Economy 2003: Anxious And Waiting

It was the year the economy roared back, the markets went up, a Wall Street boss was taken down and financial scandals spread.

As Illinois Sen. Peter Fitzgerald put it: "The mutual fund industry is now the world's largest skimming operation."

But in 2003, the economy's recurring refrain was the phrase "jobless recovery."

The year began with worries about war in Iraq. The Dow fell below 8,000 in February, the economy was, as Wharton School of Business economist Jeremy Siegal put it, "nervous, anxious and waiting."

But as U.S. troops advanced on Baghdad, the mood changed.

Mortgage rates plunged to 30-year lows and homeowners rushed to refinance.

That and the president's tax cut package put money back in consumers' pockets and they went out and spent it.

"The consumer has carried the economy on his back like Atlas carried the world, and we don't know if he's going to shrug it off or he's going to get tired," says Arthur Cashin, of UBS Securities.

But while the economy came to life, the job market didn't, and pink slip parties were packed.

Even chief executives found their jobs in jeopardy.

"This is certainly the year of living dangerously if you're in the corner office," says Forbes Editor Bill Baldwin.

The CEO's of Boeing, Motorola, Putnam Investments and Strong Mutual Funds were shown the door.

"Boards of directors are very jumpy," says Baldwin. "They're pushing people out when they get into even a little bit of trouble."

Tyco's former CEO Dennis Kozlowski was in big trouble - on trial, accused of bilking his company out of $600 million. He even billed the company $1 million for his anniversary party in Italy, which featured, as a home video showed, gladiators at the door, posing Adonis's by the pool, toga-clad beauties scattering rose petals in a Roman orgy of excess.

Only Martha Stewart could upstage that performance.

The Securities and Exchange Commission accused her of insider trading; and the feds charged her with a cover up.

"Martha Stewart is not being prosecuted because of who she is but because of what she did," said Manhattan U.S. attorney general James Comey.

In January, the home decorating diva gets to plead her case in court.

"It's gonna be a great thing to watch," says Baldwin. "People are going to be sitting around it like Madame LaFarge at the guillotine."

The smooth blade of the guillotine fell fast on Dick Grasso's head, after the New York Stock Exchange chairman's pay package of nearly $200 million was exposed.

The stock market with this revelation has become a symbol I think of greed and I think. And I think it's the wrong symbol," said Wall Street observer Jim Grant.

Grasso heard the closing bell, and he was gone. But Wall Street's bulls were not scared by scandal.

In December the Dow broke 10,000 for the first time in a year and a half.

"People have not run out screaming a plague on all your houses I want nothing more to do with you. And that's really a great saving grace for this country and for Wall Street," said Cashin.

The markets will close 2003 up for the first time since the Internet bubble burst back in 1999. Thus ending three years of 401K misery, but analysts caution, "be careful."

"Just because the stock market went up a whole lot in 2003, doesn't mean that we're out of the woods,'' said Baldwin. "If you're out of work now and looking for a job, it's still going to be hard. That is not over yet."

The vitals signs may be good, but 2004 will show whether this economy is fully recovered.