As of this writing Bear Stearns (BSC) was down 40% and it also took the whole market on a south trip with it to celebrate “significantly deteriorated liquidity”. These are the same guys who have been relentlessly denying any liquidity crunch for past several days.
We have tried to confront and dispel these rumors and parse fact from fiction,” Schwartz said in the New York-based company’s statement today. “Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated.
“24 hrs”..is that what it takes to melt such a large institution? Sorry, I don’t believe this! But hey who am I to question this, does anyone really listen? did I do this when Enron was saying everything was alright. I even didn’t do this when Worldcom was going bankrupt and every day there were promises that nothing was broken. I still hold those shares, so I learned my lessons and “Potential Bankrupts” are my favorite trade picks.
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According to Yalman Onaran of Bloomberg:
A collapse of Bear Stearns would be the biggest failure of a U.S. financial institution since the insolvency of Continental Illinois National Bank and Trust Co. in 1984, according to Geisst. Continental Illinois had $40.7 billion of assets at the end of 1983, just before its failure and bailout by the Fed and the Federal Deposit Insurance Corp., according to the FDIC. Bear Stearns had $39.5 billion of assets as of Nov. 30.
Let’s see what’s in store for BSC. A buyout by JPM seems likely. Attached is a chart of Bear Stearns, what a fall from grace; from a high of $170 in Beginning of Jan’07 to $35 today, for what “was” a solid financial institution. Who is next?
While BSC saga is going on, Gold has quietly reached record $1,007 an ounce and its close proxy, GDX is one of the few brighter spot. Read my earlier article about my investment idea on GDX.
Markets are very tough to trade currently. 200-300 points daily fluctuation has become more of a norm. In fact, today itself the range was quite amazig, from 12,193 to 11,845 that’s 348 points. Yesterday Dow dipped over 200 below previous opening and then close in the positive territory. Monday was one of the record up day with over 400 points gains.
As of this writing VIX is over 30, a sign that there a lot of nervousness in the market. And why not? If BSC fails now, what’s next?
Have fun and profitable trading, OP