Balance Sheet Checker (BSC)'s Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/167204/comments http://seekingalpha.com/article/77034-beware-the-financials-value-trap?source=feed#comment-166972 166972
"...for every $33 in assets they had, they had $32 in liabilities."

It doesn't sound nearly as dramatic, but it is accurate.]]> Tue, 13 May 2008 14:34:00 -0400
"...for every $33 in assets they had, they had $32 in liabilities."

It doesn't sound nearly as dramatic, but it is accurate.]]> http://seekingalpha.com/article/75126-bear-stearns-bailout-the-worst-fed-mistake-ever-really?source=feed#comment-161047 161047
The fact that Bear Stearns has never traded at-or-below JPMorgan’s offer price appears to signal the market's belief that Bear Stearns was/is actually worth more than the offer price (discounted for the likelihood that it will be taken over). Since “a government official advised Mr. Schwartz that a stabilizing transaction needed to be accomplished by the end of the weekend” it seems that the market was ultimately prevented from providing its own stabilization. Instead of supplying the short-term support that Bear Stearns apparently needed until the market was able to price its longer-term stability, the Fed-sponsored buyout gave a strong signal that short-selling the next target will be profitable. The Fed's actions set the precedent that it will not wait for, or encourage, the market to find a support level - it will withdraw lending in favor of a deal priced below any reasonable measure of value or support-level the market may be willing to provide if given adequate time. This will surely encourage future short selling.

In fact short selling financial institutions will be attractive even if the Fed doesn’t “stabilize” the next short target because neither will the market! The Fed has effectively removed any incentive for market participants to even try to provide support for the next target of a bear raid. If there turns out to be another run on a major financial institution the results will surely be much more damaging to the firm involved and to the Federal Reserves ability to promote confidence in the financial system. In that case calling the Fed's actions "the worst policy mistake in a generation" could turn out to be the understatement of a generation.]]> Sat, 03 May 2008 02:03:43 -0400
The fact that Bear Stearns has never traded at-or-below JPMorgan’s offer price appears to signal the market's belief that Bear Stearns was/is actually worth more than the offer price (discounted for the likelihood that it will be taken over). Since “a government official advised Mr. Schwartz that a stabilizing transaction needed to be accomplished by the end of the weekend” it seems that the market was ultimately prevented from providing its own stabilization. Instead of supplying the short-term support that Bear Stearns apparently needed until the market was able to price its longer-term stability, the Fed-sponsored buyout gave a strong signal that short-selling the next target will be profitable. The Fed's actions set the precedent that it will not wait for, or encourage, the market to find a support level - it will withdraw lending in favor of a deal priced below any reasonable measure of value or support-level the market may be willing to provide if given adequate time. This will surely encourage future short selling.

In fact short selling financial institutions will be attractive even if the Fed doesn’t “stabilize” the next short target because neither will the market! The Fed has effectively removed any incentive for market participants to even try to provide support for the next target of a bear raid. If there turns out to be another run on a major financial institution the results will surely be much more damaging to the firm involved and to the Federal Reserves ability to promote confidence in the financial system. In that case calling the Fed's actions "the worst policy mistake in a generation" could turn out to be the understatement of a generation.]]> http://seekingalpha.com/article/71268-backroom-bear-stearns-deal-exposed?source=feed#comment-146130 146130
Even if JPMorgan does hold 49.5% of the shares it seems that the remaining "Longs" hold something like 65%, with the "Shorts" holding negative 15%. Wouldn't JPMorgan then need another 8%-to-16% to ensure this goes through. (+58% JPM, +57% "Longs", -15% "Shorts" *OR* +66% JPM, +65% "Longs", -31% "Shorts") Who is still selling shares of BSC besides the "Shorts", and how will they cover? Am I missing something here?

I think I figured out what I was missing:
Has the public seen BSC's books lately (it didn't file its 10Q)?
Has JPM seen BSC's books lately?
How do the courts define insider trading?
Maybe JPM won't actually get to keep those shares? Is it possible that nothing about this deal is as we are being told?

Wow!]]> Sun, 06 Apr 2008 21:18:04 -0400
Even if JPMorgan does hold 49.5% of the shares it seems that the remaining "Longs" hold something like 65%, with the "Shorts" holding negative 15%. Wouldn't JPMorgan then need another 8%-to-16% to ensure this goes through. (+58% JPM, +57% "Longs", -15% "Shorts" *OR* +66% JPM, +65% "Longs", -31% "Shorts") Who is still selling shares of BSC besides the "Shorts", and how will they cover? Am I missing something here?

I think I figured out what I was missing:
Has the public seen BSC's books lately (it didn't file its 10Q)?
Has JPM seen BSC's books lately?
How do the courts define insider trading?
Maybe JPM won't actually get to keep those shares? Is it possible that nothing about this deal is as we are being told?

Wow!]]> http://seekingalpha.com/article/71268-backroom-bear-stearns-deal-exposed?source=feed#comment-146129 146129
Even if JPMorgan does hold 49.5% of the shares it seems that the remaining "Longs" hold something like 65%, with the "Shorts" holding negative 15%. Wouldn't JPMorgan then need another 8%-to-16% to ensure this goes through. (+58% JPM, +57% "Longs", -15% "Shorts" *OR* +66% JPM, +65% "Longs", -31% "Shorts") Who is still selling shares of BSC besides the "Shorts", and how will they cover? Am I missing something here?

I think I figured out what I was missing:
Has the public seen BSC's books lately (it didn't file its 10Q)?
Has JPM seen BSC's books lately?
How do the courts define insider trading?
Maybe JPM won't actually get to keep those shares? Is it possible that nothing about this deal is as we are being told?

Wow!]]> Sun, 06 Apr 2008 21:18:02 -0400
Even if JPMorgan does hold 49.5% of the shares it seems that the remaining "Longs" hold something like 65%, with the "Shorts" holding negative 15%. Wouldn't JPMorgan then need another 8%-to-16% to ensure this goes through. (+58% JPM, +57% "Longs", -15% "Shorts" *OR* +66% JPM, +65% "Longs", -31% "Shorts") Who is still selling shares of BSC besides the "Shorts", and how will they cover? Am I missing something here?

I think I figured out what I was missing:
Has the public seen BSC's books lately (it didn't file its 10Q)?
Has JPM seen BSC's books lately?
How do the courts define insider trading?
Maybe JPM won't actually get to keep those shares? Is it possible that nothing about this deal is as we are being told?

Wow!]]> http://seekingalpha.com/article/71215-jpmorgan-buying-bear-stock-on-the-open-market-at-10?source=feed#comment-137116 137116
Has the public seen BSC's books lately (it didn't file its 10Q)?
Has JPM seen BSC's books lately?
How do the courts define insider trading?

Maybe JPM won't actually get to keep those shares?

Wow!]]> Sun, 06 Apr 2008 01:42:25 -0400
Has the public seen BSC's books lately (it didn't file its 10Q)?
Has JPM seen BSC's books lately?
How do the courts define insider trading?

Maybe JPM won't actually get to keep those shares?

Wow!]]> http://seekingalpha.com/article/71244-is-the-sec-really-to-blame-for-bear-stearns?source=feed#comment-137109 137109 Sun, 06 Apr 2008 01:07:37 -0400 http://seekingalpha.com/article/71211-jpmorgan-s-actions-indicate-bear-was-a-bargain?source=feed#comment-137105 137105 Sun, 06 Apr 2008 00:48:26 -0400 http://seekingalpha.com/article/71215-jpmorgan-buying-bear-stock-on-the-open-market-at-10?source=feed#comment-136757 136757
Even if JPMorgan does hold 49.5% of the shares it seems that the remaining "Longs" hold something like 65%, with the "Shorts" holding negative 15%. Wouldn't JPMorgan then need another 8%-to-16% to ensure this goes through. (+58% JPM, +57% "Longs", -15% "Shorts" *OR* +66% JPM, +65% "Longs", -31% "Shorts") Who is still selling shares of BSC besides the "Shorts", and how will they cover? Am I missing something here?]]> Fri, 04 Apr 2008 18:08:40 -0400
Even if JPMorgan does hold 49.5% of the shares it seems that the remaining "Longs" hold something like 65%, with the "Shorts" holding negative 15%. Wouldn't JPMorgan then need another 8%-to-16% to ensure this goes through. (+58% JPM, +57% "Longs", -15% "Shorts" *OR* +66% JPM, +65% "Longs", -31% "Shorts") Who is still selling shares of BSC besides the "Shorts", and how will they cover? Am I missing something here?]]> http://seekingalpha.com/article/71112-a-conspiracy-to-kill-bear-stearns?source=feed#comment-136742 136742 Fri, 04 Apr 2008 17:26:52 -0400 http://seekingalpha.com/article/71112-a-conspiracy-to-kill-bear-stearns?source=feed#comment-136718 136718 Fri, 04 Apr 2008 16:30:51 -0400 http://seekingalpha.com/article/71215-jpmorgan-buying-bear-stock-on-the-open-market-at-10?source=feed#comment-136494 136494
It is also interesting to see that on March 17, 18, and 19 JP Morgan bought 240,000 shares at an average price of $51.11 (when there was a $2 offer on the table). Can anyone suggest why?]]> Fri, 04 Apr 2008 10:18:47 -0400
It is also interesting to see that on March 17, 18, and 19 JP Morgan bought 240,000 shares at an average price of $51.11 (when there was a $2 offer on the table). Can anyone suggest why?]]> http://seekingalpha.com/article/71175-jpmorgan-all-but-locks-up-bear-stearns-vote?source=feed#comment-136473 136473 Fri, 04 Apr 2008 09:53:58 -0400 http://seekingalpha.com/article/71175-jpmorgan-all-but-locks-up-bear-stearns-vote?source=feed#comment-136470 136470 Fri, 04 Apr 2008 09:50:06 -0400 http://seekingalpha.com/article/70302-bear-stearns-bailout-by-the-fed-jpm-a-century-old-conspiracy?source=feed#comment-133127 133127 Fri, 28 Mar 2008 14:39:24 -0400 http://seekingalpha.com/article/70307-crises-averted-not-crises-solved?source=feed#comment-132979 132979 Fri, 28 Mar 2008 11:01:58 -0400 http://seekingalpha.com/article/70302-bear-stearns-bailout-by-the-fed-jpm-a-century-old-conspiracy?source=feed#comment-132975 132975
www.ronpaul2008.com/ar.../

]]> Fri, 28 Mar 2008 10:54:10 -0400
www.ronpaul2008.com/ar.../

]]> http://seekingalpha.com/article/69983-investment-bank-regulation-beware-the-dawn-of-this-new-era?source=feed#comment-131979 131979 seekingalpha.com/artic...

I suspect the courts will decide it was illegal and business will resume as normal for Bear Stearns (but it will take time). It is important in these cases that the Fed's role doesn't get challenged but rather JPMorgan's - that way the next time a crisis happens (in a few decades) the Fed still has all it's (percieved) tools to manage the crisis.]]> Wed, 26 Mar 2008 15:09:27 -0400 seekingalpha.com/artic...

I suspect the courts will decide it was illegal and business will resume as normal for Bear Stearns (but it will take time). It is important in these cases that the Fed's role doesn't get challenged but rather JPMorgan's - that way the next time a crisis happens (in a few decades) the Fed still has all it's (percieved) tools to manage the crisis.]]> http://seekingalpha.com/article/69824-jpm-guilty-of-grand-theft-investment-bank?source=feed#comment-131697 131697 seekingalpha.com/artic...

The courts will decide it was illegal and business will resume as normal for Bear Stearns (but it will take time).]]> Wed, 26 Mar 2008 09:00:21 -0400 seekingalpha.com/artic...

The courts will decide it was illegal and business will resume as normal for Bear Stearns (but it will take time).]]> http://seekingalpha.com/article/69567-jpmorgan-boosts-bear-bid-to-10-ny-times?source=feed#comment-131392 131392
Bear Stearns is worth a whole lot more than its current price but an irrational run on the bank (as short-term panics tend to be) put it and the whole financial system at risk. The Fed's role is to promote stability in the financial system which meant it had to do something. And fast. Now put yourself in the Fed's shoes. It didn't want Bear Stearns to go under. Period. And in the panic of the moment there was no way anyone was going to step up and pay a full price for Bear. What do you do? You don't really want to give Bear away to JPMorgan, or anyone else for that matter because that would imply that the system is/was in fact unstable and just giving it away to someone would put it in a comprimised position (as evidenced by all the inquiries/lawsuits/etc... the deal now faces). Everything I have read about this deal seems like the Fed came up with the perfect solution - Have JPMorgan offer to buy/backstop Bear for an absurdly undervalued price with some help from the Fed ($30 billion support that was incredulously only offered to JPMorgan?!). The less people in on this fix of a deal the better. As we have seen this has provided the needed stability/confidence for Bear to contunue operations as normally as possible under the circumstances, which is job A-1 for the Fed. Also at the ridiculously low price it ensures the deal never actually goes through because shareholders would never vote for it. (Even a week later the volume of shares trading hands well above offer price shows that nobody actually thinks this deal will go through). Finally the deal was structured so that it doesn't make sense for anyone else to make a run at Bear AND the whole process is forced to drag on for at least a year through a re-votes mechanism, giving the markets plenty of time to calm down. I must say, the Fed came up with a brilliant solution to such a tricky situation! A company with over 80 consecutive years of profitability (how many firms can say that?) gets to stay in business rather than being forced to sell itself out in an irrational panic. Sharholders will keep voting down the absurdly low offer (which, if the rumors are true, the Fed forced to be low-balled for this very purpose) and no one will be foolish enough to give JPMorgan 20% of the firm by making a counter-bid within the next year. In time this crazy JPMorgan offer will expire and it will again be business as usual for Bear (and more reasonable valuations will return for its shares). The value of Bear coming out of this will depend on how much Bear employees let JPMorgan meddle/sabotage their company while JPMorgan waits for their rejected offers to expire. Bear may lose some of its value as fair-weather employees panic and jump ship before this sorts itself out, but long-term employees that keep the faith in the value of their firm, their shares, and the financial system should come through just fine in the end (or at least much better than they are now!) There is, of course, the option on Bear's building which it will presumably have to buy back from JPMorgan next year for $400 million-or-so, but such is the cost for surviving a panic (and JPMorgan's fee for it's troubles).

The new $10 offer had to be made because the world saw through the $2 offer and presumed the deal may not go through. Thus the confidence the Fed hoped JPMorgan would provide was comprimised by doubts about the likelyhood of JPMorgan's success. The new offer is much more convincing, but with the pending legal challenges it will probably be voided, as the Fed wanted (as per above) and it will probably take longer to resolve (again, as wanted per above).]]> Tue, 25 Mar 2008 17:31:36 -0400
Bear Stearns is worth a whole lot more than its current price but an irrational run on the bank (as short-term panics tend to be) put it and the whole financial system at risk. The Fed's role is to promote stability in the financial system which meant it had to do something. And fast. Now put yourself in the Fed's shoes. It didn't want Bear Stearns to go under. Period. And in the panic of the moment there was no way anyone was going to step up and pay a full price for Bear. What do you do? You don't really want to give Bear away to JPMorgan, or anyone else for that matter because that would imply that the system is/was in fact unstable and just giving it away to someone would put it in a comprimised position (as evidenced by all the inquiries/lawsuits/etc... the deal now faces). Everything I have read about this deal seems like the Fed came up with the perfect solution - Have JPMorgan offer to buy/backstop Bear for an absurdly undervalued price with some help from the Fed ($30 billion support that was incredulously only offered to JPMorgan?!). The less people in on this fix of a deal the better. As we have seen this has provided the needed stability/confidence for Bear to contunue operations as normally as possible under the circumstances, which is job A-1 for the Fed. Also at the ridiculously low price it ensures the deal never actually goes through because shareholders would never vote for it. (Even a week later the volume of shares trading hands well above offer price shows that nobody actually thinks this deal will go through). Finally the deal was structured so that it doesn't make sense for anyone else to make a run at Bear AND the whole process is forced to drag on for at least a year through a re-votes mechanism, giving the markets plenty of time to calm down. I must say, the Fed came up with a brilliant solution to such a tricky situation! A company with over 80 consecutive years of profitability (how many firms can say that?) gets to stay in business rather than being forced to sell itself out in an irrational panic. Sharholders will keep voting down the absurdly low offer (which, if the rumors are true, the Fed forced to be low-balled for this very purpose) and no one will be foolish enough to give JPMorgan 20% of the firm by making a counter-bid within the next year. In time this crazy JPMorgan offer will expire and it will again be business as usual for Bear (and more reasonable valuations will return for its shares). The value of Bear coming out of this will depend on how much Bear employees let JPMorgan meddle/sabotage their company while JPMorgan waits for their rejected offers to expire. Bear may lose some of its value as fair-weather employees panic and jump ship before this sorts itself out, but long-term employees that keep the faith in the value of their firm, their shares, and the financial system should come through just fine in the end (or at least much better than they are now!) There is, of course, the option on Bear's building which it will presumably have to buy back from JPMorgan next year for $400 million-or-so, but such is the cost for surviving a panic (and JPMorgan's fee for it's troubles).

The new $10 offer had to be made because the world saw through the $2 offer and presumed the deal may not go through. Thus the confidence the Fed hoped JPMorgan would provide was comprimised by doubts about the likelyhood of JPMorgan's success. The new offer is much more convincing, but with the pending legal challenges it will probably be voided, as the Fed wanted (as per above) and it will probably take longer to resolve (again, as wanted per above).]]> http://seekingalpha.com/article/69561-thoughts-on-the-bear-stearns-jpmorgan-deal?source=feed#comment-131185 131185 Tue, 25 Mar 2008 11:06:09 -0400 http://seekingalpha.com/article/69561-thoughts-on-the-bear-stearns-jpmorgan-deal?source=feed#comment-131091 131091
That's where the Fed's job is to step up and provide liquidity. It's called "lender of last resort". Reasonable conservative accounting provides a value that the Fed will honor in times like these.

Anyhow, since this was originally posted JPMorgan was forced to raise their bid because the plan I described above was seen through. When it became too obvious the Fed didn't actually want the deal to go through they had to renegotiate on the fly to keep up the charade. The current offer on the table has been structured to be much more convincing but if I had to bet I'd say the deal still won't go through, but it will probably be halted due to legal challenges (how many holes are baked into this thing?!) rather than the more obvious shareholder vote. Just my theory.]]> Tue, 25 Mar 2008 09:21:21 -0400
That's where the Fed's job is to step up and provide liquidity. It's called "lender of last resort". Reasonable conservative accounting provides a value that the Fed will honor in times like these.

Anyhow, since this was originally posted JPMorgan was forced to raise their bid because the plan I described above was seen through. When it became too obvious the Fed didn't actually want the deal to go through they had to renegotiate on the fly to keep up the charade. The current offer on the table has been structured to be much more convincing but if I had to bet I'd say the deal still won't go through, but it will probably be halted due to legal challenges (how many holes are baked into this thing?!) rather than the more obvious shareholder vote. Just my theory.]]> http://seekingalpha.com/article/69561-thoughts-on-the-bear-stearns-jpmorgan-deal?source=feed#comment-130439 130439 Sun, 23 Mar 2008 23:39:24 -0400