Interesting week. Indexes finished unchanged or higher on the week with NQ100 have a outside week higher close. But the action was dramatic with swings against troubling new from investment bank Bear Stearns and others. It seems there was a run on BSC when the likes of legendary fund manager John Simons of Renaissance Technologies decided to move billions out of BSC to another location. Simons, who had taken pipe of about 9% in August was not going to let this one get away from his once top dollar hedge fund of 30 billion. This and other events created enough worry to get Bernanke out of bed in the wee hours and create a battle plan. First, the Fed, JP Morgan, and BSC invented a financial wonder. The deal works this way; BSC gets a line of credit from Morgan, Morgan borrows the money from the Fed on the cheap, and the Fed guarantees the the money. Nice.
Discussions of where to put the money goes on continually now as managers struggle to understand what is 'investable' in this risk adjusting environment. There is serious talk by some that commodities, hard assets, present reliable alternatives. World demand has created a need for a range of commodities, it is reasoned, as price action has demonstrated. But it seems the reason for investing is merely that they are going up and any idiot can tell you piling onto a directional trade will give you misery as a return, as it did in tech stocks and real estate of recent times. Commodities are a trade, not an investment. Jim Rodgers, the ultimate commodity bull has been wrong for most of his entire life. He has been touting commodities from the day this trader walked into a trading pit in 1981. He is finally seeing a big run. It only took twenty seven years. Great call Jim.
This coming week, Fed rate reduction may leave traders looking for some catalyst for direction. Markets will just have to grind it out unless a mega price move points to market direction for the balance of the year.
