Have you seen the pictures and video of the planes hitting the towers? The country needed to do something. Iraq appeared easiest. We are all experts in retrospect.
Across the board tax raises in a crappy economy. That would be worse. Most people forget that the economy generally boomed under Bush. Although we are going to pay for it for quite some time (deficit spending). BTW, I am not a Bush fan, just pointing out a fact. But this is a Bama thread. If he gets his way with taxes on both cap gains, and the wealthy, who create most jobs (small biz owners), then the USA economy will be significantly worse.
Pabst your numbers are just wrong. I am using http://www.djindexes.com/mdsidx/index.cfm?event=showAverages. Let's look at each period in turn: WWI: Why are you using the 1914 low, since this was after the war had started? To see the reaction to the news of war, you have to take the price *before the market knew a war was going to take place*. The Dow was trading around 80 before any news of war came out. The market then *closed* and reopened in the low 50s - a decline of over 30% from pre-war prices. The price just before the US entered the war was around 90. I.e. a mere 10% above the pre-war prices. Prices having risen 10% in 3 years is an *underperformance* of normal stockmarket returns of 10% per annum on average. In a typical 3 year stretch one would expect the Dow plus dividends to have a total return of 33% over 3 years. Stripping out dividends, it should still have been up more than 10% over 3 years during a normal run. During 3 years of war, it underperformed its long run average. You also ignored my point about having to compare returns during war with typical returns during peacetime. The market will typically return 10% per annum anyway, so war returns must at least exceed this number for your argument to hold, and to really be proved it needs to exceed 10% per annum by a *statistically significant* margin. In WWI, if we use the accurate start date - before the market expected war - then stock returns were lower than average. I will grant you the US entry point as the comparison, since when that occurred the market was probably discounting peace. The reason I used the end of war price was because without using that, the alleged "war rallies" are even smaller! Using a realistic "victory discounted" point, rather than the end of the wars themselves, is even more damaging for the "war rally" argument. WWII - "The Dow was about 120 on Pearl Harbor. By the end of 1945 the index was over 200." But WWII started in 1939, not at Pearl Harbor. Also your second point contradicts what you earlier said about WWI - you said the end point for price comparisons should be where victory/peace starts to look probable. Well, the market was obviously discounting peace/victory *way before* 1945. Even without using hindsight, it became clear from somewhere between Stalingrad and the time of the D-Day landings that Germany would lose. It became highly likely the US would win in the Pacific after Midway. Churchill in his diaries wrote that he knew victory was certain - barring the Axis developing something like the atom bomb - as soon as the US entered the war i.e. at Pearl Harbour. So the "end point" for price comparisons, has to be somewhere between Pearl Harbour and D-Day, NOT 1945. The most accurate point to use would be somewhere in 1942, after Midway or after Stalingrad, and certainly way before D-Day. Even if we are very generous to your point of view, and use the end of 1943 as the point at which the markets start discounting peace, and Pearl Harbor as the start date - rather than use the end of 1942 (when victory started becoming odds-on) as the end date and the invasion of Poland (WWII start) as the start date, we have a market performance where the Dow from Pearl Harbour to Jan 1st 1944 was up a little under 20%. In other words, it performed roughly in line with the typical 10% per annum return. You claimed that peace was a "bear item". Yet in 1944 and 1945, when it was almost inevitable the Allies would win and peace was being discounted by the market, the Dow rallied further, and then soared after the Japan surrender. So on WWII, if you use the same standards as for WWI - i.e. consistent start and end dates - then war was certainly not a bull item, and peace certainly *was* a bull item. Korea: "Ridiculous spin. Those lows made on the initial selloff have NEVER AGAIN BEEN TESTED!!! In fact the Dow took out it's pre war highs just 4 months after the war started." But the N Korean forces in S Korea had been cut off and routed within 4 months of the beginning of hostiliies. Seoul had been restored as capital by the end of September 1950. In WWI you want to use US entry into the war as your end point despite there being another year of fighting left...yet in Korea you refuse to use the date where defeat was decisively averted? That is clear inconsistency. I also don't see your point about the lows never again being tested. That is true for many other bear market lows also. The peacetime lows of 1932 have never been tested. Same with 1937. Nor the 1974 lows (since you claim Vietnam was over by 1972). The 1982 lows have never been tested. Etc. MOST bear market lows don't get tested, at least not in nominal terms. Also once again you fail to compare the peacetime returns to war-time. Even if we use the most generous comparisons for you - start of Korea to end - the Dow performed far better in the 3 years *after* the Korean war ended, than during the 3 years of the war itself. How does this indicate that the war was bullish? The Dow rose from 220 before the war, to around 280 aftewards, 3 years later - a compound return of about 8% per annum. The post-war bull market saw the down go from 280 to 480 in 2 years! Vietnam: "Real terms? Who the fuck cares about inflation adjusted. In ACTUAL INDEX LEVELS the Dow was 500 in late 1962 when JFK started move in in troops and the Dow cranked to 1000 by 1966. The war was well over by 1972 as far as America is concerned not 1975. The selloff in 74 was Watergate/Nixon resignation not Vietnam." Your dates are off, since the USA only effectively declared war after the Gulf of Tonkin resolution passed in Congress in late 1964, with the Dow in the low 800s. 1972 as an end date is a bit early, since Saigon did not fall until 1975. But even using 1972 to avoid the 73-74 bear market (which I agree was nothing to do with Vietnam), that is a return from late 64 to 1972 of about 20% in nominal index terms. Even accounting for dividends, that is way below the normal 10% per annum return. In inflation-adjusted terms things are even worse. In no way does that support the idea that war is good for stocks, when compared to peacetime returns. Gulf War I "On Jan. 17, 1991, after hostilities actually began and the results looked good for U.S. forces, the Dow industrials soared 114 points. The market has NEVER BEEN THERE AGAIN." But on your WWI explanation you said that the likelihood of victory/peace was a bear item. Now you are saying that the likelihood of victory caused a huge rally. Which is it? Also you are comparing stocks prices to the wrong start point again. The correct start point is the price the day before the market starts expecing war, NOT the day that military action actually begins. Just as VJ day is not the day that the market started discounting peace, nor the WWI armistice day or Versailles Treaty is the day the market discounted peace then, so the victory day in Gulf War I is not the day the market discounted victory. It discounted victory pretty much on the day the war started. Also, the Dow from the invasion of Kuwait to the victory over Iraq was flat for the year, way below the normal return, and with a large dip during that time. Stocks performed way better in 1991 after the war had ended. Gulf War II "Pabst - You can subscribe whatever reason you want for the rally but the additional stimulous of government spending is the why. Bottom line is the market doubled during the war." Where is your evidence that deficit spending is what caused the market to double? First of all, the war lasted a few days! There has been no war since early 2003, just an occupation. Also going from the low to the high is not the correct start end end point (this is becoming a recurrent theme). War only became expected by the market in Dec 2002, with the S&P around 900. It is now 1400. That's about a 9% total return including dividends - lower than the average 10% return for big cap US stocks in the last century. Second, stocks have always performed very well after a multi-year 50%+ bear market ends. Even if you think that was not the only factor, or even if you think it was a minor factor, how can you deny that a prior massive fall, and cheap valuations played a part? E.g. after 1973-74, stocks had a monster rally in the next few years. After the 1929-32 collapse, again a massive rally. After 2000-2002's huge bear market, stocks would rally big in almost any circumstances short of WWIII breaking out (although maybe you'd argue they would go up in that situation!). As for deficit spending - 1975 saw Vietnam War spending cease and the deficit situation improve as a result. Stocks soared. Stocks rallied massively after the Korean War, again with a cessation of military spending. Stocks rallied massively after the end of the Cold War, where deficits reduced due to huge military cuts. The best stock market runs were 1920-29, 1955-1965, and 1991-2000 - all during peacetime and all with improving budget situations. The biggest deficit spending years were the 1930s, the 2000s, and the 1970s - all horrendous decades for stocks. Stocks do better in peacetime with low budget deficits than they do in wartime with high budget deficits.
If war was indeed a bull item, then wouldn't stocks RALLY every time as soon as we get war news? Yet in *every single war* of the last 100 years, the first reaction of the market is to go down, not up. Why is that, if war is a bull item? Stocks react the way to war that they do to any other serious negative news, like an anticipated earnings shortfall or expected recession. They go down until the expected bear threat becomes fully discounted. Then, once it is fully discounted and the event actually happens, because the news is more than priced in and people became excessively pessimistic (the market hates uncertainty, after all), they rally back. To claim that this secondary sentiment-driven rally is proof that the initial news was good for stocks makes as much sense as saying that an earnings shortfall is good for a stock, or that a recession is good for stocks. After all, stocks frequently rally off their bear market lows when bad corporate earnings are announced (e.g. 2002), or when a recession is in place (e.g. 1991, 1982, 1932-33). War rallies occur only *after* war has already caused stocks to plummet. They occur for one of only two reasons - excessive pessimism, or anticipation of victory and peace. Either investors reached a point of massive pessimism...a situation which causes rallies in almost all situations regardless of bad news (e.g. late 1932 was hardly a bullish economy, yet stocks ramped massively from there, purely because sentiment got too bad), or stocks rally because they are discounting the likely victory. The only exception to this is a war where the US is not expending much resources, but US corporations stand to make huge profits. For example if India and Pakistan went to war, and both made huge arms and raw materials purchases from the US, this could be bullish for US corporate earnings and thus stocks, without affecting US security much if at all. This happened to some extent in WWI, but even then stocks underperformed - they did not do as badly as in Vietnam, but they did not exceed peacetime returns.
and this looks like the messiah complete with the Dark Lord supporting the staircase coming down from the heavens: does B O's hand look alien, or is that just me? surf