The boom in anti-depressant drugs is one possible explanation for the continuing global stockmarket bubble, according to new Crikey columnist Dennis Depressant.

Booms don’t need much of an intellectual rationale simply a mildly plausible story the cowboys in the broking houses can tell their clients. More detailed analysis – like arguments that markets revert to the mean in historic dividend yields and P/E ratio levels – never gets a look in.

In this case there were a number of plausible stories: the supposed long-term impact of an historic increase in US productivity; new valuation models; the unique impact of the Web; momentum; even the old “weight of money” theory which underpinned the Japanese market before it crashed.

The latest US Government figures show that the so-called productivity miracle was actually an illusion after all. Dot bomb casualties show that new valuation models were no substitute for value.

Yet the market is still pretty resilient – particularly in the US. The tendency to use dodgy top-line earnings figures to measure profit hides the fact that US P/Es are actually around the 37 mark implying a fall of another 50 plus percent to get back to traditional P/Es. Nevertheless Abby Cohen and others are still predicting 20% year on year growth and there are still proponents of V-shaped recoveries and other arcane concepts.

That resilience, plus the length and timing of the boom, does however correlate with another interesting set of numbers – the rise in consumption of Prozac and other SSRIs.

The long market boom started in the 1980s with Ronald Reagan’s tax cuts and massive deficit spending creating the classic ingredients for asset inflation. The supposedly conservative Reagan actually practised old-fashioned Democrat spending policies but just missed out on the “tax and, 05.” part of the usual Democrat mix. LBJ had done something the same during the Vietnam War.

All in all that would have made the boom not much different than the booms which preceded the US panics of 1792, 1837, 1857, 1865-69, 1873, 1884, 1893-1895, 1901, 1907,1914, 1929, 1962 et al. Booms and busts are not exactly terribly new.

Equally the boom could be written off as just another product of new technology like the booms stoked by railways, electricity, cars and radio.

Yet the pattern after 1987 – now obviously a dip and not a correction or even a major setback – is quite different. The market just powered into the stratosphere and – despite the 60% plus NASDAQ fall in recent times – has stayed very high by historic standards.

So what keeps it so high? There’s simply not enough pot around, and cocaine consumption in the US has been declining, to explain it all with a theory about what they all must have been smoking.

Enter a miracle drug called Prozac. Prozac (a fluoxetine) is an anti-depressant approved for use by the FDA in, wait for it, 1987.

Now Prozac is not your normal type of anti-depressant just used for those poor sods who suffer from real despair and depression. It’s supposedly safe and it makes you feel great. Renee Rivkin, for one, has sung its praises.

Prozac is also approved to treat that condition which affected all those poor dealers from 1792 to 1987 – panic disorder.

From 1987 Prozac boomed. It still has 21% of the US market. Anti-depressants are the third-ranked therapy in the US and, even in 2000, achieved 19% growth. In the past decade total global anti-depressant use has created a $US13.4 billion market.

Of course, since 1996 Prozac’s market share has declined largely due to new drugs in the same sector and generic competition but total consumption is still holding up as resiliently as the market.

So why did the market boom? The normal reasons of loose monetary policy, greed, crookedness and short-sightedness which mark all booms obviously played a role.

But the discovery and distribution of a quick hit drug producing joyful confidence and the dispatching of any form of panic disorder might just have been a contributor too.

And the fact that not even the best anti-depressants cure the underlying condition might just explain why reality is now finally intruding on the party.

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Peter Fray

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