As we looked around for reasons to explain the rise in the price of gold and silver this morning in Sydney and Hong Kong we were alerted to this piece of news. Bear Stearns, one of the worlds largest banks, which closed on Friday at $30 per share as been purchased by JPMorgan Chase for just $2.00 per share! How the once mighty have fallen, no wonder gold is on a tear.
According to Yahoo Business who reported that:
“The last-minute buyout was aimed at averting a Bear Stearns bankruptcy and a spreading crisis of confidence in the global financial system.
The Federal Reserve and the U.S. government swiftly approved the all-stock deal, showing the urgency of completing the deal before world markets opened.
The Fed will provide special financing to JPMorgan Chase for the deal, JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of Bear Stearns' less liquid assets. Risky bets on securities tied to subprime mortgages — loans given to customers with poor credit history — crippled Bear Stearns, the nations' fifth-largest investment bank.”
Something else to note:
At almost the same time as the deal for control of Bear Stearns was announced, the Federal Reserve said it approved a cut in its lending rate to banks to 3.25 percent from 3.50 percent and created another lending facility for big investment banks. The central bank's official meeting is on Tuesday. Before the emergency move to lower the discount rate, which is the rate at which banks lend each other money, the Fed was widely expected to again cut its headline rate by as much as a full point to 2 percent.
Well, it looks like our suggestion of a rate cut of 50 basis points may be off the target as these guys are suggesting a full 100 basis points!
Monday is going to be troubled day for the mainstream markets, thankfully we don't have one single bean invested in other sector than the precious metals. Thanks to Daniel for the heads up.
Smile you are a gold bug!
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