April 4, 2008 | Leave a Comment
Congratulations John and Suzy Taxpayer, you are now the proud owners of Bear Stearns. Yes, this could be you should Bear end up filing for Chapter 11 over the next couple of days. This looks likely as the heroics by JP Morgan and the Federal government has not been able to completely stop the bleeding. For the tax payer, the likely result is losses as the government will not want to carry these assets on the books and will look for the quick fire sale. What does this mean for the hedge funds? A couple of good things: 1) hedge funds will be the likely buyers of these assets at significant discounts and 2) one, if not more of the big boys will be invited to manage and facilitate the sale of the assets.
My money is on The Blackstone Group given the media’s recent attention to their enviable liquidity position and ability to raise $10 billion fairly effortlessly for their latest real estate fund. So as a taxpayer (or burgeoning hedge fund manager) how do you ease the pain and potentially participate in all of this? Pick up a few shares of The Blackstone Group (ticker: BX)* and ride the wave of their liquidity and strategic positioning. Alternatively, play the part of the activist investor: shoot some e-mails to your congressmen, Fed governors, Bear Stearns execs, and other related players and let them know that we are watching and that we want a fair and open market bid (or ongoing asset management process) that yields the best possible return on our investment.bail out, bear stearns, start up hedge funds
April 1, 2008 | Leave a Comment
Attached/linked please find And That’s The Week That Was, the Brounes & Associates market/economic commentary for the week ended March 28, 2008. Never let it be said that JP Morgan Chase would kick a man (shareholder) when he’s down. Last week, the major bank undoubtedly looked to take advantage of Bear Stearn’s financial “challenges” with its feeble (Fed orchestrated) bailout offer of $ 2/share. This week, it increased its offer to $10/share (though still may be making out with a pretty good deal). Speaking of deals, the current credit crisis may be hindering Clear Channel’s move toward privatization as some key banks began balking over financing terms. The economic numbers of the week depicted continued sluggishness as recession seems more and more the likely scenario. Investors still can’t seem to make heads or tails of the times as volatility in the form of triple digit price moves remains very much the norm for the markets these days. Looking for a distraction? March Madness is upon us (and the Horns are still alive and kicking).
Coming up in the week ahead: Construction Spending (Tuesday), ISM - Manufacturing (Tuesday), ISM - Services (Thursday), Unemployment Rate (Friday), Nonfarm Payroll Additions (Friday)bail out, bear stearns, clear channel, economics, investment
March 18, 2008 | Leave a Comment
I’m extremely curious; why was JP Morgan/Chase granted the sole privilege of purchasing Bear Stearns for $2 per share. Seems like a lot of this went on behind closed doors and occurred in such a quick manner that other market participants didn’t have a chance in Hades to respond. While I haven’t fully crunched the numbers, it appears that their prime brokerage business alone would be worth $236 million at a low multiple, let alone any of the other profitable divisions and residual assets. I’m pretty sure there are a lot of pissed off hedge fund managers that would have liked to been in on the bidding here. And let’s not overlook the shareholders that got royally screwed here.
A tip for the Fed: let the chips fall where they may. The only cure for the mess that we’re in is to teach all the players involved some fiscal responsibility.bail out, bear stearns, fed, hedge funds, JP Morgan
March 18, 2008 | Leave a Comment
Attached/linked please find And That’s The Week That Was, the Brounes & Associates market/economic commentary for the week ended March 14, 2008. Ex-Governor Eliot Spitzer’s “incident” brought a little comic relief to what had otherwise been a dark and gloomy time on Wall Street. Of course, even traders and portfolio managers with underwater positions can find comfort and take great delight in the misfortune of others (especially when those “others” are despised by most on the Street). While the economic numbers still remains weak and recession talks are heating up with each passing day, Chief Bernanke turned to some creative financing arrangement to help breathe life back into the economy and the markets. (And, it worked, if only for one day). Oil soared to new records for no good reason, leaving some energy analysts “hopeful” that once any semblance of normalcy (or reality) returns, oil and gas prices could tumble (pretty significantly and quickly). News of a near failing by Bear Stearns (and a subsequent bailout) reminded investors that the crisis is far from over. (Who will be next?) The Fed meets next week and most watchers are again looking for more of the same. Anything short of a 75 bps cut will most likely be viewed with disappointment. So much for those creative juices, Dr. B.
December 7, 2007 | Leave a Comment
Attached/linked please find And That’s The Week That Was…the Brounes & Associates market/economic commentary for the week ended December 7, 2007. This week, President Bush did his best Superman, Batman and even Underdog imitations (anyone know his motto?), by announcing a plan to “bail out” the most unsophisticated of subprime mortgage borrowers and many (greedy) financial institutions. (Of course, the term “bailout” may not be the most appropriate description since his Administration is not in the business of Federal handouts.) With investors basking in the collective glow that someone is finally doing something to help remedy the situation, all eyes will be on Bernanke and friends who meet next week to set monetary policy for the last time in 2007. It’s been quite a roller coaster ride this year, hasn’t it Dr. B.? Do you have a nice holiday offering in the form of a (larger than expected) rate cut?
Coming up in the week ahead: Fed Policy Meeting Statement (Tuesday), Retail Sales (Thursday), PPI (Thursday), CPI (Friday)bail out, bernanke, subprime
September 22, 2007 | Leave a Comment
Attached/linked please find And That’s The Week That Was…the Brounes & Associates market/economic commentary for the week ended September 21, 2007. Circle October 31 on your calendars. That’s the day we next find out whether Bernanke and friends with provide a “trick” or a “treat” when it comes to future monetary policy. The ink was barely dry on the latest Fed statement and already investors and economists began speculating about the next move. Was this larger than expected 50 basis point rate cut a one-time deal? Will this housing/subprime crisis warrant multiple cuts over multiple meetings? Will those “unscrupulous” lenders reemerge now that the Fed has helped “bail” them out of certain financial woes? Will skyrocketing oil prices lead to inflation, the old arch-nemesis of the Fed? While investors praised the actions of the past week and many chose to put their money where their mouth is (OK…not the best grammar), few have any clues about the next move. (Maybe Greenspan’s “The Age of Turbulence: Adventures in a New World” can provide some answers.)
Coming up in the week ahead: Consumer Confidence (Tuesday), Existing Home Sales (Tuesday), GDP (Thursday), New Home Sales (Thursday), Personal Income/Spending (Friday)
August 31, 2007 | Leave a Comment
There is a lot going on today with the subprime situation, etc. So, for the sake of brevity, here are some of the more compelling headlines today …
And for a bit of fun, our friends at Fintag have some scoop on the Wall Street sequel, Money Never Sleeps
Gekko is back – as a hedge fund manager.
August 30, 2007 | Leave a Comment
Dealbook reports on a couple of new studies that whine about hedge fund manager salaries being out of whack with the rest of the workers in the United States:
HFL says: Notice how these “advocacy” groups like to single out the top 20 hedge funds. What about the other 8500 hedge funds out there? Guess they don’t count.
HFL says: Let me clarify this for you … The Institute of Policy Studies and United for a Fair Economy are nothing more than socialist front groups determined to destroy the capitalist system. Groups like this like to hide behind euphamisms. It is always about promoting “fairness” and “preventing the corruption of democracy.” But really its about taking your liberty and controlling how successful you can be. No wonder they are out to get hedgies.
HFL says: Horror, the horror. None of these nitwits can make over $35K per year. No wonder their pissed off. They want diamonds like Percy Walker has — Oh, but that would mean having to go out and earn it! Nevermind.
HFL says: Of course she does … because she’s a socialist.
August 21, 2007 | Leave a Comment
So the Fed lowered the enigmatic “Discount Rate”, in an effort to provide liquidity into a floundering system. I hate to say it, but doesn’t this send a bad message to all market participants along the lines of: “Don’t worry about it. Keep chasing risky assets and compressing spreads to unreasonable tights. If we have a hiccup, the Fed will bail us out!” Not quite the story that I grew up with. When I pumped my entire week’s stipend into the video machines and then went to the bank (i.e., my father) for a loan for necessities I was told to get lost, suck it up, and stop wasting my money. A valuable lesson that I’m sure is not lost on the majority of my fellow investors.
How about the multi-billion dollar injections by investors including Citadel, Goldman Sachs, Eli Broad, and the like? This sort of intervention I find much more palatable and healthy for the long-term viability and fiscal plumbing of our system. Rather than the Fed providing a cheap safety net to continue feeding the borrowing machine, the hedge fund saviors are saying: “Sure, we’ll bail you out, but at a painful discount that will make you think twice before getting into this same predicament again”. Food for thought for the Fed, SEC and other governmental types that scrutinize hedge funds: Take a closer look; hedge funds will again save the day in a fashion more akin to the tradition of America’s great free market system.bail out, crash, fed, hedge funds, SEC