Saturday, June 23, 2007

The Monday Morning Run

The WSJ reports that Bear Stearns is injecting 3.2 billion into their hedge funds to stave off the risk of a fund collapse. It was either that or risk having the junk, marked to market and that is not something that any fund wants to see happen.

I would bet that the cash infusion is just a ploy, a stall for time. They are not going to do it. The mere suggestion of a 3.2 billion dollar bailout, suggests that the people in charge are over medicated.

On the street, they are openly laughing at the bond rating services. The reality gap for a lot of these bond ratings could be labeled downright unbelievable. Bankers refer to Equity Tranches as Toxic Waste and now you hear references to them as Radioactive Waste. Even if S&P gets the ratings straight, there are a lot of financial institutions that will have to sell anything re-rated BBB. That could mean a 50% loss of equity. Talk about some mad fund managers! The retirement funds have the weekend to figure out what to sell.

So come Monday morning, it looks like Bear Sterns is in the cross hairs. The words "Coup de grace" come to mind. It kind of has the feel of a 1930’s run on the bank. Where’s Jimmy Stewart when you need him?


Cranky said...

I find this Bear Stearns business to be huge. Reminds me of one of those movies when the timbers in the mine start creaking just before the big cave-in.

What I find most disturbing about these Bear Stearns, subprime type problems,
is the attitude in the government and financial world have on all this. It’s the same attitude they had before the great depression. Everything is hunky dory… don’t worry about a thing.

Jim in San Marcos said...

Hi Cranky

I agree it's beyond big. Monday could be a "hold your breath day and pray." So if nothing happens tomorrow, I'll bet they will be sneaking out en mass on Tuesday.

I can live without government intervention. The last time they fiddled with cable TV and my phone, my rates doubled.

Anonymous said...

Housing news BAD -- "check"
Bear Stearns funds NOT saved -- "check"
Global stock markets down -- "check"

US stock market UP? !?@$&@!!

This PPT anticts just infuriates me! SO BLATENT

Numpty McHoon said...

This was the first thing I thought about upon awaking this morning.

Will it play out today? This week? Surely something this big won't just die with a whimper.

Cranky got me started. So I hope you don't mind, Jim, as I was going to comment further- but it got too long. I linked back to your blog from my post here.

Bad form? I'm not called a Clueless Numpty for nothing.