29 May 2008: Bear Stearns shareholders accept their fate
On May 29, 2008 Bear Stearns shareholders approved the sale of the 85-year-old investment bank to JPMorgan. Little more than a year earlier the stock had traded above $150. In March, JPMorgan, backed by the Fed, first offered $2 a share, then raised it to about $10 after shareholders revolted. It was a sign of things to come for Wall Street that year.
The lesson: Leverage and short-term funding can erase a century of reputation in a matter of days.
What it meant for investors
$1,000 in Bear Stearns at the start of 2008 → $114 today, vs $4,626 in the S&P 500.
We start the clock at the start of 2008, the year it happened. That is a loss of $886, while a plain index fund over the same years made $3,626.
What Bear Stearns teaches: Investment banks run on confidence and short-term funding; when either disappears, even a firm worth billions on Friday can be worth almost nothing by Monday.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2008 | $88.00 | $114 | $4,626 |
| 2010 | $10.00 | $1,000 | $6,071 |
| 2012 | $10.00 | $1,000 | $5,312 |
green = beat the S&P 500 · red = lost money
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Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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