The markets got hammered at the opening on the news that JP Morgan had bought Bear Stearns, they are off their lows for the moment but the DJI hit a low of 11756 and the futures hit 11671 before rebounding, Gold hit a record of $1030 an ounce but is currently trading at $1006. People are running for the Hills. it will be interesting to see what comes out this week with the FOMC statement on the 18th.Already the Fed has cut the lending rate for institutions from 3.5% to 3.25%. This increases the likelihood of another large cut at the next Fed meeting there is some talk of a full 1%-that to me really smacks of panic .It is also reported in the UK Sunday Telegraph that Goldman Sachs will report a $3 billion write down when they report on Tuesday, so it seems even the previously untouchable Goldman have got their fingers burnt as well. Unfortunately I think there is a way to go with this before we see the bottom, but only time will tell.
Precious Metals and Commodities, it is becoming a mantra but there is nowhere else(apart from Cash) that looks likely to be reasonable in the next 12-18mths until the stock market has dealt with all the issues and found a bottom.
On a slightly lighter note I found this article on another blog, and found it amusing but also very telling about the state of the Financial Institutions, it is worth noting that not that long ago Bebo the social networking site was sold for $850 million -more than 3 times what Bear Stearns was deemed to be worth. Interestingly the Fed has also underwritten the purchase of Bear Stearns, so similarly to the debacle in the UK of Northern Rock it is the American Taxpayers that are in hock for the approx. $30billion of "Toxic Waste " that has caused the decline of Bear Stearns, when you consider back in September Bear Stearns was trading for around $100 that is one hell of a discount .
Things you can buy for $2:
- 2 limes
- 1 organic avocado
- 15% of a drink at a bar
- A pound (sterling)
- A day’s worth of labour from a farmer in the Indian countryside
- Nothing at a strip club
- A payoff of that persistent newspaper boy who wants his $2
- 2.3 cheeseburgers from McDonald’s
- Medicine for an African child for a whole month
- Oh yeah and these guys….
Amazing Bear Stearns (NYSE: BSC) Fact: Their building is worth 3x more than what their equity was sold for.