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Preston, it's a simple problem. One has to have a billion to lose a
billion, so no I wouldn't have lost a billion on Bear Stearns.
When I saw Bear Stearns stock price dropping, I asked a few people I
know if they would lend me a few hundred million to buy some, but
their money was all tied up in mortgages, so I was spared a terrible
painful lesson in diversification.
Super
--- In equismetastock@xxxxxxxxxxxxxxx, pumrysh <no_reply@xxx> wrote:
>
> All,
>
> Below is a story reported by the Orlando Sentinel concerning the loss
> of money suffered by Joe Lewis when Bear Sternes bellied up.
>
> Several Questions:
>
> 1. How would you have handled the situation?
>
> 2. Would you have lost money?
>
>
> Preston
>
>
>
> OrlandoSentinel.com
> Lake Nona 'Medical City' will survive Lewis' Bear Stearns loss of
> more than $1B
> Jerry W. Jackson
> Sentinel Staff Writer
> March 18, 2008
> Tavistock Group and its high-profile "medical city" in southeast
> Orlando won't be hurt by owner Joe Lewis' loss of more than $1
> billion in the meltdown of investment-banking giant Bear Stearns, a
> spokesman for the British billionaire and his Windermere-based
> company said Monday.
>
> Lewis, ranked by Forbes magazine as the 368th-wealthiest person in
> the world, had gambled as much as a third of his net worth during the
> past year on a turnaround for Bear Stearns Cos., paying an average of
> about $107 a share for 11 million shares, according to papers filed
> with federal regulators.
>
> But in a stunning downfall for the storied brokerage, the Federal
> Reserve helped engineer a takeover Sunday by another U.S. investment-
> banking giant, JPMorgan Chase & Co., for about $2 a share and the
> assumption of debt.
>
> "It happened very quickly. The investment essentially went to zero,"
> said Doug McMahon, a managing director for the privately held
> Tavistock, which Lewis uses to invest some of his earnings as a
> currency trader and investor.
>
> Lewis, who lives part time in Isleworth, the ultra-exclusive
> residential development in southwest Orange County, will not have to
> sell any of Tavistock's assets, McMahon said, because no debt was
> involved in his Bear Stearns holdings.
>
> "Certainly, it's a big deal," McMahon said of the loss. "But he can
> absorb the hit, and it doesn't change the business here one way or
> another." Forbes recently put Lewis' net worth at $3 billion, though
> McMahon said that figure "underestimates his portfolio," and The
> Sunday Times of London earlier this month reported that Lewis was
> worth about $5.6 billion.
>
> "Our actions will be reassuring," McMahon said of Tavistock. The
> company will continue working, he said, on the infrastructure for its
> planned medical campus in Lake Nona, a Lewis-owned development in the
> southeast corner of Orlando. Buildings are already under construction
> there for the University of Central Florida College of Medicine and
> the Burnham Institute for Medical Research.
>
> McMahon said Tavistock, which recently announced plans to build a
> 100,000-square-foot "wet lab" in Lake Nona in hopes of attracting
> startup biotech companies to the medical campus, is going forward
> with design work on that project. The company also just began
> building a joint-venture golf resort on New Providence in the
> Bahamas, in partnership with golfers Tiger Woods and Ernie Els.
>
> Lewis, 71, who was born in an apartment above a pub in London's East
> End, has been widely known as a "contrarian" investor for years,
> gambling on big returns as others are fleeing an investment. Long a
> resident of the Bahamas, he began buying up Central Florida property
> in the late 1970s, acquiring both Isleworth and Lake Nona when they
> were financially ailing luxury developments.
>
> He began snapping up shares in Bear Stearns last year just as the
> breakdown of the nation's subprime-mortgage market was beginning to
> spread to other credit instruments across the country and around the
> world. The company's shares were trading at well over $100 a share
> when Lewis began accumulating his stake through a Tavistock
> affiliate, but Bear Stearns had helped create the market for complex
> financial derivatives, and as that market unraveled, the company's
> stock price fell.
>
> Lewis kept buying as the share price fell, and at one point he was
> the company's single-largest shareholder. He ranked second, with more
> than 9 percent of the outstanding shares, when Bear Stearns' fortunes
> took a turn for the worse last week and the company could no longer
> raise capital on its own.
>
> McMahon, who oversees business investment and marketing for
> Tavistock, said Lewis never sold his shares as the credit crisis
> deepened. "It was intended as a long-term investment," he said, and
> as a bad stock bet is likely to go down as one of the biggest in
> history by an individual.
>
> New York-based JPMorgan, the third-largest financial-services company
> in the U.S., agreed to pay about $260 million for Bear -- a fraction
> of its $13.6 billion market value as of Nov. 30, the end of its
> previous fiscal year.
>
> David Currie, a professor of economics at Rollins College's graduate
> school of business in Winter Park, said the Fed's action in helping
> to arrange the deal was a high-stakes gamble in itself, designed to
> maintain liquidity in the financial markets and calm the nerves of
> investors and bankers worldwide.
>
> "The key is confidence," Currie said. "Once people lose confidence,
> they try to liquidate as fast as they can."
>
> Currie said he, too, was surprised by the rapid collapse of Bear
> Stearns, an 85-year-old financial institution that had a stock-market
> capitalization of $3.4 billion, or $30 a share, as recently as
> Friday, when the Fed and JPMorgan announced a rescue effort. But he
> said he was not surprised that the nation's central bank had crafted
> a plan to help Bear avoid bankruptcy.
>
> Bear Stearns stock was still trading at more than $4 a share Monday,
> an indication that at least some investors were betting that the
> offer of about $2 a share from JPMorgan will somehow be bettered. By
> the end of the day Monday, a federal lawsuit seeking class-action
> status had been filed in New York on behalf of investors who had
> purchased Bear Stearns shares between Dec. 14, 2006, and March 14.
> The complaint accuses the company of making "materially false and
> misleading statements" about its financial condition, causing the
> stock to trade at "artificially inflated prices," which peaked at
> $159.36 a share in April.
>
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