Defending Market-Value Accounting
(March 18, 2008 03:38 PM, by Arnold Kling) Felix Salmon writes, Krugman’s saying they’re all wrong, and that Bear Stearns, along with other financial institutions, actually has a……
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Ftizgerald Was Wrong
There are second acts in American lives. Joe Weisenthal writes:
Google’s New Banking Partner?
Qatalyst. Release.
“The launch of Qatalyst is an important development for the technology industry,” said Eric Schmidt, Chairman and CEO of Google. “Frank and his team bring unparalleled industry knowledge, a unique 25-year market perspective and candid, insightful judgment that CEOs greatly value on important strategic initiatives. I look forward to working with him again and am very enthusiastic about Qatalyst’s prospects for success.”
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The Tip We Just Received Is Presented Without Comment, Because Words Fail To Capture The Absurdity Of The Situation, Though We Have To Wonder– Did They Cut Off All Water To The Building? Yeah, That’s What We Thought. The Soda Thing, However, Is Total B
To: tips at dealbreaker dot com
From: redacted
Subject: DealBreaker Tip
Goldman just cut free water/soda for employees.
Goldman’s official comment? “We’re not tanking, we’re conserving. Do you see the distinction?” Regardless, times are tough. You want to keep your job? Let me introduce you to Mr. Tap, and his friend, Senor You can afford to pay for your own Coke.
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Original Source
Bear Stearns Stock Manipulation: SEC on the Case
Amazingly prescient trading in way out of the money put options on Bear Stearns last week. Could only have been done by some very well informed traders. SEC on the case.
Bloomberg reports:
U.S. regulators are investigating whether traders illegally sought to force Bear Stearns Cos. shares into a tailspin last week by spreading false information about the firm’s finances, …
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The Best Day in Five Years
Remember how I said that last Tuesday was the best day in five years. Well, I’ve changed my mind. I meant to say that this Tuesday was the best day in five years.
Date……………Gain
18-Mar-08…….4.24%
11-Mar-08…….3.71%
17-Mar-03…….3.54%
13-Mar-03…….3.45%
18-Sep-07…….2.92%
13-Nov-07…….2.91%
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Original Source
"Open the Kimono"
Wow! I just heard Lehman’s CFO, Erin Callan, use the phrase “open the kimono” in a CNBC interview with Maria Bartiromo. By my math, that’s +1 to any company’s P/E.
By the way, Portfolio has just dubbed Ms. Callan as “Wall Street’s Most Powerful Woman.” I was waiting for Maria to ask about that….
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Fed Defies Wall Street, And Wall Street Cheers
So the Federal Reserve decided to defy market expectations and the predictions of most Wall Street economists that it would cut 100 basis points from the Fed Funds target rate and delivered only a 75 basis point cut. Economists for Citigroup, Morgan Stanley, Goldman Sachs, Standard & Poors and Bear Stearns all called it wrong.
DealBreaker’s readers did better. The chances of a 75 basis point cut ran neck and neck with the chances of a 100 basis point cut for most the morning and early afternoon. As the Fed announcement approached, however, the votes for a 75 basis point cut pulled ahead. Thirty-nine percent of readers voting in the poll favored 75 basis points, and 34.% favored 100 basis points. Joseph LaVorgna, chief U.S. economist at Deutsche Bank, also called it right by predicting a 75 basis point cut.
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Original Source
The Fed Cuts By 0.75%
The Fed Funds rate is now down to 2.25%. Here’s the statement:
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.
Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.
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Original Source
FactSet Research Systems
The popular belief seems to be that FactSet (FDS) is somehow a proxy for bad news in money management. The company’s results, however, continue to upset that thesis.
For Q2, FDS just reported a sales increase of 22% and adjusted EPS rose from 52 cents to 62 cents. Breaking down to the decimals, that’s an increase of 20.4%, and it beat the Street by two cents a share.
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Original Source
FactSet Research Systems (FDS)
The popular belief seems to be that FactSet (FDS) is somehow a proxy for bad news in money management. The company’s results, however, continue to upset that thesis.
For Q2, FDS just reported a sales increase of 22% and adjusted EPS rose from 52 cents to 62 cents. Breaking down to the decimals, that’s an increase of 20.4%, and it beat the Street by two cents a share.
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Original Source
Bernanke’s Mother Also Available For Quotes (Not So Much Dad, Who Never Thought He Was Good Enough)
A lot of you think the end is nigh. You think there’s no way out. You think JPMorgan is going to replace all of Bear Stearns with this huge bug, and that’s going to be the end of it. And you think the guy who should be saving and holding and stroking us all, Ben Bernanke, doesn’t have a clue as how he can make things better, and spare us from BugBot. Well, we’ve got news for you, sisters—Ben Bernanke knows exactly how to get us out of this techno-arachnid mess, and we know he does because his thesis adviser from grad school, whose reputation is not at all at stake, said so.
An inside look at hedge fund deliberations
In the opaque world of hedge funds, there is one area where the sun shines brightly through - the meeting minutes of public pension plans….
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The Medium and The Message
(March 18, 2008 09:55 AM, by Arnold Kling) Not the topic du jour, by any means, but one that has interested me for a long time. Megan McArdle……
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This Could’ve Been You
Gather ’round everyone and listen close because I’m only going to say this once– yes, it’s really quite a tragedy what’s going on over at Bear Stearns. Yes, a lot of people are going to get canned, and yes, there won’t be enough summer internships to go around and yes, dollars to donuts, Jimmy Cayne’s got a few bad highs coming his way. But let’s get a little perspective: few, if any of you are receiving sub-par lap dances. You should count your lucky stars; Stephen Chang didn’t have such good fortune. According to a lawsuit filed in Manhattan yesterday afternoon, the securities trader claims he was injured when a stripper doing her thang swiveled too closely, and smacked him in the face with the heel of her shoe. This all happened back in November at the Hot Lap Dance Club, which is a great name for a business and one I’ll be stealing for the hedge fund I plan on starting within the next five years (Hot Lap Dance Club Capital). Unfortunately, the attorney representing the injured party declined to disclose the name of the brokerage fund where he works, and there are about a billion Stephen Changs listed on Bloomberg. Get to work.
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Original Source
The Pro Bailout Case
In Slate, Elizabeth Spiers argues in favor of the Bear bailout:
The alternative would have been to let Bear slide into a Chapter 11 bankruptcy, which would have happened quickly. Among other things, Moody’s, S&P, and Fitch all downgraded Bear on Friday, potentially forcing the firm to put up additional collateral to meet the requirements of a credit-default swap triggered by the downgrades—collateral it didn’t have. Bear notionally holds $13 trillion in derivatives contracts, and even if credit-default swaps were only a small fraction of that, any sort of credit event would have been catastrophic for both Bear and its buyers, the latter of whom would find themselves holding guarantees from a firm that was not in a position to guarantee anything.
Bear Stearns Lawsuits Already Getting Filed
One thing that was clear to everyone involved in the deal for JP Morgan Chase to take over Bear Stearns was that there would be lots of litigation. The unusual features of the deal—including JP Morgan’s option to buy the Bear Stearns headquarters even if the deal doesn’t close, the non-solicitation clause, and the option for JP Morgan to purchase 20% of Bear’s shares—amount to an extraordinarily firm lock-up, and the JP Morgan deal team wasn’t shy about mentioning their deal protection on Sunday night’s conference call.
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Original Source
What Good Is Sarbanes-Oxley Anyway?
Larry Ribstein, who writes on Ideoblog, asks:
Is there potential [Sarbanes-Oxley] internal controls liability for Bear executives? If not, and melt-downs like this can happen after SOX (worth $80+/share one day, $2 the next), then what was it, exactly, that SOX did for us? Could it be that SOX didn’t eliminate risk after all? … So two possible lessons from Bear: We didn’t need SOX, and it didn’t do any good.
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