Sunday, March 16, 2008

Remain Calm All Is Well (Part Nineteen)

Well, while I still think there is potential for a short and vicious bear market rally, the efforts by the Fed to keep the system of Wall Street Financial Alchemy operating in the manner it has become accustomed over the last fifteen years are beginning to look panicky:

U.S. Fed Cuts Discount Rate, Says Dealers May Borrow
by Scott Lanman, Bloomberg

March 16 (Bloomberg) -- The Federal Reserve, in an emergency weekend decision, cut the rate on direct loans to commercial banks and opened up borrowing at the rate to primary dealers in government securities.

In an announcement before the start of trading on the Tokyo Stock Exchange, the Fed lowered its so-called discount rate by a quarter of a percentage point to 3.25 percent. The central bank also approved the financing of JPMorgan Chase & Co.'s purchase of Bear Stearns Cos., including support for as much as $30 billion of Bear's assets.

Fed Chairman Ben S. Bernanke is stepping up efforts to keep strains in financial markets from spiraling into a full-blown meltdown. Last week the central bank agreed to emergency loans to a non-bank, Bear Stearns, for the first time since the 1960s. Fed officials also announced a program to swap $200 billion in Treasuries for debt including mortgage-backed securities...

Oh yeah, and then there is Tibet burning, bombings of non-state targets in Pakistan, oil over $100 per barrel, gold over $1000 per ounce and a United States that has not used the lull in Iraqi violence to forge a final deal with Iran or to "declare victory and go home". In short, things are fine.

Go out and buy an SUV. Above all - remain calm, all is well, the elites tell us so...

UPDATE: Bear Stearns is going to be sold off to JP Morgan for $2 per share. Two freaking dollars per share - for one of the great old names of Wall Street. The brain death that occurred on Wall Street over the last 15 years or so is finally catching up to the firms themselves. When finance went from being a mechanism to fund productive behavior to an end in itself, we get what we have today. Does the Fed have one last rabbit to pull from their collective hat? We'll see - but just know, whatever "they" do to shore this situation up, it will be only temporary.

Your house best be in order by now. The hour is late. We are about to enter into the long, painful transition period before we finally arrive at "What Comes Next" for our society.

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