I was just watching Secretary of the Treasury Henry Paulson on MSNBC. His news conference reinforced a suspicion I began courting a couple of days ago. Then, he went before the press to explain how additional actions that the government was taking would ease the credit crunch and get money moving again. The Dow took a nosedive. Today (maybe it was yesterday, it is hard to keep these things straight anymore) Bush told the media that the economy was going through a rough patch but that his administration were getting things under control. The Dow took another nosedive.
My wife, who trains dogs, is always after me not to coddle our dogs when they are spooked by something. When I reassure them that everything is okay, they conclude that -- if I am worried enough to reassure them -- they must really have something to worry about.
Investors can't be less rational than dogs can they?
Investing is ultimately an exercise in confidence. When our leaders keep telling us that everything will work out -- when these leaders, particularly, tell us that -- then we get spooked. And when they try to explain things while doing their best Alan Greenspan imitation it gets really scary.
So here is a modest suggestion for Mssrs Paulson and Bush: Shut. Up.
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