The Financial Crisis – The Worst Is Yet To Come

Dear Friends,
A friend sent me the following article.Thought you would like to know.

The Financial Crisis – The Worst Is Yet To Come

A guru once told me that for most people, it is easier to accept and believe a lie than Truth. To accept truth is to accept a paradigm shift – a shift that challenges our perception, our comfort zone and the harsh rejection of a false reality for which we have been entombed.

Why do we allow ourselves to be lulled into a state of mind whereby we accept uncritically the propaganda by the financial elites in the mass media?

1. There is so much information out there that it is just impossible to check and verify each and every bit of information. So we take the easy way out and assume that they are correct and verifiable.

2. Thinking is hard work and we don't seem to have the time to think things through.

And that is why it is so easy to subdue the masses through propaganda. Anyone who challenges the official line will be demonized and labeled a pariah. It is just not worth the effort. Our mind ceases to function.

Try this exercise. In a normal working day, from the time you wake up to the time you go to bed, how many hours do you actually devote to thinking about issues that affect your life and your family?
Less than fifteen minutes!
In this article I would like to invite you to think critically about certain issues which will enable you to see through the lies and propaganda of the financial elites concerning the current global financial crisis.
For the purposes of this exercise, I will use the headlines of leading international newspapers.

First Headline:
New York Times Sunday 16th March 2008: "JPMorgan Chase Says It Will Acquire Bear Stearns for $2 a Share."

The week preceding the sale of Bear Stearns, its shares were quoted at US$60 per share. The sale of Bear Stearns was broadcasted by all the major international news agencies. This was followed by the Fed's announcement on 18th March 2008, that it had reduced its target for the Federal Fund Rate 75 basis points to 2-1/4 percent.
The Dow went wild and rose over 400 points.
The official line then went out – The crisis is contained, the worst is over. The Market will rally. The good old days are back!

Please consider my reaction. "This is baloney! Horseshit and bullshit. If you are still in the market, take whatever gains and get out of the market!"

Let me now take you through my thinking process and show you how I arrived at my conclusions.

Step 1: I did a research of the price of Bear Stearns in the 4th quarter of 2007. It was quoted at US$180 per share. In early 2008, it went down to US$80. In early March, it plummeted to US$60 and just before the sale it was US$27.

Yet, JP Morgan Chase bought Bear Stearns for US$2 per share, paying approximately US$250 million.

Step 2: Further research showed that the HQ building was worth at least US1 billion. Therefore, Bear Stearns' liabilities must be horrendous and taking everything into consideration, the quoted price of US$27 on Friday, 14th March 2008 was either overvalued or JP Morgan took advantage of the situation to demand from the Fed, as a condition for taking over Bear Stearns, that it must be at bargain basement price.

Step 3: Given this scenario of a leading global investment bank in such dire situation, how can anyone trust the valuations of the other global banks that are equally exposed to the toxic wastes of sub-prime mortgages, CDOs, CLOs, CDSs etc.

Step 4: The deal was structured and finalized between the Fed, JP Morgan Chase and Bear Stearns on Sunday, 16th March 2008. There can be only one conclusion – such drastic and rapid intervention by the Fed on Sunday is to prevent the total collapse of Bear Stearns before the opening bell on Monday. This back room deal stinks!

Bear Stearns is therefore insolvent, bankrupt in layman's terms.

Yet prior to this collapse, financial analysts of leading financial newspapers and brokerage houses were giving clients the "buy" signal. So does it make any sense to rely on such advice without thinking through?

There is no such thing as a "free market". It is only "free" for the big boys of Wall Street to make money out of suckers, and should the market turn against them the Central Banks are "free" to intervene to bail them out at the expense of the small guys! This is the stark reality in every major depression and recession in the last century. The coming depression will be no exception. People will put up with this nonsense and rip-off and allow the fat cats to get away with this massive fraud and wealth transfer.

Second Headline:

Thomson Financial -12th March 2008

"The International Monetary Fund (IMF) today warned authorities worldwide to 'think the unthinkable' in planning to cope with a mounting crisis in the global financial system."

Given this warning by none other than the IMF, why are people still debating whether there is a global financial crisis? Why is our government insisting that Malaysia will not be affected by this mess? Why are people accepting President Bush's assessment that here is no recession in the US?

Once again, let's go through the thinking process.

What can be the "Unthinkable" referred to in the above quote?

Why is the IMF avoiding the use of the word "Depression"?

Therefore, to think the unthinkable is to adopt a paradigm shift, to prepare for the worst scenario. Yet, there are people who refuse to accept this reality. It is just mind boggling.

Those of you who have followed my "Red Alerts" since last year but refused to accept my prognosis will have to reckon with the IMF assessment, albeit nine months behind the curve!

The IMF has now wised up to reality and is taking corrective measures. I suggest that you prepare yourself for the coming financial Tsunami.