on a morning like this one when a major wall street broker dealer is down nearly 50% and it's not even noon, memories from a decade ago comes back vividly.
then, i was trading interest rate swaps, futures and fixed income securities at morgan stanley.
days like today when a counterparty like bear stearns is announcing a liquidity crisis, my controllers would have already called me days ago to take action to protect the "book" and my boss would have screamed over and asked "what about this...".
this process of adding liquidity, swapping to another with a better credit, is a tiny part of the ever complex financial system.
although complicated this system maybe. now, as in 1997, or even a century ago, when you spot a bad borrower, you do not lend them more money, unless you have someone giving you that money.
today, those are jp morgan and the feds.
a few days ago, the fomc declared over 200bln in pledges to help bail out crumbling credits and others. they must have known about bear then and lets hope it ends there.
but my gut tells me not to be buying any banks or brokers even with these marked down prices.
if not for the benign cpi of unchanged this morning, a 2-4% drop in the spx would have already been posted right now.
Any idea why BRKB is falling? I would have thought that BRKB would be unaffected by this mess?
ReplyDeleteRaj
raj
ReplyDeletebrk has fallen alongside banks, brokers and monolines, still brk has held up far better than the banks and broker dealers. down less than 9% ytd while c -32%, bac -12% and even gs -25%.
i do not see buffett buying bear or any parts of it. thge wsj even said this a day ago:
http://blogs.wsj.com/deals/2008/03/13/should-alan-schwartz-sell-bear-stearns/
paul