From AP….

Wall Street capped its worst week ever with a wild session Friday that saw the Dow Jones industrials rocket within a 1,000 point range before closing with a relatively mild loss and the Nasdaq composite index actually end with a modest advance. Investors were still agonizing over frozen credit markets, but seven days of massive losses made many stocks tempting for traders looking for bargains.

That is a whole year’s worth of price changes in one day.

From Naked Capitalism….

Hedge fund margin calls appear to be playing a role, perhaps a substantial one, in the precipitous fall in stock prices. One hedge fund manager told us yesterday that a West Coast hedge fund was supposed to have dumped a lot of risky fixed income positions late in the day yesterday. That affected the stock market over the fear that the distressed prices its paper was fetching would force banks and other financial firms to mark similar assets down, leading to further losses.

I thought as much yesterday, but today people are saying it everywhere. Admittedly there is no hard proof yet, but where there is smoke there is fire. At least that is how it has been so far.

From the Financial Post….

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don’t trust the financial institution named in the buyer’s letter of credit, analysts said.

“There’s all kinds of stuff stacked up on docks right now that can’t be shipped because people can’t get letters of credit,” said Bill Gary, president of Commodity Information Systems in Oklahoma City. “The problem is not demand, and it’s not supply because we have plenty of supply. It’s finding anyone who can come up with the credit to buy.”

So far the problem is mostly being felt in U. S. and South American ports, but observers say it is only a matter of time before it hits Canada.

I not big fan of government intervention. But if they are throwing money around like water anyway, why don’t they backstop some of these letters of credit so people can get food?

From Felix Salmon….

The Dow swung 780 points between its low point and high point just in the first hour of trading this morning. This is a crazy market, and it’s overloading the information systems:

From the Motley Fool….

While the government can certainly raise $700 billion in the debt market, the money to buy that debt has to come from somewhere. That somewhere will very likely be cash that investors could otherwise have used to finance productive, private-sector companies looking to help grow the economy. As a result, borrowing costs for companies other than the politically privileged recipients of the bailout cash will likely rise as they have to pay more interest to attract investors. That doesn’t exactly spur economic growth.

From Naked Capitalism….

On the one hand, I was mystified that the stock market was up in the morning session given that the money market seize up was not at all improved and several key measures had worsened overnight. I was wiling to accept the view that we might have an oversold bounce and saw several bloggers indicate they had gone long in the last three days. But even with my bearish predisposition, given that the mess in the debt markets is now starting to engulf the real economy, I am still perplexed with the pattern of the last two days, with a plus 350 point end of session fall yesterday, and a roughly 600 point plunge today in the final hour.

From Felix Salmon….

I’ve long said that end-of-day market reports are silly, since the only thing reporters can normally say with any confidence is “the market moved and we don’t know why”. But what we’re seeing right now isn’t moves so much as fully-fledged earthquakes. Even during a bear market, you don’t expect three 700-point down days to come in quick succession like this: if anything, you expect big one-day rallies, followed by more grinding-yet-inexorable decline. The big one-day plunges happen at the top of bull markets, when bubbles burst. But we were already down 35% when the market opened today. Now we’re down 42%. Whatever that might be, it sure ain’t a bull market.

I think the hedge funds are blowing up myself.

From WKBW…

Erie County Executive Chris Collins says because of the unexpected increase of fuel prices this year the county will soon run out of money to pay for fuel for county vehicles by the middle of this month. This shortage would impact important services such as sheriff road patrols, snow plowing, and emergency response. “I’m asking for the third time for the legislature to approve this administrative transfer of funds,” Executive Chris Collins said in a news conference Wednesday.

Are counties too small to be bailed out? Everyone else is getting free money.

From Reuters….

DETROIT (Reuters) – General Motors Corp (NYSE:GM – News) shares fell as much as 21.6 percent to their lowest level since 1950 on Thursday amid financial market turmoil and the car maker’s report of European sales declines through the first nine months of 2008.

Should be zero, but I guess the markets are thinking that the government will bail GM without wiping out shareholders.

From Felix Salmon…

If Morgan Stanley was in distress back in mid-September, it’s much worse today, trading as low as $12.50 a share: that’s just 40% of its stated book value. For all the denials coming out of the bank, clearly the market is very skeptical that the injection of cash from Mitsubishi UFJ Financial Group is going to happen — or that even if it does happen, it will be sufficient to stave off insolvency. After all, even $85 billion wasn’t enough for AIG, and MUFG is putting much less than that into Morgan Stanley, which has a similarly-sized balance sheet to AIG.

People in the comments section are just about ready to shoot Mr. Salmon for writing that post. They think he is going to bring down poor innocent Morgan Stanley by pointing out that the market is losing faith that the bank will survive. It is amazing how many people still think that this is crisis of confidence. They must not be paying attention to the skyrocketing default rate.

From Naked Capitalism….

First it was banks and securities firms, and now the focus of worry has widened to include insurance companies. Reader John referred us to a Reuters article that MetLife credit default swaps are now trading on an upfront basis, which means buyers of protection against the default of MetLife bonds must make an upfront payment as well as agreeing to periodic fees. Only companies seen as being in serious risk of failure trade on an upfront basis. Another story shows similar pricing of XL Capital CDS.

One of the things that they used to push through the bail out package was the claim that a big insurance company was about to go bust. I thought they were talking about AIG (which had already received a bail out from the Fed) but maybe they were talking about MetLife.

This also from Naked Capitalism….

One has to wonder whether the FDIC’s giving a wink and a nod to Wells Fargo’s attempt to snatch Wachovia away from Citi will prove to have been too clever by half. The apparent motivation was the lower explicit cost to the taxpayer of the Wells deal (note Wells was going to take large tax writeoffs, which reduce, indeed may eliminate the cost differential, but that point seems lost on the mainstream media), but it may also have been to keep pressure high to wrap up a deal before anyone could take too hard a look at at the supposed prize. Wachovia is looking less desirable than it once did, now that both sides have dug deeper as a result of the negotiation process, further complicating achieving a quick resolution.

This is why I don’t buy the “if we could stop the panic we would be fine” argument. Every time outside parties start looking at the balance sheets of these banks, it turns out that things where worse then everyone thought.

From the Globe and Mail….

“It’s Armageddon out there,” Mr. Tonken, the chief executive officer of junior oil and gas company Birchcliff Energy Ltd., said yesterday.

“I’ve lost millions. Everyone has.”

The value of Canada’s energy companies has been devastated since oil plunged from record levels in the summer. Among the 58 companies in the S&P/TSX capped energy index, about $110-billion in market value has been wiped out in the past six weeks, calculations show.

Higher cost oil producers the world over are being killed. When demand goes down the people who have to pay 60 dollars just to get a barrel of oil out of the ground have a hard time competing with those who can do it for 20 to 30 dollars a barrel.

The bottom line as far as most Americans are concerned is this….

The Dow Jones Industrial Average is now below 8900 8800 8700.

The S&P 500 is off 40% from the peak of last October.