WASHINGTON, March 18 (UPI) -- Terrorists attacks on commuter trains in Madrid, and heightened terror alerts in France, not to mention continued violence in Iraq, are keeping tensions high around the globe. And as the United States marks exactly a year since its war to topple Saddam Hussein, there is greater cautiousness about the possibility of terrorists attacking the U.S. mainland, which at first blush would all seem to suggest a potential dampening on investor sentiment.
Yet despite these increased geopolitical risks, the stock market is experiencing nothing short of a boom, and Wall Street is reaping in the rewards. This, in turn, has spurred markets worldwide to gain strength from a year ago.
For the first time in three years, many brokerages are offering their top traders a raise in their bonuses, and their leaders are enjoying particularly handsome rewards this year. For instance, Citigroup reported earlier this week that its top three executives earned a combined $103 million in 2003. The world's largest banking group reported that its chairman, Sanford Weill, pocketed $44.7 million in total, including a $29 million bonus, nearly five times more than he took home the previous year. Meanwhile, chief executive Charles Prince got $29.2 million, including a $7 million bonus, while chief operating officer Robert Willumstad secured $28.6 million.
Certainly, Citigroup's pay scale reflects the return of good times on Wall Street, and the bank itself stated that 2003 "was an excellent year" for them.
Indeed, it's been a good year for all brokerage houses, as the Dow Jones Industrial Average has climbed from 8,342.38 in January 2003 to over 10,580 this week, marking a 27 percent increase in gains over a 15-month period. The tech-heavy Nasdaq index, meanwhile, has risen to over 2,000 from 1,346.93 during the same time, surging 48 percent.
The persistence of low interest rates, with the federal funds target rate remaining at its record low of 1 percent has certainly helped, coupled with renewed confidence that the worst is over for the U.S. economy. In fact, so strong is that confidence that Wednesday's massive bomb attack on a Baghdad hotel failed to dent the buzz on the stock markets, while last week's bombings in Madrid only had a temporary negative effect on the bourses worldwide.
Yet, some investors, notably Warren Buffett, are cautioning against having too much faith in stocks right now.
In his annual letter to shareholders last week, the chairman of investment group Berkshire Hathaway warned against buying up stocks, pointing out that there wasn't really anything worth buying.
"In recent years, however, we've found it hard to find significantly undervalued stocks, a difficulty greatly accentuated by the mushrooming of the funds we must deploy," Buffett stated.
He also pointed out that Berkshire Hathaway's investment gains rose to $2.73 billion in 2003 from $566 billion the previous year in part because the group bought up foreign currencies and sold off the greenback.
"As an American, I hope there is a benign ending to this problem "(the dropping dollar), Buffett stated.
Known as the Oracle of Omaha, Buffett was proclaimed by Forbes magazine as the second- richest person in the world, as a result of the Nebraska-based Berkshire Hathaway's financial investments over the decades. His reluctance to invest in high-tech shares during the 1990s drew much attention as well as criticism from those who reaped in the rewards of the bubble economy. But with the collapse of that bubble, his foresight has been particularly noteworthy.
As a result, Buffett's latest comments on the stock market have caught the eye of many investors, but that still hasn't stifled institutional investors' appetite for more equities across the board.
Still, gains on Wall Street have yet to be felt on Main Street, as many workers continue to fret about job security and new job opportunities. Indeed, as President George W. Bush and Democratic hopeful John Kerry gear up for the elections in November, the state of the U.S. economy, and the labor market in particular, is likely to be a key issue for voters.
And the irony is that while Wall Street is booming, the average investor continues to feel that economic conditions are far from robust. And many on Main Street continue to hesitate from investing too heavily in the equities market.
