The New York Times has reported that Warren Buffett is contemplating buying a sizable stake in the investment banking firm Bear Stearns (NYSE: BSC). No doubt the rumor affected the stock, which closed today at $123.00 per share, up $8.67 on the day. It had closed as low as $99.75 this past summer amid the news of two of its hedge funds being distressed over subprime loan investments.

If there is money to be made, which I think there is, then "My pal Warren" will be investing. I will be watching closely because I own Berkshire Hathaway (NYSE: BRK.B) and Bear Stearns as well. I have written about both stocks: Serious Money: Safe havens -- T-Bills or Warren Buffett? and Chasing Value: Bear Stearns - cheap and growing. In the case of Berkshire I am making a tidy sum, but in the case of Bear Stearns I was broadsided by the subprime fiasco and am just now recovering, although I have not held it long.

It is said that BSC might be willing to sell about 20% of the company and that CEO James E. Cayne, is looking for as much as a 40% premium. A premium to what is the question? If you add it to today's closing price you arrive at a value of $172.20, right at BSC's 52-week high of $172.61. I do not think Buffett or any of the other potential investors would be willing to pay this much or should pay this much. I do believe they would be willing to pay as much as a 20% premium, with an eye to obtaining the potential of a 20% remaining return if they can "set the ship right" and get back on a growth track.

Continue reading 'My pal Warren' looking for value in Bear Stearns (BSC)

'My pal Warren' looking for value in Bear Stearns (BSC) originally appeared on BloggingStocks on Wed, 26 Sep 2007 18:00:00 EST. Please see our terms for use of feeds.

Goldman Sachs (NYSE: GS) volatility increase suggests greater Crises. GS is recently down $7.62 to $169.99. GS September option implied volatility of 57 is above its 26-week average of 30 according to Track Data, suggesting larger risk.

Bear Stearns (NYSE: BSC) implied volatility increase suggests greater Crises. BSC is recently down $2.31 to $107.41. James E. Cayne is chairman of the board and CEO of BSC. BSC has been a board member since 1985. BSC call option volume of 7,419 contracts compares to put volume of 10,103 contracts. BSC September option implied volatility of 78 is above its 26-week average of 38 according to Track Data, suggesting larger price movement.

Lehman (NYSE: LEH) September volatility of 73 above 26-week average of 33. LEH is recently down $2.55 to $54.79. LEH call option volume of 18,902 contracts compares to put volume of 33,956 contracts. LEH August 55 straddle is priced at $4.60. LEH September option implied volatility of 73 is above its 26-week average of 33 according to Track Data, suggesting larger risk.

Continue reading Option update: Risk increases for investment bankers/mortgage dealers

Option update: Risk increases for investment bankers/mortgage dealers originally appeared on BloggingStocks on Tue, 14 Aug 2007 17:00:00 EST. Please see our terms for use of feeds.

Bear Stearns (NYSE: BSC) is planning to fire one of its co-presidents and the head of its trading operations. It must be that the CEO, James E. Cayne, was not available to be dismissed.

The Wall Street Journal (a subscription serivce) writes that Warren Spector, who runs stock and bond trading, will be gone on Monday. At least he has a month to enjoy the summer before Labor Day.

The departure of Mr. Spector is fairly typical of big company behavior. Investors in BSC will probably never know the extent to which he was familiar with the problems at three hedge funds at the company. On Friday, Bear Stearns had to tell a frightened market that it had "reduced its reliance on short-term loans so it isn't vulnerable to being shut off from the day-to-day loans required to fund its trading operations." Due to these concerns, BSC has lost about 30% of its market value this year.

The balance sheets and investing activities of a huge financial firm like Bear Stearns are bound to be immensely complex. It investors in a huge variety of financial instruments from all over the world. That means that it is probably that Mr. Spector would not know the details of all the firm's activities. He would need to rely on others to do that by bringing in specialists who understand each market and its dynamics.

So, why is Mr. Spector leaving?

Douglas A. McIntyre is a partner at 247wallst.com.

Bear Stearns (BSC) to sack trading chief originally appeared on BloggingStocks on Sat, 04 Aug 2007 12:40:00 EST. Please see our terms for use of feeds.