Why one data point does not equal causation

I took a lot of flak on the Huffington Post a few weeks ago for denying the fact that the Senate health care reform bill was just an insurance industry giveaway.   The sum total of the evidence for that fact was that when the bill passed or gained support, stocks for the insurance companies went up.  Thus, it was “proven” that the bill was awesome for insurance companies

But today:

Wall Street is already betting that a Republican win in Massachusetts will complicate efforts to get a strong health care reform package through Congress.

Six major health insurance company stocks went up Tuesday as pundits and reporters began writing off the candidacy of the state Attorney General Martha Coakley. Republican State Senator Scott Brown appears to have won before the votes have even been counted.

Investors are counting on it.

Health insurance companies would presumably benefit financially if the current legislation is further watered down or even killed. Without a 60-vote super-majority, so goes the thinking, Democrats would have to start negotiating away hard-won concessions or face defeat.

So insurance companies gain if the bill fails and gain if the bill succeeds. It’s all good for the insurance companies!

Or, there’s just no relationship at all and the stock market is too complex for such an easy read.

(h/t Bob Cesca)

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