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Panic!

Is it time to panic yet? We're getting there. All this financial calamity makes me giddy. Sometimes I wonder whether that's healthy…

JP Morgan made a deal to buy Bear Stearns for a mere $2/share. Bear Stearns closed at $30 on Friday… and $57 on Thursday.

JPMorgan's acquisition of Bear Stearns represents roughly 1 percent of what the investment bank was worth just 16 days ago. It marked a 93.3 percent discount to Bear Stearns' market capitalization as of Friday, and roughly a 98.8 percent discount to its book value as of Feb. 29.

Poof!! I'm always unhappy with the Fed, but I was particularly unhappy that they were bailing out a broker instead of a bank by using JP Morgan as a conduit. Now that JP Morgan is acquiring Bear Stearns I no longer have a reason to feel more upset than usual. Also, there's this (emphasis added):

At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.

All this news has provoked a large negative reaction in the Asian markets. It's going to be a lousy day for U.S. markets too.

Oh yes, and this confidence-building [sic] move caused the dollar to sink to fresh lows. You can guess what that's doing for gold and silver.

3-day US Dollar Index 3-day Gold Spot Price 3-day Silver Spot Price

P.S., Carlyle Capital, the hedge fund that defaulted on margin calls last week, is liquidating.


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Tiny Island