Tuesday, June 17, 2008

JP Morgan to FED: Thanks Chumps!

Strange weather. Late night thunderstorms had the dog all riled up, which was not fun if you happen to want to sleep. It was mostly sunny all day, then as I was leaving work it got very dark and rained very hard for about an hour. Then light again. "Unsettled" is what the weather for caster calls it. OK.

AP Gets Crabby
I am not sure what to make of the whole move the Associated Press (AP) is trying to make. It seems they have taken umbrage to the fact that bloggers all over the universe use their stories in posts. I know I do. I guess there is some concern that AP is not capturing the revenue they are due by this kind of widespread copy making. I guess that is fair enough.

I like Yahoo Finance for most of the news stories I use because I feel that AP and Reuters represent the basic mainstream media reporting that bugs me. If my using the stories from there is not getting back to AP, then perhaps they need to better monetize their material. I think it is useless to try and stop bloggers from excerpting, there are just too many to follow up on. Until I get a clear directive from AP, I will continue to excerpt stories. This may change in the future. Geez, can't even use mainstream stories any more!

Financial Stocks Unhinged
If you have been following stocks like LEH, WM, and WB it has been revealing as an exercise. One day up 15%, the next day down 8%. Day after day. Week after week. What does this mean? Probably two things at least:
One: Wall Street has zero ability to price financial stocks. While this has always been true (due to funny money book keeping) there seems to be a sudden realization of this fact. Add to this the serial dilution that capital raising does and you see that this area is subject to quick and nasty repricing to both the up and downside. Like I have said, the value of an insolvent bank is zero, but a FED bailed insolvent bank has a value of X. Solve for X and you have a trading theory.
Two: How much is short interest playing a role here? Wild swings of 25% from peak to trough have been weekly pretty common, and those kind of swings smack of short covering.

In either case, it bears watching to see the levels of volatility involved here. In a finance based economy I wonder how long things can remain reasonably ok while the money machine companies themselves are broken. We may have one part of that answer this summer when the FED runs out of cash.

JP Morgan to FED: Thanks Chumps!
From my favorite department, the department of "you can't make this up", comes this story from CNBC today about the JP Morgan (JPM) buyout of Bear Stearns (BSC) that the FED felt was the key to keeping the universe from unravelling and the end of the world as we know it:
JPMorgan Chase: We Got Bear Stearns on the Cheap
By Charles Gasparino, On-Air Editor 17 Jun 2008 12:36 PM ET
JP Morgan Chase's top investment banking executives conceded yesterday that their acquisition of Bear Stearns was worth far more than the rock-bottom $10 a share price they paid, but that the market turmoil is still taking a toll on investment-banking profits and may result in further layoffs, CNBC has learned.
The executives—CEO Jamie Dimon, as well as investment banking co-heads Steve Black and Bill Winters—made the comments late yesterday afternoon during their first company address to the newly combined investment bank.
Bear was forced to sell itself to JPMorgan amid a run on the bank that nearly toppled the US financial markets as investors bet that bad loans on Bear’s books would leave the firm insolvent. Under the terms of the deal, the Federal Reserve guaranteed $30 billion of those bad loans, while JPMorgan agreed to assume the first $1 billion.
That said, Black, the investment banking co-chief, said the integration of the firm is proceeding "smoothly" and that JP Morgan "got something that has far more value then the price we paid," according to people who attended.

Not to say I told you so, but I told you so! The FED has no idea how sleazy these guys are. JPM not even a half year removed from getting BSC on a cramdown deal by the FED is already out gloating about it. If you were a BSC major stock price loser, you may be even more pissed off now.

I love this story. It shows how shameless JPM is, how foolish the FED is, and what a fix the rest of us are in!

Have a good night.

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