Tuesday, March 11, 2008

Is Bear Stearns Going Bankrupt?

Anyone?  Anyone?  After unbelievably bearish option activity yesterday (supposedly spurred by rumors the firm is having liquidity problems that cased severe widening in Bear's credit default swaps,) the stock had a nice recovery this morning on news of the Fed's liquidity injection.  However, it has now given up its gains and is down on the day.  This does not bode well for the investment bank.  If I had to guess which investment bank was going bankrupt, I would certainly pick Bear given its lack of diversification from fixed income, particularly mortgages.  However, I do believe that if Bear goes bankrupt before march options expiration, the other brokers should take it on the chin as well.  I guess I'd rather short a 160 stock (hint hint) on its way to 50 rather than a 58 stock on its way to zero.  Call me crazy...

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