Lewis takes $1 billion hit from Bear Stearns

Discussion in 'Old Threads' started by syscom3, Mar 17, 2008.

  1. syscom3

    syscom3 Pacific Historian

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    Lewis takes $1 billion hit from Bear Stearns - Yahoo! News

    LONDON (Reuters) - Even the most successful investors can get it horribly wrong, as reclusive British tycoon Joe Lewis has just found out.

    The septuagenarian British billionaire currency trader last year built a stake approaching 10 percent in Bear Stearns (BSC.N), a U.S. investment bank weakened by the subprime crisis and widely seen as a takeover target.

    The speculation was half right. JP Morgan (JPM.N) set a deal to buy the stricken bank over the weekend, but at a knockdown $2 a share, implying a loss for Lewis of more than $1 billion.

    Lewis on Monday called the takeover offer "derisory," according to U.S. business news channel CNBC, and said he does not expect JP Morgan to be successful in closing the deal.

    The reclusive financier, who dropped out of school aged 15 to work in his father's pub in London's East End, is one of Britain's richest men.

    He made most of his estimated fortune of over $5 billion from foreign exchange bets that shook some of the world biggest currencies.

    An avid golfer and a shareholder in London soccer club Tottenham Hotspur, Lewis counts golf professionals Ernie Els and Tiger Woods as business partners. Actor Sean Connery is a friend and neighbor in his Bahamas resort.

    Lewis, who generally prefers to stay out of the limelight, grabbed headlines last year after building the biggest individual-owned stake in Bear Stearns, the U.S's fifth-biggest investment bank.

    He paid more than $100 a piece for the majority of his 11 million shares, according to U.S regulatory filings. It is unclear whether he had hedged the nearly 10 percent holding.

    A soccer industry deal maker who knows Lewis said he was not the kind of man to lose money.

    "He certainly paid real money for that (Bear Stearns stake) but where, and how he hedged who knows," he said.

    HUMBLE BEGINNINGS

    With a fortune of 2.8 billion pounds ($5.6 billion) according to the latest Sunday Times rich list, Lewis ranks in a Top 20 list of the richest Britons and is the 369th wealthiest person worldwide, according to U.S. magazine Forbes.

    Lewis sold the family business in the late 1970s and turned his hand to currency trading.

    Today, he divides his time between his Bahamas home, a luxury estate in the Orlando, Florida area, and property he owns in Argentina, where in 1999 there was a reported plot on his life.

    Lewis' U.S. investment firm, the Tavistock Group, is also based in Florida.

    It has a portfolio of investments in 170 companies in 15 countries, according to its Web site, including luxury developments, U.S. restaurant chains such as Napa Grille and Alcatraz Brewing Co, and biotech firms.

    Lewis' luxury beach-side Nassau, Bahamas resort is one of Tavistock's investments and was featured in the 2006 James Bond blockbuster "Casino Royale."

    Lewis' golfing pals Els and Woods are shareholders and consultants for a new golfing complex.

    According to one report, it was the actor and one-time James Bond, Connery, who encouraged Lewis to branch into soccer.

    In 2001 Lewis bought into premier league side Tottenham and later took stakes in Glasgow Rangers and several other European teams.

    Owning a leading English club threw Lewis into the British spotlight, but he is still relatively unknown in the United States, which is just fine with the reclusive billionaire.

    "I really feel that, if one is successful, one of the rewards of your success is the quiet enjoyment of it," Lewis told the New York Times in a rare media interview about a decade ago.

    Neither the Tavistock Group nor Lewis immediately returned calls seeking comment.

    (Additional reporting by Lilla Zuill; Editing by Erica Billingham, Leslie Gevirtz)
     
  2. timshatz

    timshatz Active Member

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    Yeah man, that was one helluva a Monday. Never seen that happen before. An I-bank backed up by the fed. Thank God they did it. If Bear had gone south, Lehman was next and then banks that were in good shape would've tanked. Run on the I-banks leads to a run on the regular banks and stuff we haven't seen since the 20s would've been common (banking and market panics).

    I am less worried about the US banking system than Europe's. The Euros are trying to defend their currency (have bad memories of run away inflation) and that tends to produce problems as well.

    This thing ain't over by a long shot but what happened with Bear was a lot better than it could've been.
     
  3. syscom3

    syscom3 Pacific Historian

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    I blame the Chinese for whats happening. Their undervalued currancy (and instance on it) is distorting normal trading patterns.

    As long as we have huge trade deficits, then the dollar will continue to sink lower and lower.
     
  4. timshatz

    timshatz Active Member

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    I dunno Sys, as I see it, it's more settled here than there. We've been bouncing from bubble to bubble for the last 20 some odd years. The most recent Real Estate bubble is the second in twenty years.

    It was more a game of musical chairs and the music stopped. Now, everybody is trying to find a seat an there just enough. Further, the seats (call it liquidity to cover debt obligations) are dissapearing. A combination of everyone from Hedge Funds taking their monies out of the investment banks to Corporations taking money out on their lines of credits to individual investors redeeming funds means the I-banks have a lot of calls on cash and not enough to cover. That was what drove Bear to fire sale prices.

    To my mind, the scary question is what forces a company that was worth $70 on Monday of last week to be sold for $2 on Monday morning. I know it was the debt obligations vs available cash but where else is this happening and is this systemic through out the whole group, both I-banks and regular banks.

    In short, what the hell is going on out there!
     
  5. syscom3

    syscom3 Pacific Historian

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    Tim, many people have asked the same questions on why Bears Strearns collapsed so fast.

    I smell a pack of lies that came from their CEO!
     
  6. timshatz

    timshatz Active Member

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    I dunno Sys, the guy lost a billion dollars. Nobody with any sense is gonna let a billion go away. Heard back in September he had a chance to sell their CDO porfolio but didn't 'cause he thought the whole thing would blow over.

    I worry there are other I-banks in the same condition.
     
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