Monday, March 17, 2008

Who's Next to Fail?

Despite all the Fed's promises to bail out every bank in America, rampant speculation about the next financial institution to fail continues.  The April 10 puts in Lehman have changed hands 15,000 times today and are currently 1.85 bid.  The price of volatility doesn't seem to matter, investors will pay anything to hedge their brokerage exposure.  Exchange stocks are getting pasted today as well (CME, NYX etc.)  Perhaps investors are thinking that no one will be left to trade if all the BD's fail?  Commodities, with the exception of gold are also taking it in the chin.  Maybe investors are selling liquid assets to get long cash?  Despite all of this, President Bush made another statement this morning claiming that our economy was strong.  He supported the Fed's actions and stated that capital markets are working efficiently.  Makes me wonder if the guy paid attention in his Macro class during business school.  You can't claim that capital markets are working efficiently if the Government is bailing out our banking system!  As a very astute friend of mine asked me today while we were discussing the state of the markets:  Who's going to bail out the Fed?    

1 comment:

Stephen said...

Here's new buzzterm that Jason and I have been using for the past few weeks...FINANCIAL MARTIAL LAW. If someone else has something better than by all means please do tell. The Fed is inventing new acronyms almost daily. I cannot wait for 3/31st when at 11 am they will the ...HSIAF account. I don't know if that will be the case because for the time being they seemed to have at least calmed the lending market but if you keep watching LIBOR you wouldn't know that. The cost of money is going up kids and the more leverage you have the more succeptible you are to getting squeezed. Let's see...Too much paper/not enough cash = Insolvency. There you go.

(Holy Shit I am F....ed) Account