Afternoon Update....

Dow -146
S&P - 29
Nasdaq -51

After gapping lower, the market actually went positive just before noon. Since then we have drifted back lower.

My take: This market is pretty much washed out. Not that we can't go lower, but long term, we have a serious buying opportunity here. The Fed is not going to let the entire US Financial system collapse. However, this is how assets are currently being priced. Bear Stearns was always the type of company that had an air of shadiness about them....and they probably got what they had coming to them.

Tomorrow the Fed meets on interest rates. No doubt they will try to shock the market back to life again. It's too bad they didn't react quicker...if you remember I was pushing for them to act on rates the first week of January...they waited until the third week...and basically created this run on the bank mentality.

If history holds up...and it should...this looks like an inflection point...a place to buy and NOT a place to sell. Hang in there and I think you will be better off a year from now.

Look for bargains.

Market Gaps Lower....

Dow -152
S&P - 22
Nasdaq -38

Following Bear Stearns collapse the market is lower. The big question is whether there are any other collapses in the wings.

The Fed meets tomorrow...should be an interesting meeting.

Fed Cuts Discount Rate....

At the same time it was backstopping J.P. Morgan's buyout of Bear Stearns, the Fed also stepped in to prop up the broader credit crunch. The Fed dropped its discount window rate -- at which intstitutions borrow directly from the Fed -- by 25 BP to 3.25%, and extended the maximum loan term to 90 days from 30. In an unprecedented move, it also opened up the window to securities dealers for at least the next six months.

The move to waive the usual restriction on Fed lending to banks was approved unanimously by the five FOMC governors.

Bear Stearns Taken Out by JP Morgan...

Bear Stearns (BSC) shocked Wall Street by selling itself Sunday for just $2/share to J.P. Morgan & Chase (JPM), the bank that stepped up Friday to bail it out in tandem with the New York Federal Reserve. In order to make the deal palatable, the Fed will assume risk on up to $30B of Bear Stearns' riskiest assets, including $20B of mortgage-backed securities. "

Despite recent events, the health of franchise and the prime brokerage and clearing business is in good shape," a JPM executive said Sunday. JPM does, however, assume some of Bear's large positions. It's unlikely other bidders will emerge, due to the degree of uncertainty surrounding Bear's positions.