Tuesday, July 16, 2002

I DO BELIEVE IN SPOOKS! Why is the stock market tanking? Joe Conason has the answer. Writing in his new Salon-based blog, Conason distills it down to this key sentence:
Bush's inability to focus and provide real assurance about the direction of the economy and the integrity of financial markets is spooking investors.
I like Joe Conason. As kneejerk lefty pundits go, he's a good read: articulate; intellectually honest, and impeccably researched. But like most people who come to the table with a pre-ordained conclusion in search of supporting facts, at some point he must resort to "proof by assertion." His entire agenda would collapse without some key argument being valid, and if there is nothing out there to support its validity, he simply claims it as a given, and moves on.

Now, I'm no economist -- but neither is Conason, and it's perfectly obvious that he's more interested in tarring Bush than getting to the bottom of this market dynamic. To lay the blame on anything Bush said (or failed to say) assumes causality rather than mere correlation -- the lamest argument in the book, and the quickest to be abandoned as a matter of convenience. What's Conason going to say when the market eventually rebounds? For sure, he won't be crediting Bush's newly-honed ability to focus and provide real assurance about the direction of the economy.

Look -- it's all perfectly simple. The markets are tanking because Corporate America has been put on notice that it can no longer make its quarterly earnings targets by cooking the books. A certain amount of fantasy wealth now has to be wrung out of the system. If that means the Dow, accurately valued, belongs in the neighborhood of 7500 or thereabouts, then that's where we're headed. When investors are convinced that the numbers are a fairly close reflection of the truth -- when, for the first time in many years, they can make sound decisions based on reality -- then, and only then, the markets will stabilize and grow again.

To the extent that it was Bush who put Corporate America on notice, perhaps Conason can fairly lay some of the "blame" at Bush's feet. But you can blame Bush for giving an ill-conceived speech that had the undesirable effect of "talking down the economy" -- or you can praise Bush for risking his political capital and accepting a certain amount of economic pain as the necessary price for imposing disciplined accounting principles. In the end, how you characterize Bush's speech has very little to do with the timing and substance of his remarks, and everything to do with whether you simply want to diminish a president whom you still believe was not legitimately elected.

(Besides -- if Conason were a truly savvy investor himself, he'd recognize the tremendous buying opportunity that is at hand, and start larding up his IRA with a few good index funds.)


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