We Know Nothing

WSJ (03.20.08):

"The collapse of Bear Stearns Cos. dealt a severe blow to investors, from big names like billionaire Joseph Lewis to thousands of employees of the brokerage firm.

But there's one group trying to contain their joy amid all the gloom on Wall Street: Investors who placed big bets against Bear Stearns.

Some Traders Win Big

"Large hedge funds -- including Harbinger Capital Partners, Greenlight Capital, Tremblant Capital Group and Paulson & Co. -- made millions of dollars as Bear Stearns's shares tumbled and various bearish positions rose in value, according to securities filings and people close to the firms."

Reuters (03.20.08):

"The Securities and Exchange Commission is investigating the events leading up to the collapse of Bear Stearns, specifically a surge in options contracts betting that the investment bank's share price would fall sharply, according to the Wall Street Journal

Citing people familiar with the matter, the paper reported the SEC probe focuses on a surge last week in 'put' options that came days before the firm's proposed sale to J.P. Morgan Chase & Co. for stock now valued at about $278.5 million, or $2.32 a share."

SEC probing options activity in Bear Stearns

Merely a coincidence, no doubt.

Wall Street Welfare

Free market capitalism at its finest. This is not rewarding greed and stupidity, but rather an example of the ingenuity of the markets (h/t AmericaBlog). Bloomberg (01.23.08):

"MBIA Inc. and Ambac Financial Group Inc., the biggest bond insurers, are likely to be bailed out to avert worsening credit-market turmoil, according to analysts at UniCredit SpA.

'A kind of bailout supported by monetary authorities or governments is the only chance for the industry to survive,' Jochen Felsenheimer, the Munich-based head of credit derivatives research at UniCredit, Italy's biggest bank, wrote in a note to investors today.

MBIA, Ambac Likely to Get Bailout, UniCredit Says

"'This bailout seems to be highly likely given the important role of bond insurers in the current market environment.'"

They're hammering out the deal as we speak. WSJ (01.23.08), via Calculated Risk:

"Regulators at the New York Insurance Department met Wednesday with banks that are parties to contracts with bond insurers to discuss ways of stabilizing the business and bringing in additional capital and capacity."

New York Meets With Banks On Stabilizing Bond Insurers

Gee. Wonder who'll pick up the tab for all of this?

Also from Calculated Risk, this is priceless.

Run Away!!

Man, does China have us by the short ones or what? Reuters (02.27.07):

"Stocks fell sharply in heavy trading on Tuesday after Chinese stocks suffered their worst one-day sell-off in a decade and a weak U.S. economic report reignited concerns about a slowdown in global growth.

The major U.S. indexes tumbled more than 1 percent in the first hour, following a rout in global stock markets, amid fears that Chinese authorities would crack down on stock market speculation."

Wall St. drops on China, economic fears

UPDATE: How's your 401(k) feel today? Bloomberg (02.27.07):

"U.S. stocks fell the most since March 2003 as a plunge in Chinese shares sparked a global selloff and raised concern that investors will dump equities after a four- year bull market."

U.S. Stocks Tumble Most Since 2003 on China Plunge, Orders Drop

Holy crap! At one point, the Dow was off over 500 points.