The Dow is now officially in a bear market, defined as a greater than 20% drop from the last high point. This is the third bear market of Bush's two terms in office.

The first bear market was from May, 2001 (11,350) to September, 2001 (8,062), a decline of 29%. The second was from March, 2002 (10,673) to October, 2002 (7,197). a decline of 33%. The most recent bear market started last October (14,165) to around 11,300 today.

By comparison, Clinton had a very short bear market in 1998 associated with the Long Term Capital Management implosion. But the Dow quickly recovered; the Dow was higher in November than it had been in July. The first two Bush bear markets were almost continuous, and the bear didn't end until March, 2003--almost two years after it began. The Clinton 'bear' had a decline of 20.4%, barely qualifying as a bear market.

Bush's father also had one bear market in the Dow. From July, 1990 (3,010) to October (2,354), a decline of 22%.

Reagan had two bear markets: the first lasting from June, 1981 (1.023) to August, 1982 (770), a decline of 25%, and associated with the deepest recession since the Great Depression. The second bear market was of course the 1987 crash: the month of October, 1987 alone witnessed a 40% decline from top to bottom. Unlike the 1998 correction in the Clinton administration, this bear market was protracted (the Dow didn't recover its October, 1987 high until July, 1989 in the first Bush administration).

The Dow under Jimmy Carter ended about where it started, but along the way suffered one bear market from the beginning of his term (954) to March, 1978 (770), a decline of about 20%.

Nixon suffered two bear markets, the first from May, 1969 (937) to May, 1970 (700), a decline of 25%. The second was the worst post Depression bear; it lasted from January, 1973 (1,000 to October, 1974 (665), witnessed a decline of nearly 35%, and lasted nearly two years. The only thing comparable is the 2001-3 Bush bear market.

All figures before Bush I are monthly averages, as my source (MSN Money) doesn't give monthly highs and lows before 1988.

Somehow, Republicans have been rewarded with the reputation for being good for business, but the truth of the matter is that no one compares with Nixon and Bush for once-in-a-generation portfolio busting bear markets. Now it looks like Bush is outdoing Nixon, and we'll have his two terms of office bracketed by bear markets. And Bill Clinton had the best bull market since Roosevelt's first term.

I posted earlier about just how bad the Bush market has been in an historical context. You're right in identifying the Nixon administration as the only historical precedent (going back at least through the 1950s). When I compared all periods of equal duration to the Bush era, it turned out the Bush era was worse than the vast majority of other periods of that length on record. The only periods that were substantially worse were ones ending in the early-to-mid 70's. Like you said, this is a once-in-a-generation (or rarer) portfolio buster. Normally when there's a decline of 20%, there's a relatively prompt and robust rebound. On Bush's watch, bears are followed by anemic recoveries and then more bears, such that the long-term post-inflation trend is downwards.

O.k. I am going to play devil's advocate here a bit. I think that both Bush II and Nixon inhereted things beyond a simple bias toward business and free markets to correct. Nixon inhereted the Vietnam war debt which ultimately lead to the inflation of the 70's, Bush II inhereted a economy built around asset bubbles much thanks to the chairman which was clearly unsustainable. Clinton was beneficiary of of the IT revolution, Carter was beneficiary of unwarranted exburence over the idea that the mess of Nixon, which was the delayed mess from before, was behind us, and which Reagan's era clearly showed was not behind us.

Point being one can't simply imply that a bias toward low taxes and low regulation is bad for economic performance, ( and God knows Nixon doesn't even belong in the same policy class as Reagan), based upon historical record. The weight of circumstance over rides the ideology.

One must also, (for Arkady), be carefull of such broad historical comparisions. Is it fair to throw Reagan, Nixon, and Eisnehower in the same tub? So much of circunstance bears down upon each each of these administrations. I don't mean to imply that Dems have just had the luck of the draw, but I also wouldn't feel comfortable equating the presidency of Clinton with that of Roosevelt from a policy standpoint.

Perusing the business press today, I found this:

<link>

Historically, the economy performs better when a Democrat is in the White House than when a Republican is president. Here are some examples, by my calculations, for full four-year periods from 1948 through 2004:

Unemployment has averaged 4.6% when a Democrat is in the oval office and 6.2% under a Republican administrator.
The stock market has risen 46% under a Democratic president and 32% with a Republican in the Oval Office.

The U.S. budget deficit has averaged $11 billion under a Democratic president, compared with $163 billion when the president was a Republican.

The trade deficit has averaged $83 billion when a Democrat was in the White House and $117 billion under a Republican president.

Now, the interesting thing about these comparisons is how far they go back in time. Had Kellner gone back to 1928 instead of 1948, his conclusions probably would have been even stronger. Arkady has compared the unemployment and GDP growth rates, and found that periods with Democratic administrations almost always have higher GDP growth and lower unemployment. Now Kellner is telling us that the stock market and the twin deficits are also better under Democratic administrations.

As for your individual points, I'll try to return the favor and play the Devil's Advocate to you.

Nixon inhereted the Vietnam war debt which ultimately lead to the inflation of the 70's.

I would rather say that Nixon inherited the Vietnam War, promised to end it, but let it drag on through his entire first term; we didn't withdraw from Vietnam until Ford was in the White House. Nixon continued and added to the debt. Nixon also continued the Great Society programs of Johnson (he couldn't eliminate them immediately). Nixon's deficits were as bad as Johnson's and Nixon's Fed also printed money under the inept stewardship of Arthur Burns. Inflation got started under Nixon (remember the wage-price controls of 1971?). It only worsened in successive administrations. Blame LBJ for busting the federal budget and for starting the Vietnam War, but allow that Nixon continued in his path.

Bush II inhereted a economy built around asset bubbles much thanks to the chairman which was clearly unsustainable.

Not true. Bush II inherited a tech stock bubble, which was partly caused by the fear over Y2K. But Fed Funds rates were not particularly low in 1999, and by May, 2000 they were at 6.5% for Chrissakes. The Chairman did Bush II the favor of lowering them to 1.75% by the end of 2001. That's when the real bubble got started. Imagine, Fed Funds rates were below 2% from late 2001 to late 2004, a 3-year period.

Carter was beneficiary of unwarranted exburence over the idea that the mess of Nixon, which was the delayed mess from before, was behind us.

If this were true, how come the stock market started declining the first month of Carter's presidency, and didn't stop falling until a year later? As I noted, Carter's one bear market occurred during his first year in office. There really wasn't much exuberance during the Carter years, and the Misery Index was high. I'll grant you, it wasn't Carter's fault. He inherited the inflation which LBJ and Nixon had cooked up, and ultimately lost his bid for re-election because of the Iran hostage situation and Volcker's punishingly high rates. But he appointed Volcker to tame inflation. These high rates ultimately led to the 11% unemployment rates in 1982. Once Volcker starting cutting, the economy recovered, and by 1984 it was Morning in America. This also shows how the man who inherits a terrible situation (FDR, Reagan, Clinton) often can turn things around. Reagan also had the stimulus of deficit spending every year of his two terms, but Clinton achieved his recovery and economic boom while reducing deficits--which is much more impressive. Likewise, the Dow rose by a higher percentage from 1993 to 2001 then it did from 1981 to 1989.

Points all well taken.

genedio:

The Dow is now officially in a bear market, defined as a greater than 20% drop from the last high point. This is the third bear market of Bush's two terms in office.

Is it? I have heard some talking heads say it wasn't because it didn't CLOSE under 20%...

Of course it's a distinction without a difference, since it's so close as to be insignificant.

But still...official...or not official?

"Clinton was beneficiary of of the IT revolution"

Who wasn't? The IT revolution began in the 1950s and continues today. The Clinton era was noteworthy for the rapid expansion of public use of the Internet, of course, and that benefited that era's economy, but the 1970s were noteworthy for the rapid expansion of computers in business, and the 1980s for the rapid expansion of PCs in homes. So, there's no reason to simply start with the assumption that there was something about the IT advances of the 90s that made that exceptional economic growth inevitable. IT has been advancing robustly for generations, but robust economic advancement hasn't been so consistent.

In fact, the Clinton era was noteworthy for an unusual slowdown in the advance of computer chips. Moore's Law predicted the doubling of the number of transistors in integrated circuits every two years (in rough terms, computers getting twice as fast every two years). But, around the time Clinton came to office, chip manufacturers started finding it hard to keep pace with that trend, for the first time. The paths on chips had gotten so tiny that the wavelengths of light, itself, were becoming an obstacle to printing those chips. So, for most of the Clinton era, the "revolution" was that chips were no longer getting twice as fast every two years, as they always had before. Electrical engineers spent years struggling to come up with new ways around the new problems imposed by raw physics, before chip improvements returned to their former blistering pace of improvement.

See here:

<link>

You'll note that the Clinton years are the ones with the new chips sitting below the trend line. For that reason, if the economy of the Clinton years had been sub-par, it would have been possible to make excuses for him, by pointing out that the IT Revolution went through an important set of growing pains on his watch, which kept the most fundamental accelerator of IT growth off its traditional pace for a few years. But, of course, we don't need to make excuses for the Clinton-era economy, since it was wonderful.

That's the way it goes. When Republicans are in the White House, clever folks need to come up with all sorts of clever explanations for why economic underperformance isn't their fault, while when Democrats are in office, we can allow actual economic results to speak for themselves.

It's one of those things like "recession" where there are standard definitions, but nothing formal, so I suppose one can game those fine distinctions.

Maybe I was a day early, but the handwriting was clearly on the wall. Today the Dow closed at 11,215, which is a full 100 points into bear territory. If this market matches the other Bush bears, it'll drop 30% to 10,000. At least now I can say the Dow was higher in the Clinton administration. Nya, Nya, Nya!

Of course, as I'm so fond of pointing out, the dollar has fallen by a third since Clinton was in office, so investor pain is palpable. That's why so many have switched their allegiance to emerging markets or foreign markets. Bush can't run the blasted country.

And as I'm also very fond of pointing out, there is now no place to hide except commodities, and you can blame Bush and the Fed for that, too. What were they thinking? Did they really think the people were that dumb?