It's being reported tonight that the riskier of the two Bear Stearns hedge funds is as good as worthless, while the other troubled fund is worth about NINE CENTS on the dollar. From the NY Times:
“'The preliminary estimates show there is effectively no value left for the investors in the Enhanced Leverage Fund and very little value left for the investors in the High-Grade Fund as of June 30, 2007,' according to the letter."
In a related story, Bloomberg reports that Goldman Sachs and JPMorgan are among a few bank who are unable to dump their debt:
"'The private equity firms, being very tough negotiators, are unlikely to let the banks off the hook,' said Martin Fridson, chief executive officer of high-yield research firm FridsonVision LLC in New York. 'They'll say that's your problem and that's why we're paying you: To take risk.'''
"'Those bonds are probably worth 94 cents on the dollar, or $43.5 million less than when they were sold on June 28', according to Justin Monteith, an analyst at high-yield research firm KDP Investment Advisors in Montpelier, Vermont."
I have a feeling that the faulty debt problems will be mostly contained within the banking industry. I can't see this affecting tech stocks very much, if at all. As for gold, these developments will only cause upward pressure on metal and metal stocks, especially if it gets bad enough for a federal bailout.
Investment banks beware. When the chickens come home to roost, the cock-fights will get bloody. Did you follow my advice? What about this? Are you covered?
(Edited 7/17/07 7:57 PM: edited to fix the NY Times link)
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