Continued Fun at Bear Stearns & Related News / Opinions

[TJ_98370]

What I'm getting from the recent Bear Stearns media coverage is that it appears that no-one really seems to know (except insiders) how to quantify or qualify what is going on with these hedge funds and that fact is scaring people. In other words, the interested investing public have the following type questions: Will this problem be contained to Bear Stearns hedge funds only? Which banks are involved with financing these type funds and at what risk? What are the "real" quality rating and value of the assets in these type funds? Can a sudden devaluation be expected with other CDO bonds, given the subprime market collapse?



Is the Bear Stearns hedge fund debacle the subprime Chernobyl we all feared or are carrot-juice-swigging financial journalists blowing the whole thing out of proportion? This is what we don't know: how large exactly are these two Bear-managed funds? What type of subprime assets are in them? And how leveraged are the funds? By using a hedge fund structure to invest in subprime assets, Bear has created a Dick Cheney-like "cone of silence" to prevent the outside world from knowing what exactly is going on at the two hedge funds....
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[TJ_98370]

June 25 (Bloomberg) -- Financial shares tumbled on concern losses tied to subprime mortgages will deepen, extending the U.S. stock market's worst weekly decline since March.

Bear Stearns Cos. slid to its lowest in nine months after a Merrill Lynch & Co. analyst said the second-biggest U.S. underwriter of mortgage bonds may have to salvage another hedge fund. A decline in sales of previously owned homes sent shares of builders to their lowest since 2004.

Mounting speculation that hedge fund losses are greater than forecast erased a rally that lifted the Dow Jones Industrial Average 129 points. Moody's Corp., whose founder created credit ratings, dropped the most in the Standard & Poor's 500 Index.

``People are concerned that there's some great, big unknowable out there,'' said Brian Barish, president of Denver- based Cambiar Investors, which manages $10 billion. ``There's nothing the financial markets dislike more than uncertainty. That's why the market is jittery.'' ....
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[TJ_98370]

[Jazen]

I agree TJ, and get this...

Oh no, not another one!

[Jazen]

Mr. Jubak breaks it down quite well.
Look out below!

[Eleua]

Nobody is concerned about the hole in the roof until it starts to rain.

[TJ_98370]

[TJ_98370]

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Gross said there are hundreds of billions of dollars of subprime residential mortgage-backed securities (RMBS), derivatives on subprime RMBS and collateralized debt obligations (CDOs) that buy subprime RMBS and/or the derivatives on the RMBS -- all of which he considers "toxic waste."

"Whether or not they're in CDOs or Bear Stearns hedge funds matter only to the extent of the timing of the unwind," said Gross, who manages the $104 billion Pimco Total Return Fund. "To death and taxes you can add this to your list of inevitabilities: the subprime crisis is not an isolated event and it won't be contained by a few days of headlines in The New York Times."....



June 26 (Bloomberg) -- Holders of investment-grade portions of collateralized debt obligations may lose all of their money in the securities, which have been dressed up in ``six-inch hooker heels,'' according to Bill Gross, manager of the world's biggest bond fund.

Subprime mortgage bonds made up about $100 billion of the $375 billion of CDOs sold in the U.S. in 2006, Moody's Investors Service and Morgan Stanley data show. CDO's are created by bankers and money managers who bundle together securities and divide them into slices with credit ratings as high as AAA from Standard & Poor's and Aaa by Moody's.
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...``AAA? You were wooed Mr. Moody's and Mr. Poor's by the makeup, those six-inch hooker heels and a `tramp stamp,''' Gross said in his monthly commentary posted on Pimco's Web site today. ``Many of these good looking girls are not high-class assets worth 100 cents on the dollar.''...

....``Those that point to a crisis averted and a return to normalcy are really looking for contagion in all the wrong places,'' Gross said. ``Because the problem lies not in a Bear Stearns hedge fund that can be papered over with 100 cents on the dollar marks. The flaw resides in the Summerlin suburbs of Las Vegas, Nevada, in the extended city limits of Chicago headed west towards Rockford and yes, the naked -- and empty -- rows of multistoried condos in Miami.''...
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[TJ_98370]

Interesting site provides links to some historical news articles regarding Bear Stearns and CDO's. These articles make Bear look dirty..........



Bear tracks are all over the place. No, I am not talking about the stock market I am talking about Bear Stearns and CDOs. It's time for some history as the Bear Stearns tracks go back a long time....
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[TJ_98370]

June 26 (Bloomberg) -- Bear Stearns Cos. said it will put up $1.6 billion to rescue one of its money-losing hedge funds, half as much as it offered last week, after raising additional money through asset sales.
The money will help prop up the Bear Stearns High-Grade Structured Credit Strategies Fund, the New York-based firm said in a statement today.

Bear Stearns, the biggest U.S. broker to hedge funds, said June 22 it would assume as much as $3.2 billion of loans to prevent lenders from liquidating assets. The reduction means New York-based Bear Stearns won't have to tie up as much capital to salvage the fund from bad bets on subprime mortgage bonds and collateralized debt obligations.....

.....The company is continuing to work with the creditors of the sister fund, called High-Grade Structured Credit Strategies Enhanced Leverage Fund, to ``facilitate an orderly de-leveraging of the fund in the marketplace,'' Bear Stearns said. That fund has $1.2 billion of outstanding loans, it said.



June 26 (Bloomberg) -- Bear Stearns Cos. probably won't bail out the second of its money-losing hedge funds, Merrill Lynch & Co. analyst Guy Moszkowski said, a day after sounding the alarm that investors couldn't ``rule out'' such a rescue.

The Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund owes creditors about $1 billion, two people with knowledge of the situation said yesterday. That compares with the $7 billion that Moszkowski estimated when he said in a note yesterday that Bear Stearns might have to ``stump up'' to keep the fund from being liquidated....

So what happened? Where did they find $6 billion? Did they magically pump up the value of the existing assets in this fund by $6 billion?

... ``We are increasingly comfortable that the fund will not receive a credit extension from Bear Stearns,'' Moszkowski, who rates Bear Stearns a ``buy,'' wrote in a note to clients today.
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[TJ_98370]

A really good article about credit rating agencies analyses of CDO's....


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[deejayoh]

[Jazen]

So without claiming the obvious, I think this is the catalyst that will begin the whole downward spiral.

[deejayoh]

It looks like its killing the ability to finance these LBOs that have been annonunced. Couple of those tip over, and there goes the stock market.

I'm not sure how much more damage it does to housing. These are 2006 loans making their way through the snake - causing indigestion for the bankers now. But even if the market's appetite for CDO's is down, given that home sales are down by 10%, supply and demand for them might not be that far out of balance.

[TJ_98370]