Scarsdale Equities holds a regular luncheon, immortalized in the book The Money Game. I am privileged to occasionally break bread with the interesting group of traders, thinkers and fund managers assembled by Rudy Beutell.
I received an email Wednesday morning reminding me of my own comments to the group back in August 2007. A NYT article on Bear Stearns (NYSE:BSC) -- Extrication Time at Bear Stearns -- must have jogged the memory.
I thought it was worth sharing. Over the summer, I had said:
“Just wait until Jimmy Cayne gets dinged out of Bear Stearns. The new CEO will look at all the junk on the books – problems he had nothing whatsoever to do with – and likely say ‘Get all this shit off of my books. All of it. I don’t care what it cost, I don’t care what it's worth, I want all this garbage outta here.’ ”
That's only the beginning. There's a danger in that these sales will further reveal the mark-to-model as the fairy tale it is. Even more ominous, it will force other houses carrying this junk to price them realistically. That could lead to some even larger write downs then we have seen so far.
I suspect that the finance sector still has lots of work ahead of it ...
Extrication Time at Bear Stearns
LANDON THOMAS Jr.
NYT, January 9, 2008