Is The Warren Buffett-Bear Stearns Story Bullshit?

Posted by John Carney, Sep 27, 2007, 9:15am

warrenbuffettwasrobbed.jpgBear Stearns shares shot up over 8% yesterday after reports surfaced that the Wall Street bank in serious talks with Warren E. Buffett about selling the Oracle of Omaha as much as 20 percent of the firm. But is Warren really riding to the Bear’s rescue? We're skeptical.

It’s hardly news that Bear Stearns has been out shopping a 20% stake to potential investors. There’s been talk of several US bidders and, of course, a Chinese take-out bank making bids. But does Warren make sense? That old guy made out decently with Salomon Brothers but he still hates on them. Yesterday Bess quoted him as saying he how much he found the “brash Salomon culture of big egos, big risks and even bigger salaries to be out of step with his down-to-earth demeanor.” Do you want to be the person who sells him the story that Bear is totally different? We’d rather tell him why Bess Levin was called DQ in high school than try to explain Bear’s internal culture to him.

More importantly, there's little about Bear Stearns to suggest that Buffett would look to put in that kind of money. Trading below book value? You're going to tell us anyone knows what Bear Stearns book value is? Even Bear Stearns admits its guessing about the value of some of the assets it owns. Reliable revenue stream? This company makes much of its money trading securities.

It's also hard to see what Buffett brings to Bear Stearns apart from money and a reputational boost. Bear Stears needs a large cash infusion and a partner that can help it build global exposure. How does Buffett add value to the business? We don't see it.

Probably the strongest point in favor of the rumor is that Buffett is unpredictable. And so that wascaly wabbit might have something this wacky up his sleeve. Just when you thought he was buying trains, he turns around and buys traders.

Yesterday, CNBC’s “simple country reporter” Charlie Gasparino sounded a skeptical note. Nothing we heard would cause us to think that the Old Man of Omaha is anywhere close to buying a huge chunk of Bear Stearns. We do a lot of rumor sorting here at DealBreaker, and we call bullshit on this rumor.

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Posted in: Bear Stearns, Warren Buffett

Comments

Posted by idiot, Sep 27, 2007 9:24AM

she was called DSL, not DQ

Posted by , Sep 27, 2007 9:27AM

i'm calling shenanigans on this whole buffett business. if you are buying, i have been writing you calls all yesterday and will be today

Posted by Random Banker, Sep 27, 2007 9:30AM

Jesus, what the F is going on over there. Now Bess is writing the "opening bell" if you guys are going down, just admit. I'm shorting, what's your ticker symbol?

Posted by , Sep 27, 2007 9:34AM

my guess is that british investor put the rumor out. wanna bet he unloaded a bunch of his stake?

Posted by off topic, kinda, Sep 27, 2007 9:39AM

Side note: I love how you guys are starting to drink the Comment Kool-Aid on Bess. Just a few months ago Bess was an outstanding Manhattan citizen...now even Carney is calling her out on her mischievous sexual demeanors. hell, if bess goes an article without a sexual reference i think the Street my collapse. Screw MNF at Tonic East, let's all go over to Bess' and give the girl what she desperately wants...Use your imagination.

Posted by anon4life, Sep 27, 2007 9:40AM


... and gosh, who thought someone would be putting out rumors right before the end of the financial quarter? Gotta lock in those incentive fees somehow!

Posted by Random Banker, Sep 27, 2007 9:42AM

ok carney he's the next story. call somebody over at lazard and have them pitch this to the UAW. The UAW now has a $50bn endowment they need to invest. What's the best way for them to deploy it? Why not LBO GM?

The biggest obstacle to a deal (besides the credit markets) is that the unions have a change of control clause in their contracts... but if they're the buyers no need to worry about that. If the UAW buys GM then they'll finally stop whining about cost cutting because the profits will flow directly into their own health care benefits. They could cram down the existing debt quite easily since it was issued a investment grade.

Posted by , Sep 27, 2007 9:48AM

she remains an "outstanding Manhattan citizen," jackass.

Posted by John Carney, Sep 27, 2007 10:02AM

Random Banker: Joe's just on assignment on the West Coast. It seemed cruel to ask him to post Opening Bell on Pacific time. He should be back tomorrow.

Everything is going swimmingly here at DealBreaker.

Posted by , Sep 27, 2007 10:11AM

Carney, where's Keith?

Posted by LippyTex, Sep 27, 2007 11:04AM

Buffett helped Salomon out of a jam a while back if I recall....

Posted by Juan Karni, Sep 27, 2007 12:23PM

Where is Keith?

Posted by Richard wicks, Sep 27, 2007 7:34PM

Of course it's bullshit. Everything about this market is bullshit.

And who spread this rumor? Gee whiz, the SEC isn't investigating, so they must be friends of the right politicians.

Our economy is fucked folks and our markets are a joke.

Posted by Jason G., Sep 28, 2007 9:24AM

To play lawyer rumor monger on ya...

The articles I read yesterday said something like "they're in serious talks to sell as much as 20% of bear" and then "rumors are they are talking with Warren Buffet".

To me, these seem like two distinct statements that are put together to imply a relationship. So, they called Warren... it doesn't have anything to do with the infusion of cash.

The only way Buffet would buy Bear is if he could buy their valuable assets for pennies on the dollar -- I doubt he'd buy shares in the company at large.

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