Whether you call it tough love or reverse psychology, it worked, and I was pleasantly surprised. By leaving rates unchanged, the Fed found a middle ground that left everyone wanting more. And after an initial temper tantrum, the gambit began to work. Investors started to buy stocks, buoyed by a perception that if the world was really on the precipice of collapse, the Fed would have acted… right?

Of course, the Fed had already pumped in $70 billion via open-market operations and probably wanted to keep its powder dry because of a larger and quite frankly more consequential (and controversial) decision - the bailout of American International Group (AIG).

Could we one day call the government’s bailout of AIG “The Perfect Compromise”? An $80 billion bridge loan that includes warrants for 80% of the company, the deal pushes for quick asset sales. It doesn’t kill shareholders - but it does dilute them significantly.

Well, cheering this market is a one-day-at-a-time event, more akin to rooting for the New York Mets in September. Heck, the emotional tides shift so quickly minute to minute it feels more like having a conversation with Sybil then watching and trading the efficient platform of the world’s most sophisticated economy.

Be that as it may, volatility is now embedded into the fabric of our market and probably will be for some time. On that note, investors have to be able to grapple with wild swings where their nerves and intelligence are challenged over and over again.

The thing is, good news gets swept away quickly, while bad news and fear get magnified. After the close, there was a fair amount of “good” news that could end up like that proverbial solitary tree that falls in the woods.

Sandisk (SNDK) received a higher offer from Samsung to be acquired for $5.85 billion, or $26 a share, in cash. I don’t have the stats, but a lot of recent acquisitions have occurred after several offers, and there are even a few takeover battles brewing. Industry consolidation is a sign of market bottoms and suggests businesses are preparing for greater business opportunities in the future. We have an open position on Sandisk on the Swing service in part because we thought the stock was cheap. It had been in the rumor mil for two years or longer.

Morgan Stanley (MS) posted earnings of $1.32 on revenue of $8.0 billion; the Street was looking for $6.28 billion and $0.78 respectively. The company outshone its more celebrated rival Goldman Sachs (GS), which posted results before the open. The shares were much higher in the after-market, and dragged Goldman along for the ride!



Darden Restaurants (DRI) posted earnings of $0.61, in line with the Street, but the company nudged earnings guidance higher for fiscal year 2009, to $2.75-$2.89 against the consensus of $2.75.

By the way, the restaurant space was sizzling yesterday, particularly Panera Bread (PNRA) and CBRL Group (CBRL).