I’m gonna give you a quote I just read on Money.com. You just let it sink in for a minute (emphasis mine):
“At $2 a share, you might as well just let them go bankrupt,” said Fred J. Wallace, a Houston retiree who owns 1,500 Bear Stearns shares, which he bought last month. Wallace, 62 years old, said he bought the stock with his retirement money when he heard a Bear Stearns executive on television saying the company was sound financially. “If I get contacted for a class-action (lawsuit), I’m interested in being involved,” he said.
Ahem. Let me get this straight, Mr. Fred J. Wallace, you bought 1500 shares of a company’s stock because said company had an executive who said the company was sound financially?!? Faulkner couldn’t come up with words to express my level of amazement. People in Houston must be bloody idiots after Enron and now this guy. Wow. Just Wow. You bought a stock that had to have been priced in the $80s that was so overexposed to the subprime market, any idiot with a stock screener could have found it, and you now want to join a class action?
We’re in for some bad times economically speaking, folks. This is the exact kind of crap that happened during the last bubble when Enron and Tyco and Global Crossing blew up in our faces. It’s going to get uglier and IMNSHO, it’s going to be a long recovery. I really hope I’m wrong but when you have average investors like Fred J. Wallace showing up in the articles, I don’t think I can be. I’m no expert but I can tell you that I sure wouldn’t want to be too exposed to the market over the next 12–18 months.
You missed the whole point! Investors can not rely on CEO’s or Government officials to act in the best interest of shareholders. Enron was suppose to be an exception. I bought the stock at $32, the day after the CEO said they had no liquidty problems. It collapsed 2 days later. I can take my losses as long as I am dealing with honorable people. Don’t try to use this as part of your bubble theory, the air was already let out. If the CEO had any balls, he would have not taken that rip off deal. Don’t you think the FEDs would have come up with something else rather than let the Bear open in default. The only idiots are people that come with theories not based on facts.
First of all, let me say thanks for dropping in on my little corner of the interweb. It’s amazing how small the world is getting through technological advancements. Second, sorry for calling you an idiot. This being the internet, I tend to get carried away with the rhetoric on occasion.
All that said, until you can reconcile your this statement “Investors can not rely on CEO’s or Government officials to act in the best interest of shareholders” with this one “I bought the stock at $32, the day after the CEO said they had no liquidty (sic) problems”, then I’m going to stand by the gist of my original statement which was buying Bear Stearns stock on the sole recommendation of the CEO (in effect) was a dumb idea.
Look, CEOs are going to always do whatever it takes to make them look smart and their companies look profitable. It has nothing to do with honor. It’s your job as an investor to evaluate the soundness of the companies fundamentals and the future possibilities for success of said business based on said fundamentals. Read Benjamin Graham.
On top of all that, I’m not completely sure you understand how companies are bought by other companies but the CEO has little or nothing to do with it. I’m sorry you lost all that money but joining a class action because the CEO lied to you and then JP Morgan chase got Bear at a fire sale price isn’t going to help you long term in making money in the market.
Maybe you’re arguing that the government should get involved and make CEOs tell the truth but Sarbanes-Oxley was supposed to do that and you sure know how that’s working out. The government does not have a great track record of managing much of anything, CEOs of large companies included. If that’s what you’re suing for, I wish you the best of luck but I’m not going to hold my breath waiting on your success.
All of this is just my two cents (greatly overvalued at that) but there you have it. Hopefully you weren’t just googling yourself and doing a drive-by.