Stock Traders Are Not Pundits; They Pay What They Think Stocks Are Worth

Today’s lead New York Times story (2/1/09)–subheaded in the print edition “Scant Details, and Wall Street Reacts With a 4.6 Percent Plunge”–is a classic example of the fallacy of treating stock market prices as a kind of opinion poll. Reporters Stephen Labaton and Edmund L. Andrews wrote: “The initial assessment of the plan from the markets, lawmakers and economists was brutally negative, in large part because they expected more details.” Presumably the reporters talked to lawmakers and economists and got their responses directly. But when one is talking about the reaction of the market, one can only look at the […]