Monday, March 17, 2008

Wow! What a day! Just last night, sitting down around a dinner with friends, we were discussing how terrible the dollar is, which is my excuse for not going to Europe this year. Today gold jumped again, higher than $1,030, and oil is at $111. The Fed cut rates another 25 bps and three month T-Bills are returning less than 1%. They are barely worth the paper they are printed on. Europe is looking further and further out of reach for a poor old American.

Bear Sterns news is bad for everyone, including European and Asian markets today, but I hope that we will get some more information about the deal in the coming days. For those of you who don't know (or care), JPM is buying 140 million shares of Bear Stearns stock for about $2 each, a whole $28 dollars less than it closed at on Friday, and about $120 less than the 52 week high, through a stock swap. The Fed will be covering JPM on the liquidity because of the risk of buying the CDO heavy, leveraged-to-their-tits Bear with only two days of due diligence. On one hand, that's crazy, and clearly there was some reason why JPM is taking on the risk, right? I mean, either they know something that makes the deal profitable or there was some pushing from the Fed. On the other hand, they only paid $250 million for a firm doing about $2bn in profit per year, plus the building downtown worth an estimated $1.2bn. Freels? If the Fed had helped me I'd have bought it, too.

In any case, lets hope that we won't be wallpapering our living rooms with greenbacks and JP Morgan stock certificates in the coming months, because I'm totes gettin yelled at if I try to put Europe off another year.


Anonymous farmfresh said...

i smell litigation all over this bear sterns thing. a company that strongly held by it's employees and it gets dumped over the weekend at an 85% discount... the fed is covering $30B in liquidity, and they can't, at the very least, offer the vested employees a buyout at the friday close price? that's only about $1.5B by my rough calculations. i just don't see JPM getting out of this cleanly. i wouldn't even be surprised if the shareholders voted down the buyout in favor of bankruptcy.

4:30 PM  
Blogger Ben Shepard said...

Total agreement. This is def not over.

Also, did you see Jim Kramer's advice last Tuesday?

A person called into Jim Cramer's Mad Money show and asked, "Should I be worried about Bear Stearns? In terms of liquidity and get my money out of there? --Peter

Cramer said: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”

5:51 PM  
Blogger Ben Shepard said...

Er, Cramer.

8:50 PM  

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