Bear Stearns Girds for More Losses
Bear Stearns (BSC) expects to take a $1.2 billion writedown related to its exposure to mortgage-related securities in the fourth quarter, but said its leveraged finance business is getting better.
The writedowns are linked to the liquidation of Bear's warehouse of collateralized debt obligations and other subprime mortgages, whose prices have been crushed in the market over the past two months.
However, Bear has cut its exposure to CDOs by more than half since the end of August, to $884 million, and its long position in domestic subprime mortgages has been eliminated. That apparently led investors to believe Bear has gotten a handle on the biggest of its problems, and they sent its shares up 6.1% to $107 in premarket trading.
"[I] don't want to predict that things couldn't get worse, because things keep surprising," Chief Financial Officer Sam Molinaro Jr. commented during an investor conference in New York sponsored by Merrill Lynch (MER). "While hedges have worked reasonably well ... there are no perfect hedges. The perfect hedge is selling the assets."Molinaro said that the business of originating and selling mortgage securities had essentially coming to a "grinding halt," but he held out hope that the company's prime brokerage and global clearing business in the U.S. and internationally would excel. "We think that the business more broadly away from mortgages is very well poised in 2008," he said.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV