Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Lehman Brothers Worth A Big Fat ZERO?

Companies / Credit Crisis 2008 Sep 09, 2008 - 05:13 PM GMT

By: Mike_Shedlock

Companies Best Financial Markets Analysis ArticleLehman is getting crushed today. It may not be long for this world. Bloomberg is reporting Lehman Shares Fall After Talks With Korean Bank End .
Lehman Brothers Holdings Inc. fell 35 percent in New York trading after talks about a capital infusion from Korea Development Bank ended. The Wall Street firm is continuing to negotiate with other potential investors, a person briefed on the matter said.


Lehman's market capitalization of $11.2 billion is almost equal to the value of its asset-management arm, which includes Neuberger Berman Inc. That leaves its main business of trading stocks and bonds as having little worth. The numbers are similar for Merrill Lynch & Co.: Take out its retail-brokerage and asset- management businesses, and the investors' valuation of the rest of the third-biggest U.S. securities firm is zero.

Goldman Sachs Group Inc. analyst William Tanona estimates another $12 billion of losses for the three firms in the third quarter. Those probably will wipe out any trading revenue for the period.

"Uncertainty requires a discount," said Roger Lister, New York-based chief credit officer for financial institutions at DBRS Inc., a Canadian credit-rating company. "Equity investors are worried about writedowns resulting in more dilution. That swamps longer-term valuations. Similarly, the credit-default swaps on these banks' debt are treated like junk."

Lehman would be crippled more than its rivals if it sold its asset-management division, he said. While Morgan Stanley and Merrill have retail-brokerage divisions to bring in revenue, Lehman would be hard-pressed to replace the income it earns from asset management.

Investors are having a hard time valuing the rest of the business at Lehman because there's no transparency about the mortgage securities on their books, said Janet Tavakoli, author of "Credit Derivatives & Synthetic Structures." Lehman, Merrill and Morgan Stanley borrowed heavily to fund their mortgage investments, which is coming back to hurt them, she said. The three investment banks' total assets were about 30 times their capital levels last year.

"When you're highly leveraged, you need to be very careful about the quality of your fixed-income assets," said Tavakoli, president of Chicago-based Tavakoli Structured Finance Inc. "Even if you held Treasuries, you could lose big money when interest rates moved against you. When you take credit risk as well, which was the case with mortgage bonds, then you're really in trouble."

From The Trading Desk

Minyanville professor Bennet Sedacca is writing about Lehman preferreds and Washington Mutual (WM) credit default swaps (CDS)

On Deck: Lehman

Lehman(LEH) preferreds are now offered in size at 17%.

Washington Mutual (WM) CDS are trading around the 30% level.

Me thinks LEH is next.

And if you own the preferreds, you can expect... zero.

The best case is that the company sells its good assets and ends up a carcase. Meanwhile, most of my Street contacts won't trade with 'em.

Key Strategic Initiatives

Lehman CEO talked about "key strategic initiatives".

THE key strategic initiative is to raise capital. And no one is biting. Without capital it is the end of the line. Lehman's equity is worthless. Depending on the agreement to raise capital, its shares could be worth zero even IF it does raise capital. Anyone smell another Fed sponsored shotgun marriage coming up?

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2008 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in