Two Dollars/share, or an “Orderly Liquidation” ?

Absolutely stunning, current stock holders including a lot of BSC employees virtually wiped out… things at BSC must have been far worse than we imagined; but then that could be said about a lot of things the past 8 years.

It’s no different than an old fashioned shut down of a failed S&L. The Gov comes in, shuts it down, finds somebody to take over. Gov eats the losses ($30 bn) in this case. Management and shareholders are effectively wiped out. Nothing to see here just move along

Barry,

The fed gave JPM a $30b dollar non-recourse loan. They paid $260m for BCS. Yes. It look like a bailout.

files.shareholder.com/downloads/ONE/260969463x0x180609/8cbd90fb-0f16-4238-a908-e0a07a904682/JPM_Bear%20FINAL.pdf

What are any of the IB’s worth if BSC is worth $2/share? UBS $3? MER $4?, LEH $5?, MS $6?, GS $7?

What are margin calls going to be like tomorrow?

Do bond holders get mad whole? What is the status of CDS holder on BSC. They’re screwed too. Your bearish bet against the company loses? And your bullish bet on the common loses?

If their HQ building was worth $1.2B they were over $1B NW plus whatever they valued the Bear Trademark….truly remarkable!

Im so pissed I sold almost all my SKF & EEV! Though I did put that $$$ into more gold.

Is this the beginning? The end? The beginning of the end OR the end of the beginning?
Hmmmmmmmmmmmmmm!

I agree with the margin call concern. What will the first big bank to go?

hey, moubarak just give orders that army will help to reduce the queues for bread in Egypt. aftermexican fajitas crisis, egyptian bread crisis…

Paying $2/sh for that overleveraged house of cards was a gift to current shareholders. Who knows what liabilities JP has just assumed?

Jim Cayne is probably through his second bottle of Scotch about now….It’s gotta be awful to watch most of your net worth evaporate over 3 days.

Re: Looking into put buying….

The one guy who would is stuck in his apartment dealing with this “client 9” situation. Hahah This is so amusing.

WIll the magic hand close us green tomorrow????

A couple random thoughts:

1) Isn’t the street supposed to go into a buying frenzy after M&A activity? (I kid… I kid…)

2) Wow Meredith Whitney was right again.

3) Is LEH next?

Hey Phil – get your own blog if you have so much to say – but then again, none of it is your own words – spare us please

What about some of the big players who came in within the last couple of months?

Do they take the Bear board out for a walk amongst the fishes? :)

As in, were they misled too?

The real beauty is that this event will make it harder for all the others to raise money and to garner credibility.

May 17, 2007

The subprime mess is grave but largely contained, said Federal Reserve Chairman Ben Bernanke Thursday, in a speech before the Federal Reserve Bank of Chicago. While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S. economy, he said. The speech was the Chairman’s most comprehensive on the subprime mortgage issue to date.

“Given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited,” Bernanke said.

March 16, 2008

“I continue to believe the troubles in the subprime sector on the broader housing market will likely be limited to every bank and neighborhood in the country. So, unless you have a savings account or you own a home, you should be just fine.”

Regards,
George

Cayne is into second bag of the “good stuff” not the second bottle of scotch!!
He will have plenty of time for bridge playing now.

Jesus! another one who put a stop-loss order at 29.50 and believes it will be executed!!
Who are these people, how did they even make money to lose it in the stock market??!!

Don’t get me wrong I got wiped out twice, both in 2000-2001 (bottom fishing) then in 2004 (greedy bets on chtr options after quadrupling on chtr stocks), I always saw them as a very expensive tuition.

There are no seminars, classes, tutors exist that can teach you like getting your ass-kicked by the market.

Looking back to those two lessons, I learned a great deal…Will I pay for any more expensive lessons? I hope not, but greed and fear have their ways of sneaking into you and getting the better of you so, now at least I am “trying” to recognize them as they approach me…

I got on the computer about 9:30 est and the futures are already green. I take it that they were red initially, but the magic hand has propped them up. I still can’t believe it. How can Bear Sterns be assuring everyone that things were well under control only 3 days ago and go into a weekend and emerge practically bankrupt? Will shareholders be able to sue the company (or its new owner, JPMorgan)? Or will the congress pass a bill to give immunity to these corporate crooks in the name of “handling the financial crisis?” I don’t have a position in any financials, but curious how the Fed is throwing billions of taxpayer money to bail out banks without finding any of those executives criminally culpable for leading us to this situation.

Nevermind, I got the green quotes from Globex flash quotes page. CNN Money, however, has futures running deep in the red. I’m assuming CNN Money is accurate as it is in line with what folks have observed above.

Of all the crazy developments that have transpired since the credit crunch hit in the summer, today’s Bears Stearns announcement is the most frightening. If the 5th largest brokerage firm, that recently had a market value of 17 Billion is being “sold” (actually liquidated) for 250M it begs the following question- what are the numerous other walking wounded financial companies worth?

Two Dollars! I want my two dollars!

http://www.killerclips.com/clip.php?id=71&qid=626

Credit spreads are bound to explode – the 6-month T-bill will drop below 1% – how can Fannie Mae and Freddie Mac fade that action?

They are both leveraged higher than any of the investment banks.

Madam Wu? Line 1. It’s Paulson, again. Shall I tell him you’re not in?

BRING IT ON! Truly a bunch of dead-enders are attacking the average folks around the world now. Just Pathetic.

This marks the end of blind-ism and an era of mild depression for bankers/HFs/PE guys.

The good news is some of these rocket scientists and quant head PhDs will start looking for a real job.

Another good news – we end the week on a positive note – Good Friday!

US losing confidence vote as investors flee

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml

Can I get three woots for SDS and gold???

Woot!
Woot!
Woot!

Anyone seen cinefoz? :D

anon: with exports our only real saving grace, propping up the dollar seems almost suicidal. As per Krugman, “if a weak dollar wasn’t helping net exports, we’d be in much worse shape than we are. Of course, others — like the Europeans and the Japanese — aren’t so happy about the dollar’s fall. But for our purposes, the $1.55 euro is about the only thing we’ve got going for us. ”

Conditions are building for a sea-change.

Sea-Change One. 1968 to 1982 witnessed sideways US retrenchment. Failure in Vietnam led to national retrenchment. The USSR expanded in Asia and Central America. Senator Church throttled the CIA. OPEC in ’72 strangled the world economy. Oil prices jumped. The Great Society spending under Johnson, Nixon, Carter combined with high oil drove inflation and a broken economy. Because we were overspending and devaluing the dollar, the French demanded the gold backing our dollar (Breton Woods agreement). Nixon closed the gold window and took the dollar off any gold support. The stock market went backwards for 14 years and gold jumped to $850 from about $45. In 1980 we had 16% interest rates, 7-8% unemployment, 6% inflation. The misery index of 16+8+6 doomed Carter.

Sea-Change Two. 1982 to 2000 witnessed the 20th century peak of US power under Reagan, Clinton, Bush. Reagan gets credit for two things he did not do. First Fed Chairman Paul Volker jacked up interest rates to 16% to choke out inflation and defended the dollar. He got a recession, reduced inflation, and a stronger dollar. It was an adult decision that is not in vogue. The Fed then steadily reduced interest rates from about 1984 to 2002. Secondly, Big Oil and technology, spurred by the market prices, found new oil production and broke the OPEC choke hold. The oil price crashed in ’84 and housing prices crashed in TX in the late ‘80s. One in three houses went unsold all over Houston. California killed mass transit and accelerated freeway building to celebrate the new boom and cheap oil. Low energy costs, low inflation, low taxes, high innovation led to economic growth. On the political front, Reagan cut taxes, and did not cut spending. Clinton and Gingrich together, restrained spending, helped reform welfare, supported free trade and accidentally benefited from the Steve Jobs, Bill Gates PC revolution and the DOD/university internet revolution. By 2000 inflation was under control and gold was back to $250. Commodities were literally dirt cheap. But the foundation was built on the sand of increasing debt.

Lurking in the background, from 1968 to 2006 was a revolution in the financial markets, much of it good. But Wall Street and Main Street took on ever more debt, and the Political Class led the way. Federal Debt mounted to, $9 Trillion, and Federal promises, another $45 Trillion. The dollar was unfettered by gold and the Fed could create more currency for every crisis and at every turn. Also the US and the EU drove expansion of global markets and the little Asian tigers began to stir.

Exogenous events: BAM! NASDAQ bubble bursts. BAM! 9/11. War. Recession. Cut taxes, increase spending, slash interest rates. Crawl out of a recession. Create a housing bubble, and way overspend.

Sea-Change Three. The global economy wakes up to free trade, the internet, and realizes that the world currency, the US Dollar, has no foundation. More importantly all commodities are priced in the USD, which are being created at every whim of the Fed, with the urging of Congress. The MidEast, Asia, and BRIC save and the US borrows. Commodities and gold rise as traders price in devalued dollar. The Fed will not increase interest rates to defend the dollar and must print more dollars at each collapse on Wall Street. The Political class promises to add more benefits to the $45 Trillion already promised but un-financed. Today, the government has already spent $30,000 per person it does not have ($9 Trillion) and promises to spend another $150,000 per person ( $45 Trillion) it does not have. And the candidates are fighting over how to further increase the spending and raise tax rates.

What will be the Sea-change three impact: Here it gets murkey
– The Republicans may be thrown out, for a time.
– But will the Dems understand the underlying issues and Econ 101
– Housing prices will return to historical averages. Three times average household income, if we avoid Deep recession
– The Fed will be forced to raise interest rates to put a patch on the dollar, deepening the recession
– The G10 will move to put currencies back on some modified gold standard
– The Dow Jones index/Gold index hit 1:1 in 1981. One ounce would buy the DJ Index. It rose to about 40 to 1 in 1999. It is at 12 to 1 now. Expect it to go to 3 to 1. Dow Jones 9,000 / Gold $3,000. The Dow drops another 25%, Gold triples.

As Bush said Friday, “We’re in a rough patch. I believe a meeting og Bear’s stockholders w/ Bush present might be truly called a rough patch.

1) Am I to believe that buying Bear for $2 instead of letting them go BK will avert a crisis of confidence????

2) The situation is so bad, the Fed cannot wait until Tuesday to cut the discount rate?

3) I was looking forward to Bear’s conference call tomorrow…I guess we won’t hear “great quarter guys” from the analysts.

Guess I picked the wrong week to give up amphetamines.

I told you guys last week that I was conducting a global margin call…hope you took note. JP Morgan buying Bear is funny…JP may be getting a call too after I examine their $20 Trillion derivative book…Ben himself will have to print that money up for me.

OMG. Bye Bye capitalism! Hello fascism.

Fortunately, this is a Goldilocks economy. I know it is because some guy on CNBC commercial keeps telling me it is.

Finally the veil is pierced on the ‘too big to fail’ meme. Whatever other shops are in deep do-do (Lehman, BoA, et al.) are going to see a massive repricing of risk in their common equity now that we know that while the FED will do whatever it can to preserve the stability of the banking system, the bailouts will not extend to the common shareholders of the institutions that took on too much risk.

For me, that was the biggest thing holding me back from having larger short positions but I think it is now relatively safe to march the DOW down below 10,000. Will pour my BSC profits tomorrow into LEH and BAC unless they already open down 20% or more.
FXP looks good too as China is still way way overvalued if this continues to play out.

Circuit breaker day??

let’s close that italics tag. I’m also willing to bet that the answer is “never.” But I’d like confirmation…

and, what’s to stop someone from bidding $5? the sneaking suspicion that even $2 is about $3 too much. I think bear is underwater already, and that not even a fire sale could bring their accounts out of the red.

The funny thing is, I’ve heard rumors that JPM is in the same situation.

This entry is to end the italics that somebody forgot to shut off!

No, whipsaw, but it was beautiful the way you fell on the sword! Will you be my broker? lol.

Recession or depression? I say depression. Anyone else want to weigh in?

Tell me you can’t see this tomorrow…Dow down 700 points…rallies to down 600…Erin Burnett gushes “market is definitely off its worst levels of the day!!”

Depression? Well, the NYTimesseems to have “weighed in” and their headline now reads:
Fed Acts to Rescue Financial Markets
Since this now goes beyond BSC, I’d say you can’t get much heavier than that.
Depression it is.

LOL’r from the Times story:
In a highly unusual maneuver, Fed officials said they would minimize the central bank’s own risk by taking direct control over Bear Stearns’s huge portfolio of financial assets.

For a little gallows humor: http://lolfed.com/

But will the Dems understand the underlying issues and Econ 101.

_____

At this point, the Republicans look like grade school drop-outs. Total and absolute repudiation of their economic philosophy is happening. Any leadership at all would be an improvement.

Our nation’s balance sheet looks like someone took a bank ledger and sh– all over it.

I keep having this vision of an army of press corps members crowded into the Bear Stearns lobby and someone says, “We need to get some pictures.”

Makes me wonder who got the Monet.

“At this point, the Republicans look like grade school drop-outs. Total and absolute repudiation of their economic philosophy is happening. Any leadership at all would be an improvement.”

you’d be surprised. As i posted a few days back, the dreaming tools are more loyal to their misconceptions than post WWII Nazis.
I’ve seen them post, with NO sense of irony, how if the Dems take control in ’08 (as expected) their reckless Liberal spending will destroy the economy. lol

There will be no repudiation for neo-ons and their unpleasant ilk. After all, W wasn’t a “real” conservative ya know. He was a LIBERAL in conservative clothing!!! (never mind that we had 4 years of solid/total Republican (politburo) control.

i hate the bastards.

and now it’s there (once again) for all to see….”Meltdown” IS Republican rule.

WSJ article says $30 B financing is such that Fed will bear the loss, not JPM, if BSC’s “less liquid” assets go belly up.

This means that this is a taxpayer funded bail-out/guarantee. It’s the Resolution Trust Corporation without calling it that.

As for domestic financials, in my opinion, T Rowe Price (TROW) is the best. $ O long term debt, current ratio of 3. Yes, I own shares.

“Serious question…whay doesn’t CNBC run this programming every night? It is CNBC World…regular CNBC, but with twice the IQ and cool accents.”

Dee, I too, am a fan. The guests on CNBC World to be quite insightful and blunt compared to the fluff on CNBC U.S.

“So that’s a short on LEH?”

yup.

and a short on the Republican party ;)

At this point, the Republicans look like grade school drop-outs. Total and absolute repudiation of their economic philosophy is happening. Any leadership at all would be an improvement.
—

Yup. The keystone of the Republican brand had been that Republicans will at least turn a penny back and forth before spending it, because “it’s not the government’s money.”

That’s now been blown to hell.

Markets going up tomorrow, big time, too much negativism. Contrarians, put your bull caps on!

I’m sure he’s making tons of money on his longs anyway.

Oh wait.

Carlyle Capital, the used condom for Carlyle Group’s radioactive Liar-level mortgage-f–k holdings, wadded up and IPO’d off the books, announced tonight it’s walking away from $22B in debt securities held by Deutsche Bank and JPMorgan, making this day the first $40B loss in a single day that the Fed has ever taken, (that we know of anyway), 20x Silverado S&L,
then who shows up with his TGH, but McCain,
“100 years, a 1000 years, a 1,000,000 years!”

Dear Mr. Ritholz,

Will you be attending this conference on March 19th.?
Transocean Inc. to Present At the Bear Stearns 2008 Global Oil and Gas Conference.

Would be great to get a firsthand update.

maybe JP Morgan’s building is even nicer!

Obama will save us. He’ll reappoint Volcker. I’m sure of it.

“America, we know this is year of the rat, but you sell two buck bear, we say no more Chinese soup for you!”

On a more serious note, Cramer wrote Wednesday “Come on Bears! We really need the bears to kill this rally here”. I mention this not to be a Cramer-basher, but because Cramer’s words are a symptom. I don’t know how it’s all going to end, but any reasonable person can see that we are on the edge of potential disaster. But are people truly puking stocks and running for the hills? No, they are trading every bounce, looking for upside in every Fed and government news and if realmoney.com is any indicator market participants are comparing every new daily disaster to previous meltdowns for signs of a bottom. And so Cramer’s bring ‘em on is another sign of the complacency that comes from living too long in a bubble.

One last thought.

Taking the NYSE Exchange public a while back was a decision made with great thought and debate by market insiders. It looks like their view into the future was correct. They lost the US retail investor in 2000/2001 and now they have lost the rest of the world. It will come back over time and a lot of money will still be made; but, it will take years to straighten up this mess and restore any kind of confidence in the market.

Thinking about a $60 BSC at the open last Friday morning and what has happened since can knot your stomach if you think about the fact somebody took that trade.

rj: sure, the new Japan, without the fiscal responsibility and savings!

Japan fiscal responsibility? Isn’t their debt/GDP ratio 160%?

Obviously rules are changing daily but what happened to shareholder approval? And what does that make this transaction in literal terms besides a bailout?

“The Argentina experience is another model, and probably more likely.

But….the US isn’t a country that’s as likely to be stuffed down as Argentina.”

——

Our debts are dollar denominated. We can crank the printing press and pay off every public and private creditor tomorrow. While the damage to economy would be substantial, we’re not Argentina.

Hat-tip to sadlyno.com for the A-Rod note.

The BSC ordeal was a complete joke, and we haven’t seen the last of this mess I can assure you.