03/17/2008

And this Downturn's Sockie Award Goes to.....

Hello:

It appears that every market downturn has it's mascot company, mascot individual and mascot derivative. For example, for the tech bubble collapse, there was the sock puppet from Pets.com, that immortalized the irrational exuberance of the clicks, not bricks economy. Hence, we would like to dedicate an award for the most obtuse investment scheme and call it "The Sockie" in honor of the Pets.com sock puppet.

Let us look at the past icons:

Year                        Company                    Icon                                Derivative

2000                        Pets.com                    The Sock Puppet            Employee Stock Option

1994                        Orange County            Robert Citron                   Reverse Repo

1987                        Drexel Burnham           Michael Milken                Junk Bond

 

And now, ladies and gentleman, with a drumroll, please, the winners of the 2008 Sockie awards for the most obtuse investment scheme are:

2008                        Bear Stearns                Jimmy Cayne                 Mortgage Backed Securities

Why Mr. Cayne? The former CEO of Bear Stearns, who stepped down quietly at the beginning of this year, has [according to Reuter's news service] "been criticized for spending too much time playing bridge and golf while Bear stumbled this [past] summer on wrong-way bets on subprime mortgages. Two Bear-run hedge funds collapsed, a crisis that unfolded as Cayne, a world-class bridge player, competed in a tournament in Nashville." Fiddling while Rome burned, perhaps?

Today, JP Morgan Bank is offering $2/share to buy Bear Stearns, a stock that has traded as high as $159/share in the past 12 months. Maybe the second shoe is finally starting to drop, and we can look forward to getting all the bad news out, let it price into the market, and then look forward to a true rally.

We certainly would like Wall Street to "fess up" and clear the air.

The Markets and our office will be closed on Friday due to the holiday.

Terri G. Millson, CIMA, CIMC President

Ray Dicius, CSA, GEPC LPL Branch Manager