March 16, 2008

The Fed in race against the clock to get Bear Stearns taken out - with trillions and trillions of derivative counterparty risk on the line tonight


Tick, tick, tick, tick..

The Fed and Goldman Sachs' CEO Paulson (oops I mean US Treasury Secretary of course) are racing against the clock right now, as we speak, before Asia opens, to try to get Bear Stearns taken out - with JPMorgan being the shotgun bridegroom of the day.

Why?

Simple.

Counterparty risk.

If Bear flamed out without being nationalized or merged, a tsunami of counterparty risk in the derivatives market would be unleashed. And with Bear, it's in the trillions. Trillions and trillions and trillions and trillions.

Oh, what a week it will be...

67 comments:

Anonymous said...

Keith,

This is crazy. Even GS is getting hit with 3 billion. The cream of the crop investment bank.

No way of avoiding this mess here.

Dny

Anonymous said...

Fed will offer to buy up trillions in mortgage CDOs this week and cut 1% or the market crashes

Anonymous said...

Poor Ben

Sunday night he should be drinking

Anonymous said...

The govt. involvement in this is deplorable and constitutionally illegal; just like the federal reserve bank itself.

When the bubble was inflating it was all about capitalism, free enterprise, sink or swim, hands off policy.

Now that it is crumbling the fed is making up billions of dollars of phoney money and backing a PRIVATE bank with assurances it will cover their losses WHEN this thing fails.

Socialized banking is the new cool thing. It should be done on an individual level to be fair. Hmmmm..I can't walk into a Ferrari dealer and pay cash for a car so the "gubament" should write Ferrari an IOU on my behalf saying that if I fail to make payments they will pay for me and I get to keep the car.

tater said...

Paulson's already saying that the federal government will do whatever it takes to maintain financial stability in the markets. Let me put that in HP speak. Paulson is really saying that no Wall Street buddy will go under as long as there is an American taxpayer left breathing.

Man, we are so screwed.

corvinus said...

Guns and ammo will become the de facto currency of the Americano nation within the next couple of years.

What better than currency that you can use to defend yourself??

Meanwhile, we'll be using those worthless $1 (one North American Peso) bills to wipe our asses.

Afterthought said...

Diluting = stealing;

In other words they will dilute/steal YOUR money to save their friends.

Trevor Cordes said...

It doesn't matter anymore what the Fed does. Cut, no cut. Bailout, no bailout. It doesn't matter. The market is going down, down, down. The only thing the Fed can control is how fast. They want it slow. That's fine with me, just day-trade with a down bias and you'll make money.

I'm just watching the Fed & CNBC for entertainment purposes these days. It's funny watching them scramble to try to fix the unfixable! Like a really dumb sitcom. Or, maybe a Greek tragedy.

Anonymous said...

But Cramer and his Wall Street pals will be cerebrating the fake rally on Tuesday because of another useless rate cut by Bernanke. After that phoney rally on Monday or Tuesday, follows another huge gigantic humongous nosedive to fleece the sheep.

If you get into this stock market, you are a fool.

Anonymous said...

I know that this is a side issue and everyone has heard these stories but there is the story of a couple that were allowed to buy over 200 houses in Las Vegas, (no money down of course) now there are 118 in foreclosure and the people have collected over 100 million on the properties. Go over to Housing Doom for more details and then on Patrick.net there is the story of the Chinese business owner who bought a 5 million dollar home in Atherton, CA took out a 1.7 million dollar loan on it the first month and then maybe a year later took out a 7.1 million dollar loan. It's a beautiful house pictures included, if you want it it's for sale for 11million dollars(notice the 6 million dollar mark up) You may get it at a discount now that it's in foreclosure. Also it's never been lived in 10,000 square feet if you need a hotel I mean house. And people can not understand how the country got into this mess. My neighbor got 699,00(refinanced dollars I am sure) for his house did plenty of remodeling and now has to walk away...what else did he do with the money: his church encouraged goers to get equity off their property to help pay for church financed business. Becha the pastor isn't loosing his property although the congregation is.
I foresee alot more "stories to come out" because I am sure there are plenty more stories to tell and more people who thought their houses were lotto tickets, winners at that. Your chances of winning the lotto is like putting a golf ball in a paper cup after throwing it from a thirty story building.
There is going to be alot more blood letting. At the good ole post office you should see the amount of businesses for sale, name brand fast food restaurants up for sale (just guess a name and they have units for sale except Mickey D's and I just may not have seen the mail, all sorts of restaurants (they go first in econonic hard times I'll make my burgers at home thank you), apartment complexes (30 units or more) gas stations, liquor stores, chinese restaurants, grocery stores, you name it. Did I mention this is a new phenomena. (unless of course it happened in 1929) Never in my 30 years do I remember mail like this. Trays of foreclosures, collection agencies, storage units, repo companies and please pay us please from credit unions (they don't have money on the same scale as say BOFA). When I saw a foreclosure notice for a church I paid off my last bill and now I am cowering in a corner waiting for bolts of lighting to flame through the skies. This is ugly. And just to think this is just the beginning.
Gotta go. I need to get to the grocery store and get some cases of top ramen before the real estate agents get there because in about 6 month that is all I will able to afford to eat gotta stock up now.
PS: GEAB predicts the whole thing is going to crash by the end of Sept 08. We'll see. Get ready. Please don't fight me over that last box of beef flavored ramen.

And to think Bear Stearns is the first in the USA to go. (Although it has been predicted for a while so no one should really act surprised) what else is waiting to get out of pandora's box. Maybe citibank maybe Merril Lynch we'll see (aren't they on the ropes too).

mairca izda debol said...

Poor Ben

Sunday night he should be drinking



He probably has been since last summer

Anonymous said...

Bear sold-2$ a share
From Asia

Anonymous said...

Hey Europeans, how's that New World Order deliberate plan of depressing your wages, by creating an EU full of competing cheap labor and importing poverty from Third World Countries, working for you?

How's that obscene socialist tax rate to subsidize all the Muslims and Africans who hate you but gladly take your country and hard earned tax money? Here's the evidence:

BusinessWeek -- German Incomes Lag Behind Inflation.

New figures from Germany's Finance Ministry show that despite an upturn in the economy, average incomes have failed to keep up with inflation.

Germans are feeling the pinch. Although the country's economy has been growing steadily in recent years, the man in the street is, in fact, worse off, as average incomes have failed to keep up with inflation. According to new figures from the Finance Ministry, in the last three years prices have been rising faster than disposables incomes -- and the drop in real wages is accelerating.

That purchasing power is falling won't come as a surprise to most Germans. Relative to one year ago, prices for a number of goods and services have risen drastically. Petrol prices have shot up by 10 percent with diesel rising by 16 percent relative to Feb. 2007. Electricity is likewise 7 percent more expensive and natural gas prices are set to rise in April. Even a bag of groceries costs on average 7.8 percent more than a year ago. Germany's federal statistics office said on Friday that the inflation rate hit 2.8 percent in February.

The bad news comes on the heels of a report by the German Institute for Economic Research that Germany's middle class is continuing to shrink. Whereas the group made up a solid 62 percent of German society for decades, only 54 percent are now middle class.

Anonymous said...

I can't understand how people listen to Grateful Dead...their music sux!

Anonymous said...

okay at 4:20 pm my time (PST 3/16/08) Bloomberg news just reported that Bernacke just cut the interest rate 3/4 percent and Bearn Stearns was just sold for 2 dollars a share. Heaven help us all.

Anonymous said...

Wow 2 bucks a share!


JPMorgan Closes Deal on Bear Stearns
Mar 16, 7:18 PM (ET)

By JOE BEL BRUNO and MADLEN READ
NEW YORK (AP) - JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million, a stunning collapse for one of the world's largest and most venerable investment banks.
JPMorgan Chase & Co. (JPM) said the $2 a share, all-stock deal has received the required approvals from the federal government and the Federal Reserve. Bear Stearns shares close Friday at $30 a share.
The Fed will provide special financing to JPMorgan Chase in connection with the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets.

Burn Baby Burn

Simisteve said...

For $236 Million and $30 BILLION from the fed OMFG. Futures up $136 and then dropped to $96. WTF? They get a deal done at 1-1/4 % of peak value!! Move along, nothing to see here.

Anonymous said...

$2 a share... $2 A SHARE!!!

SOLD said...

Bear sold for $2/share. NOT A TYPO! JPM Chase the 'lucky' winner.

http://tinyurl.com/2r3rkw

Menlobear said...

yep - you called it, Keith: http://money.cnn.com/2008/03/16/news/companies/jpmorgan_bear_stearns/index.htm?postversion=2008031619

Anonymous said...

$2 per share, that's how much JP Morgan is paying for Bear Sterns

Anonymous said...

Asia has opened.

Tom said...

How much does Japan and Europe and China go down tonight?

Steve said...

Watching this fiasco unfold at Bear Stearns highlights just how dangerous the derivatives game truly is even for the supposedly finacially astute. Reading up on the history of Bear Stearns, it's notworthy that since its founding in 1923 until this year, it had never experienced a year of running a loss. That time frame of course includes all of the Great Depression as well as many recessionary years when lots of its peers registered losses. It's also of interest that Bear Stearns made a big point of encouraging its employees to invest their savings in the company that employed them, with the 14,000 employees owning a significant share in the company.
With the stock down some 90% from its all time high in early 2007, I think the experience of employees at Bear Stearns highlights the perils of investing too much in your employer.

simisteve said...

Futures down $76 now! Dollar @ .98 yen. Gold up 14.50! Uh oh.

a.creampuff said...

Keith, now you should be saying "it hath been foretold".

Jeepers.

Anonymous said...

http://www.forbes.com/feeds/ap/2008/03/16/ap4778473.html

JPMorgan says it is would buy ailing Bear Stearns for $2 a share

HAHAHAH ROFL!!!!

Good riddence !!!

Lehman Bros is NEXT !!!!!!!

Trevor Cordes said...

NEWS FLASH: Sunday night. JPM buys BSC for $2/share. Fed provides $30B of "financing" for the deal. BSC closed at $30/share after falling from around $55 in 1 day.

This is complete insanity. If you hold a bank stock, to think that your $60 can be turned into $2 in 2 days is an unthinkable prospect. If you held BSC puts the past 2 trading days you are now rich beyond belief.

Note, the Fed backstop is effectively nationalizing and monetizing BSC liabilities. Free market indeed.

Now, start guessing what the market will do on this day-shortened, triple-witching options week! First up, Asia. Oops, looks like Shanghai is past the point of no return...

face the music said...

Cheney still hasnt returned my scud-missle chemical attack duct-tape refund yet (plus late fees and interest) now totaling $423.87. I'm pissed.

Anonymous said...

Chase buys Bear for 25% of the "value" of its Manhattan office building. With, of course, the taxpayer taking 30 billion in "less liquid" assets, i.e. alt-a toxic waste.

Chase overpaid, and the taxpayer got screwed.

edd said...

Maybe Elliot Spitzer will save us.


..... He what ???

Anonymous said...

Remember that movie from the eighties?

With that paper-boy chasin thhat guy around yelling,
"My two dollars, give me my 2 dollars!!!"

I thought of that when I read the news.

Anonymous said...

Bear Sterns just bought for $2.00 per share or about 250 million this for a company that was valued at about 8 billion a month ago. In January 2007 it trade at about $170.00 per share what a disgrace to have allowed this to occur.

W.C. Varones said...

I know the rent is in arrears
The dog has not been fed in years
It's even worse than it appears...

Anonymous said...

Now this is hilarious: JP bought Bear Stearns for 2$ a share($30 at close time last Friday) That is about $300M.
And then you learn BS's building alone is estimated at $1.2 Billion.
So corporate real estate is overvalued at least by a factor of 4.

Anonymous said...

There have been two MAJOR developments this weekend:

http://tinyurl.com/2ggfzc
The deal calls for J.P. Morgan to pay $2 a share [for Bear Stearns]

http://tinyurl.com/yu4s97
Fed Takes New Steps to Ease Crisis

Trevor Cordes said...

21:57ET S&P futures have been below the Jan low of 1270 for over 30 minutes, with one attempt to regain the level.

Strong volume and huge downside below 1270 completes the H&S and 1982 trendline breakout for 20% downside risk in the next few months.

Yen has touched 96.88, multidecade lows. Dollar is off a cliff. Gold is at 1025, through the roof. Anyone think we'll ever see below $1000 again?

SELL ALL RALLIES (including intraday ones)!

Monday may end positive, but not without some big pain first, and intermediate term we're going down, down, down.

I wonder if DOPES bought the 400 pt deadcat bounce last week??

Anonymous said...

Hanover Fiste: He never did... anything that was... illegal...
[pauses]
Hanover Fiste: Unless you count all the times he sold dope disguised as a nun.

Hanover Fiste: STEARN!!

Anonymous said...

Bear Stearns has now imploded. $2 a share...yikes.

Anonymous said...

Nothing says "RUN ON THE BANKS" like a $2 per share price for Bear Stearns........

Good night Irene!!!

bickerer said...

Paulson, is that the guy who was a professor at Princeton, or is that the other one.

I always get those two confused.

upthecreek said...

Friday was D=Day.. this week will be the debt explosion heard around the world..'BOOM BOOM OUT GO THE LIGHTS'

Anonymous said...

Interest rate seems to be heading to 0% just as mandated by Islamic Sharia. I can't imagine a better publicity move to gain confidence of the Muslim world. Bush and his band of rascals have ruined the United States.

thomas jefferson said...

holy crap:
http://www.cnbc.com/id/23664454

Marsupial said...

It's about 12 noon Monday in Japan. The Nikkei is down over 500 points and the dollar is about to drop below 96 yen. And who said nothing ever happens on a Sunday?

Anonymous said...

Once again you sound like a child trying to analyze the economy using grown-up words.

You are far outside your league.

Little Boy Keith, Amateur Economist.

upthecreek said...

I just can't decide... if I should buy shares of bear stearns or shares of VG Vonage...talk about a haircut.. The best thing to do is stay away from anything with a ticker symbol.

Anonymous said...

Well, Bear is bought. Problem solved?

Chris in HB said...

Keith; I didn't know you are a deadhead, hey Keith if your gonna be in Newport Beach next Monday to see Peter Schiff I'd love to meet up I'll bring some good Cali medical bud to share with you.

Anyways 2 bucks a share for Bear Stearns huh? so i'd like to buy some of that stock at 2 bucks is that not a public offering? i could afford to throw some worthless paper at a worthless company..thats like tipping strippers 2 bucks

-Chris in Huntington Beach

LauraVella said...

Asian Markets are down -500 tonight.

Ugly day tomorrow for Ben...

Anonymous said...

This should prove interesting for the NYC realestate market over the next few months.

Charles said...

This is amazing to watch. The FED is poised to inflate the economy big time.

The risk will be socialized and taxes WILL jump significantly to cover the debt all while the printing press roars. The upper middle class is about to be wiped out. Soon enough that McJob will be enough for a McMansion on a 30 year fixed. Sure gas is gonna be $7 a gallon... But the McJOB is gonna pay $25 an hour! The debased dollar should make exports and manufacturing explode.

All the while we get MASSIVE RE deflation as ALL commodities inflate and Real Estate is seen for what it is, dirt with a building on it. You can't eat it. You can't ride it to work

Probably all by design, thank you FED.

DOPES said...

HANG SENG: 11:24PM ET DOWN 1,048.20 (4.71%)

JINGLE MAIL!!!

JINGLE MAIL!!!

DOPES!!!

Anonymous said...

JPMorgan to Buy Bear for $2 a Share

Anonymous said...

Where are all the articles about shareholder lawsuits???

Lost Cause said...

It is Holy Week, and St. Patrick's Day is Tuesday. I don't predict a meltdown.

Anonymous said...

Bear has had a "mark to market" event. even with this orderly close out of bear this mark to market event will cause a major wave throughout the industry. People are now realizing that the writedowns of the past year were just the first wave.

Anonymous said...

Another point that no one seems to make:

1. The Fed is a private org whose ownership is very secretive but it is NOT a US gov agency or funded through the US budget.

2. If it takes losses on the toxic crap it buys from banks and IB's and broker dealers in these bailout operations - those losses are currently hits to its balance sheet/income.

3. These bailouts currently seem to put the
Fed's money and capital at risk, but not that of the taxpayer - yet.

4. So when does the US gov start formally backing/bailing out the Fed? - that is when the real shit hits the fan - that is when the taxpayer starts really picking up the losses on all these liar loans/MBS/CDO's and crap.

5. Until the US gov/joesixpacktaxpayer gets stuck with the Fed's losses, there are limits to the losses the Fed can take and how many of its Wall St. buddies it can bail out.

6. And keefer - you were so excited by bush's statement on sat. that the gov will not bailout the homedebtors - what's your deadpool now on how long that lasts??

irish toast said...

3/14/08, 4 PM, BSC is worth $3.54 billion

3/16/08, 9 PM, BSC is worth $236 million

LOL - 7 cents on the dollar!

Let the games begin on St. Patty's day!

Anonymous said...

Keith, you will like this:
http://www.youtube.com/watch?v=CnnOOo6tRs8&fmt=18

or
http://tinyurl.com/2v6o2e

Homeless sheep in the LA area.


Ozman.

Anonymous said...

The wave keeps growing and growing. And when it hits, we will witness an historic unwinding. Asian markets mostly down 2-4%.

Anonymous said...

Amazing times. It should be interesting. $2 dollars a share. Unbelievable

cobra2411 said...

Two dollars!

Anonymous said...

Pretty funny, after peaking around the 170 mark in 2006 JPM pick it up for 2 bucks a share. The building their head office is in was last valued at 1.2B

Anonymous said...

looks like JPMorgan just bought Bear for 236 million, and the FRB had a busy Sunday w/ a 25bps cut :-)

gold @ $1031/oz.

get ready for the FedGov to seize gold holdings, fully nationalize the GSEs, and repeal the 2nd Amendment for the safety of the bankers.

keith said...

Well good f*cking morning!

I miss anything when I was asleep?

Good god.

There was chatter on a stock board early last week about the massive action in Bear $10 puts. Those guys who bought are either rich, or heading to jail for insider trading.

Wonder what other companies are 99% overvalued as of today.

Gold is going to go nuts this week.

It is here.

Head to the shelter.

Trevor Cordes said...

For those who don't sit and watch US futures all night (you mean you don't?):

S&P futures within 1 hour of opening Sunday crashed below the Jan 23 intrayday low of 1270.05. The low so far that I have seen (5 min ticks) was 1255 at 10:58pm. At 3:51am it has tried regaining 1270 a couple of times to be quickly repelled.

In case you don't follow technicals: 1270 is the magic number from the Jan low (lowest point since summer 2006) and the point of huge support and defense. If it breaks decisively we will rapidly see another 20% off the markets.

The Fed will defend 1270 at all costs! PPT will be on overdrive! Whether we close below (even slightly) Monday will have huge repercussions. Watch for intraday attempts to regain 1270. Watch for the market to tank in the last hour if it appears 1270 won't be attainable!

This is the most critical trading week for at least 1-2 months!!