The week that was

Wow...another pretty dramatic week on Global Markets...some amazing action all around.

In case you missed it...while our markets were closed on Thanksgiving Monday, we missed a massive global rally...but Japan, which was also closed, showed Canada the way, making up for the holiday in japan by rallying about 13 percent overnight...Toronto opened seventeen hundred points higher...obliterating the old record, but surrendered nearly one thousndd of the points before the market closed...meanwhile, New York gave back a fair chunk of Monday's gains. Japan managed to give away all their gains, and more, falling nearly 20 percent over the next two days. Toronto fell below last week's lows by Thursday, with an intraday drop of over 500 points. The Dow was down 300 plus points Thursday morning, before bouncing over 700 points, closing up 400. Friday saw Toronto tear ahead over 500 points, only to give half of the gain back...while the Dow fell, after being up over 200 points.

What was the final dasmage? First and foremost, investors' nerves must be rather frayed, with intraday moves in the 10-15 percent range. This was bourne out by the VIX, a rather complicated measure of volatility measurement, which essentially equates the level of fear in the market with a number. Scotia Capital has an analyst who has traditionally indicated panic is any level above 30...a number rarely reached over the last year...incredibly, this week, we smashed through 50, 60 70, and 80...indicating an immense level of fear in the market. Many global markets are now down over 40 percent on a year to date basis...and the seizure in the global bond market is perhaps even worse than the sell off in equities.

Sounds awfully gloomy, and there was lots of reasons for concern: globally, terrible consumer and housing numbers, and locally, rotten news on the employment front. But, as the old saying goes, it is always darkest before the dawn.

Here is the positive side. First, the US credit markets appear to be freeing up, at least marginally...the best indication of this is the gradual normalization of LIBOR, which reflects the gradual willingness of banks to lend to each other. The Dow managed to fit in its worst day in 21 years, and still have its best week in 5 years. Toronto rose on the week, albeit less than the US...and Toronto;s pain was the world's gain, as stocks in the oil patch swooned, as oil dropped to less than half of its June peak.

The bottoms of markets generally come when fear reaches a peak. This month's market behaviour really shows a great deal of fear...and there are definitely signs of a level of market despair consistent with a market bottom.

Ultimately, the best news may be that Warren Buffet, the Oracle of Omaha, is buying stock in his own account...a rare endorsement from a man who keeps the lion's share of his personal account in US government bonds. With little yield available in bonds, and government treasuries thus selling at excellent prices, Buffet would appear to be following his long held belief in buying at deep discounts, and selling when he achieves maximum value.