Share our mistakes

[bovverd]

Originally Posted by Stockowner

Just out of pure curiosity.

What in your investment thesis in regards to Bear Stearns where you wrong? Where was the glitch? Any clues you could have picked up?

I didnt carryout my usual due dilligence with this one and just focused on some big assumptions ie its book value was listed as $110 per share so $33 seemed like a fair margin of safety, It was the 9th biggest bank in the world and I therefore assumed it couldnt possibly die, Its headquarters alone was worth 1 billion dollars and it was reported to have have 394 billion in total assets so quite how it was sold for $2 a share was a mystery to me.

Im still holding the stock and its back up to $10 a share after JP Morgans revised offer but I doubt it will climb further so will just have to put this one down to experience.

I find these banks too complex to value anyway hence the incorrect assumptions.

[Stockowner]

I'm not very profecient in investing, but your thoughts on Bear Stearns didn't seem too shabby? Does anyone here know how we could have forseen the Bear Stearns episode happening?


Benjamin Graham once said:

"I don't believe any of us have the pretension of believing that by being very good analysts, or by going through very elaborate computations, we can be pretty sure of the correctness of our results. The only thing that we can be pretty sure of, perhaps, is that we are acting reasonably and intelligently. And if we are wrong, as we are likely to be, at least we have been intelligently wrong and not unintelligently wrong."

At least you were intelligently wrong, right? :)

[bovverd]

Originally Posted by Stockowner

I'm not very profecient in investing, but your thoughts on Bear Stearns didn't seem too shabby? Does anyone here know how we could have forseen the Bear Stearns episode happening?


Benjamin Graham once said:

"I don't believe any of us have the pretension of believing that by being very good analysts, or by going through very elaborate computations, we can be pretty sure of the correctness of our results. The only thing that we can be pretty sure of, perhaps, is that we are acting reasonably and intelligently. And if we are wrong, as we are likely to be, at least we have been intelligently wrong and not unintelligently wrong."

At least you were intelligently wrong, right? :)

Well Joe Lewis was holding close to 2 billion dollars worth of shares and he never saw it coming either!

I dont believe this was predictable by any means. I think the real issue with this one along with Banks in general and will be the reason why ill be giving them a wide birth in the future is the fact their customers can collectively remove billions and billions of dollars very quickly on mass and they can sometimes be left with a lack of cash to meet obligations.

My problem with banking stocks is its very difficult to calculate those obligations by looking at their balance sheets because they change from day to day quite rapidly.

How can a company with 394 billion dollars in assets be sold off for what was initially two hundred million dollars or whatever the pitfull figure was. The revised figure is still only 1.18 billion and that is only slightly more than what the bear stearns Head quarters is worth alone!, so to me its clear that obligations which were not present on the balance sheet caused this thing to sink.

The complexity of this should have been enough for me to say no but its been a great learning curve anyhow and Im pretty well diversified so the hit was relatively small.

[npg]

Well, you could take a good look at one of their main revenue streams (hedge funds) and determine this is highly leveraged, over hyped and dangerous. Add to it a lack of transparency and you get a pretty explosive mix.

Then consider the fact that the market is over-saturated with hedge funds who possibly cannot all produce the returns they claim in order to take these huge fees.

It is a recipe encouraging people to do stupid thing just in order to fulfill a promise they cannot possibly hold. And its the one doing the least stupid things that makes money like the Berkshire boys, not the one doing the cleverest things.

That one was always an iron too hot to handle.

It's not a biggie though. Everyone does a stupid investment ;) Mine was in DFC which tanked like no tomorrow. And I knew I was doing something fishy because all I saw was the fictionary upside and non-existing value proposition. Thank god I only did that one with my play money, but I would have preferred having hanged on to that amount.