What is Digg?111 Comments
- inactive, on 08/13/2008, -10/+102Sounds vaguely like the insider information used to short-sell United and American Airlines stock one crisp September day a few years ago.
- allowners, on 08/13/2008, -6/+46Nothing like crony capitalism for quick wealth for a few coupled with quick poverty for many.
- Hangly, on 08/13/2008, -0/+31I think it means that people at Stearns knew it was going to collapse and decided to capitalize on it. Insider trading, in other words.
Though shorting the stock could also have caused it to fail... - sgiffy, on 08/13/2008, -1/+30In order to determine whether this was likely nefarious we would need to look at the past few years to see if other(losing bets) were placed. If this was the only one then it looks suspicious. However if there were various short plays over the past few years the it seems more like someone got lucky. In other words was it like one lottery ticket being sold and that ticket was the winner, or were many sold and one happened to win.
Also the idea that firms might be in trouble was hardly all that unknown in the weeks prior to Bear. We were already in the credit crunch and housing had already declined. - TheJimid, on 08/14/2008, -9/+36This is a total sham. We arrested 840,000 Marijuana smokers last year while this crook got a Bentley at every house. The public deserves a name or proof of a solid investigation.
- looselips, on 08/13/2008, -6/+30"nail the guys who did it"
Agreed, they all should be in pound-ur-ass-prison for the pressure they were trying to put on bear-stearns to try to keep them in-check.
It should not be long now for the much bigger farce. - Hangly, on 08/13/2008, -0/+21That one led mainly back to Deutsche Bank, IIRC.
- ljin, on 08/13/2008, -3/+22So are we saying bear wouldn't have collapsed without those rumors? Or did that single investor push bear into leveraging on mortgage backed security?
- brad3378, on 08/13/2008, -1/+17........"Another analyst said the trade equated to buying a lottery ticket."
Source: http://www.businessspectator.com.au/bs.nsf/Article ... - EffYoo, on 08/14/2008, -0/+16Shorting a stock can affect confidence in it because others can see how many of the company's shares are being short sold.
However, that's now what happened. This person bought options which are essentially the right to sell the stocks at a price. For example, a stock price is $30 and the cost to buy a put is $2, the price on the put is $15. By buying the put you're eseentially betting that the stock will fall below $13 (15-2). You're spending $2 to keep whatever the difference is between the actual price of stock at maturity and $15. If the price doesn't get below $15 then you lose all your money.
That's what this guy did. The possibility of a failure of a firm was high enough that someone with a lot of money under management wouldn't think it was much of a risk to bet 1.7 million for such a potentially large payoff. Some of these fund managers control billions of dollars and I would be surprised if this was actually a conspiracy. Free market capitalism never would have gotten this far if 1.7 million was enough to bring down bear stearns. - hoppdawg, on 08/14/2008, -3/+18Bear Stearns was leveraging sub-prime mortgage backed securities 35:1. Of course they were going to go under. Borrowing shares from other shareholders to short them has no effect on their (bleeding red) balance sheet and isn't unethical - it's intelligent.
What is f'ed up is the Federal Reserve is bailing them out. - sicntired, on 08/13/2008, -3/+16And probably a nice bailout from,guess who?These bandits are all organized and have known each other since university.They cover each others asses and have their hands deep in the administrations pockets.They don't refer to the general population as sheep and cattle for nothing.It's all just numbers and they didn't even get that right.
- BobOki, on 08/14/2008, -1/+14*puts on his tinfoil hat*
Anytime I hear some douchebag say that term, it reminds me how they are ALWAYS wrong. I'll take my common sense, thinking, and tin foil hat happily sir, you can continue to live in head-up-your-ass-ville where the weather is always nice and warm, and you can never get screwed because you already have it plugged. - Prosequi, on 08/14/2008, -1/+14"Jimmy Cayne, Bear's chairman, told shareholders he believed a "conspiracy" was behind its collapse".... because it might absolve him of his own culpability perhaps? Consider the source.
- inactive, on 08/14/2008, -2/+14le chiffre
- Hangly, on 08/14/2008, -0/+11Both are disasters, and you can make money on both if you have prior knowledge.
- inactive, on 08/13/2008, -4/+15Here's an idea, next time list the person's name.
- rebelcapitalist, on 08/13/2008, -0/+10It is also predatory capitalism and the predators and preying upon each other. That is classic.
- inactive, on 08/14/2008, -2/+12Hedge Funds are extremely unregulated and unmonitored. It takes a large amount of money to invest in one and the risks are extremely high. The government has been extremely slow to respond to regulations which makes me wonder how many politicians' pockets have been filled out of the owners of these hedge funds.
- wonderchemist, on 08/14/2008, -0/+9For a company on the brink, shorting hurts confidence in the company which hurt the company's ability to borrow more money.
Now in most cases it won't make a difference, but ex-management/investors typically delude themselves into thinking "If only we had gotten that loan, we would have survived!" - lulzy, on 08/14/2008, -1/+10ha that'll be the day man. guys like that don't get touched
- monkeyhoward, on 08/14/2008, -2/+11This is strikingly similar to what what some think happened to ENRON.
Remember when Ken Lay was going around saying that they were then victim of predatory short sellers?
As much as we want to hold the companies responsible for their own demise, you have to wonder if what theses CEOs are saying might not be all that far from the truth.
Predatory Short Selling = Ultimate Greed
And greed is the oil that lubes Wall Street's gears.
An easy enough scenario to imagine....
A "Predatory Short Selling, Well Connected Investor(s)" discovers a company that is playing it just a bit too close to the edge. If left to their own, this company might just continue on for a long time. All the PSSWCI needs to do is place the bet and give said company a little push.
The righteous indignation leveled at the company leaders, which inevitably follows such a collapse, only serves to shield the PSSWCI.
We yell at the dog that was supposed to be guarding the chickens and accuse him of eating his charge; while behind our backs the wolf slinks away, licking his chops and smiling.
Easier than fixing a fight or doping a horse and you get to live in New York and hang out with classier people. - badbadmike, on 08/14/2008, -1/+9Someone enlighten me - why are these sorts of transactions allowed to be done anonymously?
- lulzy, on 08/14/2008, -0/+8i was thinking that exact same thing.. *****
- enantiodromia, on 08/14/2008, -0/+8$20 says the mystery person also smokes doobies
- tidu, on 08/14/2008, -1/+9yeah, like five... believe me.
- sockpuppets, on 08/14/2008, -4/+11My bet it's the head of Stephen Hawking traveling back in time for some quick cash. You know how many hookerbots you can get for $270 million in the future?
- richgustavson, on 08/14/2008, -0/+7He didn't say "DONT SELL BEAR STEARNS", he said don't take your money out of Bear Stearns, in reference to withdrawing from brokerage accounts held with the firm. That money was safe. Sure, he was off in saying that Bear was fine, but he did NOT say not to sell their stock. In fact, he said right around that time that he wouldn't get behind any banks at the moment.
- TheJimid, on 08/14/2008, -0/+7that type of money buys to many friends.
- ljin, on 08/13/2008, -0/+6except the lottery ticket cost upwards of 1 million dollars :)
- 007brendan, on 08/14/2008, -2/+8say you want to buy a share of stock A, which is $100, you can pay me, and I'll buy it for you. But if I'm short selling, you give me the $100, and I don't buy it right away, I wait for the price to go down. If the stock drops to $50 the next day, and you decide to get out of it, I'm only liable to you for $50. So I just made an easy $50, without ever having to actually buy the stock.
- Pittance, on 08/14/2008, -0/+5Or in the difference between drugs. To some people, crack=dope=pot=heroin=whatever. Its the dumb asses like these who really screw things up.
- Elite1789, on 08/14/2008, -0/+5Lets look at yahoo finance to see how absurd this article is.
In the summer of '07, the share price of Bear Stearns was 143 dollars. Two weeks before the collapse of the firm, its price was already at about 60 dollars.
All that value had already been erased. That is billions of dollars in market cap. Some crazy speculator did not have enough capital to do that. He just made a good call, he did not bring the firm down. No inside information was likely involved.
Hedge fund guys like taking large bets against sick firms all the time: http://seekingalpha.com/article/55849-vic-greenlig ...
And guess what? It is good for the economy. What has happened at Goldman, Merrill and Lehman after the Bear collapse? They all lowered there leverage and moved to increase capital reserves. i.e. they are taking less risks given the dangerous environment.
Trust me, Bear did MANY things wrong, and while it did not bring about its own destruction, it very much put itself in a vulnerable position for that to happen. - TheJimid, on 08/14/2008, -0/+5Crack? classy another digger who doesn't believe in constructive debate.
- cjhowe, on 08/14/2008, -0/+4The entire industry knew they were selling crap mortgages back and forth to each other. March 10th, there are "serious" concerns on BSC's liquidity position. If I were managing an institution holding in BSC, I'd be taking out an insurance policy on March 11th as well. Guess what. That's what put options essentially are...insurance policies.
- mille716, on 08/14/2008, -0/+4Excellent Bond reference! Unfortunately it will have gone over most people's heads.
- Aroundtheworls, on 08/14/2008, -0/+4From the article, "Others, though, pointed to the 158 per cent return to suggest it was a bet with a reasonable risk-reward ratio."
Slight math error here. A 158 percent return on US$1.7m is a US$2.7m return. A return of 141 million pounds, worth US$282m at the time (yaaaay dollar) is a return of 16588%. - CountBeefula, on 08/14/2008, -0/+4The person who wrote this should at least have spoken to someone in finance. First off the whole street was short Bear Stearns and most financials. Large options trades do not bring companies that size down, bad management and over exposure to sub-prime do. If someone made money off of someone's stupidity then god bless. It is called capitalism. If the stock traded the other way this guy would have ate that million and change which by the way is very very small peanuts on Wall Street. Unless there is solid evidence of insider trading this is called a free market economy.
- goes211, on 08/14/2008, -0/+4Finally a sensible comment!
- Aroundtheworls, on 08/14/2008, -0/+4Short-selling is like fortune telling- people only remember the shorts when they're right.
There are big bets placed against equities every day. - NSResponder, on 08/14/2008, -0/+4"How can you borrow shares?"
You can borrow shares from another investor who collects a premium from you for the use of his shares. This transaction is facilitated by brokers, typically. If you've borrowed shares, you have the obligation to replace them before a given expiration date.
If you can buy back shares to cover the borrowed shares you owe for less than you sold them for previously, you make money. If the price of the shares has increased in the meantime, you lose money.
-jcr - 2reflective, on 08/14/2008, -0/+3Short selling is a really good skill to acquire, given the current status of the economy.
- EffYoo, on 08/14/2008, -0/+3many of these fund managers have billions under management, a 1.7 million dollar lottery ticket is nothing to them. They're just using the law of large numbers with a move like that.
- railsroad, on 08/14/2008, -0/+3Short selling is by definition predatory.
If their weren't short sellers, then the liquidity of the market would not exist to the degree it does now. - Kallius, on 08/14/2008, -0/+3Forget about the maxim of "work smart and work hard." You get ultra rich by being born into the right family, making the right connections, and being unethical and ruthless as hell.
- UheardItHear, on 08/14/2008, -0/+3(sigh) I can tell you have never watched Mad Money, because what Cramer said was that your "money" is safe in Bear Stearn's (ie. the bank, your assets are safe because they are insured) -- he was responding to a caller asking if he should take his money out of the bank, it had nothing to do with the stock. (end sigh)
- Hangly, on 08/14/2008, -1/+4$270 million American dollars?
Your best bet would be the recycling center. Scrap paper goes in the yellow bin. - LordRedSnake, on 08/14/2008, -0/+2Explain to me how the Fed bailed them out. This nonsense keeps getting parroted by people without a basic knowledge of the supposed "bailout."
The Fed brokered Bear Stearns' takeover by JP Morgan at $2 a share, down from $30 at the market close on the Friday before. Hardly a bailout considering Bear Stearns investors got completely creamed and a private entity was taking over the troubled bank.
The Fed's only other involvement was assuming the risk of Bear Stearns mortgage-backed securities at a heavy discount. The Fed actually stands to profit from this deal as they valued those securities at much lower than their true value to offset the risk caused by their illiquidity. The market for mortgage-backed securities will pick back up and liquidity will be restored, at which time the Fed will unload the securities it's holding as collateral at higher prices than at the worst depths of the credit crunch. - inactive, on 08/14/2008, -3/+5That's what happens when people invest in imaginary property.
- inactive, on 08/14/2008, -4/+6The "bailout" was a prime example of corporate welfare Bush/Cheney style!
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