Can We Shut the F Up About the "Biggest One-Day Loss in History" on the Dow Already?
Nick Gillespie | September 30, 2008, 10:24am
Are journalists, politicians, analysts, et al. really so retarded that they insist on leading all stories about yesterday's Dow with a patently useless measure? (The short answer is probably yes.). To wit:
Stocks plunge as House rejects bailout package: Dow absorbs biggest one-day loss in history: 777.68 points
Stocks plunged yesterday with the Dow Jones industrial average falling nearly 780 points—the biggest one-day point drop ever—after federal lawmakers failed to pass a $700 billion plan to bail out the financial system.
That particular formulation comes from The Baltimore Sun, but you've all read or heard countless variations on the theme. If this figure is not expressed in percentage terms, it is absolutely useless. Indeed, for most of its existence, the DJIA, couldn't have dropped 780 points because the index wasn't that high. Which of course reporters (and pols, and analysts, et al.) know, and always bury somewhere deeper in the story. To wit, from the Sun story mentioned just a few lines above:
The Dow's 7 percent decline was the 17th biggest percentage drop in its history, well below the more than 20 percent drops seen in October 1987 and the Great Depression.
Somehow "Dow absorbs 17th-biggest percentage drop in its history" just doesn't pack the same wallop, does it? More here.
mike | September 30, 2008, 11:56am | #
did you rtfa?
Other indicators also fell. The Nasdaq dropped 199.61, or 9.14 percent, to 1,983.73, the eighth largest point decline and the third biggest percentage fall in its history. The Standard & Poor's 500 index declined 106.59, or 8.79 percent, to 1,106.42. It was the S&P's largest-ever point drop and its biggest percentage loss since the week after the October 1987 crash.
As to the DJIA (date/close/change/%):
1 12/12/1914 54.00 -17.42 -24.39
2 10/19/1987 1,738.74 -508.00 -22.61
3 10/28/1929 260.64 -38.33 -12.82
4 10/29/1929 230.07 -30.57 -11.73
5 11/06/1929 232.13 -25.55 -9.92
6 12/18/1899 58.27 -5.57 -8.72
7 08/12/1932 63.11 -5.79 -8.40
8 03/14/1907 76.23 -6.89 -8.29
9 10/26/1987 1,793.93 -156.83 -8.04
10 07/21/1933 88.71 -7.55 -7.84
Another 100 pts would have put the dow in top 10 % drop. You are taking the moves in the equity market entirely too lightly and you appear to have even less understanding of the situation in the credit market. We are well past the 'let them all die' option.
ChrisH | September 30, 2008, 12:40pm | #
OK, now for some serious editorializing. There's this meme out there -- and I also see it as a minority view in HnR comments -- that the free market may be all fine and well during ordinary times, BUT DAMMIT! NOW IT'S AN EMERGENCY! Principles must be abandon!
I can understand the argument that free markets are a bad principle, or more government oversight was needed. I disagree with these, but I can see their intellectual integrity.
There is even a point to saying, well you understood free markets within this confined range, but now we are outside that range, so you have to reconsider your beliefs.
What puzzles me is that anyone would think that principles are for the easy parts of life, and once things get tough... I don't know. You act randomly? You do whatever the speaker demands? You hand over your critical judgement to the Chairman of the Fed?
If people really think that way, I can understand why the current situation is terrifying.
Let us imagine a young man who is raised by his parents to moderate his behavior; to live some kind of moral life. Now, imagine that he comes to his father and says, "Dad, I've been on a drunken bender. I stole the neighbor's car, ran over someone's pet dog, and I got one of my teachers pregnant."
Dad responds: "Son, we've warned you about these things, and have tried to steer you on the right path. But now that you've gotten to this point, all I can say is, 'well, fuck it.' You are just going to have to lie and cheat your way out of this, and use violence where necessary. And, I want you know that I love you and I'll help you every step of the way."
Would that strike you as... odd, somehow?
I kind of get that feeling when people say, "a lot of comfort Hayek will give you in a bread line." I don't know how comforting it will be, but it will still be correct. I would not see how acting in a way contrary to how you thought the world worked would be advantageous at that point.
More perplexing is the "I was with you guys up until now, but now is the time to freak out and do the opposite of what we used to believe, right?"
I guess maybe what that means is that there are some who believe a free market is one that always produces a pleasing outcome in whatever time frame the believer is concerned with. I don't know what school of economics that is, but it's not "free markets".
Maybe we need to co-opt the Christian bumper sticker: "Free Markets Aren't Perfect, Just Self-Correcting."
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