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Wow, Bear Sterns
Old 06-23-2007, 07:45 AM   #1
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Wow, Bear Sterns

http://www.nytimes.com/2007/06/23/bu...23bond.html?hp
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Old 06-23-2007, 08:35 AM   #2
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Yep they were really stupid. But the true broader impact should be clear next month with banks/insurance companies post their quarterly results. It's confined to the subprime securities area. Financial stocks have already taken a big hit as folks already fear the worst.

But it's also likely that we get a few more of these little "hiccups" through 2007. I suspect Bear Stearns were not the only stupid ones.

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Old 06-23-2007, 08:57 AM   #3
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I liked the phrase about "investors were clamoring for even higher yields" as if their demands drove Bear Stearns to engage in that behavior. Good thing that I don't have BS.
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Maybe if they paid their people more
Old 06-23-2007, 02:20 PM   #4
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Maybe if they paid their people more

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Old 06-24-2007, 09:27 AM   #5
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Hedge funds are supposed to bear the higher risks for their higher returns. I hope no one holds any other BS funds! Where did the billions in bailout come from?
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Old 06-24-2007, 05:31 PM   #6
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Hedge funds are supposed to bear the higher risks for their higher returns. I hope no one holds any other BS funds! Where did the billions in bailout come from?
All of the large firms now have "firm capital" that they trade for the profit of the MDs and eventually the shareholders (or partners if it's a partnership). At firms like Goldman Sachs the return on their own invested capital actually contributes more to their profits than any other activity.

In the past, these cases of hedge funds blowing up could have been avoided if the lenders were a little more patient. I think BS realizes this so they would rather risk the firms own capital and not let all of the funds assets get called away.
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Old 06-24-2007, 05:41 PM   #7
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It indicates a short-term cash crunch may be at hand if the hedge fund's investors want to bolt and run.

Bear Stearns needs to make it good or else their creds will be shot. It is not uncommon for market forces to cause investors to stress and otherwise survivable situation. Some insurance companies have run into similar problems and been acquired when underlying assets were temporarily low and the company did not have resources to make it good without cashing out at a loss.
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Old 06-25-2007, 08:20 AM   #8
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Hmmmm.... let's see...

Start a hedge fund and bring in billions of dollars and charge a ridiculous high fee to the people...

Manage that fund and keep charging a high fee...

When the fund gets into trouble LEND money to it at probably a good interest rate and continue to charge the high fee...

Yes, you do have the risk that the loan will go bad... but it is not like they lost $3 billion... it was the investors who did...
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Old 06-26-2007, 12:06 AM   #9
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And don't forget about a government-led bail out (to protect the "fragile financial marketplace").
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Old 06-26-2007, 09:38 AM   #10
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And don't forget about a government-led bail out (to protect the "fragile financial marketplace").
Please name all of the hedge funds that the government has bailed out?
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Old 06-26-2007, 09:41 AM   #11
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Please name all of the hedge funds that the government has bailed out?


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Old 06-26-2007, 11:30 AM   #12
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Sorry, I misspoke, I was actually referring to the "Fed". And even so, I never said the Govt monetarily bailed out a hedge fund, just that it LED them. I was referring to the fed-organized bailout of LTCM.
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