The End is Nigh, One of My Predictions Has Come True

Yep, it's the end of the world, I got a prediction right. On August 2, 2007, I predicted that, "Bear Stearns will cease to exist. It will either be forced to liquidate, or it will be bought out in a fire sale".

I never get my predictions right. I look at my predictions on the HD-DVD/Blu-Ray fight.

So, after the Fed lends Bear Stearns $200 billion, JP Morgan buys Bear for 236 million, and they look to be ditching off the risk on the Federal Reserve:

Shareholders of New York-based Bear Stearns will get stock in JPMorgan equivalent to about $2 a share, compared with $30 at the close on March 14, the two companies said in a statement today. The U.S. Federal Reserve will provide financing for the transaction, including support for as much as $30 billion of Bear Stearns's "less-liquid assets."

Normally, when I say the end is nigh, I'm joking. I'm not joking now, and it has nothing to do with whether or not I got a prediction right.

It has to do with the fact that in Asia, where it's Monday already, markets imploded. The Nikkei the Hang Seng have so far fallen by more than 4%, and the Korea Composite Stock Price Index by more more than 3%.

What's more, on this side of the international dateline, the Fed cut the discount rate by 25 basis points, from 3.5% to 3.25%:

The central bank approved a cut in its lending rate to financial institutions to 3.25% from 3.50%, effective immediately, and created another lending facility for big investment banks to secure short-term loans. The new lending facility will be available to big Wall Street firms on Monday.

That was done on Sunday. When the last time that you've heard of the Fed doing anything on a weekend, much less a Sunday.

People are now talking about this in terms of being 1929 bad, not 1970s bad:

Wall Street fears for next Great Depression
....

One UK economist warned that the world is now close to a 1930s-like Great Depression, while New York traders said they had never experienced such fear. The Fed's emergency funding procedure was first used in the Depression and has rarely been used since.

....

In the UK, Michael Taylor, a senior market strategist at Lombard, the economics consultancy, said on Friday night: "We have all been talking about a 1970s-style crisis but as each day goes by this looks more like the 1930s. No one has any clue as to where this is going to end; it's a self-feeding disaster." Mr Taylor, who had been relatively optimistic, has turned bearish: "It really does look as though the UK is now heading for a recession. The credit-crunch means that even if the Bank of England cuts rates again, the banks are in such a bad way they are unlikely to pass cuts on."

I think that they are very nearly right on this, at least for the US.

Unlike during the great depression, the US is no longer an exporter of oil, nor does it have the most vibrant and advanced manufacturing base in the world.

It may be bad world wide, but it's going to be hideous here.