Weekly Commentary through September 12th, 2008

Volatility has been much higher than normal.  For example, the S&P 500 index rose or fell by more than 2% on five of the nine trading days so far this month.  There were only six such days during the last 4½-year bull run.

Yet, for all that violent flip-flopping and massive gaps in both directions, the stock market ended last week essentially flat.

We are back near the lows for the year.  Bears had a great opportunity to plunge through important psychological levels. Everything turned red for the ride down; and then the market reversed again. Part of me wonders whether short-sellers didn't press their luck because they "fear" another Sunday bail-out (in some form or fashion).

The big news this week was about the fall of Lehman.  Here is a simple chart showing what happened to their stock this year.

As I write this, it looks like Lehman is filing for bankruptcy and that Merrill Lynch is getting sold to Bank of America.  Futures are down.

However, a big, quick, move down - here - might be the best thing to hope for if you are bull.

Here are a few of the posts I found interesting this week:

• U.S. Gives Banks Urgent Warning to Solve Crisis (NYTimes, WSJ, Clusterstock)
• Bank of America Buys Merrill Lynch (NYTimes, WSJ)
• Locusts: Shorts Moving On to AIG and Others? (Seeking Alpha, Naked Capitalism, NYTimes)
• Federal Reserve announces additional support for the markets (Federal Reserve)
• Is the latest bailout working?  Someone thinks so (Bronte Capital)
• Russian Market Down 50% Because of War and Falling Oil Prices (NYTimes)

And, a little bit extra:

• Sweet Dreams in Hard Times Add to Lottery Sales (NYTimes)
• Niederhoffer's Ten Principles of Cricket and Market Power (Daily Speculations)
• Wisconsin man eats 23,000 Big Macs since 1972 (Chicago Tribune)
• Lehman Replaces Palin as Wikipedia Plaything (Infectious Greed 1 and 2)
• McCain leading Obama in prediction markets and polls (Kudlow, RealClearPolitics)
• Retailers Using Software to Increase Sales and "motivate" employees (WSJ)
• Has the large Hadron Collider destroyed the world yet? (Click)
• Biologists on the verge of creating a new form of "life" (Wired)