Michael Gracie

Light on thought.

• Check out today’s shocking level of discount window borrowing. Who wants to start a bank?
• A crank Craigslist posting led to a run on an Oregon man’s possessions. Henry Blodget wonders who’s responsible (i.e. who should pay for the ransacking). I’m wondering when the copycats are going to arrive.
• Luxury car sales are on the decline, and Ford is selling Jaguar and Land Rover as a result. Not too long ago luxury goods sales were being touted as a mainstay. What changed all of a sudden? Failing hedge funds?
• New home sales fell to a 13-year low. You wouldn’t know it if all you were listening to was the National Association of Realtor’s counter-productive spin.

Commentary will remain light around here for the next few months…until the project I am working on has reached its next milestone or I catch a ten pound trout, whichever comes first.

Tom Chandler posted some excellent tips for taking fine photos while on the river. He followed it up too. This is good, especially for me - I’m a self-proclaimed camera idiot .

And…the tips can actually be used just about anywhere (outdoors preferred, of course).

Why anyone would listen to financial advice from a television program host is beyond me. It’s comedy, not advice:

After it was announced March 16 that J.P. Morgan Chase & Co. (NYSE:JPM) was purchasing Bear Stearns Cos. (NYSE:BSC) for $2 a share, the stock plummeted over 80 percent at the open of trading on March 17.

But, on March 11, Cramer told an e-mailer not to sell the beleaguered investment bank’s stock on his show’s Web site:

“Dear Jim: Should I be worried about Bear Stearns in terms of liquidity and get my money out of there? –Peter
Cramer says: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”

They don’t call it “mad” money for nothing.

The Wall Street Journal calls it a rescue, but at roughly $2 per share I doubt anyone but the remaining prime brokerage clients and derivative counterparties are looking at it that way.

Monday the company was trading at $70 per share, which sounds more like a bloodbath.

In a short conversation this evening with a friend from the Street, he noted that this was downright ominous. 97% of the market value of the fifth (?) largest investment bank in the world disappeared into thin air in 144 hours. Who else is out there with such destructive off-balance sheet liabilities of a similar magnitude? And who is really left to “rescue” them?

…with the exception of the Fed (and maybe some tech companies that have zero debt and tens of billions of cash on hand)…?

Spreads in the gargantuan credit default swaps marketplace are forcing otherwise platinum rated borrowers to pay significantly more for their money. A bit of this is to be expected - up until summer credit spreads were tighter than a snare drum, and some widening was to be expected. But nobody foresaw GE paying 129 basis points over the government yield (they’re probably more credit worthy THAN the government ).

Will the anomaly work itself out in due course…?

“The credit-default swap market is completely distorting reality,” said Henner Boettcher, treasurer of Heidelberg Cement in Heidelberg, Germany, the country’s biggest cement maker. “Given what these spreads imply about defaults, we should be in a deep depression, and we are not.”

Or should there be a “Yet.” at the end of the above statement?