The early action from overseas markets and trading in US stock futures suggests investors are worried about more victims of the credit crunch that finally claimed Bear Stearns over the weekend, notes David Gaffen on WSJ’s MarketBeat. Dow futures are indicated down 190 points in overnight trading, and Asian markets were hit hard, along with the dollar, in early trading overseas.
“It could restore some level of confidence in the credit markets,” writes Peter Cohan on Bloggingstocks.com. “Alternatively, it might just be a temporary bright spot in a very gloomy stretch of financial weather.”
Writing on Conglomerate, Gordon Smith notes reports that the Fed wanted Bear Stearns to avoid a “bankruptcy filing that could have sent shock waves through the markets”.
“Perhaps this purchase by JPMorgan will provide some assurance to the markets, but based on the trading in Asia at this hour, the shock waves are reverberating”.
Fintag, in fighting-fit verbal form on Monday, notes that the “rooster is roosting”.Events are happening quickly. Having raised our concerns about Bear Stearns since last August, we were treated once more to “its all fine” and as predicted “we are screwed” within the space of 4 days. It took Citi 10 weeks to admit it had lied.
This is the problem. Nobody knows how bad it really is. I am scared and so should you be. Although Bear have been the butt of many an unfunny joke, I never thought this would happen…Let us hope that Lehman, Citi and maybe AIG can avoid this very serious market event
Still, it adds, unlike the UK’s Northern Rock debacle, “swift action was taken. Bernanke did something right for once”.
Much of the media seems to think of this as an isolated Financial problem. This is what they thought in 1929 and poverty and unhappiness for millions kicked in during the 1930s
Meanwhile, the Disciplined Investor says that the “horrifying news” of the JPMorgan-Bear deal evokes thoughts about the (former) masters of the lip-sync world, Milli Vanilli.
Remember them? Rob and Fab were the gorgeous singing duo who had a hypnotic effect on a global scale. When they sang, fans were awed. When they danced…well, actually let’s not go there. Where are they now?
Our trusted government and its agencies have now taken over as the Milli Vanilli of Finance. Who in the hell is calling the plays? Who is making these abhorrent decisions to hide information from the public and allowing for a multi-billion dollar company to to fail over a weekend? How are we going to have trust in the system if they pull a fast one like this? It is now more obvious than ever that we are in bad shape and the lack of either: 1) people in the know, knowing or 2) trust for the system, is going to hit hard.
Still, it concludes, over the next few days, “amazing trading opportunities will probably arise as rumors and speculations will run rampant”.
Back to Bloggingstocks, Donald McIntyre notes that the New York Fed’s separate move to create a lending facility for primary dealers – and allow credit to be collateralised by a broad range of investment-grade debt securities – may mean that the “Fed will be exchanging capital for paper worth much less than a dollar being currently held on bank balance sheet”.
“The moves by the [Fed] board are now a full bail-out and the only open question is how much money the agency will provide”.
Finally for a bit of humour, in an otherwise unfunny situation, we turn to longorshortcapital.com, which has come up with a cheeky list of “things you can buy for $2″ [we presume at current US peso prices]:
* 2 limes
* 1 organic avacado
* 15% of a drink at a bar
* A pound (sterling)
* A day’s worth of labor from a farmer in the Indian countryside
* Nothing at a strip club
* A payoff of that persistent newspaper boy who wants his $2
* 2.3 cheeseburgers from McDonald’s
* Medicine for an African child for a whole month
* Oh yeah and these guys… BEAR STEARNS