Brandon Fuller writes at The Big Money:
Generations of Americans have been trained to follow the Dow Jones Industrial Average for a quick snapshot of how the economy is performing or is expected to perform. There’s a lot that’s ill-advised about that habit, but, most importantly, attending to the ups and downs in the Dow won’t tell you much about the current financial crisis. (Source, link in original.)
Fuller suggest instead to watch the TED Spread, which Bloomberg.com charts.
The TED spread started its recent rise on Monday, September 15, 2008, the day Lehman Brothers filed for bankruptcy. Merrill Lynch agreed the day before to sell to itself to Bank of America.
In comparison, Fannie Mae and Freddie Mac going into conservatorship one week before caused barely a blip in the TED Spread.
Financial crises, like wars, give us an opportunity to learn new terms and places. It’s hard to keep up…
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Hat tip. Planet Money.