Bear Stearns....A Story of Leverage

Bear Stearns this week has demonstrated clearly my earlier point about leverage and what it can do when it works against you. There will be a few more shoes to drop they will not be the last. What you have just witness is a $170 last year, and one of Wallstreets darlings, reduce to $2 a share in literally and instant.

Lenders and banks are not aware of their own sickness. It took Bear 24 hours from the CEO saying their balance sheet was fine to being insolvent. That is the nature of being leveraged to hill with debt you have lent out that you don't actually have. Fractional Reserve banking compounds bank returns, but in in reverse can snuff them out of existance literally overnight. It is a shame our banking system is built on this "ponzi scheme" but that is the nature of big business I guess. Try to understand that every bank that lends in America is structured this way and all of them lack the visibility to give adequate warning to impending doom on the horizon. Who is next? Keep your eye on the birdie.