Stearns Goes Pear Shaped...Who's Next?

JPMorgan shareholders don't seem to think Bear was worth $2 - rather at least $3 - $4. So who is right, the speculators playing with credit default insurance and betting on a big banking freeze, or the people now buying banks at bargain basement prices?

I think JPM is a winner buying BS. JPM is looking beyond the credit crunch-and there will be such a time. Seems like the market agrees as JPM's shares were up 10% yesterday.

I am stunned at the lack of regulation- organisations like PRMIA are there to help provide education-but perhaps the banks spent their money on TV ads and a few glittery baubles

Don't think JPM will necessarily be the winner here. Given JPM's exposure to BS, it was cheaper to buy BS than let them default.

We are on the point of selling our (rather valuable) house, on which we have no mortgage and going into rental. Dare we go through with this? What on earth would we do with the money? Perhaps we should put the whole lot into Northern Rock if it's now safe. We have never been in debt and have done our best to save enough for our old age, which is now upon us, only to find our pension has not lived up to expectations and our share portfolio is down over 50% on last year. What does regulation amount to? I find it extraordinary that very dodgy mortgages can be sold to people unable to pay and then these are packaged up and sold on to other financial institutions and that totally innocent people should bear the brunt. The people who sell these should be forced to keep them on their own books and take the risk and not allowed to sell them on in some other guise. And who were the idiots who bought them? They must be bonkers. Why should we suffer for the greed of others?

Why the surprise? It's all one big self serving club. The regulators are the "bent coppers" overseeing the gangsters. The central banks are the foxes watching over the hen house. It is only a few short months since the Kristal and bonuses were flowing like water through a sieve with this around the corner and no one saw it??! Like deckchairs on the Titanic only the bankers already have their life boats reserved with their cash replete suitcases already nestled under the tarpaulin.

The big problem is that the banks are just printing more paper - effectively increasing borrowings to support bad debts. This has to be a recipe for future disaster. The greed of the Banks for greater profits has to be to blame. Things have a habit of coming back to bite!
At the moment the biggest risk must be the Credit Card companies. They must be over-stretched with 3 trillion pounds of borrowings, which is why they are cutting credit limits, closing accounts and taking serious measures to reduce exposure as there is a lot of sub-prime borrowing there.
That reminds me I must reclaim my illegal charges before they go bust!!

beastofbodmin,
"It surprises me that large financial institutions are allowed by the regulators to get themselves into stupid situations like this."
True, but whilst the regulators grapple with simple issues on the left, the market finds ways to avoid it on the right. That's the only way they can make money.
The credit crunch is like this: there is a bad batch of eggs infested with Salmonella (high-risk sub-prime loans) that gets mixed in with good eggs (prime loans), freeze-dried, used by manufacturers to make everything from cakes to milkshakes, checked by food standards (ratings agencies) and then distributed across the world. Now people start dying - and there is no way to trace where the virus came from, so no way to know what is diseased and what is not. Customers (the banks) stop buying all food, just in case.
MBSs have been packaged then unpackaged and sold on so many times, no-one has any idea what exposure they have. Every MBS is suspect and notionally worth $0. BS bought MBSs and now nobody wants to buy them.

I blame the ratings agencies for falling asleep whilst on duty. If they had been more vigilant then the MBSs would have been priced more accurately for risk, and there would have been an audit trail.

paygate,

"Say that to a friend of mine who during the Tech crash told me that ARM Holdings was cheap..."

We can all quote examples of greedy, impatient and stupid people coming a cropper on individual share picks (particularly during the dot.com period). My point was simply that the "market" is very cheap at the moment, which is always a good time to invest. Selling when the market is declining and buying when it has recovered is not very foolish. There are a lot of lemmings around at the moment.

Guys ... the whole thing is a pack of cards ... where does all this 'wealth' come from and when does it end?

How long can the 'underclasses' support the governments of the world... extacting the worlds base resources exploiting 3rd world labour adding 'designer' value based on some hyped up, twisted, media based, drug crazed, air brushed celebrity icon and gift wrapping it in a pretty packages, and then selling it to the less well endowed - BOOM! Pure greed and exploitation of the masses!

Check out the kids dumped in eastern european block countries and war torn Africa on... maybe watch the film 'Blood Diamonds' and then contrast and compare the very DIFFICULT situation we find ourselves in - how would 80% of the worlds population get this.... how share prices dipped and house prices dropped and ... and ... and inflation and unemployement ... so we lose a few pounds here and there ... big deal!

HOW FRAGILE is this pack of cards....

What would happen if 50% of in the states withdrew all their savings in cash from all the banks say next Tuesday & then cancelled all their direct debits.... comments on a postcard please!

Er ... buy in a falling market - what's this if not a falling market? As an example, I've been buying Barclays shares and every time I do I get more for my money! The bank has not become unbalanced because of the suprime exposure; it has other ways of making money. And the dividend is 22.5p. Besides Foolish people know that you only lose money when you sell. I'm in it for the three to five years.

I just saw an article in The Times dated December 1986 where it talked about marketmakers being very jittery and the FRM market (whatever that is) bouncing and how they couldn't see that it was going to make money in their lifetime! Let me think where I've heard that ...

To Bouleversee please do not put all your money in Northern Rock. Just because the government says this month that they will guarantee your money doesn't mean that next month they won't change their minds. And yes £35k chunks may be a good idea.
The people who made money in the last slump were those buying where everyone else was fleeing. I just need to make more money so that I can put it in the stockmarket.

bouleversee,

How frustrating for you. The silver lining is that since buying your house in 1973, its value has gone up immeasurably, so even an 11% loss from the previous offer is little compared to the existing profit made.

Anyone who sells their house in the present financial uncertainty has done well. In fact, you are in a strong position now as a potential purchaser. So, I hope your sale goes through.

As to renting, the market is very strong I'm told. My local letting agent is inundated with 'rentees', as the vast majority who have sold their properties are seeking to rent for the time being. Some properties are being rented out just hours after coming onto the market.

As for where to place your money, find banks which have not been exposed to the subprime debacle and don't borrow heavily. My savings are in two overseas banks, The Icelandic Landsbanki (Icesave) and the Indian ICCI (Hisave). Both offer interest rates of over 6%. The sensible thing is not to place more than £35k into each bank, as by law, you are insured for up to this sum if the company goes bust.

Being an optimist, I feel the present credit crunch will correct itself, but it may take some time. Both the property and stock markets should enjoy a better second half of the year. Let us hope so.