The day Twitter went public not only was profitable in the fiscal sense, but also illuminated a metric that has heretofore been underappreciated by those attempting to comprehend and thereby profit from the laws that guide the market. We will call this potent new tool the Wall Street Stupidity Index.
On Nov. 7, 2013, you may remember, the market went down more than 150 points. Yet Twitter hovered cheerfully above the bloodbath, darting about in the sunshine of a 73% increase from its opening price. There were many good reasons for this, of course. Twitter is terrific. What was just as evident, however, was a display of a kind of stupidity that is vital to the market’s function. It ebbs at times, but it always returns when it is needed. The Twitter IPO rolled out like the chart above left.
This particular form of stupidity is not a pure element, like gold or silver, but an alloy, like steel, a substance that, I believe we will all agree, is often more useful in battle than the stuff that glitters. Of what does this potent force consist? Early estimates of its composition look something like the chart above right.
Quite a heady mix, is it not? And yet it fuels the engine that makes our system the envy of the world. Some days, true, it is quiescent. But never for long. At times of great stress and great opportunity it can be counted upon to come roaring back.
Utilized with the right intention and proper respect for its power, the Wall Street Stupidity Index may be used for good, certainly. But God forbid it falls into the wrong hands! That way lies certain madness.
Not to mention you could lose a lot of money.
This story is from the December 09, 2013 issue of Fortune.