Dow jumps 900 points. Why?

To be sure, I didn't see this one coming. The last big jump was obvious, imho, but this was out of the blue.

Some say Tuesday's expected rate cut was the catalyst. Hogwash. Rate cuts mean absolutely nothing right now. As I've said before: if a rate cut would help, what monumental incompetence has caused the Fed to wait until now to do it? Rates are already as low as they can possibly go, regardless of what the Fed's number says.

It certainly wasn't the news today. Housing prices have fallen 17% in the last year? Nope, probably not that one. Consumer confidence at an all-time low? Doubt it.

The market *can* climb a wall of worry, but that's not worry, that's hard data, and very negative.

The market gained in spite of the news. The news beat the market back from a 4% gain to near even, then, when no more horrible news was forthcoming, the market saw fit to advance about 9% in just two hours.

It was clear by the world market action that the market was going to jump. The question is, why did the world markets jump? If anything, they usually follow the lead of the U.S. markets, which would have suggested a further plunge. But the Nikkei soared, along with the Hang Seng, and Europe followed suit. So this time, the international markets pulled the U.S. markets up. Again, why?

Maybe it was just a case of "fallen too far, too fast, maybe it's going to turn around." That's what happened on the last 10% up day. Or maybe Volkswagen had something to do with it. It isn't every day that a company adds over $200 billion to its market cap. Normally the stocks of the major auto companies don't bounce around like penny stocks, but the last two days VW is reminding me of K-Tel from 1998. Back then, if you recall, K-Tel basically announced it was going to do something associated with the "World Wide Web." This was enough during those heady days to send it out of its normal $5 range to upwards of $80, for a brief time.

Volkswagon's announcement, or rather Porsche's announcement, was that it was going to buy more of VW until it owned a lot more of it. This made VW jump, somewhat due to that being a vote of confidence, but also because Porsche's buying was certain to juice the stock, and most importantly of all, the critical mass of people who had been shorting VW suddenly had to get out when not much stock was being traded. The classic "short squeeze" but on a monstrous level: for a short while Volkswagon was the world's most valuable company. I'd tell you what percent it went up each of the last two days but the story isn't straight, and the charts lie, so chaotic was the action in the car maker's stock.

Which just goes to show how irrational the markets are. When a company as huge as Volkswagon can triple in value almost overnight, something about our system for valuations is amiss. Not to mention that a $10 trillion dollar stock market can shed 9% in two days, then gain 10% the next. The markets don't always work seemlessly.

And we wonder why we can't figure out what our derivatives are worth.