The Bear on Wall Street
Today is an interesting day in the markets (to say the least).
Troubled financial firm Bear Stearns was valued at $3.54 billion on Friday evening. This morning, JPMorgan Chase bought the company for $236 million in an emergency fire sale. Angry Bear Stearns stockholders are already calling in the legal beagles in the hopes of some kind of recourse.
Of course, the news caused the market to panic, which then prompted the Fed to step in with more rate cuts. And even more rate cuts are expected. (The Fed meets again tomorrow, March 18.)
In another unusual move, the Fed agreed to fund up to $30 million of Bear Stearns’ "less liquid assets" to grease the purchase deal. Furthermore, the Fed announced a new lending facility that will assist not only banks, but non-bank lending institutions as well.
MSN Money reports on the situation:
"This is the first time since the Great Depression that the Fed has extended financing to non-banks," Merrill Lynch North American economist David Rosenberg wrote in a note to clients this morning.
While some view the sale of Bear Stearns and the Fed’s recent actions as positive moves for the market, there are many dissenting voices. From the same MSN Money article:
"Today’s moves by the Federal Reserve are the desperate acts of failing men," Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission, wrote in a note to clients late Sunday. "The threat of contagion and wholesale breakdown is on a scale of 1929 is real."
It seems the Bear on Wall Street is alive and well. What do YOU think? Leave a comment and let me know your thoughts.
Best regards always,
A.J. Brown
Comments on The Bear on Wall Street »
I am relaxed and sitting back to see what the market is going to do. No point to get excited but wait to see what is going to happen in weeks to come.
TT members. See my comments on the community forum market discussions, concerning recent fed policy.
who would have thought that they sold for
approximate 1/10 of of last stock quote
on friday……. what an eye opener…..
makes you wonder how many of the herd are
in line for more defaults !!!
I think its past time for the government to step in and investigate this financial debacle. I strongly suspect that there is collusion going on with so many ailing financial institutions being bailed out with tax payer (mines and yours) money. Who will pay my bills when I can’t pay?
So who really cares about the strength of the dollar if the Fed doesn’t? What happened to their real mission?
I am a member of the Society of Market Technicians here in the DC. Two months ago, in the second half of one of our monthly meetings, one of our members got up to speak about the mortgage crisis. He belongs to a firm that is the largest mortgage broker in Maryland. He said if you look deeply into some of the large US banks, you will see how deeply they are into the subprime mess. Citi Corp, Wachovia, BAC, just to name of few. His comment was that when all the details become known, it will make 1929 look like the “good old days.”
I have been short the market since Jan 2 using QID. Friday I closed half my short position, but still hold the rest as of the close today.
The question you have to ask youself is: “Do you really think Bear Sterns was the only one in this situration?”
I think not.
“Opinions are often wrong, the market never is.” Jesse Livermore
Great comments!
RJ320 - It does make you wonder, doesn’t it?
Rasheed - Unfortunately, government investigations won’t stop financial institutions from going down the tubes. If anything, it would only accelerate the process. In most cases, the damage is already done. It’s only a matter of time before the public learns the truth.
Jim - At this point, the Fed is more interested in preventing a severe liquidity crisis than preserving the value of the dollar.
Dennis - Thanks for such an insightful comment! Kind of scary to think that the potential coming shake-down “will make 1929 look like the ‘good old days.’”
Thats what happens when you use too much fancy leverage and things go wrong. It happens to us all, big banks, rogue traders and retail traders.
[...] has it that of the 14,000 Bear Stearns employees, about 7,000 of them will lose their jobs. What’s more, roughly 30% of the common [...]
Hi,
This is an attempt to save a ship that has been greatly batterred by the ocean weaves.The Corporate image of this company has been greatly diminished.Hence, government intervention would only keep the vale for a while. Yes! it would not be for too long before the cmpany dies a natural death.
Thank you.
[...] Kranyak left a comment on A.J.’s Option Trading Blog. With regard to problems in the banking industry, he says, [...]