CURIOUSER AND CURIOUSER: GREENRABBIT KEEPS WATCH; TROLL THE ANCIENT WALL ST. CARROLL, FA LA LA LA LA LA LA LA LA

The Romance Channel carried “A Tale of Two Cities” as 1998 wound down, but that was too pat an ending for a year that may indeed have been the best of times and the worst of times. The writer wasn’t Dickens. Must’ve been Lewis Carroll.

It wasn’t only Bill (“When I use a word…it means just what I choose it to mean”) Clinton, or his current (“Sentence first – verdict afterward”) defenders.

Or the eight-year boom that put more people out of work last year than did even the “It’s the economy, stupid” year of 1992. Or the unemployment rate that magically fell even as hundreds of thousands of jobs vanished.

Or the predictions that earnings would drop as the stock market rose.

Or Congress (“Why, sometimes I’ve believed as many as six impossible things before breakfast”), which refused to allow banks and insurance companies and brokerages to get into each other’s business, after its members had grinned like the Mad Hatter as the Securities and Exchange Commission gave Citicorp and Travelers Group Inc. permission to do just that.

Still, what really revealed Alice to be lurking behind the next mirror was Alan Greenspan’s showing himself to be as nimble – and about as prompt – as the White Rabbit.

In July, after the Dow Jones Industrial Average had peaked at 9337, the chairman of the Federal Reserve Board announced to Congress that interest rates might have to be raised to keep all this prosperity – the Dow up almost up 2000 points in six months! – from kicking off another wave of inflation. This spiral might even cause, as Alan the dour quaintly hinted, “a correction of some significant dimension.”

Oops. As he spoke, American Express Co. was revealing that second-half revenue would be down because of some sort of Asian indigestion. Then Russia, its stock market off 60%, its interest rate on three-year notes over 55%, defaulted. That should have surprised nobody who had ever heard of czarist bonds (or sovereign debt paying 55%), but the market overreacted as first George Soros and then Julian Robertson and then UBS AG and Deutsche Bank AG and Credit Suisse and others fessed up that millions of their dollars had vanished in Russia.

Still, the White Rabbit hid out, doing nothing at the August Federal Open Market Committee meeting, doing nothing even when the Dow tripped over September’s arrival. The Dow gave itself a 512-point bloody nose in the second-biggest one-day point drop in history, scaring the spit out of a lot of brokers and bankers and bears, oh my.

Not mutual fund investors, though, as placid as the oysters (“For some of us are out of breath/And all of us are fat”) the Walrus and the Carpenter entertained at dinner. The steady savers poured a net $17 billion into stock mutual finds in September (they took out about $11 billion in August) as the Dow headed for Tierra del Fuego, with money stocks leading the way.

Then the market’s drag chute opened for real with the revelation that the New York Fed had worked out a deal with 14 of the world’s biggest financial institutions to come up with $3.5 billion in loose change to save Long-Term Capital (“You’re nothing but a pack of cards”) Management LP.

It’s the world’s most famous hedge fund now, but when the news broke Sept. 24 not everybody remembered John Meriwether, the man who made liar’s poker a household word (in some households, at least) as vice chairman of the old Salomon Brothers. The new Salomon Smith Barney unit of Citigroup had about $2 billion invested with him, by the way, and top execs at Merrill Lynch & Co. Inc. had some of their own millions there too, as did two Nobel laureates, those gurus of quant (“the different branches of arithmetic: Ambition, Distraction, Uglification and Derision”) Myron Scholes and Robert Merton.

Even with the bailout, Long-Term did a Cheshire Cat impression (“it vanished quite slowly, beginning with the end of the tail, and ending with the grin, which remained some time after the rest of it had gone”), making all but 10% of its $90 billion capital disappear.

That got the watch out of the White Rabbit’s tabard pocket. Within days, he’d cut the fed funds rate a quarter point, and two weeks later (“I’m late, I’m late, for a very important date”), after the Dow had slipped back below 8000, cut it another quarter point. For good measure, he trimmed another fourth in November, all of which blasted the Dow past its previous high in time for Thanksgiving turkey and a holiday weekend of online trading that whipped up Internet stocks like Aunt Betty’s meringue.

The Standard & Poor’s 500 stock index kept climbing until Christmas, as did the Nasdaq composite. The New York Stock Exchange composite headed toward home up more than 15%, the Dow up almost 17%, the S&P up 26%, the Nasdaq composite up 39% and – grab your chapeaux, ladies and gentlemen – the Nasdaq 100 up almost 84%.

Thank you, Mr. Chairman, but remember that every major European index did at least as well as the Dow. Then again, as Mr. Carroll asked, “What’s the French for fiddle-dee-dee?”