JP Morgan agreed to buy Bear Sterns for 236 million dollars on Sunday. This is 2 dollars a share. Not long ago, it was worth 160 Dollars a share. When the market closed Friday it was at $30. It's a no brainer for JP Morgan because the US Government is essentially guaranteeing Sterns losses. They will redeem these losses in T-Bills. The Fed also lowered the cost of borrowing money another 25 basis points, to 3%. This tells foreign holders of US Treasuries, that they are worthless. It tells the American people, that their dollars, are worthless. Asian markets all lost a few percent of their value again on Monday. Dollars declined against foreign currencies this morning, as well. Bear Sterns owns some very valuable Real Estate. In the end, this will prove to be the best part of the deal for Morgan.
If you are upside down on your mortgage, this is good news. If you can hang on a little longer, your real property will be worth virtually any amount of money, as money becomes just so much paper.
Forget gold. Forget commodities. Buy small rental houses and multiple unit dwellings for as little down as possible. Relax, it's not the end of the World, just the end of the World as we know it. And I feel fine.
It's going to be fun watching the US Markets open in the morning. Many Corporations have extensive assets. These assets have intrinsic worth. This may make them attractive buys. The outlook for profitability may be poor for these same companies, which makes them a sell. The markets are not going to go up or down, as much as begin, very slowly and tortuously, to turn themselves, inside out.
This situation at Bear Stearns is really sad. Imagine how sad you would be if you owned a lot of Bear Stearns stock. Somebody owns it and I would guess some people own a lot of it.
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