The potential loss of a major US brokerage is
shaking markets. Gold over $1000. Dollar breaks to record low. Stock
market volatility erupts.
Despite the ‘good news’ of unbelievably low
inflation, and overnight stock futures up strongly on the ‘good news’
the markets are all now reacting badly to what was, I am sure, supposed
to be even more good news – the bailout of Bear Sterns and Co by JP
Morgan and the Federal Reserve.
Here’s the news:
SAN FRANCISCO (MarketWatch) — Bear Stearns Cos.
said Friday that it got short-term financing from the Federal Reserve
and J.P. Morgan Chase after the brokerage firm’s liquidity
"deteriorated significantly" during the past 24 hours.
On the surface it’s a great thing that JP Morgan and the Federal
Reserve were able to join hands and string together a bailout so
quickly.
On the other hand, what does it mean that Bear Stearn’s "liquidity
deteriorated significantly"? It turns out that we are facing the very
real prospect of the collapse of a major financial institution. And you
never get just one of those. Once one big one falls down, they tend to
drag a bunch of others with them.
More coming as the news develops.
The stock market has been ignoring the bad news for entirely too long.
It is completely clear to nearly all observers that we are already in a
recession, and a particularly nasty one at that. The only indicator not
giving a reliable clue here is the stock market.
by ideaslingering 
