TOPICS > Economy

Surging Stocks

December 11, 2003 at 12:00 AM EDT


JIM LEHRER: The Dow Jones Industrial Average closed above 10,000 today, the first time since May 2002. John Steele Gordon is a market historian and author of “The Great Game: The Emergence of Wall Street as a World Power.” Mr. Gordon, welcome.

JOHN STEELE GORDON: Thank you. Glad to be here.

JIM LEHRER: First a basic. Tell us what the number 10,000 represents. What was added up to make this sum total?

JOHN STEELE GORDON: Well, what was added up was the prices of 30 large stocks and then fit into a very complex formula that would make it consistent over time.

JIM LEHRER: And these 30 stocks, in other words, the prices of these stocks when added up together made 10,000 today, that was the total?

JOHN STEELE GORDON: Right, allowing for a very complex formula to make it consistent.

JIM LEHRER: When was the last time it was this high?

JOHN STEELE GORDON: It was 18 months ago in May of 2002. It was on the way down then.

JIM LEHRER: Why is 10,000 important?

JOHN STEELE GORDON: Well, economically it’s not. It’s only one higher than 9,999. Psychologically it may well be important because human beings love big round numbers.

JIM LEHRER: Is there an example in history where a number like this had a psychological effect that was substantial?

JOHN STEELE GORDON: Well, I can’t think of a particular instance but it tends to — when it happens, people tend to say all right now the market is really going up or really going down and I should do something because of that.

JIM LEHRER: That has happened in the past?

JOHN STEELE GORDON: It has indeed.

JIM LEHRER: Can it be expected this time?

JOHN STEELE GORDON: Sometimes yes and sometimes no. The Dow crossed the 1,000 four times before it finally crossed it for what let us hope is permanently. It took 15 years to finally get across it.

JIM LEHRER: What if it goes back to say 9,994 something like that tomorrow, does everybody say never mind?

JOHN STEELE GORDON: No, no, I don’t think so.

JIM LEHRER: In other words, this 10,000 today is big deal no matter what happens tomorrow or the next day?


JIM LEHRER: Now is the — does this reflect, should this 10,000 today be read by laypeople at least, not you experts but laypeople as a reflection of a confidence in the market in the economy, or is this leading confidence, in other words, should people say this is terrific now I can do this and this and this or does this mean they have already done these wonderful things and that’s why the market went to 10,000?

JOHN STEELE GORDON: Well, the market reflects economic reality in the long run; it reflects human psychology in the short run. And so it all depends on how people interpret this. The stock market is the world’s largest Ouija board with millions and millions of people pushing at each other. The sum is where the Dow closes.

JIM LEHRER: What is the next big benchmark then? If 10,000 is a big deal, then what should all of us who report and wonder about these things start looking for as the next big one?

JOHN STEELE GORDON: Well, that would seem to be the all-time high on the Dow, which is 11,700 and something or other which was reached in very early 2000.

JIM LEHRER: That’s the highest it’s ever been?

JOHN STEELE GORDON: That’s the highest it’s ever been.

JIM LEHRER: How long did it take to get there?

JOHN STEELE GORDON: Well, the Dow started in 1896 at around 40 and so it took slightly over 100 years.

JIM LEHRER: When it went from 10 to this 11-7 was that a big dramatic. That was back when the market was really swinging, right?


JIM LEHRER: That was a special time?

JOHN STEELE GORDON: That was in the middle of the dot-com bubble or actually towards the end of it. It first crossed 10,000 I believe in 1999. So it was only about a year before it reached 11-7 and then began to sink and finally got down as low as 7,200.

JIM LEHRER: When you analyze all of the economic factors that exist in the country right now, does this 10,000 make sense to you?

JOHN STEELE GORDON: Well, I mean I’m not a market analyst. I’m a market historian. So I’m perhaps the wrong person to ask that question to.

JIM LEHRER: But I’m going to ask you anyhow. Look at it from the market standpoint. In other words, look at what the market looks at. You study the people who do the market. What — based — go through them and look at it. You don’t have to go through it as an economist, go through it as somebody who studies the market and the people who work on the market and go through their eyes and minds. Does this make sense? Is this a real number in other words?

JOHN STEELE GORDON: I personally suspect that it is because one thing presidential election years tend to be pretty good for markets because the government is really anxious that the economy do well. And when the economy does well, the market does well.

JIM LEHRER: Would you expect the 10,000 day today to lead to other things for separate and apart from the market tomorrow, the next day, in other words, is this a confidence-building move today?

JOHN STEELE GORDON: It certainly will be a confidence-building move if it’s confirmed. If the market stays above 10,000 for any length of time that would certainly be a positive indicator.

JIM LEHRER: Okay. But today by itself is not going to do that?


JIM LEHRER: Mr. Gordon, thank you very much.