Who was on the other side of bear stearns trade?

"It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another." ------------------------------------------------------------- The Wall Street Journal reports today that the collapse of Bear Stearns dealt a severe blow to investors, from big names like billionaire Joseph Lewis to thousands of employees of the brokerage firm. But there's one group trying to contain their joy amid all the gloom on Wall Street: Investors who placed big bets against Bear Stearns. The Journal says that large hedge funds -- including Harbinger Capital Partners, Greenlight Capital, Tremblant Capital Group and Paulson & Co. -- made millions of dollars as Bear Stearns's shares tumbled and various bearish positions rose in value, according to securities filings and people close to the firms. Harbinger Capital, the $19 billion hedge-fund firm run by Philip Falcone, a former head of high-yield trading at Barclays Capital, had a short position on Bear from the summer of 2007 until Monday, according to a person familiar with the matter. The stock fell to $5 from $150 in that time period. In a short position, an investor borrows shares and sells them, hoping to replace them at a later date at a lower price, pocketing the difference in the shares as profit.

So when the talking heads report "xx billions lost today" after any big day - they are basically saying that xx billions were transferred from one person to another. Not necessarily that poor lost and rich gained...as seen in the BSC example. Although I would venture to guess that joe6p does not typically short the market. So when the market does drop - the people who know what they are doing usually reap the benefits.

A-ha, I am deeply impressed with the way you have handled this series of trades so far. I'd like to know: 1) how do you decide what percentage of total money-under-management you will place in any given trade before initiating the trade? 2) do you ever place stops on your positions and, if so, how do you decide when to do so and when not to do so?

With options and futures it is a short term zero sum game but with stocks its different. Take Bear Stearns. Through the life of the company it issued stock to rake in money to use in its business. Those shares were sold to investors. Assuming a buy and hold pension fund invesotor they lost the value of their investment, assuming they paid more than 2 bucks, and Bear got the win but its not sitting anywhere as it was a long time ago and dissipated. So there is no winner per se only in the long term abstract sense. The loss for the pension fund is huge not only the value is down but the opportunity time value of those shares. Yes those that were short the stock won but over all , value was erased from the face of the earth. If stocks were a zero sum game at the end of the great depression the GDP would have been the same as pre 1929 just different people would have living the good life. Was not that way. There was wealth destruction and evaporation.

Edited by zedor, 20 March 2008 - 10:05 AM.

I was talking to the branch manager of a brokerage I use. He said he spent half of Monday calling clients who decided it prudent to put everything they had into BSC when it fell to 29 on Friday. He implied that he lost some noticable business from those indescretions. They levered up but the broker delevered them. J

Some people always get it right from the best spots. But maybe the best question should be....who pressed the issue last Thursday (9-13-08) and what did they have to gain from it? I am no fan of the big box brokers and that is an understatement. In fact, I chose not to open accounts at TRAD three or four years ago just because I would have had to open them with BSC at that time. I just did not want an account with a big box. And, I virtually never believe a lot of what the big boxes say in press releases....especially under duress. But I do believe that BSC's CEO was truthful last Thursday when he said there were no known issues beyond what the market already knew....i.e., that things had not gotten materially worse. The bottom line is, in my opinion, the BSC issue came to a panic head as a result of Thursday's panic trading. Where did the panic start? Who pushed the rumor? Was it a few Hedge Funds that had tons to gain from massive short positions? And did it get out of control because of the fear that resulted from that? BSC was apparently trading at $66.00 premarket Friday. I bet they would have survived easily had the story not broken about JPM going to the discount window for them. And that would not have happened had it not been for Thursday's panic. Maybe some people are doing fist pumps from their huge gain. Maybe their chests have been poked out all week and there has been an unmistakable strut in their gait since but.....they destroyed some people's lives in the process....not to mention their dreams. It is one thing for the market to take care of an issue in response to real events. It is another when at least some of the events are imagined and are pushed by those with much to gain. I have never owned BSC stock and have nothing to gain. I don't even know a BSC employee personally. I cannot defend all of their actions or positions in the market place and no doubt many were ill advised in retrospect but....I really believe some people should go to jail for this.....yet I know that they probably will not.

Edited by Iblayz, 20 March 2008 - 10:10 AM.

Some people always get it right from the best spots. But maybe the best question should be....who pressed the issue last Thursday (9-13-08) and what did they have to gain from it? I am no fan of the big box brokers and that is an understatement. In fact, I chose not to open accounts at TRAD three or four years ago just because I would have had to open them with BSC at that time. I just did not want an account with a big box.

And, I virtually never believe a lot of what the big boxes say in press releases....especially under duress. But I do believe that BSC's CEO was truthful last Thursday when he said there were no known issues beyond what the market already knew....i.e., that things had not gotten materially worse. The bottom line is, in my opinion, the BSC issue came to a panic head as a result of Thursday's panic trading. Where did the panic start? Who pushed the rumor? Was it a few Hedge Funds that had tons to gain from massive short positions? And did it get out of control because of the fear that resulted from that? BSC was apparently trading at $66.00 premarket Friday. I bet they would have survived easily had the story not broken about JPM going to the discount window for them. And that would not have happened had it not been for Thursday's panic.

Maybe some people are doing fist pumps from their huge gain. Maybe their chests have been poked out all week and there has been an unmistakable strut in their gait since but.....they destroyed some people's lives in the process....not to mention their dreams. It is one thing for the market to take care of an issue in response to real events. It is another when at least some of the events are imagined and are pushed by those with much to gain. I have never owned BSC stock and have nothing to gain. I don't even know a BSC employee personally. I cannot defend all of their actions or positions in the market place and no doubt many were ill advised in retrospect but....I really believe some people should go to jail for this.....yet I know that they probably will not.

Who should go to jail ? Stupidity, bad decissions are not jailable offenses. If fraud was committed and deliberately with intent to harm then needs to be proved (like Enron) and dealt with. Calling for a the head of someone for driving a business into the ground though is not the answer.

The problem was too much group think. Too much just bulls charging into the impropable and lack of some cautious bears on the board for a reality check and brakes on the over exposure.

Who should go to jail ?

I would think that should be easy to figure out from the post. The people that should go to jail are the ones who planted the rumors that led to the panic....if that is indeed what happened. How could you possible imagine that I was suggesting anyone from BSC should go to jail from that post?

Who should go to jail ?

I would think that should be easy to figure out from the post. The people that should go to jail are the ones who planted the rumors that led to the panic....if that is indeed what happened. How could you possible imagine that I was suggesting anyone from BSC should go to jail from that post?

Absurd. Rumors have been around Wall Street since it the 1780s. Bear did not go under because of rummors. It went under due to over levergage and lack of prudent risk taking on their part and group think that real estate will somehow remain in a magic perpetual bull market.

If a rumor can take a company down then it was not a very sound company to start with.

What I would make a crime is top management lying to the press or in the media. Going on TV and denying there are any problems is fraud. Either shut up or be honest but dont lie as the Bear CEO did just last week.

all dramatic headlines not much else how does anyone know how much Mr. Lewis really lost? does anyone think that he really sat w/ 1B invested and exposed? No fancy option hedging? No protective puts? And he sat w/ all the stock all the time? never sold any? gimme a break !