It's interesting that this figure of $9.7 billion doesn't appear anywhere in the articles on the same subject from Marketwatch or Bloomberg. WSJ the only "honest" one?
"This is what the new economic liberalism is all about. Darwinism for the little guy. Socialism for the big guy." - When I read stories about China that is what I see there to. If they are a communist society why are people migrating to the cities to find work? Why are people going hungry?
It seems like both ends of the spectrum have found the middle ground they can agree on.
Ditto Downsouth. They could loose another $30B through 2009 and the feds would help out. No worries for them. Tell that the small business owners across the country that struggle every day and when they go to their banks to expand a LOC they are getting laughed at, milked and screwed from the big banks that are being bailed out thanks to US tax payers. Pathetic. Free market? Not so. That ideology was thrown out this year.
bzb, the $3.1 billion in write-downs at the banks isn't included in most reports. This could be reported as $6.6 billion - and then the $3.1 billion is a separate loss.
BF,
What makes you think that the economic policies on China have anything to do with the writings of Marx and Engles? It is an authoritarian capitalist society. Lots of economic freedom, very little political freeom. More Pinochet than Mao. As an interim step, not a bad place to be, since China has never had significant political freedom in 5000 years of history.
I may have been misunderstood. I meant to say that I found especially Marketwatch's long report confusing; they could have just said "they wrote down $9.7 billion..." But if your goal is obfuscation, then I guess you bury the facts in a lot of detail.
I know this isn't a bold or unique view, but I tend to disagree that this recession will only last 6 months. More like a year or more. Probably 18 months.
The most frigtening thing about risk management at Merrill (as reported in WSJ's "Merrill Upped Ante as Boom in Mortgage Bonds Fizzled") is that when they found an area with too much credit risk (such as in their CDO collection) they "managed" the risk not by just selling the damn things, but by layering insurance or CDS coverage on top of them. Problem solved!
No wonder the Fed was chilled at the idea of Bear Sterns going BK: not only would you lose all those CDSs it wrote, but worse, like the return of the undead, lots of "solved problems" would instantly become -- unsolved. Ugly.
A trip to the confessional means that some type of absolution will be forth comming...will BB be dispensing a "forgiveness" (bailout) plan? And the beat goes on.....
and the consequence for continuing to destroy capital faster than it can be created?? Stock is down only 2%.....
If this is punishment for lying than we will see a lot more of it.
Moody's should downgrade, forward looking aren't they? Ugliest last two quarters in US financial history? Writedown armageddon--stock should rally! Video - CNBC.com
The first-quarter results brought Merrill's net losses to about $14 billion over the past nine months, wiping out more than it earned in all of 2005 and 2006.
Yeowza! So should the execs give back the bonuses they got based on these gains, when the business practices that made them blew up shortly thereafter? This is why bonus should be paid in stock, and only saleable over a longer period. That way, there is no incentive to pander to strategy that accomplishes only short-term gain.
By my back of the envelope calculations, they have at least another 6B of writeoffs coming.
Fed Philly consensus -15, Actual -24.9. 66% worse than expected and Dow RALLIED? In the green? Wow! Better than a buffet and box seats at the Colosseum Bloomberg.com:
Economic Calendar
"So should the execs give back the bonuses they got based on these gains, when the business practices that made them blew up shortly thereafter?"
Good question!
So, tell us: should the execs give back the bonuses they got based on these gains, when the business practices that made them blew up shortly thereafter?
ipodius, that is the most aglling thing about all of this . . . everybody pocketed huge bouses along the way, from the 2 and 20 (but 0%of losses) hedgies to the md's and CDO structurers of the major investment banks, to the lowly mortgage brokers.
And they get to keep it all. Unbelievable system we have.
I would never, ever, be a holder of IB stock. Our private equity. You're begging to be fleeced. . . it's what they do for a living!
Why don't they hire their ex-CEO who must be bored, having written all of his investment philosophy on golf score cards, and must be chomping at the bit for something where he can get in there and do some "good"?
Merrill will be saved by virtue of inflation. The Germans will be recognized as the great teachers. Weimar returns to see if the future generations are yet on their toes.
(A fact on which the bulb finally turned on; an acquaintance works for an irrigation supplies firm; plastic pipe is flying out the door at his employer's; he's surprised at the level of biz. Cost push and demand pull have come to town, and they're staying!)
"Merrill's first-quarter loss contrasts with earnings at Goldman, Morgan Stanley and Lehman Brothers Holdings Inc. Even Bear Stearns Cos. eked out a profit of $115 million. A cash shortage forced Bear Stearns to sell itself last month to JPMorgan Chase & Co. for $10 a share."
ha! yea Im preparing for the problems! Funny, I have about 15 wall streeters on the sidelines waiting to buy with me. Their reasons to wait - will they have a job in 6-12 months?
And they get to keep it all. Unbelievable system we have.
Well, a lot of it is paid out in stock, and the sale of that stock is regulated. So many are still cashing out. But yes, it's an interesting question...and my point was about incentives.
We seem to target the execs, but I might point out that all the loan reps at the bottom of the chain only behaved in ways that were incented...and they made a lot of money for getting the loans done. Everyone did. An entire industry sprang up overnight out of it. Each one making a healthy living, not just the execs. I personally know of mortgage reps that made close to 500k during the height.
But the bottom line is that the stockholders are the ones to bear the brunt of this, which is why I don't understand the market's behavior. The only way you get major change at a company is to punish the stock price by massive selling.
ipodius
Actually, one other way is sensible regulation and enforcement of existing laws . . . an approach that has been completely abandoned for over 7 years now.
Oh and, btw, if you think JPM was raising money to recapitalize strictly to cover losses and get their capital ratios back in line, you'd be wrong. Background rumor is that they are on the acquisition prowl.I'm hearing whispers about looking for another IB...could just be rumor, but you never know.
As was pointed out in this thread, BSC was still making money last quarter. So perhaps Jamie was a bit more savvy than you might think with the deal.
I'm sure BSC was still making money last quarter, but they were losing even more. Their previous bets sunk the ship. And there's no getting around that.
Their previous bets sunk the ship. And there's no getting around that.
Actually Gary they didn't. What sunk the ship was a run that sucked out any liquidity like a black hole sucks matter. They weren't liquid, it didn't mean that the operations weren't throwing off cash, just not what it needed to satisfy their margin calls. It remains to be seen what bets pay off, what do not, and what was properly hedged.
Actually, according to their quarterly report, BSC really did earn a profit last quarter. I believe them too. ( They put on a number of clever prop trades. )
BSC got wiped out by a liquidity problem, not a profitability problem. That's an important point to understand. You can make all the money in the world, but if the world decides it won't trade with you anymore then you're screwed!
I personally know of mortgage reps that made close to 500k during the height.
Yeah, me too. And all without 10 yrs. of schooling, massive student loans, and high malpractice insurance costs. I bet some drs. were pulling their hairs out at that.
I've been wandering off to frolic in the NOT-too-big-to-fail playground. Tired of the whipsaw and all the bailout measures. Long term they're screwed from a flexibility and margins will collapse, but in here, I don't see a way to win.
I can see what people are saying about Bear earning money but when liabilities are going thru the roof and punters are bailing left right and centre can you really say you are earning money? Back in July two of their hedge funds became worthless. Then we have had the mark to fantasy fiasco.....earning money???? technical point perhaps.
I "looked it up" and can find no real reason to believe a bank that decided along time ago that telling any sort of truth was not in it's best interest.
again if they were making money then why not sell all those wonderful assets they claim are performing that were peddled to the fed as collateral???
Sorry you can't see the forest through the trees.
putting faith in most of these banks is an exercise in denial...you know it but can't come to grips with it.
Good luck with getting your advice from a bank's own statements.
Earlier in this thread, I linked the story from Bloomberg that said, among other things, that Bear Stearns had been making a profit. If you believe that it was done with mirrors, you very well may be right. And yes, they had a solvency problem.
Many have complained that no failing company should be bailed out. But it's even more outrageous that US taxpayers were billed a potential $29 billion to rescue a profitable corporation.
I've not heard it all. Bear was profitable but was facing bankruptcy without the fed stepping in.
Can someone get me the new definition of profitable? Apparently the old one isn't applicable. Can someone point me to any other profitable companies they know of that have declared bankruptcy?
Ipodius -- It's suprising that so many people think that Bear could not possibly have been profitable.
They really were making money ( not much, but at least they weren't losing ). The problem is that tons of people decided to unwind their trades with BSC. Or more accurately, everyone with positive NPV against BSC decided to unwind.
In addition, nobody would engage in a new derivatives trade with BSC unless they posted full daily margin. Even then, some banks wouldn't trade with them at all.
Their cash reserves evoporated overnight and nobody would trade with them. That has nothing to do with their profitability per se. Indeed, it turns out that a hit to liquidity is far more dangerous and punishing than a hit to profitability.
Massive buying of puts and shorting stock in Bear Stearns
On March 10, 2008, the closing price of Bear Stearns was 70. The stock had traded at 70 eight weeks prior. On or prior to March 10, 2008 requests were made to the Options Exchanges to open new April series of puts with exercise prices of 20, and 22.5, and a new March series with an exercise price of 25.
Their requests were accommodated and new series were opened March 11, 2008.
Since there was very little subsequent trading in the call series with exercise prices of 20, 22.5 or 25, it is certain that the requests were made with the intention of buying substantial amounts of the puts. There was, in fact, massive volumes of puts purchased in those series which opened on March 11, 2008.
For example, between March 11-14 inclusive, there was 20,000 contracts traded in the April 20s, 3700 contracts traded in the April 22.5s, and 8000 contracts traded in the April 25s. In the March 25s there were 79,000 contracts traded between March 11-14, 2008.
Question: Why did the options exchanges not open the far out of the money puts for trading the first time that BSC hit 70, when the Aprils and Marchs had far more time to expiration. Certainly if the requesters were legitimate hedgers or speculators, buying the March and April with two and three months to expiration was more appealing.
Answer: The insiders were not ready to collapse the stock and did not request the exchanges to open the new series then.
Second Request and Accommodation
On or prior to March 13, 2008, an additional request was made of the Options Exchanges to open more March and April put series with very low exercise prices even if that meant those March put options would have just five days of trading to expiration. The exchanges accommodated their requests, knowing that the intentions of the requesters was to buy puts. They indeed bought massive amounts of puts. For example the March 20 puts traded nearly 50,000 contracts (i.e. contracts to sell 5 million shares at 20). The March 15s traded 9600, the March 10s traded 13,000 and the March 5s traded 6300 all on March 14 (the first day of trading of the new March series).
The introduction of those far-out-of-the-money put series in the April and March months immediately before the crash, provided a vehicle whereby extreme leverage was available to the insiders. In other words if you had $100,000 and you knew that Morgan would buy Bear Stearns at two dollars, you could make five to 10 times more on the $100,000 by using the $100,000 to buy the newly introduced March puts. This is so because the soon to expire far out-of-the-money puts were far cheaper than the July or October out of the money puts. And that is why the inside traders requested the exchanges to introduce the far out of the moneys just days before the crash.
But this scenario has enormous implications. It means that the deal was already arranged on March 10 or before. That contradicts the scenario that is promoted by SEC Chairman Cox, Fed Chairman Bernanke, Bear CEO Schwartz, Jamie Dimon of J.P. Morgan (who sits on the Board of directors for the New York Federal Reserve Bank) and others that false rumors undermined the confidence in Bear Stearns making the company crash, notwithstanding their adequate liquidity days before. I would say that the deal was arranged months before but the final terms and times were not determined until maybe March 7 or 8, 2008.
On March 14, the April 17.5s, the 15s, the 12.5s and the 10s traded 15,000 contracts combined. Each put gives the right to sell 100 shares. So for example, these 15,000 April puts gave the purchaser(s) the right to sell 1.5 million shares at prices between 10 and 17.5. Those purchasers expected to make profits on 1.5 million shares because they knew the deal was coming at $2.00.
That is the only plausible explanation for anyone in his right mind to buy puts with five days of life remaining with strike prices far below the market price. So there were requests, during the period of March 10 to 13, to the exchanges to open the March and April series for buying massive amounts of extremely out-of-the-money puts, which were accommodated by the Options Exchanges. Did the Exchanges aid and abet the insider trading scheme? We are not able to have a clear opinion on that.
Reuters, however, on March 10, 2008 was citing Bear Stearns sources that there was no liquidity crisis and that there was no truth to the speculation of liquidity problems. And none other than the Chairman of the Securities and Exchange Commission on March 11, 2008 was stating that "we have a good deal of comfort with the capital cushion that these firms have."
We even had the "mad" Jim Cramer proclaiming on March 11, 2008 that all is well with Bear Stearns and that the viewers should hold on to their Bear Stearns.
And on March 12, 2008, Alan Schwartz CEO of Bear Stearns was telling David Faber of CNBC that there was no problem with liquidity and that "We don't see any pressure on our liquidity, let alone a liquidity crisis."
The fact that the requests were made on March 10 or earlier that those new series be opened and those requests were accommodated together with the subsequent massive open positions in those newly opened series is conclusive proof that there were some who knew about the collapse in advance, while Reuters, Cox, Schwartz and Cramer were telling the public that there was no liquidity problem.
This was no case of a sudden development on the 13 or 14th, where things changed dramatically making it such that they needed a bail-out immediately. The collapse was anticipated and prepared for, even while the CEO of Bear Stearns and the SEC Chairman of the SEC were making claims of stability.
What was the reason that Cramer, Cox and Schwartz were all promoting Bear Stearns immediately before its collapse. That will be speculated upon for years to come.
Cramer has admitted that "truth" was not his friend and that he manipulated stocks to influence investors behavior. Was this one of his acts? But no apologies from Cramer as he claims now that he was referring to keeping money in Bear Stearns Bank not in Bear Stearn's stock.
Compelling Evidence of Insider Trading
To prove the case of illegal insider trading, all the Feds have to do is ask a few questions of the persons who bought puts on Bear Stearns or shorted stock during the week before March 17, 2008 and before. All the records are easily available.
If they bought puts or shorted stock, just ask them why. What information did they have access to which the CEO and the SEC did not have? Where did they get the info? Why are Cramer, Cox, Paulson, Faber, and Schwartz not subject to a bit of prosecutorial pressure to get to the bottom of this?
Maybe the buyers of puts and short sellers of stock just didn't believe Reuters, Cox, Schwartz, Cramer, and Faber and went massively short anyway buying puts that required a 70% drop in a week. Maybe they had better information than Schwartz or Cox. If they did then that's a felony, with the profits made subject to forfeiture.
April 4, 2008 Congressional Hearings on the Bear Stearns Bail-out. I watched both sessions and drew the following conclusions.
In the first session there were the following witnesses. Bernanke of the Federal Reserve Board, Cox from the SEC, Geithner representing the New York Reserve Bank and an incidental player Mr. Steel from the Treasury. The only Senators that seem to be willing to attack these bankers were Bunning, Tester, Menedez and Reed. All the rest were useless and very respectful.
Absurdities
All witnesses did their best to keep their stories consistent but they did slip up a bit. They all agree that the bail-out was necessary without any proof that it was.
They all agreed that what caused the cash liquidity to dry up within one day was the rumor mongers. Apparently it is claimed that some people have the ability to start false rumors about Bear Stearns' and other banks liquidity, which then starts a "run on the bank." These rumor mongers allegedly were able to influence companies like Goldman Sachs to terminate doing business with Bear Stearns, notwithstanding that Goldman et al. believed that Bear Stearns balance sheet was in good shape. (Goldman between March 11-14 warned their average customers that Bear Stearns stock was "hard to borrow" for shorting due to the fact that other customers had used up all of the stock available for borrowing for short sales) .
That idea that rumors caused a "run on the bank" at Bear Stearns is 100% ridiculous. Perhaps that's the reason why every witness were so guarded and hesitant and looked so mighty strained in answering questions....
How about Frontier Airlines? they seemed to be doing ok and the credit card company made it difficult for them.
And here in Finland in the 1990's there were thousands of profitable companies that were destroyed because the banks wanted the loans back to save themselves
En Fuego, that was an excellent post, and fully describes what happened. Bear was literally frozen like..umm...a bear in the headlights. Which is exactly what the Fed feared would happen to the entire system if uncontrolled margin unwinding were allowed to happen. Literally, overnight, even profitable companies would be frozen, as their liquidity dried up and no lending was forthcoming.
Think of what is happening right now to the Student Loan marketing happening to all markets at the same time. That's the event that everyone was concerned about. BSC is probably still technically profitable, even with losses resulting from bad investments. If they are given the support to operate and the liquidity.
there is only one reason that BSC was bailed out......
Keep the books out of the hands of a judge.
By doing this the lid stays on about what clowns BSC (and to a lesser extent the entire banking system).
So make up whatever profitable or not profitable reasons why they were saved....they were bought to bury it's books so that no one will really see what type of "advice" they should have been giving.
See the reality of all of BSC's poor decisions (over the last 20 years or so) is not what tanked them, nor was it the reality of it's crushing debt load, nor the risk of default on counter party transactions...no... none of that. It tanked simply because Goldman took it's sand box away.
That is a solvency issue and nothing else.
that it is anything more than that is a creation of the smoke and mirror approach that has been blessed by the current administration.
But, again, continue to believe the banks that have, for the third straight qtr., "priced it all in"....
You see MS, I actually know how to read 10k's and the Q's...and i mean READ, even the footnotes. I also have these spreadsheets where you can pop all these numbers in for up to 5 years and they will flag things that look like they might be suspicious. Contrary to what you are saying, there is very little that can be hidden in the public reporting mechanisms without outright accounting fraud, and even then if you know what you're looking for you can spot it. Take a forensic accounting class at the graduate level if it interests you. If you know how to do this, you'd see that BSC was eeking out a profit, which means it's operations were throwing off more cash than consumed by it's losses. It just wasn't thowing off enough to satisfy Mr Margin.
All of this analysis is surely better than just raving about things.
Maybe if interest rates hadn't been so artificially low (encouraged by a reckless Fed) firms wouldn't have borrowed so much, nor would they have suddenly developed massive liquidity problems.
Maybe if interest rates hadn't been so artificially low (encouraged by a reckless Fed) firms wouldn't have borrowed so much
Sure El Cliffo, and maybe if my aunt were born with balls she'd be by uncle. You know, when skydiving and I end up with a bunch of crap over my head, i never keep falling thinking "gee, if i had only packed that differently...what should i do the next time?". I pull the handles. Because, you know, the ground is hard and it comes up fast. And that ending isn't pretty, as i can tell you from experience.
hey does anyone know of someone (preferably a public blog) keeping track of all the writedowns and capital raisings we've had so far? all i could come up with was this...
So, Ipodius, you obviously agree that what I said was perfectly correct. We cannot change history, but eventually we can determine where to place the blame.
there is very little that can be hidden in the public reporting mechanisms without outright accounting fraud,>>
on the contrary....we've seen massive accounting fraud appear before our very eyes.....it's just a little ironic that your basis of fact comes from the institution's own filings that would state whatever they want WHENEVER they want.
Hooray for you!! You can read a doctored 10-k....would you like to present more fantasy as fact???? because since you fail to see what was done to accomplish "profitability". I would really like to see what qualifies as profitability for you since based on what you say as long as it's in the filing it must be true.
as I have said before all you have is fiction......there is no fact just what you say is and throwing up a 10-k (from the very same institution) does not change or mitigate the actual reality of relying on fantasy to make numbers. Which is exactly what is happening with all IB's
that JPM outright lies about it's capital structure (company-issued 10-k's mean nothing) and then goes to the well the next day is just them "raising capital for acquisitions" is just grasping at straws hoping that it will confirm some wild-ass fantasy you've cooked up.
Unless it's backstopped by the biggest and best destroyer of capital around (the Fed) you are dreaming in a world of fantasy marks. Just like the C deal would "open up a frozen market"....yea I see all those deals just waiting to go off as the seller finances the buyer AND gets a Fed backstop to boot.
Ipodius seems to believe that books cannot be cooked well enough to fool modern forensic accounting.
You believe they can be.
Is this just a generous regard for the cleverness of evil or do you actually know of cooked books passing the kind of close scrutiny Ip. refers to?
Look at AMZN for cooking books. Anyone that is allowed to treat A/R as booked profits is lying....that is but one example.
For the record all Ipodius has done is regurgitate a doctored 10-k....There is some serious crap going on that allows simultaneous write ups of a bond portfolio (again another example of fantasy marking) against a write-off of loan impairments (almost at 1:1).
Nevermind that these "assets" are all being shoveled into accounting la-la land to sit at a valuation that allows the marker (BSC) to value them at whatever they dream up. See the C "deal" at .90 for what they should have done to confuse the market even further...but that didn't work either as most people could clearly see that C backstopped the deal in order to have it happen...just like a realtor..not caring for the dynamics of a deal....only that it got done regardless if it was right or wrong.
It's not up to me to provide you the willingness to see beyond the failed reality you've constructed (all with the help of 10-k's from the issuing institution(s) )
plainly put...if the reality that you see is based on information that the banks provide you have quite a bit of learning to accomplish about what they say and then (most importantly) what they do.
plschwartz, what MS is attempting to do is make the facts fit his theory, and if the numbers don't then everyone is lying. Hence my statement about being a fundamentalist preacher. If the book has statements in obvious contradiction, then you're not understanding what is said there.
take his AMZN statement about profits. It doesn't fit his theory about what the stock is worth, so they're cooking their accounting...GAAP be damned. If you've spent anytime in a real class about accounting or finance, you'd be able in a glance to see things that are suspicious. you do cases in this all the time.
and as will all things, especially financial statements, caveat emptor, you know? if you're not sophisticated enough to do what i just described, you shouldn't be playing the game buying stocks on an individual basis.
Oh boy, we need an accounting lesson here. Why can't A/R be treated as revenue with an appropriate contra-account that accrues for reasonable losses?
The only "irregularity" would be if I were booking a larger than expected loss rate and credited the excess back in to make up for revenue shortfalls in the next accounting period.
-in your opinion: why did Mr. Margin call if BSC was profitable?
-I have no understanding of financial statements... are off-balance sheet entities included in these financial statements? and is there "mark-to-model" accounting in these financial statements?
I am ignorant of accounting rules... but it would seem to me that MANY bloggers/commentators/analysts were waiting for Bear to implode... and many of them seemed able to read these financial statements.
there must have been a reason for that, no?
I assumed (again, ignroantly) that it is because BSC had it's official "books" and then "the rest of the story", and people knew "the rest of the story" was more important.
The definition, in AMZN's case, is a period that extends for over 7 years.
That's not what I call reasonable.....but continue to not deal with the real problem which is, again, more mark to fantasy.
Explain it away all you like.....
When you can offer up something that is not defended by yet another fantasy-type scenario then you might have something...until then leave the creation of spin to people who at least do a better job of it than you.
Profitable means throwing off more cash than is consumed by daily operations, right? If BSC had continued unhindered, it would have reamined profitable. Technically, most companies, even GE, could not survive if all their notes were called at once. Or am I missing something here?
Just because something is off-balance sheet, doesn't make it suspicious or illegal. There are reasons to take things off balance sheet that make sense.
Mark to model is used when paper is illiquid. Your house is marked to model, is it not? So what's the point here?
BSC didn't fail, btw. It was bought. BSC had a liquidity problem when everyone called it's paper at once and also denied credit at once. There were many reasons for this, some reasonable and some not. Bank runs are seldom totally reasonable events. They are usually hyterical reactions to non-specific cases.
If BSC had continued unhindered, it would have reamined profitable.>>
You can't even make this up it's so horribly flawed.
Care to answer (if they were so profitable) why those assets were not sold on the open market???? Why would you answer that I've only asked you more than 5 times.......
That's why they blackmailed the Fed into backstopping it's biz or face the reality of handing over it's books to a bankruptcy judge by filing CH. 11 in a scant few days.
Truly you are an amateur who stumbled upon a financial thesaurus at some point.....
Care to answer (if they were so profitable) why those assets were not sold on the open market????
What is the price of my house worth if it is the only house in my neighborhood for sale? What is the price of my house if EVERY house in my neighborhood is for sale? Now, what if someone bought all the houses except mine and held them. What is my sale price going to be now?
MS I just can't believe that you're as idiotic in person as your internet personna.
Well, Bear Stearns might have remained profitable, if they could have continued to pretend that their underwater paper was worth way more than it would bring on the open market.
If this is analogous to real estate, then Bear Stearns was like the individual who bought at the top with very little down, and then continued to fantasize that his house was worth much more than it was, all the while complaining that "he couldn't sell it." Eventually, he got his Uncle Ben to buy his house for an inflated price, (putting the whole thing on his company expense account).
If we were talking about houses than the original question would state it.
This is not a home we are talking about..but I see how your twisted logic fails to come up with an adequate response to the original question and make it about something else.
Ok MS: what is the price of my security if I'm the only one selling? What is the price of my security if EVERYONE is selling theirs? What is the price of my security if someone buys what everyone just sold and holds it?
Your logic is set up to cannonize a bank's statement as if it were truly an actual liquid and functioning market we trade in. What we have now is so far from that denying it will not make it any better.
But leave it to you to ignore the facts that we continue to allow banks to shovel assets (at whatever price they decide) into area's that have no real value input other than fantasy and then try to convince others that we are just "reading the balance sheet wrong" because you say so....
You still refuse to deal with the one reality that I know you are aware of: fantasy valuations.
Deal with that instead of hopelessly denying that the valuations made up by the holder is not a problem and that continuing to allow marks at .97 on the dollar (sure LEH we believe you) when the market has declined 15-20% is just pure and total fantasy.
I have a bridge for sale for any of you who actually believe that the L3 assets are "fairly valued" in any of these companies......if they were they wouldn't be placed there....
You guys are missing the point. Bear Stearns obviously went out of business because it is SOP for big time "financial executives" to spend all day posting on internet message boards. That's what Bernanke needs to address!
MS:
"Anyone that is allowed to treat A/R as booked profits is lying"
not a flame on you MS but almost every business in US does that.
Maybe your terms are different from what I'm used to hearing. "booked profit"...do you mean the gaap net income that results from the sales (on credit) being run through the income statement?
And to clarify further, you don't mean the whole amount of the A/R would wind up as "booked profit" correct? Because when a sale occurs on credit and is placed in A/R, the sale is run through the income statement as revenue, and then corresponding operating expenses, taxes, etc., are charged,...so what ends up in gaap net income (your booked profit, i assume?) is a small percentage of the revenue (and the A/R). AMZN had a gaap net margin was 3.2% for 2007, so a $100 A/R would result in only $3.20 of booked profits.
those are gaap rules and almost all companies sell products on credit and report revenue, net income, and A/R in such a manner. Not saying it's right or wrong, it is what it is. now, if AMZN is knowingly using too high of an assumption for how much cash they will actually collect down the road then the "booked profits" are misleading.
Over time if the cash collected was materially less than what gets run through the income statement we would be able to see that on the cash flow statements.
not a flame. just making sure the debaters are talking about the same thing.
If you have a spreadsheet that can divine what the true book value of the banks are then you have an informational advantage that will allow you to retire and post even ever more. I wonder if that spreadsheet flashed red last year re the SIV, SPE exposures?
AMZN's assumptions (too nice of a word IMO) have been driving it's "results" for over 7 year's.
AMZN buys "billmelater" and it's A/R instantly shows up as booked profit. That's just last Q.....
They had no hand in the creation of those "profits" just the placement of them on it's own books as real results.
Over time if the cash collected was materially less than what gets run through the income statement we would be able to see that on the cash flow statements.>>
Not if it were booked "elsewhere". You are assuming that they actually run ALL activities through book...they most certainly do not.
There is so much obfuscation in any of these books it's difficult to tell what is going on in any of them let alone ones that decided long ago that truth in reporting is just a statement that is released with whatever they have decided the results are.
Don't worry, we're all too big to fail now.
Marco....
What do these guys have to worry about?
They know that the Federal government will bail them out.
This is what the new economic liberalism is all about. Darwinism for the little guy. Socialism for the big guy.
re: the 256 point moonshot yesterday. It must be really nice to know the news several days prior.......
creating yet another cushion to soften that "landing"
Ciao
MS
Dubai, anyone?
It's interesting that this figure of $9.7 billion doesn't appear anywhere in the articles on the same subject from Marketwatch or Bloomberg. WSJ the only "honest" one?
Next half year will continue to be difficult.
Some of the big boys are pretty gloomy this week.
Does anyone know how many wall st. jobs have been lost so far? I heard a 40K estimate for London (so far vs total predicted not specified).
"This is what the new economic liberalism is all about. Darwinism for the little guy. Socialism for the big guy." - When I read stories about China that is what I see there to. If they are a communist society why are people migrating to the cities to find work? Why are people going hungry?
It seems like both ends of the spectrum have found the middle ground they can agree on.
"Next half year will be difficult". It will be gloomy well they say "next 4 years will be difficult, and there's nothing a ZIRP can do about it".
Some of the big boys are pretty gloomy this week.
12th Percentile | 04.17.08 - 9:41 am
There any chance the windows in their offices open? CEO sidewalk pizza would be a sure winner on pay-per-view.
Ditto Downsouth. They could loose another $30B through 2009 and the feds would help out. No worries for them. Tell that the small business owners across the country that struggle every day and when they go to their banks to expand a LOC they are getting laughed at, milked and screwed from the big banks that are being bailed out thanks to US tax payers. Pathetic. Free market? Not so. That ideology was thrown out this year.
bzb, the $3.1 billion in write-downs at the banks isn't included in most reports. This could be reported as $6.6 billion - and then the $3.1 billion is a separate loss.
But why have two posts?
Best Wishes.
BF,
What makes you think that the economic policies on China have anything to do with the writings of Marx and Engles? It is an authoritarian capitalist society. Lots of economic freedom, very little political freeom. More Pinochet than Mao. As an interim step, not a bad place to be, since China has never had significant political freedom in 5000 years of history.
CR,
But why have two posts?
I may have been misunderstood. I meant to say that I found especially Marketwatch's long report confusing; they could have just said "they wrote down $9.7 billion..." But if your goal is obfuscation, then I guess you bury the facts in a lot of detail.
I know this isn't a bold or unique view, but I tend to disagree that this recession will only last 6 months. More like a year or more. Probably 18 months.
Roubiniesque, I call it.
The most frigtening thing about risk management at Merrill (as reported in WSJ's "Merrill Upped Ante as Boom in Mortgage Bonds Fizzled") is that when they found an area with too much credit risk (such as in their CDO collection) they "managed" the risk not by just selling the damn things, but by layering insurance or CDS coverage on top of them. Problem solved!
No wonder the Fed was chilled at the idea of Bear Sterns going BK: not only would you lose all those CDSs it wrote, but worse, like the return of the undead, lots of "solved problems" would instantly become -- unsolved. Ugly.
A trip to the confessional means that some type of absolution will be forth comming...will BB be dispensing a "forgiveness" (bailout) plan? And the beat goes on.....
oh c'mon it's nto that much... just I mean it'd only buy like 3 hudge fund managers..... for a year
and the consequence for continuing to destroy capital faster than it can be created?? Stock is down only 2%.....
If this is punishment for lying than we will see a lot more of it.
Disgusting
Ciao
MS
Dirk - The simple answer to your question is "my ignorance"
Josh Birnbaum GS look'em up
Philadelphia Fed Survey
General Business Conditions Index -
Previous -17.4 Consensus -15.0
Consensus Range\t-25.0 to -10.0
Actual -24.9
NPR this morning said that they lost $2Billion on this Q !
Review of Fed Alt-A data --> MR MORTGAGE ALT-A EXPOSE' - THE WORST IS YET TO COME [Presentations] - MarketTicker Forums
Moody's should downgrade, forward looking aren't they? Ugliest last two quarters in US financial history? Writedown armageddon--stock should rally!
Video - CNBC.com
No worries, Dick Bove said on CNBC this morning that Merrill numbers were better than he thought they would be.
This goes with JPM beating their lowered estimates and then taking 6 billion in debt out later in the day.
Great, we should be up 300 points today.
Remain calm, all is well.....
Wouldn't the loses be in the Trillions if the Big Ds ever get called in?
The first-quarter results brought Merrill's net losses to about $14 billion over the past nine months, wiping out more than it earned in all of 2005 and 2006.
Yeowza! So should the execs give back the bonuses they got based on these gains, when the business practices that made them blew up shortly thereafter? This is why bonus should be paid in stock, and only saleable over a longer period. That way, there is no incentive to pander to strategy that accomplishes only short-term gain.
By my back of the envelope calculations, they have at least another 6B of writeoffs coming.
HS - I think wall st job cuts are at 35K or so right now.
Probably will be over 100K by this time next year in total.
Fed Philly consensus -15, Actual -24.9. 66% worse than expected and Dow RALLIED? In the green? Wow! Better than a buffet and box seats at the Colosseum
Bloomberg.com:
Economic Calendar
"So should the execs give back the bonuses they got based on these gains, when the business practices that made them blew up shortly thereafter?"
Good question!
So, tell us: should the execs give back the bonuses they got based on these gains, when the business practices that made them blew up shortly thereafter?
Some banks are more equal than others.
ipodius, that is the most aglling thing about all of this . . . everybody pocketed huge bouses along the way, from the 2 and 20 (but 0%of losses) hedgies to the md's and CDO structurers of the major investment banks, to the lowly mortgage brokers.
And they get to keep it all. Unbelievable system we have.
I would never, ever, be a holder of IB stock. Our private equity. You're begging to be fleeced. . . it's what they do for a living!
So urbandigs, surely that will be good for NY real estate? (j/k)
Oh, and GE capital bought citi capital . . . should improve C's capital position a bit. Looks like the selloff of Sandy's empire is beginning.
GE Buys $13.4 Billion in Citigroup Leasing Assets (Update3) - Bloomberg.com
Why don't they hire their ex-CEO who must be bored, having written all of his investment philosophy on golf score cards, and must be chomping at the bit for something where he can get in there and do some "good"?
Merrill will be saved by virtue of inflation. The Germans will be recognized as the great teachers. Weimar returns to see if the future generations are yet on their toes.
(A fact on which the bulb finally turned on; an acquaintance works for an irrigation supplies firm; plastic pipe is flying out the door at his employer's; he's surprised at the level of biz. Cost push and demand pull have come to town, and they're staying!)
According to the Bloomberg story about Merrill that Bear Stearns was making money:
"Merrill's first-quarter loss contrasts with earnings at Goldman, Morgan Stanley and Lehman Brothers Holdings Inc. Even Bear Stearns Cos. eked out a profit of $115 million. A cash shortage forced Bear Stearns to sell itself last month to JPMorgan Chase & Co. for $10 a share."
ha! yea Im preparing for the problems! Funny, I have about 15 wall streeters on the sidelines waiting to buy with me. Their reasons to wait - will they have a job in 6-12 months?
Plus, they all know that it could get ugly!
And they get to keep it all. Unbelievable system we have.
Well, a lot of it is paid out in stock, and the sale of that stock is regulated. So many are still cashing out. But yes, it's an interesting question...and my point was about incentives.
We seem to target the execs, but I might point out that all the loan reps at the bottom of the chain only behaved in ways that were incented...and they made a lot of money for getting the loans done. Everyone did. An entire industry sprang up overnight out of it. Each one making a healthy living, not just the execs. I personally know of mortgage reps that made close to 500k during the height.
But the bottom line is that the stockholders are the ones to bear the brunt of this, which is why I don't understand the market's behavior. The only way you get major change at a company is to punish the stock price by massive selling.
Oh Cliffo, Bear Stearns is so last month.
Why not use your usual handle?
ipodius
Actually, one other way is sensible regulation and enforcement of existing laws . . . an approach that has been completely abandoned for over 7 years now.
Oh and, btw, if you think JPM was raising money to recapitalize strictly to cover losses and get their capital ratios back in line, you'd be wrong. Background rumor is that they are on the acquisition prowl.I'm hearing whispers about looking for another IB...could just be rumor, but you never know.
As was pointed out in this thread, BSC was still making money last quarter. So perhaps Jamie was a bit more savvy than you might think with the deal.
David Faber reported this morning that Thain said they were "quite active" buying Alt-A mortgages this past quarter.
I don't get it.
It's sort of like wearing the same underwear every day?
And I'm coming closer to the alternative to wanting a bottle in front of me.
This is good news - the losses are not even close to A BILLION DOLLARS PER WEEK! So the losses for 2008 wont come close to a loss of 52B for the year.
Moodys may down grade. Huh, what do these folks know about rating anything?
Yes Bubba the stock moves higher.
Based on what??? according to whom??
Yet another unsubstantiated claim you try to pass off as real.
Total bullshit coming from JPM.....of course they would say that.....it makes stealing sound that much better.
Fool.
Ciao
MS
I'm sure BSC was still making money last quarter, but they were losing even more. Their previous bets sunk the ship. And there's no getting around that.
Yet another unsubstantiated claim you try to pass off as real.
As usual all hot air MS. Look it up. They were profitable. Or maybe you don't know how to read, just rant.
Their previous bets sunk the ship. And there's no getting around that.
Actually Gary they didn't. What sunk the ship was a run that sucked out any liquidity like a black hole sucks matter. They weren't liquid, it didn't mean that the operations weren't throwing off cash, just not what it needed to satisfy their margin calls. It remains to be seen what bets pay off, what do not, and what was properly hedged.
Actually, according to their quarterly report, BSC really did earn a profit last quarter. I believe them too. ( They put on a number of clever prop trades. )
BSC got wiped out by a liquidity problem, not a profitability problem. That's an important point to understand. You can make all the money in the world, but if the world decides it won't trade with you anymore then you're screwed!
Btw, here's their 10Q for all the conspiracy theorists
http://www.bearstearns.com/includes/pdfs/investor_relations/proxy/1q_10q_08.pdf
Thanks En Fuego, nice to see two posts say the same thing independently. BSC failed because Mr Margin was on line 1 again.
I personally know of mortgage reps that made close to 500k during the height.
Yeah, me too. And all without 10 yrs. of schooling, massive student loans, and high malpractice insurance costs. I bet some drs. were pulling their hairs out at that.
I've been wandering off to frolic in the NOT-too-big-to-fail playground. Tired of the whipsaw and all the bailout measures. Long term they're screwed from a flexibility and margins will collapse, but in here, I don't see a way to win.
I can see what people are saying about Bear earning money but when liabilities are going thru the roof and punters are bailing left right and centre can you really say you are earning money? Back in July two of their hedge funds became worthless. Then we have had the mark to fantasy fiasco.....earning money???? technical point perhaps.
I "looked it up" and can find no real reason to believe a bank that decided along time ago that telling any sort of truth was not in it's best interest.
again if they were making money then why not sell all those wonderful assets they claim are performing that were peddled to the fed as collateral???
Sorry you can't see the forest through the trees.
putting faith in most of these banks is an exercise in denial...you know it but can't come to grips with it.
Good luck with getting your advice from a bank's own statements.
Ciao
MS
Earlier in this thread, I linked the story from Bloomberg that said, among other things, that Bear Stearns had been making a profit. If you believe that it was done with mirrors, you very well may be right. And yes, they had a solvency problem.
Many have complained that no failing company should be bailed out. But it's even more outrageous that US taxpayers were billed a potential $29 billion to rescue a profitable corporation.
I've not heard it all. Bear was profitable but was facing bankruptcy without the fed stepping in.
Can someone get me the new definition of profitable? Apparently the old one isn't applicable. Can someone point me to any other profitable companies they know of that have declared bankruptcy?
Ipodius -- It's suprising that so many people think that Bear could not possibly have been profitable.
They really were making money ( not much, but at least they weren't losing ). The problem is that tons of people decided to unwind their trades with BSC. Or more accurately, everyone with positive NPV against BSC decided to unwind.
In addition, nobody would engage in a new derivatives trade with BSC unless they posted full daily margin. Even then, some banks wouldn't trade with them at all.
Their cash reserves evoporated overnight and nobody would trade with them. That has nothing to do with their profitability per se. Indeed, it turns out that a hit to liquidity is far more dangerous and punishing than a hit to profitability.
Massive buying of puts and shorting stock in Bear Stearns
On March 10, 2008, the closing price of Bear Stearns was 70. The stock had traded at 70 eight weeks prior. On or prior to March 10, 2008 requests were made to the Options Exchanges to open new April series of puts with exercise prices of 20, and 22.5, and a new March series with an exercise price of 25.
Their requests were accommodated and new series were opened March 11, 2008.
Since there was very little subsequent trading in the call series with exercise prices of 20, 22.5 or 25, it is certain that the requests were made with the intention of buying substantial amounts of the puts. There was, in fact, massive volumes of puts purchased in those series which opened on March 11, 2008.
For example, between March 11-14 inclusive, there was 20,000 contracts traded in the April 20s, 3700 contracts traded in the April 22.5s, and 8000 contracts traded in the April 25s. In the March 25s there were 79,000 contracts traded between March 11-14, 2008.
Question: Why did the options exchanges not open the far out of the money puts for trading the first time that BSC hit 70, when the Aprils and Marchs had far more time to expiration. Certainly if the requesters were legitimate hedgers or speculators, buying the March and April with two and three months to expiration was more appealing.
Answer: The insiders were not ready to collapse the stock and did not request the exchanges to open the new series then.
Second Request and Accommodation
On or prior to March 13, 2008, an additional request was made of the Options Exchanges to open more March and April put series with very low exercise prices even if that meant those March put options would have just five days of trading to expiration. The exchanges accommodated their requests, knowing that the intentions of the requesters was to buy puts. They indeed bought massive amounts of puts. For example the March 20 puts traded nearly 50,000 contracts (i.e. contracts to sell 5 million shares at 20). The March 15s traded 9600, the March 10s traded 13,000 and the March 5s traded 6300 all on March 14 (the first day of trading of the new March series).
The introduction of those far-out-of-the-money put series in the April and March months immediately before the crash, provided a vehicle whereby extreme leverage was available to the insiders. In other words if you had $100,000 and you knew that Morgan would buy Bear Stearns at two dollars, you could make five to 10 times more on the $100,000 by using the $100,000 to buy the newly introduced March puts. This is so because the soon to expire far out-of-the-money puts were far cheaper than the July or October out of the money puts. And that is why the inside traders requested the exchanges to introduce the far out of the moneys just days before the crash.
But this scenario has enormous implications. It means that the deal was already arranged on March 10 or before. That contradicts the scenario that is promoted by SEC Chairman Cox, Fed Chairman Bernanke, Bear CEO Schwartz, Jamie Dimon of J.P. Morgan (who sits on the Board of directors for the New York Federal Reserve Bank) and others that false rumors undermined the confidence in Bear Stearns making the company crash, notwithstanding their adequate liquidity days before. I would say that the deal was arranged months before but the final terms and times were not determined until maybe March 7 or 8, 2008.
On March 14, the April 17.5s, the 15s, the 12.5s and the 10s traded 15,000 contracts combined. Each put gives the right to sell 100 shares. So for example, these 15,000 April puts gave the purchaser(s) the right to sell 1.5 million shares at prices between 10 and 17.5. Those purchasers expected to make profits on 1.5 million shares because they knew the deal was coming at $2.00.
That is the only plausible explanation for anyone in his right mind to buy puts with five days of life remaining with strike prices far below the market price. So there were requests, during the period of March 10 to 13, to the exchanges to open the March and April series for buying massive amounts of extremely out-of-the-money puts, which were accommodated by the Options Exchanges. Did the Exchanges aid and abet the insider trading scheme? We are not able to have a clear opinion on that.
Media Statements of adequate liquidity
Reuters, however, on March 10, 2008 was citing Bear Stearns sources that there was no liquidity crisis and that there was no truth to the speculation of liquidity problems. And none other than the Chairman of the Securities and Exchange Commission on March 11, 2008 was stating that "we have a good deal of comfort with the capital cushion that these firms have."
We even had the "mad" Jim Cramer proclaiming on March 11, 2008 that all is well with Bear Stearns and that the viewers should hold on to their Bear Stearns.
And on March 12, 2008, Alan Schwartz CEO of Bear Stearns was telling David Faber of CNBC that there was no problem with liquidity and that "We don't see any pressure on our liquidity, let alone a liquidity crisis."
The fact that the requests were made on March 10 or earlier that those new series be opened and those requests were accommodated together with the subsequent massive open positions in those newly opened series is conclusive proof that there were some who knew about the collapse in advance, while Reuters, Cox, Schwartz and Cramer were telling the public that there was no liquidity problem.
This was no case of a sudden development on the 13 or 14th, where things changed dramatically making it such that they needed a bail-out immediately. The collapse was anticipated and prepared for, even while the CEO of Bear Stearns and the SEC Chairman of the SEC were making claims of stability.
What was the reason that Cramer, Cox and Schwartz were all promoting Bear Stearns immediately before its collapse. That will be speculated upon for years to come.
Cramer has admitted that "truth" was not his friend and that he manipulated stocks to influence investors behavior. Was this one of his acts? But no apologies from Cramer as he claims now that he was referring to keeping money in Bear Stearns Bank not in Bear Stearn's stock.
Compelling Evidence of Insider Trading
To prove the case of illegal insider trading, all the Feds have to do is ask a few questions of the persons who bought puts on Bear Stearns or shorted stock during the week before March 17, 2008 and before. All the records are easily available.
If they bought puts or shorted stock, just ask them why. What information did they have access to which the CEO and the SEC did not have? Where did they get the info? Why are Cramer, Cox, Paulson, Faber, and Schwartz not subject to a bit of prosecutorial pressure to get to the bottom of this?
Maybe the buyers of puts and short sellers of stock just didn't believe Reuters, Cox, Schwartz, Cramer, and Faber and went massively short anyway buying puts that required a 70% drop in a week. Maybe they had better information than Schwartz or Cox. If they did then that's a felony, with the profits made subject to forfeiture.
April 4, 2008 Congressional Hearings on the Bear Stearns Bail-out. I watched both sessions and drew the following conclusions.
In the first session there were the following witnesses. Bernanke of the Federal Reserve Board, Cox from the SEC, Geithner representing the New York Reserve Bank and an incidental player Mr. Steel from the Treasury. The only Senators that seem to be willing to attack these bankers were Bunning, Tester, Menedez and Reed. All the rest were useless and very respectful.
Absurdities
All witnesses did their best to keep their stories consistent but they did slip up a bit. They all agree that the bail-out was necessary without any proof that it was.
They all agreed that what caused the cash liquidity to dry up within one day was the rumor mongers. Apparently it is claimed that some people have the ability to start false rumors about Bear Stearns' and other banks liquidity, which then starts a "run on the bank." These rumor mongers allegedly were able to influence companies like Goldman Sachs to terminate doing business with Bear Stearns, notwithstanding that Goldman et al. believed that Bear Stearns balance sheet was in good shape. (Goldman between March 11-14 warned their average customers that Bear Stearns stock was "hard to borrow" for shorting due to the fact that other customers had used up all of the stock available for borrowing for short sales) .
That idea that rumors caused a "run on the bank" at Bear Stearns is 100% ridiculous. Perhaps that's the reason why every witness were so guarded and hesitant and looked so mighty strained in answering questions....
12th
How about Frontier Airlines? they seemed to be doing ok and the credit card company made it difficult for them.
And here in Finland in the 1990's there were thousands of profitable companies that were destroyed because the banks wanted the loans back to save themselves
Grown men cried. Families were torn asunder.
Re: Bear Stearns
My gambling habit is also profitable, as long as you only count the free meals I get at the casino and nobody ever asks me to pay on my losing bets.
Institutions and hedgies need to push DOWN harder to sweep the rest of the options off the other side of the table and make their numbers this month.
En Fuego, that was an excellent post, and fully describes what happened. Bear was literally frozen like..umm...a bear in the headlights. Which is exactly what the Fed feared would happen to the entire system if uncontrolled margin unwinding were allowed to happen. Literally, overnight, even profitable companies would be frozen, as their liquidity dried up and no lending was forthcoming.
Think of what is happening right now to the Student Loan marketing happening to all markets at the same time. That's the event that everyone was concerned about. BSC is probably still technically profitable, even with losses resulting from bad investments. If they are given the support to operate and the liquidity.
there is only one reason that BSC was bailed out......
Keep the books out of the hands of a judge.
By doing this the lid stays on about what clowns BSC (and to a lesser extent the entire banking system).
So make up whatever profitable or not profitable reasons why they were saved....they were bought to bury it's books so that no one will really see what type of "advice" they should have been giving.
See the reality of all of BSC's poor decisions (over the last 20 years or so) is not what tanked them, nor was it the reality of it's crushing debt load, nor the risk of default on counter party transactions...no... none of that. It tanked simply because Goldman took it's sand box away.
That is a solvency issue and nothing else.
that it is anything more than that is a creation of the smoke and mirror approach that has been blessed by the current administration.
But, again, continue to believe the banks that have, for the third straight qtr., "priced it all in"....
Ciao
MS
YouTube -
JPM/MER have wery,wery wong straws!
You see MS, I actually know how to read 10k's and the Q's...and i mean READ, even the footnotes. I also have these spreadsheets where you can pop all these numbers in for up to 5 years and they will flag things that look like they might be suspicious. Contrary to what you are saying, there is very little that can be hidden in the public reporting mechanisms without outright accounting fraud, and even then if you know what you're looking for you can spot it. Take a forensic accounting class at the graduate level if it interests you. If you know how to do this, you'd see that BSC was eeking out a profit, which means it's operations were throwing off more cash than consumed by it's losses. It just wasn't thowing off enough to satisfy Mr Margin.
All of this analysis is surely better than just raving about things.
Maybe if interest rates hadn't been so artificially low (encouraged by a reckless Fed) firms wouldn't have borrowed so much, nor would they have suddenly developed massive liquidity problems.
Maybe if interest rates hadn't been so artificially low (encouraged by a reckless Fed) firms wouldn't have borrowed so much
Sure El Cliffo, and maybe if my aunt were born with balls she'd be by uncle. You know, when skydiving and I end up with a bunch of crap over my head, i never keep falling thinking "gee, if i had only packed that differently...what should i do the next time?". I pull the handles. Because, you know, the ground is hard and it comes up fast. And that ending isn't pretty, as i can tell you from experience.
hey does anyone know of someone (preferably a public blog) keeping track of all the writedowns and capital raisings we've had so far? all i could come up with was this...
Subprime mortgage crisis - Wikipedia, the free encyclopedia
http://www.mrswing.com/artman/publish/best-financial-content/Billion_in_Writedowns_and_Credit_Losses_The_List_o.shtml
14 Bank and I-Bank Write-Downs -- Seeking Alpha
and capital raised from SWFs
Follow the Money - DealBook Blog - NYTimes.com
So, Ipodius, you obviously agree that what I said was perfectly correct. We cannot change history, but eventually we can determine where to place the blame.
on the contrary....we've seen massive accounting fraud appear before our very eyes.....it's just a little ironic that your basis of fact comes from the institution's own filings that would state whatever they want WHENEVER they want.
Hooray for you!! You can read a doctored 10-k....would you like to present more fantasy as fact???? because since you fail to see what was done to accomplish "profitability". I would really like to see what qualifies as profitability for you since based on what you say as long as it's in the filing it must be true.
as I have said before all you have is fiction......there is no fact just what you say is and throwing up a 10-k (from the very same institution) does not change or mitigate the actual reality of relying on fantasy to make numbers. Which is exactly what is happening with all IB's
that JPM outright lies about it's capital structure (company-issued 10-k's mean nothing) and then goes to the well the next day is just them "raising capital for acquisitions" is just grasping at straws hoping that it will confirm some wild-ass fantasy you've cooked up.
Unless it's backstopped by the biggest and best destroyer of capital around (the Fed) you are dreaming in a world of fantasy marks. Just like the C deal would "open up a frozen market"....yea I see all those deals just waiting to go off as the seller finances the buyer AND gets a Fed backstop to boot.
Profitable my ass......
Dream on
Ciao
MS
as I have said before all you have is fiction
You really missed your calling as a fundametalist preacher there MS.
Anon
It seems like Spy versus Counterspy.
Ipodius seems to believe that books cannot be cooked well enough to fool modern forensic accounting.
You believe they can be.
Is this just a generous regard for the cleverness of evil or do you actually know of cooked books passing the kind of close scrutiny Ip. refers to?
Look at AMZN for cooking books. Anyone that is allowed to treat A/R as booked profits is lying....that is but one example.
For the record all Ipodius has done is regurgitate a doctored 10-k....There is some serious crap going on that allows simultaneous write ups of a bond portfolio (again another example of fantasy marking) against a write-off of loan impairments (almost at 1:1).
Nevermind that these "assets" are all being shoveled into accounting la-la land to sit at a valuation that allows the marker (BSC) to value them at whatever they dream up. See the C "deal" at .90 for what they should have done to confuse the market even further...but that didn't work either as most people could clearly see that C backstopped the deal in order to have it happen...just like a realtor..not caring for the dynamics of a deal....only that it got done regardless if it was right or wrong.
It's not up to me to provide you the willingness to see beyond the failed reality you've constructed (all with the help of 10-k's from the issuing institution(s) )
plainly put...if the reality that you see is based on information that the banks provide you have quite a bit of learning to accomplish about what they say and then (most importantly) what they do.
Good luck with a one sided analysis...
Ciao
MS
plschwartz, what MS is attempting to do is make the facts fit his theory, and if the numbers don't then everyone is lying. Hence my statement about being a fundamentalist preacher. If the book has statements in obvious contradiction, then you're not understanding what is said there.
take his AMZN statement about profits. It doesn't fit his theory about what the stock is worth, so they're cooking their accounting...GAAP be damned. If you've spent anytime in a real class about accounting or finance, you'd be able in a glance to see things that are suspicious. you do cases in this all the time.
and as will all things, especially financial statements, caveat emptor, you know? if you're not sophisticated enough to do what i just described, you shouldn't be playing the game buying stocks on an individual basis.
I'm trying to make facts fit my theory??
Where are your "facts"??
Oh yea the BSC 10-k....if it's there it MUST be true.
"If the book has statements in obvious contradiction, then you're not understanding what is said there."
I see....me, as well as countless other's are just reading it incorrectly.
You are an amateur.......
Ciao
MS
as far as AMZN is concerned where do I mention share price????
Go look it up and you'll see exactly what I mention... nothing about GAAP or share price at all. Just the FACT that they treat A/R as booked profits.
But doing a little DD on something rather than relying on it's own numbers sort of fits what you call "analysis"
amateur
Ciao
MS
Oh boy, we need an accounting lesson here. Why can't A/R be treated as revenue with an appropriate contra-account that accrues for reasonable losses?
The only "irregularity" would be if I were booking a larger than expected loss rate and credited the excess back in to make up for revenue shortfalls in the next accounting period.
Are you an accountant, Ipodius? Really?
No Cliffo, I am not an "accountant". Would you like to explain GAAP revenue rules? I'll go to the mat on you with this one.
ipodius:
-in your opinion: why did Mr. Margin call if BSC was profitable?
-I have no understanding of financial statements... are off-balance sheet entities included in these financial statements? and is there "mark-to-model" accounting in these financial statements?
I am ignorant of accounting rules... but it would seem to me that MANY bloggers/commentators/analysts were waiting for Bear to implode... and many of them seemed able to read these financial statements.
there must have been a reason for that, no?
I assumed (again, ignroantly) that it is because BSC had it's official "books" and then "the rest of the story", and people knew "the rest of the story" was more important.
So, if you're not an accountant, why did you offer to give the other guy an "accounting lesson?"
Cliffo, I said i wasn't an "accountant". That didn't mean that I wasn't a financial executive. Accountant is a job title.
The definition, in AMZN's case, is a period that extends for over 7 years.
That's not what I call reasonable.....but continue to not deal with the real problem which is, again, more mark to fantasy.
Explain it away all you like.....
When you can offer up something that is not defended by yet another fantasy-type scenario then you might have something...until then leave the creation of spin to people who at least do a better job of it than you.
Ciao
MS
Yearing:
Profitable means throwing off more cash than is consumed by daily operations, right? If BSC had continued unhindered, it would have reamined profitable. Technically, most companies, even GE, could not survive if all their notes were called at once. Or am I missing something here?
Just because something is off-balance sheet, doesn't make it suspicious or illegal. There are reasons to take things off balance sheet that make sense.
Mark to model is used when paper is illiquid. Your house is marked to model, is it not? So what's the point here?
BSC didn't fail, btw. It was bought. BSC had a liquidity problem when everyone called it's paper at once and also denied credit at once. There were many reasons for this, some reasonable and some not. Bank runs are seldom totally reasonable events. They are usually hyterical reactions to non-specific cases.
More Fantasy:
You can't even make this up it's so horribly flawed.
Care to answer (if they were so profitable) why those assets were not sold on the open market???? Why would you answer that I've only asked you more than 5 times.......
That's why they blackmailed the Fed into backstopping it's biz or face the reality of handing over it's books to a bankruptcy judge by filing CH. 11 in a scant few days.
Truly you are an amateur who stumbled upon a financial thesaurus at some point.....
Ciao
MS
" . . .Just because something is off-balance sheet, doesn't make it suspicious or illegal."
Didn't Jeffrey Skilling of Enron believe that, too?
Care to answer (if they were so profitable) why those assets were not sold on the open market????
What is the price of my house worth if it is the only house in my neighborhood for sale? What is the price of my house if EVERY house in my neighborhood is for sale? Now, what if someone bought all the houses except mine and held them. What is my sale price going to be now?
MS I just can't believe that you're as idiotic in person as your internet personna.
Well, Bear Stearns might have remained profitable, if they could have continued to pretend that their underwater paper was worth way more than it would bring on the open market.
If this is analogous to real estate, then Bear Stearns was like the individual who bought at the top with very little down, and then continued to fantasize that his house was worth much more than it was, all the while complaining that "he couldn't sell it." Eventually, he got his Uncle Ben to buy his house for an inflated price, (putting the whole thing on his company expense account).
Apples and Oranges..
If we were talking about houses than the original question would state it.
This is not a home we are talking about..but I see how your twisted logic fails to come up with an adequate response to the original question and make it about something else.
Can you live in a mortgage????
No
Next example?????
Nice try though....
Ciao
MS
Ok MS: what is the price of my security if I'm the only one selling? What is the price of my security if EVERYONE is selling theirs? What is the price of my security if someone buys what everyone just sold and holds it?
I fail to see a difference.
Ipodius-
Your logic is set up to cannonize a bank's statement as if it were truly an actual liquid and functioning market we trade in. What we have now is so far from that denying it will not make it any better.
But leave it to you to ignore the facts that we continue to allow banks to shovel assets (at whatever price they decide) into area's that have no real value input other than fantasy and then try to convince others that we are just "reading the balance sheet wrong" because you say so....
You still refuse to deal with the one reality that I know you are aware of: fantasy valuations.
Deal with that instead of hopelessly denying that the valuations made up by the holder is not a problem and that continuing to allow marks at .97 on the dollar (sure LEH we believe you) when the market has declined 15-20% is just pure and total fantasy.
I have a bridge for sale for any of you who actually believe that the L3 assets are "fairly valued" in any of these companies......if they were they wouldn't be placed there....
Dear Mr. Fantasy should be your new handle.....
Ciao
MS
Now you didn't answer the question: what's the difference between my two examples?
I see a big difference..
That you can't????
Well that's your problem isn't it
Ciao
MS
You guys are missing the point. Bear Stearns obviously went out of business because it is SOP for big time "financial executives" to spend all day posting on internet message boards. That's what Bernanke needs to address!
MS:
"Anyone that is allowed to treat A/R as booked profits is lying"
not a flame on you MS but almost every business in US does that.
Maybe your terms are different from what I'm used to hearing. "booked profit"...do you mean the gaap net income that results from the sales (on credit) being run through the income statement?
And to clarify further, you don't mean the whole amount of the A/R would wind up as "booked profit" correct? Because when a sale occurs on credit and is placed in A/R, the sale is run through the income statement as revenue, and then corresponding operating expenses, taxes, etc., are charged,...so what ends up in gaap net income (your booked profit, i assume?) is a small percentage of the revenue (and the A/R). AMZN had a gaap net margin was 3.2% for 2007, so a $100 A/R would result in only $3.20 of booked profits.
those are gaap rules and almost all companies sell products on credit and report revenue, net income, and A/R in such a manner. Not saying it's right or wrong, it is what it is. now, if AMZN is knowingly using too high of an assumption for how much cash they will actually collect down the road then the "booked profits" are misleading.
Over time if the cash collected was materially less than what gets run through the income statement we would be able to see that on the cash flow statements.
not a flame. just making sure the debaters are talking about the same thing.
ipodius
If you have a spreadsheet that can divine what the true book value of the banks are then you have an informational advantage that will allow you to retire and post even ever more. I wonder if that spreadsheet flashed red last year re the SIV, SPE exposures?
do tell
craig-
AMZN's assumptions (too nice of a word IMO) have been driving it's "results" for over 7 year's.
AMZN buys "billmelater" and it's A/R instantly shows up as booked profit. That's just last Q.....
They had no hand in the creation of those "profits" just the placement of them on it's own books as real results.
Not if it were booked "elsewhere". You are assuming that they actually run ALL activities through book...they most certainly do not.
There is so much obfuscation in any of these books it's difficult to tell what is going on in any of them let alone ones that decided long ago that truth in reporting is just a statement that is released with whatever they have decided the results are.
No offense taken
Ciao
MS
CR
The two posts above by borkafatty are by far the most interesting I've seen on the BSC collapse. Can you comment? TIA
I agree with jkiss by far. It would be nice to hear if at any time CR wishes to comment.