The Stock Market Proved . . . Or Did It?
On September 29, the day the House of Representatives voted down the bailout bill, the S&P 500 opened at 1,209 and closed at 1,106, registering a loss of 8.5 percent. Other stock-market indexes recorded similar declines in share prices.
Politicians and the media were virtually unanimous in interpreting these declines as evidence that the gods did not approve of the House’s action, and in concluding that unless the House sacrificed a goat and passed a bailout bill, there would be Hell to pay. Absent a bailout, the gods would wreak economic disaster on this country and probably on the rest of the world, too, for good measure.
House members got the message, and they got the loot, too, as they spent the rest of the week bulking up the bailout bill with every form of pork they could think of, to render the passage of an amended bill more politically savory. Having cut their deals with one another, and, they devoutly hoped, with the gods, they kept their part of the bargain on Friday by approving the Emergency Economic Stabilization and Congressional Grand Larceny Act of 2008.
Meanwhile, the stock markets had rebounded somewhat, with the S&P 500 closing on Tuesday and Wednesday about 5 percent above its Monday close. On Thursday, however, with the vote on an amended bailout bill looming in the House, the market closed down about 4 percent, and on Friday, after the House had approved the bill, it closed even lower, at 1,099, which was slightly lower than Monday’s frightening close. Were the gods not happy after all?
To propitiate the gods fully, the House leadership set out early the next Monday to sacrifice the unfortunate goat on the steps of the Capitol. To their horror, however, not to mention the votes they lost with their animal-rights constituents, they have since discovered that the deal to sell their souls has evidently failed. They sold the souls, all right (what little they had left of them), yet stock prices have continued downward at a brisk pace. Every day this week has brought a further loss. Yesterday the S&P 500 closed at 910, down 17 percent from last Friday’s close. And as I write (Friday morning, Oct. 10), the market is fluctuating violently at still lower levels.) It begins to look as though the goat died in vain.
Reading the stock market’s tea leaves is no easy task. If it were, I would have made myself a billionaire a long time ago. Yet very often politicians and other schemers seize on market movements as proof of a proposition they need us to swallow if they are to achieve their ends (at our expense, of course). So it was on Monday, September 29, and the several days that followed. The stock market showed, the politicians and the braying asses in the media warned us, that unless the bailout bill was passed, our stocks would become worthless and, rather than enjoying a comfortable retirement, we would see our life savings evaporate and find outselves eating cat food instead of caviar in our golden years.
Let’s face it: they didn’t have a clue why the market fell on September 29. In truth, nobody knows why it goes up or down as it does on a particular day. Such interpretations are sheer guesswork. The market’s gyrations reflect every idea, emotion, close analysis, and baseless hunch that millions of traders bring with them as they place their orders. Sometimes it seems more or less obvious that the market has moved in a certain direction for a particular reason, but even on those occasions, our interpretation may be wrong. To let the politicians get away with the biggest daylight robbery of all time because of fears occasioned by a short-term drop in the stock markets is folly, indeed.