Holy fuck Bear Sterns sold for 2$/share

[A_C_E]

After trading for over $150/share one year ago, Investment Banking giant Bear Stearns was bought just a few minutes ago for only 2$/share by JP Morgan. Given the turbulent nature of the US economy right now, the fact that an established ibank lost so much money in a single year is a very dark sign.

Look for another major Wall Street sell-off tomorrow.

Jesus.

JPMorgan close to Bear buy - report - Mar. 16, 2008

[Scrum]

Didn't they just get handed $200 Billion by the government?

[A_C_E]

Originally Posted by Scrum

Didn't they just get handed $200 Billion by the government?

The number is wrong, but yea, sort of.

The Treasury (via the Fed) agreed to loan up to 30 billion to cover shortfalls in the Bear Stearns selling spree, but the money isn't actually going to Bear right away. It's first going to JP Morgan, which is going to then turn around and lend it again to Stearns, obviously now its subsidiary. It's a bit screwy but so is everything else in the wonderful, wacky world of finance.

This spells serious, serious, SERIOUS trouble for the US economy. A major slowdown is coming (or is likely already here).

[bheld]

We're boned, seriously boned.

The fed is looking out for themselves now and will be knifing us all in the back with rate cuts while they try to figure out a way to bail out of this bullshit economy and leave with all the gold and euros they can carry.

[A_C_E]

Originally Posted by bheld

We're boned, seriously boned.

The fed is looking out for themselves now and will be knifing us all in the back with rate cuts while they try to figure out a way to bail out of this bullshit economy and leave with all the gold and euros they can carry.

I'm scrambling to move some money around as fast as possible.

The sell-off tomorrow is going to rape my mutual funds if I'm not careful.

[bheld]

commodities and foreign currency

[A_C_E]

Originally Posted by bheld

commodities and foreign currency

Pretty much

I'm all but cleaning out my mid-cap growth fund. Moving everything there into international markets before the dollar eats away any more of my savings.

[WickedLou9]

Originally Posted by A_C_E

Pretty much

I'm all but cleaning out my mid-cap growth fund. Moving everything there into international markets before the dollar eats away any more of my savings.

Not that I have alot invested but not including my 401K, I took everything out of my global equity fund back in October and moved it to a short-term bond index fund. I'm still in the black for this year. Everytime the market falls this fund ticks upwards I wish I had more money to invest. I'm nervous about the international markets though, they are reacting negatively to our markets as well. I'm just going to sit this disaster out and wait till things stabilize and then get back into equity. Maybe later this summer

[WickedLou9]

This is actually pretty scary. It smacks of the 1920's banking crisis that led to the great depression. Banks are having liquidity problems investors are pulling thier money out, huge credit crunch, foreclosures... hopefully with the fed doing everything it can to ensure liquidity we will avert anything on that sort of scale.

Great Depression - Wikipedia, the free encyclopedia

Debt is seen as one of the causes of the Great Depression. (What follows relates to the USA).
Macroeconomists including Ben Bernanke the current chairman of the U.S. Federal Reserve Bank, have revived the debt-deflation view of the Great Depression originated by Arthur Cecil Pigou and Irving Fisher: in the 1920s, American consumers and businesses relied on cheap credit, the former to purchase consumer goods such as automobiles and furniture and the later for capital investment to increase production. This fueled strong short-term growth but created consumer and commercial debt. People and businesses who were deeply in debt when price deflation occurred or demand for their product decreased often risked default. Many drastically cut current spending to keep up time payments, thus lowering demand for new products. Businesses began to fail as construction work and factory orders plunged.
Massive layoffs occurred, resulting in unemployment rates of over 25%. (US) Banks which had financed this debt began to fail as debtors defaulted on debt and depositors became worried about their deposits and began massive withdrawals. Government guarantees and Federal Reserve banking regulations to prevent these types of panics were ineffective or not used. Bank failures led to the loss of billions of dollars in assets.
The debt became heavier, because prices and incomes fell 20–50% but the debts remained at the same dollar amount. After the panic of 1929, and during the first 10 months of 1930, 744 US banks failed. (In all, 9,000 banks failed during the 1930s). By 1933, depositors had lost $140 billion in deposits. [5]
Bank failures snowballed as desperate bankers called in loans which the borrowers did not have time or money to repay. With future profits looking poor, capital investment and construction slowed or completely ceased. In the face of bad loans and worsening future prospects, the surviving banks became even more conservative in their lending. [6] Banks built up their capital reserves, which intensified deflationary pressures. The vicious cycle developed and the downward spiral accelerated. This kind of self-aggravating process may have turned a 1930 recession into a 1933 great depression.

We are in a sort of cycle now where banks are tightening credit because of the sub prime meltdown. Because they do that, more people either can't get loans or go into forclosure, further causing more tightening of credit, which makes more people default, etc. You can see why the Fed has been furiously pouring money into the sytem and cutting rates to try and ease the credit crunch.

[Fed Up]

Originally Posted by WickedLou9

This is actually pretty scary. It smacks of the 1920's banking crisis that led to the great depression. Banks are having liquidity problems investors are pulling thier money out, huge credit crunch, foreclosures... hopefully with the fed doing everything it can to ensure liquidity we will avert anything on that sort of scale.

We are in a sort of cycle now where banks are tightening credit because of the sub prime meltdown. Because they do that, more people either can't get loans or go into forclosure, further causing more tightening of credit, which makes more people default, etc. You can see why the Fed has been furiously pouring money into the sytem and cutting rates to try and ease the credit crunch.

That "wiki" definition also had the following (I highlighted the pertinent parts):

Austrian School explanations (of the Great Depression)

Another explanation comes from the Austrian School of economics. Austrian theorists who wrote about the Depression include Hayek and Murray Rothbard, who wrote "America's Great Depression" in 1963. In their view, the key cause of the Depression was the expansion of the money supply in the 1920s that lead to an unsustainable credit driven boom. In their view, the Federal Reserve, which was created in 1913, shoulders much of the blame.

In fact, Hayek, writing for the Austrian Institute of Economic Research Report in February 1929 [13] predicted the economic downturn, stating that "the boom will collapse within the next few months."

Ludwig von Mises also expected this financial catastrophe, and is quoted as stating "A great crash is coming, and I don't want my name in any way connected with it." [14] when he turned down an important job at the Kreditanstalt Bank in early 1929.

One reason for the monetary inflation was to help Great Britain, which, in the 1920s, was struggling with its plans to return to the gold standard at pre-war (World War I) parity. Returning to the gold standard at this rate meant that the British economy was facing deflationary pressure.[15] According to Rothbard, the lack of price flexibility in Britain meant that unemployment shot up, and the American government was asked to help. The United States was receiving a net inflow of gold and inflated further in order to help Britain return to the gold standard. Montagu Norman, head of the Bank of England, had an especially good relationship with Benjamin Strong, the de facto head of the Federal Reserve. Norman pressured the heads of the central banks of France and Germany to inflate as well, but unlike Strong, they refused.[16]

Rothbard says American inflation was meant to allow Britain to inflate as well, because under the gold standard, Britain could not inflate on its own.

In the Austrian view it was this inflation of the money supply that led to an unsustainable boom in both asset prices (stocks and bonds) and in capital goods. By the time the Fed belatedly tightened in 1928, it was far too late and, in the Austrian view, a depression was inevitable.

The artificial interference in the economy was a disaster prior to the Depression, and government efforts to prop up the economy after the crash of 1929 only made things worse. According to Rothbard, government intervention delayed the market’s adjustment and made the road to complete recovery more difficult.[17]

Furthermore, Rothbard criticizes Milton Friedman's assertion that the central bank failed to inflate the supply of money. Rothbard asserts that the Federal Reserve purchased $1.1 billion of government securities from February to July 1932 which raised its total holding to $1.8 billion. Total bank reserves only rose by $212 million, but Rothbard argues that this was because the American populace lost faith in the banking system and began hoarding more cash, a factor very much beyond the control of the Central Bank. The potential for a run on the banks caused local bankers to be more conservative in lending out their reserves, and, Rothbard argues, was the cause of the Federal Reserve's inability to inflate.[18]

Don't forget that Bernanke, in his 2002 speech, said that what the Fed did in 1934 - devaluing the dollar versus gold - "was a good thing." What he failed to tell you in that speech is that the year before, in 1933, gold was confiscated from We The People and The People were given fiat paper in return.

So what Bernanke thinks is a "good thing" was taking that Fed created Fiat Paper they had just given The People in 1933 and devaluing it by 60% by artifically moving the price of gold from $20 an ounce to $35 in 1934.

Anything to help "the good ol boys" club out...that's what the Fed will do....and always at the expense of The People.

Fed Up

[WickedLou9]

Originally Posted by Fed Up

Don't forget that Bernanke, in his 2002 speech said that what the Fed did in 1934 by devaluing the dollar versus gold "was a good thing." What he failed to tell you in that speech is that the year before, in 1933, gold was confiscated from We The People and The People were given fiat paper in return.

So what Bernanke thinks is a "good thing" was taking that Fed created Fiat Paper they had just given The People in 1933 and devaluing it by 60% by artifically moving the price of gold from $20 an ounce to $35 in 1934.

Anything to help "the good ol boys" club out...that's what the Fed will do....and always at the expense of The People.

Fed Up

I don't think I can buy that. A financial disaster of that size hurts everyone, it hurts the rich sometimes more than the poor because the rich are generally more heavily invested in the financial markets. The fed would not purposefully try and harm our economy because no one benefits from that, not even the rich.

[Fed Up]

Originally Posted by WickedLou9

I don't think I can buy that. A financial disaster of that size hurts everyone, it hurts the rich sometimes more than the poor because the rich are generally more heavily invested in the financial markets. The fed would not purposefully try and harm our economy because no one benefits from that, not even the rich.

The Fed didn't have a choice in the matter in 1933 and 1934, but understand one thing....The Fed was the problem to begin with and this is what led to the Great Depression.

They tried to make you feel like they are helping you by doing some magic tricks (like the confiscation of gold in 1933) at the expense of We The People and the dollar that their purpose was to maintain the purchasing power of.

To say the Fed doesn't take care of their own is to not understand who the Fed is....and this isn't "conspiracy" either: YouTube - BANKS OF AMERICA-Federal Reserve Bank KILLING America PT 1

Things were different back then with the Fed than they are today. Now the Fed has other "mandates"...and that is why they are interfering even more in the markets....and if you haven't noticed, at the expense of the U.S. dollar.

If you think the Bear Stearns bailout is all that is going to happen, think again. The Fed's Desperation Move by Gary North and Mish's Global Economic Trend Analysis: Fed Fails To Halt Debt Meltdown

And at some point, The Fed's game will end too.....and no, for the second time in America, it won't be good for We The People. But this doesn't mean that people can't prepare themselves....unless the Fed comes after our gold again...via the strong arm of the government....which seems to be "ok" with Bernanke. I'm not saying it will happen, but the laws are still on the books for it to happen. In 1933 if you didn't turn in your gold, it was a $10,000 fine or 10 years in jail. What would the consequences be in today's numbers?

Fed Up

[bheld]

Originally Posted by WickedLou9

I don't think I can buy that. A financial disaster of that size hurts everyone, it hurts the rich sometimes more than the poor because the rich are generally more heavily invested in the financial markets. The fed would not purposefully try and harm our economy because no one benefits from that, not even the rich.

No, the truly rich are already out. Cheney started his dollar hedge a few years ago. Right now the fed is trying to arrange the last few lifeboats for their cronies and they're going to sail off and leave us to deal with the aftermath when this house of cards finally falls.

The whole deal was brokered so that JP Morgan can assume Bear Stearns' operations and liabilities without Bear Stearns' assets being auctioned off in bankruptcy and showing just how much trouble all these investment banks are really in. Now the show can go on for a little while longer until Lehman Brothers falls.

[Fed Up]

Originally Posted by bheld

No, the truly rich are already out. Cheney started his dollar hedge a few years ago. Right now the fed is trying to arrange the last few lifeboats for their cronies and they're going to sail off and leave us to deal with the aftermath when this house of cards finally falls.

The whole deal was brokered so that JP Morgan can assume Bear Stearns' operations and liabilities without Bear Stearns' assets being auctioned off in bankruptcy and showing just how much trouble all these investment banks are really in. Now the show can go on for a little while longer until Lehman Brothers falls.

The part that struck me the most comical about all this was the fact that Bear Stearns, from what I had read, had about 13 trillion of derivatives exposure and that they were bailed out by the Fed and of all people, J.P. Morgan Chase, who is the largest derivatives player of them all, with over 40% (might be 50% now) of the derivatives market! My guess is that most of that exposure was to J.P. Morgan, hence the sweet deal of $2 a share.

Fed Up

[A_C_E]

Fed Up, do you have to turn EVERYTHING into a debate about the gold standard!?!!?!?

We were exchanging some good advice for how to survive a slumping market and once again got derailed by your incessant need to inject Austrian economics into every single discussion. Can't we fucking stay on topic for once?

[A_C_E]

Originally Posted by WickedLou9

Not that I have alot invested but not including my 401K, I took everything out of my global equity fund back in October and moved it to a short-term bond index fund. I'm still in the black for this year. Everytime the market falls this fund ticks upwards I wish I had more money to invest. I'm nervous about the international markets though, they are reacting negatively to our markets as well. I'm just going to sit this disaster out and wait till things stabilize and then get back into equity. Maybe later this summer

I only have about $15,000 to play with, since my university tuition (all $49,000 per year of it ) is slowly but surely eating away at all my remaining savings. That said, given that I have two years (and thus 4 more payments) until I graduate, I'm trying to at least maintain my current level of income so I can keep making payments.

The thought was that as long as my investments were growing at a rate greater than the interest on my (albeit small) student loans was accruing, I was better off drawing the loans and leaving the money in the market. Not sure if I want to keep doing this though, given that I'm down about 4.5% overall on the year.

Either way I started hacking my losses. I moved $7000 this morning into a low-risk international fund (as long as the dollar keeps dropping, overseas is relatively safe) and a limited maturity bond fund, which grows consistently @ 3.8% per year and has no service charge. Gotta love government debt investing. Either way, it's better than continuing to hemorrhage money for the next 6 to 8 months.

[A_C_E]

Also, Lehman so far today is down 38%.

The fact that they might fall apart just like Bear Stearns did is absolutely terrifying.

My unending thanks go out to Alan Greenspan for replacing one bubble with another and fucking us all over once again. My sincerest gratitudes go out to you, Uncle Al.

I picked a hell of a time to want to go into Finance

Some good news on Lehman, though....Moody's (for now) thinks they're going to be ok. Stable outlook, not positive, but not negative, either: Lehman Brothers outlook cut to stable, rating affirmed at 'A1' - Moody's - Forbes.com