Tuesday, September 30, 2008

The gyres! The gyres! Old Rocky face, look forth!

Sombeody's gonna have to explain it to me, I'm not sure what it means. Fortunately, the NYT is available to do just that:

Though financial markets around the world plunged on Monday after the rejection, the American markets rebounded Tuesday with both the Dow Jones industrial average up 2.5 percent and the Standard & Poor’s 500-stock index up 3.2 percent. The Dow was up 260 points in early afternoon trading.

Investors seemed to be optimistic that Washington may still approve a financial rescue plan, after the House’s defiance of the president and party leaders left lawmakers groping for a resolution. While the markets were calmer, overnight lending between banks was stalled, analysts said, exacerbating the tight credit market.
That was the version posted earlier in the article. Since then, the market has simply gone up:

Though financial markets around the world plunged on Monday after the rejection, American stocks rebounded Tuesday. The Dow Jones industrial average was up more than 300 points in early afternoon trading, and the broader S.&P. 500 and New York Stock Exchange indexes posted solid gains on renewed optimism that the bailout would eventually be enacted, though the gains were not enough to retrace Monday’s sharp losses.

Credit markets continued to tighten, however, with investors continuing to shun risk in favor of Treasury securities. Overnight lending between banks remained stalled, analysts said.
So the DJIA is an economic indicator; or it doesn't really mean all that much. And the movement of the market clearly tells us something; if we fit that interpretation into the narrative we've all agreed upon.

You see, the market is "up" because the market expects that Congress, leaderless and divided and harried by the electorate and facing re-election in five weeks and shocking everyone by refusing yesterday to panic as the market dropped, will panic on Thursday and make everything alright. And the market "knows" this because....well, because the priests of the Oracle say so. Or something.

Anyway, the only possible explanation for a rise of 300 points after a fall of 777 points is that the market knows it will be bailed out by Thursday. Right? I mean, it couldn't be anything else. The causal relationship is so clear. After all, if it wasn't news, the Times wouldn't print it, right?

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