Foresight Better than Hindsight

Implications: 1. Stepping in by two of the market's biggest players viz., the Fed and JPM is a signal to the investors that they would not be left in the lurch and shall not be left alone to fend for themselves. 2. Right price is always a relative term.

Analysis: The move by the Fed and JPM should instill much needed confidence in the investors. Though, Lewis and Cayne may disagree with the price that is on offer and the billion dollar question is, will the Fed pump in USD 30 billion with any other partner ? If not, then this could be a better deal. But hindsight is not an existing (current) decision making tool. There is no immediate need for a Nostradamus to predict the future of the stock market. It usually gets worse before it starts getting better.It might be one year before a clear picture starts emerging, by then many more skeletons will tumble out of the stock market cupboard.

The price being paid is based on the prevailng conditions and maybe if the market improves in the medium term, the situation could change for the better.For now, JPM has applied the theory of probability and which side the coin falls is anybody's guess. Bear Stearns earned a revenue of about USD 6 billion for the year ended November 30. That means the company retains some value.  

Having said that, only a full assessment and a careful due diligence of the books of Bear Stearns will reveal a true picture and until then foresight of Dimon should not be spoken in past tense.