Market assumptions

Between yesterday's Dow surge and today's small drops, it is important to remember this little gem from Dan Gross about the stock market being a public policy quality assessment instrument:

The market is made up of all types of participants: rational, irrational, some focused on the past, some on the future, some obsessed with Washington, others with China. In October 2007, with the Dow at 14,000, did the market "know" a recession was about to start and that a financial tsunami was about to hit? Um, no. Of course, over time the market does respond to fundamentals like earnings and dividend payments. But in the past half-dozen months, the fundamentals have been fundamentally unsound. The S&P 500 could be at around 700 because Obama is a Commie who wants to destroy free enterprise. Or it could be at around 700 because that's roughly 15 times the index's estimated operating earnings per share.

And if anyone knows about the market, inside and out, it's Dan.