happened when prices reached a certain level: They started going up again. Oh sure, there were a few fund redemptions reported, but as of late last week, the Dow was again well over 10,000 despite the inevitability of higher interest rates for the rest of the year.

Fund managers might be anxious these days about the market’s seesaw patterns and the resulting drop-off in returns but investors are standing pat. There is, of course, a pretty pragmatic reason for doing so much of the money being plowed into the market is the 401(k) variety, a monthly inflow that many of us are disinclined to mess around with. Besides, where else would we put those retirement bucks?

There’s also a subtler issue at play. It’s called a smoking economy.

The revised fourth-quarter GDP, showing an otherworldly annual growth rate of 6.9 percent, pretty much reflects what Main Street has seen play out for months: a super-vibrant economy that has kept unemployment low and personal income high. This has boosted consumer confidence to near-record highs (despite taking a slight dip in February over higher gasoline prices and higher interest rates).

It stands to reason that as long as folks are comfortable with their lot and confident about where things are headed stocks are bound to hold their own. That will only change with a protracted period of bad news that economists and policymakers can now only guess at. Higher interest rates alone won’t do it.

Which means that the concerns of Wall Street and Main Street have become one in the same.


It’s to be expected that last week’s release of a damning LAPD internal review did not satisfy department critics who would prefer an outside investigation. For the moment, however, we’ll keep our money on Police Chief Bernard Parks, who will be more motivated and better equipped than any outside body to get to the root of the department’s structural flaws. Obviously, he will not be a disinterested observer during this terrible process, but it’s unlikely some outside inquisitor will come up with solutions any different than those of Parks. And kudos to Mayor Richard Riordan for sticking with the chief in the face of the usual naysayers.

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