Posted on 03/17/2008 6:41:36 AM PDT by Lazamataz
To everyone who called me or emailed me over the weekend saying, "How could this happen? How could Bear Stearns go from $57 to $2 in two days?" I would offer the comment of one astute trader, who said, "When you are levered 30 times and have no access to finance it doesn't take a huge move on $400 billion in assets and $260 billion of debt to wipe out the equity."
Two questions dominate the Street this morning:
1) What will Bear Stearns' shareholders--specifically Bear employees--do? The $2 per share deal is subject to shareholder approval, and Bear employees--many of whom have significant parts of their life savings in Bear stock--are certainly stunned enough to create at least a minor protest over the price. Sandler O'Neill noted that "we do not believe it is incomprehensible that this deal may have bought Bear Stearns additional time to assess its situation which may lead shareholders to reject the offer."
2) What will happen to the other major brokers and banks, and what will the reaction of the credit markets be? With a book value at nearly $80 per share for Bear, the $2 price makes it tough on other brokers. A flight to firms with the strongest balance sheets seems obvious. Analysts were out this morning with various comments on who does have the strongest balance Goldman Sachs , for example, opined that Morgan Stanley and JP Morgan had the strongest balance sheet. Street seems to be treating it that way: Lehman down 28 percent pre-open, Merrill down 16 percent, Goldman and Morgan Stanley down down 8 percent, JP Morgan up.
Meredith Whitney, who has become an ax in this space through her coverage at Oppenheimer, put out a note this morning titled, "BSC Fire Sale to Cause Valuation Adjustment for All Financials: Banks at Risk," in which she argues that financial stocks have further downside of as much as 50% based upon 1990/1991 multiples of tangible book values. She says most banks are trading well above their price to book lows of the 1990-1991 cycle.
So, what will finally end all this turmoil? The Street is screaming that the government should directly or indirectly begin buying mortgage backed securities, and, to a lesser extent that a wider bailout program needs to be devised to stem home price depreciation.
This must have been part of what had occurred:
Japanese government intervention in the currency market
In the 1970s, Japanese government and business people were very concerned that a rise in the value of the yen would hurt export growth by making Japanese products less competitive and would damage the industrial base. The government therefore continued to intervene heavily in foreign-exchange marketing (buying or selling dollars), even after the 1973 decision to allow the yen to float.
Despite intervention, market pressures caused the yen to continue climbing in value, peaking temporarily at an average of ¥271 per US$1 in 1973 before the impact of the 1973 oil crisis was felt. The increased costs of imported oil caused the yen to depreciate to a range of ¥290 to ¥300 between 1974 and 1976. The re-emergence of trade surpluses drove the yen back up to ¥211 in 1978. This currency strengthening was again reversed by the second oil shock in 1979, with the yen dropping to ¥227 by 1980.
http://en.wikipedia.org/wiki/Yen
Thanks for the info.
yw
I simply asked you if you were predicting a depression.
From one of your first posts on this thread:
The market/economy is in deep doo doo; the fed is putting off the inevitable, making the consequences inevitably worse. In the meantime, we hear lies by the feds, corporate greedholders, and certain posters who have obviously gotten their 30 pieces of silver, that all is well. Yet more evidence just last week with Bear Sterns' claiming that there's "no substance to the rumors" that it was facing liquidity/financial problems.
Now does that sound like you're predicting roses and sunshine?
Or does it sound like you are predicting dire economic stratits and claiming conspiracy. I rest my case.
You did NOT "simply" ask anything.
groanup: "The Dow is actually up at the moment. DAMN! WERE NOT GONNA DIE!
The person who is hyperventilating on this thread is YOU.
Check mate.
Is all of this beyond your comprehension? Look back over the posts. You can apologize afterward.
You never addressed my question of whether you were predicting a depression. You ignored it. You lose round 1,2 and 3. Game over.
Toddster is right. You are one of those people who can be incredibly wrong and never realize it.
When does he start throwing spitballs?
He’ll just hold his breath and stamp his feet.
False. That is NOT what you stated. What you stated is in RED, below, and is YOUR OWN IDEA, attributed to me.
To repost the entire post within context, once again:
To: groanupThe market also rallied before the Depression.
A recession is borne out by statistics after the fact. The reality of a recession is brought out by anecdotal evidence, during the fact.
And statistics can show whatever someone wishes it to show....especially since .gov has altered how things are measured from time before.222 posted on 03/17/2008 3:05:38 PM EDT by nicmarlo
Which was in response to this comment, by you:
To: ToddsterpatriotThe Dow is actually up at the moment. DAMN! WERE NOT GONNA DIE!
220 posted on 03/17/2008 3:03:45 PM EDT by groanup
From which you made up, whole cloth, the following, and attributed it to me:
So are you predicting a recession based on today's rally?
So............when do you predict “we’re going to die”?
Do you know the difference between a statement attributed to you and a question asked of you. You see in a statement attributed to you I would quote your statement and give YOU a byline. In a question posed to you I would ask you for an answer in response to my INQUIRY. Do you see the difference?
Are you going to hold your breath until you turn blue now?
Do you understand making up an completely different idea and then attributing that idea to someone else?
Ask me a question about what I ACTUALLY stated, not something YOU invented that I said from which to base your question.
Or is that task too difficult for you, to actually base a question upon the person’s actual comment and context within which it was made?
And I have a question for you.
Of which .gov do you also belong?
Okay, here is what you actually stated:
The market also rallied before the Depression.
A recession is borne out by statistics after the fact. The reality of a recession is brought out by anecdotal evidence, during the fact.
222 posted on 03/17/2008 3:05:38 PM EDT by nicmarlo
So here's my question, based on what you actually stated: Do you think we are headed for a depression?
and
nicmarloantagonist.gov
inbedwiththefed.gov
benismycopilot.gov
LOL.
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