Posts filed under “Derivatives”

Open Thread: Bear Stearns

On last night’s Kudlow & Company, I took some heat for my criticism of David Malpass’ ill-timed WSJ Op-Ed (The "Chutzpah" of Bear Stearns).

Then today, I read in Marketbeat that Bear took it in the tail in the credit markets:

Bear Stearns Pays a Heavy Price

For an indication of how less forgiving the corporate bond market has become, look no further than Bear Stearns’ $2.25 billion bond sale on Tuesday. The
Wall Street investment bank, which last week fought to dispel rumors of
liquidity problems, proved it still had access to the capital markets
when it sold new five-year bonds. But the interest rates it had to pay investors raised some eyebrows.

The bonds were priced to yield 2.45 percentage points above yields on Treasury bonds, half a percentage point above existing Bear Stearns bonds that also come due in 2012.

Just two months ago, a junk bond rated “B” was yielding that same 2.45 percentage points over Treasurys, a record low.  The so-called spread on junk bonds has since jumped to 4.18 percentage points. Bear sports an “A+” credit rating, but appears to be paying a lot more than most “A”  corporate bonds, which are currently yielding 1.25 percentage points more than Treasurys, according to a Merrill Lynch index.

The hefty rates Bear is paying on its new bonds illustrate “a willingness to secure liquidity at any price,”
analysts from Banc of America Securities noted in a report. The large
premium also implies that other companies that want to tap the
investment-grade bond market may have to pay significantly higher
rates, they added. (emphasis added)
-Mark Gongloff,  Marketbeat

Here’s my question for the assembled multitudes:

How much has this entire credit issue dinged Bear Stearns?
Has their Reputation been badly stained?
What about their Liquidity and Creditworthiness?
What other liabilities are on their books we may be unaware of?
Can they still attract and retain top talent?

I do not know the answers to any of these questions . . .


Bear Stearns (BSC), Daily Chart, One Year


And for the record, neither I, nor my firm or its clients, has any position, long or short, in Bear Stearns (BSC).

What say ye?

Category: Corporate Management, Credit, Derivatives, Finance, Psychology, Trading

A Short History of the Credit Boom & Bust

Category: Credit, Derivatives, Finance, Markets, Psychology, Real Estate

Notice to Loan Officers/Brokers

Category: Credit, Derivatives, Psychology, Real Estate

The “Chutzpah” of Bear Stearns

Category: Credit, Derivatives, Economy, Markets, Psychology

Understanding Credit’s Alphabet Soup

There were a couple of great graphics in the New York Times recently, explaining in some degree of detail, the machinations of the RMBS, CDO and CLO markets.

These are the packaged (and repackaged) holdings that are based upon the sub-prime mortgages that have been defaulting in such large numbers, and have been leading to hedge fund blow ups.

First up: todays front page article by Gretchen Morgenson: Mortgage Maze May Increase Foreclosures.



Graphic courtesy of NYTimes


Next up, the accompanying graphics to Floyd Norris’ The Loan Comes Due:


Read More

Category: Credit, Data Analysis, Derivatives, Real Estate

Blaming the Retail Investor

Category: Credit, Derivatives, Financial Press, Investing, Markets, Psychology, Real Estate

Quote of the Day: “the stunning failure of responsibility”

Category: Credit, Derivatives, Earnings, Hedge Funds, Markets, Psychology

Get Your Trading Tools Here

Category: Derivatives, Markets, Psychology, Trading

Credit-Market Tremors

Category: Credit, Derivatives, Finance, M&A, Markets

Cool! Residential Mortgage Backed Securitization Process

Category: Credit, Derivatives, Economy, Finance, Real Estate