Kicking back in his swivel chair, James E. Cayne surveyed the bond futures and currency quotes on the flickering Bloomberg screen at the center of his sweeping, half-moon desk. The US was on the verge of attacking Iraq, and the dollar was being sold down by investors.
Cayne, the chairman and chief executive of Bear Stearns, could see that his stock was holding steady, as it had for more than a year. But he was thinking about his traders just down the hall, making big bets on the markets.
"I'll tell you what worries me," he said, "that we might be doing something stupid."
By any standard, Cayne and his top executives at Bear Stearns have accomplished too much this year for their actions to be called stupid.
In what will probably be one of the worst years ever for Wall Street, Bear Stearns reported that its earnings rose 55 percent for its quarter ended Feb. 2. Its return on equity of 19 percent is the street's highest, and the firm has emerged nearly unscathed by last year's banking scandals.
A dominant bond division and the firm's relatively modest presence in the imploding stock market has set Bear Stearns apart from most of its banking peers. Indeed, Bear Stearns is one of the few Wall Street firms that is hiring bankers, and hardly a day goes by when Cayne, better known as "Jimmy," does not get a call from a senior-level banker at a rival firm seeking to make a move.
Life has been good for Cayne -- so much so that he was able to duck out of the office for a weeklong vacation earlier this month to participate in a world-class bridge tournament in Philadelphia.
Still there is a restlessness to Cayne, who is 69, during what should be the time of his life.
Jjust about right
"We are hitting on all 99 cylinders, so you have to ask yourself: What can we do better? And I just can't decide what that might be."
Analysts, while complimentary of the firm's performance, warn that when the equity markets do recover, Bear Stearns will once again lag behind the competition. "They are a great fixed-income house," said Brad Hintz, a brokerage stocks analyst at Sanford C. Bernstein. "But they have been losing market share in investment banking for three years now."
Cayne remains buoyant. "Everyone says that when the markets turn around, we will suffer," he said. "But let me tell you, we are going to surprise some people this time around. Bear Stearns is a great place to be.
Such words of confidence coming from a Wall Street executive seem unusual these days.
Eliot Spitzer, the New York State attorney general, will wind up his investigation into banking practices within weeks by releasing a stream of findings that will chronicle the banking excesses of the bull market. Lawyers are preparing to file class action suits for billions of dollars, and investment banks all across the street are laying off senior dealmakers.
But at Bear Stearns, everyone seems to be happy. The stock is near its 52-week high, Moody's recently upgraded the bank's credit outlook from neutral to positive, and in a bit of a surprise, Fortune magazine recently ranked Bear Stearns as the best financial firm to work for.
To a large extent, Bear's success today is the direct result of its weaknesses during the stock market boom in the late 1990s.
Where firms like Morgan Stanley and Goldman Sachs dominated in all facets of issuing stocks, Bear Stearns was a laggard. Its core fixed-income business suffered as investors piled into stocks and ignored bonds.
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