Thursday, April 3, 2008

Bear Sterns

Bear Sterns
Too Big to Fail
Is Bear Sterns too big to fail? What about Lehman Brothers? The Federal Reserve Bank of New York believes so. Bear Sterns has a giant liquidity problem. They do not have any. In my book, "The Angry Black Man's Guide to Success," I discount the ability of African-Americans to earn wealth from Wall Street investments. However, there may be hope. Wall Street is sinking and there are good stocks that pay dividends at bargain prices.
In order to save Bear Stearns, The Federal Reserve Bank of New York is making a non recourse loan to JPMorgan which in turn will make a loan to Alan Schwartz of Bear Stearns. The amount of the loan is not disclosed. Again, the mortgage backed securities cannot be valued because the credit quality (credit scores) is not transparent and cannot be analyzed. But there is a bigger issue. Debt is not liquidity.
I wish I was lucky enough to receive a non recourse loan for my corporation. Perhaps, if I were white....wait - I am thinking like Geraldine Ferraro. So what will the result of this welfare be. Simple, Bear Stearns will fail anyway because they have no liquidity and no capital. This non recourse loan will simply disappear into the foundation of someones house in the Hamptons. After 85 years in business, Bear Sterns will be sold to JPMorgan or an Asian investment firm and exist in name only in by April 2008. Do not worry about the partners, they will not go broke or suffer any financial hardship except for a bruised ego.
So what is and Angry Black Man to do? Raise cash and lots of it to take advantage of a market in disarray. I personally am working with the best financier in the world, Andrew Sherman of the firm Dickstien Shipiro. Andrew, author of 17 books on Business, has so much knowledge that if I owned a university, my school of business would be named after him.
If I can encourage my brothers and sisters to do one thing, its to raise and hoard cash and eliminate debt as soon as possible. In the March, 2008, the Carlyle Group and now Bear Stearns are crashing because they lived on debt. The Carlyle Group borrows 32 dollars for every one dollar in capital. Lehman Brothers leverage ratio is 40 to 1. Again, leverage is not liquidity. Join me building wealth, not debt and lets start with firm footings.

George Farrell
The Angry Black Man's Guide to Success
Post a Comment