Comments on: Bear Stearns (BSC) http://zachstocks.com/2007/06/bear-stearns-bsc/ Dynamic Investments for Exceptional Traders Tue, 31 Jan 2012 01:21:02 -0700 http://wordpress.org/?v=2.8.6 hourly 1 By: fivefingers shoes http://zachstocks.com/2007/06/bear-stearns-bsc/comment-page-1/#comment-16057 fivefingers shoes Wed, 01 Jun 2011 02:59:18 +0000 http://zachstocks.com/?p=29#comment-16057 What’s Happening i am new to this, I stumbled upon this I’ve found It absolutely useful and it has aided me out loads. I hope to contribute & aid other users like its aided me. Great job. What’s Happening i am new to this, I stumbled upon this I’ve found It absolutely useful and it has aided me out loads. I hope to contribute & aid other users like its aided me. Great job.

]]> By: ZachStocks » Blog Archive » Reading List 8/4 http://zachstocks.com/2007/06/bear-stearns-bsc/comment-page-1/#comment-210 ZachStocks » Blog Archive » Reading List 8/4 Sat, 04 Aug 2007 21:41:30 +0000 http://zachstocks.com/?p=29#comment-210 [...] MCO CMG COH VCLK PNK ICE LM STAR TPX STP CPLA NUE MTOX ACM FCSX TLM NVEC BARE RIMM MR ATV TSL PCS BSC BLUD FIG KMX KNOT QSII CBG FMCN BOT LVS RMD [...] [...] MCO CMG COH VCLK PNK ICE LM STAR TPX STP CPLA NUE MTOX ACM FCSX TLM NVEC BARE RIMM MR ATV TSL PCS BSC BLUD FIG KMX KNOT QSII CBG FMCN BOT LVS RMD [...]

]]> By: Joel Odom http://zachstocks.com/2007/06/bear-stearns-bsc/comment-page-1/#comment-20 Joel Odom Thu, 28 Jun 2007 11:25:55 +0000 http://zachstocks.com/?p=29#comment-20 That helps me to understand the situation better, but I don't understand what Bear Stearns has to gain from loaning money to a dying fund. If the fund is selling off its CDOs, is their price really likely to hold steady? As their price declines, what if the creditors get spooked and start calling the loans? It seems to me that the fund is near bankruptcy already and that Bear Stearns is probably taking a lot of risk with a few billion dollars. If they loose $2,000,000,000 dollars in the deal (I just had to type that number out in all its glory), then they loose more than 1% of their entire market cap in one transaction and probably loose a lot more of their liquidity.<br/><br/>All that having been said, I wish you and them the best in pulling this off. (And, again, I don't understand these things very well to begin with!) That helps me to understand the situation better, but I don’t understand what Bear Stearns has to gain from loaning money to a dying fund. If the fund is selling off its CDOs, is their price really likely to hold steady? As their price declines, what if the creditors get spooked and start calling the loans? It seems to me that the fund is near bankruptcy already and that Bear Stearns is probably taking a lot of risk with a few billion dollars. If they loose $2,000,000,000 dollars in the deal (I just had to type that number out in all its glory), then they loose more than 1% of their entire market cap in one transaction and probably loose a lot more of their liquidity.

All that having been said, I wish you and them the best in pulling this off. (And, again, I don’t understand these things very well to begin with!)

]]> By: Zach http://zachstocks.com/2007/06/bear-stearns-bsc/comment-page-1/#comment-19 Zach Thu, 28 Jun 2007 11:14:47 +0000 http://zachstocks.com/?p=29#comment-19 well you're right in that the fund needs to be shut down. The problem was that investors couldn't get out because in order to meet withdrawals the fund had to sell securities that were illiquid and once the market knows there is a motivated seller, the bids dry up and it is impossible to sell to meet redemptions. Lenders like MER then get spooked and take posession of collateral in place of the loans, continuing a vicious cycle.<br/><br/>To my understanding, Bear's capital will allow the fund to meet redemptions, and dissolve in an orderly fashion. The fund (funds) will be shut down but hopefully in a manner that at least gets investors some return of their capital and lenders some return of their loans.<br/><br/>Much of these dealings are not completely transparent so there is definitely a lot of uncertainty surrounding the situation. Bear is not an investor in the funds and so this has more to do with the company's reputation than a financial loss suffered by BSC (aside of course from the most recent capital infusion) well you’re right in that the fund needs to be shut down. The problem was that investors couldn’t get out because in order to meet withdrawals the fund had to sell securities that were illiquid and once the market knows there is a motivated seller, the bids dry up and it is impossible to sell to meet redemptions. Lenders like MER then get spooked and take posession of collateral in place of the loans, continuing a vicious cycle.

To my understanding, Bear’s capital will allow the fund to meet redemptions, and dissolve in an orderly fashion. The fund (funds) will be shut down but hopefully in a manner that at least gets investors some return of their capital and lenders some return of their loans.

Much of these dealings are not completely transparent so there is definitely a lot of uncertainty surrounding the situation. Bear is not an investor in the funds and so this has more to do with the company’s reputation than a financial loss suffered by BSC (aside of course from the most recent capital infusion)

]]> By: Joel Odom http://zachstocks.com/2007/06/bear-stearns-bsc/comment-page-1/#comment-18 Joel Odom Thu, 28 Jun 2007 11:00:40 +0000 http://zachstocks.com/?p=29#comment-18 I really don't understand much about the Bear Stearns scenario -- I admit that right off -- so to my uneducated eye, the whole thing looks crazy. You have a hedge fund that's highly leveraged in these CDOs, so you have a lot of risk to begin with. The lending market gets rocky, so the leveraged strategy doesn't work: the fund is at risk of suffering gambler's ruin. In steps Bear Stearns to loan them a bunch of money so that they can continue to pay on existing debt? Really, how will taking on <i>more</i> debt help the fund? If I were one of the funds investors, I'd be doing all that I could to cut my losses and get out, yet Bear Stearns thinks that the funds can hold on long enough to repay the loan. That seems to be a quite risky move. Perhaps this post reveals total ignorance of the circumstances, but that's the best of my understanding. I really don’t understand much about the Bear Stearns scenario — I admit that right off — so to my uneducated eye, the whole thing looks crazy. You have a hedge fund that’s highly leveraged in these CDOs, so you have a lot of risk to begin with. The lending market gets rocky, so the leveraged strategy doesn’t work: the fund is at risk of suffering gambler’s ruin. In steps Bear Stearns to loan them a bunch of money so that they can continue to pay on existing debt? Really, how will taking on more debt help the fund? If I were one of the funds investors, I’d be doing all that I could to cut my losses and get out, yet Bear Stearns thinks that the funds can hold on long enough to repay the loan. That seems to be a quite risky move. Perhaps this post reveals total ignorance of the circumstances, but that’s the best of my understanding.

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