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Nashville Scene Gore Rebounding

"Scene" index shows he's overcoming slow start

By Phil Ashford

SEPTEMBER 27, 1999:  Any regular viewer of the Sunday shout-show circuit knows that the presidential campaign of Vice President Albert Gore Jr. is stumbling, tangled up in his oafish political skills and the public's fancy for new faces.

But for Tennessee supporters of The Prince, there is good news. A more subtle and forward-looking measuring tool has discovered that Gore has already bottomed out and has made something of a comeback.

The tool is the Nashville Scene's Albert Gore Index, a device that seeks to harness the accumulated brainpower of the financial markets to predict the political future. Launched on Sept. 15, 1998, the Goredex now has a full year's experience to review and has produced some credible results.

The Goredex works by tracking the performance of a basket of stocks that would be expected to suffer if Gore were elected president against the performance of the market as reflected in the Dow Jones Industrial Average.

The portfolio is composed of stocks that would have problems if Gore was given the opportunity to apply his strong environmental policies as outlined in his book, Earth in the Balance. Specifically, the index includes stocks in the oil, automobile, forest products, and environmental management industries.

When it was launched, the index was set with an arbitrary value of 1000. Over the past year it has fluctuated, hitting 1054.04 at its highest point and dropping to 915.30 at its lowest point. (The index is inverted: Higher numbers mean good prospects for Gore; lower numbers mean an assessment that his prospects for the White House are shaky.)

In Sept. 1998, Gore trailed Texas Gov. George W. Bush by 10 points in a hypothetical matchup in the NBC News-Wall Street Journal poll. Since then, Bush has raised over $50 million in small donations and stretched his lead in the same poll to nearly 20 points.

In recent weeks, the steady drumbeat of commentary has focused on the political ineptitude of the Gore campaign, the power of the Bush juggernaut, and the unexpected strength of the campaign of Bill Bradley. All of this has seemed rather grim for Gore, but such commentary tends to reflect the sensations of the moment rather than steadier long-term analysis.

One of the cornerstones of modern finance theory is the concept of efficient markets. This theory holds that stock prices quickly adjust to reflect all the information about companies and the factors that can influence their performance. While academics argue about the nuances of the efficient-market theory, its general validity has moved beyond debate.

Hence, the prospect of a strong environmentalist president would be one of the things that Wall Street analysts would review in assessing the future for companies like Exxon, General Motors, or Georgia-Pacific.

Obviously, companies have individual factors that cause their prices to oscillate, but by aggregating them in a basket of companies with common concerns and comparing them to the market as a whole, one can isolate the pricing effect of specific factors.

So what has happened in the past year with the Gore Index? There have been a number of significant turning points that seem to coincide with significant political events. Here are some of the key developments:

From its inception, the Goredex followed a steady downward path, bottoming out at 920.80 on Oct. 2. This followed the release of President Clinton's August acknowledgement of an "inappropriate" relationship with Monica Lewinsky and the release of the Starr report detailing what the president was also doing while talking on the phone to Rep. John Tanner.

As Congress broke for the election and the conversation turned from sex to substance, the index started a steady climb. When the Democrats unexpectedly picked up seats in the House of Representatives, the index was already back over 1000 and peaked at 1021.19 on Nov. 20.

After the November euphoria, things turned sour again for Gore during the House impeachment hearings and subsequent Senate trial, marching down to 945.71 on Feb. 5. The Goredex then drifted for a couple of months, before heading sharply downward to its low-point of 915.30 on April 16, as the full force of the George W. Bush juggernaut started to become clear.

Since May, however, the Goredex began a steady upward climb to hit its peak of 1054.04 before the Labor Day weekend. The recovery coincided with the first cracks in the Bush faŤade, the inept handling of the drug-use issue, and the growth of the nagging suspicion that W. is almost as smart as Dan Quayle.

A little subsequent slippage might be interpreted either as a Bradley boomlet or a healthy correction to premature optimism. Hence, the conclusion all this suggests is that while the business community has been more than willing to throw money at the Bush campaign representing a good shot at victory, it is already showing uneasiness about Bush's ability to get the job done.

How legitimate is this analysis? Less fanciful than is obvious. The stock market, after all, tends to be a good predictor of trends. That is why one of the first signs that a recession is bottoming out is generally when stock prices start to rally.

On the other hand, one could argue that the stocks in the analysis tend to all be big cyclical stocks that don't move as sharply as the market as a whole and are more susceptible to worries about the economy as a whole than to specific aggregated company issues. But, then, indicators of economic weakness must surely indicate troubles for Gore, who is running on the strength of the current administration's management of the economy.

One other thing. The Scene considered trying to construct a parallel Lamar! Index, but was unsuccessful. It was just not possible to identify anyone or anything in nature whose behavior was being affected by the prospect of Lamar Alexander becoming president. Given the ennui Lamar's last ride stirred, perhaps the absence of indicators should have been considered an indicator in itself. It would certainly have been right on the mark.

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