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PostPosted: Sat Mar 15, 2008 9:26 am
 


What need is there for a private enterprise to calculate risks when it can expect a bail out from the state and from its competitor!?

http://www.dawn.com/2008/03/15/ebr7.htm


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PostPosted: Mon Mar 17, 2008 10:28 am
 


For all practical purposes, Bear Stearns is bankrupt. Despite the shotgun nature of the Bear/JP Morgan deal, Bear would not have agreed to a $2/share valuation unless the damage to their business was extremely severe. The Federal Reserve is scared sh*tless. There is no reason for them to get involved in this deal unless they were worried about one of two things (and probably both): 1) the ripple effect and/or 2) other banks in a similar situation. The Fed is looking for any tool (and making some new ones up) to prevent a system wide crisis. Bernanke is trying to prevent a financial sector meltdown.

MAD MONEY Cramer Said 'Don't Move' From Bear a Week Before Collapse

J.P. Morgan Buys Bear in Fire Sale,As Fed Widens Credit to Avert Crisis

After Bear Stearns, others could be at risk

Just heard on the wire the JP expects to cut 7000 jobs from Bear Stearns.


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PostPosted: Mon Mar 17, 2008 12:39 pm
 


Scape wrote:
Just heard on the wire the JP expects to cut 7000 jobs from Bear Stearns.


I have to wonder if their real estate holding are worth more then the $200 million JP is supposed to be buying them for.

Fire sale indeed.


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PostPosted: Mon Mar 17, 2008 12:45 pm
 


DrCaleb wrote:
Scape wrote:
Just heard on the wire the JP expects to cut 7000 jobs from Bear Stearns.


I have to wonder if their real estate holding are worth more then the $200 million JP is supposed to be buying them for.

Fire sale indeed.


The new tower they bought in Manhattan a few years back is worth over a billion dollars itself.


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PostPosted: Mon Mar 17, 2008 12:51 pm
 


Wall Street Journal wrote:
To help facilitate the deal, the Federal Reserve is taking the extraordinary step of providing as much as $30 billion in financing for Bear Stearns's less-liquid assets, such as mortgage securities that the firm has been unable to sell, in what is believed to be the largest Fed advance on record to a single company. Fed officials wouldn't describe the exact financing terms or assets involved. But if those assets decline in value, the Fed would bear any loss, not J.P. Morgan.


The Fed is not scared much; it's trying to save the world.


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PostPosted: Mon Mar 17, 2008 1:00 pm
 


Like so many dominoes, the Wall Street banks are getting ready to tumble.


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PostPosted: Mon Mar 17, 2008 1:12 pm
 


BartSimpson wrote:
Like so many dominoes, the Wall Street banks are getting ready to tumble.


The deal has been done in a couple of hours on Sunday to avoid the tumble of Asia earlier today.


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PostPosted: Mon Mar 17, 2008 1:29 pm
 


Benoit wrote:
BartSimpson wrote:
Like so many dominoes, the Wall Street banks are getting ready to tumble.


The deal has been done in a couple of hours on Sunday to avoid the tumble of Asia earlier today.


The fall of the markets is a matter of too little liquidity against too much debt. The problem simply cannot be reconciled that there exists more debt in the world than there is currency to cover it all.


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PostPosted: Mon Mar 17, 2008 1:35 pm
 


BartSimpson wrote:
Benoit wrote:
BartSimpson wrote:
Like so many dominoes, the Wall Street banks are getting ready to tumble.


The deal has been done in a couple of hours on Sunday to avoid the tumble of Asia earlier today.


The fall of the markets is a matter of too little liquidity against too much debt. The problem simply cannot be reconciled that there exists more debt in the world than there is currency to cover it all.


More fundamentally, the fall of the markets is a matter of not being able to believe anymore that the supply and demand of all goods and services can find equilibrium.


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PostPosted: Tue Mar 18, 2008 4:53 pm
 


Benoit wrote:
BartSimpson wrote:
Benoit wrote:
BartSimpson wrote:
Like so many dominoes, the Wall Street banks are getting ready to tumble.


The deal has been done in a couple of hours on Sunday to avoid the tumble of Asia earlier today.


The fall of the markets is a matter of too little liquidity against too much debt. The problem simply cannot be reconciled that there exists more debt in the world than there is currency to cover it all.


More fundamentally, the fall of the markets is a matter of not being able to believe anymore that the supply and demand of all goods and services can find equilibrium.


No, it is more to do with too much debt. The leverage of the investment banks have gone from 15x-20x equity to 25x-35x equity. Banks levered up their balance sheets to increase return on equity and stock prices, believing their models were an accurate reflection of risk. They were wrong, and volatility has exploded, wreaking havoc with the balance sheets of the banks.

There is more to come.


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PostPosted: Tue Mar 18, 2008 5:11 pm
 


Toro wrote:
Benoit wrote:
BartSimpson wrote:
Benoit wrote:
BartSimpson wrote:
Like so many dominoes, the Wall Street banks are getting ready to tumble.


The deal has been done in a couple of hours on Sunday to avoid the tumble of Asia earlier today.


The fall of the markets is a matter of too little liquidity against too much debt. The problem simply cannot be reconciled that there exists more debt in the world than there is currency to cover it all.


More fundamentally, the fall of the markets is a matter of not being able to believe anymore that the supply and demand of all goods and services can find equilibrium.


No, it is more to do with too much debt. The leverage of the investment banks have gone from 15x-20x equity to 25x-35x equity. Banks levered up their balance sheets to increase return on equity and stock prices, believing their models were an accurate reflection of risk. They were wrong, and volatility has exploded, wreaking havoc with the balance sheets of the banks.

There is more to come.


The leverage intensity of the investment banks is, for the most part, a mere reflection of the beliefs in the capacity of the financial markets to absorb a bigger default rates on housing mortgages.


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PostPosted: Tue Mar 18, 2008 5:37 pm
 


Benoit wrote:
The leverage intensity of the investment banks is, for the most part, a mere reflection of the beliefs in the capacity of the financial markets to absorb a bigger default rates on housing mortgages.


Actually, the banks expected a lower amount of defaults. The investment banks sent around circulars for collateralized debt obligations filled with subprime mortgages, arguing that based on historical precedents, investors were safe. As we now know, defaults of subprime mortgages hit levels far higher than ever seen before, which has triggered the mess we are in.


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PostPosted: Tue Mar 18, 2008 5:45 pm
 


Toro wrote:
Benoit wrote:
BartSimpson wrote:
Benoit wrote:
BartSimpson wrote:
Like so many dominoes, the Wall Street banks are getting ready to tumble.


The deal has been done in a couple of hours on Sunday to avoid the tumble of Asia earlier today.


The fall of the markets is a matter of too little liquidity against too much debt. The problem simply cannot be reconciled that there exists more debt in the world than there is currency to cover it all.


More fundamentally, the fall of the markets is a matter of not being able to believe anymore that the supply and demand of all goods and services can find equilibrium.


No, it is more to do with too much debt.


This is what confuses me. I keep reading headlines about banks borrowing from each other to "solve a coming credit crunch." To me, this says that they are making more debt to solve a debt problem. [bash]


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PostPosted: Tue Mar 18, 2008 8:15 pm
 


Toro wrote:
Benoit wrote:
The leverage intensity of the investment banks is, for the most part, a mere reflection of the beliefs in the capacity of the financial markets to absorb a bigger default rates on housing mortgages.


Actually, the banks expected a lower amount of defaults. The investment banks sent around circulars for collateralized debt obligations filled with subprime mortgages, arguing that based on historical precedents, investors were safe. As we now know, defaults of subprime mortgages hit levels far higher than ever seen before, which has triggered the mess we are in.


The investment banks had two good reasons not to bother about estimating carefully default risks: 1) they knew the U.S. government believes in the public virtue of subsidizing the housing mortgage business (the "ownership society"-version of the American Dream) and 2) they had created a new and readily marketable financial instrument to share the default risks.


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PostPosted: Tue Mar 18, 2008 8:22 pm
 


bear stearns story is not over yet. Investors are saying they will vote down the deal. Way under valued bear sterns is trading way above the 2 dollars since the deal.


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