Okay, so now we know the latest shoe to drop. One of the oldest firms on Wall Street got caught by a lack of cash, and now it is no more. Bear Stearns is being acquired by JP Morgan for the princely sum of $2 per share. They’ll play the Good Samaritan and assume all of Bear’s liabilities as well.
When will all this bad news end? When the financial markets finish de-leveraging and stabilize. Right now there’s a lot of borrowing and buying that has to be undone. There are people with cash out there, but they’re on the sidelines, and they’re not opening their checkbooks until things get really cheap. How cheap? It depends on the asset, but from my experience, not a lot further down from here.
Someone once said that the time to buy is when the blood is running in the streets. With Bear Stearns the latest casualty, that time just got a little closer.
Douglas R. Tengdin, CFA
Chief Investment Officer
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