Page 1 of 2 12 LastLast
Results 1 to 15 of 17
  1. #1
    Bench Warmer Achievements:
    Veteran5000 Experience Points

    Join Date
    Mar 2006
    Location
    Waukee
    Posts
    299
    Thumbs Up
    Received: 0
    Given: 0

    Bear Stearns - Wow

    JP Morgan has agreed to buy Bear Stearns for $2/share or about $236 million. This was a company that was worth about $3.5 billion in market cap as of Friday and over $20 billion just over a year ago.

    The Fed also stepped in and provided $30 billion to JP Morgan to cover some of the assets of Bear Stearns as part of the deal. If those assets fall in value, guess who takes the hit, the Fed (your tax dollars).

    It will be interesting to see if the stockholders of Bears Stearns put up a fight. Many have already expressed an opinion that they would get more than $2/share if they went through bankruptcy.



  2. #2
    Legend
    Points: 174,241, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 3.0%
    Achievements:
    SocialVeteran50000 Experience Points
    alaskaguy's Avatar
    Join Date
    Apr 2006
    Posts
    10,204
    Points
    174,241
    Level
    100
    Thumbs Up
    Received: 6
    Given: 1

    Re: Bear Stearns - Wow

    If the company was worth more someone would have bid more. No other bidders offered as much as J.P. Morgan.

    The individuals that approved the transaction for Bear Stearns were the largest shareholders and have the most to risk by not going with the best deal.

    The market for the assets (collateralized debt obligations) that the Federal Reserve has "covered" is illequid. Valuing these assets is rather complex since it depends on default and repayment assumptions of the underlying assets.

    In addition, the Federal Reserve is unlikely to take a loss on the sale of the CDOs. The price a CDO brings at a firesale versus a reasonable marketing time frame should protect the Fed. They can hold the CDOs until more favorable market conditions arise.


    Last edited by alaskaguy; 03-17-2008 at 12:46 AM.
    "If the facts don't fit the theory, change the facts." Albert Einstein
    "If your worried about falling off the bike, you'd never get on" Lance Armstrong
    "Dress cute wherever you go, life is too short to blend in." Paris Hilton
    "Money is one of the greatest instruments of freedom ever invented by man." F.A. Hayek

  3. #3
    Bench Warmer Achievements:
    Veteran5000 Experience Points

    Join Date
    Mar 2006
    Location
    Waukee
    Posts
    299
    Thumbs Up
    Received: 0
    Given: 0

    Re: Bear Stearns - Wow

    Yes, the inability to place a value on collateralized debt obligations leads me to believe that Bear won't be the last to fall. As an investor, it's disheartening to have very little notice that a company of this size is going to take a dive (due to the inability to value these assets). Even the credit rating agencies didn't cut Bear's rating until Bear itself came out and said they were in trouble.

    Yes, it doesn't necessarily mean that the Fed will take a loss, but if I were a betting man I know where I'd put my money.



  4. #4
    Legend
    Points: 174,241, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 3.0%
    Achievements:
    SocialVeteran50000 Experience Points
    alaskaguy's Avatar
    Join Date
    Apr 2006
    Posts
    10,204
    Points
    174,241
    Level
    100
    Thumbs Up
    Received: 6
    Given: 1

    Re: Bear Stearns - Wow

    The rating agencies didn't cut their ratings on CDOs until well after the public discovered the risks.

    Lehman Brothers has significant CDO holdings and many pundits are forecasting that its share price will tumble once it opens for trading on Monday.


    "If the facts don't fit the theory, change the facts." Albert Einstein
    "If your worried about falling off the bike, you'd never get on" Lance Armstrong
    "Dress cute wherever you go, life is too short to blend in." Paris Hilton
    "Money is one of the greatest instruments of freedom ever invented by man." F.A. Hayek

  5. #5
    Legend
    Points: 174,241, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 3.0%
    Achievements:
    SocialVeteran50000 Experience Points
    alaskaguy's Avatar
    Join Date
    Apr 2006
    Posts
    10,204
    Points
    174,241
    Level
    100
    Thumbs Up
    Received: 6
    Given: 1

    Re: Bear Stearns - Wow

    Its difficult to value CDOs that are backed by sub-prime mortgages. The sub-prime market is relatively new. In addition, the nation hasn't encountered a housing market as weak as what is currently being experienced. How do you model something when you do not have any historical information to base your model on? If the real estate market picks up the CDOs backed by subprime mortages would gains substantial value but if the housing market continues to deteriorate or stays the same I would imagine that the values decrease.


    "If the facts don't fit the theory, change the facts." Albert Einstein
    "If your worried about falling off the bike, you'd never get on" Lance Armstrong
    "Dress cute wherever you go, life is too short to blend in." Paris Hilton
    "Money is one of the greatest instruments of freedom ever invented by man." F.A. Hayek

  6. #6
    Hall-Of-Famer
    Points: 76,419, Level: 85
    Level completed: 93%, Points required for next Level: 131
    Overall activity: 1.0%
    Achievements:
    SocialVeteranCreated Album pictures50000 Experience Points
    4429 mcc's Avatar
    Join Date
    Aug 2007
    Location
    Wall Street
    Posts
    4,402
    Points
    76,419
    Level
    85
    Thumbs Up
    Received: 1
    Given: 0

    Re: Bear Stearns - Wow

    Talk about a kick in the nuts...man I think everyone of the employees that own the stock will reject the offer, but it wont help.

    Half of Bear's 14,000 Employees May Lose Their Jobs - Financials * US * News * Story - MSNBC.com



    "I've been at Bear for 11 years and I want to vomit," said a Bear Stearns employee, who described himself as a partner, as he entered the striking seven-year-old octagonal building two blocks from Grand Central Terminal.


    Last edited by 4429 mcc; 03-17-2008 at 03:37 PM. Reason: added more

  7. #7
    Speechless
    Points: 452,425, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 28.0%
    Achievements:
    SocialRecommendation Second ClassVeteran50000 Experience PointsOverdrive
    brianhos's Avatar
    Join Date
    Jun 2006
    Location
    Trenchtown
    Posts
    39,689
    Points
    452,425
    Level
    100
    Thumbs Up
    Received: 249
    Given: 35

    Re: Bear Stearns - Wow

    Quote Originally Posted by 4429 mcc View Post
    Talk about a kick in the nuts...man I think everyone of the employees that own the stock will reject the offer.

    Half of Bear's 14,000 Employees May Lose Their Jobs - Financials * US * News * Story - MSNBC.com



    "I've been at Bear for 11 years and I want to vomit," said a Bear Stearns employee, who described himself as a partner, as he entered the striking seven-year-old octagonal building two blocks from Grand Central Terminal.

    The problem is they built their entire portfollio around poor investments in mortgage backed securities. If the remaining employees/shareholders choose to vote no, then pretty much all of them will lose their jobs as the company goes into chapter 11 or more likely chapter 7.


    They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. - Benjamin Franklin 1775

  8. #8
    Burgermeister!
    Points: 357,423, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 31.0%
    Achievements:
    SocialVeteran50000 Experience Points
    TykeClone's Avatar
    Join Date
    Oct 2006
    Posts
    22,823
    Points
    357,423
    Level
    100
    Thumbs Up
    Received: 230
    Given: 446

    Re: Bear Stearns - Wow

    Quote Originally Posted by brianhos View Post
    The problem is they built their entire portfollio around poor investments in mortgage backed securities. If the remaining employees/shareholders choose to vote no, then pretty much all of them will lose their jobs as the company goes into chapter 11 or more likely chapter 7.
    After the stock market bubble popped in 2001, mortgage backed securities were the place to be - especially if they were Fannie Mae or Freddie Mac securities. These have the implied backing of the federal government and are (were?) generally considered pretty safe.

    The issue with Bear Stearns is that they have a bunch of that paper, but can't move it in order to keep their cash reserves in order. Once that happened, they were DOA.



  9. #9
    Legend
    Points: 174,241, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 3.0%
    Achievements:
    SocialVeteran50000 Experience Points
    alaskaguy's Avatar
    Join Date
    Apr 2006
    Posts
    10,204
    Points
    174,241
    Level
    100
    Thumbs Up
    Received: 6
    Given: 1

    Re: Bear Stearns - Wow

    Quote Originally Posted by TykeClone View Post
    After the stock market bubble popped in 2001, mortgage backed securities were the place to be - especially if they were Fannie Mae or Freddie Mac securities. These have the implied backing of the federal government and are (were?) generally considered pretty safe.

    The issue with Bear Stearns is that they have a bunch of that paper, but can't move it in order to keep their cash reserves in order. Once that happened, they were DOA.
    Default risk of a FNMA, FHLMC, or GNMA is negligible. The market in these securities continues to be brisk.

    The mortgage backed market moved beyond GMMA, FHLMC, and FNMA into CMOs "collateralized mortgage obligations" and mortgage backed bonds in the early 1980's. In addition, subprime loans are packaged into pass-through securities and those pass-through securities are used to create CMOs.

    Bear Stearns had a leadership role in the CMO business. They earned fees from packaging GNMAs, FHLMCs, FNMAs, and other pass-through mortgage securities into CMOs.


    "If the facts don't fit the theory, change the facts." Albert Einstein
    "If your worried about falling off the bike, you'd never get on" Lance Armstrong
    "Dress cute wherever you go, life is too short to blend in." Paris Hilton
    "Money is one of the greatest instruments of freedom ever invented by man." F.A. Hayek

  10. #10
    Hall-Of-Famer
    Points: 65,018, Level: 79
    Level completed: 11%, Points required for next Level: 1,432
    Overall activity: 5.0%
    Achievements:
    SocialVeteran50000 Experience Points
    Cyclonesrule91's Avatar
    Join Date
    Apr 2006
    Location
    Waukee
    Posts
    4,929
    Points
    65,018
    Level
    79
    Thumbs Up
    Received: 10
    Given: 73

    Re: Bear Stearns - Wow

    January 2007 Bear Stearns stock was worth $171/share.
    Fridays stock dropped to a low of $30/share.
    JP Morgan buys Bear Stearns for $2/share.

    That is a major kick in the sack.

    But this was building because it was a series of stupid decisions that brought this company to it's knees. Another Enron in the making?



  11. #11
    Addict
    Points: 143,346, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 12.0%
    Achievements:
    Veteran50000 Experience Points

    Join Date
    Apr 2006
    Posts
    7,727
    Points
    143,346
    Level
    100
    Thumbs Up
    Received: 141
    Given: 212

    Re: Bear Stearns - Wow

    Quote Originally Posted by Cyclonesrule91 View Post
    January 2007 Bear Stearns stock was worth $171/share.
    Fridays stock dropped to a low of $30/share.
    JP Morgan buys Bear Stearns for $2/share.

    That is a major kick in the sack.

    But this was building because it was a series of stupid decisions that brought this company to it's knees. Another Enron in the making?
    COmparing Enron and Bear Stearns has very little merit, if any.


    As far as depth goes though, the combination of White, Woodbury, Olaseni, Basabe, and Uthoff is much better than Niang, Ejim, Edozie, Gibson. Not because of the top 2, but because of the next 2 or 3. -DeanVogs

  12. #12
    Speechless
    Points: 452,425, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 28.0%
    Achievements:
    SocialRecommendation Second ClassVeteran50000 Experience PointsOverdrive
    brianhos's Avatar
    Join Date
    Jun 2006
    Location
    Trenchtown
    Posts
    39,689
    Points
    452,425
    Level
    100
    Thumbs Up
    Received: 249
    Given: 35

    Re: Bear Stearns - Wow

    Quote Originally Posted by Cyclonesrule91 View Post
    January 2007 Bear Stearns stock was worth $171/share.
    Fridays stock dropped to a low of $30/share.
    JP Morgan buys Bear Stearns for $2/share.

    That is a major kick in the sack.

    But this was building because it was a series of stupid decisions that brought this company to it's knees. Another Enron in the making?
    Not a major kick for the shorts that saw it coming.


    They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. - Benjamin Franklin 1775

  13. #13
    Speechless
    Points: 452,425, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 28.0%
    Achievements:
    SocialRecommendation Second ClassVeteran50000 Experience PointsOverdrive
    brianhos's Avatar
    Join Date
    Jun 2006
    Location
    Trenchtown
    Posts
    39,689
    Points
    452,425
    Level
    100
    Thumbs Up
    Received: 249
    Given: 35

    Re: Bear Stearns - Wow

    Quote Originally Posted by Cyclonesrule91 View Post
    January 2007 Bear Stearns stock was worth $171/share.
    Fridays stock dropped to a low of $30/share.
    JP Morgan buys Bear Stearns for $2/share.

    That is a major kick in the sack.

    But this was building because it was a series of stupid decisions that brought this company to it's knees. Another Enron in the making?
    Enron was an entire company built on a sham. Bear Stearns just made some really really really really bad business decisions in the last few years. Stupidity is not malice.


    They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety. - Benjamin Franklin 1775

  14. #14
    Speechless
    Points: 396,504, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 99.9%
    Achievements:
    SocialOverdriveVeteran50000 Experience Points
    Wesley's Avatar
    Join Date
    Apr 2006
    Location
    Omaha
    Posts
    58,198
    Points
    396,504
    Level
    100
    Thumbs Up
    Received: 449
    Given: 312

    Re: Bear Stearns - Wow

    Merrill Lynch is next up. When Carlisle Group collapsed they were levergaed by a factor of 32. They had $800M in real assets and 32 times more under their ownership. Guess that mean when people ask for their uninsured money back at a 3% of previouslyu stated valkue, the investment bank is kaput. I would not recommend anyone having their money in investment banks. Heard the Bear Stearn billionaire (1.5) is now a millionaire (14). One week to lose a personal billion. Buffett would say the guy walked the plank too many times and received his just punishment. Heard a partner who had billions lost a billion also. Paper value can erode fast. The govt has offered up $200B of their govt bonds and they can tap another $500B as collateral to give to the wilting investment banks. Then the govt starts printing more money and down goes the dollar. More pain to come. Hurry up and start the football season.


    Let my Fred's Posse Ride: Georges, Naz, Hogue, Bryce, Nader, Monte, Matt, and McKay.

  15. #15
    Legend
    Points: 174,241, Level: 100
    Level completed: 0%, Points required for next Level: 0
    Overall activity: 3.0%
    Achievements:
    SocialVeteran50000 Experience Points
    alaskaguy's Avatar
    Join Date
    Apr 2006
    Posts
    10,204
    Points
    174,241
    Level
    100
    Thumbs Up
    Received: 6
    Given: 1

    Re: Bear Stearns - Wow

    Quote Originally Posted by brianhos View Post
    Enron was an entire company built on a sham. Bear Stearns just made some really really really really bad business decisions in the last few years. Stupidity is not malice.
    Bear Stearns was a leader in CMOs. The default rates on mortgages are higher than what Bear Stearns had assumed. Had the housing market not cratered, Bear Stearns would be a hero.


    "If the facts don't fit the theory, change the facts." Albert Einstein
    "If your worried about falling off the bike, you'd never get on" Lance Armstrong
    "Dress cute wherever you go, life is too short to blend in." Paris Hilton
    "Money is one of the greatest instruments of freedom ever invented by man." F.A. Hayek

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
  • TV: Fox Sports 1
  • Iowa State vs. Kansas State
  • September 6, 2014
  • 11:00 AM