This Week’s Financial News: Bear Stearns crumbles, mortgages now back the dollar and Visa comes to the rescue
Posted March 22, 2008
"You can just imagine the scene enacted last weekend: Ben Bernanke on his knees begging pal Jamie Dimon, JP Morgan’s CEO, to rescue Bear Stearns from imploding in a panic and creating a blackhole large enough to suck the rest of the U.S.’s banking industry in with it. Jamie agreed to help out his friend with a mere $240 million… because who wouldn’t buy one of the oldest investment firms in America for less than the rent on its office space?" — Stephanie Grimmett
by Stephanie Grimmett
J. Christoph Amberger is probably about 40,000 feet above the Atlantic right now. So he asked me to give you an update on this week’s stories and a preview of what we have coming up on Today’s Financial News. Take a look:
Christoph lost his nickel this week.
In last Saturday’s round up, our intrepid president bet you all that the news would be dominated by the Visa IPO this week. And while it did push its way into the news quite a bit, the IPO lost some of its limelight when Bear Stearns had to sell itself to JP Morgan over the weekend for a pittance.
You can just imagine the scene enacted last weekend: Ben Bernanke on his knees begging pal Jamie Dimon, JP Morgan’s CEO, to rescue Bear Stearns from imploding in a panic and creating a blackhole large enough to suck the rest of the U.S.’s banking industry in with it. Jamie agreed to help out his friend with a mere $240 million… because who wouldn’t buy one of the oldest investment firms in America for less than the rent on its office space? And Bear Stearns stock plummetted from $57 to $5 in a matter of two days.
*** But according to Horacio Marquez, former director of emerging market research for Merrill Lynch and Swiss Bank, the Bear Stearns firesale isn’t as bad as it looks. Horacio told Market Insights host Krista Das that investor shouldn’t be so quick to discount the financial sector for good. Learn when and how to get back into banks in this week’s Market Insights.
After the smoke cleared on Monday, the finance world’s attention did turn back to Visa, with even more hope and anticipation than before. Now Visa had not only the IPO market riding on its shoulders, but also the overall sentiment of Wall Street to bolster with its public offering.
And the company did not disappoint. Visa (V: NYSE) began its career as a publicly traded company with a bang, not a whimper, this week. Visa sold all of its shares, including 40.6 million held in reserve, for a record-breaking total of $19.1 billion.
*** If you decided Visa’s current price, $64 per share, is too rich for your blood or you, like us, don’t believe that following the crowd can ever make you the kind of gains you’re after, but you’re still interested in finding a profit in the Visa IPO, check out a special report compiled by Christoph this week. He gives you three more options to find a way into the Visa phenomenon without buying directly into the company’s shares.
*** Unfortunately, the party may soon be over for credit card issuers like Visa and Mastercard. Andrew Snyder advised Laura Cadden about legislation making the rounds in Washington that could take a huge bite out of Visa and Mastercard’s earnings in the future. Andrew has found a way to profit from the possible new law, and he told Laura all about it in this week’s Smart Trading Action Alert.
*** While investors were watching Visa with bated breath, Peter Schiff was watching the U.S. currency edge ever-closer to hyperinflation. In this week’s Dollar Bear, Peter examined the concept of backing currency with mortgages, an idea that the Fed did not originate, but do we really want to imitate the financial policies that destroyed the economy after the (first) French Revolution?
*** The dollar may slide further and further downhill in coming months, which could make the commodities supercycle even more profitable for those interested in solid (or liquid, or gas) investments. And Laura Cadden discovered a small-cap gem in energy this week. Tests could prove this oil and natural gas company has its hands on a new 168-trillion-cubic-feet deposit of natural gas. And when they do, the stock could skyrocket. If you hurry, you can get into the company before results are announced.
Oh, and don’t miss tomorrow’s special report with Christoph and bestselling business advisor Michael Masterson, who outlines the six steps to keep your business successful and profitable during the recession. If you own a business, or just work for one, Michael’s advice could be invaluable to you in the current economic storm.
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