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Memo To Chris Cox

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April 03, 2008 – Comments (13)

""The fate of Bear Stearns was the result of a lack of confidence, not a lack of capital," Cox said in a March 20 letter to international banking regulators."

Dude. You're embarassing youself. The excuse-making is understandable, given that you're having to bolster public and international regard for a flat-out taxpayer-guaranteed, government-led bailout/liquidation hybrid. But try throwing a bit more truth into your arguments.

When an entire business depends on confidence to obtain big slugs of leverage and liquidity, a lack of confidence IS a lack of capital.

And if the business loses that, it deserves to go down. Hard.

 

13 Comments – Post Your Own

#1) On April 03, 2008 at 10:31 AM, HistoricalPEGuy (62.31) wrote:

The problem with many of the airlines is not that they are losing billions of dollars, its just that people don't want to fly as much. We should bail out the airlines due to this horrible, unfortunate set of events.

The problem with American car makers is not that can't stay profitable, its simply that they can't compete in the market place.  We should bail out the car makers based on this unfortunate situation.   

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#2) On April 03, 2008 at 10:33 AM, charlesblazer (99.02) wrote:

Sounds like what the same BS we hear from the homebuilders.  "The problem isn't a declining market... it's the fear of a declining market."  (not an exact quote, but might as well be)

Spinmasters aren't even trying anymore, and it shows.  Comeon, guys!  Put some effort into it!

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#3) On April 03, 2008 at 11:16 AM, TMFBent (99.81) wrote:

I wish some of these guys would use a line more similar to my old excuse when I'm bowling. That excuse is: You know why my score is so low this week? It's because I really suck at bowling.

What are we, as a nation, when it becomes impossible for people to simply admit they've made mistakes or changed their minds?

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#4) On April 03, 2008 at 11:58 AM, golfer121501 (< 20) wrote:

TMFBent:

 I agree completely.  No one is responsible for anything they do anymore.  Its ALWAYS someone's elses fault.  No wonder this country is floundering.  The government is enabling the irresponisibility by bailing everyone out.

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#5) On April 03, 2008 at 12:04 PM, abitare (33.78) wrote:

WSJ front page concern about Bear Sterns:

Today in Bear Stearns

Still in the Game: Lacrosse that is. Bear Stearns’s lacrosse team. Among the numerous questions still swirling around Bear is the question of what will happen to its lacrosse team [WSJ]

You have to love the legacy media..... 

 

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#6) On April 03, 2008 at 12:05 PM, charlesblazer (99.02) wrote:

It's not that you suck at bowling... it's the recent rumors of gutterballs and media over-emphasis on hitting pins.  If people would just stop looking at your scorecard and watching you bowl, then things could return to normal.  "Normal" being 200-point games, of course.

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#7) On April 03, 2008 at 12:59 PM, TDRH (99.66) wrote:

This guy is one of the "best and the brightest"?   What are they teaching these financial gurus in business school these days?   I cannot believe that they were so naive that they could not see it coming.  

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#8) On April 03, 2008 at 1:32 PM, saurabhprasad (97.99) wrote:

Despite all the logic presented, how is what Mr. Cox is saying wrong? ANY business will go belly-up the moment there's a lack of confidence. If all the consumers lose faith in Apple, there's nowhere for even this giant to run.

I don't think that the bailout was a good option, seems like it was just the best option available. I don't agree with everything Cox says, but that doesn't mean everything he says is crap.

I think we're coming close to just plain demonizing everybody. "Those damn people, they're making me lose money!!!"

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#9) On April 03, 2008 at 3:45 PM, TMFBent (99.81) wrote:

Huh? I'm ragging on Cox because of exactly what you're saying. Any company that loses the faith of its counterparties and customers is going to fail. That's why Cox's statement is patently ridiculous. It pretends that the only thing wrong was a bit of perception, when a bit of perception is all a business like that has if it's that levered up and vulnerable.

Cox deserves the criticism because he's toeing a bogus company line. And Cox isn't losing me any money. He's defending policies that put taxpayer money on the line in order to bail out people and enterprises that booked profits early, paid themselves handsomely, and then failed to run their businesses properly.

That's no way to run a capitalist economy, because it encourages wasteful allocation of capital which is (despite Bernanke's love of the printing press) a limited commodity.

Sj

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#10) On April 03, 2008 at 3:48 PM, TMFBent (99.81) wrote:

It's not that you suck at bowling... it's the recent rumors of gutterballs and media over-emphasis on hitting pins.  If people would just stop looking at your scorecard and watching you bowl, then things could return to normal.  "Normal" being 200-point games, of course.

That's pretty funny. In fact, I have found a way around this media demonization of my bowling game. I am simply marking my scores to a 200-point-per-game model beforehand, and selling them on the market. After having done this, there is, in fact, no need for me to actually bowl the game.

The price for these 200-point game contracts has been rising consistently, which indicates that the market has great faith that I can, in fact, bowl those 200-point games, if necessary. But why bother, when the securities are already trading up and the market says I'm a 200-point bowler?

Sj (considering a new career on Wall Street...)

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#11) On April 03, 2008 at 4:09 PM, charlesblazer (99.02) wrote:

According to recent price action, futures markets are now predicting you will bowl 212-point games.  Don't ask how.  Just buy, buy, buy! -- before it runs to 220!

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#12) On April 03, 2008 at 6:20 PM, FleaBagger (29.53) wrote:

Historical -

I like your post! I would like to add that I'm not too lazy to go out and get a great job, but rather employers are just unwilling to pay me a six figure salary to sit around and do whatever I want. So the government should bail me out.

SJ -

There is no way to run a capitalist economy, because if (or should I say "since") someone is running it, it's not a capitalist economy anymore. Also, I haven't seen you bowl, but I'm buying puts with a strike of 200, based on technical analysis.

P.S. When The Fool Disclosure Policy says you're short AAPL puts, does that mean you own them or you wrote them? It means you wrote them, right?

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#13) On April 04, 2008 at 8:06 AM, TMFBent (99.81) wrote:

last question, yeah I was short those puts. Ii wrote 'em. They expired, I kept the cash.

As a side note, on big bad down day over the past few months, writing puts on companies you'd like to own at $xx strike has been free money. Looking forward to the next leg down.

Oh, and on those TMF Bowling puts, a little inside info. We're now asking the securitization folks at Bear Stearns to model them as if I were going to take 8 weeks of lessons and practice about 3 hours per night. Their quants now model my scores in the 228 range, meaning easy money for anyone who bought these things at 200.

I don't understand why all you people are so down on financial innovation. This is win-win, at least for me.

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