Bear Stearns: The Bare Facts


Amongst all the rumors, panic, and speculation in the market about Bear Stearns (BSC), little has been revealed. Rumors questioning Bear’s liquidity essentially created a run on the investment bank Thursday. After closing at $57.00 Thursday, Bear’s stock dropped to an intraday low of $26.85 on Friday, before closing at $30.00.

In a press release yesterday, CEO Alan Schwartz said that “our liquidity position in the last 24 hours had significantly deteriorated.” Bear made arrangements with JPMorgan Chase (who is Bear’s clearinghouse) to go to the Federal Reserve’s discount window on Bear’s behalf “to provide a secured loan facility for an initial period of up to 28 days allowing Bear Stearns to access liquidity as needed. Bear Stearns also announced that it is talking with JPMorgan Chase & Co., regarding permanent financing or other alternatives.” JPMorgan (JPM) received non-recourse financing from the Fed for Bear. This means that JPM would not be held liable if Bear defaults on the loan. Contrary to media reports, this is not a government bailout of Bear. The Fed would have required Bear’s collateral to be valued above the amount of the loan. The loan amount and details have not been disclosed. In a Friday afternoon conference call, Bear said it is working with Lazard (LAZ) “to pursue alternatives to insure we can protect customers well.” Bear’s first quarter 2008 earnings call scheduled for March 20 was rescheduled for March 17 at 4:30 PM. In the afternoon, ratings agencies S&P and Fitch cut Bear’s credit rating.

Last June I wrote about the problems Bear Stearns and the brokers would face beginning in August 2007. The final alignment of Saturn in Leo opposite Neptune in Aquarius last summer burst the speculative credit bubble. In September 2007, Saturn entered Virgo, the sign of the bookkeeper. Credit and lending tightened, resulting in a drop in value and a dry up of the market for asset backed securities and the related derivatives held by financial companies worldwide. Banks became suspicious of what other banks held on their books. Accounting regulations require that assets be “marked to market” (valued at current market pricing). Many of these financial instruments are illiquid (not easily tradable right now), so companies have to develop their own valuation methodologies.

In my Weekly Forecast, I wrote that yesterday’s market would be negative. Venus was opposing Saturn, which I thought would result in actions or statements made by regulators regarding the financials that the market would negatively react to. Pluto in Capricorn exactly challenged the USA’s tenth house (Midheaven) of global reputation in the horoscope. That aspect and the fact that the Pisces New Moon conjoined with Uranus, could create geopolitical shocks/surprises that would affect the stock market. Mercury aspecting Pluto can manifest in news that creates financial panic. Yesterday’s Mercury-ruled Gemini First Quarter Moon squaring the USA’s Neptune in Virgo, along with several planets in Neptune-ruled Pisces, resulted in more rumor than facts about Bear.

Bear Stearns began publicly trading on the NYSE on October 29, 1985. With its Sun and Pluto conjoined in Scorpio, it is very much affected by Pluto’s energies. Transiting Pluto is challenging Bear’s Mars in Libra at the Midheaven square Neptune in Capricorn. Pluto represents toxicity on a large scale. Rumors have elevated the level of fear in Bear’s liquidity, resulting in a run on the bank. Additionally, Pluto is conjoining Bear’s progressed* Ascendant,** transforming its public image. The March 7 Pisces New Moon/Uranus is conjoining Bear’s progressed Moon and squaring its progressed Uranus in Sagittarius, resulting in huge volatility and movement in Bear’s stock price. The lack of transparency by Bear’s executives has done little to calm the market. (In a Wednesday interview on CNBC, CEO Schwartz said that everything was fine at Bear.)

Bear’s relationships as a borrower and lender deeply entwine it with all the major financial players. This is why the Federal Reserve will not allow Bear Stearns to fail.

Related Posts about Bear Stearns:
"Barron’s Bounces Around" (8/13/07), "Who Knows What They’re Worth?" (9/4/07)

*A mathematical method of prediction that calculates the horoscope forward in time.
**The sign ruling the first house of the horoscope.
USA: July 4, 1776 5:10 PM LMT Philadelphia, Pennsylvania

No comments: