Sunday, March 16, 2008

Do yourself (and your grandchildren) a favor...

Write down what you are thinking and feeling over the next few days. Seriously.

Astonishing things are happening in America, and it will help to have some notes.
JPMorgan Chase said Sunday it will acquire rival Bear Stearns in a deal valued at $236.2 million -- or $2 a share -- a stunning collapse for one of the world's largest and most venerable investment banks.

The last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system.

The Federal Reserve and the U.S. government swiftly approved the all-stock deal, showing the urgency of completing the deal before world markets opened.

Bear Stearns shares close Friday at $30 a share. At their peak, the shares traded at $159.36.

The Fed will provide special financing to JPMorgan Chase for the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets. Risky bets on securities tied to subprime mortgages -- loans given to customers with poor credit history -- crippled Bear Stearns, the nations' fifth-largest investment bank.

At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent. [More]
This is different from the dot-com bubble, I think. And because this problem is based on housing, it touches far more lives than tech stocks.

Great moments in history doesn't often look like epics at the time. They just look weird. And by the time you realize something BIG has happened, it's over.

Heads up, pilgrims.


Anonymous said...

Scared the crap out of me on Friday - I think this scares me even more! A multi billion $ co going down in a mater of minutes now being sold under the cover of darkness. Does this mean I should sell my corn (if I can find a buyer) or hold on to it?


John Phipps said...


I don't have a clue. As of this writing, e-CBOT doesn't seem worried. My own poorly informed guess is stuff will be worth more, money will be worth less in the near future.

Now if you are still sitting on three crops, fer cryin' out loud sell something!

Otherwise, decide what enough looks like.