Who's Next ?

On Mar 16, 10:58 am, Doobie Keebler <kooper...@[EMAIL PROTECTED]
> wrote:

> I see Wachovia, and Morgan Stanley, and Merrill Lynch...

The trouble at Bear will now cause every firm to become even more
cautious with counterparty risk, clamping down on credit lines to
trading partners and customers. The immediate reaction is "Bear is
history, who's next?". Unlike the isolated 1998 LTCM snafu - one bad
apple threatening to contaminate many otherwise healthy apples - the
current crisis is fundamentally more serious and widespread. We know
that many healthy-looking apples are already wormy inside, but we
don't know which ones. The result is less trust in "apples" overall, a
major problem in an industry where trust is the cornerstone of daily
business.

Broker/dealers are entirely dependent on ample short term loans and
trading lines to carry their securities' inventory and to clear
transactions. Any hint of trouble and counterparties pull their lines
and customers pull their accounts. The end comes instantly, usually no
more than a few hours.

That is why, tonight, Sunday 3/16/08, in emergency session:

"... the Federal Reserve Board voted unanimously to authorize the
Federal Reserve Bank of New York to create a lending facility to
improve the ability of primary dealers to provide financing to
participants in securitization markets. This facility will be
available for business on Monday, March 17. It will be in place for at
least six months and may be extended as conditions warrant. Credit
extended to primary dealers under this facility may be collateralized
by a broad range of investment-grade debt securities. The interest
rate charged on such credit will be the same as the primary credit
rate, or discount rate, at the Federal Reserve Bank of New York."
http://www.federalreserve.gov/newsevents/press/monetary/20080316a.htm

This is Ben Bernanke's infamous 'drop money from helicopters' come
true.
It is Pandoras Box sprung wide open.

Bottom line: margin squeeze is the name of the game.

..
..d