The Dow closed up 165 points today.  There were rumors all day of an impending buyout of Lehman on the weekend, and at 3:30, it was reported that the Treasury and the Fed were facilitating the sale of the 158 year old broker.  The Dow, which was flat at the time, exploded higher into the close.

I have heard but I cannot confirm - since I don't do much actual, you know, "confirming" - that the company will be bought by a consortium, perhaps including private equity managers.  If so, it does not bode well since one would think that a reputed shop such as Lehman would be a desirable candidate for a single bank. If the Fed has to backstop the transaction and they can't find a big bank to swallow the firm, it says either that Lehman was so toxic banks do not want to touch it even with Fed financing, or banks are so capital constrained, they cannot do it even if they wanted to.  My bet is that its primarily the latter but the former is on the bank exec's minds.

This is the fifth major action by the government to assist the financial markets, including slashing interest rates, bailing out Bear Stearns, creating an alphabet soup of asset swaps onto the Fed's increasingly precarious balance sheet, the nationalization of the GSEs, and now this.  Yet, the market's reaction to each becomes more muted.  I expect this one to be no different. 

More worringly, I am hearing anecdotally of a pronounced slowdown in Europe and Asia, worse than advertised by Wall Street and worse than the official statistics suggest.

Nothing has changed.  This is a bear market.  We may be due for a bounce, but in a bear market, one sells the rallies.