All Fired Up: Bear vs. Merrill
Oh, how the mighty have fallen. Jimmy Cayne is reported to be resigning from the helm of Bear Stearns under a lot of pressure from shareholders - a move that Cramer said should gratify anyone who owns BSC. Unfortunately, Cramer thinks Bear’s problems aren't going to end here.
As Bear Stearns fell from $172 to $75, it has been nothing short of a “catastrophe,” Cramer said. Cayne had to go but the firm still faces an uphill battle because of its extreme exposure to mortgage-backed bond trading. The new boss, Alan Schwartz, is a Bear insider but what the company really needs is an outsider, Cramer said. It needs someone new to come in and clean house in the model of John Thain at Merrill Lynch. And because Cayne is staying on as chairman, it’s unlikely that Schwartz will be given a real chance to do what needs to be done.
Cramer wouldn’t touch BSC until it restructures and brings in money from the outside to stay competitive. He would rather buy Merrill , although he tempered that recommendation due to the uncertain market conditions.
Merrill is the broker to buy for those tempted to buy BSC off Cayne’s ouster, Cramer said. But he still prefers Goldman Sachs to both. Goldman hasn’t had a change at the top because it doesn’t need one. That speaks volumes, as far as Cramer is concerned.
The bottom line? Jimmy Cayne had to go but Bear Stearns has a long way before it comes close to a Merrill Lynch, let alone a Goldman Sachs.
Jim's charitable trust owns Goldman Sachs.
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