adrock3215 Posted March 17, 2008 Report Share Posted March 17, 2008 People on the Street will be jumping off buildings tomorrow. JP Morgan acquiring Bear at $2 a share. The stock was trading over 100 during the summer, in the high 50's on Thursday, and the 30's on Friday's close. Now JP Morgan values it at $2 a share. Anyone who owns this stock got crushed. The Dow futures are 200 something points down and of course overseas markets are taking a dump. So what does the Fed do? Well, of course, create more money by lowering the Fed Funds by a quarter percentage point with an unprecedented weekend move. The dollar takes a dump, but the bankers are happy. Make some bad bets, receive cheaper money. It's socialism for the banks. Quote Link to comment Share on other sites More sharing options...
softwareNerd Posted March 17, 2008 Report Share Posted March 17, 2008 (edited) Bear being taken out basically means they were not too big to fail. It is highly likely that Bear was nowhere near being bankrupt. The situation is akin to a run on a bank -- i.e. the bank may be totally solvent, but still not have the liquidity to pay its immediate debt. Added: I just heard on TV that the Fed would "back up" the first $30 billion of any loss from Bears Stearns' assets. Not sure if this means the Fed will take any losses from such securities, or what. Given that Chase is paying less than $300 million, the nature of the $30 billion is important in determining the nature of this transaction. Edited March 17, 2008 by softwareNerd Quote Link to comment Share on other sites More sharing options...
adrock3215 Posted March 17, 2008 Author Report Share Posted March 17, 2008 (edited) Yep. Joe Lewis lost over $1.1 billion Bear Sterns investment. CEO Jimmy Cayne is wiped out, and for good reason. The stock started the year at $85. I know a few guys who had bought this stock on Friday after it was down 47% in the low 30's and they were holding over the weekend for a bounce. They got crushed and their accounts are nearly cleared out. Greenspan came out and said today that the current credit crisis was the worst financial crisis since World War II. LONDON (Reuters) - There will be many casualties from the unfolding financial market crisis, which will lead to a large-scale overhaul of international banking regulations, codes and risk management, former Federal Reserve Chairman Alan Greenspan said. His editorial in the Financial Times today can be found here. I wonder if Greenspan now sees that he was originally right. That his Gold Standard essay was correct, and that he is mostly to blame for any problems we are experiencing today. What worries me is Bernanke appears ready to drop money on the system any time the futures point that the stock market will open down. I blame the current monetary policy on Milton Friedman, who was very adamant about stating that the Fed prolonged the Great Depression by not making policy loose enough. When Bernanke took the Fed role, and Friedman passed away, Bernanke came out and said "Milton, you were right. We prolonged the Depression. Thanks to you, it will never happen again." So, I think that about summarizes Bernanke's actions at this point. He is loosening money in almost panic-like manner. Edited March 17, 2008 by adrock3215 Quote Link to comment Share on other sites More sharing options...
adrock3215 Posted March 17, 2008 Author Report Share Posted March 17, 2008 (edited) Bear being taken out basically means they were not too big to fail. It is highly likely that Bear was nowhere near being bankrupt. By the way, you're wrong here. The situation was: Bankruptcy or, Take the Buyout. They have been stating that on CNBC a few times this morning. The value that the deal is being done at is less than half the value of the midtown skyscraper Bear Stearns owns. It is truly amazing. CNBC has Bertha Combs interviewing Bear Stearns traders and other employees who wonder whether their last paycheck will bounce or not. Edited March 17, 2008 by adrock3215 Quote Link to comment Share on other sites More sharing options...
softwareNerd Posted March 17, 2008 Report Share Posted March 17, 2008 By the way, you're wrong here. The situation was: Bankruptcy or, Take the Buyout.I meant a bankruptcy in terms of accounting: i.e. their assets are more than their liabilities. Of course, that doesn't help you if you cannot liquidate those assets according to a schedule of your own choosing. Yes, in terms of having to declare themselves bankrupt, I agree. The guys from Bear Stearns must have told the Fed: "If you're willing to underwrite those $30 billion, then we have no problem, we can run the company". The Fed obviously decided that the Bear Stearns shareholders should take the fall. In effect, the Fed protected the interests of Bear's creditors, but insisted that the shareholders walk away. The net result is that their has been a bailout, but not of Bear Stearns. Right now, it appears the people who were bailed out were Bear Stearns's creditors. Quote Link to comment Share on other sites More sharing options...
aequalsa Posted March 17, 2008 Report Share Posted March 17, 2008 I wonder if Greenspan now sees that he was originally right. That his Gold Standard essay was correct, and that he is mostly to blame for any problems we are experiencing today. Maybe he does and intended it. Quote Link to comment Share on other sites More sharing options...
K-Mac Posted March 17, 2008 Report Share Posted March 17, 2008 (edited) I know a few guys who had bought this stock on Friday after it was down 47% in the low 30's and they were holding over the weekend for a bounce. They got crushed and their accounts are nearly cleared out. 1.) You shouldn't time the market 2.) You should never invest more in stocks than you can afford to lose 3.) Diversify 4.) Diversify 5.) Diversify Maybe he does and intended it. Ha ha! That would be too awesome. Edited March 17, 2008 by K-Mac Quote Link to comment Share on other sites More sharing options...
adrock3215 Posted March 18, 2008 Author Report Share Posted March 18, 2008 0.75% rate cut today. I was mistaken in my original post. I said 0.25% in Fed Funds rate, but it was a cut in the discount rate. Today's cut is in the Fed Funds rate, lowering it to 2.25%. A half percentage point more and I will be looking to refinance my mortgage for sure. Quote Link to comment Share on other sites More sharing options...
adrock3215 Posted March 19, 2008 Author Report Share Posted March 19, 2008 Bear being offered on ebay... Quote Link to comment Share on other sites More sharing options...
adrock3215 Posted March 27, 2008 Author Report Share Posted March 27, 2008 The Next Bailout: Homeowners Seems as if there was some trouble at Bear's headquarters today. I certainly hope that what this article is saying does not come true. However, there is a point to be made here: Privatizing gains and socializing losses is not legitimate, whether you are a large financial firm or a single individual. "I think there's a growing populist feeling that if you're going to bail out Bear Stearns you better bail out individuals," said Greg Valliere, political economist with the Stanford Group, a Washington think tank. And some consumers clearly are in an uproar about the bailout. According to a Reuters report, about 60 protesters entered the lobby of Bear Stearns's New York headquarters Wednesday and made a fuss about how consumers needed more help from the government than Wall Street investment banks. What I found particulary telling is the following: The Fed also announced earlier this month that it would make billions in loans directly to Wall Street firms at the Fed's so-called discount rate, a right previously reserved for commercial banks. In addition, the Fed has said it will now accept troubled mortgage-backed securities as collateral on up to $200 billion in loans to Wall Street. Ahh, so Bernanke is going to accept mortgages as collateral instead of the typical Treasuries. I suppose the Fed thinks it is going to enter the landlord business and Bernanke is going to start collecting rents. Quote Link to comment Share on other sites More sharing options...
prosperity Posted September 30, 2008 Report Share Posted September 30, 2008 Bear being offered on ebay... A little late on the reply I know but... ...did the SEC move to find out if the seller was securities licensed and if not did they prosecute for violating SEC regulations? ...it seems like that would be funny, but maybe it would just be because of the absurdity of it...obviously we know the listing is meant to be funny. Quote Link to comment Share on other sites More sharing options...
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