JPMorgan acquires troubled Bear Stearns

[BlueBrained]

JPMorgan Chase & Co. said today that it is acquiring troubled Wall Street firm Bear Stearns amid deepening fears that Bear's demise could have sent shockwaves across the already shaky financial markets. The deal is subject to approval by shareholders but has already been approved by the Federal Reserve and other regulators, according to JPMorgan. full story

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[Cavalier79]

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I am not sure that this is over.

JPM on Friday gave BSC a guarantee on certain aspects of their business. If I am a shareholder, why do I not enforce the guarantee and wait for a better offer once the business stabilizes? I think Jamie Dimon, who is no dummy, is trying to get this at fire sale prices. Shoot the real estate they own is worth more than $2.00 a share.

Markets on Monday will be a disaster, though not the apocalypse that I have already read about on a couple of sites. Futures down 210 on the Dow, which is only about 2%. Now if it comes out that BSC has undisclosed liabilities, then watch out.

The good news is that an event like this, the failure of a weak player, tends to be the beginning of the end of the really nasty stuff. Assuming that this is the worst, the market will drop 10% and then begin recovering.

[Schwahalala]

Is that drop 10% from the 10% its already down?

Anyway - this is the first time the federal govt has bailed out a banking firm since.



The Great Depression.

[Cavalier79]

Is that drop 10% from the 10% its already down?

Anyway - this is the first time the federal govt has bailed out a banking firm since.



The Great Depression.

From where it closed Friday. There is a chance that we break 10K and then we won't stop until about 9K.

Technically, the Fed is not bailing out anyone. They are guaranteeing JPM, who in turn is guaranteeing BSC. The bailout occurs only if JPM experiences losses from BSC above agreed upon and already identified levels.

By the way, do you remember the Resolution Trust Company? It de facto bailed out about 75% of the S&L Industry. I remember my dad, who was involved in the business coming home late each night bitching about how RTC was changing the rules to save groups that took unnecessary risks and got burned. Sound familiar?

[Schwahalala]

From where it closed Friday. There is a chance that we break 10K and then we won't stop until about 9K.

Technically, the Fed is not bailing out anyone. They are guaranteeing JPM, who in turn is guaranteeing BSC. The bailout occurs only if JPM experiences losses from BSC above agreed upon and already identified levels.

By the way, do you remember the Resolution Trust Company? It de facto bailed out about 75% of the S&L Industry. I remember my dad, who was involved in the business coming home late each night bitching about how RTC was changing the rules to save groups that took unnecessary risks and got burned. Sound familiar?

Yes it does -

I'm been looking at picking up a foreclosure.

[Cavalier79]

Yes it does -

I'm been looking at picking up a foreclosure.

Be careful and make sure that you thoroughly research the title and liens other than the mortgage. Also, make sure that your title company is rock solid. That way if anything does happen, the insurance will protect you. Finally, be prepared to essentially have to prove you don't need to borrow the money to get the loan. My mortgage broker friends are having a hell of a time placing mortages even for people with great credit and documentation of income.

They can be fantastic investments but not as easy to find good ones as the informercials would have you believe.

[Schwahalala]

Be careful and make sure that you thoroughly research the title and liens other than the mortgage. Also, make sure that your title company is rock solid. That way if anything does happen, the insurance will protect you. Finally, be prepared to essentially have to prove you don't need to borrow the money to get the loan. My mortgage broker friends are having a hell of a time placing mortages even for people with great credit and documentation of income.

They can be fantastic investments but not as easy to find good ones as the informercials would have you believe.

Thanks - I will keep this in mind and pass it on to my sister who's doing the same.

[Jack Daniels]

Asian stocks tumble on Bear Stearns news

SEOUL, South Korea - Asian stocks plunged and the dollar sank Monday after JPMorgan Chase said it would acquire troubled U.S. investment bank Bear Stearns, signaling to investors the depths of the credit crisis.

Oil prices hit a record in Asian trading and U.S. stock index futures were down sharply, suggesting Wall Street would open lower later Monday.

JPMorgan said Sunday it would acquire Bear Stearns for $236.2 million — or $2 a share — in a deal that represents a stunning collapse for one of the world's largest and most venerable investment banks.

The buyout was aimed at averting a bankruptcy and a spreading crisis of confidence in the global financial system.

But to Asian investors the move suggested that the credit problems, triggered by defaults on risky U.S. mortgages, are far from over — and fanned worries that other big American banks could face serious troubles.

"There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.

"Just buying an investment bank does not solve the problem," he said. "Markets are prodding (the U.S. government) to inject public funds."
News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul.

Japan's benchmark 225 index sank 4.5 percent in early afternoon trading to 11,691.00 points, its lowest since July 2005. Hong Kong's Hang Seng index plunged as much as 5.4 percent before trimming some losses to trade at 21,304.38, down 4.2 percent.

Across Asia, all major stock indexes were down, including markets in Australia, China, Indonesia and South Korea.

"We are worried" about what comes next, Shim Jae-youb, a strategist at Meritz Securities in Seoul, said of concerns that other banks may face collapse.

He said investors were on guard ahead of the release of quarterly earnings reports from big U.S. investment banks this week, including Lehman Brothers Holdings Inc., Goldman Sachs Group Inc., and Morgan Stanley. Bear Stearns had been scheduled to report its results Monday, though it wasn't clear if it would go ahead with that plan.

In an extraordinarily rare weekend move, the Federal Reserve took bold action Sunday evening by cutting the discount rate, its lending rate to financial institutions, to 3.25 percent from 3.5 percent, effective immediately. The Fed also created another lending facility for big investment banks to secure short-term loans that would be available to big Wall Street firms on Monday.

The Fed was also widely expected to again cut its headline interest rate by as much as a full percentage point to 2 percent at a regular meeting set for Tuesday.

In currency trading, the dollar plunged to 95.72 yen — its lowest since August 1995 — driven down by a gloomy outlook for the American economy and prospects for lower interest rates. The euro rose to $1.5839.
Oil prices, meanwhile, hit an all-time trading high in Asia as the greenback's tumble and decline in stock markets prompted investors to seek shelter in commodities such as crude oil. Light, sweet crude for April delivery spiked to a record $111.42 a barrel in electronic trading on the New York Mercantile Exchange.

On Friday, U.S. stocks sank after the announcement of a Fed plan in conjunction with JPMorgan to alleviate the liquidity crisis at Bear Stearns touched off concerns about the severity of credit troubles in the world's largest economy. The Dow Jones industrial average fell 194.65, or 1.60 percent, to 11,951.09.


Wall Street appeared poised for another drop when trading resumed Monday morning. Dow index futures were down 232 points, or 1.9 percent, to 11,750, while the Standard & Poor's 500 index was down 21.7 points or 1.65 percent, to 1,291.6.
__ Associated Press writers Chisaki Watanabe in Tokyo, Gillian Wong in Singapore and Anthony Deutsch in Jakarta contributed to this report.

http://news.yahoo.com/s/ap/20080317/ap_on_bi_ge/world_markets

[Airshark]

You don't hit a bottom until the last bull gives up. We're just about there.

[Cavalier79]

You don't hit a bottom until the last bull gives up. We're just about there.

Sure sounds like Cramer is giving up and he might be the last bull. I think he is overstating the case. In '87 we had a much larger % one day drop and we survived.

JPMorgan's Bid Is No Remedy By Jim Cramer RealMoney.com Columnist 3/16/2008 8:38 PM EDT Click here for more stories by Jim Cramer

Try Jim Cramer's Action Alerts PLUS CLICK HERE NOW

Not a market-soothing bid. I am talking about the absurd $2-a-share bid for Bear Stearns (BSC - commentary - Cramer's Take) that says Bear was insolvent and its portfolio not only worthless but perhaps worth minus-$30 billion, the amount that JPMorgan Chase (JPM - commentary - Cramer's Take) is protected for.

Put aside that it is amazing that the board of Bear would ever agree to this. Put aside that it does seem that JPMorgan Chase is stealing the company.
What do people in the market think when the fifth-largest brokerage is worth $50 on Thursday and $2 on Monday? I think they think that everything is collapsing and they should pull out every penny they have.
I think they think of calamity.
Everything is finally coming to a head. Every financial is on the line. The credit markets will be preserved, but the equity of so many financial companies now can be considered wiped out if Bear is this bad. It's amazing to me that fewer than 300,000 home defaults can do this, but that's what I figured could happen when I said the Fed knew nothing.
All of this could have been so easily avoided.
Now it is, indeed, too late.
Tomorrow there will be vast bargains created among the companies that do not need the credit markets.
It could be 1987 all over again: a lack of confidence in the machines and the credit markets, not in Main Street businesses.
Opportunity and catastrophe all rolled into one. Oh, and one last point: I hope Jimmy Cayne, the chairman of Bear Stearns, had a good bridge game at the Detroit championships. It sure was costly. At the time of publication, Cramer had no position in stocks mentioned.

[Jack Daniels]

...

[Schwahalala]

I guess we should prepare for the worst today.

Someone hold me.

[Iowa_Card]

I guess we should prepare for the worst today.

Someone hold me.

Just get trashed and go to the St. Patties Day parade. Plenty of folks there willing to hold you.

[Moon Man]

Hank Paulson says we aren't heading for a recession and that the market will rebound.

Why worry?

Moon

[Schwahalala]

Now the market is down about 180 at the bell.