If You Think Your Losses are Bad, Read This

If you think your investment portfolio has taken a beating due to the market's rapid decline, check out what has happened to these guys:

British billionaire Joseph Lewis made his fortune gambling on currencies. His recent investment in Bear Stearns has turned out to be a disastrous bet. The elusive septuagenarian is one the biggest losers from the New York investment bank's problems. In just a few months, he has lost almost all of the $1.1 billion he spent building up his roughly 9.6% stake in Bear, which agreed last night to be acquired by JPMorgan Chase for just $2 a share.

Among the stakeholders: James Barrow, a Dallas money manager who runs the firm Barrow, Hanley, Mewhinney & Strauss, is the single biggest investor, with a 9.95% stake, according to recent regulatory filings. Bear Stearns Chairman James Cayne, who stepped down as chief executive in January amid criticisms from some investors that he was too hands-off when the mortgage mess unfolded, holds a stake just under 5%. So does activist investor Bruce Sherman, CEO of Naples, Fla., money manager Private Capital Management, a unit of Legg Mason, recent regulatory filings show.

And finally, another reason not to have a large part of your investment portfolio in your the company you work for:

Employees lost an estimated $5.2 billion on the sale of the company.

Not only will their investments take a hit, but many of these people will likely lose their jobs -- a double whammy. Hence the reason for not having much (if any) of your portfolio in your company's stock -- you already have a lot invested with them (your career.)

Comments

[Dave]

It's unclear what Joe Lewis's personal net wealth is, but I hope for his sake that he was a multibillionnaire and that this loss doesn't wipe him out completely. It's absurd that someone with that much wealth wouldn't diversify broadly.

Same goes for those employees...

[thebaglady]

It is pretty amazing how hard and fast it all came down. This just shows that putting all your eggs in one basket is a horrendous idea.

[J in FL]

Yea, I think that is the big lesson here... things can change very quickly and very harshly, so it is best to diversify.

[Dave]

According to the WSJ: "His $1 billion bet on Bear didn’t turn out to be as prescient as some of his other market calls. But Mr. Lewis still has $2 billion left (at least according to Forbes), so the loss isn’t likely to cramp his boating style."

(Cue the world's smallest violins.) He's still a billionnaire but that's still a really bad bet.

[Sarah]

It looks as if a lot of employees with Bear stock were people whose bonuses (which are in large part made up of stock) hadn't vested yet. Hence, no option to get out.

[fathersez]

I feel so sorry for the employees.

The lowest in the pecking order when we look at the rewards to the stakeholders and the hardest hit when it turns bad.

I remember reading articles in Fortune about families losing everything when Enron collapsed. I wonder how many families would be affected now...directly from this BS debacle. (Looks like Bear chose a great name for themselves!)

[Big Cheese]

Joe Lewis should ask Ben Bernanke for a bailout for his share. After all helicopter Ben is giving his buddies at JPM a nice bailout courtesy of the tax payer. Isn't this was America is all about?

BC

[rachel @ master your card]

I always tend to spread my investments between different accounts - some high risk and some low risk. I also Invest through different companies to spread the risk. I am sure that Joe Lewis would not have had all of his investents in the one company - someone that wealthy must have enough common sense to spread the risk!

[Kyle]

Wow. It's hard to feel sorry for him though. He knew the risk.

[rwh]

My wife and I work at separate companies but both companies invest our retirement funds with the same mutual fund family. It's a well rated fund family with many investment options, but obviously that limits our diversification just to what funds we choose within this specific mutual fund family; we don't have the option to move the funds somewhere else. At least we are not required to invest in company stock, and we don't.

Needless to say, our IRAs are invested elsewhere. We're not as exposed as the people at Enron or Bear Stearns, but we are not as diversified as we would like to be.

So I have a lot of sympathy for the Bear Stearns employees, many of whom may also have little say in where their retirement money is (or was, unfortunately) invested.

I'm not unsympathetic to the two individuals profiled here, but the higher the reward the higher the risk, and vice versa. My guess is they will both be okay.