Investor Sentiment, Media Hype/Myths

Bye-Bye Bear Stearns

By, 05/30/2008

Story Highlights:

  • Bear Stearns shareholders approved the sale of Bear Stearns to JPMorgan Chase & Co.
  • Back in March, the media predicted Bear Stearns' collapse would shatter investor confidence, but markets have since recovered nicely from March lows.
  • Ignore media sensationalism and instead take heed of broader fundamentals—the yield curve is as steep as it's been, and many sectors of the global economy are booming.


What was deemed a shot-gun wedding has turned out to be quite a ho-hum boardroom ceremony. The hasty engagement of Bear Stearns and JPMorgan Chase & Co. has finally been consummated (so to speak) with a majority of Bear Stearns shareholders approving the sale of Bear.

Back in March, Bear Stearns' sale to JPMorgan was widely perceived to be the first domino to fall in a vast chain of financial failures. Investor confidence was crumbling. The markets were in turmoil. The Street's future looked bleak. Babies were crying. Dogs and cats were living together…mass hysteria!

Yet, here we are in May, wondering what all the fuss was about. The world didn't end, markets have since recovered from March lows and the Bear Stearns saga has finally come to an end:

JPMorgan Closes $2.3 Billion Bear Stearns Deal, Ending an Era
By Elizabeth Hester,

Bear Stearns Shareholders Approve Buyout by J.P. Morgan
By Kate Kelly and Randall Smith, The Wall Street Journal

The media announced the approval of the deal with relatively little fanfare. What was once sensational media fodder has fizzled into a snooze-fest. Financial companies get purchased all the time. Ho-hum. Still, we'd call this event one of the great acquisitions in recent memory: For a mere song, JPMorgan scooped up Bear's plentiful assets (not to mention prime Manhattan real estate).

News stories mentioning the deal gave but brief mention to the shareholders' approval. Instead, attention was heavily bestowed on the more dramatic, fast-paced events in March. The Wall Street Journal prominently featured a three-part, inside perspective of Bear's last days:

Bear Stearns Neared Collapse Twice in Frenzied Last Days
By Kate Kelly, The Wall Street Journal

The imbalance of news attention is an explicit admission yesterday's news is much more compelling than today's. That's very bullish. The truth is 2007 was a mildly up year for stocks, today we're back near breakeven levels for 2008, and somewhere in between we saw some lows. If that's the mark of what some have deemed financial "Armageddon," we're left wondering what those same folks are saying about today's resilience or yesterday's US GDP's upward revision.

Tellingly, the media has continued to stretch for drama, proclaiming Financials' continuing woes:

Economy Loses as Financials Fall off Perch
Mark Gongloff, The Wall Street Journal

It's a common, but incorrect, assumption to extrapolate Financials' problems to the entire economy and stock market. True, the Financials sector is a huge component of US and world stocks by weight, but clearly their slump does not a bear market or recession make. Global stocks' recent recovery—even as Financials lagged—is evidence of such, and all the more reason to maintain a properly diversified and disciplined portfolio strategy.

Less noticed by the media is the fact the yield curve is as steep as it's been for some time, allowing financial institutions to continue capitalizing and engaging in loan activity (vital for economic health), or the fact other sectors across the global economy are still booming.

The task ahead for JPMorgan isn't easy or completely clear-cut, but it is evident the shareholders, the markets and the world have moved on. So it is bye-bye Bear Stearns, and hello bigger JPMorgan. Have fun on the honeymoon. And don't forget to send a postcard.

For more MarketMinder coverage on Bear Stearns and related market news, please see:

• "A Confidence Game," 3/17/2008
• "Whoa-oh, Domino?" 3/18/2008
• "Don't Call It a Bailout," 3/25/2008

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

Click here to rate this article:

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.


Get a weekly roundup of our market insights.Sign up for the MarketMinder email newsletter. Learn more.