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Quote of the Day

“If we were long $60 billion in mortgages and had $40 billion in short positions, I assumed our exposure was $20 billion. But what if you were long apples and short oranges? Then we weren’t necessarily hedged at all, were we? That, alas, to a painful extent proved to be the case.”

-Alan Greenberg, CEO of Bearn Stearns which on this day in 2008 was sold to J.P Morgan for $2 a share. Source: The Rise and Fall of Bear Stearns

March 16th – This Day in Stock Market History

March 16th, 1999 – The Dow Jones Industrial Average crosses 10,000 for the first time.

However, it would not close there. The market would tease traders for 2 weeks before finally closing above 10,000 on March 29th.

Chart from macrotrends
Chart from macrotrends

The Dow’s run up to 10,000 would come on the tail end of what many consider the greatest bull market of all time. From the early 80’s to the peak of the tech bubble in 2000, the Dow rose from around 800 to over 11,000!

Source: The Market’s Measure

March 16th, 2008 – Bear Stearns is purchased by JP Morgan Chase in an all stock swap worth $2 a share (about $236 million).

The deal valued Bear at less than 7 percent of Bear Stearns’ market value just two days before.

CNBC_coverage
CNBC_coverage2

Bear Stearns’ fall was a shock even to the most experienced on Wall Street. Just one year prior, Bear Stearns’ shares were at $170 per share and was the 5th largest investment bank in the country. Just one week before this deal shares were over $60!

Bear Stearsn Stock Chart

On this day in 2008 (a Monday), Bear Stearns shares traded more than 90% lower than they closed on Friday. Shares of Bear Stearns had fallen 99% in 3 weeks.

Here is how CNBC covered the deal:

The final price for Bear would be raised to $10 per share after it appeared unlikely that shareholders would approve the deal. Regardless, this would be the end for the 85 year old company, which just a year prior was one of the most notable names on Wall Street.

It would be just one of the few casualties of the 2008-2009 financial crisis.

Best March 16th in Dow Jones Industrial Average History

2000 – Up 4.93%, 499.19 points.

Worst March 16th in Dow Jones Industrial Average History

1938 – Down 3.43%, 4.37 points.

Read of The Day

Before 2008, Bear Stearns was one of the most famous, and most admired, investment banks on Wall Street. For decades, the company put up amazing numbers under the leadership of Alan Greenberg who was Bear’s CEO from 1978 to 1993, and Chairman from 1985 to 2001.

The book Memos From the Chairman is a collection of letters that Greenberg sent to his employees over his tenure.

“Many years ago, Where are the Customers’ Yachts?, through a humorous looks at Wall Street, dispensed some of the best investment advice ever written. In this book Ace (Alan Greenberg) has applied the same treatment to managerial advice with equal success.”

– Warren Buffett, 1996, in his forward for ‘Memos From the Chairman’

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