March 17, 2008

Farewell Bear Stearns

As of Sunday night, Bear Stearns basically ceased to exist as JP Morgan Chase purchased it for $2 a share. This may be the bargain of the century, by the way. The building alone is supposedly worth $8 a share. The CDO Book, which is illiquid and not tradeable, and therefore not really possible to value, is apparently performing. This means that the debt obligations which were sliced up to create the debt instruments are still paying out. In other words, while you can't trade 'em, at its most basic, people are paying the debts that make them up. If the instruments pay out and perform, it will be one hell of a coup for JP Morgan Chase.

Of course, the roughly 14,000 people of Bear and the investors who bought Bear are fucked. The retirement portfolios made up of Bear stock are ash. The jobs are questionable. The investments are up in smoke.

But there is still liquidity.

I do not share the view of the fellow this morning in my train station. I was buying my paper and overheard the following exchange as a man came in:

Woman: Hey! What are you doing here this early [5 a.m.]? I never see you this early.

Man: I always come in early when the earth is about to end.

Who was it who said that eternal nothingness was ok so long as you were dressed for it?

It is going to get a lot uglier out there before it gets better.

Posted by Random Penseur at March 17, 2008 08:56 AM | TrackBack

Yes, a lot uglier. We've gotten through this before, though, and we'll do it again.

Posted by: Linda at March 20, 2008 01:38 PM

Like all things ugly: Throw some money at it and it will go away. I enjoy your blog.
~ anemi

Posted by: anemi at April 4, 2008 10:50 PM