The Unsung History of the Bush and the Technology Bubble
An interesting thing happened in a blog debate today. It turns out that there's a sort of a money trail that shows interesting details about the relationships among the political campaign, the energy industry, and the painful implosion of the technology bubble. It starts in early 2000, when the Bush campaign was still an unknown quantity, and connects the dots.
The NASDAQ peaked in March 2000, and began to correct, but the NASDAQ's a broad index; the decline was led by the technology sector, which carried excessive P/E ratios at the time. 3Q2000 was the first major transfer of equity funding away from tech.
The 15-stock DJ Utilities index was at 325 on August 1, 2000; by September 15, it had reached 397, a gain of 22%. That 22% gain represents a vast sum of money, and that money didn't come out of thin air. During the same seven week period, Exxon/Mobil equity prices gained 18%.
A great deal of the money that lifted Exxon and the DJU came out of tech, particularly out of telecom, where the P/E ratios were particularly inflated. Both Nortel and Lucent equity prices peaked around the end of August, 2000, and by the end of September, each had corrected by around 30%. That decline amounted to hundreds of billions in market cap. Probably not enough to account for the entire DJU move, but enough to identify a sector taking a major hit from the rush of equity into energy, beginning in August, 2000.
The telecom crash was the beginning of the avalanche, and led it all the way down the mountain. By the start of 2Q01, Nortel and Lucent had each lost between 85% and 90% if their market cap; by that month, the broader NASDAQ index had plunged from its March 2000 peak at 5048 to 1639, a 67% drop. This was the real tech implosion . The games that were being played within the energy industry triggered it.
The money trail's pretty clear: the California energy crisis was manufactured by energy companies very close to the Bush/Cheney campaign, and directly triggered the implosion in technology equity; direct actions of Bush's allies "popped" the tech bubble, just in time for the downturn to be useful in the last days of the 2000 election.
Isn't that SPECIAL?!?