March 18, 2008 by admin.

Did someone forget that the Federal Reserve Bankers are just bankers and not Investment bankers.  Actually they may be investment bankers but they are not very good ones. Either way,  where is the public’s( ie taxpayer money) investment banker. Why is this deal any good for anyone but JP Morgan. The Fed has zero upside, carries all the major risk and JP Morgan has all the upside. This deal makes no sense. Heck, a full bailout would have been much better -at least there would be some upside. There is one possibility and that would make the Fed look really smart- IS  JP Morgan using the Fed or is the Fed using JP Morgan. ……? This deal has at the very least brought Bear some time and who knows what type of better buyers at better prices could emerge… I dont think we have actually seen the end of Bear Sterns and clearly at over $4 a share neither does that market ( but clearly “the market” is not that accurate given the $30 Friday stock price ) Time will tell as to who looks like the genius. Right now it is Dimon. It may end up being Bernake.

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March 16, 2008 by admin.

No cash transaction…See our blog commentary below….

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March 16, 2008 by admin.

The Child in this case being the banking business/hedge fund business  ( there is so much overlap between the two that it is essentially the same set of risks- especially if you are Bear Sterns.) If only the market would have allowed Long-Term Capital Management to fail.  The market would have swallowed and learned…..It is ironic,  given that Bear Sterns did in fact decline to participate in that bailout ; it was the only major bank who actually did not spare the rod……. If only the other major banks had declined as well- We  would be in nowhere of a mess we are in today and Bear Sterns would be worth more then 2 dollars a share… Historically, in all areas, financial and politics, sports and everyday life-  this is a typical scenerio ; ignore and bailout small problems which in turn create much bigger problems….. I think we can almost all wish today that in fact LTM should have been allowed to fail…..

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March 13, 2008 by admin.

S & P reports of an end to financial writedown drive market up.  SO let me get this straight- the same S and P that could not tell the difference between junk and AAA is now being relied on to drive the market. go figure.

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March 13, 2008 by admin.

What is a major cause of this economic crunch we are in…. I think a root cause is the technology  our banks  have created and use to make them more financially sophisticated and to “improve” the way they  do business.

We are living in a very crazy economic time brought upon ourselves by the ability to slice and dice any security stuff it into a computer and in theory make money. ITs a big game with big stakes and big risk. ITs also a game where the participants ( banks, hedge funds etc) are so detached from real assets and the tangible touch of feeling that something is just not right  - its the detachment from reality and the attachment to digits on the computer that allowed this big game to go on.  There is no one who can take a quick look at the tracks and say “derailment…….the tracks are not there no one can see the, and then “Poof ” press a button and you just made millions on your position and unloaded a portfolio of mortgages. Nothing tangible . Nothing Real. Nothing Lasting.. ….

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March 13, 2008 by admin.

The Fed is now an investor in the Mortgage Backed Securities market. It allowed the market to run amok, banks make billions and now it is forced to save the market by actually holding securities that are meant for risk investors. The Fed will only hold AAA rated MBS.

What happens when the Moodys wakes up one morning and realizes that AAA rated mortgage securities were in fact based on new information, no longer AAA but AA or less. What happens then ? does the Fed dump them or does it lower the bar. Who knows.  The one thing which strikes me is that we have the Fed , a key government entity , relying on the analysis of a group of private corporations who in the last year have shows us that their ratings do not reflect reality and can change in an instant. The ratings system is broken and its accuracy has now fallen into the category of projections by economists - and we all know how reliable economists are…

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March 7, 2008 by admin.

Ok. I was pretty much wrong in the last week on the general market direction ( I am not too upset since it is the first time in several months that I have been wrong.)  I will not make another prediction on the market but I will say the obvious that it continues to look dreadful and that from a risk prospective it is very similiar to betting that Ralph Nader will be president…. Google, on the other hand makes dreadful look good. The company continues to get slammed and rightfuly so. It can not escape economic reality. I will reiterate that this will trickle down eventually to the PE market and when it does it will be conference ghost towns all over again. Been there. Done That. Will do that again.

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