Writing on the Wall...Street
Charles R. Stahl
The transfer of power in the United States went as smoothly as counting one, two, three ... Ford! Already the change has produced some visible improvements, by partially rebuilding confidence and self-esteem around the country. When the nation's confidence in its future will be fully restored, rising stock market prices will follow. The stock market gave a 45-point cheer to the anticipated resignation of the former President, but then, for eight consectuive days after the new President was sworn in, it headed south to the tune of 88 points on the Dow Jones Industrial Average. On August 20, when President Ford named Nelson A. Rockefeller as his Vice Presidential choice, an eleven-point salute greeted the news, and although the market fluctuated widely afterwards, on that day it managed to stage the first rally of the Ford presidency. Since the beginning of 1973 the value of shares listed on the New York Stock Exchange has declined by almost $350 billion, an amount which puts into proper perspective the $25 billion that the country will have to pay for its oil imports this year. Another indication of the vast economic strength of the United States may be derived from an irrelevant yet eloquent figure just published by the US News & World Report: Americans own 600 million pets, i.e. about three pets per capita, on whom they spent $17 billion last year. Apparently, in 1973-1974, the American public stopped buying cats and dogs in the stock market and switched to the real thing .. . thing . . .
When President Nixon entered the Oval Office, the US inflation
was running at 6 per cent per year; when he left it, it had doubled to 12 per cent. In 1969, the GNP was rising at a yearly rate of about 14 per cent, whereas in 1974 so far it is declining at a yearly rate of 1.2 per cent. The federal budget for the year ending June 30, 1969 was $184.5 billion; the last budget proposed by Mr Nixon for the year starting July I, 1974 was $305 billion. In the beginning of 1969, unemployment was 3.4 per cent; by the time Mr Nixon resigned, it exceeded 5.3 per cent. In 1969, the prime rate that banks charged their best customers was 7 per cent; nowadays it is 12 per cent. When Mr Nixon became President, the Dow Jones Industrial Average stood at about 931, and was down to 785 when he resigned. During Mr Nixon's term in office, the parity of the dollar against most leading currencies declined by about 20 per cent.
The Presidential changeover already had a visible effect on the strength of the dollar, which is now at a five-month high, being actively sought in the foreign exchange markets. The Arabs, who have the world over a barrel, are now transferring large sums of money into the United States, and that too should further help boost the value of the dollar as well as have a positive influence on the stock market, where investors will be able to benefit not only from the anticipated bull move but also from the higher valuation of the dollar against other currencies.
Charles Stahl is publisher of Green's Commodity Market Comments and President of Economic News Agency
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