Wow, Bear Sterns

[dumpster56]

http://www.nytimes.com/2007/06/23/business/23bond.html?hp

 

[audreyh1]

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.

Audrey

 

[bssc]

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.

 

[Tadpole]

Maybe if they paid their people more

How can you hire the best help when you don't pay them enough?
Bloomberg.com: Worldwide

 

[kcowan]

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?

 

[saluki9]

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.

 

[chinaco]

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.

 

[Texas Proud]

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...

 

[Olav23]

And don't forget about a government-led bail out (to protect the "fragile financial marketplace").

 

[saluki9]

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?

 

[FinanceDude]

Please name all of the hedge funds that the government has bailed out?

What did we do before the Internet??

 

[Olav23]

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.