Bear Sterns Lost > 96% Of Its Value In One Business Day. This Is Very Frightning To Me.

[MannyGoldstein]

The fifth-largest investment bank in the US collapsed in hours in a nuclear explosion fueled by derivatives. To me, this is utterly mindblowing. Obviously the concrete under these banks is very rotted out.

I guess this is what happens when banks play with derivatives. The current lack of liquidity (i.e., everyone's scared to buy anything for fear that it contains land mines) will only get worse because of this, which in turn will cause more derivative nukes to go off.

I'll freely admit to more than a bit of schadenfreude for the financial types who have sodomized our middle class, but the rational part of my mind is scared shitless. I fear this is going to get very, very, very ugly - it will suck for all of us.

[selador]

1. maybe so

but i say this as a trader (futures and stocks and options ) who spends hours a day in front of a bank of monitors.

fear is ALWAYS worse at market bottoms.

what i am watching is how the market acts near the retest of the january lows, and what the fear is (putcall, VIX, etc.) at that point.

we could get an awesome selloff. or not. either way, one should be positioned to make money off other's fear or off their euphoria\


im not saying its a bottom, but the more gloom and doom i hear from retail traders, the more contrarian i want to get.

personally, i would love to see a huge selloff because that would expose some serious value

as for financial types.

plenty make very good money. i know more than one who earns a "phone book" each year. others, lose everything they have. and some make a decent living. that's what happens when you put capital at risk.

[girl gone mad]

19. Fear is also a motivating factor near the top of the market.

Although it's a different kind of fear.

As a scientist, it's hard for me to accept predictions which are based on the small amount of data we have on human psychology during market declines. People panicked in 1929, but it took decades for the market to recover.

[tekisui]

2. We will be in the same sinking ship.

All aboard!

[angstlessk]

4. funny, we sink with the yachts yet when they are sailing high we are swamped

by them. why is that?

[tekisui]

6. The yachts are so fucking big, they knock into the tugs and row boats.

We gotta learn to sail on our own devices.

[Yael]

3. Warren Buffet said last week that the $516 trillion derivative market

is the next to pop.

BSC is simply the first one with a pin.

You should be frightened. This is not going to end well.

[MannyGoldstein]

7. $516 Trillion? Holy Shit, That's 43 Years Of US GDP!

Oh fuck.

[wtmusic]

8. ..then divide by 50

..."Also, keep in mind that while the $516 trillion "notional" value
(maximum in case of a meltdown) of the deals is a good measure of
the market's size, the 2007 BIS study notes that the $11 trillion
"gross market values provides a more accurate measure of the scale
of financial risk transfer taking place in derivatives markets."

http://groups.google.com/group/misc.activism.progressive/browse_thread/thread/3d27f1e0417fb463/0c96ff7d3c99059b?lnk=raot

Panic is the enemy.

[MannyGoldstein]

10. I Suspect That A 96% Devaluation Of The US's Fifth Largest IB - In One Day - Is Panic

and a meltdown.

[wtmusic]

12. Facts are your friend

http://chart.bigcharts.com/custom/nyt-com/big.chart?ClientID=46045&symb=BSC&sid=789&time=5dy&freq=5mi&chartType=P&maval=60&uf=0&lf=1&type=256&sPage=cr%2Fprofile&cal=200004&view=7&nav=0&focusdate=3%2F14%2F2008&miniCalFocus=3%2F14%2F2008&priceTimeFrame=2mo&histTimeFrame=2mo&histDate=3%2F16%2F2007&mocktick=1&country=US&doChartIV=0&style=1792&size=3&rand=5946

$55 -> $30 = 46% devaluation. Don't let the panic get you.

[MannyGoldstein]

13. Sold For $2 A Share Tonight To JP Morgan

Am I missing something?

[wtmusic]

14. No, you're right

sort of.

"Over the weekend, Bear Stearns, with the Federal Reserve and Treasury Department patched in by conference call from Washington, held the equivalent of a speed-dating auction, with prospective bidders holed up in a half dozen conference rooms at its Madison Avenue headquarters.

While the talks were taking place, Bear Stearns was simultaneously preparing a bankruptcy filing in the event the deal had fallen through, underscoring the severity of the firm’s troubles.

While the firm toyed with suitors including the big private equity firms Kohlberg Kravis Roberts & Company, which had its roots at Bear Stearns, and J.C. Flowers & Company, the only meaningful bidder was JPMorgan, headed by Mr. Dimon, who slept less than four hours the entire weekend.

The deal is a major coup for Mr. Dimon, one of the shrewdest players on Wall Street."

http://www.nytimes.com/2008/03/16/business/16cnd-bear.html?ex=1363406400&en=fa281a3d92db11ae&ei=5088&partner=rssnyt&emc=rss

So JP Morgan got a great deal because Bear was desperate. I don't see this as a major underpinning of the market though:

"Bear Stearns was never considered a white-shoe Wall Street firm and often operated on the edge of the industry. When the Federal Reserve helped plan a bailout in 1998 of Long Term Capital Management, the hedge fund, Bear Stearns proudly refused to join the effort. Even up until last week, Alan "Ace" Greenberg, Bear Stearn’s chairman for more than 20 years and a champion bridge player, still regaled its partners over lengthy lunches about gambling with the firm’s money in its wood-paneled dining room."

[BobTheSubgenius]

15. "Ace"?

The CEO of a major investment bank is known as "Ace"?

[Earth Bound Misfit]

21. LOL! n/t

[MadMaddie]

5. This leads me to believe that the * Administration has been

allowing many of these companies a free ride on accountability and responsibility. * motto is let the market govern itself and it will be successful.


Just like the Iraq debacle....we are now seeing that the * administration never expected the failures we are seeing now....housing market, Bears and Stearns.....energy costs and the list goes on...

There was a time the administration could control the media, and bad news. The issues are like holes in a dam and the * WH can't plug up each new hole....Bears and Stearns is the big gaping hole in the dam and there is no plugging it back up with slight of hand and distraction.

Oh when the American people finally understand the true undermining and destruction of the government and major institutions by the Republicans......oh dear....oh dear...

[Hannah Bell]

16. sure they expected it.

they changed the laws to enable it.

[MadMaddie]

17. Yea...that's kind of a red flag isn't it?

[Gman]

9. Obviously the federal government is not afraid to buy mortgage backed securities

and of course we all take the beating for it.

[Golden Raisin]

11. But the Republicans are the party of

"Fiscal Responsibility". :sarcasm: The U.S. economy is beginning to implode before our very eyes. Are Clinton & Obama ever actually going to say something? They are too busy counting delegates and flinging shit at each other when they should be rallying the public and castigating Bush and the Neocons for pushing us ever closer to the brink of another 1929.

[ryanmuegge]

20. Those two aren't going to say or do shit.

It's all about them and their personal vanity.

[lectrobyte]

18. You ain't seen nothing yet. Better buckle up.