History is not fungible. Nor is it ideological, meaning that it can be interpreted differently by the left wing and the right wing. Yet that's what is happening right now regarding the bull market that coincided with the Clinton era, the one that started in 1992 and continued until 2000, when the Dow powered from 3200 to 11,000.First, that did happen. I don't want any Dow deniers out there, although there seem to be plenty of Clinton haters who would like to say that the rally didn't even occur. Occur it did. The discussion right now, though, of course, centers on what will happen to the stock market if you put through Clinton-era tax rates. Most Democrats say that not only did the rate increases not hurt the stock market but because the deficit went down and Treasury interest rates went down along with the deficit, the rate increases actually helped the stock market. Most Republicans either want to ignore than analysis or say that the rally occurred because of the Internet explosion, and that that's what drove prices, not the Clinton-era tax increases. Others say that the rally occurred only because we had gridlock after a series of crucial victories in the House and Senate during the so-called Republican Revolution. First, let me say, I lived through that era. It was when my hedge fund was ascendant, and I studied the bull endlessly. So I consider myself an astute examiner of the period. Second, I want to put things into context. Notice I didn't talk about the bull market in the Nasdaq. The Internet played a major role in that overheated index. You can easily put an asterisk on that performance. But you can't asterisk the industrials. Third, I know this is real heresy, but other than the bull market in bonds that ended up lowering both interest rates and the supply of bonds that sloshed around every day, I think Washington mattered much less than people in this politically charged era understand. Back then, you didn't sit there every minute and obsess about Washington as we do now. Sure, you had a moment where Clinton bashed the drug companies. They got hammered, but they snapped back after some huge merger activity. You did get the peace dividend, but, again, that was minor when compared with the overall surge in earnings that came from globalization and the expansion of our companies overseas.
In fact, to me, the greatest thing about the bull market of the 1990s was how little Washington mattered at all. For all of the griping about the havoc that Democrats wreak on business, it was simply a benign time with a White House that was deeply wired to creating jobs and allowing the private sector to blossom. In short, my conclusion about that era is that the genesis and sustenance of the bull market came from corporate profits. Tax rates just weren't much of a factor in decision making, certainly not as much as the certainty of knowing what they were and what they would be, with a Treasury Secretary from Goldman Sachs, Bob Rubin, who was in his prime and knew how to stay out of the way and get involved only when a foreign crisis, such as the Mexican bond debacle, intervened. So enough with the Washington obsession. It was about corporations spewing cash as the world's economies expanded at a terrific pace. If you get that to happen again, the Clinton era bull market will be repeated.