Bear Stearns - anyone else worried? Any thoughts or predictions?

[Callisto]

I must admit that this has got me quite worried and the effects are being felt globally as the Asian stock markets have fallen. What does everyone else think?

I didn't know that JP Morgan were going to buy Bear Stearns.

news.bbc.co.uk/1/hi/business/7299938.stm

Am v interested and a bit concerned at how this will all pan out.

The bank of england have just pumped £5 billion into market to try and improve things.It hasn't worked so far though here or in the US.

dh is director of a stockbrokers and he doesnt seem overly concerned (although he has slightly less hair than last week ). When he starts to look pale and go off his food I'll know to worry

Selfishly, I'm more concerned about the knockon impact of jobs in financial services. There have already been some cuts so am anticipating some more...

SchnitzelVonKrumm - as I said I am clueless - just regurgitating what DH said and obviously got it wrong!

DH has just said to me that there is carnage in the markts this morning and everyone is cacking themsleves!

rvmcw
on today r4 this morning they said jpm had bought bear sterns at fraction of cost of even last week..

DeeRiguer - some of the ones who caused this crisis will reap the rewards

it is the ordinary people who will suffer the most

According to the BBC, just $2 a share.
Ouch

Shares were valued at $30 on Friday, if I remember correctly.

depressing graph of share price

I work in the city, supporting companies floating on the Stock Exchange. Deals are being pulled at a hideous rate, its been quiet since Christmas when normally the market picks back up in mid to late Jan. Am starting to get nervous for my job, we're ttc our first and I'm the main breadwinner. All a bit shit really. Also am very very bored at work as bog all to do.

I'm feeling a bit clever that I liquidated my stocks at the beginning of last week

I think it is going to be a disastrous year. The banks are not lending at all, for anything, to anyone, including each other. And I must say I can't see what lowering interest rates is going to do since we have had historically low interest rates for almost a decade or so - so if all of this wasn't caused by high interest rates why does anyone think that lowering them will help? Won't stop governments from doing it though - so at least I suspect mortgage payments won't go through the roof which is a lot of people's main concern.

I think it is time to batten down the hatches and endeavour to ride this one out. Put any spare cash into oil, gold, Northern Rock or government savings!

Agree Claire. It is the complete paralysis of the debt market that is killing deals

Agree it is good for struggling home-owners that interest rates are unlikely to go up massively.

However, as the really cheap deals are being pulled, anyone looking to remortgage as their current cheap deal comes to an end is likely to find it difficult to find a new mortgage on such good terms.

The confidence in the markets has taken such a knock and it is going to take a lot of time to regain the momentum ..

There are going to be a few more casualties I am sure..

Just a bit worrying as DH is in the financial sector and is in the process of changing jobs... eek!!

pph is right interest rates are virtuaklly irrelevant in all this.People coming to the end of fixed rates will be forced in some cases to go onto the variable rate as 'deals' are drying up and those that are available have huge fees.

Upwind - not as simple as that, but yes, there will always be winners and losers whenever there is volatility.

I work in Investment Banking and this is all getting pretty serious. It isn't that companies don't have assets, but that they will not lend to each other. This is exactly the same in essence as the main reason why small businesses fail - not that they are unprofitable, but that they don't have CASH. Just as we borrow on mortgages because we haven't got cash in the bank to buy our houses outright so the banks do the same, which all works well until someone is considered to be a bad credt risk and it all falls down. This is what happened at Bear Stearns - as a result of what happened at Carlyle (an investment vehicle) a few days before. The reason why it was Bear Stearns first (and Northern Rock over here) is because they were the 'riskiest'. Put it another way, if you knew 10 people who had mortgages and one of them was self-employed with variable income and a lot of debt, who do you think gets shot the first time the mortgage lending business tightens? That's exactly why it was Bear Stearns - they were just bringing up the rear in terms of riskiness when it came to lending.

My prediction? (1) it is going to get a lot worse, it WILL filter through to ordinary people and I will surprised if houses don't fall at least 15% by the end of the year; (2) there will be job losses and this will hit the high street as well, especially fashion houses and the like. There will undoubtably be a backlash against excessive consumption; and (3) a drop in house prices will, for the vast majority of people be a fantastic benefit. So long as you can still pay the mortgage, there is no advantage whatsoever to normal people from house price inflation (until they die). What most aspiring people should pray for every night are drops in prices - that way when they come to move UP the housing ladder their next home is more affordable than it would have been otherwise. The house price inflation of the last decade has been horrendous for normal people - the mortgages have risen as we trade up and we have all borrowed against equity - money we now need to pay back just when job security is suffering. Yuk. House price inflation is only good for property investors who can trade out and bank the profits.

Agree with squiffy
Except would add that companies do have assets but as property prices fall and stock markets fall and things get tighter the asset values will fall and writedowns/offs will rise and I think there is going to be a big crunch.

And then entities who have actual proper assets will do a lot of clever cheap buying and things will loosen up again. What do you reckon squiffy - 6-8 months for things to hit rock bottom institutionally/corporately?

But surely if your house drops in value what you can afford when trading up costs the same as what your house has fallen by so it won;t mean much really in terms of the housing market?

Thanks Squiffy - I tend to agree with your predictions. It is an utter disgrace that the media types who understood this have persisted in creating a myth that hyper-inflation of house prices was a good thing. Acting in the interests of their advertisers instead of their consumers.

PrincessPeaHead, I worry that this crunch will be more drawn out than that but hope you are right!

If your house is now worth £300k and you want a bigger house that costs £400k then you need an extra £100k obviously.

If both drop 20% to errrrrrrr ummmm £240k and £320k then you only need another £80k. Hope that makes sense twinkie. So its better for everyone (apart from property investors) if house prices fall, IMO.

Oh right got you - thank god we stretched oursleves already and now have a huge mortgage!!

No real idea on when the 'man in the street' will feel the effects, but I reckon it will be 4-6 months for the banks to shake out, and the property prices will start tottering quite soon - people will expect there to be the normal spring effect, with lots of movement in the market, and it just won't happen...

But I could be totally wrong.

Saying that, we had been thinking of moving house this year (trading down, not up) and for the last few weeks I have - for the first time ever - been seriously considering selling up completely and going into rented.