How this protocol plays out will reverberate throughout the entire Credit Default Swap universe. In plain English, there isn’t enough money to go around and counter-party risk has increased in kind. Whether or not that can be contained will go a long way in shaping the next leg of the tape.

The government is keenly aware of these developments. They woefully underestimated the amount of short-term Lehman Brothers paper held in money market funds—which contributed to the panic when some funds "broke a buck"—and explains why they’ve been more careful in how they’ve since handled situations, keeping both AIG (AIG) and Wachovia (WB) alive while allowing WaMu, with little short-term debt, to fail.

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• On September 26, I posed the question “What Happens If We Don’t Rally on the Bailout?" 
  
  
• I mused that, with everyone conditioned to believe that the upside was a given (on passage of the bill), the potential existed for a capitulatory whoosh (to S&P 1080 and VXO 70) before the specter of hyperinflation lent a bid to the market.
  
  
• I don’t have a crystal ball—and S&P 1080 isn’t a whoosh anymore—but that scenario warrants a mention as we fit together the moving pieces.
  
  
• I’ll again offer that we shouldn’t be shocked to see a coordinated global rate cut as early as Monday.
  
  
• Achtung Baby! The German government, along with the country’s banks and insurers, plunked down $68 Billion for commercial property lender Hypo Real Estate Holding AG, after an earlier bailout failed. Meanwhile, officials in Belgium and Luxembourg are trying to rescue Fortis for the second time this week as the global credit crisis spreads through Europe .
  
  
• I will again remind you that in order to get through this, we need to go through this.  We’re one step closer to the “outside-in” recovery and the golden age of globalization will indeed arrive. Our mission in the rain is to be around to prosper when it does.
  
  
• And yes, just as we were early in eyeing our current conundrum, we’ll likely be viewed as Pollyanna by the time Hoofy is ready to rock and roll.
  
  
• Leaving the legal issues to the lawyers, it’s my view that Wells Fargo (WFC) and Wachovia are an intuitive fit. The question is begged, however, whether Citigroup (C) “needs” this deal to stay circled as a survivor.
  
  
• A little levity goes a long way.
  
  
• If you’re diggin’ the ‘Ville, tell two friends (or scoop a snazzy new lid!). We’re going for that retro vibe and would appreciate the help of ye faithful as we spread the good word.
  
  
• We’re less than two months from the Minyanville Festivus for Children’s Education. The ethos of our community is to surround yourself with people you trust who have skill-sets that complement your own while trying to serve the greater good. December 4th is our hallmark event, Minyans, so come one, come all!
  
  
• It’s important so we’ll again share that “It's about unity and perseverance and perspective. It's about making the world a better place through our actions, our words--even our body language. It's about sharing what you know, appreciating what we have and communicating our gratitude as a matter of course. There is only one way for us to "win" and that's to rebuild our nation, and our world, from the inside out.”

R.P.