Goodbye, Bear Stearns
Just posted in the Financial Times Alphaville blog:
Trackback uri“It’s a sad day but we’ll get through it, and we may be better off for it… The company that is taking us over, or is merging with us, is a first-class company… That which doesn’t kill you makes you stronger. By now we all must be Hercules… We ran into a hurricane… There’s no anger; there’s simply remorse.”
Alan Schwartz, Bear Stearns CEO, speaking at the shareholder meeting which finalised and formalised the takeover of Bear Stearns by JP Morgan moments ago. The deal is due to close tomorrow.
June 3rd, 2008 at 10:16 am
Given their ability to generate a few hundred millionaires from clipping the tickets of derivatives that were always destined to hit the fan, will we actually miss them? I doubt it.
There are few “professions” that I totally dislike and loath, but ‘wealth managers’ are definately in that category and for a simple reason. Their role in life is not to create wealth for their clients, but for themselves. THey spend their time thinking of ways to insert themselves into cash flow in a manner that allows them to grab a bit of what goes past, any way will do, and if they can clip a ticket both ways, things are even better.
THe leveraged mortgage catastrophe is a classic in Wealth Management bullsh1t. THey sold the idea of lending people more than the asset backing was worth, based on the ‘truism’ that property values always rise (I wonder if any of them were over 25 years old?). They pooh-poohed the idea of the borrower having to be able to afford the payments when their second brainwave - the ‘low start-up rate period’ - expired. They bundled these unsustainable securities into big batches, and sold them at a discount to cashed-up ‘investors’ (aka widow and orphan funds or WAOFs). Clipped the ticket at the seller and buyer end, and even sold them to people as secured investments through their own fund managers. (their only BIG mistake). When the house buyer couldn’t stump up the extra cash to service the mortgage, everything collapsed and the WAOFs standard of living dropped - significantly!
As for these Masters Of The Universe, they paid each other bonuses that make the NZ National Debt seem reasonable, and headed off to the sunset, ’sad’ that their customers could not afford the roof over their heads anymore.
Good Riddance is my farewell to BS.