.. No bloodbath! Dow down 51 points.
.. Yahoo Finance
...As evidenced by a 1.2% sell-off in the more heavily weighted Financial sector, the resurfacing of the subprime fallout lending further evidence that the apparent meltdown is likely to become an industry wide crisis took an added toll on sentiment. Bear Stearns (BSC) reportedly telling investors that its two troubled hedge funds are nearly worthless prompted analyst downgrades on five investment banks (BSC, JPM, MS, GS, and LEH). JP Morgan Chase (JPM) was already weak after saying credit-loss provisions in Q2 tripled....
..
I'm sorry, but is there something wrong with my math here?
Total amount invested by fund A: ~$11.5B Percent rumored to be lost in internet blogs including this one: 70% ("can't sell for 30 cents on the dollar" - check the beginning of this thread) Implied loss: $8 billion Actual loss: $600 million Multiple by which internet rumor-mongering overstated the impact: 13X
So now we see the extent of the debacle, and you are acting like its the end of the world, when the actual impact was oh, lets see - 7.5% of what was thrown out earlier?
Is it just me, or have you all completely lost perspective? If Jim Cramer turned bearish, I now know what he would sound like.
I know, you are tired of listening about the whole subprime issue and you wish it to go away. Now, it will.
Along with a lot more
It is time for rejoicing.
No, I am just saying you should get your facts straight. Compared to the stories that were going around, these bankers pulled a rabbit out of their hat. The total potential exposure for the first fund was $11 billion. They lost $600 million. You guys don't seem to get that. The impact was a fraction of what was predicted, yet the tone of this thread is "told you so". It's simply not true.
It
Wait a minute dude, when did I ever present facts? I just said the end is coming, as in the end of the subprime fiasco, as I have stated again. Get your friggin' facts straight and get off the soap box. Prickhole.
Wait a minute dude, when did I ever present facts? I just said the end is coming, as in the end of the subprime fiasco, as I have stated again. Get your friggin' facts straight and get off the soap box. Prickhole.
Wait a minute dude, when did I ever present facts? I just said the end is coming, as in the end of the subprime fiasco, as I have stated again. Get your friggin' facts straight and get off the soap box. Prickhole.
Pot, meet kettle. LMAO
Yes, it is pretty funny how stupid you are, but really to be rolling on the floor about it, well, you aren't that stupid if it's any consolation.
Wow, this conversation has really taken a lovely turn. How about losing attitude and sticking with reason and logic. Being an ass just detracts from your point. :roll:
Wow, this conversation has really taken a lovely turn. How about losing attitude and sticking with reason and logic. Being an ass just detracts from your point. :roll:
Linked article (bolded paragraph) supports your earlier statements. I am still somewhat skeptical about CDO sales covering the majority of their loans though, especially if there was a margin call involved. Am I missing something here?
NEW YORK (MarketWatch) -- The demise of two hedge funds run by Bear Stearns & Cos. reminds me of one of those stories about another bear, the one who is shot by a gun and keeps charging.
In this case, Jimmy Cayne doesn't seem to realize his firm may be mortally wounded.
Cayne needs a refresher in the facts. At the end of 2006, these whiz-bang hedge funds were worth more than $1.5 billion. Today, High Grade Structured Credit Strategies and High Grade Structured Credit Strategies Enhanced Leverage Fund aren't even worth those nickel names Bear Stearns bought for them.
And you only thought your 401(k) did that.
Bear's CEO is most likely comforting himself with the fact Bear isn't going to take a financial bath on those funds.
The $1.6 billion bailout package Bear put up is almost certain to be paid back. The lenders who backed the funds initially have been paid back, too. The investors - Bear's clients - on the other hand, will get a "thank you" and "come again soon." ....
..
Linked article (bolded paragraph) supports your earlier statements. I am still somewhat skeptical about CDO sales covering the majority of their loans though, especially if there was a margin call involved. Am I missing something here?
I think this post from minyanville might clear it up.
1. Worthless!
Bear Stearns (BSC) yesterday afternoon told investors in two troubled hedge funds it manages that one fund was worthless and the other had only about nine cents remaining for every dollar invested following bad bets on the US subprime mortgage market.
How fast can something like this happen?
Snap your fingers. The two Bear Stearns hedge funds, worth an estimated $1.5 billion at the end of last year, were reporting stellar returns even as recently as this spring.
Now, the net value of assets in in the High-Grade Structured Credit Strategies Enhanced Leverage Fund are zero, according to the Wall Street Journal.
And the net value of assets in its other, larger, less-leveraged fund lost about 91%.
The net-asset value represents the value of an investor's holdings after debts have been paid.
Meanwhile, Bear Stearns, which last month said it would offer a $1.6 billion loan to shore up the more "conservative" of the two funds and help it sell its assets, nonchalantly reported yesterday that about $1.4 billion of the loan remains untapped, the New York Times said.
So, in other words, it appears Bear Sterns was able to either sell or take down internally all the holdings of the funds at a level that wipes out customers, but leaves the firm fairly well covered. Sweet!
.... it appears Bear Sterns was able to either sell or take down internally all the holdings of the funds at a level that wipes out customers, but leaves the firm fairly well covered. Sweet!
..
The phrase "...or take down internally.." implies that Bear may have used some of their own funds to retire the debt?
As hedge funds are famously non-transparent, it's possible that the public will ever know exactly how Bear paid off those loans.
..
Bear Stearns Cos. said late Thursday that it seized assets from its High-Grade Structured Credit Strategies Fund after the hedge fund suffered huge losses in mortgage-backed securities and structured- finance markets.
The bank lent $1.6 billion to the hedge fund earlier this month after the losses. On Thursday Bear said that $1.3 billion of the loan remained.
Bear took control of the assets because the fund couldn't meet its margin obligations as part of the loan agreement, the bank explained.
"We do not anticipate any material change in financial exposure to Bear Stearns as a result of this action," the company said in a statement.
Bear (BSC) will continue to liquidate the fund in an "orderly" way and will be able to set up hedges to protect against any further declines in the value of the portfolio, if appropriate, the bank added.
The High-Grade fund lost 91% of its value in the first half of 2007, while a smaller, more leveraged fund called the High-Grade Structured Credit Strategies Enhanced Leveraged Fund was totally wiped out, Bear told clients last week. The two funds had about $1.6 billion in assets at one time, but through leverage they controlled more than $10 billion in mortgage securities and credit-related securities.
The crisis has dented the reputation of Bear Stearns, which has been known for its expertise in the mortgage market. Other hedge funds have also blamed the two Bear funds for triggering broader losses and margin calls in other parts of the asset-backed securities market.
..
Bear Stearns Cos., the manager of two hedge funds that collapsed last month, blocked investors from pulling money out of a third fund as losses in the credit markets expand beyond securities related to subprime mortgages.
The Bear Stearns Asset-Backed Securities Fund had less than 0.5 percent of its $900 million of assets in securities linked to subprime loans, spokesman Russell Sherman said in an interview yesterday. Even so, investors concerned about losses sought to withdraw their money, he said.
Shares of New York-based Bear Stearns had their biggest drop in almost three months, pushing brokerage stocks lower on concern about shrinking profits from debt underwriting and trading. Bear Stearns triggered a decline in credit markets in June, when funds it managed faltered after defaults on home- loans to people with poor credit rose to a 10-year high.
``There will be more pain,'' said Felix Stephen, a strategist who helps oversee the equivalent of $7.5 billion at Advance Asset Management Ltd. in Sydney. ``I'm giving it a couple of months at least. It's not the subprime issue that really matters, it is the first card to fall in the tower of cards in this situation.''
.....Bear Stearns doesn't plan to close the Asset-Backed Securities Fund, which has $50 million in cash and gets about $13 million in principal and interest monthly, Sherman said. The fund, which probably lost money in July, can afford to wait until the slump in the mortgage market is over because it doesn't have any debt, he said....
....The collapse in July of Bear Stearns's High-Grade Structured Credit Strategies Fund and its High-Grade Structured Credit Strategies Enhanced Leverage Fund fueled concerns about subprime securities.....
...Both funds filed for bankruptcy protection yesterday, two weeks after Bear Stearns told investors they would get little if any money back. Bear Stearns in June assigned its top mortgage trader, 45-year-old Tom Marano, to get the best prices for the funds' remaining assets....
...
We don't believe it's prudent or in the interests of our investors to sell assets in this current environment
How nice that Bear Stearns is looking out for the interests of investors by denying them the right to redeem their capital. I am sure Bear customers will be thrilled when the value of the assets drops even further.
Hey, why don't all the financial services firms do the same thing and cancel all sell orders for stocks and bonds? After all, we need someone to save us from ourselves...
It is appalling. Remember, reports fraud and abuse always rise as bubbles pop. I consider this contempt for their investors to be just another pin in the bubble.
Bear Stearns Cos was hit on Wednesday by a legal claim stemming from the meltdown of two of its hedge funds, sending its shares, already under pressure from woes at a third fund, to a 19-month low.
The securities firm has been slapped with an arbitration claim for allegedly misleading investors about its exposure to subprime mortgages. The claim, filed with the NASD, was brought on behalf of a 73-year-old retired insurance salesman in Wisconsin who lost $500,000, according to the man's lawyers..... S&P May Cut Bear Stearns' Credit Rating
Standard & Poors is considering cutting its rating on Bear Stearns Cos.' creditworthiness, a move that could make it more expensive for the investment bank to finance deals.
The ratings agency said Friday it may downgrade Bear Stearns' comparatively strong credit rating because of the firm's exposure to the distressed mortgage and corporate buyout markets.
The announcement sent the Wall Street brokerage's shares tumbling to their lowest price since November 2005.
Bear Stearns said the issues S&P cited in considering a downgrade are affecting the entire market, and will not affect Bear Stearns more than many other companies.
"Every financial institution - Bear Stearns included - is facing an extremely challenging market environment," Chief Executive James Cayne said in a conference call.
Bear Stearns depends on a mortgage industry that is in distress right now, S&P said, noting that mortgage loans and mortgage-backed bonds are under "severe pressure." Plus, the meltdown of two hedge funds operated by Bear Stearns exposes the company to lawsuits and has damaged its reputation, S&P said....... Bear CFO: Bond turmoil 'extreme'
Pretty dire warning from Bear Stearn's CFO....
Sam Molinaro says fixed-income market condition could be worse than the 1980s stock market fall and Internet bubble burst.
Bear Stearns Cos. Friday said it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.
Bear Stearns' chief financial officer said the shockwaves hitting lending markets, triggered by rising mortgage losses, were as bad as crises such as the Internet bubble bursting in 2001 or the 1998 collapse of hedge fund Long-Term Capital Management.
"These times are pretty significant in the fixed-income market," CFO Sam Molinaro said on a conference call with analysts. "It's been as bad as I've seen it in 22 years. The fixed-income market environment we've seen in the last eight weeks has been pretty extreme." ...
..
Bear Stearns Cos co-president and co-chief operating officer Warren Spector resigned on Sunday, becoming a casualty of a credit risk crisis at the investment bank.
Bear Stearns said that, effective immediately, Alan Schwartz has been named the company's sole president.
Spector's departure follows Bear Stearns' assertion on Friday that it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.
Standard & Poor's warned that the recent collapse of two Bear Stearns-managed mortgage funds could hurt the company's performance and reputation for an extended period.
The collapse of the funds triggered a downturn across credit markets, put a damper on corporate buyout financing and sparked fears about Wall Street's trading and banking profits.
Spector's departure is a blow to Bear Stearns because he was regarded as a possible successor to Chairman and Chief Executive James Cayne. One analyst said Schwartz is now a strong contender to succeed Cayne......
.....Richard Bove, a bank analyst at Punk Ziegel & Co., said that as head of Bear Stearns' fixed income and asset management divisions, Spector was the executive most directly responsible for the recent failings in these businesses.
Bove said Spector may have made some questionable judgment calls, but in a note to clients Bove said he believed that some Bear Stearns peers made similar judgments and that it seemed clear top management also took part in these decisions.
Bove said Bear must now prove to its creditors that it can meet their demands to be paid back. The analyst said Bear will withstand the onslaught about to begin on its balance sheet......
..
Bear Stearns Cos.' decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors' and investors' ability to get their money back.
While most of their assets are in New York, the funds filed for bankruptcy protection July 31 in a court in the Caymans, where they are incorporated. The bank also used a 2005 bankruptcy law to ask a U.S. judge in Manhattan to block all lawsuits against the funds and protect their U.S. assets during the Caymans proceedings.
The Bear Stearns cases may establish a precedent that would let other failed hedge funds liquidate in the Caymans, where judges have a track record of favoring management. The local monetary authority estimates that three out of four hedge funds globally are incorporated in the islands....
.....The funds, which invested in securities tied to home mortgages, collapsed amid rising defaults on subprime loans, made to people with weak credit. Bear Stearns, the fifth-largest U.S. investment firm by market value, on Aug. 5 ousted Co-President Warren Spector, who headed the mortgage and fixed-income business....
....Creditors and investors in the two funds are likely to get back ``a pittance on the dollar'' and will attack Bear Stearns's bankruptcy tactics in court, said Bill Brandt, president of Chicago-based Development Specialists Inc. His firm advises hedge fund Ritchie Capital Management Ltd. in the bankruptcies of its two life insurance funds in New York....
....Filing the funds' bankruptcy in the Caymans ``is a nice little stunt, and it may work for a while,'' Brandt said. ``Bear Stearns is trying to put a wall between themselves and these so- called rogue funds.''....
..
When push comes to shove, 1.3 billion is 1.3 billion. Screw the investors. They should have know the risks.
After another dozen or two hedge funds go belly-up, the public will have forgotten about Bear. They'll look like 1st-class stewardesses with short skirts and endlessly flowing champagne, compared to the ones going down next.
Wall Street bank Bear Stearns is right at the heart of the subprime mortgage meltdown. It's reeling from massive, multibillion-dollar losses at two hedge funds.
And every investor who has watched the stock collapse from more than $172 to just $117.78 in a few months is probably kicking himself for not selling at least some back at the peak, before the crisis hit.
Four savvy investors did just that.
Step forward, Alan Greenberg, Sam Molinaro, James Cayne and Warren Spector.
Who are they?
Top honchos at ... Bear Stearns. (Or they were: Spector has now left in a management shake-up. The others remain.)
Between them, the four quietly cashed out more than $57 million worth of company stock before the crisis hit.
The executives saved themselves nearly $16 million by their astutely timed sales, which were disclosed in a series of public filings.
Those losses got passed on to the unlucky outside investors who bought the stock.
Bear Stearns declined to comment.......
.......It is, perhaps, a shame that Bear Stearns' two disastrous hedge funds didn't prove as nimble and astute in their trading as the guys at the top. Instead, they were caught holding junk mortgage paper as default rates soared.
Stock sales weren't the only way top executives at Bear Stearns pocketed a fortune even as they sailed the Titanic straight at the iceberg. Company filings reveal that Bear Stearns also awarded a staggering $140 million in bonuses to top executives last year.
And by good fortune, just over half of those bonuses were paid in cash rather than in the company's fast-shrinking shares.
..
I'm sorry, but is there something wrong with my math here?
Total amount invested by fund A: ~$11.5B Percent rumored to be lost in internet blogs including this one: 70% ("can't sell for 30 cents on the dollar" - check the beginning of this thread) Implied loss: $8 billion Actual loss: $600 million Multiple by which internet rumor-mongering overstated the impact: 13X
So now we see the extent of the debacle, and you are acting like its the end of the world, when the actual impact was oh, lets see - 7.5% of what was thrown out earlier?
Is it just me, or have you all completely lost perspective? If Jim Cramer turned bearish, I now know what he would sound like.
I know, you are tired of listening about the whole subprime issue and you wish it to go away. Now, it will.
Along with a lot more
It is time for rejoicing.
No, I am just saying you should get your facts straight. Compared to the stories that were going around, these bankers pulled a rabbit out of their hat. The total potential exposure for the first fund was $11 billion. They lost $600 million. You guys don't seem to get that. The impact was a fraction of what was predicted, yet the tone of this thread is "told you so". It's simply not true.
It
Really? Care to restate that now?
Yes, I am saying a veiled way, I told you so.
I'm sorry, but is there something wrong with my math here?
Total amount invested by fund A: ~$11.5B Percent rumored to be lost in internet blogs including this one: 70% ("can't sell for 30 cents on the dollar" - check the beginning of this thread) Implied loss: $8 billion Actual loss: $600 million Multiple by which internet rumor-mongering overstated the impact: 13X
So now we see the extent of the debacle, and you are acting like its the end of the world, when the actual impact was oh, lets see - 7.5% of what was thrown out earlier?
Is it just me, or have you all completely lost perspective? If Jim Cramer turned bearish, I now know what he would sound like.
I know, you are tired of listening about the whole subprime issue and you wish it to go away. Now, it will.
Along with a lot more
It is time for rejoicing.
No, I am just saying you should get your facts straight. Compared to the stories that were going around, these bankers pulled a rabbit out of their hat. The total potential exposure for the first fund was $11 billion. They lost $600 million. You guys don't seem to get that. The impact was a fraction of what was predicted, yet the tone of this thread is "told you so". It's simply not true.
It
Really? Care to restate that now?
Yes, I am saying a veiled way, I told you so.
? did they suddenly lose more money? what should I be restating? happy to see anything new here.
Almost forgot.
I TOLD YOU SO!
Tell all the good people on this board how you were wrong and misleading and perhaps I will stop.
To mislead the general public for personal reasons is just as bad as being a real estate agent, politician and all those other slimy pukes.
Almost forgot.
I TOLD YOU SO!
Tell all the good people on this board how you were wrong and misleading and perhaps I will stop.
To mislead the general public for personal reasons is just as bad as being a real estate agent, politician and all those other slimy pukes.
Jazen, what is your deal? I made a reasonable argument that they lost $600mm on ONE fund - the smaller one. And I never made an estimate on the second. From what I read - it looks like my math was pretty good and they lost $600mm on that one fund.
So what is with all the neener-neener? I really don't have time for your bad juju.
Yeah, Jazen...I think in essence DJO had theorized that these funds lost all the investment money. IE, if they were leveraged 10/1, they lost 10% of their value. That's enough to pay off the leverage, but not enough to return any of it to investors.
Correct me if I'm wrong, but isn't that essentially what did happen to those two funds. Just because other funds are falling out, that doesn't change what happened in those two cases.
.. I want to be an investment banker! You can collect millions in advisory fees and you don't even have to give good advice. Way cool!
.. Bear Stearns Sued Over Collapse of Fund Again!
A limited partner in a failed hedge fund run by Bear Stearns has sued the investment bank, saying it took only "meager steps" to prevent the fund's recent collapse.
The limited partner, Navigator Capital Partners, made the accusation this week in a lawsuit filed in New York State Supreme Court in Manhattan. The complaint names Bear Stearns, its asset management division and the High-Grade Structured Credit Strategies hedge fund, which collapsed in mid-July.
Bear Stearns said it planned a vigorous defense and called the lawsuit's allegations unjustified and without merit.
"The plaintiff is an experienced investment firm and, as described in the fund's materials, this was a high-risk, speculative investment vehicle," Bear Stearns said in a statement.
Navigator Capital, run by Steven Resnick, invested more than $700,000 in the hedge fund from August 2004 to mid-April 2005. The firm and other investors lost nearly the entire value of their investments, the lawsuit said.
"Defendants failed to disclose to investors the significant challenges facing the partnership, and the meager steps they were taking to face those
challenges, while at the same time reaping substantial fees," the suit said.
Bear Stearns Asset Management, the hedge fund's general partner, made more than $13.3 million in 2006 from advisory fees and profit-sharing before the hedge fund's demise, according to the lawsuit.
..
Yeah, Jazen...I think in essence DJO had theorized that these funds lost all the investment money. IE, if they were leveraged 10/1, they lost 10% of their value. That's enough to pay off the leverage, but not enough to return any of it to investors.
Correct me if I'm wrong, but isn't that essentially what did happen to those two funds. Just because other funds are falling out, that doesn't change what happened in those two cases.
I'm late to the thread, but this doesn't make sense to me. The way I read that bold part is as follows:
If you are leveraged 10:1 and you lose 10% then you just lost it ALL. If you got the leverage/loss ratio correct there, then there ain't nuttin to pay off nobody, lenders, investors, anyone.
Yeah, Jazen...I think in essence DJO had theorized that these funds lost all the investment money. IE, if they were leveraged 10/1, they lost 10% of their value. That's enough to pay off the leverage, but not enough to return any of it to investors.
Correct me if I'm wrong, but isn't that essentially what did happen to those two funds. Just because other funds are falling out, that doesn't change what happened in those two cases.
I'm late to the thread, but this doesn't make sense to me. The way I read that bold part is as follows:
If you are leveraged 10:1 and you lose 10% then you just lost it ALL. If you got the leverage/loss ratio correct there, then there ain't nuttin to pay off nobody, lenders, investors, anyone.
If I understand correctly, the fund takes their money and borrows against it, leveraging that to 10 to 1 for example. So now the fund has 2 kinds of money, the borrowed money, which will be payed back with interest, and the initial investment. If the fund looses 10%, then the borrowed money is still payed back, but the investment isn't. I believe this is what happened with Bear Sterns. If the funds had truly lost 100%, then both the investors and the lenders would have been out of luck.
Comments
No bloodbath! Dow down 51 points.
..
Yahoo Finance
...As evidenced by a 1.2% sell-off in the more heavily weighted Financial sector, the resurfacing of the subprime fallout lending further evidence that the apparent meltdown is likely to become an industry wide crisis took an added toll on sentiment. Bear Stearns (BSC) reportedly telling investors that its two troubled hedge funds are nearly worthless prompted analyst downgrades on five investment banks (BSC, JPM, MS, GS, and LEH). JP Morgan Chase (JPM) was already weak after saying credit-loss provisions in Q2 tripled....
..
Pot, meet kettle. LMAO
Agreed! There's no reason to call anybody names.
DJO,
Linked article (bolded paragraph) supports your earlier statements. I am still somewhat skeptical about CDO sales covering the majority of their loans though, especially if there was a margin call involved. Am I missing something here?
Bear hunting
Commentary: Bear Stearns' Cayne may have putted away the company
NEW YORK (MarketWatch) -- The demise of two hedge funds run by Bear Stearns & Cos. reminds me of one of those stories about another bear, the one who is shot by a gun and keeps charging.
In this case, Jimmy Cayne doesn't seem to realize his firm may be mortally wounded.
Cayne needs a refresher in the facts. At the end of 2006, these whiz-bang hedge funds were worth more than $1.5 billion. Today, High Grade Structured Credit Strategies and High Grade Structured Credit Strategies Enhanced Leverage Fund aren't even worth those nickel names Bear Stearns bought for them.
And you only thought your 401(k) did that.
Bear's CEO is most likely comforting himself with the fact Bear isn't going to take a financial bath on those funds.
The $1.6 billion bailout package Bear put up is almost certain to be paid back. The lenders who backed the funds initially have been paid back, too. The investors - Bear's clients - on the other hand, will get a "thank you" and "come again soon." ....
..
I think this post from minyanville might clear it up.
..
The phrase "...or take down internally.." implies that Bear may have used some of their own funds to retire the debt?
As hedge funds are famously non-transparent, it's possible that the public will ever know exactly how Bear paid off those loans.
..
UPDATE: Bear Stearns Seizes Assets Of Its High-Grade Hedge Fund
Bear Stearns Cos. said late Thursday that it seized assets from its High-Grade Structured Credit Strategies Fund after the hedge fund suffered huge losses in mortgage-backed securities and structured- finance markets.
The bank lent $1.6 billion to the hedge fund earlier this month after the losses. On Thursday Bear said that $1.3 billion of the loan remained.
Bear took control of the assets because the fund couldn't meet its margin obligations as part of the loan agreement, the bank explained.
"We do not anticipate any material change in financial exposure to Bear Stearns as a result of this action," the company said in a statement.
Bear (BSC) will continue to liquidate the fund in an "orderly" way and will be able to set up hedges to protect against any further declines in the value of the portfolio, if appropriate, the bank added.
The High-Grade fund lost 91% of its value in the first half of 2007, while a smaller, more leveraged fund called the High-Grade Structured Credit Strategies Enhanced Leveraged Fund was totally wiped out, Bear told clients last week. The two funds had about $1.6 billion in assets at one time, but through leverage they controlled more than $10 billion in mortgage securities and credit-related securities.
The crisis has dented the reputation of Bear Stearns, which has been known for its expertise in the mortgage market. Other hedge funds have also blamed the two Bear funds for triggering broader losses and margin calls in other parts of the asset-backed securities market.
..
I love being right.
http://money.cnn.com/2007/07/26/news/co ... 2007072616
Bear Stearns Blocks Withdrawals From Third Hedge Fund (Update5)
Bear Stearns Cos., the manager of two hedge funds that collapsed last month, blocked investors from pulling money out of a third fund as losses in the credit markets expand beyond securities related to subprime mortgages.
The Bear Stearns Asset-Backed Securities Fund had less than 0.5 percent of its $900 million of assets in securities linked to subprime loans, spokesman Russell Sherman said in an interview yesterday. Even so, investors concerned about losses sought to withdraw their money, he said.
Shares of New York-based Bear Stearns had their biggest drop in almost three months, pushing brokerage stocks lower on concern about shrinking profits from debt underwriting and trading. Bear Stearns triggered a decline in credit markets in June, when funds it managed faltered after defaults on home- loans to people with poor credit rose to a 10-year high.
``There will be more pain,'' said Felix Stephen, a strategist who helps oversee the equivalent of $7.5 billion at Advance Asset Management Ltd. in Sydney. ``I'm giving it a couple of months at least. It's not the subprime issue that really matters, it is the first card to fall in the tower of cards in this situation.''
.....Bear Stearns doesn't plan to close the Asset-Backed Securities Fund, which has $50 million in cash and gets about $13 million in principal and interest monthly, Sherman said. The fund, which probably lost money in July, can afford to wait until the slump in the mortgage market is over because it doesn't have any debt, he said....
....The collapse in July of Bear Stearns's High-Grade Structured Credit Strategies Fund and its High-Grade Structured Credit Strategies Enhanced Leverage Fund fueled concerns about subprime securities.....
...Both funds filed for bankruptcy protection yesterday, two weeks after Bear Stearns told investors they would get little if any money back. Bear Stearns in June assigned its top mortgage trader, 45-year-old Tom Marano, to get the best prices for the funds' remaining assets....
...
How nice that Bear Stearns is looking out for the interests of investors by denying them the right to redeem their capital. I am sure Bear customers will be thrilled when the value of the assets drops even further.
Hey, why don't all the financial services firms do the same thing and cancel all sell orders for stocks and bonds? After all, we need someone to save us from ourselves...
Bear Stearns hedge fund investor files claim
Bear Stearns Cos was hit on Wednesday by a legal claim stemming from the meltdown of two of its hedge funds, sending its shares, already under pressure from woes at a third fund, to a 19-month low.
The securities firm has been slapped with an arbitration claim for allegedly misleading investors about its exposure to subprime mortgages. The claim, filed with the NASD, was brought on behalf of a 73-year-old retired insurance salesman in Wisconsin who lost $500,000, according to the man's lawyers.....
S&P May Cut Bear Stearns' Credit Rating
Standard & Poors is considering cutting its rating on Bear Stearns Cos.' creditworthiness, a move that could make it more expensive for the investment bank to finance deals.
The ratings agency said Friday it may downgrade Bear Stearns' comparatively strong credit rating because of the firm's exposure to the distressed mortgage and corporate buyout markets.
The announcement sent the Wall Street brokerage's shares tumbling to their lowest price since November 2005.
Bear Stearns said the issues S&P cited in considering a downgrade are affecting the entire market, and will not affect Bear Stearns more than many other companies.
"Every financial institution - Bear Stearns included - is facing an extremely challenging market environment," Chief Executive James Cayne said in a conference call.
Bear Stearns depends on a mortgage industry that is in distress right now, S&P said, noting that mortgage loans and mortgage-backed bonds are under "severe pressure." Plus, the meltdown of two hedge funds operated by Bear Stearns exposes the company to lawsuits and has damaged its reputation, S&P said.......
Bear CFO: Bond turmoil 'extreme'
Pretty dire warning from Bear Stearn's CFO....
Sam Molinaro says fixed-income market condition could be worse than the 1980s stock market fall and Internet bubble burst.
Bear Stearns Cos. Friday said it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.
Bear Stearns' chief financial officer said the shockwaves hitting lending markets, triggered by rising mortgage losses, were as bad as crises such as the Internet bubble bursting in 2001 or the 1998 collapse of hedge fund Long-Term Capital Management.
"These times are pretty significant in the fixed-income market," CFO Sam Molinaro said on a conference call with analysts. "It's been as bad as I've seen it in 22 years. The fixed-income market environment we've seen in the last eight weeks has been pretty extreme." ...
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Bear Stearns president resigns
Bear Stearns Cos co-president and co-chief operating officer Warren Spector resigned on Sunday, becoming a casualty of a credit risk crisis at the investment bank.
Bear Stearns said that, effective immediately, Alan Schwartz has been named the company's sole president.
Spector's departure follows Bear Stearns' assertion on Friday that it is weathering the worst storm in financial markets in more than 20 years after a major rating company warned mortgage credit problems could hurt the investment bank's profits.
Standard & Poor's warned that the recent collapse of two Bear Stearns-managed mortgage funds could hurt the company's performance and reputation for an extended period.
The collapse of the funds triggered a downturn across credit markets, put a damper on corporate buyout financing and sparked fears about Wall Street's trading and banking profits.
Spector's departure is a blow to Bear Stearns because he was regarded as a possible successor to Chairman and Chief Executive James Cayne. One analyst said Schwartz is now a strong contender to succeed Cayne......
.....Richard Bove, a bank analyst at Punk Ziegel & Co., said that as head of Bear Stearns' fixed income and asset management divisions, Spector was the executive most directly responsible for the recent failings in these businesses.
Bove said Spector may have made some questionable judgment calls, but in a note to clients Bove said he believed that some Bear Stearns peers made similar judgments and that it seemed clear top management also took part in these decisions.
Bove said Bear must now prove to its creditors that it can meet their demands to be paid back. The analyst said Bear will withstand the onslaught about to begin on its balance sheet......
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The customer / investor comes first at Bear Stearns!
Bear Stearns Caymans Filing May Hurt Funds' Creditors (Update2)
Bear Stearns Cos.' decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors' and investors' ability to get their money back.
While most of their assets are in New York, the funds filed for bankruptcy protection July 31 in a court in the Caymans, where they are incorporated. The bank also used a 2005 bankruptcy law to ask a U.S. judge in Manhattan to block all lawsuits against the funds and protect their U.S. assets during the Caymans proceedings.
The Bear Stearns cases may establish a precedent that would let other failed hedge funds liquidate in the Caymans, where judges have a track record of favoring management. The local monetary authority estimates that three out of four hedge funds globally are incorporated in the islands....
.....The funds, which invested in securities tied to home mortgages, collapsed amid rising defaults on subprime loans, made to people with weak credit. Bear Stearns, the fifth-largest U.S. investment firm by market value, on Aug. 5 ousted Co-President Warren Spector, who headed the mortgage and fixed-income business....
....Creditors and investors in the two funds are likely to get back ``a pittance on the dollar'' and will attack Bear Stearns's bankruptcy tactics in court, said Bill Brandt, president of Chicago-based Development Specialists Inc. His firm advises hedge fund Ritchie Capital Management Ltd. in the bankruptcies of its two life insurance funds in New York....
....Filing the funds' bankruptcy in the Caymans ``is a nice little stunt, and it may work for a while,'' Brandt said. ``Bear Stearns is trying to put a wall between themselves and these so- called rogue funds.''....
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After another dozen or two hedge funds go belly-up, the public will have forgotten about Bear. They'll look like 1st-class stewardesses with short skirts and endlessly flowing champagne, compared to the ones going down next.
Bear Stearns Fat Cats Cashed Out at the Top
Wall Street bank Bear Stearns is right at the heart of the subprime mortgage meltdown. It's reeling from massive, multibillion-dollar losses at two hedge funds.
And every investor who has watched the stock collapse from more than $172 to just $117.78 in a few months is probably kicking himself for not selling at least some back at the peak, before the crisis hit.
Four savvy investors did just that.
Step forward, Alan Greenberg, Sam Molinaro, James Cayne and Warren Spector.
Who are they?
Top honchos at ... Bear Stearns. (Or they were: Spector has now left in a management shake-up. The others remain.)
Between them, the four quietly cashed out more than $57 million worth of company stock before the crisis hit.
The executives saved themselves nearly $16 million by their astutely timed sales, which were disclosed in a series of public filings.
Those losses got passed on to the unlucky outside investors who bought the stock.
Bear Stearns declined to comment.......
.......It is, perhaps, a shame that Bear Stearns' two disastrous hedge funds didn't prove as nimble and astute in their trading as the guys at the top. Instead, they were caught holding junk mortgage paper as default rates soared.
Stock sales weren't the only way top executives at Bear Stearns pocketed a fortune even as they sailed the Titanic straight at the iceberg. Company filings reveal that Bear Stearns also awarded a staggering $140 million in bonuses to top executives last year.
And by good fortune, just over half of those bonuses were paid in cash rather than in the company's fast-shrinking shares.
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Yes, I am saying a veiled way, I told you so.
? did they suddenly lose more money? what should I be restating? happy to see anything new here.
No, I don't think they have announced anything, but it's late, wait till tomorrow to see if you can get any money back.
But wait, here are some more people announcing bad news, going right along with what I was eluding to as this was the end of the subprime fiasco.
http://www.tickerforum.org/cgi-ticker/a ... ?post=2878
WAMU, in case you are into them at all.
http://www.tickerforum.org/cgi-ticker/a ... ?post=2870
CFC, kind of a large broker.
http://www.tickerforum.org/cgi-ticker/a ... ?post=2854
Bunch of European BS, don't believe it.
http://www.bloomberg.com/apps/news?pid= ... refer=home
Good one from bloomberg, learn CONTAGION dude.
http://www.bloomberg.com/apps/news?pid= ... refer=news
Frenchies from bloomberg, what do they know, bunch of conspiracy theorists over there.
I appreciate your worthless retort in order to allow me to soap box and grandstand at your stupiditys' expense.
I TOLD YOU SO!
Tell all the good people on this board how you were wrong and misleading and perhaps I will stop.
To mislead the general public for personal reasons is just as bad as being a real estate agent, politician and all those other slimy pukes.
Jazen, what is your deal? I made a reasonable argument that they lost $600mm on ONE fund - the smaller one. And I never made an estimate on the second. From what I read - it looks like my math was pretty good and they lost $600mm on that one fund.
So what is with all the neener-neener? I really don't have time for your bad juju.
Correct me if I'm wrong, but isn't that essentially what did happen to those two funds. Just because other funds are falling out, that doesn't change what happened in those two cases.
I want to be an investment banker! You can collect millions in advisory fees and you don't even have to give good advice. Way cool!
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Bear Stearns Sued Over Collapse of Fund Again!
A limited partner in a failed hedge fund run by Bear Stearns has sued the investment bank, saying it took only "meager steps" to prevent the fund's recent collapse.
The limited partner, Navigator Capital Partners, made the accusation this week in a lawsuit filed in New York State Supreme Court in Manhattan. The complaint names Bear Stearns, its asset management division and the High-Grade Structured Credit Strategies hedge fund, which collapsed in mid-July.
Bear Stearns said it planned a vigorous defense and called the lawsuit's allegations unjustified and without merit.
"The plaintiff is an experienced investment firm and, as described in the fund's materials, this was a high-risk, speculative investment vehicle," Bear Stearns said in a statement.
Navigator Capital, run by Steven Resnick, invested more than $700,000 in the hedge fund from August 2004 to mid-April 2005. The firm and other investors lost nearly the entire value of their investments, the lawsuit said.
"Defendants failed to disclose to investors the significant challenges facing the partnership, and the meager steps they were taking to face those
challenges, while at the same time reaping substantial fees," the suit said.
Bear Stearns Asset Management, the hedge fund's general partner, made more than $13.3 million in 2006 from advisory fees and profit-sharing before the hedge fund's demise, according to the lawsuit.
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I'm late to the thread, but this doesn't make sense to me. The way I read that bold part is as follows:
If you are leveraged 10:1 and you lose 10% then you just lost it ALL. If you got the leverage/loss ratio correct there, then there ain't nuttin to pay off nobody, lenders, investors, anyone.
If I understand correctly, the fund takes their money and borrows against it, leveraging that to 10 to 1 for example. So now the fund has 2 kinds of money, the borrowed money, which will be payed back with interest, and the initial investment. If the fund looses 10%, then the borrowed money is still payed back, but the investment isn't. I believe this is what happened with Bear Sterns. If the funds had truly lost 100%, then both the investors and the lenders would have been out of luck.