We're On Our Way Up...

[AFKAFSinLOS]

As an optimist, I'd say we're pretty close to the bottom on the recent small downturns.

One of the big uncertainties has been which banks would be left without a chair when the music stops. The music being in this case "Subprime unexposed symphony".

With UBS owning up again and having written down even more recently - nearly USD 40bio now to date - it looks like we're we're finding out where the missing and broken chairs are. I guess it's comforting to some degree that it's the big boys like UBS 38bio, Merril's 24bio, Citigroup 22bio, Morgan Stanley 9bio, HSBC Deutsche etc, who are big enough to take the hits. Bear Stearns looks like being one of the few small financial institutions to be not quite so lucky.

As the holders are becoming largely known, the appetite to lend to other financial institutions will increase again, liquidity should increase and the worst of the credit crunch should at least be known if not quite over.

As a lovely Thai nurse would say... There, there, that wasn't too bad was it.

We're on our way up... Don't be discouraged by the sandpaper phase...it may not be quick, but it's coming...

Edit: Sorry, I just realised I posted this in the General forum, instead of the business/economy forum. If admin/mods could be so kind as to move...

Edited April 1, 2008 by AFKAFSinLOS

[lazeeboy]

As an optimist, I'd say we're pretty close to the bottom on the recent small downturns.

One of the big uncertainties has been which banks would be left without a chair when the music stops. The music being in this case "Subprime unexposed symphony".

With UBS owning up again and having written down even more recently - nearly USD 40bio now to date - it looks like we're we're finding out where the missing and broken chairs are. I guess it's comforting to some degree that it's the big boys like UBS 38bio, Merril's 24bio, Citigroup 22bio, Morgan Stanley 9bio, HSBC Deutsche etc, who are big enough to take the hits. Bear Stearns looks like being one of the few small financial institutions to be not quite so lucky.

As the holders are becoming largely known, the appetite to lend to other financial institutions will increase again, liquidity should increase and the worst of the credit crunch should at least be known if not quite over.

As a lovely Thai nurse would say... There, there, that wasn't too bad was it.

We're on our way up... Don't be discouraged by the sandpaper phase...it may not be quick, but it's coming...

Edit: Sorry, I just realised I posted this in the General forum, instead of the business/economy forum. If admin/mods could be so kind as to move...

im glad someone else feels the same as me

[basjke]

Let's talk again in a few months when the roof comes down completely.For the next 3 to 4 months cash will be my best friend.

[jstumbo]

This whole thing is crazy. Many people got in trouble because their interest rates increased which caused their payments to increase. Then they could not afford their payments. If the banks just refinanced them to a lower fixed rate, instead of the very high rates of their adjustable mortgages, then most of the people would be able to make their mortgage payment. Then there would be fewer defaults on the loans.

Plus, the banks now are hanging onto their money, and are very, very afraid to lend most anybody money. This creates a credit crunch and the whole mess. They should just go back to the normal way, before they gave people loans with 0% down, or loans where people only pay the interest. Plenty of loans to people that are not a great risk for defaulting on their loan.

I tried to refinance my home in the US a couple of months ago. No lender would give me the money. This is with good credit rating, and about 67% equity in the home, which is leased out for the last 4 years at $300 more than the mortgage payment. Refinancing would get me a lower rate and make the extra after the mortgage even more. I could pay mortgages on 3 houses like this one and leave them empty and still have enough money to live. But unfortunately since I have been in Asia, I mised a mortgage payment almost a year ago. Since I do them online and do not get statements reminding me, I forgot one month when I was quite busy with work. 30 days late, so now, no mortgage company will lend me money. How fcuked up is that? They are over reacting causing even more of a problem.

[Spee]

I tried to refinance my home in the US a couple of months ago. No lender would give me the money. This is with good credit rating, and about 67% equity in the home,

Why would you want to refinance with almost 70% equity? Your monthly payments should be almost 100% principal and almost 0% interest.

What you're seeing with the banking and credit interests is the phenomenon of the "herd mentality." The lending "herd" has been spooked by the handful of shabbily run businesses that have rightfully gone in the tank, instead of paying attention to market forces as they should. They treat an 800 rating the same as a 500 rating, which is obviously not sound business practice. For the solidly run businesses who don't follow the herd, they are more than ready to do business.

[siamamerican]

I tried to refinance my home in the US a couple of months ago. No lender would give me the money. This is with good credit rating, and about 67% equity in the home,

Why would you want to refinance with almost 70% equity? Your monthly payments should be almost 100% principal and almost 0% interest.

What you're seeing with the banking and credit interests is the phenomenon of the "herd mentality." The lending "herd" has been spooked by the handful of shabbily run businesses that have rightfully gone in the tank, instead of paying attention to market forces as they should. They treat an 800 rating the same as a 500 rating, which is obviously not sound business practice. For the solidly run businesses who don't follow the herd, they are more than ready to do business.

Far from accurate. Lenders treat subprime borrowers much differently. If you have an above 700 FICO like most Americans and at least 10% equity, you will have no problem refinancing your prmary residence. The herd mentality is what got us into this mess. Lending to sub 600 FICO borrowers with little equity is a big gamble and many lenders played the game.

The FICO cut off where it really gets tough to get a loan is 660. Most companies that insure loans won't touch these loans and if it is a govrnment agency loan, you need insurance above 80% loan to value.

[AFKAFSinLOS]

im glad someone else feels the same as me

Yes too many doom and gloom merchants in this forum. The bulls have it now...

Let's talk again in a few months when the roof comes down completely.For the next 3 to 4 months cash will be my best friend.

Even a modest sitting on the sidelines with cash risks missing out... Still at least you're neutral rather than all these pessimists...

Looking forward:

It's only a matter of when the markets move up. Not if. Nice comfortable closes in the western markets yesterday. Dow, S&P, NASDAQ, Eurostoxx, CAC all up over 3%, with FTSE up 2.64%.

Today looks good in Asia, HK up 4%, Nikkei up 4% and most Asian markets green.

If you're holding cash now and waiting for 3-4 months before investing you risk missing out... Not a market I would be looking to time in terms of lift off to be honest. But the risk has now shifted to not being in the markets. The engines are running...

We're on the way up...Bad news for all those misery guts and doom and gloom merchants caught selling short

[AFKAFSinLOS]

UBS, Lehman Raisings May Signal Rout Is Nearing End (Update3)

http://www.bloomberg.com/apps/news?pid=206...&refer=home

A few extracts:

"April 2 (Bloomberg) -- Securities sales by UBS AG, the world's largest money manager, and Lehman Brothers Holdings Inc. underpinned a rally in financial stocks that may signal an end to eight months of market turmoil... "

``When UBS does a massively dilutive deal and the stock still goes up, that's helpful,'' said Henry Herrmann, chief executive officer of Overland Park, Kansas-based Waddell & Reed Financial Inc., which manages $65 billion. ``It's a rally associated with the presumed elimination of survival risk. The market's getting a little more comfortable that the crisis is over.''

and my particular favourite:

"Macquarie Group Ltd. and Mizuho Financial Group Inc. led the biggest gains in Asian financial stocks in almost nine years."

[britmaveric]

Not surprised - market for the most part is completely sound. Fear is what has driven the market for quite some time.

Edited April 2, 2008 by britmaveric

[LaoPo]

Not surprised - market for the most part is completely sound. Fear is what has driven the market for quite some time.

"Yes too many doom and gloom merchants in this forum. The bulls have it now..." quote from the OP.

That's a very nice statement and nobody likes Doom and Gloom but one has to be a realist, not a dreamer.

Bernanke just spoke in his testimony to Congress's Joint Economic Committee today...:

Bernanke Says U.S. Economy May Slip Into a Recession

April 2 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke acknowledged for the first time that a U.S. recession is possible as homebuilding weakens, unemployment increases and consumer spending slumps.

``It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly,'' Bernanke said in testimony to Congress's Joint Economic Committee today. He also told lawmakers the Fed's agreement to provide an emergency loan to Bear Stearns Cos. followed a March 13 warning by the company it ``would have to file for Chapter 11 bankruptcy the next day.''

Bernanke, making his first extensive public comments since the Fed's decisions two weeks ago to back the takeover of Bear Stearns and lower interest rates by 0.75 percentage point, is trying to fend off criticism of the rescue while aiming to prevent a deeper economic contraction.

While the Fed expects the economy to return to its long-term growth pace in 2009, ``in light of the recent turbulence in financial markets, the uncertainty attending this forecast is quite high and the risks remain to the downside,'' he said.

Treasury notes were little changed after Bernanke's remarks. The benchmark 10-year note yielded 3.55 percent at 10:06 a.m. in New York, about the same as late yesterday. Stocks fell.

``This is a much more pessimistic assessment of the economy than what the Fed had three months ago or six months ago,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, who previously worked as a senior economist in Congress. ``Certainly, the Fed and the capital markets have been surprised the economy has slowed so quickly.''

Emergency Move

The Fed, in an emergency decision on Sunday, March 16, voted to authorize a loan against $29 billion of Bear Stearns assets, including mortgage-backed securities, so JPMorgan Chase & Co. would buy the company. The central bank also expanded its powers by opening up lending directly to Wall Street investment banks. In addition, the Fed cut the interest rate on loans to banks, and now securities firms, by a quarter point.

Two days later, the Federal Open Market Committee cut the main lending rate to 2.25 percent and said the ``outlook for economic activity has weakened further.'' Officials also showed renewed concern about inflation, making a smaller reduction than traders anticipated. Two policy makers dissented in favor of ``less aggressive action.''

The Fed agreed to the emergency Bear Stearns loan to ``prevent a disorderly failure'' of the company and the ``unpredictable but likely severe consequences of such a failure for market functioning and the broader economy,'' Bernanke said.

Bear Collateral

The Fed hasn't disclosed details of the Bear Stearns assets taken as collateral. The Treasury Department has said that they include mortgage bonds and ``related hedge investments'' and that any losses may reduce the Fed's contribution to Treasury's general fund, according to documents released yesterday.

The Banking Committee and Senate Finance Committee have launched separate inquiries into the transaction, raising questions about the role of the regulators in facilitating it.

The Fed set up a new company to manage and sell $30 billion of Bear Stearns assets and hired BlackRock Inc. for that purpose. The Fed last week said JPMorgan will shoulder the first $1 billion of any losses.

``With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions'' and ``could have severely shaken confidence,'' the Fed chief said.

`Difficult Period'

Bernanke said that the U.S. economy is ``going through a very difficult period.''

The U.S. economy grew at an annual pace of 0.6 percent from October to December. Growth probably slowed to a 0.2 percent annual rate in the first quarter, according to the median estimate of analysts surveyed by Bloomberg News.

``Monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year,'' Bernanke said. Policy makers expect that the rate cuts and financial-market actions this year ``will help to promote growth over time and to mitigate the risks to economic activity.''

He didn't repeat the expectation of ``moderate growth'' from the FOMC's March 18 statement.

Traders expect the Fed to lower the overnight interbank lending rate by a quarter-point at the next FOMC meeting April 29-30, based on futures prices.

IMF Cuts Forecast

Separately today, the International Monetary Fund cut its forecast for global growth this year and said there's a 25 percent chance of a world recession, citing the worst financial crisis in the U.S. since the Great Depression. Also, orders to U.S. factories fell more than forecast in February, a Commerce Department report showed.

Treasury Secretary Henry Paulson told Bloomberg Television in an interview from Beijing that the IMF numbers appear ``overblown to me.'' He indicated a willingness to consider congressional plans to stem foreclosures by expanding government guarantees for mortgages.

Bernanke said that inflation ``has also been a source of concern,'' with higher commodity prices and the weaker dollar. At the same time, he said the Fed expects inflation to ``moderate in coming quarters,'' echoing the FOMC statement. A ``leveling out'' of commodity prices and slower global growth will help, Bernanke said.

Inflation `Edged Down'

The Fed's preferred inflation gauge, which excludes food and energy costs, has increased at least 2 percent from the year earlier, the upper end of officials' long-term projections, for five straight months through February. Bernanke said the rate ``has edged down recently after firming somewhat late last year.''

Senator Charles Schumer, the New York Democrat who chairs the House-Senate panel, said today that the Fed's actions on Bear Stearns ``provided some much needed breathing room to the financial markets,''

``But there are many legitimate, looming, and unanswered questions about what happened both before and after the Bear Stearns action,'' Schumer said.

http://www.bloomberg.com/apps/news?pid=206...&refer=news

LaoPo

[pliny]

Not surprised - market for the most part is completely sound. Fear is what has driven the market for quite some time.

Seldom have I read a more asinine comment upon the current situation.

The past 5 years represented the most irrational exuberance yet seen and will be followed by an equally proportionate correction. Speculation funded by cheap money unsecured by nothing more than greed and whimsy is over.Finito.Kaputt.Ended.

The walk in the wilderness has only just begun.

"Fear is what has driven the market"..... Too bloody right mate, fear that folk have lost an estimated $400 billion and rising.

It ain't fear, it's reality. Unfortunately, there are those who couldn't recognise a car accident even if they were in one.

Recession is inevitable.

[LaoPo]

UBS, Lehman Raisings May Signal Rout Is Nearing End (Update3)

http://www.bloomberg.com/apps/news?pid=206...&refer=home

A few extracts:

"April 2 (Bloomberg) -- Securities sales by UBS AG, the world's largest money manager, and Lehman Brothers Holdings Inc. underpinned a rally in financial stocks that may signal an end to eight months of market turmoil... "

``When UBS does a massively dilutive deal and the stock still goes up, that's helpful,'' said Henry Herrmann, chief executive officer of Overland Park, Kansas-based Waddell & Reed Financial Inc., which manages $65 billion. ``It's a rally associated with the presumed elimination of survival risk. The market's getting a little more comfortable that the crisis is over.''

and my particular favourite:

"Macquarie Group Ltd. and Mizuho Financial Group Inc. led the biggest gains in Asian financial stocks in almost nine years."

Not sure what you're trying to tell us here.

UBS* lost US $ 38 Billion and the stock goes UP on that news???; whatever someone is trying to tell us I think it's absurd.

UBS lost 50% of their stock value since the high peak of $ 66 last year (now $ 33) and everybody cheers "wonderful".....??? (Wunderbar in German)

Maybe it's time I check upon a shrink but my reality sense says the markets go nuts.

Losing 38 Billion and the stock goes UP on that news ?

Lehman Bros, the same; down 42% from their peak in 2007 whilst the net income dived -57% in the first quarter. If they're doing that fine they wouldn't have to cut 5.300 jobs (19% of their workforce).

You think we are on the bottom ? I don't think so. 4-5 months ago we were already told by the Wall Street Blues Brothers that ALL write downs and losses were known by now. Really ?

And, for those who call(ed) me a doom and gloom writer ? I am a bloody realist, nothing else.

* "Joerg de Vries-Hippen, who oversees about $26 billion, including UBS shares, as chief investment officer for European stocks at Allianz Global Investors in Frankfurt. Still, ``it will take years to repair the bank's (UBS) reputation,'' he said."

Personally I don't even feel sorry for UBS because I think they're bloody snobs, and, believe me, I know. I think it's about time for Swiss Banks to become a bit more modest, respectful and humble...

But, to be honest, the Swiss have beautiful mountains, tunnels, roads and funny cows with bells..

Note:

".. Mizuho Financial Group Inc. led the biggest gains in Asian financial stocks in almost nine years."

Sir: you better check something before you write:

Nov.17 - 2006 >>>>>April 2, 2008 MFG (Mizuho Financial Group) is down -46% whilst Macquarie is down -38% since it's peak last year.

LaoPo

[LaoPo]

Subprime losses since early 2007; source Bloomberg/The New York Times.

You know what I miss in this graph ? I know...but do you ?

The $ 30 Billion losses from Bear Stearns aren't even in this graph;$ 30 Billion paid to JP Morgan with Tax payers money...AND:

Bernanke: Fed had little choice but to rescue Bear

Wed Apr 2, 2008 10:25am EDT

http://www.reuters.com/article/topNews/idUKN0236699720080402

LaoPo

[AFKAFSinLOS]

Not surprised - market for the most part is completely sound. Fear is what has driven the market for quite some time.

Seldom have I read a more asinine comment upon the current situation.

The past 5 years represented the most irrational exuberance yet seen and will be followed by an equally proportionate correction. Speculation funded by cheap money unsecured by nothing more than greed and whimsy is over.Finito.Kaputt.Ended.

The walk in the wilderness has only just begun.

"Fear is what has driven the market"..... Too bloody right mate, fear that folk have lost an estimated $400 billion and rising.

It ain't fear, it's reality. Unfortunately, there are those who couldn't recognise a car accident even if they were in one.

Recession is inevitable.

In terms of exuberance you could say that about some markets. A couple of key points:

- If you're picking a 5 year time frame, don't forget 2003/4/5/6/7 were on the back of two very poor market years for 2001/2 for many makets. So part of the "exuberance" was compensating for the overdone corrections that time too. Markets overdo it on the ups as they do the downs. I reckon they've also overdone the downs this time, hence the upswing coming

- The beauty of Global markets is there is always somewhere to be optimist. (Or pessimistic for those who love misery). eg as we're in LOS, Just as in 2001/2 there were some nice gains to be had in Thailand, while other markets were losing. Now again Thailand has had a tough couple of years and is looking undervalued.

In terms of the walk in the wilderness. I'd say that started after the small October corrections for the markets.

As for a recession. Maybe/ maybe not. But the US is just one country. Even in Q407 US posted small GDP growth, after all that was chucked at it. That would need negative Q108 and Q208 for it to qualify technically. Given the FED's over-reactions there's a good chance we'll avoid. My worry on the FED is they're firing all their bullets too soon. What will they do if something really bad comes up.

Anyway we've had enough fear driving the markets for 6 months. Time for a little optimism drive...

Edited April 2, 2008 by AFKAFSinLOS

[AFKAFSinLOS]

....

Not sure what you're trying to tell us here.

UBS* lost US $ 38 Billion and the stock goes UP on that news???; whatever someone is trying to tell us I think it's absurd.

UBS lost 50% of their stock value since the high peak of $ 66 last year (now $ 33) and everybody cheers "wonderful".....??? (Wunderbar in German)

Maybe it's time I check upon a shrink but my reality sense says the markets go nuts.

Losing 38 Billion and the stock goes UP on that news ?

Lehman Bros, the same; down 42% from their peak in 2007 whilst the net income dived -57% in the first quarter. If they're doing that fine they wouldn't have to cut 5.300 jobs (19% of their workforce).

.....

I would have thought the message is clear. The corrections have been overdone...

You've quoted, and we've seen some big falls in certain financials. That is past. We're looking forward now and the way is up. As the certainty is coming back, so markets will realise they've over reacted. They always do. Overreact downwards, then upwards. This is compounded by media who love to exaggerate. There's no news in "markets are going down", "markets are going up". They have to dramatise it all. The more we see over the years the more dramatic they feel they have to get to sell news and grab attention.

This time tho' for some reason the FED has also thrown in a few overreactions too.

Personally I thought we'd seen the worst by around 22/23 January. Since then we've been in the "sandpaper phase". Reactions by many on TV are typical of the sandpaper phase. People start to despair as markets rally a bit then go down a bit. People start to believe they'll never make money again. This can go on for weeks/months. I'd say we've done just over 2 months already. Key is the the losses are mainly over, it's just when exactly we start going up significantly...Thailand in particular is just waiting for an excuse to rise

Edited April 2, 2008 by AFKAFSinLOS

[basjke]

Goldman sachs estimates,together with othe analysts,that the subprime losses will account for up to 460 billion us$ in writedowns.As of today the banks,hedgefunds etc. have made public a total of 216 billion us$.That's even not half of the estimates yet.Analysts also predicted that the crisis may last for at least 8 to 10 quarters.All these are announcements made in the last 3 days.

But ok if you say that everything is over then that's the way it will be.

Edited April 2, 2008 by basjke

[jstumbo]

Why would you want to refinance with almost 70% equity? Your monthly payments should be almost 100% principal and almost 0% interest.

My equity is a combination of increase in house value and paying of previous mortgage. Still have over 15 years left on it.

Should be able to drop my interest rate by ~1.5%, get rid of the stupid mortgage insurance, and refinance for 15 years and pay less than I do now. Paying less each month plus paying off a few years earlier. Should have done it years ago, but we have been over in Asia and it was not costing us anything, so I just did not get around to it.

Just need to wait until June and then the stupid late payment will be over one year old and then they will finance it. I would think having so much equity and having it leased out would be enough to do it now. I mean how much of a risk could it be? They could take the house and sell it for 50% of it's value and still make plenty of money if I defaulted.

Being over here and trying to refinance remotely is a bit of a pain, and if I was there in person, I could probably do it now. But we will be there in June, so I will do it then.

Edited April 2, 2008 by jstumbo

[LaoPo]

Key is the the losses are mainly over, it's just when exactly we start going up significantly...Thailand in particular is just waiting for an excuse to rise

"Key is the losses are mainly over"

May I learn form you HOW you know that ?

Maybe you should study what the CEO's of the Giant Financials said in the past 2, 3, 4 or more months ago...

Basically they said "NO MORE LOSSES"....and guess what ?

They lied.

The last one who stepped down -yesterday- was the CEO of UBS*, Mr. Marcel Ospel who, 2 weeks ago, said that he didn't know if there would be more losses.....and YOU are telling me that the losses are mainly over......? I am talking about the man who was responsible for $ 38 Billion in losses, Sir ! ..............

So, I don't believe no one, not even you

Facts please, AFKAFSinLOS, not words.

* UBS, the company you were praising a few messages back; yeah right.

LaoPo

[johnnyk]

Ignore Bernanke, he's a Bushtool.

Pay attention to what Warren Buffett says, he deals in realities.

[LaoPo]

Ignore Bernanke, he's a Bushtool.

Pay attention to what Warren Buffett says, he deals in realities.

I'm all ears

LaoPo

[johnnyk]

Ignore Bernanke, he's a Bushtool.

Pay attention to what Warren Buffett says, he deals in realities.

I'm all ears

LaoPo

Bernanke sez there's a possibility of a recession...

Buffett sez the US is already in a recession...

Maybe Buffett sees things that way because he's actually in the market.

[LaoPo]

Ignore Bernanke, he's a Bushtool.

Pay attention to what Warren Buffett says, he deals in realities.

I'm all ears

LaoPo

Bernanke sez there's a possibility of a recession...

Buffett sez the US is already in a recession...

Maybe Buffett sees things that way because he's actually in the market.

"The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling.

Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

Warren Buffett

LaoPo

[Pakboong]

Bear Sterns had leveraged its approximately $80 billion to over $13 trillion. That $13 trillion has not gone away, it is simply added to the already huge number for JP Morgan. I think Morgan is now sitting on something like $90 trillion. This is a disaster waiting to happen. JP Morgan is the largest Fed share holder at over 30%, This can't be swept under the rug for much longer.

[lannarebirth]

Bear Sterns had leveraged its approximately $80 billion to over $13 trillion. That $13 trillion has not gone away, it is simply added to the already huge number for JP Morgan. I think Morgan is now sitting on something like $90 trillion. This is a disaster waiting to happen. JP Morgan is the largest Fed share holder at over 30%, This can't be swept under the rug for much longer.

Possibly. Another way of looking at it is, that both Bear and JPM were counterparties (with each other)to a significant amount of derivatives. By melding the two companies all that risk is erased. How much that might be, I have no idea.

Edited April 3, 2008 by lannarebirth

[Pakboong]

Bear Sterns had leveraged its approximately $80 billion to over $13 trillion. That $13 trillion has not gone away, it is simply added to the already huge number for JP Morgan. I think Morgan is now sitting on something like $90 trillion. This is a disaster waiting to happen. JP Morgan is the largest Fed share holder at over 30%, This can't be swept under the rug for much longer.

Possibly. Another way of looking at it is, that both Bear and JPM were counterparties (with each other)to a significant amount of derivatives. By melding the two companies all that risk is erased. How much that might be, I have no idea.

The reason the $29 billion was loaned to JP instead of directly to Bear in my view was to hide something. The Fed didn't want to save Bear, it wanted to save the economy meltdown that would have occured if Bear had been allowed to go bankrupt. I can't imagine what their actual collateral would have been against that $13 trillion. IMHO, less than 10% could have been immediately liquidated and what a mess that would have made. The Fed had little choice but the Bear Sterns failure has not gone away by any stretch

[lannarebirth]

Bear Sterns had leveraged its approximately $80 billion to over $13 trillion. That $13 trillion has not gone away, it is simply added to the already huge number for JP Morgan. I think Morgan is now sitting on something like $90 trillion. This is a disaster waiting to happen. JP Morgan is the largest Fed share holder at over 30%, This can't be swept under the rug for much longer.

Possibly. Another way of looking at it is, that both Bear and JPM were counterparties (with each other)to a significant amount of derivatives. By melding the two companies all that risk is erased. How much that might be, I have no idea.

The reason the $29 billion was loaned to JP instead of directly to Bear in my view was to hide something. The Fed didn't want to save Bear, it wanted to save the economy meltdown that would have occured if Bear had been allowed to go bankrupt. I can't imagine what their actual collateral would have been against that $13 trillion. IMHO, less than 10% could have been immediately liquidated and what a mess that would have made. The Fed had little choice but the Bear Sterns failure has not gone away by any stretch

Well, we don't know do we? Personally I don't think the deal would have happened if it created a net gain in derivative exposure. My guess is that it created a net subtraction. I would not be surprised to see more deals with a similar aim.

[AFKAFSinLOS]

..

Facts please, AFKAFSinLOS, not words.

* UBS, the company you were praising a few messages back; yeah right.

LaoPo

The key with facts is interpreting them, not quoting them. There are plenty of facts in my posts above, which are then combined to form an opinion. Quoting all the facts used to arrive at this opinion is simply too time consuming and not worth it.

If you're looking for facts that something "will" happen, then you're chasing a holy grail.

As for "praising UBS" that's a misinterpretation of a fact and opinion. Nowhere have I praised them above. I'd "owned up" but I'd hardly call that praise.

Markets largely up yesterday, and starting postively in Asia today...Third day in a row...

[AFKAFSinLOS]

This one arrived in my mailbox this morning. Not saying I agree with it all, but might be an interesting read for some, and some good points to support an opinion "We are on our way Up":

"What to do now that a spring rally has begun..." by Goldman Sachs

20080403_StockScreen.pdf

[siamamerican]

"The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling.

Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

Warren Buffett

LaoPo

Isn't Buffet saying this current environment is an opportunity. Maybe that is the argument you are making, but it contradicts some earlier posts. Markets are extremely pessimistic the last few months. We have had a nice bounce the last few days and I'm almost break even for the year, but I feel the markets could test the previous lows.

He is a proponent of picking value stocks when everyone else is exiting the markets. It's is hard to determine a posters point of view and i may have misread yours.

[AFKAFSinLOS]

"The most common cause of low prices is pessimism – some times pervasive, some times specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling.

Unfortunately, Bertrand Russell's observation about life in general applies with unusual force in the financial world: "Most men would rather die than think. Many do."

Warren Buffett

LaoPo

Isn't Buffet saying this current environment is an opportunity. Maybe that is the argument you are making, but it contradicts some earlier posts. Markets are extremely pessimistic the last few months. We have had a nice bounce the last few days and I'm almost break even for the year, but I feel the markets could test the previous lows.

He is a proponent of picking value stocks when everyone else is exiting the markets. It's is hard to determine a posters point of view and i may have misread yours.

Funny you should post this Siamamerican. I read this along similar lines as yourself, that Buffet is saying the current environment could be an opportunity. Myself, Lazeeboy and a few others excluded, the majority of people on TV, including Lao Po are pessimistic. Hence to me it seemed to actually contradict Lao Po's comments to an extent.

Goldman's obviously see it as an opportunity

Personally I don't think we will significantly test previous lows, but I think there's a possibility it could go slightly lower than previously in the general ebb/flo ups and downs of the market. However, there is much more upside than downside in my view. Could go a little lower, but mainly looks like trending higher to me.