Today's Rumor: Bear Goes Belly Up (Who's next?)
A few years ago -- around 2001-02 -- I had strongly recommended Bear Stearns (BSC).
They had a great franchise, they had lagged the rest of the banking sector for no apparent reason, and overall, the quality of management under Ace Greenberg seemed to be terrific. The stock was $54-57.
Subsequently, Bear ran to $170+. I have long since been gone from the stock.
Today, we witnessed it complete the round trip as it careened through that $54-57 range. At one point, today, Bear was down $10, on a rumor that they were going to go belly up.
I have no opinion or special insight as to the truth of that . . . Hey, it could happen, it really wouldn't surprise me, but I don't know, and we have no position in BSC.
But that rumor raises a more interesting question: What companies could take the long dirt nap? Who out there is ripe to be absorbed, merged, taken over (hostile or not). There has to be a long list of mortally wounded firms out there that simply haven't keeled over yet. What CEOs are dead men walking? What stocks are waiting to be euthanasized?
~~~
What say ye?
(I want names and stock symbols!)
>
~~~
Thursday, March 13, 2008 | 09:30 PM | Permalink
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» Bear Stearns Gets Emergency Funding From NY Fed, JP Morgan from The Big Picture
As we discussed last night, liquidity concerns about Bear Stearns (BSC) have been validated. The NY Federal Reserve Bank, and JP Morgan (JPM) have agreed to provide secured funding to Bear and an initial period of up to 28 days. JPM is working with Bea... [Read More]
Tracked on Mar 14, 2008 9:51:53 AM
» Bear Stearns Gets Emergency Funding From NY Fed, JP Morgan from The Big Picture
As we discussed last night, liquidity concerns about Bear Stearns (BSC) have been validated. The NY Federal Reserve Bank, and JP Morgan (JPM) have agreed to provide secured funding to Bear and an initial period of up to 28 days. JPM is working with Bea... [Read More]
Tracked on Mar 14, 2008 9:55:30 AM
Comments
Chrysler. No Lee Iacoca. Nobody cares about manufacturing. No government sponsored K-car purchases. Too much money spent bailing out Wall Street.
Posted by: njdoc | Mar 13, 2008 10:01:13 PM
Barry, Great Blog.
I think the Fed will rescue Bear Stearns and Bear Stearns will think it rescue the Fed. LOL
“They laugh that win.”
William Shakespeare
Posted by: David | Mar 13, 2008 10:01:40 PM
Heely's (HLYS)
The wheeled-shoe, one-trick pony won't survive the slowdown in discretionary spending.
(Better to have shorted it 9 months ago, though, at $35.)
No position in above stock.
Posted by: Winston Munn | Mar 13, 2008 10:06:35 PM
I doubt the BAC/Countrywide deal goes thru -- that leaves Countrywide (CFC) on life support . . .
Posted by: Scott | Mar 13, 2008 10:07:50 PM
Thats the strangest thing about the markets since last february. No bankruptcies. LEN, BSC, XL, CTX, BSC
Posted by: shrek | Mar 13, 2008 10:17:33 PM
CFC (Countrywide)- FBI gives cover for BAC to walk away. Wonder who called the FBI in?
ABK, MBI (Ambac/MBIA)- obvious
WM- Washington Mutual
BSC (Bear Stearns)- covered above
FRE, FNM (Freddie/Fannie)- Government bailout?
F- beginning to look like a penny stock
Posted by: Adil | Mar 13, 2008 10:18:36 PM
Sears/K-Mart. I'm surprised they have lasted this long.
Posted by: Xennady | Mar 13, 2008 10:19:11 PM
The old Pump-n-Dump. Gotaloveit! Did you run into the guy at Wellspring when you were hanging out on the stock message boards?
Posted by: russell120 | Mar 13, 2008 10:30:55 PM
Can I vote for the US dollar? On life support now and future is cloudy...
Posted by: Don | Mar 13, 2008 10:39:23 PM
WM, CFC, DSL, IMB, and a lot other poorly capitalized and under reserved banks. The S&L meltdown was the pre-game (batting practice, infield, etc) for the big game. Play ball.
Posted by: Benner29 | Mar 13, 2008 10:47:54 PM
Die italics!
Posted by: That Guy Drinks Beer | Mar 13, 2008 10:53:31 PM
SPF Standard Pacific
WM Washington Mutual
CFC Countrywide
WCI WCI Communities
DSL Downey Financial
IMB Indymac
267 Small banks as yet to be named
ETFC E*Trade (don't hate me)
CC Circuit City
Also:
Fox Business News Channel
Hillary Clinton
Dennis Kneale (he gets his own network)
Posted by: Rich Shinnick | Mar 13, 2008 10:57:44 PM
Sadly, I have to 2nd the greenback.
The Bush tax cuts in an extremely loose lending environment just added fuel to the credit balloon. Letting the Wall St. alchemists get creative and out-of-control [CDO squared sounds like a sick joke...] is always a bad idea with a very bad ending. [Maybe Spitzer was smart to get his ying-yanged to get out before the sh*t really hits the fan...] Trade imbalance, massive spending (Iraq War, senior drug program, bridge to nowhere, etc.) How does the greenback survive?
Going forwards, it seems things will be more about asset deflation interrupted by short squeezes than peace & prosperity spurring steady growth.
Buffett was sure smart when he bought the Brazilian Real a few years ago.
Posted by: Chief Tomahawk | Mar 13, 2008 11:02:44 PM
I assumed you were asking about financial stocks which I know nothing about. In retail, I'd be shocked if Circuit City lasts the year.
As you know the recording industry business model is dead meat in the mid/long term.
I found this blog about a year ago when I was trying to figure out why the Gov and media kept reporting there was no or low inflation. I find it entertaining and informative. I can't "invest" in stocks as I can never get beyond "past performance is no guarantee of future results" and the whole "five to ten year horizon" thing so I've always been all in cash and gov bonds.
Thanks Barry, I always enjoy it.
Posted by: SIV | Mar 13, 2008 11:13:27 PM
Airlines are not a happy fun place right now. Pick any two.
Posted by: E | Mar 13, 2008 11:22:46 PM
Slam dunk.
FNM
FRE
BSC
DOLLAR
Posted by: Stuart | Mar 13, 2008 11:31:01 PM
CIT - cost of capital way up, loads of debt, bad mortgages still to be written down, bad student loans, lends to companies at high risk during the recession.
PNC - to a lesser degree - more exposure to cmbs than acknowledged
HIG- ALOT of toxic paper in their general account, is a UBS main customer for bad paper.
LAMAR- seems to be on a death spiral.
Looking at PSA - very high pe. huge long term head and sholders, should see declining business, overcapacity in storage...opinions?
Barry thanks for all you do. This is an absolute top rate blog. I continue to learn, enjoy, and profit....
Posted by: rightline | Mar 13, 2008 11:34:15 PM
Don't forget Citi. Heavily exposed in every problematic sector, e.g., largest single creditor to Carlyle.
Posted by: Random | Mar 13, 2008 11:36:25 PM
Barry,
I wouldn't want to start a run on the stocks.
Oops, that's already underway...
Posted by: Movie Guy | Mar 13, 2008 11:47:00 PM
Rightline,
Is HIG The Hartford? If so, I could only dream they go belly up.
Posted by: TheGuru | Mar 13, 2008 11:54:54 PM
OK - for you guys who look out 2,3,4 years
Dell Computer - will not make it by 2011
They made the mistake of Gateway - screwed up customer service as well as putting out bad product in the since about 2002. Computers will be sold by Chinese companies. - Once you try a Lenova - why would you buy a DELL.
I know you will not believe this, But
Best Buy is not a best buy they are the 21st century Crazy Eddie. Their costs are not reliable nor are they competitive - in the small stuff and addon's. Sure you'll get a Sony Big Screen for a good price -
but you will not be a repeat customer for your daily needs.
Bankers are in many ways like Morticians, in personality, etc. Except Morticians are better business people. Once a Banker has to take back Real Estate (anything other than money) they get Diarrhea until they can dispose of the property at any cost.
We all will be doing Banking differently
by 2010 including Banks with names we are not familiar with.
Posted by: la grande poussée | Mar 13, 2008 11:56:23 PM
LEH, to either merge or be taken over. Just a hunch.
GM, F. The whole "car" concept/experience must be rethought. (And I don't know what the Unions are thinking...)
---
"The true man wants two things: danger and play. For that reason he wants woman, as the most dangerous plaything." Nietzsche
This Market has been one wild woman...
Posted by: mhm | Mar 14, 2008 12:01:33 AM
gee no body picked gld or slv what happens when they go to zero is the gold still there
Posted by: billz | Mar 14, 2008 12:05:26 AM
"What CEOs are dead men walking? What stocks are waiting to be euthanasized?"
That's still the crux of the problem isn't it? No one knows, not even the FED. And if they don't know the extent of the problem how can they attempt to fix it. In essence they're just throwing money at it and hoping it will go away. That's what the government does. They need to demand that all those who are affected come clean, right now! Until they do, it will be like the blind leading the blind.
Posted by: Pat G. | Mar 14, 2008 12:05:53 AM
BBI
EMMS
Posted by: SINGER | Mar 14, 2008 12:13:55 AM
Isn't the problem with the whole credit market that you have to ask? Shouldn't the existing laws kinda make that a mandatory disclosure that you should make or risk facing JAIL TIME?
The fact that noone knows is why noone wants to lend any damn money. Too bad the folks who should be stopping this (FED, SEC) are in on the game.
Long Gold and QID, not that I'd recommend it - I'm amateur night compared to most of you guys.
Posted by: Jim D | Mar 14, 2008 12:21:46 AM
The State of California. OK, So Cal.
AS just cut $4B from education today,
20,000 teachers get their pink slips.
What's BSC, WMU or CCC-AEX to that??
Posted by: Laffin Lenny | Mar 14, 2008 12:24:36 AM
Wild guess--
J.P. Morgan Chase seems to have been a prime motivator in the margin calls on both Carlyle and Thornburg. Could they be in a position to take what's left of C?
Posted by: Jay | Mar 14, 2008 12:25:35 AM
some companies going belly up - maybe
one of the big brokers/banks being bought ?? by whom?
certainly not by other banks/brokers since they just do not have the liquidity to do so in the current environment of mistrust and risk averse behavior...
Posted by: rollsroys | Mar 14, 2008 3:10:34 AM
Re the JPM comment.
Jamie Dimon is playing hardball huh? He's out there twisting arms, trying to save his own balance sheet? This is who we need out there, someone willing to lose friends by calling in the ious. Might start the ball rolling...faster.
Posted by: American ZIRP | Mar 14, 2008 4:24:13 AM
As much as I appreciate all the advice on this blog, a word of caution goes out to those who are short bank stocks.
The BKX - Bank Index, is being held at 75. Technically a textbook double bottom is forming. It seems that if this level holds, a medium term rally of at least a few weeks will take most bank stocks higher. I don't think that BSC is a part of this index.
There may be much better short opportunities at much higher prices in a few weeks... if at that time you are still bearish.
Posted by: Blin | Mar 14, 2008 5:09:29 AM
When it comes to shorting, investors would be well advised to never forget Keynes: "The market can stay irrational longer than you can stay solvent."
Posted by: Barry Ritholtz | Mar 14, 2008 5:39:57 AM
BZH - Beazer Homes. Too much debt. Still needs to restate earnings for last several years. Under federal investigation and open to lawsuits. Housing is not going to pick up anytime soon.
Posted by: SRQ | Mar 14, 2008 6:52:01 AM
HOV
Posted by: JustinTheSkeptic | Mar 14, 2008 7:22:23 AM
Barry,
God bless you and everybody that writes into your blog-we have a smart group of people out there- I am serious and I love your blog.
I would short CNBC, Larry K and Fast Money (when Joe Terranova gets invited onto the Fast Money panel BELIEVE ME, the end is near)
Thank you for all.
Posted by: Cornea Implants | Mar 14, 2008 8:50:00 AM
FNM, C - no explanation needed
NTAP - storage provider heavily dependent on deep wall street pockets to buy its overpriced machines - in the last recession this stock went to low single digits. Current P/E is still high.
DSL - So Cal mortgage bank, heavily loaded with zero interest subprimes.
QQQQ - always goes down in a recession
Most emerging market indexes - still tied to S&P index in short term.
Posted by: logan | Mar 14, 2008 9:16:19 AM
California ground zero option arm alt-A, no doc specialists.... DSL and FED
The weakest of the builders, WCI and SPF.
Its been easy money. Thank you sheeple.
Posted by: RD | Mar 14, 2008 9:24:30 AM
Jefferson County, Alabama. But can you short a county?
Posted by: DonKei | Mar 14, 2008 9:42:16 AM
It really can't come as a surprise to anyone that a major financial institution (like Bear) would come under enough pressure to go "belly up".
What is even more surprising is that a) it took this long for serious rumors of a bank to reach this level; and b) that it is still only one!
There is no way, none, that Bear is the only one in this position. Their portfolios are way too similar at the DNA-level to not see this as an indictment of the entire sector.
Posted by: C | Mar 14, 2008 10:13:39 AM
Citi. And if Bob Rubin is the smartest guy in the world, we're all in a heap 'o trouble.
Posted by: MitchN | Mar 14, 2008 10:33:08 AM
Wachovia
Bad home loans, bad home equity loans, bad auto loans, bad credit card debt.
Posted by: k2163 | Mar 14, 2008 11:18:29 AM
I will bet on WAMU... (not the radio station - the bank)
Had this BSC/financials on Wednesday, March 12th, 2008 @ 2:10 pm - http://www.thedisciplinedinvestor.com/blog/2008/03/12/bernakes-junk-exhange/
Come on in...the water is f i n e .....
Posted by: Andrew Horowitz | Mar 14, 2008 10:05:54 PM
A comment posted on Oz's blog at 11 pm Thursday night:
OK guys, have a good night
Tomorrow, BSC is going down
NExt week its LEH..
watch out folks;
Written by Martin on 2008-03-13 23:05:14
It'll now cost you almost $10 to speculate on Oct08 $40 puts.
Posted by: Paul | Mar 15, 2008 8:14:58 AM
Can't believe no one mentioned MER.....how much hedge/derivative "value" is on their books?
Posted by: Brad | Mar 15, 2008 9:07:52 AM
