My US$2 Thoughts

Must be severe inflation, it used to be my two cents, even longer it was just penny for your thoughts ... now its US$2!!!

a) US$2 or US$10, doesn't matter. The buyer is important, JP Morgan. The man behind is even more important, Jamie Dimon, whom I reckon to be the best banking CEO and strategist - used to be Sandy Weill's blue eyed boy but had a falling out, struck out on his own. Joined a small bank BankOne I believe, and built it up in a deliberate but savvy strategy to be the now JP Morgan. The fact that he is willing to even buy at US$2 is some comfort. If it was very very bad, he wouldn't touch it if Bear Stearns was offered at US$0.20.

b) The deal had to be done and Jamie twisted Fed's arm properly to get the Fed to pony up for the deal. JP Morgan behind BS would provide strength for BS to negotiate outstanding deals and gaps in funding. BS problems was compounded when Carlyle also compounded as BS holds a 15% stake in the Carlyle unit.

c) The Fed opened their windows not just to banks but brokers as well. Lehman Brothers was shorted significantly on Friday - the best gauge of looking at how the market is faring today is to monitor Lehman Brothers share price. If it recovers, it could rebound significantly.

d) The Dow is likely to lose 300 points today but could recover most of it if Lehman Brothers trade as I expect it to trade (too many over eager shorts on Friday).

e) Rate cuts at the same time can be interpreted as panic mode by the Fed, but one should not ignore the cuts and the US$200bn injection.

f) We know the approximate gravity of the write downs US$250-350bn. They have done US$100bn so far, and the market has basically factored in another US$100bn by Citigroup, Lehman and the likes. The European banks will also be writing down the rest. So one or two big companies failing is kinda expected and should not be the beginning of another down wave. When all moves to save itself has been exhausted-they sell at depressed prices. Thats not the beginning, that's the end of the cycle or thereabouts.