| Investment Banks, Heard on the Street, Earnings | 21 Feb 2008 11:00 PM |
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| Bear Stearn's Bear Market - revisited by Reggie Middleton |
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As illustrated in detail in my analysis, Bear Stearns is in some real trouble. CNBC reports that the US attorney is intensifying its investigation of the bank and an indictment is increasingly possible. In addition, Bear Stearn's exposure to the mortgage and real estate markets are sinking it. I expect:
- $121 million in losses in CMBS,
- $172 million in Alt A residential
- $363 milion in ARMs
- $4 million in Helocs
- $402 million in midprime loans
- $148 million in 2nd lien loans
- and $1.4 BILLION in subprime loans.
A total of at LEAST $2.7 bilion in losses will be coming down on the Bear, devastating equity capital. I have scoured through roughly 30% of Bear Stearns entire ABS holdings, and these losses are from just that 30%. You can download the list of approximately 3,600 CDOs, loans, securities and related assets here:
Bear Stearns ABS inventory (1.56 MB 2008-02-07 09:42:27).
| Asset Class | Data | Total |
| AltA | Sum of BASE CASE LOSSES | 171,716,337 |
| | Sum of Optimistic Case Losses | 145,838,684 |
| | Sum of Worst Case Losses | 223,471,645 |
| AltA ARM | Sum of BASE CASE LOSSES | 363,177,975 |
| | Sum of Optimistic Case Losses | 312,628,121 |
| | Sum of Worst Case Losses | 464,277,684 |
| CMBS | Sum of BASE CASE LOSSES | 121,477,512 |
| | Sum of Optimistic Case Losses | 97,193,113 |
| | Sum of Worst Case Losses | 168,432,011 |
| Corporate | Sum of BASE CASE LOSSES | 481,250 |
| | Sum of Optimistic Case Losses | 412,500 |
| | Sum of Worst Case Losses | 550,000 |
| HELOC | Sum of BASE CASE LOSSES | 4,104,225 |
| | Sum of Optimistic Case Losses | 3,536,575 |
| | Sum of Worst Case Losses | 5,239,525 |
| Midprime | Sum of BASE CASE LOSSES | 402,412,147 |
| | Sum of Optimistic Case Losses | 324,994,889 |
| | Sum of Worst Case Losses | 557,246,661 |
| Other ABS | Sum of BASE CASE LOSSES | 16,539,550 |
| | Sum of Optimistic Case Losses | 12,396,275 |
| | Sum of Worst Case Losses | 24,576,100 |
| Prime | Sum of BASE CASE LOSSES | 52,647,715 |
| | Sum of Optimistic Case Losses | 36,306,265 |
| | Sum of Worst Case Losses | 86,379,593 |
| Second | Sum of BASE CASE LOSSES | 147,610,602 |
| | Sum of Optimistic Case Losses | 124,662,519 |
| | Sum of Worst Case Losses | 170,558,685 |
| Subprime | Sum of BASE CASE LOSSES | 1,436,911,912 |
| | Sum of Optimistic Case Losses | 1,272,055,456 |
| | Sum of Worst Case Losses | 1,766,624,824 |
| Total Sum of BASE CASE LOSSES | 2,717,079,225 | |
| Total Sum of Optimistic Case Losses | 2,330,024,396 | |
| Total Sum of Worst Case Losses | 3,467,356,728 | |
| Losses under various scenario from exposure towards bond insurers | in US$ | |
| | | |
| Total Sum of Base Case Losses | 2,717,079,225 | |
| Total Sum of Optimistic Case Losses | 2,330,024,396 | |
| Total Sum of Worst Case Losses | 3,467,356,728 | |
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written by Reggie Middleton, February 22, 2008
I don't know anything about the trust but it does smell a little fishy given everything that you said checks out. I would suggest you check for insider transactions on one of the free sites to see how many other shares traded into the trust during the same time period.
Even if the other insiders didn't sell, it appears as if Cayne may have taken advantage of insider information since he sold on a day were a buyer was there to create such a huge demand for a weak stock. Normally, that much of a sale may have moved the stock.
As for why he is selling? Most likely the same reason why I am shorting...
Even if the other insiders didn't sell, it appears as if Cayne may have taken advantage of insider information since he sold on a day were a buyer was there to create such a huge demand for a weak stock. Normally, that much of a sale may have moved the stock.
As for why he is selling? Most likely the same reason why I am shorting...
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written by Sam Goody, February 22, 2008
Thanks for the comments Reggie. I looked at the EDGAR filings and it looks I might have jumped the gun 
This trust appears to be part of a Capital accumulation plan for selected top execs. The 27 million shares were funded by the company. May be nothing sinister going on here...
This trust appears to be part of a Capital accumulation plan for selected top execs. The 27 million shares were funded by the company. May be nothing sinister going on here...
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CEO Cayne reduces his BSC holdings to to 4.79% on 14th Feb and BSC Trust picks up 27 million shares on the same day?. Could have been a big problem to dump this many shares on the open market - but with this transaction did Cayne (possibly others) make his money without tanking the share price?. Does this mean BSC essentially picked up the tab?.
The full name of the BSC trust (from Yahoo's Insider Transactions):
BEAR STEARNS COMPANIES INC. 2008 TRUST
- A "Special Purpose" Trust created to buy back shares from insiders?
- All the senior executives "sacrifice" their 2007 bonus and this
happens now!
- If BSC is a take over target why is Cayne dumping shares?
- How many others sold their shares to the aforementioned Trust?
- According to Yahoo 89% of the float is held by institutional and mutual fund
owners - whatever happened to Fiduciary duty?
Cayne's selling:
http://www.reuters.com/article/marketsNews/idUKN2039961320080220?rpc=44
Any comments, Reggie. Could this Trust be an Off Balance Sheet structure?.