Markets as Rorschach Tests: Dow up 400

September 30, 2008 2:00pm by Barry Ritholtz

Today’s silly market junk is this wingnut nonsense:

On the political front the polls have turned very swiftly against Sen. McCain, and we are certain that that is one reason why share prices plunged so easily yesterday, and why the US market led the way down even as markets around the world fell.

That is a classic example of selective perception. Its one of the reasons why market participants and many of the idiots known as economists should steer far far away from politics.

As we wrote back in January 2008:

Markets are not skittish because the incumbent party is in trouble –
that’s getting it ass-backwards. When the ruling party is in election trouble, its because the future discounting mechanism of markets is incorporating a slowing economy into its pricing.
Markets may be imperfect and subject to the excesses of crowd behavior,
but they eventually get the big picture correct. The current market
malaise reflects a recognition what is occurring in the
macro-environment.

With the markets up 350 today, we will see that sort of thing turn very quiet very quickly. I guess we all Misunderestimated the Dow again.

Previously:
Confusing Cause & Effect: Elections and Markets
TBP, January 9, 2008
http://bigpicture.typepad.com/comments/2008/01/confusing-cause.html

Confusing Cause & Effect
TBP, July 26, 2004
http://bigpicture.typepad.com/comments/2004/07/confusing_cause.html

Related:
McCain’s Odds Crash Along With Stock Market
Henry Blodget
Silicon Alley Insider, September 29, 2008 9:00 PM
http://www.alleyinsider.com/2008/9/mccain-s-odds-crash-along-with-stock-market

Obama at 64%, McCain at 36%
Electoral College is 338 to 200 in Democrats favor
Intrade, September 30, 2008
http://www.intrade.com/

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