Sunday, March 16, 2008
Talk about the bottom falling out. Today, it was announced that JP Morgan Chase will acquire Bear Stearns for $2 a share. This is seemingly a bargain basement price because Bear closed Friday at $30. It traded as high as $170 a little over a year ago. You couple this with the unusual move by the Fed to cut a key interest rate on Sunday, and you have some very serious developments.
This portends very bad news for the markets tomorrow. While the market has been down this year, their always seems to be a rally that quickly follows it. This tends to demonstrate indecision on the markets part as people keep looking for the bottom.
What these two events demonstrates is that, despite all the doom and gloom surrounding the market these days, the problems facing the markets are even more serious than previously thought. JP Morgan would not be able to Buy Bear Stearns at such a low price if things were not dire for that company. The Fed would not step in on a SUNDAY if they didn't think something really bad was about to happen on Monday.
So what to do? I still am going to do nothing because I've been setting up for this eventuality for a while. I will have some stocks that get beaten up, I'll probably even lose a lot of money in the next few days, but I'm not one to panic even if I think the market could easily go down another 10-15% if not more.
For those without the same stomach that I have, get out while you can. As some of my readers have commented, it has been an up and down ride, but it's about to go straight down for a while.