The question we should be asking is, which 'stable' member of the Big Banking Club will the next to brazenly pull 'an Enron', 'a Northern Rock', by issuing the Big-monetarily solid-Lie to the investing public and then in 24 hours, or less... the bank crashes, as in totally out of dough?
Turns out, if you’re watching the futures, that the Fed’s bailout of Bear Stearns via Bear’s shotgun marriage to J.P. Morgan at $2 a share isn’t being viewed particularly well.
“At least it’s not $1.99,” jokes one friend.
But his joking underscores the message the deal sends to investors: With a price that low, things must be worse than anybody really knows and, if nothing else, makes you wonder what’s on the liability side of Bear’s balance sheet.
That’s underscored by the Fed’s unusual Sunday night discount rate cut, which was done to “bolster market liquidity” and “promote orderly market functioning.”
“Bolster market liquidity” and “promote orderly market functioning” are two terms that, no matter how you couch it, broadcasts just how tenuous the situation really is. So does futures trading in gold, the dollar and oil, all of which are bracing for the worst.
I like the $1.99 line. That's kinda funny. But it does make you wonder what’s on the liability side.