Isn't it funny
How a bear likes hunny.
Buzz! Buzz! Buzz!
I wonder why he does?
Hard not to have Bear on the brain today, with the weekend's events just past. While Winnie may have been the "Bear of Little Brain," it seems that the collective brains of Bear Stearns were even less capable in the end. Winnie, at the very least, was trying to get at some sweet honey when he fell out of the tree and got prickles in his nose.
What will the guys at Bear use as an excuse? They were looking for innovative ways to avoid reserve requirements on lending tons of money to people who couldn't afford to pay it back?
I'd rather have had the honey.
As Barry correctly notes, this really wasn't a bailout. The Fed provided enough backing to allow the Bear assets to be liquidated in an orderly manner over the coming months. This could turn out to be beneficial for the market overall, as it will be the first chance for us to see what the market really thinks of the value of these things.
In the meantime though, Cramer's television observation today is dead-on. You simply can't depend on the purported assets or balance sheets of any of these financial firms. They were all valued by the same formulas, audited by the same auditors and reviewed by the same SEC. If Bear's book value can go from $80 to some negative number in a matter of days, than so can everybody else's. That not to say that anybody else's will, but until we see some liquidation and get a real-world sample, there is just no basis for assuming anything else.
The orderly liquidation that has been arranged has another possible benefit. It'll re-introduce some risk into the system, by punishing some of the people involved in making these stupid bets. I admit, it would be nicer to see a bankruptcy workout that might punish some of equally stupid counterparties, but at least it's a start. Up until now few have been punished for their idiotic behavior.
If the Fed really was in "punish" mood, it's possible that they may cut less than 100 bps tomorrow. Personally I hope they do. These cuts are unlikely to help much of anybody anyway, but cutting less than the street's expectations would send an important message. Somehow I doubt they'll have the guts to do that, which is why my gold and silver positions are intact and will be added to on a significant move of the yellow metal above $1,000.
-btc
