It took 20 yrs for BSC's share value to grow to $170 but only a little more than a year to become worthless. If Bear Stearns is worth $2 now, then what about the other investment banks? How about the dow jones? Are we going to see a full scale collapse of the US financial system tomorrow? Dow -4k? Meanwhile the US central bank is freaking out.I think this Barron's article just about sums it up.
4 comments:
Yes!
BS worth $2/share!
JP Morgan gonna try their luck...
Yes Toto, we are not in Kansas anymore!!!!
dow -4k. I get it. lol.
I can understand the idea that the BSC deal is all around a good one for the US. Certainly it adds stability to the mortgage market and now you have JP Morgan, apparently the most stable bank in the country, with a real stake in productive gains in the getting the system working.
On the other hand, the deal is a complete fraud for the 14,000 Bear Stearns employees and BSC shareholders. They are essentially being asked to pay for the government's reputation even though they did nothing wrong. I think the reason why the deal priced so low is that the feds can say, oh, we didn't bail out all the Bear Stearns employees and shareholders on Wall Street, see? see! Just look at how much that Joe Lewis lost!
But how did they choose JP Morgan? The media is saying that they were the only bank that healthy enough and interested in doing a deal, and I'm no expert but that seems somewhat true. But what about Bear Stearns' biggest competitor: Goldman Sachs, seems like they wouldn't mind buying their beleaguered competitor. Or Bank of America, Morgan Stanley, Merrill Lynch? It just doesn't add up. But the feds have achevied a bailout with the appearance of no bailout which will generally be good for the dollar and for the stock market. The hidden message is that BSC got robbed to pay JP Morgan shareholders. What a huge deal for them, I wonder how many JPM shares Hank Paulson and the Bush family have?
I do suspect this gives a decent chance for a bounce in the mortgage and housing market which would obviously be good for the broader market. And with the fed cutting tomorrow, I certainly would not be short any financials for a week or so.
And we'll see but I doubt this will change one bit the direction of the US economy. Ultimately this is yet another boost for the wealthy on the backs of the average American. You can bet food and energy prices continues their march higher...
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