The link between bear stearns and abs is that if bear stearns...

The link between bear stearns and abs is that if bear stearns goes down a few traders in new york would be out of a job, hence they will not be walking down Nassau Street every evening buying a hotdog and a pretzel off the corner vendor.

Which, in turn means the vendor will sell much less hotdogs, and much less pretzels, which causes him to miss his monthly credit card bill.

Then the debt spirals after 3 months and the credit card companies call on him to repay his debt and he has no choice but to sell his hotdog stand, and remove his children from childcare center in new jersey.

Which directly translates to a lost of 45 USD per day for that particular center (assuming he has one child), which results in at pre-Morgan Stanley deal reduction of 45 USD worth of revenue to ABS (per DAY!!!), which means in the calendar year, ABS loses 16k over the loss of one hotdog.

Now mathematically, 16k revenue lost per annum, based on the current share price performance, (if I remember from reading the press clippings on their latest result) would be calculated like this.

Share price 374 before result
Share price 155 post result.
decline of 2.19 per share or 59% based on a revenue of 37 million dollars (from memory, but for purposes of this lets assume its correct).

now we can see the link, via simple algebra.

37 million = 2.19
3.7 million = 21.9 cents
370k = 2.19 cents
37k = 0.219 cents
16k = approximately 0.11 cents.

Of course there are a few caveats in this analysis, listed below.

*assumption is made that all Bear Stearns traders eat hotdogs and pretzels.
*assumption is that the hotdog vendor pays no tax, and has no competition in his product on Nassau street
*assumption that there is only ONE childcare center in all of New York, and it resides in outer New Jersey
*assumption that 37 million revenue achieved by ABS last year was a true, and honest reflection on the actual numbers as per audited by whoever.
*assumption that the market is correct with its pricing at 1.55 (ex div), which has taken to account its last years earnings, but not forward looking with the Morgan Stanley deal.
* for those who wish to account for the Morgan Stanley deal, multiply the final figure by 40%, since they will only retain 40% and selling the rest to Morgan Stanley for 60%
* Asumming 1 USD = 1 Australian dollar.

For the record - I do not work for Bear Stearns, and this post should be taken prima facie as what it is, nothing more.