So as of this morning we’re at a discount rate of 3.25% and…I’m guessing one and a quarter point, maybe even 1.5 for the funds rate looming on Tuesday. And Bear Stearns having gone from being worth a high of $87 a share on Feb 27, closed at $57 a share on Thursday, $30 on Friday, and, as of this Sunday morning, being bought up by JP Morgan (under the Fed’s assurances and backing) for $2 a share. And, frankly, while I have a huge amount of confidence in JP Morgan and Jamie Dimon, I can’t help but actually be more concerned about the risk that JP Morgan is picking up right now. And I’m 90% positive that there are going to be serious, serious ramifications on JP Morgan. And let’s be honest, what’s the bigger picture issue here? In three weeks the value of Bear Stearns fell from $87 to $2. The obvious question is: where is down? Shoes are falling all over the place: the dollar is down (at $97 against the Yen as of this writing), and both oil and gold have skyrocketed.
The truth is, I’m not sure what worries me more: the Fed’s $200 billion injection last week, and that the Fed is pulling all the strings it can (and seems to be making a few up as it goes along) or that the actions are falling on deaf ears. And some of the moves really are unprecedented — the Fed stepping in to offer short-term loans to investment banks?
As of right now (2:45am EST, Nikkei is down 3.71%, Hang Seng 4.01%, and Sensex 3.78%). Europe hasn’t opened yet, but I’m guessing that FTSE, GDAX, and SBF will be down by 1-2%. As for the US? The Dow down about 180 points. But then again, who knows what’s going to happen in the next twelve hours.
Also, now should be a good time to remind our dear reader(s) that Sen. McCain “just doesn’t understand economics.” Also: he’s crazy.