Bear Stearns Fiasco a Reminder for Us Little Guys

It is getting uglier and uglier. Bear Stearns (BSC) a major Wall Street investment bank nearly filed for bankruptcy this weekend. In a fire sale, J.P. Morgan (JPM) with backing from the Fed bought Bear Stearns for $2 per share. Bear Stearns closed at $30 per share on Friday. A little over a year ago, January 2007, Bear Stearns traded at $170 per share.

It is simply amazing how much wealth is being lost during this “financial mess.” Billionaire investor Joesph Lewis is light about a billion bucks since his ill-timed investment in Bear late last year. That will sting a little, but he will be OK. However, there are many regular folks at Bear Stearns who are in the red zone (0-5 years from retirement). Their retirements have been delayed, significantly modified or simply won’t happen.

The reason for my blog is that I know many people who have substantial assets tied up in their company’s options and stock programs. Like they say, a recession is when your neighbor gets laid off - a depression is when you get laid off. I am not sure what they say when your retirement gets wiped out, but it “ain’t” good.

Comments

[Roger Cuddy]

It's incredibly easy to end up with a large portion of holdings in company stock. It's also incredibly important to make sure you rebalance to get it down to a reasonable amount of your total portfolio. The fiasco at Bear occurred during a black out period (because of the planned earnings announcement) where many employees would have been prohibited from trading it so it's also an example that you can't think you will quickly switch out if it starts heading south.