Two Bear Funds "Nearly Worthless", Investors Told -Sources

[A HERETIC I AM]

Source: WSJ/CNN/Money

Weeks after the meltdown of two prominent Bear Stearns Cos. (BSC) hedge funds that bet heavily on the market for risky home loans, the brokerage has told the funds' investors that the portfolios' assets are almost worthless, according to people familiar with the matter.

The assets in Bear's more levered fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, are worth virtually nothing, according to people familiar with the matter. The assets in the other larger, less-levered fund are worth roughly 9% of the value since the end of April, these people said. The April valuations weren't immediately available but in March, before their sharp losses, the enhanced leverage fund had $638 million in investor money, while the other fund had $925 million.

The two funds have been in the spotlight for weeks after suffering heavy losses in the subprime market. Late last month, Bear helped stabilize the less- levered fund with a $1.6 billion secured loan; the enhanced fund began trying to unwind its remaining $1.1 billion in debt.

(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)

Bear disclosed this information to investors earlier Tuesday and is expected to make a statement Tuesday evening, these people said. A spokeswoman for Bear didn't return calls for comment.



Read more: http://money.cnn.com/news/newsfeeds/articles/djf500/200707171734DOWJONESDJONLINE000700_FORTUNE5.htm

[AngryAmish]

1. 20% of -$638 million is????

Bad trader, no Hamptons for you!

[Tansy_Gold]

2. Okay, tell me if I understand this correctly.

Bear Stearns Co sets up a "hedge fund" -- whatever that precisely is -- and a bunch of rich people turn over huge sums of their money to BSC, said money to be invested in said "hedge fund."

BSC people take that money from the rich people and "invest" it in something they think will be worth more money further down the road. The something they pick is mostly risky, sub-prime mortgage loans, which have high rates of interest (high profit for lenders/backers) and have as collateral real estate that is likely to increase in "value" . . . further down the road.

Out of the expected profits, BSC is going to pay its various employees, from receptionists and mail room clerks to "financial advisors" who make tens of thousands of dollars a month.

The banks and other mortgage lenders who originally made these risky sub-prime loans are in the clear, because they got their money back from BSC. The home "owners" can struggle to pay their mortgages and maybe some will succeed and maybe some won't, but the original lenders are safe. Even if they only made a little money on the deal, they're ahead of the game.

BSC is okay, because they've already paid their expensive payroll, and the "corporation" doesn't care because it's not human -- though it is a "person."

So who loses? The rich people who had lots of extra cash lying around and thought they could make even more by doing nothing but "investing?"

Pardon me while I don't feel too sorry for them when people who are working their asses off every day to make those original sub-prime, high-interest mortgage payments are losing their homes to foreclosure.


Tansy Gold, who has struggled many times to make a mortgage payment

[LiberalFighter]

3. The good news... the investors don't have to pay taxes on it.