House of Cards by William Cohan
House of Cards by William Cohan
This story of the rise and demise of Bear Stearns yields some insight into the company and its personalities (all the important people played bridge). Two points stand out: 1) only some people read contracts, even when they're paid to; 2) the story of the traders who sense weak positions (and one-way trades against floundering financial firms) has yet to be told.
Nor did he (Bob Pisani of CNBC) mention -- he probably was not aware -- that someone (who is still unknown to this day) had just made a $1.7i million bet that Bear Stearns stock would fall dramatically within nine days, first by buying 57,000 puts at $30 and then by buying 1,649 puts at $25. (BSC was trading around $60/share)
"The prime brokerage withdrawals began in earnest that Tuesday night," Boyd explained. "I think the two big funds that kicked it all off were Renaissance Technologies -- Jim Simon's $30 billion fund. I had two or three people tell that he pulled, and I think he had $20 billion [ at Bear ] -- and I think Highbridge did, too."
If Goldman was calling to be "helpful", Molinaro and Upton thought, that meant everyone on Wall Street knew that Bear Stearns was in serious trouble. "So that's taps," Upton said. "That's the trumpet playing because all that means is they want to come in and see our positions so they can trade against us and make money.
Just after the start of a historic six-year bull market, Joseph Ainslie Bear, then forty-four, along with two younger partners -- Robert B Stearns, thirty-five, and Harold C Mayer, twenty-eight -- founded Bear, Stearns, and Co. on May Day, 1923.
(Cy) Lewis noticed that before Roosevelt commandeered the railroads for the war effort, railroad bonds were trading at par because interest payments were still being made. "But, all of a sudden, they can't pay the coupon (wartime confiscation)...
With these railroad bonds no longer paying interest, they were trading as low as 5 cents on the dollar...
He figured either Armageddon was imminent -- in which case nothing would matter -- or the United States would end up winning the war....
the simple rules laid down by the Dean of Business Philosophers, Haimchinkel Malintz Anaynikal:
- Stick to thine own business
- Watch thy shop
- Limit thy losses
- Watch thy expenses like a hawk
- Stay humble, humble, humble
- When dealing with a new account, know thy customer and thy customer's money is up.
the way the CAP (Capital Accumulation Plan) worked was that an executive could choose what percentage -- up to 100 percent -- of his annual compensation he wanted to invest in the company's stock through the plan...
there was an opaque benefit to the plan, whereby each year the CAP participant would get an additional number of shares based on the firm's earnings and the firm's stock price. Over time, it became clear that this benefit worked out to between 7 percent and 8 percent extra a year...
Spector was one of the very few senior executives at the firm to take the time to read and fully comprehend the nuances of the CAP (lol, nuances!!!)...
He routinely decided to invest 100 percent of his annual compensation into the CAP...
Since Spector owned more stock through the CAP than anyone else, the numbers in the proxy related to his "other compensation" wre getting increasingly large...
His "other compensation" in 2002 related to those CAP shares was $13.9 million, bringing his total compensation in 2002 to $31.2 million. In 2003, the gap between Spector's total compensation, $38.5 million, and Cayne's, of $33.9 million, grew wider.