What is going on at Bear Stearns ?

Nahed

Nahed
The problem is that nobody wants to trade with them anymore they lost clients confidence...they are loosing their clients...I don't see an upside fot BSC unless JP decides to buy it.
 

alain

Older and Wiser
The problem is that nobody wants to trade with them anymore they lost clients confidence...they are loosing their clients...I don't see an upside fot BSC unless JP decides to buy it.
we were speculating the same thing... and it will be cheap (few cents on the dollar).
 

Andy Nguyen

Member
Let me repost this statement again
"Bear Stearns's balance sheet, liquidity and capital remain strong,'' Chief Executive Officer Alan Schwartz said in the company's statement. Alan ``Ace'' Greenberg, the former Bear Stearns chief executive officer and current board member, told CNBC that the liquidity rumors were "totally ridiculous.''

So everything just happened in 1 day ????
 

alain

Older and Wiser
Let me repost this statement again
"Bear Stearns's balance sheet, liquidity and capital remain strong,'' Chief Executive Officer Alan Schwartz said in the company's statement. Alan ``Ace'' Greenberg, the former Bear Stearns chief executive officer and current board member, told CNBC that the liquidity rumors were "totally ridiculous.''

So everything just happened in 1 day ????
not one day... OVERNIGHT!!! :yeahright:
 

Nahed

Nahed
Let me repost this statement again
"Bear Stearns's balance sheet, liquidity and capital remain strong,'' Chief Executive Officer Alan Schwartz said in the company's statement. Alan ``Ace'' Greenberg, the former Bear Stearns chief executive officer and current board member, told CNBC that the liquidity rumors were "totally ridiculous.''

So everything just happened in 1 day ????
either he didn't know what he was talking about, which is a little bit scary or he knew and didn't want to give negative comments that would harm the stock price.
In both cases ==> he does nothing to boost the market confidence...
I'm trying to understand why the S&P 500 is down again...The market reacts on speculations, rumours etcc...Some banks might have the same problem as BSC but It is just a SPECULATION or they MAY not....I don't know little bit confused..
==>I think that the 200 b$ is just like inflating a balloon with a hole in it ?
 

Nahed

Nahed
Note : I think that the S&P500 might delete BSC from the index ( bsc s weight is 6 bps of the SPX ) which
should push the price lower since indexers will have to sell all the bsc s positions.....
 

Andy Nguyen

Member
Bear conference call will be at 12:30PM. Look forward to hearing what the CEO gotta say now.

Side note from credit view
Counterparty Risk
Default swaps offer a synthetic means of assuming or managing credit risk. The
risk profile is, however, more complex than positioning a cash bond where
repayment is dependent only on the performance of an underlying bond. With a
CDS, the contractual arrangement is with the swap counterparty rather than the
underlying credit. Thus, the protection buyer is exposed not only to the default
risk of the Reference Entity but also to the ability of the counterparty to make
good under the default swap.
A loss due to counterparty risk would occur if following a Credit Event, the counterparty also defaulted – thus correlation of credit risk is central to this joint event equation. The higher the correlation of default risks the greater the risk for the protection buyer. Thus, for example buying protection on an Italian bank from another Italian bank should be more risky than buying the protection from a similarly rated U.S. institution. Counterparty risk is discussed in more detail in Volume 1, Chapter 10. As the protection buyer also assumes the counterparty risk of the seller, this will tend to reduce the premium it is willing to pay and therefore tighten the basis.
 

kean

Mathematics Student
Sub-prime is not so much an issue now. Please do not forget there are other problems in this areas:

1. Mortgage- backed securities..still unknown
2. Principal loan caught up with sub-prime ...soon will get exposed

Market will have to shoot down sharply. No one can help.
 

Sanket Patel

i do stuff
Bush speaking to New York Econonimc Club

On a side note, anyone watch Bush speaking to the New York Economic Club? I love how he didn't answer any of the questions - skirted everything.

As for Bear, I'm looking forward to the conference call. But one thing I don't understand and this was pointed out on CNBC - the U.S stock market has a cap. of ~20 trillion. Bear accounts for a rather negligible portion, 4 billion. Seems to be a bit of a over-reaction. But I suppose the Bear situation isn't exactly helping an already jittery market.
 

Satnam

Member
And we thought 570 bps is bad for BSC.
Here is an update from dealer this morning. This is 5 year CDS spread. BSC jumps 100+ bps since yesterday.
Code:
      **Banks***                     ***Brokers*** 
  BAC     155/165    +15          BSC     705/735      +105 
   C      235/245    +15          GS      240/250      +25 
  WB      300/320    +25          LEH     405/425      +25 
  WFC     160/170    +15          MER     310/330      +25 
  WM      635/655    -10          MS      275/295      +15 
  COF     405/425    +10 
  COF(F)  495/515    +10             ***Agencies*** 
  HSBC(F) 330/350    +15          FNMA     82/87       + 5 
  AXP     255/265    +15          FRE      83/88       + 5 
  CIT      18/20
Besides from Bear, one other company that stands out from this data is LEH, and they are down 10% today. Anybody with any insights????
 

Andy Nguyen

Member
http://www.quantnet.com/forum/member.php?u=5297@Sanket Patel,
We watched the Bush talk. He only pushed for the NAFTA thing and declined to answer questions. We laughed when he answered every questions by talking about 9/11, national security. Typical politician :D
As commented on CNBC, market is trading on sentiments and Fed bailing out of a top 5 BB is unprecedented.

@Satnam
I think Lehman has a very similar business structure to Bear, with FI their main cash machine.

I think we will see things move up a bit after the end of the day.
 

Sanket Patel

i do stuff
Bush speaking to New York Econonimc Club

... and what did you want him to say?
I wasn't looking for specific responses. I just found it amusing that when asked about the rising gold prices, inflationary pressures, falling dollar, etc - he decided to talk about New Yorkers driving battery operated cars.
 

alain

Older and Wiser
I wasn't looking for specific responses. I just found it amusing that when asked about the rising gold prices, inflationary pressures, falling dollar, etc - he decided to talk about New Yorkers driving battery operated cars.
There is nothing he could have said that could change what it's going on.

BTW, we were talking about Lehman as well.
 

alain

Older and Wiser
I wasn't looking for specific responses. I just found it amusing that when asked about the rising gold prices, inflationary pressures, falling dollar, etc - he decided to talk about New Yorkers driving battery operated cars.
There is nothing he could have said that could've changed what it's going on.

BTW, we were talking about Lehman as well.
 

Andy Nguyen

Member
The CEO is on the phone now.

Just saw this at another forum
A broker just called me, at 15.30 ZULU time, and asked me if I'd sell 1 year protection on Bear Stears for 1300.
I passed.
He said "yeah, no one will touch the trade....were stuck with the other leg...."
I didn't ask size.
My broker on BMBG Chat: "I just heard it [1 yr protection] traded up at 2000bps"
They already start a Lehman bust discussion.

On a lighter note

 

Sanket Patel

i do stuff
BSC problem escalating

I know this might seem a bit out there....

Considering Bear is a broker/dealer for many large investors and hedge funds. What are the chances that the Bear situation, for whatever reason, escalates in near future causing those investors and funds to get entwined. Such a situation seems faintly reminiscent LTCM.
 
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