A Week in Review 8/8 - 8/15/11

Still dizzy from last week's roller coaster ride? While there was more to it - margin calls, institutional buying, etc. - here are the basics on how last week played out...

Day 1: Panic
The Monday following Standard and Poors' downgrading the U.S. to AA+... The media, with sensational passion, spewed the (supposed) obvious; lower credit rating equals higher cost of money which equals less consumer spending which equals a double-dip recession which equals death for the stock market... Short-selling traders (like a pack of wolves) smelled the mounting fear, circled their prey and attacked at dawn... panic set in, the Dow plunged 600+ points...

Day 2: Shorts Cover
Having sold borrowed shares, traders executed their buys at the then-depressed prices and pocketed the difference... The prey (hearing echoes of the wise telling them to never panic), fearing the previous day's reflex would prove disastrous, panicked back in, the Dow rallied 400+ points...

Day 3: Panic
News from Europe had the French financial sector in disarray... The media spun a Lehman-style credit crisis, the wolves gathered, the prey conceded, Dow down 500+...

Day 4: Shorts Cover
News that Germany's Merkel and France's Sarkozy would meet the next week and come to terms with the Eurozone's woes... Corporate insiders scooped up their own company's shares, seeing value at current levels... The wolves covered their shorts, the prey reenact Day 2... The Dow gained 400+...

Day 5: Calm returns
Retail sales up, volume subsided... The Dow climbed 100+ pts...

Day 6: Merger Monday
Google bids for Motorola, a couple of smaller deals follow, the Dow popped to the upside 200+...

Result: The market sits higher than the day-before-downgrade level - yet still 10% off the recent high... Some traders made out, others got killed (as always)... The panic-stricken, having succumbed to the short-sellers, took it in the shorts (as always)... True investors, those who buy companies based on their intrinsic value, didn't flinch and were none the worse for wear...