Weekly Investmtent & Economic Recap: 4.4.08

April 7, 2008 | Leave a Comment

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Attached/linked please find And That’s The Week That Was, the Brounes & Associates market/economic commentary for the week ended April 4, 2008.  So the books on the dismal 1st quarter 2008 are officially closed (and not soon enough) and investors seem intent on moving past the recent negativity. Though financial (more write-downs) and economic (weak housing, manufacturing, services, labor) news highlighted the week, the markets moved higher as investors looked at the carnage of the past three months and found some value in equities.  Bernanke stood up nicely to the heat as he was grilled by a finger-pointing Congress over his role in the JP Morgan/Bear Stearns transaction.  Paulson set out to reform the entire financial regulatory system, though he knows he will be long since retired (or back on Wall Street) before any of his proposals are approved/rejected.  The new quarter is off to the races and many investors believe the worst of the news is behind us.  Let’s hope the newfound optimism lasts (despite the  continued talks of recession.  Sorry, just a friendly reminder). 

Coming up in the week ahead:  Construction Spending (Tuesday), ISM - Manufacturing (Tuesday), ISM - Services (Thursday), Unemployment Rate (Friday), Nonfarm Payroll Additions (Friday)

Owning a Piece of the American Dream?

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.

Weekly Investment & Economic Recap: 3.28.08

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)

Weekly Investment & Economic Recap: 3.21.08

March 21, 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 20, 2008.  If there is a harder working man in this country than Ben Bernanke, he should show himself now.  While academic/economist types are not typically known for their creativity, the Fed Chair has had those juices flowing lately by coming up with innovative idea after innovative idea in an attempt to save the economy from devastation (and preventing the onslaught of inflation in the process).  Of course, not everyone can be saved from collateral damage as Bear Stearns employees found out this week; but for the time being, investors seem to like the course in which the Fed is steering the economy. Equities rallied this week as more than a few bargains appeared.  Oil and gold prices fell for a change as speculators began to fear that the unbelievable (and unjustifiable) run in commodities may run have its course. The slightest bit of optimism returned as a few analysts even proclaimed that the worst of the financial crisis was now behind us (perhaps a bit premature, but the sentiment still rings nicely).  So enjoy the long holiday
weekend and come back Monday well-rested and ready for more of the same (wishful thinking).  And in the meantime. Go Horns.
Coming up in the week ahead:  Existing Home Sales (Monday), Consumer Confidence (Tuesday), New Home Sales (Wednesday), Durable Goods Orders (Wednesday), GDP (Thursday)

Remember when it was an Open Market System?

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.

Weekly Economic & Investment Wrap Up: 3.14.08

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.  
Coming up in the week ahead:  Industrial Production (Monday), PPI (Tuesday),
Housing Starts (Tuesday), Fed Policy Statement (Tuesday), Good Friday
(Friday)

Jimmy Cayne Needs a Bucket

August 10, 2007 | Leave a Comment

When Jim Cayne isn’t on the golf course, we think he’s dining at some fancy restaurant like Le Cirque or smoking those expensive stogies in his office.   As Reuters reports below, he’s getting ready to jet off to communist China to secure some more long term loans — but Bear has “ample liquidity” so their investors should feel just fine even though the firm just vomited up two large hedge funds.  (The irony here is too good to pass up - I just HAD to mention it).  Too bad, the once entrepreneural firm is being beaten to death.   I hope the Chinese restaurants over there have an ample supply of buckets ’cause their gonna need it.    They’re about to get a lesson in gluttony and high livin’.

Are you an investor in Bear Stearns?  Do you care that the executives seem to care more about their lifestyles than their business?  Do you care that the firm as been downgraded by the S&P to Latvian bank status, as Fintag says?

Bear Stearns looks to China as crisis rolls on

By David Wighton and Francesco Guerrera in New York and Jamil Anderlini in Beijing

Published: August 10 2007 04:31 | Last updated: August 10 2007 04:31

Jimmy Cayne, the chief executive of Bear Stearns, is planning to travel to China in the next few weeks amid speculation about a possible joint venture with Citic, the state-owned financial conglomerate.

News of the plan comes as Mr Cayne seeks to head off a crisis of confidence in the bank whose co-president, Warren Spector, was ousted on Sunday.

Bear has sent letters to clients reassuring them it has “ample liquidity” to support its businesses in spite of the fallout from the collapse of two mortgage hedge funds it managed.

One senior Wall Street banker said Bear might need to line up new long-term funding to calm counter-parties and lenders. “A strategic stake by a partner with deep pockets would be even better,” he said.

Last year, Bear was in talks about a joint venture with China Construction Bank but negotiations fell apart due to opposition from senior Chinese officials who felt left out of the process, according to one Chinese banker. CCB’s then president, Chang Zhenming, is now vice-chairman of Citic.

The talks with CCB involved the Chinese bank buying convertible bonds that could be translated into an equity stake of up to 20 per cent in Bear.

Mr Cayne is keen to increase the international revenues of Bear, which are relatively smaller than its bigger Wall Street rivals, and China represents a huge potential market for US investment banks.

Top Chinese officials are now nervous about big direct investments in US financial companies following the fall in Blackstone’s share price, according to a senior US banker who was in China last week.

In June, the Chinese government paid $3bn for a stake in the private equity group, whose shares are now trading almost 20 per cent below their flotation price. However, China Development Bank went ahead with a proposed $3bn investment in Barclays last month.

In spite of Bear’s challenges, it would be reluctant to sell a significant stake at about the current share price which is only about 1.2 times book value.

Brad Hintz, analyst at Sanford Bernstein, said Bear was facing “an old-fashioned funding run” amid concerns about counterparty risk. “Trading lines are being pulled and repo lines are being reduced. The Japanese banks aren’t answering Bear’s phone calls, the commercial paper investors are passing on their paper, counterparties are telling Bear’s traders that they are ‘full up’ on Bear’s name.”

But Mr Hintz, a former chief financial officer of Lehman Brothers, said his analysis showed that Bear could survive a funding run.

Who do you think buys out the Bear? 

Fiddling while The Bear Burns

August 8, 2007 | 1 Comment

I can’t take it anymore!  I had every intention of not commenting about the Bear Stearns impolosion caused by their hedge funds, but James Cayne is a Wall Street Nero fiddling while his firm (Rome) burns to the ground!  And rather than be a man and take responsibility for this debacle, he offers up one of his own, Warren Spector,  for public ridicule and feeds him to the mob in the arena.   The Wall Street Journal article the other day paints the picture with wonderful, rich dark tones …

On Wednesday James Cayne, the 73-year-old chief executive of Bear Stearns Cos., summoned his top lieutenant to his smoky, dimly lit office in midtown Manhattan.

The big securities firm Mr. Cayne had led as CEO for 14 years was under attack. Two of its mortgage-related hedge funds had blown up, costing investors more than $1 billion, and its stock was under siege, down 27% this year alone. The way Mr. Cayne saw it, Warren Spector, Bear Stearns’s co-president and the person most often cited as his likely successor, deserved some of the blame.

Really? I can almost smell the stale cigar smoke, the whiff of which brings back the hazy memory of better times .  But good times these are not and its time for a scape goat.  Typical piss-poor management at it again.  Now, granted, Spector is a capital jackass as well.  Who the hell indulges himself to a bridge tournament while his business is in crisis?  Simple, an out of touch plutocrat.  Cayne deserves to be fired — and none too soon.  My prediction — it’ll happen within another two weeks. 

What do you think??

And That’s The Week That Was

August 4, 2007 | Leave a Comment

And That’s The Week That Was…the Brounes & Associates market/economic commentary for the week ended August 3, 2007.  A week highlighted by a huge toy recall, some more devastating news on the subprime front, and a weaker than expected labor number can’t possibly be positive for the markets.  Then again, coming off the worst week for equities in five years, everything is relative.  Earnings number were mixed (as usual) and a few corporate transactions brought some welcome news (unless you enjoy the integrity of the Wall Street Journal).  Stocks were buzzing along as bottom fishers searched for value in the recent market downturn.  However, some ill-timed comments by the Bear Stearns CFO sent equities into another end-of-week tailspin and left investors once again licking their wounds heading into the weekend.  Bonds (by default) are back in favor as the economy seems to weaken with each new release.  What say you, Dr. Bernanke?

Coming up in the week ahead:  Fed Policy Meeting (Tuesday)

Bear Sterns to Their Hedge Fund Investors: No Value Left

July 18, 2007 | Leave a Comment

Most folks following the financial news are already aware of this …

July 18 (Bloomberg) — Bear Stearns Cos. told investors in its two failed hedge funds that they’ll get little if any money back after “unprecedented declines” in the value of securities used to bet on subprime mortgages …

Estimates show there is “effectively no value left” in the High-Grade Structured Credit Strategies Enhanced Leverage Fund and “very little value left” in the High-Grade Structured Credit Strategies Fund, Bear Stearns said in a two-page letter. The second fund still has “sufficient assets” to cover the $1.4 billion it owes Bear Stearns, which as a creditor gets paid back first, according to the letter, obtained yesterday by Bloomberg News from a person involved in the matter.

Wow.

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