Bear Stearns: $1.2 Billion Writedown
Submitted by
CalculatedRisk on Wed, 11/14/2007 - 6:00am (25 comments)
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So if Bear Sterns is overweight fixed income (as I recall) and originations and warehouse are way down...how is next year going to be better than this year? Oh yeah, containment!
mkts extatic, on these horrible #s, bsc up +8% pre mkt
NEW YORK (AP) -- Investment bank Bear Stearns Cos. will take a $1.2 billion writedown in the fourth quarter related to weakness in its credit portfolios, Chief Financial Officer Samuel Molinaro Jr. said Wednesday.....................
Shares in Bear Stearns rose $6.63, or 6.6 percent in premarket trading, to $107.50.
Hey bad news is good news and vice versa. We live in an alternate universe.
Bernanke says headline inflation is goal of monetary policy
REBear,
No surprise there. He's always said that core inflation is the best predictor of trends in headline inflation. He sees all energy and food price increases as "spikes" that "pass through", so if core is moderate, then headline will be moderate after the pass-through.
BTW, the reason he sees no influence of money-printing on commodity prices is that its difficult to tease out that correlation from a regression.
If he can't regress it, it just ain't so.
For HSBC emerging market bubble gains are offsetting US bubble losses:
HSBC Holdings Plc, Europe's biggest bank by market value, said emerging-market lending and accounting gains lifted third-quarter profit, offsetting losses in U.S. mortgages that are spreading to credit-card and unsecured loans.
Shares of the London-based bank rose the most in three years after HSBC said in a statement that its securities unit has few collateralized debt obligations backed by home loans to people with shaky credit. HSBC set aside $3.4 billion to cover U.S. defaults, $1.4 billion more than it forecast in July.
HSBC Profit Rises, Countering U.S. Deterioration (Update6) - Bloomberg.com
Financials were due for a bounce back this week regardless of any data. I wouldn't get too worked up about it; the braver among us will be using this week as an opportunity to go short longer term. Sell greed, buy fear.
(disclosure - I am looking at buying puts on DB and maybe Captital One if the premiums get low enough today.)
For all of those who believe the consumer has shrugged off the effect of $90+/barrel oil--the effect is not here yet, it's still on the tanker...
LA Times, today
(quote)
Analysts warn that gasoline prices soon will rise by as much as 20 cents a gallon -- which would put California's average at nearly $3.50. And it's not just gasoline. High oil costs are trickling through the economy, pushing up the price of food, airline flights and cruises as well as retail prices for a host of products derived from crude oil and its byproducts......"Normally, demand goes down at the end of the year, prices go down and we don't even think about it," said Phil Flynn, senior market analyst for Chicago's Alaron Trading Corp. "But now the gas prices are catching up to the high cost of crude and they still have a way to go yet.".....Analysts cautioned that record gasoline prices could lurk on the horizon. And oil prices could change direction again, given the market's volatility this year. "The sad part is that these prices are the launching pad for the price spikes we get every spring," said Fred Rozell of Oil Price Information Service. "If they remain this high, it will be a real mess."
(end quote)
BSC was my first short ever (puts). 13 billion in equity supporting 400 billion in assets with 55b in ABS etc. etc. etc.. Last quarter they would have had a loss except for their liabilities losing value.
This is my first post. Please let me know if someone has already used this name. I appreciate this blog and have learned alot about what is going on. While I am very hedged/short and want things to get bad, some of the sensationalism about all of the big banks going under, the dow going down 80% etc., I appreciate less. I do think that we should have had a 10-20% correction but of course we haven't.
Buffett says that Berkshire shareholders "don't want it to get bad enough to where we can be fully invested". This is my point with ANY big bank failing. I wouldn't mind if an I-bank went under but no matter how short you are I don't think anyone really wants Citigroup to go under no matter what the odds.
Retail sales up--whohoo!!
Reuters, on retail sales
(quote)
The strongest component was the 0.8 percent rise in gasoline station sales, a reflection of rising gas prices. General merchandise and department store sales were weaker.
(end quote)
I love our government. So let me get this straight we don't count energy prices in the inflation tracking numbers , but we do count gas station sales in the retail numbers.
Stupidity always has a way to correct itself, hopefully I won't get caught up in this correction.
OK, let me get this right.
Retail sales at gas stations rose 0.8% in October, yet the PPI for energy which was allegedly driven by gas was down 0.8% in October?
Did people just get really crappy gas mileage in October?
With all of the write-downs occuring by banks revaluing assets does anybody know when/if banks will potentially have to restate past earnings.
My understanging is writedowns are when the assets lose value based on the lastest data from the market or model. What happens when earnings were booked based on deffered interest being piled on via an option ARM? I know many folks were predicting that these earnings being booked would never materialize as cash. Will the banks have to restate past earnings or are these covered in the writedowns we are currently seeing? (I am not an accountant)
If the CPI comes in as expected tomorrow, we can chalk the entire retail sales extravaganza up to inflation (seasonally adjusted).
If one looks at the seasonally adjusted data, the nonstore retailers (includes online retailers) are going the wrong way.
U.S. Census Bureau: Time Series Data
Stagnation for the win!
Wait for an up-market day, trickle out a little bad news... wait for another...
Or, just wait until the weekend.
Take your pick, both strategies are now being used.
Mind-numbing...
So, according to the Fed, we had tiny inflation this month (0.1%) which doesn't count food or energy (I could have sworn Markwatch had something about the Fed claiming food or energy was cheaper this month or some insanity, but I can't find the link).
Meanwhile, gas station sales are way up... but I guess that doesn't count, and they claim the PPI for energy was down 0.8%.
Okay, so who here thinks that our GDP will soon become nothing but a measure of inflation? We don't count increases in costs of X, but a company that sells X sells more from a dollar viewpoint (not necessarily more physical product), so obviously the economy is great! By that logic, if gas prices doubled overnight, the economy would be wonderful since energy doesn't count, but think of the gas station sales, the oil company profits, etc.
I'm so sorry to hear about Bear Stearns' write-downs; they should be more like Goldman Sachs, who is doing just fine through all of this, I mean, just listen to all the press releases Goldman puts out on how well they're doing. Any company that puts out as many press releases on how well they're doing as Goldman has must be doing perfectly fine.
Please let me know if someone has already used this name.
what you smoking, fool?
"For the first time, the Fed will give forecasts for inflation both including and excluding food and energy costs, using the Commerce Department's personal consumption expenditures price index."
Fed Plans to Increase Forecasts to Once a Quarter (Update4) - Bloomberg.com
Won't it be harder to justify rate cuts if inflation including food and energy is published? Doesn't the Fed need to hide inflation?
CNBC just reported that NYSE is holding an unscheduled board meeting.
Thain to Citigroup?
central_scrutinizer said: "Financials were due for a bounce back this week regardless of any data. I wouldn't get too worked up about it; the braver among us will be using this week as an opportunity to go short longer term...."
I'm a coward---I went long.
Sebastia
You really have to give these firms credit. If they didn't keep writing billions of dollars out of existence on a daily basis we might have an inflation problem in this country.
At what point can we stop calling these errors and just switch to the good old vernacular term "lies".
BBC - Carnage on Wall Street as loans go bad
BBC NEWS | Business | Carnage on Wall Street as loans go bad
"Goal is to keep the franchise intact", Bear Stearns, Nov, 14, 2007
TRANSLATION: We're trying to stay in business.
Molinaro, presenting at the Merrill Lynch Banking and Finance Conference in New York, said Bear Stearns latest round of writedowns should "suffice" in accurately valuing products such as subprime mortgages and collateralized debt obligations
Would suffice?
"Yo, Moli, 1.2 bil 'bout good enough for youse?"
"Yeah, dat will suffice"
For now.