Caryle & Bear Stearns Collapses; Git On While The Goin is Still Good
Git on while the going is still good... re: portfolio liquidation, MSN's Jon Markman
keenly observes this tried and true axiom and comments on somethings we have Nattered about before:
the vortex or death spiral; overleverage and risk management...
because market participants use the same models and react the same way,
when they sell the same securities in the same market; all the elephants can't get out the door at the same time.
Key excerpts follow...
You can think of the Fed's move Tuesday to accept $200 billion in AAA-rated securities from banks and brokers
in exchange for Treasurys as little more than a modest money-laundering scheme.
One leading hedge fund reported in an internal memo this week (sounding like the Nattering One!)
that "the threat of a death spiral hangs over us" and added,
"There is insufficient time for those with the wrong positions to reposition and
there is even insufficient time for those with reasonable positions to just get out of the way."
On a rebound toward the 1,350-to-1,400 level of the S&P 500 Index consider exiting shares of all but the strongest, most creditworthy companies.
This bear market is likely not ending soon, the recent 400-point jump in the Dow Jones industrials notwithstanding
veteran observers are swiftly coming to the conclusion that attempts to regain world financial stability
could be doomed due to a stunning crash of commercial-debt financing and lack of trusted leadership,
and believe private investors should take advantage of any rallies to purge their portfolios of most stocks and nongovernment bonds.
Reasons why the market is collapsing: One is that the extreme levels of borrowing (read debt leverage)
that pushed the market to new highs last year via LBO leveraged buyouts, corporate share buybacks and the momentum style of trading is gone.
The other is that debt panics can last a lot longer than anyone expects because there are only a couple of exits in a crowded room. "
The Nattering One muses... and this is exactly why price discovery in the real estate market collapse is JUST STARTING...
They packed 12 FAT GUYS into a Volkswagen, and now they can't get out, much less breathe.
Speaking of a crowded room... Carlyle Group said creditors plan to seize the assets of its mortgage-bond fund
after it failed to meet more than $400 million of margin calls, The fund said in a statement that it defaulted on about $16.6 billion of debt as of yesterday.
Carlyle Capital said: Lenders will promptlytake over all of its remaining assets after it failed to reach an agreement with lenders.
Any remaining debt is expected to go into default soon.
The fund plunged 95% in Amsterdam trading. Greg Bundy, executive chairman of InterFinancial Ltd.:
"Carlyle won't be the end of it. There's more to come. The problem is no one can give you an educated guess about how much."
And too many elephants in the room... Today, Bear Stearns dropped almost 17%, the steepest decline since the 1987 stock-market crash.
The #2 underwriter of mortgage-backed bonds has lost 42% of its market value this year and is at a six-year low.
Down 67% from its 52-week high of $159.36 in April 2007 on concern the company lacks sufficient access to capital.
Put-option volume in the first hour of trading rose to 60,000 contracts, or 44% higher than the average put volume in the preceding 20 days.
The most-active contracts, which give the right to sell the stock at $50 before this month's options expire in a week, almost tripled to $3.40.
keenly observes this tried and true axiom and comments on somethings we have Nattered about before:
the vortex or death spiral; overleverage and risk management...
because market participants use the same models and react the same way,
when they sell the same securities in the same market; all the elephants can't get out the door at the same time.
Key excerpts follow...
You can think of the Fed's move Tuesday to accept $200 billion in AAA-rated securities from banks and brokers
in exchange for Treasurys as little more than a modest money-laundering scheme.
One leading hedge fund reported in an internal memo this week (sounding like the Nattering One!)
that "the threat of a death spiral hangs over us" and added,
"There is insufficient time for those with the wrong positions to reposition and
there is even insufficient time for those with reasonable positions to just get out of the way."
On a rebound toward the 1,350-to-1,400 level of the S&P 500 Index consider exiting shares of all but the strongest, most creditworthy companies.
This bear market is likely not ending soon, the recent 400-point jump in the Dow Jones industrials notwithstanding
veteran observers are swiftly coming to the conclusion that attempts to regain world financial stability
could be doomed due to a stunning crash of commercial-debt financing and lack of trusted leadership,
and believe private investors should take advantage of any rallies to purge their portfolios of most stocks and nongovernment bonds.
Reasons why the market is collapsing: One is that the extreme levels of borrowing (read debt leverage)
that pushed the market to new highs last year via LBO leveraged buyouts, corporate share buybacks and the momentum style of trading is gone.
The other is that debt panics can last a lot longer than anyone expects because there are only a couple of exits in a crowded room. "
The Nattering One muses... and this is exactly why price discovery in the real estate market collapse is JUST STARTING...
They packed 12 FAT GUYS into a Volkswagen, and now they can't get out, much less breathe.
Speaking of a crowded room... Carlyle Group said creditors plan to seize the assets of its mortgage-bond fund
after it failed to meet more than $400 million of margin calls, The fund said in a statement that it defaulted on about $16.6 billion of debt as of yesterday.
Carlyle Capital said: Lenders will promptlytake over all of its remaining assets after it failed to reach an agreement with lenders.
Any remaining debt is expected to go into default soon.
The fund plunged 95% in Amsterdam trading. Greg Bundy, executive chairman of InterFinancial Ltd.:
"Carlyle won't be the end of it. There's more to come. The problem is no one can give you an educated guess about how much."
And too many elephants in the room... Today, Bear Stearns dropped almost 17%, the steepest decline since the 1987 stock-market crash.
The #2 underwriter of mortgage-backed bonds has lost 42% of its market value this year and is at a six-year low.
Down 67% from its 52-week high of $159.36 in April 2007 on concern the company lacks sufficient access to capital.
Put-option volume in the first hour of trading rose to 60,000 contracts, or 44% higher than the average put volume in the preceding 20 days.
The most-active contracts, which give the right to sell the stock at $50 before this month's options expire in a week, almost tripled to $3.40.
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