Friday, March 14, 2008

It Really IS time to move my 401(k)

by Ken Houghton

Via Felix, a short, sharp shock:
With the support of the Federal Reserve Bank of New York, JPMorgan said in a statement that it had “agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days.”

For the next month, JPMorgan will work with Bear Stearns to reach a solution for its financing crisis. Options could include organizing permanent financing or, according to people briefed on the discussions, buying the bank for a discounted price.

“JPMorgan Chase is working closely with Bear Stearns on securing permanent financing or other alternatives for the company,” JPMorgan said in its statement.

And that's the good news.

Now, let us translate:
In a statement issued on Friday, [Bear’s chief executive, Alan Schwartz] said: “Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity.

People have noticed that our CDS spreads are higher than Argentine debt ca. 2001.
We have tried to confront and dispel these rumors and parse fact from fiction.

To do this, we enlisted Margaret Seltzer, who came highly recommended by James Frey.
Nevertheless, amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated.

Nobody believed me on CNBC yesterday; my e-mail has been filled with "The truth will set you free."
We took this important step

We threw ourselves on the mercy of the Fed and JPMC, which may do for us what BofA's support has done for Countrywide.*
to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations.”

In the desperate hope that, since Jimmy's gone, the people who remember that we kept all the LTCM collateral for ourselves will be nicer to us than he was to them.

*Insert your own Eliot Spitzer/Jessica Cutler joke here

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I don't see how the inflation number today can be even possible. Do you think Bushco could manipulate those indexes for political purposes, like thei constant revisions of the jobs statistics?


Hello, by the way.
Unless reversed soon, the gas price take-off should be reflected in a nasty headline number for March CPI. Since it's volatile, as we're often told, I'd put less stock in the month-to-month change than the 4% year-over-year.

If you look at Table 2 of the release, you'll find 3- and 6-mo annual rates for expenditure categories such as energy are appropriately shocking. Other factors (e.g., effects of non-energy commodity prices) don't appear to have been fully propagated (yet).
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