What a week!

I wasn't too surprised to see S&P end positive w-o-w last week. My previous experience was the week of August 6 2007. However in a week's time, it turns out of that 4 of the major investment banks get wiped off the street - Lehman which will be sold in parts, Merrill which got sold in whole and Goldman - Morgan which are now full banks and no longer just independent investment banks.

It also turns out that for the first time in American history a 700 billion dollar rescue package has been annouced. Paulson is undoubtedely going to be the biggest trader of all times. There is no doubt that if any one were to buy these subprime mortgages at 20 cents on a dollar; give a consumer the time he needs to fulfill his obligations; he would profit from the 80 cents he is going to earn. Even if this were to happen in the next 20 years, US treasury earns a 7% r-o-r on their invested capital. However, the only trader who could have bought this market was the US treasury.

Whether it means good or bad for the markets? - difficult question to answer! ... is Socialism the pivotal issue and Capitalism always secondary? or is Socialism always the last resort for all Capitalist wrong doings of the 20th and the 21st century? take a guess ... few men take risk, they get paid for that .. when their trade falls out to be wrong government raises its hand .. wrong doings are never punished for it means bigger harm to the larger society. Isn't that really good .. you may do whatever you want, there's no punishment ... you lose money .. you get more to lose. "Regulations" is an economic term used for Socialism and we will surely witness regulation play a bigger role in shaping financial future. If regulators drive away speculators, an important part of the markets will go missing. Indeed, speculators who failed need to be driven out. Bigger question though is why pull out swords on the successful one's.

Past week wasn't huge because 4 investment banks failed ... it was big because we saw a glimpse of time to come .. time where businesses will be guided by regulations, time where central banks would decide market actions and who know's time where free economy will go back to the books again ...