Cancel the Bailout

Apparently, the market prices the downside of not having a bailout much greater than the upside of having a bailout. This doesn't make any sense.

Last Friday, the S&P 500 was at 1213, in anticipation of a bailout. On Monday, the bailout was rejected by the House. The market crashed down to 1106 as a result -- about 9%, and over a trillion dollars lost.

It trended up again to 1166, on the news that the bailout was going to be reworked and sent through the Senate -- cutting the original crash about in half.

Then, yesterday, the market trended lower again to 1114, almost hitting its low again. So today, in anticipation of the House's revote, markets gained back up to about 1150, another 3%.

Then the House passed the bailout, and the market is selling off.

Clearly, the traders out there have no idea what they're doing anymore, and are so driven by panic that they have mispriced the value of a bailout by over a trillion dollars, measured in value to stocks. Corporate bonds are flat, too. It looks like that $700 Billion just got flushed down the drain.