Rational exuberance

The 340-point bump in the Dow Jones Industrial Average Thursday was pushed by several things.

First, there was the European Union debt deal completed in the early-morning hours in Brussels, which may actually keep Greece from going bankrupt. The deal requires banks and other private entities holding Greek debt to write off 50 percent of the debt value. It also includes measures to help Italy and Spain.

That news sent European stock markets soaring Thursday, and those in the United States followed.

But it wasn’t just the European news that made investors in this country more optimistic. Here at home, the U.S. gross domestic product grew at an annualized rate of 2.5 percent in the third quarter of 2011. That’s greater than analysts had predicted and far better than growth in the first half of the year.

Naturally, there are reasons for caution, both with the state of the U.S. economy and the fragile European debt package. But, unlike a few years ago, when Alan Greenspan accused stock-market investors of “irrational exuberance,” it appears this week investors are rationally optimistic based on several bits of good news.


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