The Five Dumbest Things on Wall Street: March 14

3. Joe Lewis' Second Thoughts

When so-called smart-money investors like billionaire Joe Lewis get dumb, "The Five Dumbest Things on Wall Street" gets dumbfounded.

Lewis is the world's second-largest shareholder in Bear Stearns BSC. Bear, in turn, is the world's second-largest underwriter of illiquid mortgage-backed securities. It stands to reason, then, that Lewis is doing some second-rate thinking as he contemplates expanding his stake in a poster child for the credit crisis.

In the past year, Bear shares have lived up to their name, falling almost 60% on mounting concerns about the investment bank's balance sheet. When Lewis started his position back in September, the company was trading above $100. Now, shares sit uncomfortably at around the $60 mark, staring down the precipice as rumors of liquidity concerns abound. Calling himself a long-term investor, the reclusive Lewis has maintained he's unfazed by the, ahem, questionable price action.

In his defense, Lewis has some cause for optimism. Bear CEO Alan Schwartz said Wednesday on CNBC that Bear expects to meet profit expectations. As CEOs sometimes do while struggling to ascertain what's going on at their companies, he dismissed rumored liquidity problems and said the broker's finances remain strong.

Analysts at Deutsche Bank beg to differ. They predict $1.9 billion in writedowns from Bear Stearns for the first half of 2008, and they're not alone in their bearish forecast. On Tuesday, Punk Ziegel analyst Richard Bove slashed his Bear price target to $45, saying, "The problem is Bear's business model is broken. ... They won't be able to get the earnings to the 2006 level for another five to six years. That's another good reason to sell the stock."

Dumb-o-meter score: 85. There's buying on dips, and then there's dippy buying.