prawn_86
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So what would happen if 13 trillion $ worth of derivatives were allowed to fail? Or if BS went broke instead of being bailed out?
Bear Stearns The New Northern Rock
- Thread starter wayneL
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This all leads back to the bail out of Long Term Capital Management in 1998.
From http://en.wikipedia.org/wiki/Long-Term_Capital_Management
Some industry officials said that Federal Reserve Bank of New York involvement in the rescue, however benign, would encourage large financial institutions to assume more risk, in the belief that the Federal Reserve would intervene on their behalf in the event of trouble. Federal Reserve Bank of New York actions raised concerns among some market observers that it could create Moral hazard. [4]
From http://en.wikipedia.org/wiki/Long-Term_Capital_Management
Some industry officials said that Federal Reserve Bank of New York involvement in the rescue, however benign, would encourage large financial institutions to assume more risk, in the belief that the Federal Reserve would intervene on their behalf in the event of trouble. Federal Reserve Bank of New York actions raised concerns among some market observers that it could create Moral hazard. [4]
Below is an excellent article on why this is all happening: Modern Portfolio theory and the authority given to it by the "Nobel Prize" in economics. How many 1 in a million year crashes do we have to have before this stuff is discredited?
http://www.ft.com/cms/s/0/4eb6ae86-8166-11dc-a351-0000779fd2ac.html?nclick_check=1
http://www.ft.com/cms/s/0/4eb6ae86-8166-11dc-a351-0000779fd2ac.html?nclick_check=1
This is a really worrying situation! $2 a share... the books must have looked really bad to strike up a price like that, which I believe is the fair value, you always pay for something for what you believe it is worth... next question is, who is next???
Next up on the chopping block for broker dealers is Lehman Bros, also watch Washington Mutual amongst the large US banks for possible chapter 11/takeover potential.
Sean K
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This is really going to be a golden period for those with lots of cash.
Kauri
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Another firm might face financial problems. The price for insuring Lehman Brothers" debt jumped to 478 USD per 10,000 USD in bonds on Friday afternoon, from 385 USD in the morning. The cost for Bear debt was up to 830 USD, from 530 USD...
prawn_86
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Once it sorts itself out it sure will be.
Might still take another year though the way some things are looking.
Im gunna havta start saving so i have as much cash as possible
Kauri
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A timetable of the failure. fron the FT... see any similarities with any other insto???
Declining fortunes
Jun 14, 2007 Bear Stearns reports second-quarter profits down 10 per cent to $486 million
Jun 22 Bear Stearns pledges up to $3.2 billion in loans to bail out two hedge funds hit by sub-prime losses and investor redemptions
Jul 19 Writes to clients informing them that two of its hedge funds contain “very little” or “effectively no value”
Aug 1 Two Bear Stearns hedge funds file for bankruptcy and another has its assets frozen
Sept 20 Reports third-quarter profit down 61 per cent to $171 million
Oct 4 James Cayne, chief executive, says: “Most of our businesses are beginning to rebound.” Alan Schwartz, president, says: “The market is in the early stages of a recovery”
Oct 22 Outlines an agreement with CITIC, of China, under which both will invest $1 billion in each other. The deal is now in doubt
Nov 28 Bear Stearns announces it will cut 650 jobs
Dec 20 Posts fourth-quarter loss of $854 million, the first quarterly loss in its 85-year history
Dec 20 Barclays sues Bear Stearns for allegedly misleading the UK bank over the performance of two collapsed hedge funds
Dec 28 Mr Cayne sells $15.4 million of the bank’s stock
Jan 9, 2008 Mr Cayne resigns as chief executive but stays as chairman; Mr Schwartz takes over
Mar 10 Bear Stearns states that “there is absolutely no truth to the rumours of liquidity problems that circulated today in the market”
Mar 12 Mr Schwartz says: “We don’t see any pressure on our liquidity, let alone a liquidity crisis”
Mar 14 Bear Stearns confirms it has secured a funding agreement with JPMorgan Chase and the Federal Reserve Bank of New York. Mr Schwartz says: “Bear Stearns has been the subject of a multitude of market rumours regarding our liquidity. Amidst this chatter, our liquidity position in the last 24 hours had significanty deteriorated”
Declining fortunes
Jun 14, 2007 Bear Stearns reports second-quarter profits down 10 per cent to $486 million
Jun 22 Bear Stearns pledges up to $3.2 billion in loans to bail out two hedge funds hit by sub-prime losses and investor redemptions
Jul 19 Writes to clients informing them that two of its hedge funds contain “very little” or “effectively no value”
Aug 1 Two Bear Stearns hedge funds file for bankruptcy and another has its assets frozen
Sept 20 Reports third-quarter profit down 61 per cent to $171 million
Oct 4 James Cayne, chief executive, says: “Most of our businesses are beginning to rebound.” Alan Schwartz, president, says: “The market is in the early stages of a recovery”
Oct 22 Outlines an agreement with CITIC, of China, under which both will invest $1 billion in each other. The deal is now in doubt
Nov 28 Bear Stearns announces it will cut 650 jobs
Dec 20 Posts fourth-quarter loss of $854 million, the first quarterly loss in its 85-year history
Dec 20 Barclays sues Bear Stearns for allegedly misleading the UK bank over the performance of two collapsed hedge funds
Dec 28 Mr Cayne sells $15.4 million of the bank’s stock
Jan 9, 2008 Mr Cayne resigns as chief executive but stays as chairman; Mr Schwartz takes over
Mar 10 Bear Stearns states that “there is absolutely no truth to the rumours of liquidity problems that circulated today in the market”
Mar 12 Mr Schwartz says: “We don’t see any pressure on our liquidity, let alone a liquidity crisis”
Mar 14 Bear Stearns confirms it has secured a funding agreement with JPMorgan Chase and the Federal Reserve Bank of New York. Mr Schwartz says: “Bear Stearns has been the subject of a multitude of market rumours regarding our liquidity. Amidst this chatter, our liquidity position in the last 24 hours had significanty deteriorated”
prawn_86
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Have ASIC and other such American regulators given up?
What do they actually do??
There no longer (was there ever, im too young) any disclosure to do with margin loans, loans from other comapnies. CEOs can say what they like in OFFICIAL releases and then a day later change their mind/postion.
Whatever happened to a (relatively) level playing field?
If you are not on the board you do not know what is happening. Simple as that
What do they actually do??
There no longer (was there ever, im too young) any disclosure to do with margin loans, loans from other comapnies. CEOs can say what they like in OFFICIAL releases and then a day later change their mind/postion.
Whatever happened to a (relatively) level playing field?
If you are not on the board you do not know what is happening. Simple as that
Kauri
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Just so long as you don't hold that cash in a bank! The manufacturers of bomb-proof under-floor safes must be doing a good trade atm....
Chiz,
AJ
Hi guys
It said in an article today that "Bear Sterns survived the Great Depression, Two World Wars and countless recessions". And yet after just 1 year from its all time high it gets sold for almost nothing, after this subprime thing.
This is just the beginning.
Spartn
:viking:
It said in an article today that "Bear Sterns survived the Great Depression, Two World Wars and countless recessions". And yet after just 1 year from its all time high it gets sold for almost nothing, after this subprime thing.
This is just the beginning.
Spartn
:viking:
explod
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prawn_86
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Its funny,
Sitting here at uni virtually everyone has no idea of what is happening around them.
Sometimes i wish i didn't either...
it will be interesting to see how this all plays out, as i bet my old man there would not be a depression like the great depression in our lifetimes
Sitting here at uni virtually everyone has no idea of what is happening around them.
Sometimes i wish i didn't either...
it will be interesting to see how this all plays out, as i bet my old man there would not be a depression like the great depression in our lifetimes
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Its funny,
Sitting here at uni virtually everyone has no idea of what is happening around them.
Sometimes i wish i didn't either...
it will be interesting to see how this all plays out, as i bet my old man there would not be a depression like the great depression in our lifetimes
Ooooer....
How MUCH did you bet ..... ??
prawn_86
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It was a slab of premium beer.
As that way it is a staple which is constant, and would still be 'worth' the same amount in X years time, rather than a set $ value.
