Rumor of the Day: Bear Goes Belly Up
While I believe Bear has lots of troubles, I am not ready to declare them a zero.
Follow this course of events:
First, Lehman Bros was reported to be cutting 5% of their staff.
Then, Briefing.com posted the following downgrades: Moody's downgrades 163 tranches from 15 transactions issued by Bear Stearns ALT-A Trust; 155 tranches placed on review (68.13 -1.95) The ratings were downgraded, in general, based on higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to credit enhancement levels.
Then, with Bear Stearns trading down over $7, a CNBC commentator was going to "discuss weakness in financials, saying speculation surrounds BSC ($62.35 -7.59). Says one rumor is that BSC tried to shop their clearing operations a few weeks ago, which was a sign how badly they need cash, but they couldn't find a buyer
~~~
I normally don't pass along hedgie rumors, but this one strikes me as unusually pernicious, and since its already on CNBC. . .
UPDATE 2: March 10, 2008 12:59pm
[theflyonthewall] Bear Stearns-BSC says there is 'no truth to liquidity
rumors'-Bloomberg
Blomberg cites a company spokesman.
UPDATE: March 10, 2008 12:50pm
Market beat reports the option activity in BSC, in Bearish Bets on Bear Stearns:
Options activity is heavily tilted toward bearish bets, with aggressive players buying put options on March options contracts at the $50 and $40 strike prices – which would be an enormous move in the shares, currently trading at about $62.50 a share. Officials at Bear Stearns were unavailable for comment.
However, “it’s very expensive to buy a put” at a $60 strike price, notes Sveinn Palsson, options analyst at Credit Suisse. “You’re paying $4 for a $60 stock, and there’s not much more than a week left in the maturity, so people are just trying to get that cheaper in sort of a worst-case-scenario thing.”
March options expire at the end of next week, so these are short-term bets, but heavy activity is being witnessed in April options as well. Volatility has spiked dramatically in the options as the bearish bets have multiplied; more than 31,000 March put options have traded today, compared with about 16,000 call options. Meanwhile, spreads on the company’s credit default swaps have widened dramatically, to between 700 and 800 basis points, compared with about 450 points Friday.
Thank, David!
>
Monday, March 10, 2008 | 12:13 PM | Permalink
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Comments
Maybe it's CNBC's attempt to stay "fair & balanced" ;-)
Posted by: Estragon | Mar 10, 2008 12:25:08 PM
On the Blackstone call this morning Schwarzman mispoke saying "since we went panic in June 2007".
He meant to say "went public".
Call just wrapping up, they have still not deployed any of the capital from the fund they raised to take advantage of current dislocation in debt markets. They think there will be a better opportunity in next 90 days.
Posted by: Vermont Trader.. | Mar 10, 2008 12:28:39 PM
It smacks of De La Vega's 16th century "confusiones de confusions."
If you have a skitish market, start a rumour. Nothing here, move along.
Posted by: Ross | Mar 10, 2008 12:36:08 PM
See the large stock purchase when the Bear price had bottomed. Is someone rigging the market?
Posted by: yoganmahew | Mar 10, 2008 12:51:45 PM
Estragon:
That's too funny!! I needed a good laugh. Thanks.
Posted by: Pat G. | Mar 10, 2008 1:05:44 PM
Maybe we'll get an oversold recovery in the market. Everyone will say smooth sailing ahead, we avoided the iceberg. But then what next? Would any market recovery simply complete the right shoulder of a much more significant head and shoulder's top? (Presaging a really big down move.) Or would such a market recovery be a double bottom?
Posted by: Aaron | Mar 10, 2008 1:08:00 PM
Hey Barry,
You should cut down on attacking Bear Stearns. There is a rumor that Bear Stearns has contacted Mozilo-Gambino family here on Long Island. They want to whack you Barry. I hate to see you incidentally hitting a garbage truck while driving early one morning. I like you and hate to see you go, leave them alone Barry.
Posted by: Vinny Mozilo | Mar 10, 2008 1:19:38 PM
Screw the NYT quotes. You know you've 'arrived' when you get a threat from the families.
Posted by: Ross | Mar 10, 2008 1:34:05 PM
a good day for the brave...despite being pretty much a perma-bear, I just got long some C, FRE, LEH for a trade (missed the BSC lows so not in it for now). Whenever the selling of major companies seems to be based on fear, a near-term bounce is usually to be found.
Posted by: 2and20 | Mar 10, 2008 1:39:01 PM
They'd all be pooched if they priced their assets at market prices.
Posted by: Stuart | Mar 10, 2008 2:11:49 PM
ALERT!!!!!
Cramer's pal, buudy, guest, investor Mr. Spitzer is in a world of trouble per CNBC.
Posted by: Dee Leverage | Mar 10, 2008 2:17:52 PM
Hey Dee,
Any bets on whether the ring employed boys as well as girls?
Whatever, at $5,000 a pop, they are the ones that got screwed.
Posted by: Ross | Mar 10, 2008 2:32:18 PM
"Forget about the cigar, was Cramer involved?"
He was on the other side of that trade.
He was one of the ones makin $5,000 a pop.
Posted by: Ross | Mar 10, 2008 2:53:40 PM
no suprise here either but well placed sources say Citibank is insolvent as well. Here we go loopty loo...
Posted by: Phil | Mar 10, 2008 3:02:15 PM
I was wondering where such a bad trader like Cramer was getting all the money. Now, it makes sense (5K a pop for a couple of years and you are a millionaire).
Posted by: A Lot Of Pops | Mar 10, 2008 3:04:08 PM
For anybody interested in what a $5500 escort looks like, here's a pic:
http://ppgmedia.buysell.com/ppgphotos/20060918162202741/20060918162202741_20071181534176387005-display.jpg
Posted by: Snarfy | Mar 10, 2008 3:12:32 PM
Good one, Snarfy.
Posted by: montaigne | Mar 10, 2008 3:22:31 PM
