Originally posted by: palehorse74
Originally posted by: K1052
Originally posted by: palehorse74
Originally posted by: MadRat
Originally posted by: palehorse74
hey brother, would you mind explaining that in laymen's terms to those of us who dont have a clue about international finance?
An 8 cent swing overnight - otherwise an instant 6% nosedive in value.
gee, that explains everything...
Is the end of the world happening today? Black Monday perhaps? The Greater Depression?
Seriously, wtf does that mean to
me? As someone who is NOT involved in moving money around, at the moment, what does this mean? Anything?
Nothing really. The markets are going to take a hit today with the currency shift and the Bear Stearns sale but we're not talking the end of times like GT is getting ready for.
Panic activity like his makes a not great situation worse.
I wish you finance gurus would one day agree on something... just once! lol...
However, being the eternal optimist that I am, I will go with your version and sleep well tonight...
Feel free to sleep well but consider ...
Capital markets require 'settlements'. When there is a drop in value in underlying securities a financial entity is obligated to 'pay up'. When a financial entity (regardless of 'assets') does not have the 'liquidity' (cash & acceptable securities) to settle their account(s), they must seek some type of credit backing.
The Federal Reserve (and central banks around the world) have been pumping cash into banks since last August. Without going into a deep explanation, $100s of billions is being extended in hopes of injecting 'liquidity' - hoping the banks would extend credit to those financial entities currently in a lurch.
There is a big problem - - - - Banks have become reluctant to take the risks in extending credit.
There is an over extension of credit through out the system - from John Doe on Main Street to John Dough on Wall Street.
Just like a bank will consider extending credit to you based upon your assets and ability to pay, they did the same with Bear Stearns. It seems that banks were not happy with what they saw when they looked at Bear Stearns assets and would not extend credit so BS could settle their accounts.
So with a Federal promise of $30 billion in backing (not real sure how they are going to do that) J P Morgan scooped-up BS for pennies on the dollar. Bear Stearns has gone from a company worth $160 billion a year ago to one worth $270 million today.
JP Morgan (best I can tell) is paying around 8 cents on the dollar for Bear Stearns.
This is much better than Bank of America - who paid around 25 cents on the dollar for Countrywide. HA!
Suckers ...
Lehman Brothers seems to be the odds-on favorite to implode and be sucked-up for pennies on the dollar. The vultures seem to be circling Morgan Stanley and Goldman Sachs as well.
You can make money on this - I'm sure there are a huge range of derivatives betting every way you could imagine. Profit from peril - the New American Way.
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