Bear Stearns

I hate to start yet another thread on Bear Stearns, but I have a few questions I have not been able to answer. Can someone tell me the specific event that kicked all of this off. Was it a margin call, did they not make a payment. (please explain this slowly for my small brain). It was somewhat of a blur due to the market reaction. Also, could this be considered a black swan, meaning a high sigma event and unexpected. Are the terms of the deal with JP Morgan private or can someone research the terms. Thanks.




"Risk management is a serious business. Accordingly,
the production of a risk ‘measure’ must be subjected to the question ‘how do you know what you claim to know’ – in other words, epistemology."

Taleb

 

bought some April call option:
5 @ 7.5
2 @ 10

This is just pure gambling. Bear stern should fight back before going down.

 

Specific event? Don't think there is one. There are a series of events though.

Greenspan/The Fed keeping rates low to bubble the market - first stocks, then real estate.

Moving the mortgage business outside regulation so it could be "re-imagined" into toxic waste CDO's.

Creating things like SIV's to park them (shades of Enron's "Raptor"!!).

Getting ratings agencies to rate them AAA because they got a cut of the deal in fees.

Booking paper profits which allowed executives to pat themselves on the back and give themselves nice fat bonuses for being so clever.

Shit hitting the fan when economy slowed, people were tapped-out, and bubble popped.

Executives running with their bonus money and laughing all the way to the bank.

Bear Stearns eyebrow deep in toxic waste.

Fed backs JPM to pick up an asset at a bargain-basement price (just like in the Great Depression!) because they are good pals.

 

They were assholes from day one. I think that pretty much sums it up.

Jimmy Caynes' report card from Kindergarten was marked "does not play well with others."

 

You see!!!

http://bigpicture.typepad.com/

Barry says the same thing, he's just long winded. I think, if were to translate his piece into my venacular, it would be something like: "they were assholes".

Wieder Holen Sie

they were assholes.

 

It's not over by a long shot, and no, I did not own, nor was I short, BSC or JPM shares at any time prior to the event.

This deal, for all the talk of it being "done," is so complicated, and so many kinks have to be worked out yet, and so many lawsuits are flying (discovery is a nasty process - I'm sure neither JPM or BSC want to open their books and records to Plaintiffs' lawyers for all the world to see) - people talk about it as a fait accompli, and they don't even realize that JPM has an 'option' to buy up to 20% of BSC shares at 2.33 each, and an 'option' to buy the building BSC owns for 1.1 billion.

They also don't realize that JPM was granted, in a preferential manner, that some other would-be-suitors (and likely might be suitors) will find discriminatory, a 30 billion dollar guarantee covering debts of BSC.

Just wait, watch and see what a huge, incredibly messy, and complicated affair this turns out to be.

There are many competing interests here between creditors, bond holders and shareholders, there is now litigation, and there are definitely other potential suitors of BSC that will want a second crack at this.

 

Two bucks. You can't fuck w/the Govt. Been trying for years.

 

The legal issues are one for the books. At some point their short term financing was pulled which (I assume) made their day to day business operations impossible, without this intervention. Point taken about BSC culture, I have no idea. As I remember Jimmy Cayne wanted to close out on LTCM way back when. Was Bear Stearns involved in the Carlye Hedge fund that blew out?