The new forums will be named Coin Return (based on the most recent vote)! You can check on the status and timeline of the transition to the new forums here.
The Guiding Principles and New Rules document is now in effect.
Bear Stearns? More like Bear Shit. It's financial meltdown time!
Savant
Simply BarbaricRegistered User regular
Simply BarbaricRegistered User regular
Bear Stearns is done for, pieces to be picked up by JP Morgan
If you don't know what Bear Stearns is, it is (was) one of the big players in the financial sector, and had its hands in a lot of things including securities trading and financial derivatives. They also had their hands in the subprime mortgage debacle, through the use of financial arcanum such as collateralized debt obligations (aka CDOs). In the summer of 2007, the music stopped playing and their hedges funds dealing with subprime mortgages were without a chair, and their value disappeared as market tightened up. The subprime mortgage crisis caused a chain reaction for a broader financial crisis as margin calls racked up and liquidity and easy credit started to dry up. You might have heard of this in terms of the foreclosure crisis.
Fast forward to this week, and the Federal Reserve backed a bail-out loan through JP Morgan to provide some quick cash and liquidity to Bear Stearns. This raised a lot of eyebrows, both because of how bad of shape it suggested they were in, and even more so that it is highly unusual for the Federal Reserve to get involved in bailing out a firm like this. There were plenty of calls of "socialism for the rich" and "moral hazard" that went out. Their defense was that a collapse of Bear Stearns could send out a shockwave damaging or destroying other financial institutions dependent on their business.
Today the details came out that JP Morgan is planning to buy them. And the moral hazard issue is pretty well mitigated by how much JP Morgan is paying: $2 per share.
It started last week at about $60 a share, and ended Friday at $30 a share, and is going to go for $2. Kaboom! Here's a picture to put it in perspective:
Supposedly the $236 million price is worth a fraction of the value of their office building.
TLDR - A major investment bank is kaput, and there may be more to follow. How big is this? Really big, like at least Enron big. We could be in the middle of a full scale financial meltdown. Hope you've got gold and guns.
If you don't know what Bear Stearns is, it is (was) one of the big players in the financial sector, and had its hands in a lot of things including securities trading and financial derivatives. They also had their hands in the subprime mortgage debacle, through the use of financial arcanum such as collateralized debt obligations (aka CDOs). In the summer of 2007, the music stopped playing and their hedges funds dealing with subprime mortgages were without a chair, and their value disappeared as market tightened up. The subprime mortgage crisis caused a chain reaction for a broader financial crisis as margin calls racked up and liquidity and easy credit started to dry up. You might have heard of this in terms of the foreclosure crisis.
Fast forward to this week, and the Federal Reserve backed a bail-out loan through JP Morgan to provide some quick cash and liquidity to Bear Stearns. This raised a lot of eyebrows, both because of how bad of shape it suggested they were in, and even more so that it is highly unusual for the Federal Reserve to get involved in bailing out a firm like this. There were plenty of calls of "socialism for the rich" and "moral hazard" that went out. Their defense was that a collapse of Bear Stearns could send out a shockwave damaging or destroying other financial institutions dependent on their business.
Today the details came out that JP Morgan is planning to buy them. And the moral hazard issue is pretty well mitigated by how much JP Morgan is paying: $2 per share.
Wall Street Journal wrote:The deal calls for J.P. Morgan to pay $2 a share in a stock-swap transaction, with J.P. Morgan Chase exchanging 0.05473 share of its common stock for each Bear Stearns share. Both companies' boards have approved the transaction, which values Bear Stearns at just $236 million based on the number of shares outstanding as of Feb. 16. At Friday's close, Bear Stearns's stock-market value was about $3.54 billion. It finished at $30 a share in 4 p.m. New York Stock Exchange composite trading Friday.
It started last week at about $60 a share, and ended Friday at $30 a share, and is going to go for $2. Kaboom! Here's a picture to put it in perspective:
Supposedly the $236 million price is worth a fraction of the value of their office building.
TLDR - A major investment bank is kaput, and there may be more to follow. How big is this? Really big, like at least Enron big. We could be in the middle of a full scale financial meltdown. Hope you've got gold and guns.
Savant on
0
Posts
Speaking of the US dollar, the Asian markets have only been open for a little bit and looks like it is already tanking (more so) http://finance.yahoo.com/q?s=USDEUR=X. It's about 1.58 USD/1 EURO at time of posting, and I imagine it will be even uglier once the rest of the world starts to wake up, as the Fed's announcing they will be cutting interest rates even more.
Edit: NYT says $30 billion, $200 billion was the larger subprime bail-out plan.
Solid outline of why Bear deserves to get bent over.
namely, Japan's stock market is already showing signs of an economic crash on par with the Great Depression
guys this is it
And since construction runs in five year cycles, it's entirely likely that this will happen.
goodbye life I was looking forward to
I hope this is being blown out of proportion
The only losers will be the middle class and the extra-stupid rich who didn't bribe enough politicians.
So does mine.
Quit bitching about it. This isn't the end of days.
I call it Black Tuesday II: Electric Boogaloo.
I'm actually kind of excited to see where this will lead
Indubitably. I've always been hella conservative with my money. I look forward to finding some real help and actually playing the market.
So am I, if only because I have no kids to worry about, and I'm too versatile to starve to death. I could live in the woods and hunt shit if I really had to.
I also keep getting "It's the end of the world, as we know it, and I feel fine" running through my head a lot now.
Unfortunately, this is mostly going to lead to more of the same. I think America's inertia of stupid is too strong at this point to really stop unless we get some kind of crazy-strong leader who actually truly cares about the country. Those things don't actually exist.
I'm pretty sure an end result will be that London will be the new financial capital of the world.
Less Great Depression, more 80's. Meaning less art deco WPA projects and more Trump gaudy overcompensation.
It's been a long time coming, to be sure.
I wouldn't bet on it.
This.
America will be marketed to like Communist Russia telling people in breadlines how happy they are.
It'll be another Gilded Age, if we aren't already in there.
--
London won't be a financial center until it's annexed by India or Islam.
I was looking into financial jobs a couple months back. A whole lot of London there, and that was in the overture of the shitstorm. When you have major Wall St. financial firms completely imploding in a matter of days, I don't think you can say with much conviction that New York is going to continue to reign supreme.
I think already calling it the collapse of the American financial world may be a bit premature.
I am not actually that concerned. I thought it would be funny to pretend to be really alarmist about a blip in Japan's stock market being the end of the financial world. I guess it wasn't.
I don't think this is an enormous thing. I think this is a thing, and it may have some interesting ramifications, but I don't think it's the end of the world.
Oh London is definitely a dynamo on the rise, I just wouldn't count New York out. Especially not with Bloomberg at the reins to keep financial markets happy and increase the city's draw to a wide range of prospects. All of which would inevitably drive it's ability to keep atop the financials just by force of inertia.
Chicago's still tops when it comes to derivatives adn the like, though, and London, or anywhere else, doesn't have a chance in hell of knocking the Merc off that pedastal.
Unlike the loldongs folks in SE, we take insane opinions seriously because the folks behind them usually are serious.
Not least because all the dumbfucks are getting bailed out at the expensive of non-dumbfucks.
That is true I have seen some pretty
I basically agree with Injen (woah, what).
...London is a financial center. It's just #2, behind New York but ahead of Hong Kong (which is being challenged by Shenzen or something with an S). Chicago is king of derivatives and a couple other financial things that are confusing as all hell. Paris lost out its fight with London decades ago. They had a chance with the EU's creation, but just didn't play their cards right.
It's certainly possible that London will be the big whup de do in the near future, while we have this bit of instability. But I think in general the center of the world, financially or otherwise, is going to be shifting towards the developing world. I don't pay particular attention to economics, so my opinion is very poorly informed, but I don't get the sense that we'll all be looking to London for an extended historical period. But this isn't an opinion I would hand over to a teacher without some serious research. :P
Japan had something similar happen with a gigantic real estate bubble in the late 1980s and early 1990s, and they're still around. It screwed them over pretty bad though, and they were only able to really start recovering a couple years back. They had problems more with deflation and were big exporters, while we're erring on the inflation side and have a horrible trade deficit.
What's happening right now isn't the fault of liberal economics.
Can we blame Reaganomics anyway? I mean, it's stupid enough to even take the blame for shit it hasn't screwed up.
Psh, Reaganomics was great you commie.
Clinton's economic policy was pretty great, yeah. Dude left shit alone for the most part, and helped a few poor people along the way while balancing the budget. If he didn't bomb my country I'd love the guy.
Watching CNBC right now, they're in full damage control mode regarding this whole Bear Sterns thing.
They also mentioned it's up to investors now and the market might not be as weak as everyone thinks, so...
So, yeah, here's hoping we're not sitting on bread lines next week.
"No.. I was wrong. This must be what going mad feels like."
Was under the impression that London kinda already was - certainly judging by the movement of finance towards London over the last 8 years or so - it's definitely been the biggest market in terms of growth. But I wouldn't be so sure it isn't going to be severely affected by this likely crash too.
Other than that, I wouldn't be either worried or particularly suprised by a financial sector crash. For a long time now (since 2002) the value of international financial markets has been greater than the total of the world economy - that basically means that the value of betting on real things has been larger than the value of the things themself. That is more or less unsustainable, and also not much desirable in my opinion, as it seriously distorts market and economic performance & issues.
But similarly, it means that you won't be sitting in bread lines, because it does not actually indicate a shortage of anything, rather a drop in your relative purchasing power. So luxury consumables etc may take a hit, the value of currency will take a certain hit, but the kind of massive hit to real production that was seen in the Great Depression is unlikely to occur - also, the lack of ties to gold & (hopefully) better understanding of inflationary pressures should mean that hyperinflation a la 20's Europe is unlikely. Remember, for example, that we had a similar big crash at the end of the 90's, and not only was the effect fairly minimal, but the recovery swift. It is possible that this will go the same route, a quickfix will happen, and we will continue much the same without learning anything until the next financial sector crisis.
Though yes, since the US is the leader of & reliant on financial markets, if that doesn't happen, your relative wealth & economic position is likely to suffer relatively badly.