Just about any big run-up of the stock markets is irrational at some point, but Tuesday's record celebration has to be the biggest head-scratcher since the bull market of 2000, for anyone not schooled in the weird ways of Wall Street.
By almost any measure, we are a nation in economic disarray.
Unemployment remains at alarming levels and would be barely down from its recession peak but for the fact that millions of people have stopped trying to find work.
Income for the typical family has been stagnant for years and health costs are rising. States, including Connecticut, are broke. Overall growth of the economy, the key to opportunity, fell to zero in the last three months of 2012.
Oh, and let's not forget one small detail: The government of the richest nation the world has ever seen is in crisis, with furloughs for more than 1 million workers and a looming question about whether it will even make debt payments later this month.
So, naturally, the Dow Jones industrial average catapulted to a record on Tuesday, closing at 14,253.77, up nearly 1 percent from Monday's close. That smashed the old mark of 14,164.53, set an eon ago on Oct. 9, 2007, before a 17-month crash brought it to 6,547 in early 2009.
How can this be?
As one Connecticut financial adviser put it, "You have to remember, the economy is not the same thing as the markets."
The markets, with the 30 giant companies of the Dow Jones as the collective standard-bearer, respond to three basic forces: company profits, future expectations, and the need for money to find a home.
Despite the malaise in many corners of Main Street — some say because of it — profits at Wall Street companies are doing rather nicely, thank you very much.
Recent weeks have brought solid if not spectacular earnings news from the nation's largest companies. They continue to squeeze more from each worker with a combination of technology, a notable lack of raises except for top executives, and the old-fashioned whip, as we dare not slack off for fear of landing on unemployment for a year or more.
Even though total sales are not flying high, the biggest companies have done what they call a "cleaning up" of their balance sheets, meaning they've long since written off bad investments and have not taken on new debt, leaving them cash-rich and strong. These include United Technologies Corp., Travelers and General Electric, Connecticut firms that are on the Dow.
They're also earning a higher percentage of profits overseas, making them less vulnerable to U.S. economic fundamentals. And although oil prices are high, the great new bargain of natural gas is driving industry.
But those are all "real" explanations, and the answer to the disconnect between Wall Street and Main Street is murkier. Rich Sega, chief investment officer at Conning & Company in Hartford, looks to the Federal Reserve's spigot of roughly $3 trillion since the recession.
"This is another version of what we've seen many times in history, the monetary illusion," Sega said. "They keep pumping the markets with money."
The result, he said: "There's no more real wealth than there was, but there's a lot more money."
All of this is dangerous economics, but good for stock prices. And on Monday we learned, to the surprise of some of us, that the federal gridlock of forced spending cuts did not scare Wall Street. Investors, it seems, either think Congress and Obama will kiss and make up, or think the sequester cuts will not cause the sky to fall. The $85 billion in cuts is, after all, barely more than one-half of 1 percent of the U.S. economy.
Or investors don't think at all, but rather they act with what former Federal Reserve Chairman Alan Greenspan famously called "irrational exuberance."
On Tuesday, one consensus explanation for the 126-point rise in the Dow, as if anyone ever knows a reason, was that the Chinese government vowed to pour money into an economy that's flagging by Chinese standards, but with growth we could only dream of having.
So, is it a Ponzi scheme, a house of cards ready to fall by 10 percent or more in the space of a few weeks?
Some say yes, some say no. Smart people on both sides have made fortunes. You buy your ticket, you take your chances.
Just last month at the annual forecast dinner of the Hartford Chartered Financial Analysts Society, market strategist Mark W. Yusko told 500 financial analysts that the United States might already be back in recession, that stock prices would lose 20 percent in the first half of the year before recovering to lose 6 percent for the year, and that fundamentals such as debt and demographics make long-term U.S. market gains impossible.
And he might still be right.
Several investment professionals, including Sega, whose company manages $85 billion, said Tuesday they foresee a temporary blip in the markets soon, followed by a period of slow gains. Measured by the ratio of profits to stock prices, shares of big U.S. firms are 20 percent cheaper now than they were in the October 2007 peak.
Then again, Sega said, "People were so burned in the crisis that it doesn't feel to me that there's that kind of elation out there."
Far from it. At 4 p.m. Tuesday, as the New York Stock Exchange closing bell rang, the main headline on Google News was, "Flights Canceled, Schools Closing." I'm sure I wasn't alone in thinking this was about the effects of the sequester.
OK, so it was about the Midwest snowstorm. Just the fact that it made sense as an economic story should mean a Dow Jones record was impossible.
