We are on the precipice, the edge is crumbling, and 'the truth' is about to be revealed....

[Blackhatjack]

The $30bil Govt backed 'sale' of the 5th largest Investment Bank Bear Stearns to JP Morgan for $2 per share(less than 1% the value Bear Stearns touted last week) was an attempt to prevent massive 'runs' on multiple investment banks by investors this week.

THis move did one very important thing... it delayed the full disclosure of how bad the losses really are at Bear Stearns, and it kept investors from knowing how bad things are at all the other investment banks as well.

The Govt might bail out Bear Stearns, but it cannot bail out simultaneously a dozen more ... which would have been the next step if Bear Stearns had filed bankruptcy --which it would have if the Govt had not stepped in to orchestrate this deal using JPMorgan.

Foreign Markets are reacting to the news exactly as we would expect, and are a good indicator of what lies in store for the rest of us still invested in the US.

The big question now is how long will it take American investors to realize the breadth and depth of the losses and move to pull their $$ out of their investment accounts. IT will happen... it is just a question of when. And when that happens you will see foreign investors do the same.

[Blackhatjack]

1. ``Something is systemically very wrong and we're at a very dangerous moment.''

``This is a serious crisis,'' said David Goldman, senior portfolio strategist at Asteri Capital in New York and former head of debt research at Banc of America Securities LLC. ``Something is systemically very wrong and we're at a very dangerous moment.''

[Blackhatjack]

2. And do not tell me Bear Stearns did not know this last week when they alleged $200/sh value..

... and remember, this was a 'guaranteed' deal for JP Morgan(Bear Stearns competitor) because they are protected from loss by the US Govt guaranteed $30bil.

[Blackhatjack]

3. Brokerages report this week... it is going to get ugly as they attempt to spin bad news...

[Dhalgren]

4. Is the liquidation of the Carlyle subsidiary that deals in mortgage

funds a symptom of this same thing? Is there a "snowball" kind of thing going on here?

[Blackhatjack]

5. The full extent of the losses which have remained hidden so far are emerging...

... people are asking if Bear Stearns took this turn, how bad is it for the others out there?

[Dhalgren]

6. A couple of questions.

1) Are they hiding these affects in order to lessen the impact on particular parts of the market or are they just trying to retain as much money for themselves as possible before the inevitable collapse?

2) How long can they sustain the ruse? And does the prolongation of this thing, caused by their hiding the negatives make things worse or can this actually be a positive in any way?

[Blackhatjack]

7. A few answers...

Re: #1 - As long as you appear to be viable and people are not drawing their investments out, you have the chance turns things around or at least reduce the unfavorable results you are currently dealing with until that information becomes known.

Re: #2 - Many of the investors are in the 'super-wealthy' category, and the longer the truth is hidden, the more time they have to reduce their positions and/or use the inflated values as collateral to do other deals which will hopefully improve their positions. As soon as the truth is revealed, it is pay up time for everyone, and the inflated values will be reduced to real values. A loss of paper profits that cannot be used to do other deals.

[Dhalgren]

8. What do you think is the "lifespan" of this thing?

What is your guess as to the resolution? Will it be a 1929 kind of thing or a Reagan-era "Black Monday" type of "adjustment" or are we dealing with a completely different breed of animal?

[Blackhatjack]

9. The struggle behind the scenes is for control of the levers of economic power ..

... we don't know how this story will end until we know who manages to wrest control of those levers of power.

[elehhhhna]

10. The ENRONIZATION of the US economy.