What Goes Up, Must Come Down, Goes Back Up, Then Round And Round

Financial Markets Go Up And Down As They Should

...it would be unwise to read too much into the Dow plunge, or to link it exclusively to the political circus in Washington. Stocks appeared to be heading lower no matter how Congress voted. Indeed, from the moment congressional leaders announced Sunday they had a deal, filled with anti-market schemes and regulation, stock prices began falling in Asia and Europe. Early yesterday, when it was expected the bailout would be approved, the Dow was down 500 points.

Bailout or no bailout, the stock markets were heading lower as financial markets continue to undergo massive asset revaluations. No matter what elaborate new rescue packages Congress, the Bush administration and the U.S. Federal Reserve bring to the party, the market is going to continue marking stock prices and other assets down until values reach realistic levels.

This is not, nor can it be, the beginning of the end of the U.S. or world financial system. It's simply how the financial market works, how it should work. And it is working, whatever the games being played out in Washington and whatever their belief that governments can resolve the crisis.

The free market isn't for the faint of heart (including the most faint of heart creature known to man: The Politician), but it does work. The sky doesn't seem to be falling. For instance, markets aren't crashing and McDonald's franchisees can still get credit. I have a feeling that the longer it takes for the gubmin't to put together a "rescue" plan - without the world ending before they finish - the harder it's going to be to sell the American taxpayer on the need for Uncle Sam to "save the day."