NIGHTMARE on Wall Street!

[Minister Masket]

Well well well. A US bank called something "Bears" (?) managed to be the 2nd victim of the economic crisis. After our very own Northern Rock of course! As usual, the news portrays a "doom and gloom" scenario, saying that more banks will self-destruct as the situation worsens.

Any opinions? What does this mean for the world ahead?

[Minister Masket]

"Bear Sterns", that's the bank which went down the crapper.

[Fruitcake]

Mods, can we have a 'merger' of these two thread

[Colossus]

I think they're all proper fuc*ed (the banks, that is). I agree with fruitcake that bear is just the tip of the iceberg over here. I have to say that I am a little bit happy to see these douchebags who have all their money tied up in these monolithic banks going down with their ships.

[Napoleon Ier]

Well well well. A US bank called something "Bears" (?) managed to be the 2nd victim of the economic crisis. After our very own Northern Rock of course! As usual, the news portrays a "doom and gloom" scenario, saying that more banks will self-destruct as the situation worsens.

Any opinions? What does this mean for the world ahead?

Yeah...and what with Barack's proposed tax raises I'm really not optimistic about the US economy.

[suggs]

All will be well. My A-level economics knowledge says so

But seriously (I hate the way Phil Cunt Collins pops into my head whenever i say that) all will be cool.
As Hoover said in Oct. '29, "The Fundamentals of the economy are fundamentally sound".
Ah.
Bugger.

[Harijan]

I know it is counterintuitive, but BS (always a good joke with those initials) getting bought is a really good thing for everyone else.

When the mergers and buyouts start to happen it is a sign that we have hit bottom and the strong have survived. The strong companies then start looking for weak companies that have value, but are crippled from the credit fall-out.

BS was weak, JP Morgan was strong.
Countrywide was weak, Bank of America was strong.

When companies start buying up their competitors it is a sign that the insiders believe that everything is in place for a recovery to begin. If we get a few more acquisitions like this over the next month or so, then I would wager market sentiment turns from doom and gloom to at least flat and boring.

Of course, now that I say this, JP Morgan will declare bankruptcy tomorrow.

[Fruitcake]

I know it is counterintuitive, but BS (always a good joke with those initials) getting bought is a really good thing for everyone else.

When the mergers and buyouts start to happen it is a sign that we have hit bottom and the strong have survived. The strong companies then start looking for weak companies that have value, but are crippled from the credit fall-out.

BS was weak, JP Morgan was strong.
Countrywide was weak, Bank of America was strong.

When companies start buying up their competitors it is a sign that the insiders believe that everything is in place for a recovery to begin. If we get a few more acquisitions like this over the next month or so, then I would wager market sentiment turns from doom and gloom to at least flat and boring.

You have got to be joking!!!!!!!

They would never have considered it without the Fed's agreement to buy up to $30 billion in troubled Bear Stearns mortgage bonds, so where is their strength??? Executives initially decided to pass on a purchase of Bear Stearns this past weekend, Bear execs said, largely because of the risks tied to Bear's mortgage portfolios. They changed their minds after the Fed agreed to stump up $30 billion in so-called nonrecourse loans - agreements that transfer the risk of Bear's bad mortgage bets to U.S. taxpayers...so what happens to that money??? Furthermore JPMorgan's fiscal year ends Dec. 31, so the firm's mortgage holdings are marked to prices that prevailed then - before the bloodbath of the last month....what price those values now eh???

[Harijan]

Hey, someone who actually knows what they are talking about.

You are right on all counts.

All I am saying is that we finally have a floor. We now know how much the worst of the lot is worth even without all of bad mortgage debt.

And it is ugly. What was once considered the 5th largest bank in the world was purchased for approximately $235 million even after the government bailed out all of the "bad debt"

A floor is where the recovery begins.

Does this mean no one else is going to go down, absolutely not, I think Lehman at least will tank in the U.S.

I think that probably a half dozen more British banks will go down.

There have already been 8 or so major financial casualties in the Asian countries.

All I am saying is that when companies start buying other companies in the same industry it is a sign to the rest of us that the worst of it is over. You don't have to believe me, but look back to every recovery from major recession that we have had. In the late 80s we had financial market consolidation. In the late 70s we had oil and mineral consolidation. In the 30s we had agricultural consolidation.

At each time the recovery was signaled by consolidation in the most damaged markets, as opposed to just letting the weak players die.

This is ugly, probably the worst economic outlook anyone on these boards has ever seen, but we are not looking at global financial collapse.

Hell, defaults on speculative (the dreaded subprime lending pool) residential mortgages is only 1.48% nationwide (despite how the media portrays the numbers). That is still pretty high quality debt.

Sure, the default rate is much higher than it was a year ago, and much higher than a month ago, but it is still at historically low levels, and even the most pessimistic forecast have the subprime default rate peaking at 5.5%, but most economist think it will peak between 2-3% which is about historically average.

[Fruitcake]

Thanks for the compliment.

OK, lets take the arguments one at a time.

We now know how much the worst of the lot is worth even without all of bad mortgage debt.

That’s the issue, we don’t really know. In a tumbling market, what is good today could be a poisoned chalice tomorrow.

A floor is where the recovery begins

Agreed, but where is that floor?

All I am saying is that when companies start buying other companies in the same industry it is a sign to the rest of us that the worst of it is over. You don't have to believe me, but look back to every recovery from major recession that we have had. In the late 80s we had financial market consolidation. In the late 70s we had oil and mineral consolidation. In the 30s we had agricultural consolidation.

Indeed you are correct, but there is one huge difference this time…the numbers involved. As a % of GDP, this time it is about 10 times worse than ever before. Now I am not suggesting the fall out will be 10 times worse (that is too horrendous to think about) but it will get pretty damned serious.

At each time the recovery was signaled by consolidation in the most damaged markets, as opposed to just letting the weak players die.

Yes, but that happened because there were still strong players, this time, every one of them has had their greedy snouts in the trough…what would Rockefeller make of this, he must be turning in his grave.

This is ugly, probably the worst economic outlook anyone on these boards has ever seen, but we are not looking at global financial collapse.

Good God no, however, I truly believe the end is nowhere in sight yet.

defaults on speculative (the dreaded subprime lending pool) residential mortgages is only 1.48% nationwide (despite how the media portrays the numbers). That is still pretty high quality debt.

Sure, the default rate is much higher than it was a year ago, and much higher than a month ago, but it is still at historically low levels, and even the most pessimistic forecast have the subprime default rate peaking at 5.5%, but most economist think it will peak between 2-3% which is about historically average.

Yes, but you have answered your own point…higher than a year ago, much higher than a month ago…see the trend…it’s accelerating. As for forecasters…two months ago they said the bottom had been reached, then 5 weeks ago the same, then 3 weeks ago…etc

We are in for a rocky time.