The Dow

My statement of the obvious today is that the stock market is a temperamental and reactive creature.... So can smart people on both sides in the fight over the bailout bill calm down and stop citing it's wild fluctuations as evidence for or against the bill's importance or success? Two things are pretty obvious to me: First, the stock market took a serious nosedive as a direct effect of the House vote last Monday. The correlation was really quite stunning, and in a circular way, it was sort of good news. That there was an irrational sell off and then a fairly quick rebound on the heels of some acute bad news was, if anything, evidence that the Dow was behaving as irrationally as it always behaves. But none of those events fundamentally change the nature of the crisis. People thought the bill would pass. It didn't. This seemed unpredictable and scary. So the Dow dropped.

After Friday's vote, the Dow dropped again, but less acutely. That sell off was perhaps more surprising than the first, but also, in a way, was perfectly typical stock market behavior. Yes, the predictable thing actually came to pass--but it heralded a new and scary time in American financial history, and the uncertainty of a scheme that places a pretty big bet on a technocrat's ability to accurately assess the future value of a lot of worthless junk. This, again, seemed unpredictable and scray. So the Dow dropped.

Right now, the Dow is up 50 some points, back above our arbitrary friend 10,000, and being above 10,000 might just restore enough investor confidence for the day that it continues to rise. Or maybe it won't. Either way, it will say almost nothing about the success or failure of the regime that kicked off on Friday. And if that regime "succeeds", it doesn't mean the Dow won't fall fairly sharply in the coming months anyhow.