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Well, my daughter came home from college for Spring break on Saturday, and the rain never showed, so we spent quite a bit of time out in the sun and brilliant blue sky, having a lovely weekend.

This afternoon I was walking along Hendry's beach, a little behind my family, watching my youngest daughter as she danced around near the low tide on the rocks, and I ran across this guy in a rather nice Italian suit sitting on the sand. He looked like he was crying, so I asked him what that matter was. He sat up and quickly dried his eyes, honking on his monogrammed handkerchief, and blubbered out something about being completely broke.

Well, as you know, my business is down on Milpas Street, just around the corner from the homeless shelter, so I'm pretty familiar with this sort of thing, so I asked him if he needed a couple of bucks for bus fare or a beer or something.

He sighed and said while he appreciated the gesture, his problems were much bigger that two or three, or even five dollars. His problems were in the millions---billions, probably---and, as he said, "when the shit hits the fan, there's gonna' be a whole lot of guys in natty suits crying in the sand."

Oooookay, I said, so how bad can this be?

Well, he said, he'd gone and got into a bit of a credit pinch. See, he and his partners had invested in some sort of shitpile, a group of assets, sight unseen, and now, like waking up next to someone you can't remember picking up at the bar last night after watching UCLA beat Stanford, the shitpile is beginning to really stink and there's no one willing to take it off their hands.

"But the debt...that's gotta' be worth something..." I trailed off.

"Yeah, the debt. Well the debt's still there, but the shitpile's worth a lot less than we can cover, and there's no money to pay on it. We're all screwed, every last one of us." He started crying again.

I asked him if there was anyway to sell his business, with the debt included.

He acknowledged that that was possible, but who would buy it? He'd been burning the lines and no one wanted it. At all.

"Does it include the building?"

"Yeah. Our beautiful building in New York. Along with the shitpile stinking up the basement, lobby, and fancy offices."

"Well, how much you want for it?"

He told me that the shareholders hadn't seen their share price lower than $20 in many years, but at this point they were willing to settle for $250 for the whole thing.

"Two hundred fifty million?"

He snorted. "That'd be nice. But nah, we'll never get that. We just want it out of our hands. Dump it, that's the ticket."

I reached into my beach shorts and pulled out my wallet. "I've got, um, $250 dollars cash here, how's that?"

He looked excited for a moment, then burst into tears again.

"Yeah, it's the best offer I've had all day. I'll take it."

He pulled out a sheath of papers, made a couple of phone calls, and we did the deal.

So that's how, by the time the rest of my family trailed back to where I was sitting on the sand, I bought Bear Stearns.

I figure, what the hell, I can turn the building into lofts. Have you seen the price of a nice loft in the City lately?

Originally posted to marksb on Sun Mar 16, 2008 at 08:12 PM PDT.

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Comment Preferences

  •  Snark and all, but damn (18+ / 0-)

    I can't believe the whole ball of wax went for 250 mil. Have fun!

  •  I'm gonna sell an ounce of Gold... (10+ / 0-)

    and buy myself 500+ shares of BS.

  •  Sure those lofts go for a lot (4+ / 0-)

    but the reason they go for so much is all the Wall Street boys and girls with money to throw around.  As of today there are a lot less of them, and next week even fewer and...
    anyway good luck.

    •  I live in NYC (3+ / 0-)
      Recommended by:
      henna218, slksfca, Gemina13

      My conversation with myself after reading your comment:

      Most of them don't give a shit because they have enough money to ride out years of a bad economy. They can still pay the rent.

      Why do you assume they have money?

      Well... because if I were making 100k+ a year for even five years, I'd have a quarter mil stashed under my bed. Which I would've converted into some other currency when the dollar started it's insane slide.

      HAHAHAHAHA you fool!! They spend all their money and then some like the rest of us. The difference is we go into debt to buy food and pay our ridiculous heating bills, they buy luxury cars, spend 4k a month on rent, blow 1k everytime they eat and send their kids to insanely expensive private schools so their kids don't have to mingle with ours.

      Yay! Rent prices in NYC finally go down. Now... if only I can keep my job-that-depends-on-federal-government-funding.

      Say, what are the chances that higher education grants to fund career and technical education in state and city schools will disappear in the next year or so?

  •  Buddy (5+ / 0-)

    can you spare an investment bank?

    "Be kind" - is that a religion?

    by ThatBritGuy on Sun Mar 16, 2008 at 08:33:27 PM PDT

  •  I'm laughing so hard, I can't stop crying. (0+ / 0-)

    Tomorrow at work is gonna look like Saipan's last hurrah.

    I want to hear nothing from George W. Bush but breathing, and very little of that.

    by Gemina13 on Sun Mar 16, 2008 at 09:08:28 PM PDT

  •  coincidence that the Americancentury site (0+ / 0-)

    is  out of order? That where my 401k (what's left) is.

    fact does not require fiction for balance

    by mollyd on Sun Mar 16, 2008 at 10:12:53 PM PDT

  •  Bear Sterns and the Road Ahead (4+ / 0-)

    I have posted this 2xs but I think it is important...

    I am a financial writer and I live in NYC/Manhattan.  I am going to address a few things here and I am going to attempt not to sound grim but to put some things in context so people understand.  First, and I will try to get the ugly part out of the way.  Bear Sterns and the Carlyle Group are just the beginning.  Bear Sterns and what they gambled actually has no value whatsoever.  They did not own or trade in tangible assets.  

    What they did was trade debt and trade a lot of it.  CDO’s to be exact.  CDO’s are high risk financial products that function in this way.  (Please forgive my simplification here.) If Joe on the street walks up to Mary and says, "I have debt, would you like to buy some of it?  You can sell it to the next buyer for possibly a higher rate."  Mary thinks she is a gambling woman and says, "Okay, I will buy some of your debt but I want you to break it up in parts so that as I sell and trade the debt, I won’t have to sell and trade all of it at once."  This way Mary is hedging against the debt she is buying.   Joe agrees that he will sell his debt in this way but he has to find someone to back the breakup of his debt because his financial institution won’t let him sell it as is.  So Joe goes to another investment house or an insurance underwriter, Dave.  Dave says, "Okay, I will underwrite your debt Joe, but first I want you to go find someone who can value your assets: your car, your house, and so on and turn and based on that price (at this point Joe’s assets because he is already in the hole are worth little), I will help you sell your debt.  And on it went and on it goes...  In other words, what was sold was for the most part purely debt (or the potential to pay the debt--in theory).  So what does this mean?  

    First, it means more write-downs are on their way.  The Fed will pump more money into the system (in other words, the tax payers are buying debt to keep the dollar and the markets from tanking even further) .  The latter, however, is a gamble.  The issue here is TWO fold.  One side of the coin is solvency.  How much do these firms actually have in tangible assets.  The fact that Bear Sterns had far less than it was trading in debt is what caused the $2.00 a share stumble.  We don’t yet know about the other firms...  

    The next piece is how to keep investors from shorting everything in sight.  The Fed does NOT have the ability to help underwrite all of the bad deals that went down out there.  I don’t know the actual number, as no one does, but the bad debt exceeds what the Treasury has and that is the problem going forward.  In other words, a lot more people are going to feel a lot more pain for the next few quarters at least, probably longer.  Expect to see more the same overseas.  

    So now we face the biggest issue for the non Bear Sterns (et all) players.  That’s the economy as a whole.  Here it is.  Valuation is now essentially up for grabs.  What any stock (be it Google or Berkshire Hathaway) is now going to have to prove, is just how good it is.  In the long run, this may help us. But don’t expect that what you read your stock to be worth to be worth what it reads.  Right now, the big benchmarking firms and the banks’ own internal benchmarking departments are under a lot of pressure.  This is a good thing.  As my Dad recently reminded me in a different context, "there isn’t an ill wind that doesn’t blow some good."    

    Here is the political part and this is why I am an CRAZED Obama supporter.  Clinton and her husband helped deregulate a lot of Wall Street.  In the ‘90s Clinton and Rubin (former Goldman Sacs Exec) set the stage for a lot of this SHIT to happen.  They did it with the idea that they could expand the economy without having to spend (see bridges and infrastructure badly needed throughout the economy).  This is why I urge all Kos heads to take this economic issue and throw this shit back in Clinton’s camp (and Krugman at the Times for supporting HRC and NAFTA).  They knew damn well what they were doing, as they let Greenspan run loose.  IF THE CLINTONS WERE REAL DEMS THIS SHIT WOULD NOT HAVE HAPPENED in the way that it did.  Those who want to just blame BUSH AND CO. are fucking clueless.  I am so sick and tired of hearing how the Dem party should support the Clintons again.  And that HRC is the candidate with EXPEREINCE.  What a fucking farce that is.  The Clintons deregulated Wall Street, put NAFTA and other bullshit trade deals front and center.  This all happened because the Clintons were too wrapped up in themselves to fight for a real 50 state party to demand basic financial infrastructure, and because they are NOT economic Dems.  Anyone who thinks HRC will fight Wall Street is delusional at best.  And is likely a liar.   I know that was a plug but that is why I hope Obama makes it.

    Getting back.  The US is exporting but we cannot export our way out of this.  We have to turn to infrastructure spending NOW.  We also have to fight to end derivatives/CDOs and other BS at the legislative level.  We can also go after Basel.  So there are things we CAN DO.  The sky is falling but if we play it right it is just falling because it is night and dawn will come...
     
    Hope that was some what of a positive ending...

  •  I was going to buy Bear Stearns, but (3+ / 0-)
    Recommended by:
    mrkvica, flumptytail, UkieOli

    then I realized I wouldn't know what to do with it and it would just end tucked into the back of the garage behind that Garden Weasel I've never used.

    •  Yeah but you could have used the shitpile (2+ / 0-)
      Recommended by:
      flumptytail, UkieOli

      I mean, this adobe soil in my beds eats all the organic matter I can spade in and just sits there, all clay and unproductive. A really big shitpile like the one BS is, um, stewarding, would probably finally make my tomatoes fat and happy.

  •  Dude, you got $250 in your wallet? (1+ / 0-)
    Recommended by:
    flumptytail

    You must be a gazillionaire.

    That's like more than I can get from an ATM in a day.

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