Bear Stearns (BSC) Held Together by JPMorgan (JPM)
The stock market is rewarding JPMorgan (JPM) for its proposal to acquire Bear Stearns (BSC). The struggling financial giant was facing near-collapse, thanks to all of the risky loans it invested in and the subprime writedowns it had to take. BSC, however, is not faring so well, since the JPMorgan deal only values the stock at $2 a share. ABC News reports on the Bear Stearns and JPMogan deal:
A complete collapse of Bear Stearns might have completely crushed the already-dwindling confidence in the global financial system, which has frozen up after last year’s collapse of the subprime mortgage market.
Now, there is a measure of hope for the financial sector, especially in light of the fact that there are still some companies out there that are solvent enough to pick up some of the slakc.
In an effort to move things along, federal regulators hastily approved the move last night in what is seen as an agreement of historic proportions. The Fed said that it would guarantee up to $30 billion of the deal, making it practically risk free for JPMorgan.
This came on the heels of an emergency Fed rate cut Friday afternoon, a likely Fed rate cut tomorrow at the Fed’s regular meeting.
It is apparent that the financial sector remains in serious trouble on the stock market. While there may be some good bargains out there, it is difficult to tell which are bargain — and which are simply basement. If Bear Stearns, one of the most venerable stocks out there, can crash and burn so badly, there is no telling who will be next to succumb to the bloodbath.
Before picking stocks right now, it is a good idea to review your holdings and to do some research. Only buy new stocks if you feel that they have a reasonable chance of recovery when this mess is all over. See what you have, and decide whether you need to reallocate. This is especially important if you will be retiring in the next five years or so.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional.
Tags: BSC, JPM, Bear Stearns JPMorgan, subprime writedowns,
stock investing blog, stock market, emergency Fed rate cut
March 17th, 2008 at 10:44 am
[…] financial institutions is taking a dive today as it is pulled from the brink of total collapse. JPMorgan has agreed to purchase Bear Stearns (for a paltry $2 a share — but, face it, at this point that might be considered generous) in […]
March 24th, 2008 at 11:33 am
[…] (JPM) is increasing the amount of the offer it made last week to purchase Bear Stearns (BSC). Originally JPM offered $2 a share for BSC stock. After last week’s rally by the financial sector, though, and the fact that many BSC […]
May 15th, 2008 at 11:12 am
[…] be transferring to the bailout of investment banks and investors who made poor decisions (remember Bear Stearns and the bailout putting taxpayers on the […]
May 26th, 2008 at 9:15 am
[…] So, when choosing financial sector stocks, make sure that you choose carefully. And remember: venerable institutions are not completely immune. Look what happened to Bear Stearns. […]
June 6th, 2008 at 9:58 pm
[…] financial institutions is taking a dive today as it is pulled from the brink of total collapse. JPMorgan has agreed to purchase Bear Stearns (for a paltry $2 a share — but, face it, at this point that might be considered generous) in […]
June 6th, 2008 at 10:27 pm
[…] be transferring to the bailout of investment banks and investors who made poor decisions (remember Bear Stearns and the bailout putting taxpayers on the […]
September 6th, 2008 at 9:49 am
[…] is to rescue both government sponsored enterprises before things get as dire as they were as Bear Stearns collapsed. And the government also considers Fannie and Freddie as vital to keeping the mortgage […]
September 6th, 2008 at 10:47 am
[…] or envisioned. This is to be a straight government takeover, not a government brokered deal like Bear Stearns. Indeed, the New York Times explains the differences between the two cases: With Bear Stearns, the […]