Do Experts Really Know March 24
I surf over to cnn money this morning and since the biggest news at the moment, is the collapse of Bear Stearns, I naturally clicked on an article related to it’s collapse. The article is about who are the biggest losers in the collapse of this company. Which brings me to this post titled “Do Experts Really Know?”
As I browsed through the article in cnn, the big losers, those in the hundreds of millions turned out to be principles or CEO of other investment house. I was more than surprised. That the CEO of Bear Stearns, Alan Schwartz lost money, that come is to be expected. Most CEO’s own a significant of the the company they manage.
But big names like James Barrow, principal of Barrow Hanley Mewhinney & Strauss, in which the company’s website mentions
“….. has provided value-oriented investment strategies to institutional investors, mutual funds, and family offices since 1979. Today, clients representing more than $50 billion in assets rely on Barrow Hanley to manage U.S. equity and fixed income portfolios”
Then there is Joseph Lewis, currency trader and multi-billionaire. Founder of the 30 year old Tavistock Group, a private investment company with offices in Argentina, The Bahamas, China, European Union, Mexico and the United States, having lost an estimated $900 plus million.
Next is Bruce Sherman, CEO of Private Capital Management, losing over $400 million and several others. This really got me asking the question “Do Experts Really Know What’s Happening?” I answer to this one is pretty straightforward. Yes they do know a lot about investing, otherwise rich people won’t be handing over millions for them to invest and no, they are human and don’t have a crystal ball that tells the future. Some of these fund managers got in when Bear Stearns shares dropped 30% in value figuring that the market won’t do much worst. Others could not unload Bear Stearns stock fast enough and got caught holding on to worthless shares.
Read this article at cnn to understand more what happens at Wall Street. As Shawn Trully wrote
“The sad truth is that Wall Street managers aren’t geniuses but big risk-takers who get lucky.
But what about the “normal” employees in Bear Stearns, the clerical and administrative staff, who holds much lesser shares. From a share that was trading at $88 each to $2 each, if these have counted on their shares for retirement, funding a loan, putting their kids through college, there are in for a rough ride indeed.
Cheryl Mar 24
Has anyone even thought of interviewing any of these folks? What helps me to not panic about this is that I’ve seen it before. You live long enough… Anyway, hopefully, the whole thing won’t come crashing around our feet.
Ed Mar 24
Well, don’t think they’d agree to an interview. After all, they are supposed to be experts at what they do. I won’t go down well with their clients, when they say they made mistakes too (a huge one). Perhaps when they retire and write a book in when they spill the beans.
Tom Stine Mar 24
Experts don’t know. Or they choose not to know. But you can rest assured that the CEO and top execs at Bear absolutely knew what was happening. But I’m no expert!
LaRene Mar 26
I agree with you Tom. I think the CEO knew what was happening long before the employees did. Ed I agree with you. Someone will probably write a book and tell us what really happened.
Ed Mar 26
LaRene, the Bear Stearns top management knew what’s happening. What I meant was the other CEO’s who bought into Bear Stearns when its shares dropped 30%. After that it hit $2 per share.
By the way, the book will probably make someone very rich from this “episode” on Wall Street