Newt Gingrich proclaimed last week that no end to the budget impasse was in sight.
The stock market immediately tumbled, with the Dow Jones index falling 60 points in one day. Or at least that is what you would believe if you listened to the market analysts.
Is this true? Did Newt's proclamation really lead to the stock market falling, or were the two simply independent events? Did Joe Investor in Kalamazoo, Mich. sell off his 100 shares of General Widgets because Newt said he and his rabble couldn't strike a deal?
In true scientific spirit, I decided to find out. I placed a long-distance call to Kalamazoo.
"If you are going to interview me, put my name down as Joseph William Investor Jr.," Joe told me sternly. "Otherwise people will think I am a fake."
"Joe," I asked in a sympathetic Barbara Walters voice, "why did you sell off your shares?"
"Them fellas built the whatdoyoucallits that went on them black helicopters they saw in East Lansing last week," he told me. "I ain't putting my money in that kind of outfit."
Looks like choosing individual samples has its pitfalls. So I decided to conduct a poll of 100 randomly chosen investors who had sold shares on that day.
Ninety-eight of them didn't answer their phones (they probably recognized my number from previous scientific polls), so I got through to only two people.
The first telephone was in a village where they raise children for a living. A hoarse voice said "Hillary."
"Why did you sell your shares?" I asked her.
"First of all, I had very little involvement in selling the shares," she corrected me. "I was concerned, and I voiced the concern to my broker, but to say that I directed that the shares be sold is simply untrue. I get a little distressed, a little sad, a little angry that people will impute such actions to me."
"But, but � " I tried to break in, but she hung up.
The second call was to Los Angeles. The voice might have sounded familiar but I am not sure. I asked the same question.
"I need the money," he told me.
"Am I allowed to ask why?" I inquired politely.
"Well, I'm making this video," he told me. Are you interested in investing in it? We expect that it will sell several million copies."
"I am not into porn," I told him, but he persisted, saying that this was about some stupid court case.
He even claimed that millions of Americans had watched his trial on television.
Had that happened, I told him, I would have definitely known about it.
So, in summary, I spoke to three people (male to female ratio of 2:1, which closely mirrors the investor community), and 67 percent of them had personal reasons for selling the shares.
Thirty-three percent wouldn't tell me why their shares were sold, but such secretiveness is common in the cut-throat world of investing.
Hence, it is conclusively proven (within reasonable margin of error) that Newt Gingrich's announcement had nothing to do with the stock market drop.
Which brings me to my point:
Don't believe all those highly paid analysts.
They don't know squat.
V. Lakshman is an electrical engineer who works at OU, all the while hoping he will land a Wall Street analyst's job. Or at least the paycheck.