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Stock Market Plunges but Wall Street's Spirits Remain Unnervingly High

The stock market plunge on Thursday was remarkable not so much for the panic selling on display during the Dow Jones industrial average's flirtation with a four-digit loss as for the startling optimism expressed by investors after the close.

As soon as the closing bell rang, guests on CNBC started to explain away the decline: The Greek economy is the size of Michigan's and so it shouldn't affect the U.S. stock market; some bozo at an investment bank executed a trade to sell X billion of something instead of X million.

One guest on the financial news channel said with a straight face that what might have been the worst intraday plunge ever was a good thing because it shows that "the wall of worry is firmly in place." He also found the decline encouraging because it made an interest rate hike in the near future less likely.

The wall of worry - a healthy skepticism about a market advance - is bullish. An indiscriminate plunge is not.

As for interest rates, he's probably right that they will remain low for longer, but he's ignoring the context: Low rates are good in normal economic and financial conditions (businesses can borrow for less) but not when they are kept near zero out of fear that the financial system will seize up (no one wants to lend money to businesses or anyone else).

The CNBC guest said he planned to use the decline as a buying opportunity. The plunge evidently left him so unconcerned that he did not even advise investors eager to join him to be cautious or wait until stocks become bigger bargains.

"You just want to build positions here," he said.

His optimism was infectious. Maria Bartiromo, the host, challenged his buy recommendation, but not his bullishness. "Can you get lower prices?" she wondered.

You probably can. This may or may not be the start of the protracted stock market decline that has been predicted in this space for several months - prematurely, granted.

Either way, a plunge like this, whatever the immediate cause, is seldom a one-off event. There is likely to be some attempt at a recovery in the next few days, but chances are it will prove a fake-out and a prelude to at least one retest of the lowest levels reached Thursday.