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.
After 5pm, Spam Bisque is free down at the kitch!
Would nicmarlo.edu be an oxymoron?
iknowtheM3butimnottellin.gov
For sure!
But I don’t like Spam.
It's premature for anyone to do anything more than speculate on whether there will be a depression, much less flatly state that we are headed for one. And as you well know, statistics don't show that we are "technically" even in a recession (I would think that a recession would be a precursor to a depression). Notwithstanding the technicalities, however, I believe it is obvious that we are experiencing a recession. And as I stated earlier, recessions are experienced anecdotally during the fact; statistics prove what is felt long afterwards.
What you laugh at, however, is the clear parallels in the here and now and the economic policies/practices, events, and statements made prior to the Depression. Ignoring these historic warnings, imho, is nothing less than stupid.
Try the Spam Thermidor. There’s not much Spam in that.
LOL!
You want to talk history? I can. If you want to use historic indicators then you should be buying like crazy. The historic buy signals outnumber the historic sells 10 to 1.
The rest is details.
Pinging Candide.
Hey groanup? Notice any problems in the last week or two??? Thought not.
Funny how no one notices that grease spot in the road where this little corner bank called BSC used to be? You wake up one morning and find that the Fed just disappeared them.
Joining the lie brigade, huh? Have fun.
Yeah, the conspiracy nut race fans are straining their necks even more because they know there's a car wreck coming. They can't wait.
Of course you didn't notice that the INDU was up 420 today AFTER a disappointing Fed announcement. Wonder why that stupid old market was rallying despite Andy Jackson's hare brained conspiracy ideas? Don't those traders and investors know any better? Volume was 7 to 1. Damn, don't they know they aren't supposed to be buying because it ruins Andy's plans for a crash celebration?
What, did you sleep through Continental Illinois, Kidder Peabody, E.F. Hutton, Orange County? Or are you not old enough?
I only hope, for your sake, that the worldwide markets crash before morning so You'll wake up in a good mood.
Run for your lives!
Glad there is nothing to see here folks. I’ll just mosey along and mind my own business.
First time I've heard you exercise sound judgement. Congrats.
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