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Bear Earnings Bad Market Response Good

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by Yves Smith and Felix Salmon
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Sep 20 2007 12:00am EDT

Bear Earnings Bad, Market Response Good

Bear Stearns' earnings today were atrocious. Never mind the fact that sales and trading revenue slumped by an eye-popping 88%; Bear also, uniquely, saw its investment-banking revenues fall as well.

Interestingly, the bank's stock is unchanged in early trading, and a good 15% above its lows of last month. I don't buy the argument that this is because of the announced share buy-back; more likely, it's a bit of a short-squeeze on speculators who strongly suspected that Bear would fall short of expectations.

And there's another aspect to the share price, too: there's simply more confidence in the financial system now than there was during the darkest days of August. Given that Goldman Sachs is doing so astonishingly well, I still – for the third day running! – have a feeling that some kind of corner has been turned.

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