It's obvious now the the initial demise of bear stearns was caused by conjecture and rumor. Isnt there a significant possibility that these rumors were in fact the orchestration of a bear raid by hedge funds and the like? If so I think the regulatory bodies and american people will demand more regulation for hedge funds who obviously wield enough power to bring a corporate giant like bear stearns down in just a few days. Not to mention that fact that there is no more uptick rule. Am i way off base here? if im not is there a way we can trade (and make money off of) the fact that regulation and possible investigation of hedge funds and like are imminent? Just some thoughts.
If you believe BSC's failure was caused by "external" factors beyond its control, then you must be a naive college student. Until you can acknowledge that the failure was brought about by their own "internal" stupidity, you'll waste your time blaming others for your shortcomings.
I'm not sure how you made the jump from BSC's shortcomings to mine, but anyways...I'm not in college. I'm 20 and I'm a real estate developer in CO. Am i naive? Maybe. Lets assume for a second that you are right. BSC's was too heavily exposed to defaulting sub-prime loans and was headed for BK no matter what. Ok i can buy that. But you have to understand BSC had ALOT of cash in hand earlier on in that week. Do you really think that investors in BSC all decided at one time "hey BSC is going under I'm going to take my cash out" all at the same time for no reason? They were GIVEN a reason, which at the time wasn't true. Whether or not BSC was going to tank bc of sub-prime loans is not what i have a problem with. I have a problem with the fact that some people somewhere decided to start spreading rumors about BSC's shortage of liquidity..which obviously wasnt true until said investors started believe those rumors, removed there cash until there actually was a liquidity crisis at BSC. There was a run on this bank caused by collusion and rumors, if you dont believe that then you simply don't know the truth. Did BSC have it coming? Maybe so. Someone made money off of the steep decline of BSC and i have to guess those same people had a hand in the rumors that caused it.
Which came first? The "rumors" of illiquidity OR the actual realization that things were worse than they appeared and then lenders withdrew credit from BSC? You're on the right track in being able to articulate that this incident didn't happen out of nowhere. It had been simmering for a long time. Focus on that part of it instead of the "victimization" aspect of it.
Rumors are a time honored way of moving price the way you want it to move, but to make them work you have to have access to the media or insiders. The Investment banks have this access. But no rumor of ill will can stick for very long to a financially sound institution. Rumor alone, can not bring down an institution such as Bear Stearns. Wall Street is like a giant shark tank waiting for the first sight of blood. Once blood is sighted, rumors are simply one of the many tools of the investment banker's arsenal used to facilitate the kill.
Once again I'm not saying BSC didn't have this coming. The rumor was about illiquidity not about things being worse than they appeared to be. Thats why the Alan Schwartz came on CNBC and said there was no liquidity crisis etc. I dont think BSC was a victim per se b/c of there exposure to the sub-prime market, but i DO think that the stock was manipulated by people and maybe hedge funds spreading false rumors which led to the abrupt drop in the stock from which they no doubt booked large profits. The stock manipulation is my issue with this. I simply don't think it could have happened so quickly if there werent outsiders who wanted the stock to drop. I think BCS was ripe for and maybe even deserved a run, and hedge funds probably shorted the hell out of it and made a killing.
It did, but why be so concerned about "why"? Concentrate on how to make money from it. That's "why" you're in the market, isn't it? Panic spreads quickly. Confidence spreads slowly. You're wasting time and effort being concerned about the "reasons", whether true or false, for the collapse.
The answer is not very complicated. He either was shielded from their liquidity problems or he wasn't telling the truth. Do you really think their liquidity was all peachy until the rumors? I mean, we are talking about 3 days here and the company goes under. An 80 year old company. They all are downplaying their liquidity problems.... LEH did it *after* BSC went down, and then days later diluted existing shareholders with an offering to raise capital. I'm shorting these guys with all I've got. I may turn out to be wrong because the market decides to go up, but I will never think that my decision wasn't based on sound analysis of the current state of the financial markets. --Relleum
Good point. I guess panic is something we can always count on, as well as greed...if we could only figure out how to trade those! haha No doubt. I'm short all the financials as well. Have taken a hit in the past few days, but i believe we will ultimately get paid off.