by Gary Alexander
March 19, 2024
Spring begins on the earliest possible date today, March 19. Living way up north, near Canada, flowers are blooming outside my window today, and I’m happy to report that early Spring is also a good time for stocks to bloom. I just charted the performance of the S&P 500 from March 15 to April 30 since 1995, and it yields average gains of over 3% for that span, with 79% up-years. Taken together, March and April present a strong tandem (about +2%) in the last 95 years, according to research by economist Ed Yardeni:
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
However, that won’t keep the press from trying to spook us, so I always like to recall some round-number anniversaries in these columns. Here are two March Madness melodramas from 15 and 60 years ago:
On Monday, March 9, 2009 – 15 years ago last week – the Dow reached its lowest closing level since January 3, 1997, at 6547, but America’s leading financial newspaper made the case that morning that we would see a further fall to 1995 levels – to Dow 5000. Their article asked: “Just how low can stocks go?”
The Wall Street Journal was merely reflecting our national gloom. According to Charles Rotblut, editor of AAII Journal, bearish sentiment dominated that week’s American Association of Individual Investors poll, as it “reached a record high of 70.3% on March 5, 2009, just as the bear market was reaching a bottom.”
Even seven years later, on March 9, 2016, Bloomberg called it the “Most-Hated Bull Market” in history.
And last week, the Dow reached 39,200 – closing in on 40,000 – without plunging to 5,000 first.
But I have bigger fish to fry this week. In light of President Biden’s spendthrift budget request last week, first signaled by his laundry list in the State of the Union address the previous Thursday, I thought I’d go back to the birth of the “long election year laundry list budget promising process” 60 years ago, the most massive laundry list ever, the Great Society, delivered at a time when the President’s economic advisors thought we really had enough money to fund their most ambitious wish list – with billions to spare.
“We’re the Richest Country in the World. We Can Do It All.”
– President Lyndon B. Johnson, 1964
On March 16, 1964, President Lyndon Baines Johnson sent a modest billion-dollar request to Congress for a down payment on his declaration of “an all-out War on Poverty and unemployment” in America. It was a year in which the first 200 days of Beatlemania & Budget Mania rivalled FDR’s first 100 days.
By August, LBJ had created the Job Corps, Food Stamps, Medicare and Medicaid, a War on Poverty, the Gulf of Tonkin Resolution on August 7, which escalated the Vietnam War, combining “guns and butter” with rockets, since we had to “put a man on the moon and bring him back safely”! JFK had promised it!
The Greatest Generation lapped it all up. In November, President Johnson won 90% of the electoral votes and his coattails created the biggest Blue Wave in history: The House went 295-140 (68%) Democrat and the Senate turned 66-34 True Blue. These quotes summarize LBJ’s state of peak euphoria in late 1964:
“I doubt there have ever been so many people seeing things alike on Decision Day.”
– LBJ on November 5, 1964, the morning after he thrashed Barry Goldwater
“These are the most hopeful times since Christ was born in Bethlehem.”
– LBJ, when lighting the December 1964 White House Christmas Tree
“We have achieved a unity of interest among our people that is unmatched in the history of freedom.”
– LBJ in his State of the Union Speech, January 4, 1965
In a 1965 poll, the plurality of Americans who said they “trust the U.S. government” was an awesome 75%. That number reversed in a decade, after the ignominious end of the Vietnam War, Watergate, urban riots, and the OPEC oil embargo. By the late 1970s, only 25% said they “trusted the U.S. government.”
It took LBJ only three years to lose trust in himself, and to recant on his giddy hopes of national unity:
“I shall not seek-nor will I accept-the nomination of my party for another term as your President.”
– LBJ, March 31, 1968
The hubris of the Imperial Presidency – that’s the title of a 1973 book by Arthur Schlesinger, Jr., mostly referring to the times from Franklin D. Roosevelt through Richard Nixon – was midwifed by those who ran the Council of Economic Advisors, all of them disciples of British economist John Maynard Keynes.
According to former Fed Chairman Alan Greenspan and his co-author (from The Economist), Adrian Woolridge (writing in the 2018 book, “Capitalism in America”), those economists told JFK and LBJ that “the biggest problem facing the country was that the Treasury was raising too much money. A large federal surplus would act as a deflationary brake on economic growth [so] the government needed to find ways of spending money. Predictably, there was no shortage of ideas for doing the spending…’
That’s why, after the JFK assassination, LBJ doubled down on spending, adding a huge array of Great Society entitlements – Medicare, Medicaid, additions to Social Security, Aid to Families with Dependent Children (AFDC), a War on Poverty, Public TV (later radio), a moon shot, and escalating Vietnam costs.
“Hell,” LBJ said in his 1964 presidential campaign, “I’m sick of all the people who talk about the things we can’t do. We’re the richest country in the world. We can do it all.” And therein lay the seeds of eternal deficits, LBJ’s Great programs that must be funded each year, in highly inflated dollars, forever and ever.
A Fed Chairman Stood in LBJ’s Path – But He Got Bullied into Submission
The Federal Reserve (almost alone) tried to rein in LBJ’s spending plans. On June 1, 1965, Fed Chairman William McChesney Martin – who had been in that office since 1951 – gave a famous warning. He was already famous for saying that his job was to “take away the punch bowl just as the party gets going,” so he tried to do just that, by limiting money supply just as the President was taking silver out of our coins.
In his address to Columbia University’s Alumni Federation on Commencement Day, Mr. Martin said he saw “disquieting similarities between our present prosperity and the fabulous 1920s.” Martin then listed several comparisons to 1929, including the fact that “many government officials, scholars, and businessmen were convinced that a new economic era had opened, an era in which business fluctuations had become a thing of the past.” He said, “Some experts seem resolved to ignore the lessons of the past.”
In the end, Martin sounded like a Biblical prophet, saying there had been “seven fat years of uninterrupted economic progress,” but now, “Prosperity was unequally concentrated…domestic debt was soaring.”
LBJ can overlook a flowery speech, but not tight monetary policy. In their book “Capitalism in America,” Greenspan and Wooldridge said that LBJ invited McChesney Martin to his Texas ranch and gave him the once-over, physically shoving him around the room, and yelling in his face. According to a New York Times report, Johnson told Martin, “You took advantage of me and I’m not going to forget it. Here I am, a sick man. You’ve got me into a position where you can run a rapier into me, and you’ve run it.” LBJ then played the blood card: “Martin, my boys are dying in Vietnam, and you won’t print the money I need.”
Wow! And we thought President Trump’s tweets to Fed Chair Jerome Powell were cheeky? Can you imagine such a war of words and physical confrontation between a President and a Fed Chairman today?
At first, fiat money seemed to work, like a drug. A top Census official said that America’s most pressing problem would be how to consume all the wealth it was producing: “A continuation of recent trends will carry us to unbelievable levels of economic activity in our own lifetimes.” But then came high inflation.
Now, after 60 years, the fruits of 1964’s Great Society are dooming us to deficits as far as the eye can see. The sad truth is that it is near-impossible to balance the budget due to ballooning LBJ-era entitlements.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
This brings us full circle to Biden’s Budget of Fiscal 2025, promising trillion-dollar deficits for as far as the eye can see. They are the sad legacy of LBJ’s “we can do it all” Great Society plans, born in 1964.
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
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March Madness: Dow 5k Fears (2009) & Bloated Budgets Begin (1964)
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The Rotation into the Broad Market Accelerates
Sector Spotlight by Jason Bodner
The Easy Road (After Hard Study) to Riches
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About The Author
Gary Alexander
SENIOR EDITOR
Gary Alexander has been Senior Writer at Navellier since 2009. He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks. For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.
Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s. He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division. Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander
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