The Bubble

Currently, the US is trying to stop the bubble from bursting. Furthermore, it is adding more "soap" on the bubble to strengthen it and meanwhile, tries to add more "air" to the bubble to create liquidity.

The fall of Bear Stearns and others were just pops of smaller bubbles. The economy is so leveraged with assets inflated and massive trade deficits that they may as well press the reset button because in the long run, they will be dead.

If uncle ben manage to save US, the next bubble will be massive if they do not learn from this lesson. And he will ensure that it will be ok until he steps down from his position.

Well, no one will learn because the basic fundamental to capitalism is profit. As long as it grows, it is good. (yes, even if it's debt (Well we can always fill for bankruptcy)).


Pop goes the weasel!!!

The bear conspiracy

Was it so easy for Bear to just fall? Or is it just that someone needs to fall? Why werent there actions taken to prevent it's fall?

Cayne, ex-chairman of Bear was playing cards amid the crisis, as if it got nothing to do with him.

On that dying day, clients withdrew $17 billion and investors stopped placing trades with them. Bear shares fall like a knife, hitting a low of 30. This was a self induced liquidity problem where herd mentality stormed out of the zoo.

The next day, JP Morgan announced its bid of $2 per share of Bear. This values Bear at around 290 million. But this is a farcry from its assets considering the building Bear Stearns own that is valued at $1.5 billion. It's like buying Ferrari for a price of an Altis because petrol price increased many folds.

All these scenarios are not just technically based where there are liquidity problems that cause this mess. Connections between the CB and JPM enable them to ally to each others' benefit.

Now that Bear has fallen, and other investment banks reporting that they have strong liquidity, the mess has been substantially been resolved for the time being.

Clients from Bear will definitely seek other existing firms, increasing their market share and resulting in higher profits. The considerable $17 billion withdrawn will be moved to other investment banks.

Anyway, most white collar employees that will be out of job will be able to find other jobs. But those blue collared workers are in deep trouble.

Who knows? Maybe someone has to sacrifice to save the country. The fed is running out of bullets.