The Secrets of Successful Investing
Between them, the four quietly cashed out more than $57 million worth of company stock before the crisis hit.
The executives saved themselves nearly $16 million by their astutely timed sales, which were disclosed in a series of public filings.
Those losses got passed on to the unlucky outside investors who bought the stock.
Bear Stearns declined to comment.
Connecting the Dots …
This is a newsletter about connecting dots. Here are the dots:
* Two giant Bear Stearns hedge funds, based on subprime mortgages—loans to cash-poor home buyers—started tanking.
* The four top executives of Bear Stearns cashed out $57 million in company stock close to the high.
* On March 1, Bear Stearns analysts issue an upbeat report on New Century, the largest subprime lender.
* Based on the optimism of Bear Stearns analysts, investors bought New Century.
* On March 8, New Century—owing billions to creditors—ceased accepting mortgage applications. A criminal investigation into its practices was announced and the stock fell to $3.57, from a high of $50 in May.
* On March 11, trading in New Century Stock was suspended.
* New Century declared bankruptcy on April 3.
The widow and her brother were wiped out.
You have to smell a rat.
Are not the Bear Stearns executives who sold company stock near the top and then sanctioned an upbeat report on New Century just days before it went under guilty of something?
Why will NBA referee Tim Donaghy spend 25 years in jail for cashing in on basketball games that he manipulated while the four Bear Stearns execs—whom it seems to me did essentially the same kind of thing—won’t be prosecuted?
In a word, Wall Street stinks.
A few insiders—like the big dogs at Bear Stearns—make their millions while millions of homes are sitting vacant and millions of middle class Americans have joined the ranks of the homeless.