March 19, 2008 6:29AM
My 3 Thoughts This Morning
By Alexis Glick
All I have to say are three things this morning.
1) Take a look at the pricing of the Visa IPO last night. The offering raised $17.9 billion dollars. It was priced at $44 dollars a share. The original price range for the 406 million shares was $37-$42. What does this tell us? The deal was oversubscribed which means more people wanted to buy shares then were available. In the world of public offerings, this is a great thing. In a market like this, this is a MONUMENTAL win! Keep an eye on where the stock trades this morning at the opening.
2) The SEC, Fed and JP Morgan (JPM) have a problem on their hands. Did Fed Chairman Bernanke rescue this market and put a floor under the financials? Yes. For now! Do shareholders of Bear Stearns (BSC) have a right to investigate how and why the fifth-largest investment bank in the world with $17 billion dollars in cash and assets on March 11 had a massive liquidation and subsequent collapse in the course of days? Absolutely! Will heads roll? Absolutely! Is the Fed between a rock and a hard place on this deal? Absolutely! Did Jamie Dimon get Bear Stearns on the cheap? Absolutely! Is there something that shareholders can do to get Jamie to up the price other than find another suitor? Probably not! Is there another commercial bank out there with the funds to buy them? Probably not! Will that bank be willing to take the risk, take the charge and deal with the headcount? Probably not!
3) Last night I went to the Rangers vs. Penguins game. Luckily we won 5-2! At the game, I saw many of my former colleagues and friends from Wall Street and elsewhere. One very close friend, who happens to be a very successful accountant and represents many small-business owners and Wall Street executives, said he had never seen anything like this. He told me a story about how he had a money market account for his business with UBS. He had $500,000 in it. He has been trying to get that money out for over a month. Today, he only has $350,000 of those dollars and he is waiting to get the remaining $150,000. He thought the money market account would be safe. Apparently, everyone else did! The fear in the marketplace has everyone else trying to liquidate, too, and the banks cannot raise the capital fast enough. He also had $450,000 in a money market account through a BlackRock fund. I went to their website this morning and if you look under the investor relations section, you’ll see a press release dated 3/17/08 BlackRock’s Closed-End Fund Board of Trustees Exploring Potential Solution for Fund Shareholders Affected by Liquidity Issues in Auction Rate Preferred Shares. Same problem, only in this case, he cannot get the money. They will loan money to him if he needs it at 4%. Sounds scary? It is! (Want the skinny on auction rate preferreds? Here’s a great column from SmartMoney.com. Here is the BlackRock press release.
Comment by Mike Garrido
Mar 19th, 2008 at 9:51 am
Alexis, the best part of the blog was that the Rangers won last night! What a mess in the market.
I understand that things are in bad shape, but the worse thing we can do is to let this cycle of bad news deter us from investing and believeing that we will over come all this crap in the long run. Some times its good to get all this bad news out in the open, this way like it or not people/politician are forced to deal with the problem and correct it!
Comment by Mark Halbert
Mar 19th, 2008 at 10:17 am
Alexis,
I just wanted to tell you how incredibly amazing you are! I have never, ever seen such an attractive, natural personality on TV. I’m sure you get a thousand of these a day, but, hey, you deserve it. I have always avoided business programming, but now i try to never miss your segments. Not only are you the most naturally beautiful woman on TV, but you like Led Zepplin, March Madness, hockey?!! And you must have an IQ over 180. Sheesh! Your husband is my idol. Way to go Mr. Glick.
Thanks for making my mornings fun, exciting, and informative. The way you juggle all the info and personalities in your last hour is also amazing. I hope everyone watching appreciates how difficult it must be to do all that, and do it almost perfectly (i would say perfectly, but i wouldn’t want your ego to get out of control-haha)
Thanks again.
Comment by Mark Halbert
Mar 19th, 2008 at 10:22 am
Could you help me on thought #3? Is this something equivalent to a run on banks? Sorry, i watch as often as i can to learn, but a lot still goes over my head. Thanks.
Comment by Rick Sanders
Mar 19th, 2008 at 11:10 am
Mr. Glick:
The UBS Money Market account anecdote you shared does pique my curiosity, since I am in precisely the same boat (actually a leaky boat with $550,000’s worth of the cash metaphor they marketed as “cash equivalent”.
I am told by UBS that they are trying hard, but I haven’t seen a penny, and I am starting to think I won’t for a long time. Your acquaintance, however, somehow got it back. The name of my leaky boat is “Cohen&Steers REIT and UTIL M7″, which I think was being auctioned every 7 days before UBS and friends conveniently decided to pull out of the “failed auction”rescue role they played for 24 years (back then when 12 billion dollar write downs were unphantomable). Care to put me in touch with your friend? Thanks!
Comment by Karl
Mar 19th, 2008 at 1:58 pm
On the 2nd point. Of course the Fed had to bail out Bear Stearns. If they didn’t and Bear Stearns filed bankruptcy, the billions of dollars of bonus’s that were given out 6 weeks ago would have to be paid back. Now the FED gets to play landlord. Why do the people stand for this! Doesn’t anyone care anymore. Do we not care about the elderly and the retired? The FED is devaluing the dollar and it is starving the fixed income people of this country. Do the people care about the debt that is being left in their children’s lap? Is society that out of sync with what is going on around them?
Comment by Peter Crane
Mar 19th, 2008 at 4:07 pm
Dear Alexis-
Just to clarify, this could not have been a “money market account” that was frozen. All money market accounts and money market mutual funds continue paying and redeeming on time and with no restrictions. The problems arose from auction-rate securities, which were clearly marketed and labelled as short-term investments with risk of principal. Investors in these securities undoubtedly were given pounds of documents making it clear that these had the potential to fall in price and to become illiquid.
Please be sure to use the term “money market” only for money market mutual funds or FDIC-insured bank accounts in the future!
Sincerely,
Pete Crane
Publisher, Money Fund Intelligence
http://www.cranedata.com