Bear and Bernanke
While things have by no means calmed down in our capital markets, I have a bit of a break and am going to take Ferris Bueller’s advice, look around a little, otherwise I might miss something.
At about 06:15 on March 14 we got a heads up from one of our brokers (thanks Kelly) that Bear Stearns was effectively getting a bail-out from the Federal Reserve. Pretty big news, you’d think? Yeah, me too… Me and the rest of the crew at work were kind of expecting Armageddon; usually events like this send everyone into a flurry almost instantaneously. But in this case, nothing really happened for about 15 minutes. The intra-day chart here is Bear Stearns’ stock price for the day. You can see (might have to maximize the plot) that the price actually went up for a few minutes after the news of the Fed bail-out.
But, that 15 minutes or so between the news and 06:30 was the quiet before the storm. Check out the plots below of the Swiss Franc and Japanese Yen, talk about mayhem. The Franc broke parity for the first time ever and 100 Yen was worth more than a US dollar for the first time since 1995 or so (I think).
Bear Stearns’ stock teeter-tottered around for the rest of the day, nothing more like the initial price shock after the news. After a weekend of the Fed and the rest of The Street trying to broker a deal to prevent one of the world’s biggest investment banks becoming insolvent, the infamous $2.00 per share announcement came from JP Morgan Chase. The opening of BSC on Monday morning, now that was something I don’t think any of us expected (on the right). The opening price of Bear Stearns on that Monday marked a reduction in market capitalization of almost $9.5 billion since February 28, just two weeks before. A company worth over $10 billion at the end of February opened up with a market cap of around $600 million, a few hundred million less than the value of the new Bear Stearns headquarters in Manhattan! Think there might be some skeletons in this closet?!
Just so I can remember all this to tell my kids one day…