Market Talk

I think we're close to the bottom.


If you look at the DJIA over the long run, in the last twenty-odd years there are a essentially two periods. The first lasted from 1985 to 1995 and exhibited relatively predictable, non-volatile growth. It coincides with the quickening of globalization, deregulation, and financial innovation. The second period is the "Bubble(s) Period," starting in the mid-1990s and covering the dotcom boom and bust and then the leverage/credit boom and bust.

If you work on the assumption that the growth of the first period was more rational and sustainable over the long run, and the growth of the second period was mere froth, then you'd expect the market to collapse until it was roughly back in line with the long-term growth average consistent with the first period.

I separated the data from the first period (it's in red), added a trend line, and projected that line forward until today. If the market had grown at the more rational, 1985-1995 pace (ie if the false bubble wealth had never been created), we'd be somewhere in the 7500-8000 range today.

The market closed in that range several days last week. Does that mean we've hit the bottom? I think the answer is yes, more or less. It could probably fall even lower temporarily, maybe even closing below 7,000 (especially if Citigroup fails). And it's certainly not going to climb anytime soon. But it doesn't have too much farther to fall.

The Ultimate E-mail Faux Pas

In this profile of Bravo chief Laura Zalaznick (which is very good but could have been half the length), we learn that a producer once accidentally sent her an e-mail meant for someone else, in which he rants about her being controlling and overcritical, and calls her a dirty word that rhymes with "runt." This was how she reacted:

She neither laughed it off nor fired anyone. Instead, a few weeks later, she wrote an essay about the experience and published it on a literary Web site called Open Letters. The essay is a thoughtful, brutally honest meditation on the expectations of a woman in power. “I’m probably regarded as being tough, fairly hardhearted, outspoken,” she wrote. “I am occasionally criticized for digging in and being less accommodating to other people’s ideas and criticisms than I ‘should be.’ But this is a weird sort of (double) standard to be held to, especially in a ‘creative’ job where passions are usually what get ideas heard.”

I like that. She could have flown off the handle or played the aggrieved victim, but instead she turned an ugly incident into the opportunity for thoughtful reflection. It probably provided some catharsis for her and gave her a forum to work through her feelings rationally. At the same time, she shamed the letter-writer without destroying their relationship. (In fact, the two are now friends.) No wonder she's had such an incredible career.

P.S. Here is the full letter, including the original email. She kept the offenders' names private, which is an extra nice touch, since certainly those close enough to the situation to matter will know who they are anyway.