First, let me preface this by
mentioning the large scale technical
background. Despite the
daily bad news, expressions of
anguish, and so forth, technical
improvements are still being seen
of a nature usually associated with
The assumption would be that
investment capital believes that
the financial system will survive
and the norms will reassert
themselves. Again, there can be
no assurance that this perception
is either correct or incorrect.
VZ is showing another apparent
cycle top, somewhat less conventional than the similar
formation seen in T.
To the extent that a measuring
implication can be derived, it's been met and the stock is presently
sitting on the very important support of it's huge base.
So, what we have here again is
a primary bear trend, but this
time in a good technical position
to reverse and trend upwards
towards the lower boundaries of
the cycle top ~40. To do so,
it will first have to get
past supply left overhead by
the last consolidation, beginning
at about 36.
In the case of both VZ and T, the
base from which the bull trend
developed was really huge; so
one might have expected a more
enduring and higher-value bull
market. Even so, that's a technical
assumption that can't be made
until the highest high seen on
this chart is exceeded.
In other words, you now focus
on the support, whether it
holds, and how minor or
intermediate bull trends
handle next resistance. One
test at a time.
You shouldn't take it personally,
as it wasn't intended that way at
Maybe it would help to state the
thing in a different way. This
deal--whatever the actual terms--
is clearly a time value proposition
Fine. I've been using time-value
for a long time and do a problem or
two most days. Even learned how
to pose the simple problems from
a very competent banker.
But the problem here is far from
simple. In fact I have no idea
at all about the inputs used by
the Fed and Morgan financial people
and less idea still about Morgan's
thinking relative to their already
colossal derivatives exposure.
(For instance, the smart trade
might be to sell JPM short on the
assumption that they may have
made an error even larger than
BSC's--assuming, of course, that
assumption has any basis in fact.
Likewise the market, because if
Morgan's wrong, the Feds are
probably wrong, as well.)
But in actual fact, the thing is
way, way over my head. The only
thing I can see is that no
intelligible rationale for the
deal had been reported last I
looked; and, once it is, it
will already have been capitalized
by more qualified market participants.
I'm not at all sure that this
deal is like anything in my
experience, so all I know is
that I know essentially nothing.
(Based on the Captain's response
re securities values with negative
sign, I'd have to wonder whether
Marty Whitman isn't correct that
current GAAP is distorting
the economic realities in question.
Even so, if everybody sells the
misconception, prices still go
Under such conditions, we're
extremely careful to act only on
the most specific and concrete
information known to us and to
avoid any actions based on
Those who know more can do more.
I agree about the implication that the value of Bear's mid-town Manhattan HQ is more than the value of the buyout, viz. that their security holdings are net negative. Given the mark-to-market situation for Level 3 assets, I believe that to be possible under a distress sale scenario, which they are effectively in.
BSC-PF BEAR ST 5.72 PFD F 35.70 10:24AM ET 2.70 (+8.18%) 10,400
BSC-PE BEAR ST 6.15 PFD E 36.57 10:25AM ET 4.47 (+13.93%) 9,300
BSC-PG BEAR ST 5.49 PFD G 34.00 10:24AM ET 4.00 (+13.33%) 16,100
and, of course,
BCH BANCO DE CHILE ADS 57.25 10:14AM ET 7.996 (+16.23%) 5,400
JPM JP MORGAN CHASE CO 40.26 10:27AM ET 3.72 (+10.18%) 38,574,606
please realize, none of this makes a damn bit of sense to me.
Yes, I thought so, too. In fact, it
does seem that Government is now
the market maker, per our previous
discussions on the subject.
Do have a look at my remarks of
last night and this am on the
BSC/JPM deal. I'm nearly certain
that we're seeing some incorrect
reporting, either on the BSC
asset picture or the real terms.
Don't know how or even whether
this would affect the most
recent Fed initiatives.
These are the things one thinks
about after the session.
Again, I'd be careful about any
financial involvements with this
I don't have time to look at a
more detailed balance sheet for
BSC, but David Faber, of CNBC,
says that BSC owns their midtown
office building and that the deal
totals about 1/2 its value.
Leaving aside the implication--
namely that Morgan/Fed analysts
would then be attributing a
NEGATIVE value to the Bear
securities portfolio--the idea
simply doesn't make any sense
from a few points of view.
So, I'm assuming that the
current information is incorrect
in as-yet unknown respects.
Faber also pointed out
stockholder approval is
required, which seems unlikely
under the circumstances now
I'm only commenting on the
seemingly nonsensical information
now out there, and the inadvisability
of acting on same, not suggesting
anything about the investment
quality of BSC, JPM, or the
credibility of the Fed at this
In other words, when you don't
know what to do, don't do it.
BTW, we covered a short sale, carried
over from Friday, this morning when
the inverse stalled briefly at
its second range of overhead
resistance. Could go further,
certainly, but we don't like to
be guessing about anything in
a problematic informational
FWIW. Now, back to it.