Should I buy Bears Stearn

[Partial]

Is it a good time to buy some stock? They went from 2 to 6 dollars in two days. They're getting bailed out so you know they're not going under anytime soon.

I am thinking about putting maybe 200-300 in just to flip a quick profit.

[turtle]

Day trading is much like playing the lottery with slightly better odds.

Why not just send the money my way?

[zippy]

Based on your thread title, I thought you were planning to buy the whole damn company. In which case I was going to point out that you were just a little late.;)

[tomoe]

Day trading is much like playing the lottery with slightly better odds. As a random aside, my government professor from undergrad succinctly summed up the lottery as a tax, on the mathematically challenged.:lol:

[cosus]

Lets see at why this is a stupid idea. If you are only putting 200-300 USD you are paying at a minimum of 20 dollars to buy and sell it, a number you'll have to consider as the cost of doing business. Now, considering it's a certainty that the sale is going through, that has already been reflected in the current price of the share. So, your risk that it falls through is greater than the idea of a return.

Anyways what I'm saying, there's no such thing as a sure thing and this is just a fucking stupid idea, not just a normal stupid idea.

[Mugge]

Is it a good time to buy some stock? They went from 2 to 6 dollars in two days. They're getting bailed out so you know they're not going under anytime soon.

I am thinking about putting maybe 200-300 in just to flip a quick profit.

I think it was Buffet who said that you should only invest in things you truly understood. No offence tensdanny, but if you where sure about this you wouldn't have logged into AN, but into your web-bank. So my advice is no.

In the current market I would be looking for companies that aren't related to the financing sector at all, yet still manage to get drawn down by the bad mood on the market. They have a much better chance of bouncing up again because they aren't in the sector doing poorly. Just remember to focus on those companies you understand well.

:)

As a random aside, my government professor from undergrad succinctly summed up the lottery as a tax, on the mathematically challenged.:lol:

I'll remember that one for later use.

:D

[cosus]

As a random aside, my government professor from undergrad succinctly summed up the lottery as a tax, on the mathematically challenged.:lol:

I just find this comment, while likely accurate, fairly depressing. Just makes the lottery look like a VERY regressive tax.

Anyways, Mugge, what company do we truly understand as the outsiders? ;)

[Mugge]

(...)

Anyways, Mugge, what company do we truly understand as the outsiders? ;)

The insiders will always have the advantage, but there's a law against that.

;)

[Windswept]

Hmm. Now let me see.

If you had bought at $2, and it's $6 now, you would have tripled your money at this point.

(Please, someone, correct me if I'm wrong, as I dabble in these higher realms of mathematics. ;) )

If I had $200 or $300 I felt like playing with, and if I were in a more jolly mood, I might have bought at $2 myself.

So, hey, why not give it a chance... if, indeed, you wouldn't mind taking a chance on losing your money altogether? :)

[veryamusing]

Personally, there's no way I'd touch it. But did you? Stock's at $5.96...

I too have heard the lottery called a "tax on the stupid," and truly it is. I played heavily for *years*, and although I knew it was a waste, I'm just now realizing what that money could have become. :(

[veryamusing]

We need a foot-in-mouth smiley...

BSC is at $12.54 currently on news that JPM is upping their per share bid price to $10 from $2. You would've doubled your money in a matter of minutes had your order been entered yesterday/transacted early this morning. Damn. :|

Hmm. Now let me see.

If you had bought at $2, and it's $6 now, you would have tripled your money at this point.

(Please, someone, correct me if I'm wrong, as I dabble in these higher realms of mathematics. ;) )

If I had $200 or $300 I felt like playing with, and if I were in a more jolly mood, I might have bought at $2 myself.

So, hey, why not give it a chance... if, indeed, you wouldn't mind taking a chance on losing your money altogether? :)

Edit: Did you buy any, Windswept?

[ghoti]

And that is exactly why the stock market is no different than gambling for the vast majority of people: you never know what's going to happen and change the price dramatically. JPM could also have gone bust overnight over revelations that a day trader lost billions and and their own stock price had gone below 0.

Investing in the financial sector is a very bad idea right now, unless you are comfortable with losing the money you put in. There will be some more fun before things start settling down, and making money in that requires a lot of training, experience, gut instinct, and dumb luck.

[Luca]

Yeah, it's like gambling. If you budget a fairly small amount of money that you can afford to lose, you could win big. I mean, say you had taken your $300 of economic stimulus money and bought some BSC at $2 a share. You could have sold that for $1500, making a tidy profit (you know, go get yourself a TV or something), but you can't really plan to do any long-term investment through day trading.

[veryamusing]

I don't deny it's like gambling, and I'll admit that when I checked Yahoo! Finance this morning I immediately logged into my StockTrak (portfolio simulation program) and bought 5000 shares at $12.95. I sold at $13.07, making a small profit. Then in my infinite wisdom, I shorted the same number of shares, and promptly lost my shirt. :lol:

The markets fascinate me, but I don't have the stomach to day trade. I much prefer dollar-cost averaging and building a well-diversified portfolio of stocks from all sectors and industries, *including* financials, bonds, et al.

[Luca]

People who don't diversify end up like all those poor Bears Stearn (ex-)employees who lost most of their retirement savings. I don't know if it's really their fault for choosing to put so much into just one stock or if it was kind of forced on them, but either way it's a bad idea to invest all your money in one place.

Is there anyone who knows more about this who can clarify for me? Because the exact same thing happened with Enron. Company goes bust, employees have all their savings in company stock instead of mutual funds, and they lose everything. Do these companies give big incentives to buy their stock instead of diversifying? Do they actually hinder people from investing in other places? I don't want to go around saying "what did they expect if they didn't diversify" only to learn that they didn't have as much of a choice as I thought.

[faust]

People who don't diversify end up like all those poor Bears Stearn (ex-)employees who lost most of their retirement savings. I don't know if it's really their fault for choosing to put so much into just one stock or if it was kind of forced on them, but either way it's a bad idea to invest all your money in one place.

Is there anyone who knows more about this who can clarify for me? Because the exact same thing happened with Enron. Company goes bust, employees have all their savings in company stock instead of mutual funds, and they lose everything. Do these companies give big incentives to buy their stock instead of diversifying? Do they actually hinder people from investing in other places? I don't want to go around saying "what did they expect if they didn't diversify" only to learn that they didn't have as much of a choice as I thought.

You raise the best point of all here, why get paid from a firm and have your retirement tied to them? And then on top of that why invest in them as well?

Is it greed, is it too mich kool-aid, is it stupidity? Sems to me that common sense dictates that you don't put all of your eggs in one basket.

[Swox]

I almost put some money in AAPL when they were at $200, then I remembered that my family is cursed in the stock market, and I kept my $. Good thing, too...

[Satchmo]

I almost put some money in AAPL when they were at $200, then I remembered that my family is cursed in the stock market, and I kept my $. Good thing, too...

I wish I sold mine when it was at $200.
My problem is my optimism for Apple gets the better of me and I held on too long. :)

[apple007]

People who don't diversify end up like all those poor Bears Stearn (ex-)employees who lost most of their retirement savings. I don't know if it's really their fault for choosing to put so much into just one stock or if it was kind of forced on them, but either way it's a bad idea to invest all your money in one place.

Is there anyone who knows more about this who can clarify for me? Because the exact same thing happened with Enron. Company goes bust, employees have all their savings in company stock instead of mutual funds, and they lose everything. Do these companies give big incentives to buy their stock instead of diversifying? Do they actually hinder people from investing in other places? I don't want to go around saying "what did they expect if they didn't diversify" only to learn that they didn't have as much of a choice as I thought.

It seems like a multiple of factors in play for these types of situations: Corporate cultures in which it's considered bad form to sell/dump your own company's stock; compensation agreements in which employees are paid in stock and/or options, and/or automatically reinvest dividends in company stock; and the tax implications of selling shares (e.g., while it might be smart from a risk standpoint, employees lose the compound-interest effect if they sell their company stock, since they are left with only the after-tax balance to reinvest).

[Windswept]

We need a foot-in-mouth smiley...

BSC is at $12.54 currently on news that JPM is upping their per share bid price to $10 from $2. You would've doubled your money in a matter of minutes had your order been entered yesterday/transacted early this morning. Damn. :|

Edit: Did you buy any, Windswept?
No, I was never planning to buy Bear Stearns. I was just saying that those who had a few hundred to *play with* might have considered taking a chance. :)

People who don't diversify end up like all those poor Bears Stearn (ex-)employees who lost most of their retirement savings. I don't know if it's really their fault for choosing to put so much into just one stock or if it was kind of forced on them, but either way it's a bad idea to invest all your money in one place.

Is there anyone who knows more about this who can clarify for me? Because the exact same thing happened with Enron. Company goes bust, employees have all their savings in company stock instead of mutual funds, and they lose everything. Do these companies give big incentives to buy their stock instead of diversifying? Do they actually hinder people from investing in other places? I don't want to go around saying "what did they expect if they didn't diversify" only to learn that they didn't have as much of a choice as I thought.
I could be completely wrong about this, Luca, but I believe some companies have a 'stock-matching' deal, where the company matches, dollar for dollar, the amount their employee puts into buying stocks (in the same company for which he works).

Or, the company might kick in $1 for every $2 the employee kicks in; but, in any case, under these 'matching' schemes, all the money goes into buying stock in that same company.

This 'matching' is considered a lucrative benefit for the employee, and probably *is*, if it's a well-run company.

Under 1 to 1 matching, the company in effect doubles the amount the employee can invest, so, yeah, that's quite an incentive.

A lot of companies don't provide retirement (pension) plans for their employees anymore, apparently; so people have to fend for themselves when it comes to saving/investing for retirement.

People should have access to opening up a 401K account, or IRAs (investment retirement accounts), and those would 'not' lock them into buying just stock in their own company.

Here is a link about 401K accounts.

http://money.howstuffworks.com/401k.htm

[colivigan]

This is pure speculation (pun intended), but in the Bear Stearns case I think that a big chunk of employee "losses" were likely paper losses from stock options.

My company grants (or used to grant) stock options to employees. It can be intoxicating when the stock is doing well. You want to ride that horse as far as you can. And, since you have no actual money invested, the incentive to diversify is reduced. But those paper profits can evaporate in the blink of an eye. I've tried to be somewhat disciplined about it by exercising options on a regular basis, and have actually been pretty successful. I've given up some gains by exercising early, but also missed some opportunities by waiting too long.

Luckily for me, my company's stock has done pretty well, although it has been volatile enough to scare some sense into me. When you have a company whose stock keeps going up up up, the temptation to hold must be tremendous.

[apple007]

This is pure speculation (pun intended), but in the Bear Stearns case I think that a big chunk of employee "losses" were likely paper losses from stock options. ...

Maybe on a limited level, but most of the losses at Bear Stearns were real -- e.g., stock portfolios that took huge, huge hits. In the biggest example, I believe the CEO of Bear saw his net worth go from something like $1.5 billion to around $16 million in a span of several months.

[veryamusing]

Joseph Lewis, founder of Tavistock Group (http://www.tavistock.com/), was the largest single owner of BSC (9% stake) and lost an estimated $904.5M. He isn't/wasn't CEO, but he reportedly (http://money.cnn.com/galleries/2008/fortune/0803/gallery.bear_big_losers.fortune/4.html) scooped up his shares six months ago when the stock had initially started falling.

CEO Alan Schwartz by comparison lost only approximately $115.7M.

Other big losers according to Forbes:

* James Barrow, who bought 10% of BSC in 2007 lost $991.7M.

* Former CEO James Cayne "stepped down...after it was revealed that he was playing bridge and allegedly smoking pot as two of the firm's hedge funds imploded last summer, touching off a crisis in confidence from which Bear Stearns never recovered. Cayne stayed on as the firm's non-executive chairman and is its second-largest shareholder." He lost $477.8M.

:\

[apple007]

Cayne is who I was referring to above, although other media outlets have tabbed his total Bear losses at over $1 billion based on the stock's value six to 12 months ago.

[colivigan]

Yikes.

Those guys have got to be nuts. How do you have $900M tied up in a single company's stock? Unless, of course, $900M is just chump change for you. :eek:

I was thinking more of the rank and file employees with my stock options speculation. No sympathy for misguided Masters of the Universe. :\

[faust]

Joseph Lewis, founder of Tavistock Group (http://www.tavistock.com/), was the largest single owner of BSC (9% stake) and lost an estimated $904.5M. He isn't/wasn't CEO, but he reportedly (http://money.cnn.com/galleries/2008/fortune/0803/gallery.bear_big_losers.fortune/4.html) scooped up his shares six months ago when the stock had initially started falling.

CEO Alan Schwartz by comparison lost only approximately $115.7M.

Other big losers according to Forbes:

* James Barrow, who bought 10% of BSC in 2007 lost $991.7M.

* Former CEO James Cayne "stepped down...after it was revealed that he was playing bridge and allegedly smoking pot as two of the firm's hedge funds imploded last summer, touching off a crisis in confidence from which Bear Stearns never recovered. Cayne stayed on as the firm's non-executive chairman and is its second-largest shareholder." He lost $477.8M.

:\

wow, I now get why folks jump out windows.

The gf and I lucked out with stock options, mine were worth zero in the end and her's paid for the down payment on our house plus the money for a rainy day fund.

[cosus]

wow, I now get why folks jump out windows.

The gf and I lucked out with stock options, mine were worth zero in the end and her's paid for the down payment on our house plus the money for a rainy day fund.

At zero, you can make that tax deductible. ;)