Double WOW!

Latest from the NY Times:

March 17, 2008

Shares Slide on Fed Move and Bear Deal
By KEITH BRADSHER and MARTIN FACKLER

European and Asian stocks fell Monday in response to renewed worries about the financial strength of the world’s banking system after the bargain-basement sale of Bear Stearns to JPMorgan Chase.

Stock markets across Europe fell 2 to 3 percent soon after opening on Monday, following drops on major Asian stock markets of 3 to 5 percent. Tokyo’s benchmark index hit a three-year low before it rebounded slightly; Chinese and Indian stock markets tumbled even more sharply.

In the United States, stock futures plunged overnight, indicating that the markets would open to heavy losses. Futures in the Dow Jones industrial average were down more than 200 points.

The euro rose again against the dollar and investors rushed to the relative safety of United States Treasuries. The dollar fell to a 13-year low against the yen, and oil hit a new record, near $112 in Asia.

The Bank of England moved to help bolster the liquidity of the financial markets and bring down interbank lending rates by offering $10 billion in three-day loans.

Investors across Europe and Asia tried to figure out who might invest more capital to shore up Western financial institutions caught with heavy losses on their holdings of mortgage-backed securities. Chinese state-run institutions, with some of the largest cash holdings, appeared to be on the sidelines, watching as the prices of financial shares plunged, while Citic announced that it would not proceed with a previously announced deal to acquire a $2 billion stake in Bear Stearns.

Tokyo’s benchmark Nikkei 225 index lost 3.7 percent to close at 11,787.51 points, after declining as much as 5 percent during the day.

By midday in Europe, the CAC 40 in France dropped 2.5 percent while the FTSE 100 index in Britain had fallen 2.2 percent. The Dow Jones Euro Stoxx 50 fell 3.0 percent, led down by the German DAX, down 3.3 percent.

The declines in Tokyo came even as the Japanese central bank, the Bank of Japan, moved to shore up financial markets by injecting $4.1 billion into short-term money markets. Asian stocks have also been hurt by the weakness of the dollar, which erodes the value in local currencies of overseas profits and forces big exporters like Toyota and Sony to raise prices in foreign markets.

Stock markets in Asia’s two emerging giants, China and India, suffered the biggest losses on Monday. The Shanghai A share market was down 3.6 percent in late trading, the Hang Seng Index in Hong Kong was down 5.2 percent and the Shenzhen A share market was down 6.4 percent. Investors in the China region were troubled not only by the ongoing financial troubles in the United States but also by a weekend of news reports of unrest in Tibet and adjacent Chinese provinces.

“Local investor sentiment is not good — the Hong Kong market is really caught in the middle between happenings in China and the United States,” said Ricky Chan, a stockbroker at Phoenix Capital Securities Ltd. in Hong Kong. With the Shanghai market declining, he said, “plus with the turmoil in Tibet, the local market is quite nervous at this point in time.”

In the United States on Sunday the Federal Reserve made a sweeping move, lowering its rate for borrowing by one-quarter of a percentage point, to 3.25 percent, as well as aiding the purchase of Bear Stearns by JPMorgan Chase for $2 per share. The acquisition underscored the severity of the credit crisis in the United States and the weakness of the American economy.

Yet pockets of optimism remained among investors and stockbrokers that the broader health of Asian economies, especially China’s, would allow the region to escape some of the worst effects of the economic slowdown in the United States — although few now expect the region to emerge unscathed.

“I expect a big rebound in the next two weeks because the market has been oversold, driven by market sentiment — the fundamentals in the Hong Kong stock market are still O.K.,” said Peter Lai, a stockbroker at DBS Vickers in Hong Kong.

In India, the Sensex 30 index in Bombay plunged 5.1 percent by early afternoon. The index had climbed 47 percent last year on an often speculative boom fueled to a considerable extent by foreign investment.

But India also imports nearly all of its oil, and now faces rising costs with crude oil close to $110 a barrel; this has contributed to a weakening of industrial production, up just 5.3 percent in January from the same month a year ago, and rising wholesale prices, up 5.11 percent for the week ending March 1.

Officials for the China Investment Corporation, China’s $200 billion sovereign wealth fund for domestic and overseas stock purchases, declined to comment on whether American financial companies had any appeal in the current credit market difficulties. Analysts were skeptical that the Chinese would step in while markets remain in turmoil.

“I would think the Chinese will be very careful,” said Hong Liang, a Goldman Sachs economist who specializes in China.

Investments by China’s sovereign wealth fund, the China Investment Corporation, and by Chinese state-owned entities have had a dismal track record so far in the financial sector.

The China Investment Corporation’s maiden investment as it was being organized last spring was a $3 billion nonvoting stake in the initial public offering of the Blackstone Group, the American private equity company. Acquired for only a 4.5 percent discount to the initial offering price of $31, or $29.605, the investment has already lost nearly half its value as the stock has plunged, closing at $15.78 on Friday.

The Blackstone investment has been an embarrassment for the Chinese government because its price was widely reported at the time of the deal — in contrast with bond purchases by China’s central bank for the country’s foreign-exchange reserves, which are managed with the strictest secrecy.
 
No. A Previous Poster said that the Bear trading floor was shut down completely. That is something different. I understand the reasons Bear went under, but it seems from the PP's post that traders were told not to come in this morning. I had not heard that and was trying to find out details.

Ok
 
Well, President W. just said that the capital markets are functioning. So, I guess we can all stop worrying now......LOL!
 
I keep saying call your congressmen and put a stop to the mortgage witchhunt! This isn't the first and it won't be the last. There's been such a hit to the mortgage industry that everyone now needs to sit back and let the dust settle. Instead they keep kicking the industry when it's down and the ripple effect is going to hurt everone. Everyone! The housing market affects so many other financial sectors. So, again...

Call your congressmen!!!!!!!!!!!!
 

there is no reason to run to your local bank and withdraw all your money.

Of course keep a small amount of cash at your house for emergencies. But the money in your bank will be there, if they all run out the Federal Government will just print up a bunch more.

The biggest risk to your cash is inflation -- as in it would start costing you $100+ to fill up your car with gasoline and the price of bread will go up over $5 a loaf. If that happens and I am by no means saying I think it will, your dollar will be just as worthless whether you are keeping it at home or in the bank.

As for the current happenings, I think everybody is just sitting around wondering right now how deep all the other Investment banks are immersed in this mess.
 
Gross negligence by our Government to spend our money for a private company. Give our money to people that are already rich. Why don't we bail out all those people that are forclosing on there houses? I will never understand for republicans that are suppose to be so "You make your bed that you lay in". For them to be stepping in and helping in this. Let the freaking thing fail, It would be a warning to all the other banks that rip people off.

This is not the government giving money to the rich. They are backing positions put on by Bear Sterns that are necessary to prevent an even bigger disaster in US fixed income markets. If someone did not step in to do this there would be major consequences all through the US economy.
 
Bear Stern was not only heavily involved in the sub prime mortgages but they were also heavily involved in the dutch auctions too. The dutch auction problem materialize a few weeks ago.
 
I am 100% serious. While agree the Fed should not be involved in setting the price for money, period, their justification for the rate run up was absurd. It was basically -- "there's too much prosperity. we have to stop it."



I happy to continue that discussion on the taxes thread. http://www.disboards.com/showthread.php?p=23804940#post23804940&highlight=

All I'll say here further on the subject is that you posted numbers that said revenue increase, adjusted for inflation, 2.5% after the tax cuts, then 10.6% the following year, with a 7.9% the year after that.

That's not a "claim." That, my friend, is data.

Go corndog!!!!:thumbsup2
 
If we could turn back time...

-The Gov't would have kept their noses out of the mortgage industry

- Rates would have naturally increased driving out the morons who had no right working in our industry to begin with

-property values would have peaked then began to gradually decline then level out

-forclosure rates would be better than they are right now and better than they're going to be (as I've said before - even at what everyone deemed high -roughly 3% means that 97% of loans were performing fine - an A+ in my book)

-we would not be dealing with the financial mess we're dealing with now

Lesson learned? The gov't should not legislate what they know nothing about (trust me most of them don't understand the mortgage industry at all but they think they can save it?:eek: )
 
I thought maybe with all this the past couple of weeks , that the interest rates on homes would have come down , but instead they have stayed the
same , and today they went up a half point more.

Huh
 
I see they're talking about a full one point rate cut today! That would be tremendous!

In 48 hours we go from the sky is falling to the sky's the limit!
 
Guess what, no matter what rate cuts the Fed makes, it will NOT help housing. The mortgage interest rate is now completely disconnected from the funds rate and that's even assuming you can find a lender willing to underwrite anything more risky than a traditions, 20% down mortgage with at least 3 months mortgage payments in the bank.

Bear was bailed out because they were a major market player in the repo market and if they went down, they would have taken the rest of that market with them. The housing/mortgage market is a completely different animal.
 
Guess what, no matter what rate cuts the Fed makes, it will NOT help housing. The mortgage interest rate is now completely disconnected from the funds rate and that's even assuming you can find a lender willing to underwrite anything more risky than a traditions, 20% down mortgage with at least 3 months mortgage payments in the bank.

Bear was bailed out because they were a major market player in the repo market and if they went down, they would have taken the rest of that market with them. The housing/mortgage market is a completely different animal.

housing is tied to the bond market, right?

maybe not the bond market, but a bond market?

:::hoping I've learned SOMETHING in this mess:::
 
housing is tied to the bond market, right?

maybe not the bond market, but a bond market?

:::hoping I've learned SOMETHING in this mess:::

Yes. 30 year mortgages are priced off the 10 yr. bond. The Fed cannot control the 10 year. They can only affect the short end.
 
OK...some questions from a VERY novice investor.
So Bear Sterns was a "BIG" player in the game...what exactly is sub prime mortgages and dutch auctions? They failed b/c both sub prime mortgages and dutch auctions went south at the same time, so to speak??? They were just to big to let go under b/c that would send a shock wave of panic to everyone else....is that correct? Or is some of their down fall due to the top guys selling out and running so to speak (again)....it always seems the guys at the top never seem to fall when the company does.
Now...tell me where I am right and wrong. I find the finance industry very interesting wish I would of went to college for it when I was younger, although it might be a good thing I don't fully understand this.;) just kidding!
 
The fed rate cuts or hikes are on short-term not long term, but they do affect mortgage rates eventually. I can't stand when people call in after a fed rate cut and ask if their interest rate on their pending loan went down. More often than not, the feds rate cut actually sends investor bank rates up not down.
 
The fed rate cuts or hikes are on short-term not long term, but they do affect mortgage rates eventually. I can't stand when people call in after a fed rate cut and ask if their interest rate on their pending loan went down. More often than not, the feds rate cut actually sends investor bank rates up not down.

I was able to get my 5.0%, 20-year fixed the day after the recent 3/4 point cut. They bottomed out that morning.
 
I was able to get my 5.0%, 20-year fixed the day after the recent 3/4 point cut. They bottomed out that morning.

Awesome! :thumbsup2 Just a trend not a rule, sounds like you got a deal. trust me, if I could predict rates - I'd be a rich woman!:)
 
Awesome! :thumbsup2 Just a trend not a rule, sounds like you got a deal. trust me, if I could predict rates - I'd be a rich woman!:)

PM me when you can beat that! We can do business.

Well, we didn't get the full one point cut, but the 3/4 point cut is progress. I must admit it's a little humorous to read some of the posts on here from Sunday about how the JPM/BSS deal meant the end of the free world, and then to compare that with today's market, less than 48 hours later.
 














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