What is going on at Bear Stearns ?

This is definitely going to be an interesting week for New York and the rest of the world. First the Spitzer scandal and resignation tomorrow with Paterson to take over. Bear Stearns fallout, which opened at $54.27 on Friday and now valued at $2 per share (I walk by that glamorous building on my commute and never conceived it will be in this state), a cloud of doubt looming over Lehman Brothers, Goldman Sachs to report write down of 1.4B later on this week, the once mighty dollar trading below Y100 and with many claiming the FED is constantly behind the wave. This is history in the making. Surely reaffirms that investors are definitely the movers of Wall Street, once your confidence level is below expectation, one is doomed in this business.

Yet, this may be an investment opportunity, probably a good time to re-evaluate my 401K, possibly to more riskier securities and see if the market rewards me in time to come.
 
Actually, this week they will announce 1st Quarter result.
3/18 is GS and Lehman, I think BSC is this week too.
It will be very interesting to see what will happen next.
I think Carlyle Capital will very likely be the next one.
 
Wow Lehman down 34% before market opening. Can only imagine what the day will bring?
 
Satnam said:
Wow Lehman down 34% before market opening. Can only imagine what the day will bring?
Click to expand...

Yes following Moody's credit rating update :

(source:Bloomberg)
Lehman had its long-term credit rating affirmed at A1 by
Moody's Investors Service earlier today. The rating company
lowered its outlook on the company to stable from positive.
 
This should be an interesting week given the recent events. To add to the fun, Friday is equity options expiration and Thursday is index futures and options expiration.
 
Sanket Patel said:
This should be an interesting week given the recent events. To add to the fun, Friday is equity options expiration and Thursday is index futures and options expiration.
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It is not interesting and not fun at all. I heard that many Bear's employees unwound most of their holding on Bear Stearns at paltry 3 or 4 dollars per share on last Friday. One lesson they learnt, is that never holding too many stocks in the compensation package. They might walk away with nothing.

Plus, there is and will continue to be a very tough job market. It definitely is terrible for all the graduating students.
 
BSC cds spread was down at 390s bps level early in the day and now at 320 bps level. Here is one of the many updates from the dealers zipping around.
Code: 
CDS BROKERS, Updated...Massive short covering taking place 
             5yr 
      BSC  300/325 
      GS   215/235 
      LEH  415/440 
      MER  305/330 
      MS   300/325
 
You guys know the saying "a recession is when your neighbor losses his job, but a depression is when you lose yours!"

My partner called me earlier in the day that our futures broker, the largest in the world, MF Global lost about 65% of their value between 11:00 am and 11:30 am..... look at a chart of MF, the stock opened at $16, was about $14 at 11:00 am and traded to $3.64 at about 11:30, ending the day at $6. Now that's a ride...... Thankfully client accounts are segregated!

Even Interactive Brokers, a favorite of mine for obvious reasons, lost over 20% intraday before bouncing to end the day at -15%.

So now, LOL, this looks like a "depression"!
 
GusTsahas said:
You guys know the saying "a recession is when your neighbor losses his job, but a depression is when you lose yours!"

My partner called me earlier in the day that our futures broker, the largest in the world, MF Global lost about 65% of their value between 11:00 am and 11:30 am..... look at a chart of MF, the stock opened at $16, was about $14 at 11:00 am and traded to $3.64 at about 11:30, ending the day at $6. Now that's a ride...... Thankfully client accounts are segregated!

Even Interactive Brokers, a favorite of mine for obvious reasons, lost over 20% intraday before bouncing to end the day at -15%.

So now, LOL, this looks like a "depression"!
Click to expand...
Something that any of you who have margin accounts at your brokers might want to read:
Herb Greenberg » Blog Archive » How to Keep your Investments Safe
 
Bear is a sad story. It has its own quirky culture (all employees wear suit, etc)
I've been inside their headquarter in Midtown during summer of 07 for an interview and at that point, never in 1000 years I would think that 6 months later, Bear Stearns will be bought for a mere 240M.
All the best for all Bear employees.
 
I think close to 1/3 of the Bear stocks are owned by its employees.
I have a drinking buddy who is the MD in Bear. He told me that they are not allow to touch their Bear stocks for the past few weeks. That's sad, basically they are watching a significant part of their hard earned wealth going from $80 to $3 in less than 10 days and they can do nothing but watching the price drop. I don't really think it is a Fed bail out, I rather say it is a Fed funded robbery.

There are rumors about in the 2nd quarter, JPM may cut Bear's work force by as much as 65-70%. I think all JPM wants is Bear's brokerage division and the building.
 
I would be surprised if shareholders will approve this bizarre transaction. Management has a fiduciary responsibility to them. It would take something very compelling in the details, I would think, for everyone to say, "OK, 50 dollars (or whatever) below book is good."

Someone at DealJournal postulated that it's a ruse to buy time. I'd keep that in mind.
 
One other item debated about at my office yesterday is that the crazy sale number could be that the management is trying desperately to get a sell off without a bankruptcy filing in order to preserve the bonuses that were just paid out to the BSC employees. I don’t know how realistic this scenario is but one of the first legal maneuvers of creditors in a bankruptcy is to see what others creditors were paid recently, prior to the bankruptcy, and bring this money back in the available cash pool for a more equitable distribution to all creditors.

If this is a possibility, it will be a cash flow disaster for the employees of BSC given their expected employment outlook and the sale is basically a trade of their last years bonus money for their remaining equity share.

No question that based on the trading yesterday, the market thought JPM got a steal and the BSC got shafted .:wall
 
Price is renegotiated up to 5 dollar and maybe more. I guess there will be more competitive offers showing up after these days' sentiment is over.
 
First Bear Stearns, Carlyle, now Bloomberg reports that Citigroup is cutting jobs. We don't see an end in sight any time.
March 20 (Bloomberg) -- Citigroup Inc. will cut 2,000 more trading and investment-banking jobs as the collapse of the subprime mortgage market puts the biggest U.S. bank on track for its second-straight quarterly loss.
The reductions are in addition to about 4,000 disclosed in January, a person familiar with the plan said. They add up to about 10 percent of the staff in Citigroup's securities division, said the person, who declined to be identified because the bank hasn't formally announced the decision. Most of the cuts will take place by the end of March.
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Same at GS:

March 21 (Bloomberg) -- Goldman Sachs Group Inc. plans to dismiss as much as 15 percent of its workforce in the capital markets and related support departments, the New York Post reported, citing unidentified people familiar with the matter.
The reductions are likely to come in the division that includes investment banking, debt and equity underwriting and merger advice, the newspaper said. Employees were first notified about the staff cuts on Monday, the Post reported.
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