Bloomberg is keeping up a rapid pace of stories on the Bear Stearns hedge funds. Bear has apparently found some buyers for the assets of its High-Grade Structured Credit Leveraged Fund, the one for which it put in place a secured credit facility to permit an orderly workout. This was not an official announcement by […]
Read more...Merrill Lynch analyst Guy Moszkowski confirms our views of the last few days, that Bear Stearns will probably have to orchestrate some sort of orderly wind-up for its second hedge fund, the High-Grade Structured Credit Enhanced Leveraged Fund. For those who have not been following this story closely, Bear had two funds, both managed by […]
Read more...Before readers get too excited, let me be clear: this post is to discuss what circumstances might lead Bear Stearns to cease to be an independent organization. It is not an attempt to forecast the likelihood of that taking place. Despite their considerable prowess, investment banks are fragile organizations. It took only one major scandal […]
Read more...By happenstance, I came across a document, “Fixed Income Overview” from a May 29, 2007 Bear Stearns Investor Day presentation by Jeff Mayer, Co-Head of Global Fixed Income, and Tom Marano, Global Head of Mortgages and Asset Backed Securities on the Bear Stearns website. It’s a fascinating bit of reading and some parts are particularly […]
Read more...We had wanted to write about the role of models and more important, model assumptions in the ongoing Bear Stearns hedge fund debacle, and Gretchen Morgenson of the New York Times, in her story, “When Models Misbehave,” provided some useful intelligence. With all due respect to Morgenson, while she touches on some dimensions of the […]
Read more...In case you missed it, the US stock market was rattled by the continuing aftershocks of the Bear Stearns subprime-related hedge fund fallout, with the Dow down 185, and Bear itself was down in line with the Dow (both fell 1.4%, although Bear was up slightly in the aftermarket at this hour). Now the odd […]
Read more...One of the reasons the US market traded down today was fears the LBO boom is coming to an end, and support for that thesis came in a Bloomberg story, “Thomson Learning Shows `Breaking Point’ for Junk Debt.” Three deals, Thomson Learning, US Foodservice, and Dollar General, are having trouble finding lenders on terms recently […]
Read more...The Economist takes a detached, often ironic, tone in its articles. So when one reads a piece that exudes worry, as this week’s “Bearish Turns” does, it’s noteworthy. The piece recites a litany of likely developments in the credit markets, all negative: the indeterminate state of the Bear Stearns subprime hedge funds; the near-certainty of […]
Read more...A solid piece, “Collateral value thrust to the fore by woes at Bear Stearns,” by capital markets editor, Gillian Tett of the Financial Times. It’s inherently difficult to value assets that don’t trade often (think of art), yet dodgy CDO paper has already been valued as colleteral so loans could be made against it. Some […]
Read more...It continues to be lively on the Bear Sterns front. As readers doubtless know, two Bear Stearns sponsored hedge funds run by Ralph Cioffi that focused on subprimes had trouble meeting margin calls and went into liquidation. On the one hand, the Wall Street Journal appears not to be putting it on the first page […]
Read more...In a MarketWatch story that was ostensibly about the continuing saga of the Bear Stearns hedge fund implosion comes a juicy tidbit about the composition of subprime loans. It turns out half weren’t even for housing purchases but to refinance other debt: Subprime loans are made to less credit-worthy borrowers at higher rates. It’s a […]
Read more...The Financial Times and the Wall Street Journal give complementary updates on the unraveling of the Bear Stearns subprime hedge funds, the larger of which was the High Grade Structured Credit Strategies Enhanced Leverage Fund. Merrill Lynch and Deutsche Bank put up over $1 billion in assets seized from the funds for sale today. Some […]
Read more...In recent years, financial services firms have become increasingly adept at the game of “pin the liability on the bagholder.” Wall Street players structure complicated new products and seem peculiarly able to strip a disproportionate share of the economic value out as up-front fees. I say “peculiarly” simply because investors buy this stuff, even the […]
Read more...OK, the headline may be exaggerating, but not by much. A Bloomberg article titled, “Bernanke, Trichet Turn to BIS as Markets Ignore Risk,” discusses how central bankers are finding the Bank of International Settlements an increasingly important forum for exchanging ideas and intelligence. What is distressing yet not surprising is the central bankers’ acknowledgement of […]
Read more...Marc Faber, who likes a colorful turn of phrase, has a sobering piece in the Financial Times, “Market insight: Beware the driving forces behind surging asset prices.” He looks at the symptom of pervasive asset bubbles (at least until US housing started unravelling) and traces it back to rapid money supply growth, which produced the […]
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