Posts for Ticker ‘BSC’

Media Digest 3/24/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to The New York Times, JP Morgan (JPM) is in talks to raise it bid for Bear Stearns (BSC) from $2 to $10.

Reuters writes that analysts now see a steep drop in Q1 earnings for S&P 500.

Reuters writes that Bank of America (BAC) may face a $6.5 billion write-down for the current quarter.

The Wall Street Journal writes that former executives from Countrywide (CFC) are launching a firm to buy distressed mortgages. The new entity is backed by Blackrock (BLK).

The Wall Street Journal writes that Verizon (VZ) is beginning to get its fiber TV product into large apartment buildings, a further threat to cable.

The Wall Street Journal writes that Big Pharma is turning to genetics to revive sales of some of its drugs.

The Wall Street Journal writes that shares of Palm (PALM) may be downgraded by S&P.

The New York Times writes that a new Google (GOOG) search feature may take advertising away from some of its content site partners.

The New York Times writes that the WSJ will remake its MarketPlace section to handle shorter, more current articles.

The FT writes that court documents filed by JP Morgan show how far the value of some risky securities have fallen.

Bloomberg writes that "New York paid 10 securities firms more than $600,000 since mid-February to handle bids for auction-bonds even though the sales failed, saddling the state with penalty interest rates." The firms included Citigroup (C) and Goldman Sachs (GS).

Douglas A. McIntyre

Posted on: March 24, 2008 – 2:48 am in Press Digest, , , , , , , , , ,

Letter From SEC Chairman Says Bear Stearns (BSC) Could Have Weathered Storm

In what is likely to be a bit of a blockbuster, SEC charman Christopher Cox sent a letter to Swiss regulators indicating the Bear Stearns (NYSE:BSC) did not have to go the way of all flesh. According to The New York Post "the "fate of Bear Stearns was a lack of confidence, not a lack of capital," Cox, the head of the Securities and Exchange Commission, wrote in a five-page letter sent to a Swiss regulator."

That letter will lead angry Bear Stearns sharedholders, who watched the stock fall from over $30 near $2, to question why JP Morgan (NYSE:JPM) was able buy the brokerage at a deep discount with help from the Federal Reserve. The missive may encourage Congress and regulators to question whether the takeover of BSC involved foul play.

JP Morgan has come under additional scrutiny for making high pay offers to key Bear Strearns employees to keep them on board after the takeover. JPM CEO James Dimon has approached a number of important Bear Stearns bankers. The Post also reports that "He’s basically bribing them for their votes," said Richard Bove, an analyst at Punk Ziegel & Co. "In this environment, there are no jobs on Wall Street, so he can bribe them by letting them keep their jobs and they’ll vote for him."

Douglas A. McIntyre

Posted on: March 23, 2008 – 6:15 am in Brokerage Firms, ,

How Much Higher Will Bear Stearns Ultimately Fetch? (BSC, JPM)

The last 5 to 10 trading days have been dominated by Bear Stearns (NYSE: BSC).  Whether it was over the counterparties ceasing to accept their credit, whether it was the CEO publicly calling themselves solvent, whether it was the way out of the money put options trading, whether it was a looming implosion that would have occurred, or whether or not the JP Morgan Chase (NYSE: JPM) $2.00 buyout was fair…. It still commanded most of the talk this week, even with the huge volatility the markets saw this week.

247WallSt.com keeps regular dialog with traders, brokers, analysts, executives, and even competitors.  We all agree one one thing: Bear Stearns had to be bailed out because they were going to implode.  But there is yet another issue that is common: no one believes that anyone besides JP Morgan Chase and Jamie Dimon is getting anything close to a fair deal here.  We and others still acknowledge that the fallout of an outright and instant failure would have been a widespread financial crisis.  In recent weeks we even went as far as saying that many financial firms may in fact become mandated, like it or not.  If that turns out to be the case, then this one is the first mandated merger.

With the Fed having thrown in some $30 Billion in backstops and with the new packages available to primary dealers, many of the riskier or lower-valued assets will get to be handed in for a period of 28 days (we think that will be extended greatly, if not indefinitely), this $236.2 million to acquire Bear Stearns is one that amounts to one of the greatest fleecings on Wall Street in this generation.  Before taking this too far, Jamie Dimon can’t really be faulted here. He did the best thing for his shareholders in being able to be the only party and not paying more.  But Bear Stearns’ management will take much blame over this.

After speaking with many contacts, the topics and opinions surrounding this are nearly endless.  More than one contact used the exact terms "STAR CHAMBER" decision.  All extremes aside, it seems that many more lawsuits will be coming in the next few weeks to overturn some of the terms here.  Those terms might not just be limited to how much is paid.  One of the greatest criticisms is that Bear Stearns had to sign away their office building win or lose.

So, here are some of the key assets Dimon & Co. are getting: underwriting and research, wealth management, clearing, prime brokerage, energy trading, M&A advisory, and more.  The capital markets side of the equation with the endless "assets" that have no set value in today’s environment is the black hole, and the leverage there makes it a far larger black hole.  That’s where the $30 Billion backstop comes in.  Imagine if you could just strip that off and let the vultures come screaming down.

Is a higher price assured?  In truth, absolutely not.  Did management get forced into signing a deal under duress?  If not, it is a common belief that they "were made an offer they couldn’t refuse."  In fact, we have yet to find a single source out of our contacts that will say this is anywhere close to a good deal.

Frankly, it’s going to be a long road ahead and it is probably far from over.  It’s also hard to find too many institutions with the books that can assume the risks right now.  There are only a handful of firms that could compete against the merger because of the current malaise.

But on Friday, March 14 JPMorgan Chase shares closed at $36.54.  On Thursday, its shares closed at $45.97.  On Friday, March 14, Bear Stearns stock closed at $30.00, already down from over $70.00 the week before and down from year-ago highs north of $150.00.  Bear Stearns closed at $5.96 Thursday and it traded as high as $8.50 this week.

In any buyout and in any "creditor lines" the common shareholder is the last one to benefit and the first one to be totally hosed.  What is more than obvious anything is that those old much higher prices are merely in the history books.  And the all-stock buyout is worth more since JPMorgan Chase stock rose this week.  This bailout is a pure "takeunder" on any scale. A price of $30, $24, or even $20 would have hurt many old investors as is.  But it’s also the price of doing business and shows there are no sure things and no entitlements to making money.  Either way, $2.00 pre-adjusted on stock prices will ultimately turn many  fans into insurgents.

Imagine what this business would be worth in individual units in an auction if the Fed kept the $30 billion backstop in place.  After all, business entities of this size do keep most units separated in different corporate and business entities.  Most wine buyers know about "Two-Buck Chuck."  There is a real shot with all the whining on Wall Street and Main Street that Dimon won’t get to keep a new title of "Two-Buck Jamie."  This is far from over.

Barron’s also ran a piece this weekend saying that Dimon will have to up the ante here, although he’ll still get a steal.  We aren’t positive that a significantly higher price will come and we do think Dimon & JPMorgan will be the winner.  But the current price is too low regardless of what anyone in the administration, the Fed, or at JPMorgan or Bear Stearns has to say.

Jon C. Ogg
March 22, 2008

Posted on: March 22, 2008 – 10:05 am in Banking, Brokerage Firms, Financial Stocks, Mergers and Buy Outs, ,

Talk of Writedowns Hit Merrill Lynch and Others (MER, BSC, MS)

This is just becoming all too familiar in the financial stocks, and the bears are still in charge since we can’t hold a major up-day.  Merrill Lynch & Co. (NYSE: MER) is feeling the wrath of writedown rumors today.  It has been seen with a sharp drop in the stock today, and it has also been seen with major volume in put options.  The March options expire tomorrow, so traders are going out to April with more than 120,000 put contracts in the April 18 expirations trading hands.

The company already announced it was suing SCA over written down assets but that is on old and already written-down numbers according to contacts.  More importantly, the talk is on yet another major writedown coming soon.  The figure vary from source to source, but the figures started out as being "more than $5 Billion" today.  Then we were told it could be $10 or $12 Billion, and someone else that is close to many primary brokers noted that $15 Billion is what some are talking about internally at Merrill Lynch.

Before you go jump out the window, please keep in mind that this is all based on what traders and brokers are talking about today.  These aren’t rumors as much as they are traders trying to factor in as much as they can in more write-offs.  It is also on the week of the big brokerage firms reporting earnings.  What should be expected is that more writedowns ARE COMING without question.  There is no way those writedowns will end suddenly, and the sad part is that many assets are bing written down to a "mark to theory" basis.

Bear Stearns (NYSE: BSC) was a winner yesterday on many rumors of better solutions coming, although that also now feels like it was a long time ago.  Morgan Stanley (NYSE: MS) is still positive today after its earnings beat expectations.

What is more important than any big numbers here by far is the notion of what write-offs will be paper and what write-offs will cause implosions.  If it is merely on paper and broker and bank counterparties don’t cut the institutions off, then the talk may be wasted time.

Outside of that, you’ve probably already gotten used to seeing writedowns from major financial institutions either each day or each week.  Even if S&P was right about being past the halfway mark, that isn’t going to end immediately.

Jon C. Ogg
March 19, 2008

Posted on: March 19, 2008 – 2:20 pm in Brokerage Firms, , ,

Media Digest 3/19/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, the Fed cut rates .75%.

Reuters writes that Visa raised $17.9 billion in its IPO.

Reuters writes that New York City will probe whether Bear Streans (BSC) misled investors.

Reuters writes that Fannie Mae (FNM) and Freddie Mac (FRE) have won relief from stringent capital rules and so can pump about $200 billion into a shaky mortgage market.

The Wall Street Journal writes that a run-up in the stock of Bear Stearns has set up a clash with JP Morgan (JPM) about whether it should have to pay more for the firm.

The Wall Street Journal writes that firms are reluctant to borrow from the Fed’s new facility because of concerns that it may make them like they have weak balance sheets.

The Wall Street Journal reports that Delta (DAL) plans to cut routes and employees.

The Wall Street Journal writes that Exxon (XOM) suffered a set-back when a judge reversed a decision that it could freeze some assets from the Venezuela state oil company.

The Wall Street Journal reports that Adobe (ADBE) is working on a media player for the Apple (AAPL) iPhone.

The Wall Street Journal writes that the size of the new Airbus 330 gives it an edge over Boeing (BA) in the dispute over who will get an Air Force tanker contract.

The New York Times reports that Intel (INTC) and Microsoft (MSFT) are creating a research budget to design a new generation of computing systems.

The FT says Apple (AAPL) may launch a free iTunes program.

Bloomberg says that Sony Ericsson believes lower mobile phone sales will hit its profits.

Douglas A. McIntyre

Posted on: March 19, 2008 – 2:53 am in Press Digest, , , , , , , , ,

Citigroup (C) And Lehman (LEH) Will Disappear

The story is the same every decade or so. Bad economic times cause well-known businesses to fail. They are bought out and merged, and they simply cease to exist as the public and investors knew them for decades.

After the 85-year-old Bear Stearns (BSC) went the way of all flesh, rumors surfaced that Lehman Brothers (LEH) or Citigroup (C) might be next. If things get bad enough, either one might get sucked up into another company.

The Fed kept Bear Stearns from being liquidated by financing a buy-out by JP Morgan (JPM). The agency cannot rescue all the firms on Wall St., so it has come up with a clever formula. It will give funds to the strong to buy up the weak. It is less expensive that way and tends to put the smartest management in charge.

Executives at Citi and Lehman have not been terribly smart, at least when it comes to keeping their businesses open.

A look back at the Fortune 500 from fifty years ago is not a bad lesson. Near the top of the list of the biggest companies sat Esmark, Armour, RCA, and Firestone. Someone owns all of those companies or their assets, but the names are gone.

The fact of the matter is that some of the companies at the top of the Fortune 500 are still in business. But, they do not look anything like what they did then. GE (GE) is a prime example. So is AT&T (T) which was on the list and then went off the list when it was broken up. Now, it is back on the list.

The Fed knows that it does not matter which brands survive, or which corporations do. The issue is what capital is preserved both for corporations and individuals, for saving and for lending.

Money does not care about brands or companies. The Fed is using that to its advantage by sinking the poor and giving the cargo to the rich.

Douglas A. McIntyre

Posted on: March 18, 2008 – 5:50 am in Financial Stocks, , , , ,

Media Digest 3/18/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

Accoding to Reuters, the Fed is set for a large rate cut in the face of the financial crisis.

Reuters writes that Google (GOOG) says it is well positioned for an economic slowdown.

Reuters reports that Paulson defended that government’s role in rescuing Bear Stearns (BSC)

Reuters reports that a big federal bail-out of housing is gaining momenturm.

The Wall Street Journal writes that the federal govenment is likely to try to curb the drop in the economy with  corporate bailouts, fiscal incentives and regulation.

The Administration is proposing easing lending restraints on Fannie Mae (FNM) and Freddie Mac (FRE) as a way to help the housing market.

The WSJ writes that Delta (DAL) and Northwest (NWA) pilot unions cannot come to an agreement, blocking a merger of the airlines.

The Wall Street Journal writes that Abu Dhabi has agreed to a sovereign investment code not to use it fund for political purposes.

The Wall Street Journal writes that Intel (INTC) has a plan to build several more powerful processors.

The Wall Street Journal writes that Alliance Data (ADS) notified Blackstone (BX) that it was in breach of finshing a buy-out deal.

The New York Times writes that Ford (F) is now desparate to get back buyers who defected to Asian and European brands.

The FT reports that the pressure is on the Fed to cut up to 1.25 points.

Bloomberg writes that oil rose again with the recovery in US stocks.

Douglas A. McIntyre

Posted on: March 18, 2008 – 2:48 am in Press Digest, , , , , , , , , ,

The 52-Week Low Club (BSC)(LEH)(C)(MER)

Bear Stearns (BSC) For those not on the planet today, firm was bought out by JP Morgan (JPM). Shares fall to $2.84 from 52-week high of $159.36.

Lehman Brothers (LEH) Fall out from banking system problems. Drops to $20.25 from 52-week high $82.05.

National City (NCC) Bank was downgraded. Has mortgage and commericial loan exposure. Sells down to $6.66 from 52-week high of $38.32.

MFGlobal (MF) Rumors about liquidity problems takes shares down to $3.64 from 52-week high of $32.20.

CIT (CIT) Worries about its credit quality bury it at $9.55 down from 52-week high of $61.47.

Citigroup( (C) drops to $17.99 from 52-week high of $55.55.

Merrill Lynch (MER) down to $37.25 from 52-week high of $85.

Force Protection (FRPT) Losing business to rivals and will delay 10-K. Down to $1.03 from $30.

GFI Group (GFIG) The inter-dealer broker is pulled down by concerns in the sector. Down to $32.66 from 52-week high of $103.16.

Blackstone (BX) Private equity group down to $13.40 from 52-week high of $38.

Douglas A. McIntyre

Posted on: March 17, 2008 – 2:55 pm in HI/LOW, , , , , , , ,

Will Billionaire Joe Lewis Be Wiped Out By Bear Stearns (BSC) Collapse?

Billionaire Joe Lewis invested in Bear Stearns (NYSE BSC), buying as much as 10% of the brokerage firm.

Now, he may be out over $1 billion. On Sunday, the Times wrote that Lewis has lost about $800 million on his investment. That was before Bear Stearns accepted a $2 per share offer from JP Morgan (NYSE: JPM).

Lewis’s holding company Tavistock Group owns the Isleworth golf course in Windermere, Florida, and has stakes in companies including sporting-goods maker Puma AG, luxury-car maker Bristol Cars Ltd. and Ambrx Inc., a genetics-engineering firm. Tavistock is also developing real estate in Orlando, Florida, and the Bahamas, according to the Sydney Morning Herald.

It is probably safe to expect that he will not own all of those businesses come next month.

Douglas A. McIntyre

Posted on: March 17, 2008 – 11:18 am in Financial Stocks, ,

Media Digest 3/18/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, the Fed is opening up its own balance sheet to poisonous securities it may get from banks in exchange for cash.

Reuters writes that JP Morgan (JPM) bought Bear Stearns (BSC) for $2 as the Fed opened up lending to primary dealers.

Reuters reports that Credit Suisee kept its estimates on JP Morgan constant.

Reuters writes that Google (GOOG) says the Yahoo! (YHOO) sale might hurt the internet.

Reuters reports that Siemens (SI) issued a profit warner after an audit of some of its projects.

Reuters writes that the Saudis will invest $40 billion into improving the water supply to the country.

The Wall Street Journal writes that Citigroup (C) replaced the head of its investment banking unit.

The Wall Street Journal reports that CME Group moved closer to an agreement to acquire Nymex Holdings.

The Wall Street Journal reports that a number of companies are pushing into online car sales.

The Wall Street Journal writes that Microsoft (MSFT) and Intel (INTC) are working on solving problems to build powerful microband chips.

The Wall Street Journal reports that Motorola (MOT) replaced two more senior executives.

The New York Times reports that there is a fear that markets could sell off on concerns that the problems at Bear Stearns might spread.

The New York Times writes that magazines and newspapers are using their archives as a way to bring in readers and advertisers.

The New York Times reports that gold moved up 3% to $1,030.

The FT writes that many investors are betting that oil will remain above $100 until 2016.

The FT writes that tech companies are making fewer, larger bets on R&D.

Bloomberg reports that the dollar dropped to a 12-year low.

Douglas A. McIntyre

Posted on: March 17, 2008 – 2:42 am in Press Digest, , , , , , , , ,

Asia Opens To A Terrible Beating, Some Shares Off Over 4% Early

The news that Bear Stearns (NYSE: BSC) was sold to JP Morgan (NYSE: JPM) and that the Fed would increase liquidity for primary dealers was too much for the Japanese market to bear. It sold off 3.4% in the opending minutes and is likely to be followed by drops in exchanges in China and other Asian countries as they open for Monday morning trading.

Hitachi opend down 8.3% to 623 yen. Mazda was down 4.8% to 341. NEC was off 5.1% to 376. Toyota (NYSE: TM) traded off 3.3% to 4920.

If US exchanges give up similar numbers, the Dow could easily open down over 300 points with some financial shares suffering sharper losses.

Douglas A. McIntyre

Posted on: March 16, 2008 – 7:57 pm in International Markets, ,

Federal Reserve Acts To Avert A Panic

The Federal Reserve Board unanimously approved a request by the Federal Reserve Bank of New York to decrease the primary credit rate from 3-1/2 percent to 3-1/4 percent. The Fed also authorized the Federal Reserve Bank of New York to create a lending facility to improve the ability of primary dealers to provide financing to participants in securitization markets. This facility will be available for business on Monday, March 17. It will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under this facility may be collateralized by a broad range of investment-grade debt securities. The interest rate charged on such credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.

With Bear Stearns (NYSE: BSC) being sold to JP Morgan (NYSE: JPM) Wall St. is certain to be near panic. The 85-year sold investment bank was worth 30 times what it is being sold for less than a weak ago.

The central bank is making certain that financial firms can turn over paper that may be worth well under $1 for $1 worth of capital.

The Fed has become the lender of only as well as last resort.

Douglas A. McIntyre

Posted on: March 16, 2008 – 7:29 pm in Financial Stocks, ,

Bear Stearns (BSC) Will Probably Disappear Into JP Morgan (JPM)

According to The Wall Street Journal, JP Morgan (NYSE: JPM) is close to buying Bear Stearns (NYSE: BSC), just days after providing financial aid, which was backed by the Fed, to the brokerage.

The paper writes that "Reflecting the dire situation at Bear, the company is likely to fetch considerably less on a per-share basis than its stock price of $30 in New York Stock Exchange composite trading Friday at 4 p.m."

In other words, investors who bought the stock at $90 last month may end up with $9, or less, tomorrow.

Douglas A. McIntyre

Posted on: March 16, 2008 – 4:53 pm in Financial Stocks, ,

Bleak House: Despair On The 52-Week Low List (GE)(VZ)(GOOG)(C)

Those rummaging through the garbage of 52-week low lists are usually bottom-fishing investors or desperate CEOs. But, the list is so broad that it has become a tableau of the market as a whole, especially the breadth of the market’s decline across almost every industry.

Not a single person in the world is surprised that financials like Bear Stearns (NYSE: BSC), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), and Cigna (NYSE: CI) hit bottoms last weak. Over in the car business both Ford (NYSE: F) and GM (NYSE: GM) dropped to lows. Perhaps more surprising Toyota (NYSE: TM), the world’s most successful car company, came close. Given its vast resources and cash position, that news said more than the GM or Ford numbers did.

Airlines, as expected, were crushed. AMR (NYSE: AMR) was at the front of the Charge of the Light Brigade. Retail would also expected to be down and many stocks in that sector were at bottom including the previously popular Best Buy (NYSE: BBY).

The newspaper industry, the dying art of people reading information off something other than a computer screen, also had a number of lows, led by Gannett (NYSE:GCI) and McClatchy NYSE: MNI).

If the painful trend ended here, with these sectors, it would at least be in line with what might be expected in troubled industries in a slowing economy. But, it does not.

Communications companies, in both telecom and cable, hit bottoms. Verizon (NYSE: VZ) did the limbo. So did Comcast (NYSE: CMCSA). These firms are known for the breadth of their businesses, astonishing cash flow, and iron-clads balance sheets. By the market’s logic, that data meant little.

Tech also was sucked under. That included some of the first class companies in the sector like Adobe (NYSE: ADBE), Nvidia (NASDAQ: NVDA), and Infosys (NASDAQ: INFY). This is worth some analysis. NVDA is expected to have a 37% increase in revenue this quarter and EPS that will move from $.28 last year to $.39. The company is down almost 50% from its 52-week high. Analysts expect Infosys revenue to be up 32% for the current period. Wall St.’s whirlpool is taking under strong companies as it pulls down the weak.

The same might be said for Big Pharma. Bristol-Myers (NYSE: BMY), Pfizer (NYSE: PFE), and Merck (NYSE: MRK) all posted lows. The markets have been worried about their product pipelines, but that issue has not become more acute recently and these companies are still, for the time being, cash machines. Most have yields above 1.5% and some are much higher.

Deep trouble has also extended to the internet content business which has done well since the tech crash of 2000. Last week TheStreet.com (NASDAQ: TSCM), CNET (NASDAQ: CNET), and IACI (NASDAQ: IACI) dropped to 52-week lows. Given the low fixed costs that these companies sport along with pristine balance sheets, they would seem to be due some break.

Older line media companies, which have said they are not seeing any profound slowing in their businesses we sold off in a near panic dropping CBS (NYSE: CBS) and Time Warner (NYSE: TWX) to the lowest end of their charts.

Alternative energy stocks, not so long ago darlings, pushed to new bottoms. Verasun (NYSE: VSE) and Trina Solar (NYSE: TSL) could not hold on. Even the high cost of oil could not give them buoyancy

The most stunning part of all of this is the capitulation of the blue chips. Boeing (NYSE: BA) hit a 52-week low. The Air Force contract it lost is not worth enough spread over its life to do any real damage. Google (NASDAQ: GOOG) bottomed telling Wall St. that a company with 60% market share and 50% earnings growth was not worth some premium.

And, General Electric (NYSE: GE), the market’s poster boy for American services and industry, hit its low for 52-weeks. It has not backed off its robust projections for EPS improvement. It credit ratings remain the envy of almost every other company in the world. Its business and geographic diversity are supposed to make it the business equivalent of Plato’s ideal of the perfect state.

To look for investor concern about how deep and long the recession will be, the 52-week low list may be the most telling set of numbers available. It is an unusually broad and deep data-base. It is about money, and without emotion.

The list is saying that things are worse off than they seem.

Douglas A. McIntyre

Posted on: March 16, 2008 – 11:49 am in HI/LOW, , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Goldman Sachs (GS) Earnings May Crush Wall St. Further

Shares in Goldman Sachs (NYSE GS): are only down about 12% over the last six months. That is about the same as the S&P. But, shares in peers Morgan Stanley (NYSE: MS) and Merrill Lynch (NYSE: MER) are off closer to 40%.

That makes Goldman’s earnings this week a critical bell-weather, perhaps more for other brokers than for itself. The firm still has the strongest balance sheet on Wall St. and is likely to make it through almost any downturn in the economy.

Goldman may do much worse than Wall St. expects. The Telegraph reports that the firm’s write-offs could hit $3 billion. That would halve earnings from the same quarter a year ago. The company is expected to writes down a large portion of its investment in the Industrial & Commercial Bank of China. "Goldman will also take a hit of about $1.6bn in its leveraged loans business, which has seen a marked decline in recent months amid a dearth in demand for trading bank debt. A further $1.1bn will be written down in connection with assets owned by Goldman’s principal investment area."

If the news out of GS is that bad, where does that leave its competitors?

Goldman Sachs may be able to handle these kinds of tough financial problems without raising more capital. The same is not likely to be true for the rest of the companies in the industry. And, new capital is hard to come by, as Bear Stearns (NYSE: BSC) found out last week. Private equity and sovereign funds may not be so ready to put money into a sector of the economy where they cannot see a bottom.

If the numbers at Goldman are bad, the real fall-out will be among the less hardy companies on Wall St.

Douglas A. McIntyre

Posted on: March 16, 2008 – 7:37 am in Brokerage Firms, , , ,

Bear Stearns (BSC) Investor Loses $800 Million

Joe Lewis, a British billionaire, has lost $800 million from investing in Bear Stearns (NYSE: BSC). Lewis has almost 10% of the brokerage company’s shares.

According to the Times ‘The huge paper losses could force Lewis to sell out of some of his other positions, according to traders, in order to meet margin calls from his lending banks."

Lewis still has the money to buy a tin cup.

Douglas A. McIntyre

Posted on: March 16, 2008 – 5:51 am in Brokerage Firms,

Bear Stearns To Address Current Situation (BSC, JPM)

The Bear Stearns Companies Inc. (NYSE: BSC) announced that will host a conference call today at 12:30 P.M. EST.  The stock is now down more than $23.00 to under $34.00 and shares actually traded under $30.00 this morning on the reception of the Fed/JPM bailout.  The Fed has already tried to issue statements to address market speculation regarding its announcement this morning.  Unfortunately, with the volume seen in put options this week and with all of the rumors and actual instances where counter-parties refuse to accept Bear Stearns collateral, this just added to fears that the firm was going to implode whether it deserved to or not.

The company will also announce its first quarter 2008 financial results on Monday, March 17, 2008, after the market close of the market.

Calling this volatile or calling it critical is something that words really can’t say.  We noted earlier in our first story today on this matter "If you want to know what the brink of disaster looks like at a major financial institution, this is it."  That hasn’t changed, at least not any better from before the point that the rug was yanked out from under this stock.

As a reminder, even if a buyout comes there can be no assurance it will be at any sort of premium.  Unfortunately, Bear Stearns no longer has any control over its destiny.

Jon C. Ogg
March 14, 2008

Posted on: March 14, 2008 – 10:59 am in Banking, Brokerage Firms, Financial Stocks, ,

JP Morgan & NY Fed Try to Rescue Bear Stearns (BSC, JPM)

Bear Stearns Co. (NYSE: BSC) is getting a temporary reprieve this morning.  JPMorgan Chase (NYSE: JPM) and the New York Fed have provided liquidity financing for 28 days to the struggling brokerage firm.  This will allow Bear Stearns funding as needed.

There has been a run on the bank over at Bear Stearns over counterparty risk concerns and over its liquidity concerns.  Part of the announcement also notes that Bear Stearns is also talking with JPMorgan Chase & Co. regarding permanent financing or other alternatives, although no assurances can be made.

Bear Stearns has been getting a liquidity crunch over the last week that culminated over the last 24 hours.  This is a bailout for all practical purposes.  If you want to know what the brink of disaster looks like at a major financial institution, this is it.

Bear Stearns closed at $57.00 yesterday.  The initial reaction looked like this was going to open up 5% to 10%, but now shares are down around $54.00 or $53.00 in early indications.

Jon C. Ogg
March 14, 2008

Posted on: March 14, 2008 – 8:36 am in Banking, Brokerage Firms, Financial Stocks, ,

The 52-Week Low Club (CHTR)(SIGM)(GM)(F)(BSC)(VM)

Virgin Mobile (NYSE VM) Quaterly loss takes shares down. Falls to $1.90 from 52-week high of $15.69.

Bear Stearns (NYSE: BSC) Market still believes that company has severe balance sheet problems. Sells down to $50.58 from 52-week high of $159.36.

Ford Motor  (NYSE: F) Research firm downgrade coupled with high gas prices. Drops to $5.12 from 52-week high of $9.70.

General Motors (NYSE: GM) Chrysler is closing down for two weeks. All industry news is bad. All the way down to $19.15 from 52-week high of $43.20.

Sigma Designs (NASDAQ: SIGM) Outlook for next quarter well below expectations. Down to $20.10 from 52-week high of $73.

Charter Communications (NASDAQ: CHTR) Cable company has over $19 billion in debt and just placed another $1 billion in junk bonds. Sells off to $.61 from 52-week high of $4.93.

Douglas A. McIntyre

Posted on: March 13, 2008 – 2:58 pm in HI/LOW, , , , , ,

Goldman Sachs Pans Financials (FNM, FRE, MI, JPM, BSC, LEH, MER, WM)

Goldman Sachs has made some key downgrades in the financial sector today.  The firm has cut both Fannie Mae (NYSE: FNM) and Freddie mac (NYSE: FRE) from an already "neutral" rating, with implied negative, down to the loathed "SELL" rating.

It has also removed it rating on Marshall & Ilsley (NYSE: MI) down to a Neutral from a Buy rating. 

Goldman Sachs has also lowered estimates on Bear Stearns (NYSE: BSC), J.P.Morgan Chase (NYSE: JPM), Lehman Brothers (NYSE: LEH), Merrill Lynch (NYSE: MER), Morgan Stanley (NYSE: MS), and Washington Mutual (NYSE: WM).  Others were hit as well, but these are the major calls.

The firm wants investors to stay defensive regardless of bailout pacts.  It believes that Freddie mac is a short ahead of earnings this week and believes you can own a Put Spread in Wa-Mu.

Jon C. Ogg
February 25, 2008

Posted on: February 25, 2008 – 9:04 am in Analyst Calls, Financial Stocks, , , , , , , ,