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Don't let yesterday's sharp gains on the stock market fool you. A swift rise of over 8%, after losses of 10% last week, is proof that the financial markets are manic depressive - around the world and here in Israel as well.

Yesterday was not a recovery and not stabilization.

The sharp switch from depression and despair to elation and a feeling that one-time business opportunities are available reflects a complete lack of certainty about the markets' very direction. It's also an attempt by investors to digest and understand the significance of the events rocking the world's financial markets.

Crises do not just happen for no reason, and they don't go away that quickly either. So you can expect a few weeks or months to pass before markets stabilize. For now, central banks are busy fighting a holding action, and the Bush administration's emergency rescue plan for the financial sector demonstrates the Americans' dedication to finding a solution. But if it turns out that the U.S. government's plan actually prevents further collapses of financial institutions, we should expect to move on to the next stage of the crisis: when reality hits.

Businesses will soon feel the effects of the market shocks when they have to report losses on their investments, as well as a drop in business from the economic slowdown, and the need to deal with debt instead of making new investments. In addition, new rules from the regulators will put even more pressure on businesses.

Until now, Israeli markets have stood up impressively to the crisis. But the flood of bad news from America will continue, and financial stability here too may become a bit shaky. For a good reason Stanley Fischer said they pay him to worry.

There are a few horror scenarios that could ruin financial markets here, starting with losses on U.S. investments, continuing with a flight of investors from horribly performing financial institutions, to the collapse of very large borrowers who can no longer serve their huge debts - and could hasten the downfall of the local banking system.

We can't affect what happens in the United States, but we can here in Israel. And we can't expect yesterday's gains in Tel Aviv to make up for our lost savings, the drop in the state's tax revenues, the fall in corporate profits and our feelings of being worse off. After the holidays, the downsizing will start at many firms, including cutbacks, halted investments, budgetary restraints, salary freezes and even layoffs.

Not only the U.S. taxpayer will have to pay - so will we.