This Week

Issue: "Postmodern politics," Sept. 12, 1998

Democrats: Losing Capitol?

Who was most spooked by the Dow's wild ride last week? Not corporate executives with stock options in their compensation packages. (The CEO of Mattel lost $24 million in a single day.) Not college presidents whose endowment funds shrank, or even individual baby boomers whose retirement plans tanked. The most nervous American of all, by law, doesn't even know what he has invested in stocks. Thus President Clinton's worries were more political than financial. With scandal at home and unrest abroad, it seems the only thing keeping his approval ratings high has been a strong economy. If that's the case, a sustained market downturn would almost certainly mean the same for his administration. With half the voting public invested in stocks, Democratic hopes of recapturing the House may also be tied to the market. The lesson is clear: Scandal and terrorism aside, in the minds of many voters, it's still the economy, stupid.

After the fall

Ask the operational head of one of America's most successful brokerage firms what's wrong with the stock market, and he's as likely to mention an impaired U.S. president as he is the financial turmoil in Russia and Asia. Robert Avis, vice chairman of A.G. Edwards and Sons, headquartered in St. Louis, told WORLD that last week's highly volatile stock market was almost certainly not "an indication of something that is problematic in the economy to come." "Interest rates are low, have been low, and are probably going to go lower," said Mr. Avis. "Inflation is so low we probably ought to worry more about deflation than inflation. The precursors to a recession just simply aren't on the scene." Mr. Avis called the market's huge 512-point drop on Aug. 31 a "painful cleansing," but wasn't particularly alarmed by it. "What we're looking at today is a very sound economy, with almost no external reasons for slipping into recession." Did the Clinton scandals help fuel the market roller-coaster? "I don't think there's any question about it," Mr. Avis said. He explained that "follow-the-leader fear" gave the day its downward momentum-but "some of that initial fear clearly came about by virtue of concern over the presidency. Who's in control? People naturally tend to ask that question right now.... The perception that Washington is distracted destroys investor confidence faster than anything else." At the same time, he pointed out that before the big price drops of the last couple of weeks, there had been five similar gigantic adjustments since World War II. "The 1973-74 decline was a horrendous 42.6 percent. The other four were 21.8, 22.3, 29.3, and 29.5." By comparison, the 1,000-point correction of the last several weeks amounted to just over 10 percent of the Dow's value. Stressing that he's not a professional analyst, Mr. Avis nevertheless predicted: "It will take a while to heal these wounds, but I think before the year ends, you'll see us back up at least at the level where all this started." Not all stock-watchers are so sanguine, of course. Some, concerned about the international situation and Y2K on the horizon, are predicting an extended downturn. But everyone agrees the markets are volatile; both bulls and bears are hanging on for a wild ride.

Chemistry 101: alcohol is poison

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Metal detectors and see-through backpacks will not be common as college students head back to campus, but some university presidents may want to borrow a breath analyzer from a nearby high school principal. Louisiana State University received a public relations black eye last week when one of its fraternities, Sigma Alpha Epsilon, was ordered to pay almost $23,000 in fines stemming from 86 counts of underage drinking. In August of 1997, 12 revelers were found unconscious on the floor of the SAE house after an evening of celebrating the new pledge class. One of those new pledges, 20-year-old Benjamin Wynne, was rushed to the hospital with a blood alcohol content six times the legal standard for intoxication. He died the next morning. "There's no admission of guilt," stressed Hillar Moore, an attorney for the fraternity's president. Mr. Moore argued that the victim, though not quite of legal drinking age, was nevertheless an adult responsible for his own actions. But the court found plenty of responsibility to go around. In addition to SAE's fine-which will go to support binge-drinking education programs-the fraternity has been kicked off campus for three years. The bar that served the alcohol faces the same 86 counts and high fines. And LSU is trying to avoid a repeat this fall by sponsoring non-alcoholic events on campus and moving fraternity bids to Sunday, when bars in Louisiana are closed.

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