Dead cat bounce much?

The bank bailout has been put together, here are some highlights:

-The government will purchase non-dilutive perpectual preferred shares

- Your taxes will be used to pay the dividend for the shareholders of banks like Bank of America

Everyone Bend Over!!!

To give you an example how well Hank Paulson looked after the taxpayer, here it a simple comparison:

Warren Buffett's latest deals

-10% preferred divi

-Warrants equivalent to 100% of preferred value

Taxpayer's deal

-5% preferred divi

-Warrants equivalent to 15% of preferred value

As stupid as this may sound, does this mean that the economy will now begin to improve?

Sorry, I don't know much about all of this. I'm too young, I guess.

@Jagged Toaster: i once had an economics professor explain that there are theories in economics, there are no laws. pretty much, economists don't know what to do to "fix" the problem, so they try to do something, if it works, great, if not, they try something else.

we all hope this is the beginning in an upswing in the market and the economy, but i have a feeling we'll see at least a 400 point drop tomorrow (but i could be (hopefully am) wrong)

Why is Consumerist spouting off about it being the largest point gain in history? Isn't it the percentage that matters?

@SarcasticDwarf: My guess is that.. it was the largest point gain in history. And they want to. And it's their blog.

Gee, seems like ample reason to me.

@robothouse: A "dead cat bounce" would be maybe a hundred points.

Seeing as how a cat, especially a dead one, is a rather soft object, much of the kinetic energy coming from the force of gravity would be absorbed into the cat's body, creating a sort of wet "thud" noise. Thus, the bounce's height would be a mere fraction of the original height when dropped.

I would say that a dead cat would absorb 85% of the energy.

Perhaps we can get a Consumerist article on testing this out?

important to note that the largest percentage gains in history were during the great depression:
date percentage change
======================================
1 1933-03-15 +15.34
2 1931-10-06 +14.87
3 1929-10-30 +12.34
4 1932-09-21 +11.36
5 2008-10-13 +11.08

so, things getting better, or worse?

@mac-phisto: Amen. What we saw yesterday was the "panic" start to fade and the bargain hunters come back into the market. I think to some extent we might have gone past the "floor" and dug into the bedrock due to the panic.

That being said, I would bet that the eventual floor will be around 8000, but I have a nasty feeling that once the elections are over and we have a president-elect, it'll drop depending on the policies that seem to come out.

I cannot fathom how daily changes on the order of 500 to 1,000 points can be deemed anything other than evidence of instability. With a downward trend starting roughly a year ago, who is fooled by small gains between steady losses? Will the market rise steadily due to (1) tremendous growth in the wooden arrow industry and (2) taxpayers' assumption that socializing banking will remove risk and its incentives?

@Tux the Penguin: I have to agree with that. If a certain person gets in our taxes will go up, small businesses will lay off and quite frankly things will go to pot but since he's bringing in communism, no one will care. :(

@Jagged Toaster: Economics leans heavily on the understanding of human behavior - incentives, fear responses, etc. Therefore, with 6.5 billion variables running around the globe, it's literally impossible to "know" what's going to happen.

Economics is a way of thinking about things. Usually, it explains things pretty well. Sometimes not.

@SarcasticDwarf: I spend dollars, not percentage points.

@Jagged Toaster: well, i guess thats up to investors to decide, whether or not they all buy or sell.

nah, it could, but no one really knows. to stress about 1 day at the market is like complaining about how dark it is at night, and wonder if the sun will ever come back. it WILL change.

Grammar Nazi Police! Pull over!

it's = it is. its = possessive.