Maniac in Motion

The Bear Stearns Saga and the Fed's Dilemna

Woooooooooooooow... news just out JPM buys BSC @ $2/share per the WSJ. And BSC closed Friday @ $30. Wooooooooooow, talk about payday for those BSC puts.

The Bear Stearns Saga and the Fed's Dilemna

Any deal JPM would get would likely by at a very steep discount.

The buy won't consider current revenue streams, it's all about the losses JPM will swallow from taking BSC under its wing. And the losses incurred by MBS exposure may likely be partially tax-deductible if JPM works it right with government begging JPM to do so.

Companies buy other companies at a premium when they see a synergy. There's no synergy here. It's less a takeover and more a takeunder. A JPM/BSC acquisition is less about winning synergies and more about keeping global financial markets from needing a defibrillator.

CLEAR! :$

Did the Fed's Move Prevent a Stock Market Panic?

It gives hedge funds an opportunity to quietly lock in profits and deleverage slowly without creating an unwinding panic in equities markets, and leave taxpaying folks with their 401k's fully invested to watch the market crash.

Then hedge funds will move into commodities to further tax the people with "inflation."

Meanwhile, the government will use taxpayer dollars to keep they're friends on life support in the public interest while investment banks unload depreciating private mortgage-backed debt securities like they're magical collateral assets in a clear case of alchemy.

Although a BSC insolvency notice would have engendered a domino series of margin calls to the hedge funds associated with BSC, the time-delaying save only slows the market downturn momentum giving the hedge funds more time to quietly deleverage away from equities. Funds of funds will get out to lock in 5 years' worth of profits, and only taxpayers will be left with crippled 401k's denominated in devalued dollars when the market crash finally arrives... it's admittedly a very smart economic system for a few.

The market will wind down to the same place, although they're just using taxpayer dollars with term-auction facilities and devaluing the dollar with rate cuts to give hedge funds more time to comfortably deleverage. Would you prefer another espresso, Sir?

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