JPM Buys Bear Stearns for $2/share

[clipper]

..and they probably overpaid.

According to Reuters (http://www.reuters.com/article/fundsFundsNews/idUSWEN452220080317), the deal will offset a "fire sale of assets."

$2 a share is not a fire sale????

Holy shit, these derivatives really are worthless.

Anyone else sell SKF Friday? Misery loves company.

[touchring]

I think BS is already insolvent - worth NADA, so $2 per stock or $250 million is a special deal negotiated with JPM.

BS probably owed JPM money so if they collapsed, the counterparty risk will also bring down JPM. Behind JPM is the Feds providing unlimited funds.

Imagine your creditor paying you to bail you out!!

Gold is now $1023!

[Rubber Duck]

This is what happens when you only listen to those who you have already told what to say.

[clipper]

I concur. $250m is less than the value of the brand. But, can JPM handle the debt load of BS with only $30b of risk covered by the Fed?

[touchring]

Wow, this is amazing. Looks like properties in London will be up for sale this week. :o


http://www.bloomberg.com/apps/news?pid=20601087&sid=a3sR9N6dOoUM&refer=home

Lewis, Barrow Hanley Lose Combined $2 Billion on Bear Stakes

By Katherine Burton and Sree Vidya Bhaktavatsalam
Enlarge Image/Details

March 17 (Bloomberg) -- Joseph Lewis, the billionaire investor who bought 9.4 percent of Bear Stearns Cos. last year, lost $1.16 billion on his stake after JPMorgan Chase & Co. agreed to buy the securities firm for $2 a share.

Lewis, the New York-based firm's second-largest holder, paid an average of about $107 apiece for 11 million shares, according to a filing submitted last year to the Securities and Exchange Commission. The stake has plunged 98 percent in value since the purchases. Bear's biggest investor at year-end was money manager Barrow Hanley Mewhinney & Strauss Inc., whose 9.7 percent holding has fallen by $991 million.

[clipper]

How to turn $8,500 into $1.5 million:

1. Get insider information on a company that's tanking
2. Buy puts at 50% of current market value
3. Cash in...

http://www.thestreet.com/newsanalysis/optionsfutures/10407812.html

Over 55,000 contracts traded that day at an average price of 15 cents a contract. This is an extremely unusual trade in terms of the number of contracts and how far out-of-the money those options were at the time.

Those 15-cent contracts are now worth $25.70, less than a week after the purchase. That purchase of $8,250 last Tuesday would now sell for $1.4 million.

What are the chances this trade was not made by an employee of Bear or JPM?

[touchring]

How to turn $8,500 into $1.5 million:

1. Get insider information on a company that's tanking
2. Buy puts at 50% of current market value
3. Cash in...

http://www.thestreet.com/newsanalysis/optionsfutures/10407812.html



Those 15-cent contracts are now worth $25.70, less than a week after the purchase. That purchase of $8,250 last Tuesday would now sell for $1.4 million.

What are the chances this trade was not made by an employee of Bear or JPM?


Is there an ETF that short financials? I know it might be too late, but just in case?

Is there an ETF that short financials? I know it might be too late, but just in case?

Someone recommended this!

http://finance.yahoo.com/charts?s=SKF

[clipper]

Dude, I wouldn't recommend anything in this market, but, yes, SKF is the Ultrashort Financials (moves 2-times the inverse of the dow financials index).

Extremely volatile, play money only! Moves at twice the inverse of the Dow US financials index. Personally, I'm on the sidelines until after the Fed cuts and Goldman announces.

[Rubber Duck]

You cannot call the Dow at the moment.

Stock Markets around the World are really because they fear a total meltdown of the US Financial system, but today the Dow Jones seems to be oblivious.

I can only assume that Americans actually do believe their President when he lies to them. Either that or there is a lot more Fed Intervention going on than is actually hitting the Press. Either way it is a completely false market and utterly unpredictable.

[clipper]

The only thing worth buying right now is ammo.

[TonyP]

I think I own a few thousand shares of JP.
Win or lose?

[Rubber Duck]

I think I own a few thousand shares of JP.
Win or lose?

It all depends how much less than nothing Bear Stearns was actually worth.

$240M is peanuts for a bit of good will and a nice building, but if the liabilities turn out to be huge, then JP Morgan could get sucked down as well!

[touchring]

Dude, I wouldn't recommend anything in this market, but, yes, SKF is the Ultrashort Financials (moves 2-times the inverse of the dow financials index).

Extremely volatile, play money only! Moves at twice the inverse of the Dow US financials index. Personally, I'm on the sidelines until after the Fed cuts and Goldman announces.


Same thing in mind, i noticed from the chart that the financials jump up each time there is a rate reduction. If the market rebounds significantly, I think i'll buy a little, just to join in the fun. :)

[Rubber Duck]

Same thing in mind, i noticed from the chart that the financials jump up each time there is a rate reduction. If the market rebounds significantly, I think i'll buy a little, just to join in the fun. :)

Well this is because based on last years earnings, they look more and more attractive, each time the interest rate drops. The problem is that you are not buying into last year's earnings, it is next year's earnings that will determine your ROI or LOI. When Wall Street wakes up to the fact that Past Results are no indicator of Future Performance, all these silly little calculation that are being done, will go out of the window and the index will Pancake. Your stupid calculator will be telling you to give them away or just let them expire!

After this debacle, Herbert Clark Hoover will be regarded as something of a Financial Guru!

[Drewbert]

Next weekend's Fed buy-out: Lehman

[Rubber Duck]

Next weekend's Fed buy-out: Lehman

The thing is the Fed have the jump on everyone else.

They run out of cash, then they just print more! :p

My tip for the day is to buy wheelbarrows!

[bwhhisc]

My tip for the day is to buy wheelbarrows!

ROTFLMOL!

[touchring]

Well this is because based on last years earnings, they look more and more attractive, each time the interest rate drops. The problem is that you are not buying into last year's earnings, it is next year's earnings that will determine your ROI or LOI. When Wall Street wakes up to the fact that Past Results are no indicator of Future Performance, all these silly little calculation that are being done, will go out of the window and the index will Pancake. Your stupid calculator will be telling you to give them away or just let them expire!

After this debacle, Herbert Clark Hoover will be regarded as something of a Financial Guru!


We're talking about buying shorts.

[Rubber Duck]

We're talking about buying shorts.

Extremely risky.

A lot of the big players will already be shorting against their own portfolios.

These investments are highly leveraged. To make money you have to not only be able to predict the direction of the market, but you have to be able to guess its speed and timing much more accurately than the herd. You virtually need inside information in order to be able to do that.

The reason the big banks are in trouble is that they have leveraged their investments and got it badly wrong. Don't make the same mistake.

[touchring]

Dude, I wouldn't recommend anything in this market, but, yes, SKF is the Ultrashort Financials (moves 2-times the inverse of the dow financials index).

Extremely volatile, play money only! Moves at twice the inverse of the Dow US financials index. Personally, I'm on the sidelines until after the Fed cuts and Goldman announces.


i bought some, but too little. darn should have bought more, went up 40%!

[touchring]

i bought some, but too little. darn should have bought more, went up 40%!

Now up 60%. :x

IndyMac Seized by U.S. Regulators Amid Cash Crunch

July 11 (Bloomberg) -- IndyMac Bancorp Inc. became the second-biggest federally insured financial company to be seized by U.S. regulators after a run by depositors left the California mortgage lender short on cash.

The Federal Deposit Insurance Corp. will run a successor institution, IndyMac Federal Bank, starting next week, the Office of Thrift Supervision said in an e-mailed statement today. Customers will have access to funds this weekend via automated teller machines. Regulators intend to eventually sell the company.

The Pasadena, California-based lender specialized in so- called Alt-A mortgages, which didn't require borrowers to provide documentation on their incomes. IndyMac's home state, where Countrywide Financial Corp. was also located before it was bought last week, has been among the hardest hit by foreclosures.

``Given their focus on Alt-A and a heavy concentration in California, they would have suffered meaningful losses in almost any scenario,'' Brian Horey, president of Aurelian Management LLC in New York, said before the seizure was announced. Aurelian is short-selling IndyMac shares to gain from declines.

Had IndyMac ``applied some common sense and changed their approach to underwriting as the housing market peaked, they might have lived to see the next cycle,'' Horey said.

IndyMac came under fire last month from U.S. Senator Charles Schumer, who said lax lending standards and deposits purchased from third parties left it on the brink of failure. In the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion, the OTS said.

Liquidity Crisis

``This institution failed due to a liquidity crisis,'' OTS Director John Reich said in the statement. ``Although this institution was already in distress, I am troubled by any interference in the regulatory process.''

Schumer blamed IndyMac's own actions and regulatory failures for the seizure.

``If OTS had done its job as regulator and not let IndyMac's poor and loose lending practices continue, we wouldn't be where we are today,'' Schumer, a New York Democrat, said in an e-mail today. ``Instead of pointing false fingers of blame, OTS should start doing its job to prevent future IndyMacs.''

IndyMac becomes the largest OTS-regulated savings and loan to fail and second-biggest financial institution to close behind Continental Illinois in 1984, according to the FDIC. Lehman Brothers Holdings Inc. advised the regulator in the transaction.

$900 Million in Losses

The lender racked up almost $900 million in losses as home prices tumbled and foreclosures climbed to a record. California ranked second among U.S. states, with one foreclosure filing for every 192 households in June, 2.6 times the national average.

After peaking at $50.11 on May 8, 2006, IndyMac shares lost 87 percent of their value in 2007 and another 95 percent this year. The stock fell 3 cents to 28 cents at 4 p.m. New York time today.

IndyMac's shutdown may mean regulators will have to raise more money to support the federal deposit insurance program that repays customers when a bank fails, Reich said during a press conference. The failure will cost the fund about $4 billion to $8 billion, the FDIC said in a statement.

About $1 billion of uninsured deposits are held by about 10,000 customers, the FDIC said. Those depositors will get an ``advance dividend'' equal to half the uninsured amount, according to the statement.

The FDIC insures $100,000 per depositor per insured bank, according to the agency's Web site. Customers may qualify for more coverage depending on the type of accounts they own, and some retirement accounts have a $250,000 limit.

Workforce

IndyMac announced on July 7 that it was firing half its employees. The lender agreed to sell most of its retail mortgage branches to Prospect Mortgage, giving the Northbrook, Illinois based-company more than 60 branch offices with 750 employees. IndyMac also has a retail network with 33 branches and $18 billion in deposits, mostly insured by the FDIC.

The company was started in 1985 by Countrywide founders Angelo Mozilo and David Loeb under the name Countrywide Mortgage Investments. In 1999, it converted into a savings institution from a real estate investment trust. That year, Michael Perry replaced Mozilo as chief executive officer.

Under Perry's leadership, profit more than doubled from $118 million in 2000 to $343 million in 2006 amid the housing boom. The stock more than tripled over that stretch.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; David Mildenberg in Charlotte at dmildenberg@bloomberg.net.

http://www.bloomberg.com/apps/news?pid=20601087&sid=atrd9_l.GrL8&refer=home

[Rubber Duck]

I understand that they may sweeten the deal by throwing in Fanny Mae. :p

[touchring]

I understand that they may sweeten the deal by throwing in Fanny Mae. :p


i doubt anything will happen to the government sponsored institutions, you'll be surprised how many crony governments will throw in money to support these 2 institutions if bush makes a phone call.

As for the small and medium sized banks, the same cannot be said.

[Rubber Duck]

i doubt anything will happen to the government sponsored institutions, you'll be surprised how many crony governments will throw in money to support these 2 institutions if bush makes a phone call.

As for the small and medium sized banks, the same cannot be said.

Nobody is going to throw in money for no return. If you mean that Bush may sell off to Sovereign Investment Funds then may be you are right, but it is going to have to look like it has legs, and produce an ROI. That will probably mean that the US Tax payer is going to have to soak up a lot of the debt. Of course none of the debt is going to get paid of before November, indeed those that are going to have to pay the bill are unlikely to get identified before then in case he loses even more votes to the Democrats.

I have done a lot of reading on this problem. It is very very clear the assumption that the assumption that Fannie and Freddie are bomb proof are the root cause of most of America's ills and the impression that they are sacrosanct has to be disparaged if confidence in the US economy is ever going to return. Whatever the outcome, it would seem that the financial crisis far from being over, has barely begun.

The real fear has to be the dollar. If confidence in the US Treasury melts down it could soon look about 100% over valued, which would then certainly result in hyper-inflation.

The way things are going don't be surprised if the the Federal Reserve Window is also extended to loss making Vegas casinos.

[touchring]

i read some articles that 20% of fannie and freddie debts are owned by foreign governments, so if they start selling their bonds, us dollar will be under pressure again.

btw, now up 70%.