Bear Stearns RIP 1923-2008
This evening (3/16/08) it is being reported that JPMorgan will be purchasing the struggling investment bank for $2 a share. Yes, that is correct I did not forget a digit, the purchase price was $2 when this stock was trading in excess of $150 a share this time last year. Absolutely shocking to see by far one of the, if no the, largest fallout from the current credit crisis we are experiencing. I will have more thoughts on this tomorrow as the details of the deal are unveiled, but needless to say JPMorgan is buying this company at a fire sale price considering the price represents only 1/4 the value of the building they own and operate out of.Â
2 thoughts on “Bear Stearns RIP 1923-2008”
Yes this is insane. What is going on here?
Has everyone been in this much panic that Bear Sterns needs to be purchased for $2 a share?
I think there comes a point where the people that are involved in the mass selling needed to be re-evaluated for insanity. Not that I’m complaining..this will make me a lot of money for value investors.
If you look at the entire history of the markets, it’s impossible to predict an exact bottom. That is why Buffet is buying in now when he is guaranteed an upside. That guarantee is what is important. Even during the Great Depression (and we are far from that now), if you had bought into the down market you would have made a killing. Even after years and years of seeing the same pattern over and over again, why is everyone still panicking? This mob mentality is what makes absolutely no sense.
Although readers of this site probably do not subscribe to the Random Walk Theory, if you look at the data itâ€™s impossible to dispute that even financial experts with years of education and training fail here. It’s that panic that will cause them to lose their shirts. In just a year or two there will be masses of people who felt sorry for over reacting here. Unless Iâ€™m wrong â€“ please let me know because Iâ€™m beginning to feel insane keeping this optimistic outlook. Yet Buffet did say when it comes to good companies..itâ€™s to our advantage when they go down in price.
Bear Stearns isn’t dead, at least for JP Morgan it isn’t. Whether or not the price is about 10$ a share, Bear Stearns might not even have positive equity. The company is so leveraged that one bad quarter of profits and a %5 mark down of its assets and a %5 mark up of its liabilities could easily wipe out its 12 billion in equity. This makes Bear Stearns risky for new buyers. Perhaps JP Morgan knows something I don’t.